##### 









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2004


Commission file number 1-3605


KAISER ALUMINUM & CHEMICAL CORPORATION


(Exact name of registrant as specified in its charter)


|                         |  |                                         
|------------------------ |  | ----------------------------------------
|Delaware                 |  | 94-0928288                              
|(State of Incorporation) |  | (I.R.S. Employer
    Identification No.)

27422 PORTOLA PARKWAY, SUITE 350,


FOOTHILL RANCH, CALIFORNIA 92610-2831


(Address of principal executive offices) (Zip Code)


Registrants telephone number, including area code:


(949) 614-1740


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) |                         |                       |  |     
|                                                             | 41/8%
    Series        |                       |  | None | 
|                                                             | 43/4%
    (1957 Series) |                       |  | None | 
|                                                             | 43/4%
    (1959 Series) |                       |  | None | 
|                                                             | 43/4%
    (1966 Series) |                       |  | None | 

þ o


þ


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Documents Incorporated By Reference












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NOTE














(i)



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KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


TABLE OF CONTENTS


|                        |          |  |                                                                                                    |      |  |     | 
|----------------------- | -------- |  | -------------------------------------------------------------------------------------------------- | ---- |  | --- | 
|                        |          |  |                                                                                                    | Page | 
|                        |          |  |                                                                                                    |      | 
|PART I                  |          |  | 1                                                                                                  |     
|                        | Item 1.  |  | Business                                                                                           |      |  | 1   | 
|                        | Item 2.  |  | Properties                                                                                         |      |  | 17  | 
|                        | Item 3.  |  | Legal Proceedings                                                                                  |      |  | 18  | 
|                        | Item 4.  |  | Submission of Matters to a Vote of Security
    Holders                                            |      |  | 19  | 
|                       
|PART II                 |          |  | 19                                                                                                 |     
|                        | Item 5.  |  | Market for Registrants Common Equity
    and Related Stockholder Matters                          |      |  | 19  | 
|                        | Item 6.  |  | Selected Financial Data                                                                            |      |  | 20  | 
|                        | Item 7.  |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |      |  | 20  | 
|                        | Item 7A. |  | Quantitative and Qualitative Disclosures
    About Market Risk                                     |      |  | 40  | 
|                        | Item 8.  |  | Financial Statements and Supplementary
    Data                                                    |      |  | 41  | 
|                        | Item 9.  |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure           |      |  | 110 | 
|                        | Item 9A. |  | Controls and Procedures                                                                            |      |  | 110 | 
|                        | Item 9B. |  | Other Information                                                                                  |      |  | 110 | 
|PART III                |          |  | 110                                                                                                |     
|                        | Item 10. |  | Directors and Executive Officers of the
    Registrant                                             |      |  | 110 | 
|                        | Item 11. |  | Executive Compensation                                                                             |      |  | 113 | 
|                        | Item 12. |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |      |  | 123 | 
|                        | Item 13. |  | Certain Relationships and Related
    Transactions                                                 |      |  | 126 | 
|                        | Item 14. |  | Principal Accountant Fees and Services                                                             |      |  | 126 | 
|                       
|PART IV                 |          |  | 127                                                                                                |     
|                        | Item 15. |  | Exhibits and Financial Statement
    Schedules                                                     |      |  | 127 | 
|SIGNATURES              |          |  | 128                                                                                                |     
|INDEX OF EXHIBITS       |          |  | 129                                                                                                |     
|EXHIBIT 21 SUBSIDIARIES |          |  | 135                                                                                                |     



(ii)



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)





PART I







|        |         
|------- | --------
|Item 1. | Business

Business
Operations  Competition
 Environmental Matters,  Factors Affecting Future
Performance, Business  Factors Affecting Future
Performance


General






Business Operations




|  |                                  
|- | ---------------------------------
| | Fabricated Products Business Unit

Overview.


1



---



##### 







|                          |  |                       |  |                                    
|------------------------- |  | --------------------- |  | -----------------------------------
|                          |  | Manufacturing         |  |                                    
|Location                  |  | Process               |  | Types of Products                  
|                          |  |                       |  |                                    
|Chandler, Arizona         |  | Drawing               |  | Aero/HS                            
|Greenwood, South Carolina |  | Forging               |  | Auto                               
|Jackson, Tennessee        |  | Extrusion/Drawing     |  | Aero/HS, GE                        
|London, Ontario           |  | Extrusion             |  | Auto, CI                           
|Los Angeles, California   |  | Extrusion             |  | GE, CI                             
|Newark, Ohio              |  | Extrusion/Rod Rolling |  | Aero/HS, GE, Conversion products(1)
|Richland, Washington      |  | Extrusion             |  | Aero/HS, GE                        
|Richmond, Virginia        |  | Extrusion/Drawing     |  | GE, Auto, CI                       
|Sherman, Texas            |  | Extrusion             |  | Auto, CI                           
|Spokane, Washington       |  | Flat Rolling          |  | Aero/HS, GE                        
|Tulsa, Oklahoma           |  | Extrusion             |  | GE                                 






|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|(1) | Conversion products can undergo one or two additional processing
    steps before being identified to an end-use application.









2



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##### 







| |                           
| | --------------------------
| | Types of Products Produced

General Engineering Products


Aerospace and High Strength Products


Automotive Extruded and Forged Products


Custom Industrial Products


Concentrations Competition




3



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##### 





| |                                          
| | -----------------------------------------
| | Types of Manufacturing Processes Employed

Flat Rolled Products


Extruded Products


Forged Products




| |                
| | ---------------
| | Legal Structure





| |                                 
| | --------------------------------
| |  Primary Aluminum Business Unit



Anglesey.


4



---



##### 







Hedging.










| |                          
| | -------------------------
| |  Discontinued Operations



Valco.


5



---



##### 





Washington Smelters.


KJBC.


Gramercy.


Alpart.


QAL.


Commodities Marketing.


6



---



##### 



Competition




Research and Development






Employees






|                |  |            |  |                 |             | 
|--------------- |  | ---------- |  | --------------- | ----------- | 
|                |  |            |  | Contract        |            
|Location        |  | Union      |  | Expiration Date |            
|                |  |            |  |                 |            
|Chandler, AZ    |  | Non-union  |  |                 | NA          | 
|Greenwood, SC   |  | Non-union  |  |                 | NA          | 
|Jackson, TN     |  | Non-union  |  |                 | NA          | 
|London, Ontario |  | USW Canada |  |                 | Feb 2006    | 
|Los Angeles, CA |  | Teamsters  |  |                 | Sept 2006   | 
|Newark, OH      |  | USWA       |  |                 | Sept 2005   | 
|Richland, WA    |  | Non-union  |  |                 | NA          | 
|Richmond, VA    |  | USWA IAM   |  |                 | Oct 2004(1) | 
|Sherman, TX     |  | IAM        |  |                 | Dec 2007    | 
|Spokane, WA     |  | USWA       |  |                 | Sept 2005   | 
|Tulsa, OK       |  | USWA       |  |                 | Jul 2005    | 






|    |                                                
|--- | -----------------------------------------------
|(1) | Contract extended until 30 days after emergence

Environmental Matters




7



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##### 









Reorganization Proceedings




| |             
| | ------------
| |  Background









8



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##### 







| |                      
| | ---------------------
| |  Case Administration









| |                                                  
| | -------------------------------------------------
| |  Commodity-related and Inactive
    Subsidiaries



9



---



##### 





|                                              |  |   |                 | 
|--------------------------------------------- |  | - | --------------- | 
|Senior Notes and Senior Subordinated Notes    |  | $ | 390.7 to $421.8 | 
|Pension Benefit Guaranty Corporation (PBGC) |  | $ | 187.6 to $198.5 | 
|State of Louisiana Solid Waste Revenue Bonds  |  | $ | 0.0 to $  8.0   | 

3 4 7 8 7 8


7 8 7 8 7 8


10



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##### 











 Entities
Containing the Fabricated Products and Certain Other
Operations






11



---



##### 











| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) All post-petition and secured claims are expected to
    either be assumed by the emerging entity or paid at emergence
    (see Exit Cost discussion below);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (b) Pursuant to agreements reached with salaried and hourly
    retirees in early 2004, in return for cancellation of the
    retiree medical plan, as more fully discussed in Note 9 of
    Notes to Consolidated Financial Statements, the Company is
    making certain fixed monthly payments into Voluntary Employee
    Beneficiary Associations (VEBAs) until emergence and
    then has agreed to make certain variable annual VEBA
    contributions depending on the emerging entitys operating
    results and financial liquidity. In addition, upon emergence the
    VEBAs are to receive a contribution of 75% of the residual value
    of the remaining Debtors in the form of newly issued equity in
    the emerging entity. Residual value in this context means the
    Companys remaining value after taking into account:
    (i) the contributions to the personal injury trust
    described below; (ii) the satisfaction of administrative,
    priority and secured claims as per (a) above; (iii) an
    equity incentive plan; and (iv) the satisfaction of the
    PBGCs claim against KACOCL;                       
|
| | (c) Pursuant to an agreement reached in early 2005, all
    pending and future asbestos-related personal injury claims, all
    pending and future silica and coal tar pitch volatiles personal
    injury claims and all hearing loss claims would be resolved
    through the formation of one or more trusts to which all such
    claims would be directed by channeling injunctions that would
    permanently remove liability for such claims from the Debtors.
    The trusts would be funded pursuant to statutory requirements
    and agreements with representatives of the affected parties,
    using (i) the Debtors insurance assets,
    (ii) $13.0 million in cash from the Company,
    (iii) 100% of the equity in a Company subsidiary whose sole
    asset will be a piece of real property that produces modest
    rental income, and (iv) a portion of the emerging
    entitys equity in proportion to approximately
    $830.0 million of intercompany claims of KFC against the
    Company that are to be assigned to the trust (which will be
    satisfied out of the 25% of equity referred to in (d )
    below); and
|
| | (d) Other pre-petition claims will receive 25% of the
    residual value of the remaining Debtors in the form of equity in
    the emerging entity. Claims that are expected to be within this
    group include (i) any claims of the Senior Notes, the Sub
    Notes and PBGC that are not satisfied under the Liquidating
    Plans, (ii) the approximate $830.0 million of
    intercompany claims that the Company has agreed to assign to the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

12



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##### 



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | personal injury trust(s) referred to in (c) above, and
    (iii) all unsecured trade and other claims. Included in
    this category are approximately $276.0 million of
    intercompany claims of KFC against the Company that will be a
    part of the consideration in the Liquidating Trusts.







|  |                                 
|- | --------------------------------
| | Financial Statement Presentation

Financial
Reporting by Entities in Reorganization Under the Bankruptcy
Code




Factors Affecting Future Performance




13



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##### 







|  |                                                                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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











|  |                                            
|- | -------------------------------------------
| | We may not operate profitably in the future



14



---



##### 







|  |                                                        
|- | -------------------------------------------------------
| | Our earnings are sensitive to a number of
    variables









|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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







15



---



##### 











|  |                                                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------
| | The settlement of the asbestos-related and other
    personal injury matters may have a major impact on our plan or
    plans of reorganization







16



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##### 







|  |                                                                                                          
|- | ---------------------------------------------------------------------------------------------------------
| | Our profits and cash flows may be adversely impacted by
    the results of the Companys hedging programs





|  |                                            
|- | -------------------------------------------
| | We operate in a highly competitive industry





|  |                                                                                      
|- | -------------------------------------------------------------------------------------
| | The Company is subject to political and regulatory
    risks in a number of countries



Segment and Geographical Area Financial Information









|        |           
|------- | ----------
|Item 2. | Properties







17



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##### 










|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



Reorganization Proceedings




Other Environmental Matters




Asbestos and Certain Other Personal Injury Claims






Asbestos and Certain Other Personal Injury Claims


Labor Matters




18



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##### 







Labor Matters


Hearing Loss Claims


Hearing Loss
Claims


Other Matters











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






PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters



19



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##### 



Incentive Plans


Capital
Structure







|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Reorganization Proceedings


Background.




Case Administration.


20



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##### 







Commodity-related and Inactive Subsidiaries.




|                                             |  |   |                 | 
|-------------------------------------------- |  | - | --------------- | 
|Senior Notes and Senior Subordinated Notes   |  | $ | 390.7 to $421.8 | 
|PBGC                                         |  | $ | 187.6 to $198.5 | 
|State of Louisiana Solid Waste Revenue Bonds |  | $ | 0.0 to $8.0     | 

3 4 7 8 7 8


21



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##### 





7 8 7 8 7 8






22



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##### 







Entities Containing the Fabricated Products and Certain Other
Operations.










| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) All post-petition and secured claims are expected to
    either be assumed by the emerging entity or paid at emergence
    (see Exit Cost discussion below);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | (b) Pursuant to agreements reached with salaried and hourly
    retirees in early 2004, in return for cancellation of the
    retiree medical plan, as more fully discussed in Note 9 of
    Notes to Consolidated Financial Statements, the Company is
    making certain fixed monthly payments into Voluntary Employee
    Beneficiary Associations (VEBAs) until emergence and
    then has agreed to make certain variable annual VEBA
    contributions depending on the emerging entitys operating
    results and financial liquidity. In addition, upon emergence the
    VEBAs are to receive a contribution of 75% of the residual value
    of the

23



---



##### 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | remaining Debtors in the form of newly issued equity in the
    emerging entity. Residual value in this context means the
    Companys remaining value after taking into account:
    (i) the contributions to the personal injury trust
    described below; (ii) the satisfaction of administrative,
    priority and secured claims as per (a) above; (iii) an
    equity incentive plan; and (iv) the satisfaction of the
    PBGCs claim against KACOCL;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | (c) Pursuant to an agreement reached in early 2005, all
    pending and future asbestos-related personal injury claims, all
    pending and future silica and coal tar pitch volatiles personal
    injury claims and all hearing loss claims would be resolved
    through the formation of one or more trusts to which all such
    claims would be directed by channeling injunctions that would
    permanently remove all liability for such claims from the
    Debtors. The trusts would be funded pursuant to statutory
    requirements and agreements with representatives of the affected
    parties, using (i) the Debtors insurance assets,
    (ii) $13.0 million in cash from the Company,
    (iii) 100% of the equity in a Company subsidiary whose sole
    asset will be a piece of real property that produces modest
    rental income, and (iv) a portion of the emerging
    entitys equity in proportion to approximately
    $830.0 million of intercompany claims of KFC against the
    Company that are to be assigned to the trust (which will be
    satisfied out of the 25% of equity referred to in (d )
    below); and
|
| | (d) Other pre-petition claims will receive 25% of the
    residual value of the remaining Debtors in the form of equity in
    the emerging entity. Claims that are expected to be within this
    group include (i) any claims of the Senior Notes, the Sub
    Notes and PBGC that are not satisfied under the Liquidating
    Plans, (ii) the approximate $830.0 million of
    intercompany claims that the Company has agreed to assign to the
    personal injury trust(s) referred to in (c) above, and
    (iii) all unsecured trade and other claims. Included in
    this category are approximately $276.0 million of
    intercompany claims of KFC against the Company that will be a
    part of the consideration in the Liquidating Trusts.                                                                                                                                                                                                                                                                                                                                                                                                 





Overview




24



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##### 







|                                                         |                                     |                                            |                               |   |        |        |        |      |        |        |        |   |       |        |  
|-------------------------------------------------------- | ----------------------------------- | ------------------------------------------ | ----------------------------- | - | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ----- | ------ | -
|                                                         |                                     | Year Ended December 31,                    |                              
|                                                         |                                     |                                            |                              
|                                                         |                                     | 2004                                       |                               |   | 2003   |        |        | 2002 |       
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|                                                         |                                     | (In millions of dollars,                   |                              
|                                                         |                                     | except shipments and prices)               |                              
|Shipments (mm lbs):                                      |                                     |                                            |                               |   |        |        |        |      |        |        |        |  
|                                                         |                                     | Fabricated Products                        |                               |   | 458.6  |        |        |      | 372.3  |        |        |   | 376.3 |       
|                                                         |                                     | Primary Aluminum                           |                               |   | 156.6  |        |        |      | 158.7  |        |        |   | 155.8 |       
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|                                                         |                                     |                                            | 615.2                         |   |        |        | 531.0  |      |        |        | 532.1  |  
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|Average Realized Third Party Sales Price (per pound):    |                                     |                                            |                               |   |        |        |        |      |        |        |        |  
|                                                         |                                     | Fabricated Products(1)                     |                               | $ | 1.76   |        |        | $    | 1.61   |        |        | $ | 1.62  |       
|                                                         |                                     | Primary Aluminum                           |                               | $ | .85    |        |        | $    | .71    |        |        | $ | .64   |       
|                                                         | Net Sales:                          |                                            |                               |   |        |        |        |      |        |        |        |   |      
|                                                         |                                     | Fabricated Products                        |                               | $ | 809.3  |        |        | $    | 597.8  |        |        | $ | 608.6 |       
|                                                         |                                     | Primary Aluminum                           |                               |   | 133.1  |        |        |      | 112.4  |        |        |   | 100.4 |       
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|                                                         |                                     |                                            | Total Net Sales               |   | $      | 942.4  |        |      | $      | 710.2  |        |   | $     | 709.0  |  
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|                                                         | Segment Operating Income (Loss):(2) |                                            |                               |   |        |        |        |      |        |        |        |   |      
|                                                         |                                     | Fabricated Products(3)                     |                               | $ | 33.0   |        |        | $    | (21.2  | )      |        | $ | (21.8 | )     
|                                                         |                                     | Primary Aluminum                           |                               |   | 13.9   |        |        |      | 6.7    |        |        |   | 7.4   |       
|                                                         |                                     | Corporate and Other(4)                     |                               |   | (71.1  | )      |        |      | (74.5  | )      |        |   | (98.8 | )     
|                                                         |                                     | Other Operating (Charges) Benefits, Net(5) |                               |   | (793.2 | )      |        |      | (141.6 | )      |        |   | (31.8 | )     
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|                                                         |                                     |                                            | Total Operating Income (Loss) |   | $      | (817.4 | )      |      | $      | (230.6 | )      |   | $     | (145.0 | )
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|Discontinued Operations                                  |                                     | $                                          | 121.3                         |   |        | $      | (514.7 | )    |        | $      | (266.0 | )
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|Net Loss                                                 |                                     | $                                          | (746.6                        | ) |        | $      | (788.1 | )    |        | $      | (468.4 | )
|                                                         |                                     |                                            |                               |   |        |        |        |      |       
|Capital Expenditures (excluding discontinued operations) |                                     | $                                          | 7.6                           |   |        | $      | 8.9    |      |        | $      | 10.9   |  
|                                                         |                                     |                                            |                               |   |        |        |        |      |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Average realized prices for the Companys Fabricated
    products business unit are subject to fluctuations due to
    changes in product mix as well as underlying primary aluminum
    prices and is not necessarily indicative of changes in
    underlying profitability. See Business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(2) | The Company has changed its segment presentation in 2004 to
    eliminate the Eliminations segment as the primary
    purpose for such segment was to eliminate intercompany profit on
    sales by the Primary aluminum and Bauxite and alumina business
    units substantially all of which are now considered Discontinued
    operations. Eliminations not representing Discontinued
    operations are now included in segment results. Operating
    results for 2003 and 2002 for the Fabricated products business
    unit reported above include $4.5 and $.4, respectively,
    previously reported in Eliminations. There is no such
    elimination required in 2004. Operating results for 2003 and
    2002 for the Primary aluminum business unit reported above
    include $(.4) and $1.3, respectively, previously reported in
    Eliminations. Operating results for the

25



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##### 



|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Primary aluminum business unit in 2004 are after the elimination
    of $.9. Also, see Part I, Item 1.
    Business  Business Operations for a
    discussion of changes to the Primary aluminum business unit.
|   
|(3) | Operating results for 2004, 2003 and 2002 include LIFO inventory
    charges of $12.1, $3.2, and $3.5, respectively.                                                                                              
|   
|(4) | Operating results for 2002 include special pension charges of
    $24.1.                                                                                                                                          
|   
|(5) | 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.      

Significant Items


Market-related Factors.






New Credit Arrangement.




| |   |                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Replaced the existing post-petition credit facility with a new
    $200.0 million post-petition credit facility (the DIP
    Facility) and                                                                                                                                            
|
| |  | Included a commitment, upon the Debtors emergence from the
    Chapter 11 proceedings, for exit financing in the form of a
    $200.0 million revolving credit facility (the
    Revolving Credit Facility) and a fully drawn term
    loan (the Term Loan) of up to $50.0 million.



Disposition of Commodity-Related Assets.


26



---



##### 





Significant Charges Associated with the Reorganization
Process.




| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Charges related to the sale of commodity interests. These items
    are classified as discontinued operations in the
    accompanying financial statements. See Note 3 of Notes to
    Consolidated Financial Statements for additional discussion of
    these items and amounts.                                     
|
| |  | Significant charges related to the termination of certain of the
    Companys previous pension and retiree medical plans and
    other agreements reached with the PBGC, the USWA and certain
    other labor unions. These items are discussed in Note 9 and
    Note 11 of Notes to Consolidated Financial Statements.
|
| |  | Certain environmental charges associated with various
    settlements and transactions. See Note 11 of Notes to
    Consolidated Financial Statements                                                                                                                                                                    



Environmental Matters.


Results of Operations


Summary.






| |                         
| | ------------------------
| | 2004 as Compared to 2003

Fabricated Aluminum Products.




27



---



##### 







Primary aluminum.






Corporate and Other.






Discontinued Operations.


28



---



##### 







| |                         
| | ------------------------
| | 2003 as Compared to 2002

Fabricated Aluminum Products.






Primary Aluminum.






Corporate and Other.


29



---



##### 







Discontinued Operations.


Liquidity and Capital Resources




Operating Activities.




30



---



##### 







Investing Activities.




Financing Activities and Liquidity.




| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Replaced the existing post-petition credit facility with a new
    $200.0 million DIP Facility and                                                                                                                
|
| |  | Included a commitment, upon the Debtors emergence from the
    Chapter 11 proceedings, for exit financing in the form of a
    $200.0 million Revolving Credit Facility and a Term Loan of
    up to $50.0 million.





31



---



##### 















Commitments and Contingencies.






32



---



##### 









Other Matters


Income Tax Matters.


New Accounting Pronouncements




33



---



##### 



Critical Accounting Policies




Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. 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 commodities interests, 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 as of December 31, 2003 and
    subsequent periods. As a result of the change in status, the
    Company recorded impairment charges of approximately
    $33.0 million in the first quarter of 2004 and
    $368.0 million in the fourth quarter of 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

34



---



##### 















35



---



##### 

















36



---



##### 















37



---



##### 







Contractual Obligations and Commercial Commitments




|                                                   |  |       |      |                 |        |   |     |       |  |     |       |  |           |         |     |  |  |   |     | 
|-------------------------------------------------- |  | ----- | ---- | --------------- | ------ | - | --- | ----- |  | --- | ----- |  | --------- | ------- | --- |  |  | - | --- | 
|                                                   |  |       |      | 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 $2.4(a) |  | $     | 4.0  |                 |        | $ | 1.2 |       |  | $   | 1.2   |  |           | $       |    |  |  | $ | 1.6 | 
|Operating leases                                   |  |       | 6.8  |                 |        |   | 2.1 |       |  |     | 3.0   |  |           |         | 1.4 |  |  |   | .3  | 
|                                                   |  |       |      |                 |        |   |     |       |  |     |       |  |           |         |    
|Total cash contractual obligations                 |  | $     | 10.8 |                 |        | $ | 3.3 |       |  | $   | 4.2   |  |           | $       | 1.4 |  |  | $ | 1.9 | 
|                                                   |  |       |      |                 |        |   |     |       |  |     |       |  |           |         |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
    $847.6 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.





38



---



##### 















| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An amount not to exceed $36.0 million and payable on
    emergence from the Chapter 11 proceedings so long as the
    Companys liquidity (i.e. cash plus borrowing availability)
    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 such sales proceeds, in certain
    circumstances, will be used to pay the shortfall.
|
| |  | On an annual basis, 10% of the first $20.0 million of
    annual cash flow, as defined, plus 20% of annual cash flow, as
    defined, in excess of $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.                                                                                    
|
| |  | Advances of $3.1 million in June 2004 and $1.9 million
    per month thereafter until the Company emerges from the Cases.
    Any advances made pursuant to such agreement will constitute a
    credit toward the $36.0 million maximum contribution due
    upon emergence.                                                                                                                                                                                                             









39



---



##### 










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



Sensitivity


Primary Aluminum.








Foreign Currency.


40



---



##### 






Item
8.Financial
Statements and Supplementary Data


|                                                                                              |  |      |     | 
|--------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                              |  | Page |    
|                                                                                              |  |      |    
|Report of Independent Registered Public Accounting Firm                                       |  |      | 42  | 
|Consolidated Balance Sheets                                                                   |  |      | 43  | 
|Statements of Consolidated Income (Loss)                                                      |  |      | 44  | 
|Statements of Consolidated Stockholders Equity (Deficit)
    and Comprehensive Income (Loss) |  |      | 45  | 
|Statements of Consolidated Cash Flows                                                         |  |      | 46  | 
|Notes to Consolidated Financial Statements                                                    |  |      | 47  | 
|Quarterly Financial Data (Unaudited)                                                          |  |      | 107 | 
|Five-Year Financial Data                                                                      |  |      | 108 | 

41



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(DEBTOR-IN-POSSESSION)


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














Deloitte &
Touche LLP






42



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


CONSOLIDATED BALANCE SHEETS


|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |          |         |       |          |          |  
|------------------------------------------------------- | ----------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---- | -------- | -------- | ------- | ----- | -------- | -------- | -
|                                                        |                                           | December 31,                                                                                                                            |                                                                        
|                                                        |                                           |                                                                                                                                         |                                                                        
|                                                        |                                           | 2004                                                                                                                                    |                                                                         |      | 2003     |         
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           | (In millions of dollars,                                                                                                                |                                                                        
|                                                        |                                           | except share amounts)                                                                                                                   |                                                                        
|ASSETS                                                 
|Current assets:                                         |                                           |                                                                                                                                         |                                                                         |      |          |          |         |      
|                                                        |                                           | Cash and cash equivalents                                                                                                               |                                                                         | $    | 55.4     |          |         | $     | 35.5     |         
|                                                        |                                           | Receivables:                                                                                                                            |                                                                         |      |          |          |         |       |          |         
|                                                        |                                           |                                                                                                                                         | Trade, less allowance for doubtful receivables of $6.9 and $6.4         |      |          | 97.4     |         |       |          | 61.4     |  
|                                                        |                                           |                                                                                                                                         | Due from affiliate                                                      |      |          | 8.0      |         |       |          | 12.8     |  
|                                                        |                                           |                                                                                                                                         | Other                                                                   |      |          | 10.9     |         |       |          | 11.5     |  
|                                                        |                                           | Inventories                                                                                                                             |                                                                         |      | 105.3    |          |         |       | 92.5     |         
|                                                        |                                           | Prepaid expenses and other current assets                                                                                               |                                                                         |      | 19.6     |          |         |       | 23.8     |         
|                                                        |                                           | Discontinued operations current assets                                                                                                 |                                                                         |      | 30.6     |          |         |       | 193.7    |         
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | Total current assets                                                    |      |          | 327.2    |         |       |          | 431.2    |  
|Investments in and advances to unconsolidated affiliate |                                           |                                                                                                                                         | 16.7                                                                    |      |          |          | 13.1    |      
|Property, plant, and equipment  net                    |                                           |                                                                                                                                         | 214.6                                                                   |      |          |          | 230.1   |      
|Restricted proceeds from sale of commodity interests    |                                           |                                                                                                                                         | 280.8                                                                   |      |          |          |        |      
|Personal injury-related insurance recoveries receivable |                                           |                                                                                                                                         | 967.0                                                                   |      |          |          | 465.4   |      
|Other assets                                            |                                           |                                                                                                                                         | 42.5                                                                    |      |          |          | 55.1    |      
|                                                        | Discontinued operations long-term assets |                                                                                                                                         |                                                                         | 38.9 |          |          |         | 433.8 |         
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | Total                                                                   |      | $        | 1,887.7  |         |       | $        | 1,628.7  |  
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)         
|Liabilities not subject to compromise                  |                                           |                                                                                                                                         |                                                                         |      |          |          |         |      
|                                                        |                                           | Current liabilities:                                                                                                                    |                                                                         |      |          |          |         |       |          |         
|                                                        |                                           |                                                                                                                                         | Accounts payable                                                        |      | $        | 50.2     |         |       | $        | 34.7     |  
|                                                        |                                           |                                                                                                                                         | Accrued interest                                                        |      |          | .9       |         |       |          | .8       |  
|                                                        |                                           |                                                                                                                                         | Accrued salaries, wages, and related expenses                           |      |          | 48.9     |         |       |          | 31.6     |  
|                                                        |                                           |                                                                                                                                         | Accrued postretirement medical benefit obligation 
    current portion |      |          |         |         |       |          | 32.5     |  
|                                                        |                                           |                                                                                                                                         | Other accrued liabilities                                               |      |          | 73.8     |         |       |          | 29.7     |  
|                                                        |                                           |                                                                                                                                         | Payable to affiliate                                                    |      |          | 14.6     |         |       |          | 11.4     |  
|                                                        |                                           |                                                                                                                                         | Long-term debt  current portion                                        |      |          | 1.2      |         |       |          | 1.3      |  
|                                                        |                                           |                                                                                                                                         | Discontinued operations current liabilities                            |      |          | 57.7     |         |       |          | 177.5    |  
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | Total current liabilities                                               |      |          | 247.3    |         |       |          | 319.5    |  
|                                                        |                                           | Long-term liabilities                                                                                                                   |                                                                         |      | 32.9     |          |         |       | 59.4     |         
|                                                        |                                           | Long-term debt                                                                                                                          |                                                                         |      | 2.8      |          |         |       | 2.2      |         
|                                                        |                                           | Discontinued operations long-term liabilities, including
    minority interests of $121.1 in 2003                                      |                                                                         |      | 26.4     |          |         |       | 208.7    |         
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | 309.4                                                                   |      |          |          | 589.8   |      
|Liabilities subject to compromise                       |                                           |                                                                                                                                         | 3,954.9                                                                 |      |          |          | 2,770.1 |      
|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 1,000,000 shares; issued and outstanding
    46,171,365 shares                |                                                                         |      | 15.4     |          |         |       | 15.4     |         
|                                                        |                                           | Additional capital                                                                                                                      |                                                                         |      | 2,452.8  |          |         |       | 2,454.0  |         
|                                                        |                                           | Accumulated deficit                                                                                                                     |                                                                         |      | (2,648.3 | )        |         |       | (1,901.7 | )       
|                                                        |                                           | Accumulated other comprehensive income (loss)                                                                                           |                                                                         |      | (5.5     | )        |         |       | (107.9   | )       
|                                                        |                                           | Note receivable from parent                                                                                                             |                                                                         |      | (2,191.7 | )        |         |       | (2,191.7 | )       
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | Total stockholders equity (deficit)                                    |      |          | (2,376.6 | )       |       |          | (1,731.2 | )
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         
|                                                        |                                           |                                                                                                                                         | Total                                                                   |      | $        | 1,887.7  |         |       | $        | 1,628.7  |  
|                                                        |                                           |                                                                                                                                         |                                                                         |      |          |         



43



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


STATEMENTS OF CONSOLIDATED INCOME (LOSS)


|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |       |   |        |        |       | 
|---------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------ | ----- | ------- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | 
|                                                     |                                                                                                                            | Year Ended December 31,  |       
|                                                     |                                                                                                                            |                          |       
|                                                     |                                                                                                                            | 2004                     |        |       | 2003    |   |        | 2002   |      
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|                                                     |                                                                                                                            | (In millions of dollars) |       
|Net sales                                            |                                                                                                                            | $                        | 942.4  |       |         | $ | 710.2  |        |       | $ | 709.0  |       
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Costs and expenses:                                  |                                                                                                                            |                          |        |       |         |   |        |        |       |   |        |       
|                                                     | Cost of products sold                                                                                                      |                          |        | 852.2 |         |   |        | 681.2  |       |   |        | 671.4  |      
|                                                     | Depreciation and amortization                                                                                              |                          |        | 22.3  |         |   |        | 25.7   |       |   |        | 32.3   |      
|                                                     | Selling, administrative, research and development, and general                                                             |                          |        | 92.1  |         |   |        | 92.3   |       |   |        | 118.5  |      
|                                                     | Other operating charges (benefits), net                                                                                    |                          |        | 793.2 |         |   |        | 141.6  |       |   |        | 31.8   |      
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|                                                     |                                                                                                                            | Total costs and expenses |        |       | 1,759.8 |   |        |        | 940.8 |   |        |        | 854.0 | 
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Operating loss                                       |                                                                                                                            |                          | (817.4 | )     |         |   | (230.6 | )      |       |   | (145.0 | )     
|Other income (expense):                              |                                                                                                                            |                          |        |       |         |   |        |        |       |   |        |       
|                                                     | Interest expense (excluding unrecorded contractual interest
    expense of $95.0 in 2004, $95.0 in 2003 and $84.0 in 2002) |                          |        | (9.5  | )       |   |        | (9.1   | )     |   |        | (19.0  | )    
|                                                     | Reorganization items                                                                                                       |                          |        | (39.0 | )       |   |        | (27.0  | )     |   |        | (33.3  | )    
|                                                     | Other  net                                                                                                                |                          |        | 4.2   |         |   |        | (5.2   | )     |   |        | (.9    | )    
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Loss before income taxes and discontinued operations |                                                                                                                            |                          | (861.7 | )     |         |   | (271.9 | )      |       |   | (198.2 | )     
|Provision for income taxes                           |                                                                                                                            |                          | (6.2   | )     |         |   | (1.5   | )      |       |   | (4.2   | )     
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Loss from continuing operations                      |                                                                                                                            |                          | (867.9 | )     |         |   | (273.4 | )      |       |   | (202.4 | )     
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Discontinued operations:                             |                                                                                                                            |                          |        |       |         |   |        |        |       |   |        |       
|                                                     | Loss from discontinued operations, net of income taxes,
    including minority interests                                   |                          |        | (5.3  | )       |   |        | (514.7 | )     |   |        | (266.0 | )    
|                                                     | Gain from sale of commodity interests                                                                                      |                          |        | 126.6 |         |   |        |       |       |   |        |       |      
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Income (loss) from discontinued operations           |                                                                                                                            |                          | 121.3  |       |         |   | (514.7 | )      |       |   | (266.0 | )     
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      
|Net loss                                             |                                                                                                                            | $                        | (746.6 | )     |         | $ | (788.1 | )      |       | $ | (468.4 | )     
|                                                     |                                                                                                                            |                          |        |       |         |   |        |        |      



44



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


STATEMENTS OF CONSOLIDATED STOCKHOLDERS EQUITY
(DEFICIT) AND


COMPREHENSIVE INCOME (LOSS)


|                           |                                                                                                            |                          |    |   |        |   |      |            |  |               |             |      |            |        |          |        |        |   |        |        |   |   |          |       |   |   |          |        |  
|-------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------------ | -- | - | ------ | - | ---- | ---------- |  | ------------- | ----------- | ---- | ---------- | ------ | -------- | ------ | ------ | - | ------ | ------ | - | - | -------- | ----- | - | - | -------- | ------ | -
|                           |                                                                                                            |                          |    |   |        |   |      |            |  | Accumulated   |             |      |            |        |         
|                           |                                                                                                            |                          |    |   |        |   |      |            |  | Other         |             |      | Note       |        |          |       
|                           |                                                                                                            |                          |    |   |        |   |      |            |  | Comprehensive |             |      | Receivable |        |          |       
|                           |                                                                                                            | Preference               |    |   | Common |   |      | Additional |  |               | Accumulated |      |            | Income |          |        | From   |   |        |       
|                           |                                                                                                            | Stock                    |    |   | Stock  |   |      | Capital    |  |               | Deficit     |      |            | (Loss) |          |        | Parent |   |        | Total  |  
|                           |                                                                                                            |                          |    |   |        |   |      |            |  |               |             |      |            |        |          |        |        |   |        |        |  
|                           |                                                                                                            | (In millions of dollars) |   
|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 | )     
|                           | Net loss                                                                                                   |                          |    |  |        |   |      |           |  |               |             |     |            |        |          | (746.6 | )      |   |        |       |   |   |          |      |   |   |          | (746.6 | )
|                           | Minimum pension liability adjustment                                                                       |                          |    |  |        |   |      |           |  |               |             |     |            |        |          |       |        |   |        | 97.9   |   |   |          |      |   |   |          | 97.9   |  
|                           | Unrealized net increase in value of derivative instruments
    arising during the year                     |                          |    |  |        |   |      |           |  |               |             |     |            |        |          |       |        |   |        | 2.1    |   |   |          |      |   |   |          | 2.1    |  
|                           | Reclassification adjustment for net realized losses on
    derivative instruments included in net loss     |                          |    |  |        |   |      |           |  |               |             |     |            |        |          |       |        |   |        | 2.4    |   |   |          |      |   |   |          | 2.4    |  
|                           |                                                                                                            |                          |    |   |        |   |      |            |  |               |             |      |            |        |          |        |        |   |        |        |  
|                           | Comprehensive income (loss)                                                                                |                          |    |  |        |   |      |           |  |               |             |     |            |        |          |       |        |   |        |       |   |   |          |      |   |   |          | (644.2 | )
|                           | Restricted stock cancellations                                                                             |                          |    |  |        |   |      |           |  |               |             | (1.2 | )          |        |          |       |        |   |        |       |   |   |          |      |   |   |          | (1.2   | )
|                           |                                                                                                            |                          |    |   |        |   |      |            |  |               |             |      |            |        |          |        |        |   |        |        |  
|BALANCE, December 31, 2004 |                                                                                                            | $                        | .7 |   |        | $ | 15.4 |            |  | $             | 2,452.8     |      |            | $      | (2,648.3 | )      |        | $ | (5.5   | )      |   | $ | (2,191.7 | )     |   | $ | (2,376.6 | )     
|                           |                                                                                                            |                          |    |   |        |   |      |            |  |               |             |      |            |        |          |        |        |   |        |        |  



45



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


STATEMENTS OF CONSOLIDATED CASH FLOWS


|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |        |       |       |        |        |       |       |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ----- | ------ | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | -
|                                                                         |                                                                                                                                                                                                             | Year Ended December 31,                                                                                     |                                                                                                            
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                            
|                                                                         |                                                                                                                                                                                                             | 2004                                                                                                        |                                                                                                             |                                                  | 2003   |       |        | 2002   |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             | (In millions of dollars)                                                                                    |                                                                                                            
|Cash flows from operating activities:                                    |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |        |       |       |       
|                                                                         | Net loss                                                                                                                                                                                                    |                                                                                                             | $                                                                                                           | (746.6                                           | )      |       | $      | (788.1 | )      |       | $     | (468.4 | )     
|                                                                         |                                                                                                                                                                                                             | Less net income (loss) from discontinued operations                                                         |                                                                                                             |                                                  | 121.3  |       |        |        | (514.7 | )     |       |        | (266.0 | )    
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             | Net loss from continuing operations                                                                         |                                                                                                             |                                                  | (867.9 | )     |        |        | (273.4 | )     |       |        | (202.4 | )    
|                                                                         |                                                                                                                                                                                                             | Adjustments to reconcile net loss from continuing operations to
    net cash used by continuing operations: |                                                                                                             |                                                  |        |       |        |        |        |       |       |        |        |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Non-cash charges in other operating charges                                                                 |                                                  |        | 805.3 |        |        |        | 161.7 |       |        |        | 38.9  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Depreciation and amortization (including deferred financing
    costs of $5.8, $4.7 and $3.8, respectively) |                                                  |        | 28.1  |        |        |        | 30.4  |       |        |        | 36.1  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Gains  sale of Tacoma facility in 2003, sale of real
    estate and miscellaneous equipment in 2002        |                                                  |        |      |        |        |        | (14.5 | )     |        |        | (3.8  | )    
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Equity in (income) loss of unconsolidated affiliates, net of
    distributions                              |                                                  |        | (4.0  | )      |        |        | 1.0   |       |        |        | 2.4   |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | (Increase) decrease in trade and other receivables                                                          |                                                  |        | (30.7 | )      |        |        | (13.5 | )     |        |        | 7.3   |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | (Increase) decrease in inventories, excluding LIFO adjustments
    and other non-cash operating items       |                                                  |        | (24.5 | )      |        |        | 10.7  |       |        |        | 31.2  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Decrease (increase) in prepaid expenses and other current assets                                            |                                                  |        | .8    |        |        |        | 3.1   |       |        |        | (5.9  | )    
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Increase in accounts payable and accrued interest                                                           |                                                  |        | 16.4  |        |        |        | 8.1   |       |        |        | 30.5  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | (Decrease) increase in other accrued liabilities                                                            |                                                  |        | (18.6 | )      |        |        | 9.8   |       |        |        | 13.0  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Increase in payable to affiliates                                                                           |                                                  |        | 3.3   |        |        |        | .2    |       |        |        | .4    |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Increase (decrease) in accrued and deferred income taxes                                                    |                                                  |        | 1.7   |        |        |        | (4.1  | )     |        |        | .6    |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Net cash impact of changes in long-term assets and liabilities                                              |                                                  |        | (11.5 | )      |        |        | 27.1  |       |        |        | 22.9  |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Net cash provided (used) by discontinued operations                                                         |                                                  |        | 64.0  |        |        |        | (29.5 | )     |        |        | (23.5 | )    
|                                                                         |                                                                                                                                                                                                             |                                                                                                             | Other                                                                                                       |                                                  |        | (.4   | )      |        |        | (4.0  | )     |        |        | .6    |      
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             | Net cash used by operating activities            |        |       | (38.0  | )      |        |       | (86.9 | )      |        |       | (51.7 | )
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|Cash flows from investing activities:                                    |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |        |       |       |       
|                                                                         | Net proceeds from dispositions: real estate and equipment in
    2004, primarily Tacoma facility and interests in office building
    complex in 2003, primarily Fabricated products equipment
    in 2002 |                                                                                                             |                                                                                                             | 2.3                                              |        |       |        | 83.0   |        |       |       | 28.5   |       
|                                                                         | Capital expenditures                                                                                                                                                                                        |                                                                                                             |                                                                                                             | (7.6                                             | )      |       |        | (8.9   | )      |       |       | (10.9  | )     
|                                                                         | Net cash provided (used) by discontinued operations;
    primarily proceeds from sale of commodity interests in 2004 and
    Alpart-related capital expenditures in 2003 and 2002                           |                                                                                                             |                                                                                                             | 356.7                                            |        |       |        | (25.0  | )      |       |       | (33.8  | )     
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             | Net cash provided (used) by investing activities |        |       | 351.4  |        |        |       | 49.1  |        |        |       | (16.2 | )
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|Cash flows from financing activities:                                    |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |        |       |       |       
|                                                                         | Financing costs, primarily DIP Facility related                                                                                                                                                             |                                                                                                             |                                                                                                             | (2.4                                             | )      |       |        | (4.1   | )      |       |       | (8.8   | )     
|                                                                         | Net cash used for restricted proceeds from sale of commodity
    interests and payment of Alpart CARIFA loan of $14.6                                                                                       |                                                                                                             |                                                                                                             | (291.1                                           | )      |       |        |       |        |       |       |       |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             | Net cash used by financing activities            |        |       | (293.5 | )      |        |       | (4.1  | )      |        |       | (8.8  | )
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|Net increase (decrease) in cash and cash equivalents during the
    year |                                                                                                                                                                                                             |                                                                                                             | 19.9                                                                                                        |                                                  |        |       | (41.9  | )      |        |       | (76.7 | )     
|Cash and cash equivalents at beginning of year                           |                                                                                                                                                                                                             |                                                                                                             | 35.5                                                                                                        |                                                  |        |       | 77.4   |        |        |       | 154.1 |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|Cash and cash equivalents at end of year                                 |                                                                                                                                                                                                             | $                                                                                                           | 55.4                                                                                                        |                                                  |        | $     | 35.5   |        |        | $     | 77.4  |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|Supplemental disclosure of cash flow information:                        |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |        |       |       |       
|                                                                         | Interest paid, net of capitalized interest of $.1, $.2 and $.1                                                                                                                                              |                                                                                                             | $                                                                                                           | 3.8                                              |        |       | $      | 4.0    |        |       | $     | 5.4    |       
|                                                                         | Less interest paid by discontinued operations, net of
    capitalized interest of $.9 in 2003 and $1.1 in 2002                                                                                              |                                                                                                             |                                                                                                             | (.9                                              | )      |       |        | (1.2   | )      |       |       | (1.4   | )     
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             | $                                                                                                           | 2.9                                                                                                         |                                                  |        | $     | 2.8    |        |        | $     | 4.0   |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         | Income taxes paid                                                                                                                                                                                           |                                                                                                             | $                                                                                                           | 10.7                                             |        |       | $      | 46.1   |        |       | $     | 37.5   |       
|                                                                         | Less income taxes paid by discontinued operations                                                                                                                                                           |                                                                                                             |                                                                                                             | (10.7                                            | )      |       |        | (41.3  | )      |       |       | (34.5  | )     
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       
|                                                                         |                                                                                                                                                                                                             | $                                                                                                           |                                                                                                            |                                                  |        | $     | 4.8    |        |        | $     | 3.0   |       
|                                                                         |                                                                                                                                                                                                             |                                                                                                             |                                                                                                             |                                                  |        |       |        |        |       



46



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In millions of dollars, except share amounts)




|   |                           
|-- | --------------------------
|1. | Reorganization Proceedings

Background.












47



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Case Administration.






Commodity-related and Inactive Subsidiaries.


48



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                                             |  |  |                  | 
|-------------------------------------------- |  |  | ---------------- | 
|Senior Notes and Senior Subordinated Notes   |  |  | $390.7 to $421.8 | 
|PBGC                                         |  |  | $187.6 to $198.5 | 
|State of Louisiana Solid Waste Revenue Bonds |  |  | $  0.0 to $  8.0 | 

3 4 7 8 7 8


7 8 7 8


49



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


7 8








50



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Entities Containing the Fabricated Products and Certain Other
Operations.










| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) All post-petition and secured claims are expected to
    either be assumed by the emerging entity or paid at emergence
    (see Exit Cost discussion below);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (b) Pursuant to agreements reached with salaried and hourly
    retirees in early 2004, in return for cancellation of the
    retiree medical plan, as more fully discussed in Note 9,
    the Company is making certain fixed monthly payments into
    Voluntary Employee Beneficiary Associations (VEBAs)
    until emergence and then has agreed to make certain variable
    annual VEBA contributions depending on the emerging
    entitys operating results and financial liquidity. In
    addition, upon emergence the VEBAs are to receive a contribution
    of 75% of the residual value of the remaining Debtors in the
    form of newly issued equity in the emerging entity. Residual
    value in this context means the Companys remaining value
    after taking into account: (i) the contributions to the
    personal injury trust described below; (ii) the
    satisfaction of administrative, priority and secured claims as
    per (a) above; (iii) an equity incentive plan; and
    (iv) the satisfaction of the PBGCs claim against
    KACOCL;
|
| | (c) Pursuant to an agreement reached in early 2005, all
    pending and future asbestos-related personal injury claims, all
    pending and future silica and coal tar pitch volatiles personal
    injury claims and all hearing loss claims would be resolved
    through the formation of one or more trusts to which all such                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

51



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | claims would be directed by channeling injunctions that would
    permanently remove all liability for such claims from the
    Debtors. The trusts would be funded pursuant to statutory
    requirements and agreements with representatives of the affected
    parties, using (i) the Debtors insurance assets,
    (ii) $13.0 in cash from the Company, (iii) 100% of the
    equity in a Company subsidiary whose sole asset will be a piece
    of real property that produces modest rental income, and
    (iv) a portion of the emerging entitys equity in
    proportion to approximately $830.0 of intercompany claims of KFC
    against the Company that are to be assigned to the trust (which
    will be satisfied out of the 25% of equity referred to in
    (d) below); and
|
| | (d) Other pre-petition claims will receive 25% of the
    residual value of the remaining Debtors in the form of equity in
    the emerging entity. Claims that are expected to be within this
    group include (i) any claims of the Senior Notes, the Sub
    Notes and PBGC that are not satisfied under the Liquidating
    Plans, (ii) the approximate $830.0 of intercompany claims
    that the Company has agreed to assign to the personal injury
    trust(s) referred to in (c) above, and (iii) all
    unsecured trade and other claims. Included in this category are
    approximately $276.0 of intercompany claims of KFC against the
    Company that will be a part of the consideration in the
    Liquidating Trusts.                                                      





Financial Statement Presentation. Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code




52



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Financial Information.


Condensed Consolidating Balance Sheets


December 31, 2004


|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |      |   |   |          |       | 
|------------------------------------------------------- | ---------------------------------------------- | ------- | -------- | ----- | ----------- | -------------- | --- | ------- |  | - | ------------ | ---- | - | - | -------- | ----- | 
|                                                        |                                                |         |          |       |             | Consolidation/ |     |         | 
|                                                        |                                                |         |          |       |             | Elimination    |     |         | 
|                                                        |                                                | Debtors |          |       | Non-Debtors |                |     | Entries |  |   | Consolidated |     
|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |     
|Current assets                                          |                                                | $       | 294.5    |       |             | $              | 2.1 |         |  | $ |             |      |   | $ | 296.6    |      
|Discontinued operations current assets                 |                                                |         | 30.6     |       |             |                |    |         |  |   |             |      |   |   | 30.6     |      
|Investments in subsidiaries and affiliates              |                                                |         | 20.9     |       |             |                |    |         |  |   | (4.2         | )    |   |   | 16.7     |      
|Intercompany receivables (payables), net                |                                                |         | (4.5     | )     |             |                | 4.5 |         |  |   |             |      |   |   |         |      
|Property and equipment, net                             |                                                |         | 214.6    |       |             |                |    |         |  |   |             |      |   |   | 214.6    |      
|Restricted proceeds from sale of commodity assets       |                                                |         | 280.8    |       |             |                |    |         |  |   |             |      |   |   | 280.8    |      
|Personal injury-related insurance recoveries receivable |                                                |         | 967.0    |       |             |                |    |         |  |   |             |      |   |   | 967.0    |      
|Other assets                                            |                                                |         | 42.5     |       |             |                |    |         |  |   |             |      |   |   | 42.5     |      
|Discontinued operations long term assets               |                                                |         | 38.9     |       |             |                |    |         |  |   |             |      |   |   | 38.9     |      
|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |     
|                                                        |                                                | $       | 1,885.3  |       |             | $              | 6.6 |         |  | $ | (4.2         | )    |   | $ | 1,887.7  |      
|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |     
|Liabilities not subject to compromise                  |                                                |         |          |       |             |                |     |         |  |   |              |      |   |   |          |      
|                                                        | Current liabilities                            |         | $        | 188.4 |             |                | $   | 3.2     |  |   | $            | (2.0 | ) |   | $        | 189.6 | 
|                                                        | Discontinued operations current liabilities   |         |          | 57.7  |             |                |     |        |  |   |              |     |   |   |          | 57.7  | 
|                                                        | Long-term liabilities                          |         |          | 34.5  |             |                |     | 1.2     |  |   |              |     |   |   |          | 35.7  | 
|                                                        | Discontinued operations long-term liabilities |         |          | 26.4  |             |                |     |        |  |   |              |     |   |   |          | 26.4  | 
|Liabilities subject to compromise                       |                                                |         | 3,954.9  |       |             |                |    |         |  |   |             |      |   |   | 3,954.9  |      
|Stockholders equity (deficit)                          |                                                |         | (2,376.6 | )     |             |                | 2.2 |         |  |   | (2.2         | )    |   |   | (2,376.6 | )    
|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |     
|                                                        |                                                | $       | 1,885.3  |       |             | $              | 6.6 |         |  | $ | (4.2         | )    |   | $ | 1,887.7  |      
|                                                        |                                                |         |          |       |             |                |     |         |  |   |              |     

53



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Balance Sheets


December 31, 2003


|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |      |   |   |          |       | 
|------------------------------------------------------- | ---------------------------------------------- | ------- | -------- | ----- | -------------- | -------------- | ----- | ------- |  | - | ------------ | ---- | - | - | -------- | ----- | 
|                                                        |                                                |         |          |       |                | Consolidation/ |       |         | 
|                                                        |                                                |         |          |       |                | Elimination    |       |         | 
|                                                        |                                                | Debtors |          |       | Non-Debtors(1) |                |       | Entries |  |   | Consolidated |     
|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |     
|Current assets                                          |                                                | $       | 234.6    |       |                | $              | 2.9   |         |  | $ |             |      |   | $ | 237.5    |      
|Discontinued operations current assets                 |                                                |         | 93.5     |       |                |                | 100.2 |         |  |   |             |      |   |   | 193.7    |      
|Investments in subsidiaries and affiliates              |                                                |         | 357.0    |       |                |                |      |         |  |   | (343.9       | )    |   |   | 13.1     |      
|Intercompany receivables (payables), net                |                                                |         | (5.4     | )     |                |                | 5.4   |         |  |   |             |      |   |   |         |      
|Property and equipment, net                             |                                                |         | 230.1    |       |                |                |      |         |  |   |             |      |   |   | 230.1    |      
|Personal injury-related insurance recoveries receivable |                                                |         | 465.4    |       |                |                |      |         |  |   |             |      |   |   | 465.4    |      
|Other assets                                            |                                                |         | 55.1     |       |                |                |      |         |  |   |             |      |   |   | 55.1     |      
|Discontinued operations long term assets               |                                                |         | (37.2    | )     |                |                | 471.0 |         |  |   |              |      |   |   | 433.8    |      
|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |     
|                                                        |                                                | $       | 1,393.1  |       |                | $              | 579.5 |         |  | $ | (343.9       | )    |   | $ | 1,628.7  |      
|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |     
|Liabilities not subject to compromise                  |                                                |         |          |       |                |                |       |         |  |   |              |      |   |   |          |      
|                                                        | Current liabilities                            |         | $        | 139.4 |                |                | $     | 4.6     |  |   | $            | (2.0 | ) |   | $        | 142.0 | 
|                                                        | Discontinued operations current liabilities   |         |          | 90.8  |                |                |       | 86.7    |  |   |              |     |   |   |          | 177.5 | 
|                                                        | Long-term liabilities                          |         |          | 60.0  |                |                |       | 1.6     |  |   |              |     |   |   |          | 61.6  | 
|                                                        | Discontinued operations long-term liabilities |         |          | 64.0  |                |                |       | 129.1   |  |   |              | 15.6 |   |   |          | 208.7 | 
|Liabilities subject to compromise                       |                                                |         | 2,770.1  |       |                |                |      |         |  |   |             |      |   |   | 2,770.1  |      
|Stockholders equity (deficit)                          |                                                |         | (1,731.2 | )     |                |                | 357.5 |         |  |   | (357.5       | )    |   |   | (1,731.2 | )    
|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |     
|                                                        |                                                | $       | 1,393.1  |       |                | $              | 579.5 |         |  | $ | (343.9       | )    |   | $ | 1,628.7  |      
|                                                        |                                                |         |          |       |                |                |       |         |  |   |              |     






|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(1) | Non-debtors discontinued operations amounts relate
    primarily to Alpart and Valco.

54



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2004


|                                  |                                         |         |         |       |             |                |       |         |  |   |              |   |  |   |         |       | 
|--------------------------------- | --------------------------------------- | ------- | ------- | ----- | ----------- | -------------- | ----- | ------- |  | - | ------------ | - |  | - | ------- | ----- | 
|                                  |                                         |         |         |       |             | Consolidation/ |       |         | 
|                                  |                                         |         |         |       |             | Elimination    |       |         | 
|                                  |                                         | Debtors |         |       | Non-Debtors |                |       | Entries |  |   | Consolidated |  
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|Net sales                         |                                         | $       | 942.4   |       |             | $              |      |         |  | $ |             |   |  | $ | 942.4   |      
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|Costs and expenses               |                                         |         |         |       |             |                |       |         |  |   |              |   |  |   |         |      
|                                  | Operating costs and expenses            |         |         | 966.1 |             |                |       | .5      |  |   |              |  |  |   |         | 966.6 | 
|                                  | Other operating charges (benefits), net |         |         | 793.2 |             |                |       |        |  |   |              |  |  |   |         | 793.2 | 
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|                                  |                                         |         | 1,759.3 |       |             |                | .5    |         |  |   |              |   |  |   | 1,759.8 |      
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|Operating income (loss)           |                                         |         | (816.9  | )     |             |                | (.5   | )       |  |   |             |   |  |   | (817.4  | )    
|Interest expense                  |                                         |         | (9.5    | )     |             |                |      |         |  |   |             |   |  |   | (9.5    | )    
|All other income (expense), net   |                                         |         | (41.2   | )     |             |                | .6    |         |  |   | 5.8          |   |  |   | (34.8   | )    
|Income tax and minority interests |                                         |         | (6.2    | )     |             |                |      |         |  |   |             |   |  |   | (6.2    | )    
|Equity in income of subsidiaries  |                                         |         | (52.2   | )     |             |                |       |         |  |   | 52.2         |   |  |   |        |      
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|Loss from continuing operations   |                                         |         | (926.0  | )     |             |                | .1    |         |  |   | 58.0         |   |  |   | (867.9  | )    
|Discontinued operations           |                                         |         | 179.4   |       |             |                | (58.1 | )       |  |   |             |   |  |   | 121.3   |      
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  
|Net income (loss)                 |                                         | $       | (746.6  | )     |             | $              | (58.0 | )       |  | $ | 58.0         |   |  | $ | (746.6  | )    
|                                  |                                         |         |         |       |             |                |       |         |  |   |              |  

Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2003


|                                  |                                         |         |        |       |             |                |       |         |  |   |              |   |  |   |        |       | 
|--------------------------------- | --------------------------------------- | ------- | ------ | ----- | ----------- | -------------- | ----- | ------- |  | - | ------------ | - |  | - | ------ | ----- | 
|                                  |                                         |         |        |       |             | Consolidation/ |       |         | 
|                                  |                                         |         |        |       |             | Elimination    |       |         | 
|                                  |                                         | Debtors |        |       | Non-Debtors |                |       | Entries |  |   | Consolidated |  
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Net sales                         |                                         | $       | 710.2  |       |             | $              |      |         |  | $ |             |   |  | $ | 710.2  |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Costs and expenses               |                                         |         |        |       |             |                |       |         |  |   |              |   |  |   |        |      
|                                  | Operating costs and expenses            |         |        | 798.5 |             |                |       | .7      |  |   |              |  |  |   |        | 799.2 | 
|                                  | Other operating charges (benefits), net |         |        | 141.6 |             |                |       |        |  |   |              |  |  |   |        | 141.6 | 
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|                                  |                                         |         | 940.1  |       |             |                | .7    |         |  |   |             |   |  |   | 940.8  |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Operating income (loss)           |                                         |         | (229.9 | )     |             |                | (.7   | )       |  |   |             |   |  |   | (230.6 | )    
|Interest expense                  |                                         |         | (9.1   | )     |             |                |      |         |  |   |             |   |  |   | (9.1   | )    
|All other income (expense), net   |                                         |         | (43.6  | )     |             |                | .2    |         |  |   | 11.2         |   |  |   | (32.2  | )    
|Income tax and minority interests |                                         |         | (1.6   | )     |             |                | .1    |         |  |   |             |   |  |   | (1.5   | )    
|Equity in income of subsidiaries  |                                         |         | (21.2  | )     |             |                |      |         |  |   | 21.2         |   |  |   |       |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Loss from continuing operations   |                                         |         | (305.4 | )     |             |                | (.4   | )       |  |   | 32.4         |   |  |   | (273.4 | )    
|Discontinued operations           |                                         |         | (482.7 | )     |             |                | (32.0 | )       |  |   |             |   |  |   | (514.7 | )    
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Net income (loss)                 |                                         | $       | (788.1 | )     |             | $              | (32.4 | )       |  | $ | 32.4         |   |  | $ | (788.1 | )    
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  

55



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2002


|                                  |                                         |         |        |       |             |                |       |         |  |   |              |   |  |   |        |       | 
|--------------------------------- | --------------------------------------- | ------- | ------ | ----- | ----------- | -------------- | ----- | ------- |  | - | ------------ | - |  | - | ------ | ----- | 
|                                  |                                         |         |        |       |             | Consolidation/ |       |         | 
|                                  |                                         |         |        |       |             | Elimination    |       |         | 
|                                  |                                         | Debtors |        |       | Non-Debtors |                |       | Entries |  |   | Consolidated |  
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Net sales                         |                                         | $       | 709.0  |       |             | $              |      |         |  | $ |             |   |  | $ | 709.0  |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Costs and expenses               |                                         |         |        |       |             |                |       |         |  |   |              |   |  |   |        |      
|                                  | Operating costs and expenses            |         |        | 821.7 |             |                |       | .5      |  |   |              |  |  |   |        | 822.2 | 
|                                  | Other operating charges (benefits), net |         |        | 31.8  |             |                |       |        |  |   |              |  |  |   |        | 31.8  | 
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|                                  |                                         |         | 853.5  |       |             |                | .5    |         |  |   |             |   |  |   | 854.0  |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Operating income (loss)           |                                         |         | (144.5 | )     |             |                | (.5   | )       |  |   |             |   |  |   | (145.0 | )    
|Interest expense                  |                                         |         | (19.0  | )     |             |                |      |         |  |   |             |   |  |   | (19.0  | )    
|All other income (expense), net   |                                         |         | (44.8  | )     |             |                | .3    |         |  |   | 10.3         |   |  |   | (34.2  | )    
|Income tax and minority interests |                                         |         | (4.0   | )     |             |                | (.2   | )       |  |   |             |   |  |   | (4.2   | )    
|Equity in income of subsidiaries  |                                         |         | (2.5   | )     |             |                |      |         |  |   | 2.5          |   |  |   |       |      
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Loss from continuing operations   |                                         |         | (214.8 | )     |             |                | (.4   | )       |  |   | 12.8         |   |  |   | (202.4 | )    
|Discontinued operations           |                                         |         | (253.6 | )     |             |                | (12.4 | )       |  |   |             |   |  |   | (266.0 | )    
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  
|Net income (loss)                 |                                         | $       | (468.4 | )     |             | $              | (12.8 | )       |  | $ | 12.8         |   |  | $ | (468.4 | )    
|                                  |                                         |         |        |       |             |                |       |         |  |   |              |  

56



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Cash Flows


For the Year Ended December 31, 2004


|                                               |                         |         |        |        |             |                |       |         |   |              |   |   |  |   |        |        |  
|---------------------------------------------- | ----------------------- | ------- | ------ | ------ | ----------- | -------------- | ----- | ------- | - | ------------ | - | - |  | - | ------ | ------ | -
|                                               |                         |         |        |        |             | Consolidation/ |       |        
|                                               |                         |         |        |        |             | Elimination    |       |        
|                                               |                         | Debtors |        |        | Non-Debtors |                |       | Entries |   | Consolidated |  
|                                               |                         |         |        |        |             |                |       |         |   |              |  
|Net cash provided (used) by:                   |                         |         |        |        |             |                |       |         |   |              |   |   |  |   |        |       
|Operating activities                          |                         |         |        |        |             |                |       |         |   |              |   |   |  |   |        |       
|                                               | Continuing operations   |         | $      | (101.8 | )           |                | $     | (.2     | ) |              | $ |  |  |   | $      | (102.0 | )
|                                               | Discontinued operations |         |        | 46.0   |             |                |       | 18.0    |   |              |   |  |  |   |        | 64.0   |  
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|                                               |                         |         | (55.8  | )      |             |                | 17.8  |         |   |              |  |   |  |   | (38.0  | )     
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|Investing activities                          |                         |         |        |        |             |                |       |         |   |              |   |   |  |   |        |       
|                                               | Continuing operations   |         |        | (5.3   | )           |                |       |        |   |              |   |  |  |   |        | (5.3   | )
|                                               | Discontinued operations |         |        | 359.6  |             |                |       | (2.9    | ) |              |   |  |  |   |        | 356.7  |  
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|                                               |                         |         | 354.3  |        |             |                | (2.9  | )       |   |              |  |   |  |   | 351.4  |       
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|Financing activities                          |                         |         |        |        |             |                |       |         |   |              |   |   |  |   |        |       
|                                               | Continuing operations   |         |        | (2.4   | )           |                |       |        |   |              |   |  |  |   |        | (2.4   | )
|                                               | Discontinued operations |         |        | (276.5 | )           |                |       | (14.6   | ) |              |   |  |  |   |        | (291.1 | )
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|                                               |                         |         | (278.9 | )      |             |                | (14.6 | )       |   |              |  |   |  |   | (293.5 | )     
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|Net decrease in cash and cash equivalents      |                         |         | 19.6   |        |             |                | .3    |         |   |              |  |   |  |   | 19.9   |       
|Cash and cash equivalents, beginning of period |                         |         | 35.4   |        |             |                | .1    |         |   |              |  |   |  |   | 35.5   |       
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  
|Cash and cash equivalents, end of period       |                         | $       | 55.0   |        |             | $              | .4    |         |   | $            |  |   |  | $ | 55.4   |       
|                                               |                         |         |        |        |             |                |       |         |   |              |   |  

57



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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                          |                         |         |        |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         | $      | (56.7 | )           |                | $     | (.7     | ) |              | $ |  |  |   | $     | (57.4 | )
|                                               | Discontinued operations |         |        | (56.8 | )           |                |       | 27.3    |   |              |   |  |  |   |       | (29.5 | )
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|                                               |                         |         | (113.5 | )     |             |                | 26.6  |         |   |              |  |   |  |   | (86.9 | )    
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|Investing activities                          |                         |         |        |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         |        | 74.1  |             |                |       |        |   |              |   |  |  |   |       | 74.1  |  
|                                               | Discontinued operations |         |        | 1.5   |             |                |       | (26.5   | ) |              |   |  |  |   |       | (25.0 | )
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|                                               |                         |         | 75.6   |       |             |                | (26.5 | )       |   |              |  |   |  |   | 49.1  |      
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|Financing activities                          |                         |         |        |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         |        | (4.1  | )           |                |       |        |   |              |   |  |  |   |       | (4.1  | )
|                                               | Discontinued operations |         |        |      |             |                |       |        |   |              |   |  |  |   |       |      |  
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|                                               |                         |         | (4.1   | )     |             |                |      |         |   |              |  |   |  |   | (4.1  | )    
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|Net decrease in cash and cash equivalents      |                         |         | (42.0  | )     |             |                | .1    |         |   |              |  |   |  |   | (41.9 | )    
|Cash and cash equivalents, beginning of period |                         |         | 77.4   |       |             |                |      |         |   |              |  |   |  |   | 77.4  |      
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  
|Cash and cash equivalents, end of period       |                         | $       | 35.4   |       |             | $              | .1    |         |   | $            |  |   |  | $ | 35.5  |      
|                                               |                         |         |        |       |             |                |       |         |   |              |   |  

58



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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                          |                         |         |       |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         | $     | (27.8 | )           |                | $     | (.4     | ) |              | $ |  |  |   | $     | (28.2 | )
|                                               | Discontinued operations |         |       | (56.7 | )           |                |       | 33.2    |   |              |   |  |  |   |       | (23.5 | )
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|                                               |                         |         | (84.5 | )     |             |                | 32.8  |         |   |              |  |   |  |   | (51.7 | )    
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|Investing activities                          |                         |         |       |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         |       | 18.3  |             |                |       | (.7     | ) |              |   |  |  |   |       | 17.6  |  
|                                               | Discontinued operations |         |       | (.2   | )           |                |       | (33.6   | ) |              |   |  |  |   |       | (33.8 | )
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|                                               |                         |         | 18.1  |       |             |                | (34.3 | )       |   |              |  |   |  |   | (16.2 | )    
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|Financing activities                          |                         |         |       |       |             |                |       |         |   |              |   |   |  |   |       |      
|                                               | Continuing operations   |         |       | (8.8  | )           |                |       |        |   |              |   |  |  |   |       | (8.8  | )
|                                               | Discontinued operations |         |       |      |             |                |       |        |   |              |   |  |  |   |       |      |  
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|                                               |                         |         | (8.8  | )     |             |                |      |         |   |              |  |   |  |   | (8.8  | )    
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|Net decrease in cash and cash equivalents      |                         |         | (75.2 | )     |             |                | (1.5  | )       |   |              |  |   |  |   | (76.7 | )    
|Cash and cash equivalents, beginning of period |                         |         | 152.6 |       |             |                | 1.5   |         |   |              |  |   |  |   | 154.1 |      
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  
|Cash and cash equivalents, end of period       |                         | $       | 77.4  |       |             | $              |      |         |   | $            |  |   |  | $ | 77.4  |      
|                                               |                         |         |       |       |             |                |       |         |   |              |   |  

Classification of Liabilities as Liabilities Not
Subject to Compromise Versus Liabilities Subject to
Compromise.




59



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                             |  |              |         |  |      |   |         | 
|---------------------------------------------------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                                                             |  | December 31, |        
|                                                                             |  |              |        
|                                                                             |  | 2004         |         |  | 2003 |  
|                                                                             |  |              |         |  |      |  
|Accrued postretirement medical obligation (Note 9)                           |  | $            | 1,042.1 |  |      | $ | 685.1   | 
|Accrued asbestos and certain other personal injury liabilities
    (Note 11) |  |              | 1,115.0 |  |      |   | 610.0   | 
|Debt (Note 7)                                                                |  |              | 847.6   |  |      |   | 848.2   | 
|Accrued pension benefits (Note 9)                                            |  |              | 625.7   |  |      |   | 448.0   | 
|Unfair labor practice settlement (Note 11)                                   |  |              | 175.0   |  |      |   |        | 
|Accounts payable                                                             |  |              | 29.8    |  |      |   | 29.4    | 
|Accrued interest                                                             |  |              | 47.5    |  |      |   | 47.5    | 
|Accrued environmental liabilities (Note 11)                                  |  |              | 30.6    |  |      |   | 43.0    | 
|Other accrued liabilities                                                    |  |              | 41.6    |  |      |   | 58.9    | 
|                                                                             |  |              |         |  |      |  
|                                                                             |  | $            | 3,954.9 |  |      | $ | 2,770.1 | 
|                                                                             |  |              |         |  |      |  






|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Other accrued liabilities include hearing loss claims of $15.8
    at December 31, 2004 and 2003 (see Note 11).                                    
|   
|(2) | The above amounts exclude $26.4 in 2004 and $49.9 in 2003
    related to discontinued operations. Such amounts were primarily
    accounts payable.



Reorganization Items.


|                                                             |  |                          |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------------------ |  | ------------------------ | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                             |  | Years Ended December 31, |     
|                                                             |  |                          |     
|                                                             |  | 2004                     |      |   | 2003 |   |      | 2002 | 
|                                                             |  |                          |      |   |      |   |      |      | 
|Professional fees                                            |  | $                        | 39.0 |   |      | $ | 27.5 |      |  | $ | 28.8 |  
|Accelerated amortization of certain deferred financing costs |  |                          |     |   |      |   |     |      |  |   | 4.5  |  
|Interest income                                              |  |                          | (.8  | ) |      |   | (.8  | )    |  |   | (1.8 | )
|Other                                                        |  |                          | .8   |   |      |   | .3   |      |  |   | 1.8  |  
|                                                             |  |                          |      |   |      |   |      |      | 
|                                                             |  | $                        | 39.0 |   |      | $ | 27.0 |      |  | $ | 33.3 |  
|                                                             |  |                          |      |   |      |   |      |      | 

60



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies

Going Concern.


Financial Statement
Presentation


Principles of Consolidation.






Recognition of Sales.


Cash and Cash Equivalents.


Inventories.


61



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                               |                                                      |              |       |      |      |   |      |      | 
|------------------------------ | ---------------------------------------------------- | ------------ | ----- | ---- | ---- | - | ---- | ---- | 
|                               |                                                      | December 31, |      
|                               |                                                      |              |      
|                               |                                                      | 2004         |       |      | 2003 |  
|                               |                                                      |              |       |      |      |  
|Fabricated products           |                                                      |              |       |      |      |   |      |     
|                               | Finished products                                    |              | $     | 23.3 |      |   | $    | 27.8 | 
|                               | Work in process                                      |              |       | 42.2 |      |   |      | 30.1 | 
|                               | Raw materials                                        |              |       | 27.9 |      |   |      | 22.8 | 
|                               | Operating supplies and repairs and maintenance parts |              |       | 11.8 |      |   |      | 11.7 | 
|                               |                                                      |              |       |      |      |  
|                               |                                                      |              | 105.2 |      |      |   | 92.4 |     
|Commodities  Primary aluminum |                                                      |              | .1    |      |      |   | .1   |     
|                               |                                                      |              |       |      |      |  
|                               |                                                      | $            | 105.3 |      |      | $ | 92.5 |     
|                               |                                                      |              |       |      |      |  





|                                                                      |                                                                                                                                                                           |      |      |      |      |   |     |      |  |   |     |     | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ---- | ---- | ---- | - | --- | ---- |  | - | --- | --- | 
|                                                                      |                                                                                                                                                                           | 2004 |      |      | 2003 |   |     | 2002 | 
|                                                                      |                                                                                                                                                                           |      |      |      |      |   |     |      | 
|Included in cost of products sold:                                    |                                                                                                                                                                           |      |      |      |      |   |     |      |  |   |     |    
|                                                                      | LIFO inventory charges                                                                                                                                                    |      | $    | 12.1 |      |   | $   | 3.2  |  |   | $   | 3.5 | 
|Included in other operating charges (benefits), net (see
    Note 6): |                                                                                                                                                                           |      |      |      |      |   |     |      |  |   |     |    
|                                                                      | Net realizable value charge  Tacoma smelter
    impairment (Primary Aluminum), net of intersegment profit
    elimination of Primary Aluminum impairment charges of $2.1 |      |      |     |      |   |     |     |  |   |     | 2.1 | 
|                                                                      | LIFO inventory charges associated with permanent inventory
    reductions  Product line exit (Fabricated Products)                                                       |      |      |     |      |   |     |     |  |   |     | 1.6 | 
|                                                                      |                                                                                                                                                                           |      |      |      |      |   |     |      | 
|                                                                      |                                                                                                                                                                           | $    | 12.1 |      |      | $ | 3.2 |      |  | $ | 7.2 |    
|                                                                      |                                                                                                                                                                           |      |      |      |      |   |     |      | 



Depreciation.


Stock-Based Compensation.


62



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






Other Income (Expense).


|                                                                                                                    |  |                         |      |   |      |   |      |      |  |   |      |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                                                                    |  | Year Ended December 31, |     
|                                                                                                                    |  |                         |     
|                                                                                                                    |  | 2004                    |      |   | 2003 |   |      | 2002 | 
|                                                                                                                    |  |                         |      |   |      |   |      |      | 
|Gains on sale of real estate and miscellaneous equipment
    associated with properties with no operations (Note 5) |  | $                       | 1.8  |   |      | $ |     |      |  | $ | 3.8  |  
|Settlement of outstanding obligations of former affiliate                                                           |  |                         | 6.3  |   |      |   |     |      |  |   |     |  
|Asbestos and personal injury-related charges (Note 11)                                                              |  |                         | (1.0 | ) |      |   |     |      |  |   |     |  
|Adjustment to environmental liabilities (Note 11)                                                                   |  |                         | (1.4 | ) |      |   | (7.5 | )    |  |   |     |  
|All other, net                                                                                                      |  |                         | (1.5 | ) |      |   | 2.3  |      |  |   | (4.7 | )
|                                                                                                                    |  |                         |      |   |      |   |      |      | 
|                                                                                                                    |  | $                       | 4.2  |   |      | $ | (5.2 | )    |  | $ | (.9  | )
|                                                                                                                    |  |                         |      |   |      |   |      |      | 



Deferred Financing Costs.


Goodwill.


Foreign Currency.


Derivative Financial Instruments.


63



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






Fair Value of Financial Instruments.


New Accounting Pronouncements. Share-Based
Payment Accounting for Stock-Based
Compensation Accounting for Stock Issued to Employees.


Inventory Costs, an Amendment of ARB No. 43,
Chapter 4


Exchange of Nonmonetary Assets, an amendment to APB Opinion
No. 29


64



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Reclassifications.




|   |                        
|-- | -----------------------
|3. | Discontinued Operations

Accounting for the Impairment or Disposal of Long-Lived
Assets






65



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |   |       |   |  |   |       | 
|----------------------------------- |  | ----------------- | ---- | ------- | ----------------- | - | --- | ----- |  | ------- | --------- |  | -------- | --------- | ----- |  | ----- | - | ----- | - |  | - | ----- | 
|                                    |  | December 31, 2004 |      |         | December 31, 2003 |  
|                                    |  |                   |      |         |                   |  
|                                    |  |                   |      | Primary |                   |   |     |       |  |         | Primary   |  |          |          
|                                    |  | Alumina           |      |         | Aluminum          |   |     |       |  | Alumina |           |  | Aluminum |           |       | 
|                                    |  | Interests         |      |         | Interests         |   |     | Total |  |         | Interests |  |          | Interests |       |  | Total |  
|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |  
|Current assets                      |  | $                 | 30.6 |         |                   | $ |    |       |  | $       | 30.6      |  |          | $         | 150.6 |  |       | $ | 43.1  |   |  | $ | 193.7 | 
|Property, plant and equipment, net  |  |                   |     |         |                   |   |    |       |  |         |          |  |          |           | 305.2 |  |       |   | 77.3  |   |  |   | 382.5 | 
|Investments in affiliates and other |  |                   | 38.9 |         |                   |   |    |       |  |         | 38.9      |  |          |           | 49.3  |  |       |   | 2.0   |   |  |   | 51.3  | 
|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |  
|                                    |  | $                 | 69.5 |         |                   | $ |    |       |  | $       | 69.5      |  |          | $         | 505.1 |  |       | $ | 122.4 |   |  | $ | 627.5 | 
|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |  
|Current liabilities                 |  | $                 | 57.3 |         |                   | $ | .4  |       |  | $       | 57.7      |  |          | $         | 116.0 |  |       | $ | 61.5  |   |  | $ | 177.5 | 
|Long-term debt                      |  |                   |     |         |                   |   |    |       |  |         |          |  |          |           | 22.0  |  |       |   |      |   |  |   | 22.0  | 
|Long-term liabilities               |  |                   |     |         |                   |   |    |       |  |         |          |  |          |           | 16.1  |  |       |   | (.4   | ) |  |   | 15.7  | 
|Liabilities subject to compromise   |  |                   | 25.6 |         |                   |   | .8  |       |  |         | 26.4      |  |          |           | 21.9  |  |       |   | 28.0  |   |  |   | 49.9  | 
|Minority interests                  |  |                   |     |         |                   |   |    |       |  |         |          |  |          |           | 105.9 |  |       |   | 15.2  |   |  |   | 121.1 | 
|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |  
|                                    |  | $                 | 82.9 |         |                   | $ | 1.2 |       |  | $       | 84.1      |  |          | $         | 281.9 |  |       | $ | 104.3 |   |  | $ | 386.2 | 
|                                    |  |                   |      |         |                   |   |     |       |  |         |           |  |          |           |       |  |       |  



|                                                               |  |           |       |         |           |   |       |       |  |         |           |   |          |           |        |   |       |         |       |           |          |   |           |   |  |       |       |   |  |   |        |   |  |   |        |  
|-------------------------------------------------------------- |  | --------- | ----- | ------- | --------- | - | ----- | ----- |  | ------- | --------- | - | -------- | --------- | ------ | - | ----- | ------- | ----- | --------- | -------- | - | --------- | - |  | ----- | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                                               |  | 2004      |       |         | 2003      |   |       | 2002  | 
|                                                               |  |           |       |         |           |   |       |       | 
|                                                               |  |           |       | Primary |           |   |       |       |  |         | Primary   |   |          |           |        |   |       | Primary |       |           |         
|                                                               |  | Alumina   |       |         | Aluminum  |   |       |       |  | Alumina |           |   | Aluminum |           |        |   |       | Alumina |       |           | Aluminum |   |           |  
|                                                               |  | Interests |       |         | Interests |   |       | Total |  |         | Interests |   |          | Interests |        |   | Total |         |       | Interests |          |   | Interests |   |  | Total |      
|                                                               |  |           |       |         |           |   |       |       |  |         |           |   |          |           |        |   |       |         |       |           |          |   |           |   |  |       |      
|Net sales                                                      |  | $         | 546.0 |         |           | $ | .2    |       |  | $       | 546.2     |   |          | $         | 637.9  |   |       | $       | 26.8  |           |          | $ | 664.7     |   |  | $     | 573.5 |   |  | $ | 194.4  |   |  | $ | 767.9  |  
|Operating income (loss)                                        |  |           | 53.6  |         |           |   | (59.8 | )     |  |         | (6.2      | ) |          |           | (450.1 | ) |       |         | (58.2 | )         |          |   | (508.3    | ) |  |       | (28.5 | ) |  |   | (232.4 | ) |  |   | (260.9 | )
|Gain on sale of commodity interests                            |  |           | 103.2 |         |           |   | 23.4  |       |  |         | 126.6     |   |          |           |       |   |       |         |      |           |          |   |          |   |  |       |      |   |  |   |       |   |  |   |       |  
|Income (loss) before income taxes and minority
    interests  |  |           | 158.2 |         |           |   | (35.7 | )     |  |         | 122.5     |   |          |           | (453.7 | ) |       |         | (57.5 | )         |          |   | (511.2    | ) |  |       | (28.8 | ) |  |   | (232.5 | ) |  |   | (261.3 | )
|Net income (loss)                                              |  |           | 142.7 |         |           |   | (21.4 | )     |  |         | 121.3     |   |          |           | (459.9 | ) |       |         | (54.8 | )         |          |   | (514.7    | ) |  |       | (34.7 | ) |  |   | (231.3 | ) |  |   | (266.0 | )






|    |                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Alumina interests for the year ended December 31, 2003
    include Gramercy/ KJBC impairment charges of $368.0 (see
    Note 5).                                                                    
|   
|(2) | Primary aluminum interests for the years ended December 31,
    2004 and 2002 include impairment charges of $33.0
    (Valco  Notes 2 and 5) and $214.4 (Mead
    Facility  Note 5), respectively.



66



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








|   |                                                       
|-- | ------------------------------------------------------
|4. | Investment In and Advances To Unconsolidated Affiliate





| |                              
| | -----------------------------
| | Summary of Financial Position

|                                                                       |              |                                            |      |      |      |   |      |      |      | 
|---------------------------------------------------------------------- | ------------ | ------------------------------------------ | ---- | ---- | ---- | - | ---- | ---- | ---- | 
|                                                                       |              | December 31,                               |     
|                                                                       |              |                                            |     
|                                                                       |              | 2004                                       |      |      | 2003 |  
|                                                                       |              |                                            |      |      |      |  
|Current assets                                                         |              | $                                          | 50.7 |      |      | $ | 45.1 |     
|Non-current assets (primarily property, plant, and equipment,
    net) |              |                                            | 36.3 |      |      |   | 36.9 |     
|                                                                       |              |                                            |      |      |      |  
|                                                                       | Total assets |                                            | $    | 87.0 |      |   | $    | 82.0 |     
|                                                                       |              |                                            |      |      |      |  
|Current liabilities                                                    |              | $                                          | 15.6 |      |      | $ | 21.4 |     
|Long-term liabilities                                                  |              |                                            | 21.6 |      |      |   | 24.2 |     
|Stockholders equity                                                   |              |                                            | 49.8 |      |      |   | 36.4 |     
|                                                                       |              |                                            |      |      |      |  
|                                                                       |              | Total liabilities and stockholders equity |      | $    | 87.0 |   |      | $    | 82.0 | 
|                                                                       |              |                                            |      |      |      |  



| |                      
| | ---------------------
| | Summary of Operations

|                           |  |                         |        |   |      |   |        |      |  |   |        |  
|-------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                           |  | Year Ended December 31, |       
|                           |  |                         |       
|                           |  | 2004                    |        |   | 2003 |   |        | 2002 | 
|                           |  |                         |        |   |      |   |        |      | 
|Net sales                  |  | $                       | 249.2  |   |      | $ | 205.5  |      |  | $ | 192.7  |  
|Costs and expenses         |  |                         | (223.1 | ) |      |   | (196.5 | )    |  |   | (182.2 | )
|Provision for income taxes |  |                         | (7.4   | ) |      |   | (2.6   | )    |  |   | (3.0   | )
|                           |  |                         |        |   |      |   |        |      | 
|Net income                 |  | $                       | 18.7   |   |      | $ | 6.4    |      |  | $ | 7.5    |  
|                           |  |                         |        |   |      |   |        |      | 
|Companys equity in income |  | $                       | 8.2    |   |      | $ | 3.3    |      |  | $ | 3.6    |  
|                           |  |                         |        |   |      |   |        |      | 
|Dividends received         |  | $                       | 4.5    |   |      | $ | 4.3    |      |  | $ | 6.0    |  
|                           |  |                         |        |   |      |   |        |      | 





67



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|   |                               
|-- | ------------------------------
|5. | Property, Plant, and Equipment



|                         |                                     |              |        |       |      |   |        |       | 
|------------------------ | ----------------------------------- | ------------ | ------ | ----- | ---- | - | ------ | ----- | 
|                         |                                     | December 31, |       
|                         |                                     |              |       
|                         |                                     | 2004         |        |       | 2003 |  
|                         |                                     |              |        |       |      |  
|Land and improvements    |                                     | $            | 8.2    |       |      | $ | 8.7    |      
|Buildings                |                                     |              | 63.8   |       |      |   | 65.3   |      
|Machinery and equipment  |                                     |              | 459.8  |       |      |   | 454.9  |      
|Construction in progress |                                     |              | 6.1    |       |      |   | 8.3    |      
|                         |                                     |              |        |       |      |  
|                         |                                     |              | 537.9  |       |      |   | 537.2  |      
|Accumulated depreciation |                                     |              | (323.3 | )     |      |   | (307.1 | )    
|                         |                                     |              |        |       |      |  
|                         | Property, plant, and equipment, net |              | $      | 214.6 |      |   | $      | 230.1 | 
|                         |                                     |              |        |       |      |  







| |       
| | ------
| | 2004 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On July 1, 2004, with Court approval, the Company completed
    the sale of its interests in and related to Alpart for a base
    purchase price of $295.0 plus certain adjustments of
    approximately $20.0. The transaction resulted in a gross sales
    price of approximately $315.0, subject to certain post-closing
    adjustments, and a pre-tax gain of approximately $101.6.
    Offsetting the cash proceeds were approximately $14.5 of
    payments made by the Company to fund the prepayment of the
    Companys share of the Alpart-related debt (see
    Note 7) and $3.3 of transaction-related costs. The balance
    of the proceeds are being held in escrow primarily for the
    benefit of certain creditors as outlined in the AJC/ KJC Plan.
    In accordance with SFAS No. 144, balances and results
    of operations related to the Companys interests and
    related to Alpart have been reported as discontinued operations
    in the accompanying financial statements (see Note 3). A
    net benefit of approximately $1.6 was recorded in December 2004
    in respect of the Alpart-related purchase price adjustments.
    Such amounts are expected to be collected during the second
    quarter of 2005.
|
| |  | In May 2004, the Company entered into an agreement to sell its
    interests in and related to the Gramercy facility and KJBC. The
    sale closed on October 1, 2004 with Court approval. Net
    proceeds from the sale were approximately $23.0, subject to
    various closing and post closing adjustments. Such adjustments
    were insignificant. The transaction was completed at an amount
    approximating its remaining book value (after impairment
    charges). A substantial portion of the proceeds were used to
    satisfy transaction related costs and obligations. As previously
    reported, the Company had determined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

68



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | that the fair values of its interests in and related to
    Gramercy/ KJBC was below the carrying values of the assets
    because all offers that had been received for such assets were
    substantially below the carrying values of the assets.
    Accordingly, in the fourth quarter of 2003, the Company adjusted
    the carrying value of its interests in and related to Gramercy/
    KJBC to the estimated fair value, which resulted in a non-cash
    impairment charge of approximately $368.0 (which amount was
    reflected in discontinued operations  see
    Note 3). In accordance with SFAS No. 144, the
    Companys interests in and related to the Gramercy facility
    and KJBC have been reported as discontinued operations in the
    accompanying financial statements (see Note 3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | During 2003, the Company and Valco participated in extensive
    negotiations with the Government of Ghana (GoG) and
    the Volta River Authority (VRA) regarding
    Valcos 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 and
    the GoG entered into a Memorandum of Understanding
    (MOU) in December 2003 pursuant to which the Company
    would sell its 90% interest in and related to Valco to the GoG.
    The Company collected $5.0 pursuant to the MOU. However, a new
    financial agreement was reached in May 2004 and the MOU was
    amended. Under the revised financial terms, the Company was to
    retain the $5.0 already paid by the GoG and $13.0 more was to be
    paid by the GoG as full and final consideration for the
    transaction at closing. The Company also agreed to fund certain
    end of service benefits of Valco employees (estimated to be
    approximately $9.8) which the GoG was to assume under the
    original MOU. The agreement was approved by the Court on
    September 29, 2004. The sale closed on October 29,
    2004. As the revised purchase price under the amended MOU was
    well below the Companys recorded value for Valco, the
    Company recorded a non-cash impairment charge of $31.8 in its
    first quarter 2004 financial statements to reduce the carrying
    value of its interests in and related to Valco at March 31,
    2004 to the amount of the expected proceeds (which amount was
    reflected in discontinued operations  see
    Note 3). As a result, at closing there was no material gain
    or loss on disposition. In accordance with
    SFAS No. 144, balances and results of operations
    related to the Companys interests in and related to Valco
    have been reported as discontinued operations in the
    accompanying financial statements (see Note 3).
|
| |  | In June 2004, with Court approval, the Company completed the
    sale of the Mead Facility for approximately $7.4 plus assumption
    of certain site-related liabilities. The sale resulted in net
    proceeds of approximately $6.2 and a pre-tax gain of
    approximately $23.4. The pre-tax gain includes the impact from
    the sale of certain non-operating land in the first quarter of
    2004 that was adjacent to the Mead Facility. The pre-tax gain on
    the sale of this property had been deferred pending the
    finalization of the sale of the Mead Facility and transfer of
    the site-related liabilities. Proceeds from the sale of the Mead
    Facility totaling $4.0 are being held in escrow as Restricted
    proceeds from sale of commodity interests until the value of the
    secured claim of the holders of the 7.6% solid waste disposal
    revenue bonds is determined by the Court (see Note 7). In
    accordance with SFAS No. 144, the assets, liabilities
    and operating results of the Mead Facility have been reported as
    discontinued operations in the accompanying financial statements
    (see Note 3).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In September 2004, the Court approved a motion to hold an
    auction in October 2004 in respect of the Companys
    interests in and related to QAL and approved certain bidding
    procedures. The motion outlined a two-prong approach to ensure
    that an auction would take place. First the Company signed a
    stalking horse agreement to sell its interest in and
    related to QAL to Comalco Aluminium Limited
    (Comalco), one of its partners in QAL, for a base
    price of $308.0 cash plus purchase of the Companys alumina
    and bauxite inventories, and subject to certain working capital
    adjustments and the assumption of the Companys obligations
    in respect of approximately $60.0 of QAL debt (see Note 7).
    The Company would also transfer its existing alumina sales
    contracts and other agreements related to QAL. The agreement was
    supplemented by a letter agreement in which Comalcos
    parent companies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

69



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | agreed that the execution of the stalking horse agreement
    satisfied, or that such parties otherwise waived, certain rights
    that they would otherwise have under an existing agreement with
    the Company. The stalking horse agreement also included a
    provision for a payment of a termination fee of $11.0 to Comalco
    upon the sale of the Companys interests in QAL pursuant to
    the auction process if Comalco is not the ultimate purchaser.
    Separately, the Company entered into an agreement with Glencore
    AG (Glencore), whereby Glencore obligated itself to
    submit a bid of $400.0 in cash plus the other payments and
    adjustments described above. The Company paid Glencore a fee of
    $7.7 in September 2004 upon submission of its qualified bid
    which amount was included in Prepaid and other current assets as
    a deferred charge. The auction occurred in October 2004 and,
    after consultation with the UCC and others, the Company entered
    into an agreement with the successful bidder to sell its
    interests in and related to QAL under the same terms as the
    Comalco agreement described above for a base price of
    approximately $401.0. The agreement was approved by the Court in
    November 2004 and is expected to close in April 2005. A net
    gain in excess of $300.0 is expected to result from the sale. As
    described in Note 1, the Company expects that a substantial
    majority of the proceeds from the sale of the Companys
    interests in and related to QAL will be held in escrow for the
    benefit of KAACs creditors until a KAAC liquidation plan
    is approved by the Court (see Note 1). Because Court
    approval and all conditions precedent to the sale were met as of
    December 31, 2004, and because such amounts were material,
    in accordance with SFAS No. 144, balances and results of
    operations related to the Companys interests in and
    related to QAL have been reported as discontinued operations in
    the accompanying financial statements (see Note 3).
|
| |  | In the ordinary course of business, the Company sold
    non-operating real estate and certain miscellaneous equipment
    for total proceeds of approximately $1.9. These transactions
    resulted in pre-tax gains of $1.8 (included in Other income
    (expense)  see Note 2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |       
| | ------
| | 2003 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In January 2003, the Court approved the sale of 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 2004, 2003 and 2002 have not been reported as discontinued
    operations in the accompanying Statements of Consolidated Income
    (Loss) because such amounts were not material.                                                                                                                                                                             
|
| |  | 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 was 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 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.
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

70



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 previously impaired to a zero basis. 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.



| |       
| | ------
| | 2002 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | As previously disclosed, the Company was evaluating its options
    for minimizing the near-term negative cash flow at its Mead
    facility 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 was
    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 the Mead
    facility. 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 related assets to their estimated fair value, which resulted
    in a non-cash impairment charge of approximately $138.5 (which
    amount was reflected in discontinued operations  see
    Note 3). 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 discontinued
    operations  see Note 3). The indefinite
    curtailment of the Mead facility also resulted in a
    $16.5 net realizable value charge and a $.9 LIFO inventory
    charge for certain of the inventories at the facility (which
    amounts were reflected in discontinued operations).
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

71



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




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



|   |                                        
|-- | ---------------------------------------
|6. | Other Operating Charges (Benefits), Net



|                                                                                                                                 |                                                 |                         |        |   |      |   |        |      |  |   |       |       |  
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | ----- | -
|                                                                                                                                 |                                                 | Year Ended December 31, |       
|                                                                                                                                 |                                                 |                         |       
|                                                                                                                                 |                                                 | 2004                    |        |   | 2003 |   |        | 2002 | 
|                                                                                                                                 |                                                 |                         |        |   |      |   |        |      | 
|Pension charge related to terminated pension plans 
    Corporate (Note 9)                                                      |                                                 | $                       | (310.0 | ) |      | $ | (121.2 | )    |  | $ |      |      
|Charge related to settlement with United Steelworkers of America
    unfair labor practice allegations  Corporate
    (Note 11) |                                                 |                         | (175.0 | ) |      |   |       |      |  |   |      |      
|Settlement charge related to termination of Post-retirement
    medical benefits plans  Corporate (Note 9)                      |                                                 |                         | (312.5 | ) |      |   |       |      |  |   |      |      
|Impairment charges                                                                                                              |                                                 |                         |        |   |      |   |        |      |  |   |       |      
|                                                                                                                                 | Office complex  Corporate (Note 5)             |                         |        |  |      |   |        |     |  |   |       | (20.0 | )
|                                                                                                                                 | Washington smelters (Primary Aluminum) (Note 2) |                         |        |  |      |   |        |     |  |   |       | (2.1  | )
|Restructuring charges                                                                                                           |                                                 |                         |        |   |      |   |        |      |  |   |       |      
|                                                                                                                                 | Fabricated Products                             |                         |        |  |      |   |        |     |  |   |       | (7.9  | )
|Restructured transmission service agreement  Primary
    Aluminum (Note 14)                                                     |                                                 |                         |       |   |      |   | (3.2   | )    |  |   |      |      
|Environmental multi-site settlement  Corporate
    (Note 11)                                                                    |                                                 |                         |       |   |      |   | (15.7  | )    |  |   |      |      
|Hearing loss claims  Corporate (Note 11)                                                                                        |                                                 |                         |       |   |      |   | (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  | )
|Other                                                                                                                            |                                                 |                         | 4.3    |   |      |   | .9     |      |  |   |      |      
|                                                                                                                                 |                                                 |                         |        |   |      |   |        |      | 
|                                                                                                                                 |                                                 | $                       | (793.2 | ) |      | $ | (141.6 | )    |  | $ | (31.8 | )    
|                                                                                                                                 |                                                 |                         |        |   |      |   |        |      | 







72



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|   |               
|-- | --------------
|7. | Long-Term Debt



|                                                                                                |                                                  |              |        |       |      |   |        |       | 
|----------------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------ | ------ | ----- | ---- | - | ------ | ----- | 
|                                                                                                |                                                  | December 31, |       
|                                                                                                |                                                  |              |       
|                                                                                                |                                                  | 2004         |        |       | 2003 |  
|                                                                                                |                                                  |              |        |       |      |  
|Secured:                                                                                        |                                                  |              |        |       |      |   |        |      
|                                                                                                | Post-Petition Credit Agreement                   |              | $      |      |      |   | $      |      | 
|                                                                                                | 7.6% Solid Waste Disposal Revenue Bonds due 2027 |              |        | 1.6   |      |   |        | 1.0   | 
|                                                                                                | Other borrowings (fixed rate)                    |              |        | 2.4   |      |   |        | 2.5   | 
|Unsecured or Undersecured:                                                                      |                                                  |              |        |       |      |   |        |      
|                                                                                                | 97/8% Senior
    Notes due 2002, net             |              |        | 172.8 |      |   |        | 172.8 | 
|                                                                                                | 107/8% Senior
    Notes due 2006, net            |              |        | 225.0 |      |   |        | 225.0 | 
|                                                                                                | 123/4% Senior
    Subordinated Notes due 2003    |              |        | 400.0 |      |   |        | 400.0 | 
|                                                                                                | 7.6% Solid Waste Disposal Revenue Bonds due 2027 |              |        | 17.4  |      |   |        | 18.0  | 
|                                                                                                | Other borrowings (fixed and variable rates)      |              |        | 32.4  |      |   |        | 32.4  | 
|                                                                                                |                                                  |              |        |       |      |  
|Total                                                                                           |                                                  |              | 851.6  |       |      |   | 851.7  |      
|Less  Current portion                                                                          |                                                  |              | (1.2   | )     |      |   | (1.3   | )    
|Pre-Filing Date
    claims included in subject to compromise (i.e. unsecured debt)
    (Note 1) |                                                  |              | (847.6 | )     |      |   | (848.2 | )    
|                                                                                                |                                                  |              |        |       |      |  
|Long-term debt                                                                                  |                                                  | $            | 2.8    |       |      | $ | 2.2    |      
|                                                                                                |                                                  |              |        |       |      |  

1 4






| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Replaced the existing post-petition credit facility with a new
    $200.0 post-petition credit facility (the DIP
    Facility) and                                                                                                                                            
|
| |  | Included a commitment, upon the Debtors emergence from the
    Chapter 11 proceedings, for exit financing in the form of a
    $200.0 million revolving credit facility (the
    Revolving Credit Facility) and a fully drawn term
    loan (the Term Loan) of up to $50.0.





73



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
















7.6% Solid Waste Disposal Revenue Bonds.


74



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




83/4%
Alpart CARIFA Loans.




97/8% Notes,
107/8% Notes
and
123/4% Notes. 7 8 7 8 7 8 7 8 3 4 3 4


Debt Covenants and Restrictions. 7 8 7 8 3 4 7 8 7 8 3 4




|   |             
|-- | ------------
|8. | Income Taxes



|         |       |                         |        |        |      |   |        |        |   |   |        |        |  
|-------- | ----- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|         |       | Year Ended December 31, |       
|         |       |                         |       
|         |       | 2004                    |        |        | 2003 |   |        | 2002   |  
|         |       |                         |        |        |      |   |        |        |  
|Domestic |       | $                       | (885.9 | )      |      | $ | (286.5 | )      |   | $ | (226.2 | )     
|Foreign  |       |                         | 24.2   |        |      |   | 14.6   |        |   |   | 28.0   |       
|         |       |                         |        |        |      |   |        |        |  
|         | Total |                         | $      | (861.7 | )    |   | $      | (271.9 | ) |   | $      | (198.2 | )
|         |       |                         |        |        |      |   |        |        |  



75



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|             |  |         |     |   |         |   |      |       |  |   |       |   |  |   |      |  
|------------ |  | ------- | --- | - | ------- | - | ---- | ----- |  | - | ----- | - |  | - | ---- | -
|             |  | Federal |     |   | Foreign |   |      | State |  |   | Total |  
|             |  |         |     |   |         |   |      |       |  |   |       |  
|2004 Current |  | $       |    |   |         | $ | (6.4 | )     |  | $ |      |   |  | $ | (6.4 | )
|Deferred     |  |         |    |   |         |   | .2   |       |  |   |      |   |  |   | .2   |  
|             |  |         |     |   |         |   |      |       |  |   |       |  
|Total        |  | $       |    |   |         | $ | (6.2 | )     |  | $ |      |   |  | $ | (6.2 | )
|             |  |         |     |   |         |   |      |       |  |   |       |  
|2003 Current |  | $       |    |   |         | $ | (1.3 | )     |  | $ |      |   |  | $ | (1.3 | )
|Deferred     |  |         |    |   |         |   | (.2  | )     |  |   |      |   |  |   | (.2  | )
|             |  |         |     |   |         |   |      |       |  |   |       |  
|Total        |  | $       |    |   |         | $ | (1.5 | )     |  | $ |      |   |  | $ | (1.5 | )
|             |  |         |     |   |         |   |      |       |  |   |       |  
|2002 Current |  | $       | (.2 | ) |         | $ | (5.6 | )     |  | $ | (.3   | ) |  | $ | (6.1 | )
|Deferred     |  |         | 3.4 |   |         |   | (1.1 | )     |  |   | (.4   | ) |  |   | 1.9  |  
|             |  |         |     |   |         |   |      |       |  |   |       |  
|Total        |  | $       | 3.2 |   |         | $ | (6.7 | )     |  | $ | (.7   | ) |  | $ | (4.2 | )
|             |  |         |     |   |         |   |      |       |  |   |       |  



|                                                                 |  |                         |        |   |      |   |       |      |  |   |       |  
|---------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                 |  | Year Ended December 31, |       
|                                                                 |  |                         |       
|                                                                 |  | 2004                    |        |   | 2003 |   |       | 2002 | 
|                                                                 |  |                         |        |   |      |   |       |      | 
|Amount of federal income tax benefit based on the statutory rate |  | $                       | 301.7  |   |      | $ | 95.2  |      |  | $ | 69.4  |  
|Increase in valuation allowances                                 |  |                         | (304.7 | ) |      |   | (98.1 | )    |  |   | (71.6 | )
|Percentage depletion                                             |  |                         | 5.1    |   |      |   | 6.4   |      |  |   | 7.6   |  
|Foreign taxes                                                    |  |                         | (6.3   | ) |      |   | (1.5  | )    |  |   | (6.7  | )
|Other                                                            |  |                         | (2.0   | ) |      |   | (3.5  | )    |  |   | (2.9  | )
|                                                                 |  |                         |        |   |      |   |       |      | 
|Provision for income taxes                                       |  | $                       | (6.2   | ) |      | $ | (1.5  | )    |  | $ | (4.2  | )
|                                                                 |  |                         |        |   |      |   |       |      | 

76



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Deferred Income Taxes.


|                                                |                                             |                                        |      |          |       |   |       |          |       |  
|----------------------------------------------- | ------------------------------------------- | -------------------------------------- | ---- | -------- | ----- | - | ----- | -------- | ----- | -
|                                                |                                             | December 31,                           |     
|                                                |                                             |                                        |     
|                                                |                                             | 2004                                   |      |          | 2003  |  
|                                                |                                             |                                        |      |          |       |  
|Deferred income tax assets:                     |                                             |                                        |      |          |       |   |       |         
|                                                | Postretirement benefits other than pensions |                                        | $    | 396.0    |       |   | $     | 268.6    |      
|                                                | Loss and credit carryforwards               |                                        |      | 411.3    |       |   |       | 356.1    |      
|                                                | Pension benefits                            |                                        |      | 243.6    |       |   |       | 158.1    |      
|                                                | Other liabilities                           |                                        |      | 153.7    |       |   |       | 114.7    |      
|                                                | Other                                       |                                        |      | 75.0     |       |   |       | 111.9    |      
|                                                | Property, plant and equipment               |                                        |      |         |       |   |       | 12.1     |      
|                                                | Valuation allowances                        |                                        |      | (1,221.3 | )     |   |       | (1,012.0 | )    
|                                                |                                             |                                        |      |          |       |  
|                                                |                                             | Total deferred income tax assets  net |      |          | 58.3  |   |       |          | 9.5   |  
|                                                |                                             |                                        |      |          |       |  
|Deferred income tax liabilities:                |                                             |                                        |      |          |       |   |       |         
|                                                | Property, plant, and equipment              |                                        |      | (39.0    | )     |   |       |         |      
|                                                | Other                                       |                                        |      | (22.0    | )     |   |       | (25.7    | )    
|                                                |                                             |                                        |      |          |       |  
|                                                |                                             | Total deferred income tax liabilities  |      |          | (61.0 | ) |       |          | (25.7 | )
|                                                |                                             |                                        |      |          |       |  
|Net deferred income tax assets (liabilities)(1) |                                             | $                                      | (2.7 | )        |       | $ | (16.2 | )       
|                                                |                                             |                                        |      |          |       |  






|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These deferred income tax liabilities are included in the
    Consolidated Balance Sheets as of December 31, 2004 and
    2003, respectively, in the caption entitled Long-term
    liabilities.



Tax Attributes.




Other.




|   |                                     
|-- | ------------------------------------
|9. | Employee Benefit and Incentive Plans

Historical Pension and Other Postretirement Benefit
Plans.


77



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KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Reorganization Efforts Affecting Pension and Post Retirement
Medical Obligations.








78



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                
| | ---------------
| | Financial Data.



| |            
| | -----------
| | Assumptions







|                                       |                                |                  |  |      |                       |  |  |      |   |  |      |      |   |      |  |      |      |  |  |      |   |  |  |      |  
|-------------------------------------- | ------------------------------ | ---------------- |  | ---- | --------------------- |  |  | ---- | - |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                                       |                                | Pension Benefits |  |      | Medical/Life Benefits | 
|                                       |                                |                  |  |      |                       | 
|                                       |                                | 2004             |  |      | 2003                  |  |  | 2002 |   |  | 2004 |      |   | 2003 |  |      | 2002 | 
|                                       |                                |                  |  |      |                       |  |  |      |   |  |      |      |   |      |  |      |      | 
|Benefit obligations assumptions:       |                                |                  |  |      |                       |  |  |      |   |  |      |      |   |      |  |      |      |  |  |      |   |  |  |     
|                                       | Discount rate                  |                  |  | 5.75 | %                     |  |  | 6.00 | % |  |      | 6.75 | % |      |  | 5.75 | %    |  |  | 6.00 | % |  |  | 6.75 | %
|                                       | Rate of compensation increase  |                  |  | 3.00 | %                     |  |  | 4.00 | % |  |      | 4.00 | % |      |  | 4.00 | %    |  |  | 4.00 | % |  |  | 4.00 | %
|Net periodic benefit cost assumptions: |                                |                  |  |      |                       |  |  |      |   |  |      |      |   |      |  |      |      |  |  |      |   |  |  |     
|                                       | Discount rate                  |                  |  | 5.75 | %                     |  |  | 6.00 | % |  |      | 6.75 | % |      |  | 6.00 | %    |  |  | 6.75 | % |  |  | 7.25 | %
|                                       | Expected return on plan assets |                  |  | 8.50 | %                     |  |  | 9.00 | % |  |      | 9.00 | % |      |  |     |      |  |  |     |   |  |  |     |  
|                                       | Rate of compensation increase  |                  |  | 3.00 | %                     |  |  | 4.00 | % |  |      | 4.00 | % |      |  | 4.00 | %    |  |  | 4.00 | % |  |  | 4.00 | %





79



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                             |  |             |       |  |             |   |       |  
|------------------------------------------------------------ |  | ----------- | ----- |  | ----------- | - | ----- | -
|                                                             |  | 1% Increase |       |  | 1% Decrease |  
|                                                             |  |             |       |  |             |  
|Increase (decrease) to total of service and interest cost    |  | $           | 8.2   |  |             | $ | (7.1  | )
|Increase (decrease) to the postretirement benefit obligation |  |             | 111.7 |  |             |   | (98.5 | )



80



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                      
| | -------------------------------------
| | Benefit Obligations and Funded Status



|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |         |         |  |   |         |         | 
|----------------------------- | -------------------------------------------------------------- | ------------------------- | - | ------ | --------------------- |  | - | ------ | ----- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                              |                                                                | Pension Benefits          |   |        | Medical/Life Benefits | 
|                              |                                                                |                           |   |        |                       | 
|                              |                                                                | 2004                      |   |        | 2003                  |  |   | 2004   |       |  | 2003 |        
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|Change in Benefit Obligation: |                                                                |                           |   |        |                       |  |   |        |       |  |      |         |         |  |   |        
|                              | Obligation at beginning of year                                |                           | $ | 644.7  |                       |  | $ | 858.7  |       |  | $    | 1,014.0 |         |  | $ | 790.1   |        
|                              | Service cost                                                   |                           |   | 3.8    |                       |  |   | 8.4    |       |  |      | 7.0     |         |  |   | 7.1     |        
|                              | Interest cost                                                  |                           |   | 28.6   |                       |  |   | 56.2   |       |  |      | 58.9    |         |  |   | 51.3    |        
|                              | Curtailments, settlements and amendments                       |                           |   | (609.6 | )                     |  |   | (276.4 | )     |  |      |        |         |  |   |        |        
|                              | Actuarial (gain) loss                                          |                           |   | (37.0  | )                     |  |   | 74.5   |       |  |      | 19.1    |         |  |   | 225.9   |        
|                              | Benefits paid                                                  |                           |   | (3.3   | )                     |  |   | (76.7  | )     |  |      | (57.0   | )       |  |   | (60.4   | )      
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|                              |                                                                | Obligation at end of year |   |        | 27.2                  |  |   |        | 644.7 |  |      |         | 1,042.0 |  |   |         | 1,014.0 | 
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|Change in Plan Assets:        |                                                                |                           |   |        |                       |  |   |        |       |  |      |         |         |  |   |        
|                              | FMV of plan assets at beginning of year                        |                           |   | 364.1  |                       |  |   | 426.4  |       |  |      |        |         |  |   |        |        
|                              | Actual return on assets                                        |                           |   | (13.0  | )                     |  |   | 89.7   |       |  |      |        |         |  |   |        |        
|                              | Employer contributions                                         |                           |   | 2.4    |                       |  |   | .3     |       |  |      | 57.0    |         |  |   | 60.4    |        
|                              | Assets for which contributions transferred to the PBGC         |                           |   | (336.0 | )                     |  |   | (75.5  | )     |  |      |        |         |  |   |        |        
|                              | Benefits paid                                                  |                           |   | (3.3   | )                     |  |   | (76.8  | )     |  |      | (57.0   | )       |  |   | (60.4   | )      
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|                              | FMV of plan assets at end of year                              |                           |   | 14.2   |                       |  |   | 364.1  |       |  |      |        |         |  |   |        |        
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|                              | Obligation in excess of plan assets                            |                           |   | 13.0   |                       |  |   | 280.6  |       |  |      | 1,042.0 |         |  |   | 1,014.0 |        
|                              | Unrecognized net actuarial loss                                |                           |   | (6.6   | )                     |  |   | (140.4 | )     |  |      |        |         |  |   | (421.5  | )      
|                              | Unrecognized prior service costs                               |                           |   | (.5    | )                     |  |   | (31.1  | )     |  |      |        |         |  |   | 125.2   |        
|                              | Adjustment required to recognize minimum liability             |                           |   | 6.8    |                       |  |   | 103.5  |       |  |      |        |         |  |   |        |        
|                              | Estimated net liability to PBGC in respect of Terminated Plans |                           |   | 630.0  |                       |  |   | 201.2  |       |  |      |        |         |  |   |        |        
|                              | Intangible asset and other                                     |                           |   | 1.3    |                       |  |   | 31.9   |       |  |      |        |         |  |   |        |        
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        
|                              |                                                                | Accrued benefit liability |   | $      | 644.0                 |  |   | $      | 445.7 |  |      | $       | 1,042.0 |  |   | $       | 717.7   | 
|                              |                                                                |                           |   |        |                       |  |   |        |       |  |      |        





81



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                                          
| | -----------------------------------------
| | Components of Net Periodic Benefit Cost 



|                                                 |  |                  |       |   |                       |   |       |      |  |   |       |   |  |      |       |   |      |   |       |   |  |   |       |  
|------------------------------------------------ |  | ---------------- | ----- | - | --------------------- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---- | - | ----- | - |  | - | ----- | -
|                                                 |  | Pension Benefits |       |   | Medical/Life Benefits |  
|                                                 |  |                  |       |   |                       |  
|                                                 |  | 2004             |       |   | 2003                  |   |       | 2002 |  |   | 2004  |   |  | 2003 |       |   | 2002 |  
|                                                 |  |                  |       |   |                       |   |       |      |  |   |       |   |  |      |       |   |      |  
|Service cost                                     |  | $                | 4.7   |   |                       | $ | 10.2  |      |  | $ | 47.9  |   |  | $    | 7.0   |   |      | $ | 7.1   |   |  | $ | 37.8  |  
|Interest cost                                    |  |                  | 30.8  |   |                       |   | 60.7  |      |  |   | 62.0  |   |  |      | 58.9  |   |      |   | 51.3  |   |  |   | 56.2  |  
|Expected return on plan assets                   |  |                  | (22.9 | ) |                       |   | (38.6 | )    |  |   | (58.0 | ) |  |      |      |   |      |   |      |   |  |   |      |  
|Amortization of prior service cost               |  |                  | 2.6   |   |                       |   | 3.6   |      |  |   | 3.8   |   |  |      | (21.7 | ) |      |   | (22.5 | ) |  |   | (23.0 | )
|Amortization of net (gain) loss                  |  |                  | 5.0   |   |                       |   | 16.1  |      |  |   | 6.5   |   |  |      | 24.6  |   |      |   | 9.7   |   |  |   | 11.8  |  
|                                                 |  |                  |       |   |                       |   |       |      |  |   |       |   |  |      |       |   |      |  
|Net periodic benefit costs                       |  |                  | 20.2  |   |                       |   | 52.0  |      |  |   | 62.2  |   |  |      | 68.8  |   |      |   | 45.6  |   |  |   | 82.8  |  
|Less discontinued operations reported separately |  |                  | (7.8  | ) |                       |   | (15.3 | )    |  |   | (9.2  | ) |  |      | (10.2 | ) |      |   | (11.9 | ) |  |   | (10.5 | )
|                                                 |  |                  |       |   |                       |   |       |      |  |   |       |   |  |      |       |   |      |  
|                                                 |  | $                | 12.4  |   |                       | $ | 36.7  |      |  | $ | 53.0  |   |  | $    | 58.6  |   |      | $ | 33.7  |   |  | $ | 72.3  |  
|                                                 |  |                  |       |   |                       |   |       |      |  |   |       |   |  |      |       |   |      |  







| |                       
| | ----------------------
| | Additional Information





| |            
| | -----------
| | Plan Assets





82



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |          
| | ---------
| | Cash Flow

Domestic Plans.










| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An amount not to exceed $36.0 and payable on emergence from the
    Chapter 11 proceedings so long as the Companys
    liquidity (i.e. cash plus borrowing availability) 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 such sales
    proceeds, in certain circumstances, will be used to pay the
    shortfall.
|
| |  | On an annual basis, 10% of the first $20.0 of annual cash flow,
    as defined, plus 20% of annual cash flow, as defined, in excess
    of $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.                                                                                                
|
| |  | Advances of $3.1 in June 2004 and $1.9 per month thereafter
    until the Company emerges from the Cases. Any advances made
    pursuant to such agreement will constitute a credit toward the
    $36.0 maximum contribution due upon emergence.                                                                                                                                                                                                                 



83



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Foreign Plans.




| |                                           
| | ------------------------------------------
| | Significant Charges in 2004, 2003 and 2002









| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               



Postemployment Benefits.


Restricted Common Stock.


Incentive Plans.


84



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|                                                                            |  |      |         |   |      |  |           |      |  |  |           |  
|--------------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | --------- | ---- |  |  | --------- | -
|                                                                            |  | 2004 |         |   | 2003 |  |           | 2002 | 
|                                                                            |  |      |         |   |      |  |           |      | 
|Outstanding at beginning of year ($3.34, $5.63 and $8.37,
    respectively) |  |      | 850,140 |   |      |  | 1,454,861 |      |  |  | 1,560,707 |  
|Expired or forfeited ($7.25, $8.86 and $5.71, respectively)                 |  |      | (40,100 | ) |      |  | (604,721  | )    |  |  | (105,846  | )
|                                                                            |  |      |         |   |      |  |           |      | 
|Outstanding at end of year ($3.14, $3.34, and $5.63,
    respectively)      |  |      | 810,040 |   |      |  | 850,140   |      |  |  | 1,454,861 |  
|                                                                            |  |      |         |   |      |  |           |      | 
|Exercisable at end of year ($3.04, $3.34, and $6.84,
    respectively)      |  |      | 781,856 |   |      |  | 645,659   |      |  |  | 987,306   |  
|                                                                            |  |      |         |   |      |  |           |      | 





|    |                     
|--- | --------------------
|10. | Stockholders Equity

Preference Stock. 1 8 3 4


Note Receivable from Parent. 5 8




|    |                              
|--- | -----------------------------
|11. | Commitments and Contingencies

Impact of Reorganization Proceedings.


85



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Commitments.




Environmental Contingencies.




|                               |  |      |       |   |      |   |      |      |  |   |      |  
|------------------------------ |  | ---- | ----- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                               |  | 2004 |       |   | 2003 |   |      | 2002 | 
|                               |  |      |       |   |      |   |      |      | 
|Balance at beginning of period |  | $    | 82.5  |   |      | $ | 59.1 |      |  | $ | 61.2 |  
|Additional accruals            |  |      | 8.4   |   |      |   | 25.6 |      |  |   | 1.5  |  
|Less expenditures              |  |      | (32.6 | ) |      |   | (2.2 | )    |  |   | (3.6 | )
|                               |  |      |       |   |      |   |      |      | 
|Balance at end of period(1)    |  | $    | 58.3  |   |      | $ | 82.5 |      |  | $ | 59.1 |  
|                               |  |      |       |   |      |   |      |      | 






|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As of December 31, 2004 and 2003, $30.6 and $43.0,
    respectively, of the environmental accrual was included in
    Liabilities subject to compromise (see Note 1) and the
    balance was included in Long-term liabilities.



86



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)














Other Environmental Matters.


87



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Asbestos and Certain Other Personal Injury Claims.






|                                         |  |              |         |  |      |   |       | 
|---------------------------------------- |  | ------------ | ------- |  | ---- | - | ----- | 
|                                         |  | December 31, |        
|                                         |  |              |        
|                                         |  | 2004         |         |  | 2003 |  
|                                         |  |              |         |  |      |  
|Liability                                |  | $            | 1,115.0 |  |      | $ | 610.1 | 
|Receivable (included in Other assets)(1) |  |              | 967.0   |  |      |   | 465.4 | 
|                                         |  |              |         |  |      |  
|                                         |  | $            | 148.0   |  |      | $ | 144.7 | 
|                                         |  |              |         |  |      |  

|                                             |  |                         |     |  |           |   |      |      |  |   |         |   |  |   |        |  
|-------------------------------------------- |  | ----------------------- | --- |  | --------- | - | ---- | ---- |  | - | ------- | - |  | - | ------ | -
|                                             |  | Year Ended December 31, |     |  |          
|                                             |  |                         |     |  | Inception |  
|                                             |  | 2004                    |     |  | 2003      |   |      | 2002 |  |   | to Date |  
|                                             |  |                         |     |  |           |   |      |      |  |   |         |  
|Payments made, including related legal costs |  | $                       |    |  |           | $ |     |      |  | $ | (17.1   | ) |  | $ | (355.7 | )
|Insurance recoveries(2)                      |  |                         | 2.7 |  |           |   | 18.6 |      |  |   | 23.3    |   |  |   | 266.2  |  
|                                             |  |                         |     |  |           |   |      |      |  |   |         |  
|                                             |  | $                       | 2.7 |  |           | $ | 18.6 |      |  | $ | 6.2     |   |  | $ | (89.5  | )
|                                             |  |                         |     |  |           |   |      |      |  |   |         |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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. Amounts
    are stated in nominal dollars and not discounted to present
    value as the Company cannot currently project the actual timing
    of payments or insurance recoveries particularly in light of the
    expected treatment of such items in any plan of reorganization
    that is ultimately filed. The Company believes that, as of
    December 31, 2004, it had received all insurance recoveries
    that it is likely to collect in respect of asbestos-related
    costs paid. See Note 1.
|   
|(2) | Excludes certain amounts paid by insurers into a separate escrow
    account (in respect of future settlements) more fully discussed
    below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



88



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)










89



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






Hearing Loss Claims.




90



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




Labor Matters.






Other Contingencies.




|    |                                                                  
|--- | -----------------------------------------------------------------
|12. | Derivative Financial Instruments and Related Hedging
    Programs



91



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)














|           |                                 |        |                    |                    |         |  |           |       |  |  |     |      |  
|---------- | ------------------------------- | ------ | ------------------ | ------------------ | ------- |  | --------- | ----- |  |  | --- | ---- | -
|           |                                 |        |                    | Notional           |         |  |          
|           |                                 |        |                    | Amount of          |         |  | Carrying/ |      
|           |                                 |        |                    | Contracts          |         |  | Market    |      
|Commodity  |                                 | Period |                    |                    | (mmlbs) |  |           | Value | 
|           |                                 |        |                    |                    |         |  |           |       | 
|Aluminum  |                                 |        |                    |                    |         |  |           |       |  |  |     |     
|           | Option sale contracts           |        |                    | 1/05 through 12/05 |         |  |           | 64.6  |  |  | $   | (3.0 | )
|           |                                 |        | 1/06 through 12/06 |                    |         |  | 47.6      |       |  |  | (.5 | )   
|           | Fixed priced purchase contracts |        |                    | 1/05 through 12/05 |         |  |           | 50.1  |  |  |     | 5.5  |  

2002


92



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                               
|--- | ------------------------------
|13. | Key Employee Retention Program





|    |                                
|--- | -------------------------------
|14. | Pacific Northwest Power Matters







93



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






|    |                                          
|--- | -----------------------------------------
|15. | Segment and Geographical Area Information









94



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KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                     |                                                  |                         |        |        |      |   |        |        |   |   |        |       |  
|---------------------------------------------------- | ------------------------------------------------ | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ----- | -
|                                                     |                                                  | Year Ended December 31, |       
|                                                     |                                                  |                         |       
|                                                     |                                                  | 2004                    |        |        | 2003 |   |        | 2002   |  
|                                                     |                                                  |                         |        |        |      |   |        |        |  
|Net Sales:                                           |                                                  |                         |        |        |      |   |        |        |   |   |        |      
|                                                     | Fabricated Products                              |                         | $      | 809.3  |      |   | $      | 597.8  |   |   | $      | 608.6 |  
|                                                     | Primary Aluminum                                 |                         |        | 133.1  |      |   |        | 112.4  |   |   |        | 100.4 |  
|                                                     |                                                  |                         |        |        |      |   |        |        |  
|                                                     |                                                  | $                       | 942.4  |        |      | $ | 710.2  |        |   | $ | 709.0  |      
|                                                     |                                                  |                         |        |        |      |   |        |        |  
|Equity in income (loss) of unconsolidated affiliate: |                                                  |                         |        |        |      |   |        |        |   |   |        |      
|                                                     | Primary Aluminum                                 |                         | $      | 8.2    |      |   | $      | 3.3    |   |   | $      | 3.6   |  
|                                                     |                                                  |                         |        |        |      |   |        |        |  
|Segment Operating Income (Loss):(3)(4)               |                                                  |                         |        |        |      |   |        |        |   |   |        |      
|                                                     | Fabricated Products(1)                           |                         | $      | 33.0   |      |   | $      | (21.2  | ) |   | $      | (21.8 | )
|                                                     | Primary Aluminum                                 |                         |        | 13.9   |      |   |        | 6.7    |   |   |        | 7.4   |  
|                                                     | Corporate and Other(2)                           |                         |        | (71.1  | )    |   |        | (74.5  | ) |   |        | (98.8 | )
|                                                     | Other Operating (Charges) Benefits, Net  Note 6 |                         |        | (793.2 | )    |   |        | (141.6 | ) |   |        | (31.8 | )
|                                                     |                                                  |                         |        |        |      |   |        |        |  
|                                                     |                                                  | $                       | (817.4 | )      |      | $ | (230.6 | )      |   | $ | (145.0 | )    
|                                                     |                                                  |                         |        |        |      |   |        |        |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Operating results for 2004, 2003 and 2002 include LIFO inventory
    charges of $12.1, $3.2 and $3.5, respectively.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | Operating results for 2002 include special pension charges of
    $24.1.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(3) | Operating results for 2003 and 2002 for the Fabricated products
    business unit reported above include $4.5 and $.4, respectively,
    previously reported in Eliminations. There is no such
    elimination required in 2004. Operating results for 2003 and
    2002 for the Primary aluminum business unit reported above
    include $(.4), and $1.3, respectively, previously reported in
    Eliminations. Operating results for the Primary aluminum
    business unit in 2004 are after the elimination of $.9.
|   
|(4) | In 2004, the Company chose to reallocate for segment purposes
    the amount of post-retirement medical costs charged to the
    business units so that the Corporate segment began to incur the
    excess of the total expenses over the amount of VEBA
    contributions allocable to the Fabricated products business unit
    and Discontinued operations.                                                                                                                                                          

|                                 |                     |                         |      |      |      |   |      |      |  |   |      |      | 
|-------------------------------- | ------------------- | ----------------------- | ---- | ---- | ---- | - | ---- | ---- |  | - | ---- | ---- | 
|                                 |                     | Year Ended December 31, |     
|                                 |                     |                         |     
|                                 |                     | 2004                    |      |      | 2003 |   |      | 2002 | 
|                                 |                     |                         |      |      |      |   |      |      | 
|Depreciation and amortization(1) |                     |                         |      |      |      |   |      |      |  |   |      |     
|                                 | Fabricated Products |                         | $    | 21.8 |      |   | $    | 22.8 |  |   | $    | 27.0 | 
|                                 | Primary Aluminum    |                         |      | .2   |      |   |      | 1.1  |  |   |      | 1.6  | 
|                                 | Corporate and Other |                         |      | .3   |      |   |      | 1.8  |  |   |      | 3.7  | 
|                                 |                     |                         |      |      |      |   |      |      | 
|                                 |                     | $                       | 22.3 |      |      | $ | 25.7 |      |  | $ | 32.3 |     
|                                 |                     |                         |      |      |      |   |      |      | 
|Capital expenditures:(2)         |                     |                         |      |      |      |   |      |      |  |   |      |     
|                                 | Fabricated Products |                         | $    | 7.6  |      |   | $    | 8.9  |  |   | $    | 10.2 | 
|                                 | Corporate and Other |                         |      |     |      |   |      |     |  |   |      | .7   | 
|                                 |                     |                         |      |      |      |   |      |      | 
|                                 |                     | $                       | 7.6  |      |      | $ | 8.9  |      |  | $ | 10.9 |     
|                                 |                     |                         |      |      |      |   |      |      | 

95



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)







|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Depreciation and amortization expense excludes depreciation and
    amortization expense of discontinued operations of $13.1 in
    2004, $47.5 in 2003 and $59.2 in 2002.
|   
|(2) | Capital expenditures exclude capital expenditures of
    discontinued operations of $3.5 in 2004, $28.3 in 2003 and $36.7
    in 2002.                                    

|                                                         |                                                                                                               |              |         |         |      |   |         |       | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | ------------ | ------- | ------- | ---- | - | ------- | ----- | 
|                                                         |                                                                                                               | December 31, |        
|                                                         |                                                                                                               |              |        
|                                                         |                                                                                                               | 2004         |         |         | 2003 |  
|                                                         |                                                                                                               |              |         |         |      |  
|Investments in and advances to unconsolidated affiliate: |                                                                                                               |              |         |         |      |   |         |      
|                                                         | Primary Aluminum                                                                                              |              | $       | 16.7    |      |   | $       | 13.0  | 
|                                                         | Corporate and Other                                                                                           |              |         |        |      |   |         | .1    | 
|                                                         |                                                                                                               |              |         |         |      |  
|                                                         |                                                                                                               | $            | 16.7    |         |      | $ | 13.1    |      
|                                                         |                                                                                                               |              |         |         |      |  
|Segment assets:                                          |                                                                                                               |              |         |         |      |   |         |      
|                                                         | Fabricated Products                                                                                           |              | $       | 430.0   |      |   | $       | 413.5 | 
|                                                         | Primary Aluminum                                                                                              |              |         | 95.5    |      |   |         | 92.5  | 
|                                                         | Corporate and Other, including restricted proceeds from the sale
    of commodity interests in 2004 of $280.8 |              |         | 1,292.7 |      |   |         | 495.2 | 
|                                                         | Discontinued operations                                                                                       |              |         | 69.5    |      |   |         | 627.5 | 
|                                                         |                                                                                                               |              |         |         |      |  
|                                                         |                                                                                                               | $            | 1,887.7 |         |      | $ | 1,628.7 |      
|                                                         |                                                                                                               |              |         |         |      |  

|                      |                       |               |   |      |   |   |      |   |     |   |     |   |     | 
|--------------------- | --------------------- | ------------- | - | ---- | - | - | ---- | - | --- | - | --- | - | --- | 
|                      |                       | Year Ended    |  
|                      |                       | December 31,  |  
|                      |                       |               |  
|                      |                       | 2004          |   | 2003 |   |   | 2002 |  
|                      |                       |               |   |      |   |   |      |  
|Income taxes paid:(1) |                       |               |   |      |   |   |      |   |     |   |     |  
|                      | Fabricated Products  |               |   |      |   |   |      |   |     |   |     |   |    
|                      |                       | United States |   | $    |  |   |      | $ | .1  |   |     | $ | .1  | 
|                      |                       | Canada        |   |      |  |   |      |   | 4.7 |   |     |   | 2.9 | 
|                      |                       |               |   |      |   |   |      |   |    
|                      |                       | $             |  |      |   | $ | 4.8  |   |     | $ | 3.0 |  
|                      |                       |               |   |      |   |   |      |   |    






|    |                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------
|(1) | Income taxes paid excludes income tax paid by discontinued
    operations of $10.7 in 2004, $41.3 in 2003 and $34.5 in 2002.

96



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                     |                     |                         |       |   |       |   |       |      |       |   |       |   |       | 
|------------------------------------ | ------------------- | ----------------------- | ----- | - | ----- | - | ----- | ---- | ----- | - | ----- | - | ----- | 
|                                     |                     | Year Ended December 31, |      
|                                     |                     |                         |      
|                                     |                     | 2004                    |       |   | 2003  |   |       | 2002 |      
|                                     |                     |                         |       |   |       |   |       |      |      
|Net sales to unaffiliated customers: |                     |                         |       |   |       |   |       |      |       |   |       |  
|                                     | Fabricated Products |                         |       |   |       |   |       |      |       |   |       |   |      
|                                     |                     | United States           |       | $ | 705.7 |   |       | $    | 525.6 |   |       | $ | 534.2 | 
|                                     |                     | Canada                  |       |   | 103.6 |   |       |      | 72.2  |   |       |   | 74.4  | 
|                                     |                     |                         |       |   |       |   |       |      |      
|                                     |                     |                         | 809.3 |   |       |   | 597.8 |      |       |   | 608.6 |  
|                                     |                     |                         |       |   |       |   |       |      |      
|                                     | Primary Aluminum    |                         |       |   |       |   |       |      |       |   |       |   |      
|                                     |                     | United States           |       |   |      |   |       |      | 3.8   |   |       |   | 1.9   | 
|                                     |                     | United Kingdom          |       |   | 133.1 |   |       |      | 108.6 |   |       |   | 98.5  | 
|                                     |                     |                         |       |   |       |   |       |      |      
|                                     |                     |                         | 133.1 |   |       |   | 112.4 |      |       |   | 100.4 |  
|                                     |                     |                         |       |   |       |   |       |      |      
|                                     |                     | $                       | 942.4 |   |       | $ | 710.2 |      |       | $ | 709.0 |  
|                                     |                     |                         |       |   |       |   |       |      |      

|                      |                       |                |       |   |       |   |       |   |       | 
|--------------------- | --------------------- | -------------- | ----- | - | ----- | - | ----- | - | ----- | 
|                      |                       | December 31,   |      
|                      |                       |                |      
|                      |                       | 2004           |       |   | 2003  |  
|                      |                       |                |       |   |       |  
|Long-lived assets:(1) |                       |                |       |   |       |   |       |  
|                      | Fabricated Products  |                |       |   |       |   |       |   |      
|                      |                       | United States  |       | $ | 193.4 |   |       | $ | 207.3 | 
|                      |                       | Canada         |       |   | 17.8  |   |       |   | 17.9  | 
|                      |                       |                |       |   |       |  
|                      |                       |                | 211.2 |   |       |   | 225.2 |  
|                      | Primary Aluminum     |                |       |   |       |   |       |   |      
|                      |                       | United Kingdom |       |   | 16.7  |   |       |   | 13.0  | 
|                      | Corporate and Other  |                |       |   |       |   |       |   |      
|                      |                       | United States  |       |   | 3.4   |   |       |   | 5.0   | 
|                      |                       |                |       |   |       |  
|                      |                       | $              | 231.3 |   |       | $ | 243.2 |  
|                      |                       |                |       |   |       |  






|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.
|   
|(2) | Long-lived assets excludes long-lived assets of discontinued
    operations of $38.9 in 2004 and $426.4 in 2003.                                                                   





|    |                                   
|--- | ----------------------------------
|16. | Supplemental Guarantor Information

7 8 7 8 3 4


97



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KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






98



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Balance Sheets


December 31, 2004


|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |          |   |  |   |          |  
|------------------------------------------------------- |  | ------- | -------- | ---------- | ---------- | - | ------- | ------------ |  | ----------- | ------- | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                        |  |         |          | Subsidiary |            |   | Other   |              |  | Eliminating |         |   | 
|                                                        |  | Company |          |            | Guarantors |   |         | Subsidiaries |  |             | Entries |   |  | Consolidated |         
|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |         
|ASSETS                                                 
|Current assets                                          |  | $       | 234.7    |            |            | $ | 18.8    |              |  | $           | 43.1    |   |  | $            |         |   |  | $ | 296.6    |  
|Discontinued operations current assets                 |  |         | .6       |            |            |   | 19.0    |              |  |             | 11.0    |   |  |              |         |   |  |   | 30.6     |  
|Investments in subsidiaries                             |  |         | 2,662.0  |            |            |   |        |              |  |             |        |   |  |              | (2,662.0 | ) |  |   |         |  
|Intercompany advances receivable (payable)              |  |         | (2,244.3 | )          |            |   | 590.4   |              |  |             | 1,653.9 |   |  |              |         |   |  |   |         |  
|Investments in and advances to unconsolidated affiliate |  |         | 16.7     |            |            |   |        |              |  |             |        |   |  |              |         |   |  |   | 16.7     |  
|Property and equipment, net                             |  |         | 176.0    |            |            |   | 20.1    |              |  |             | 18.5    |   |  |              |         |   |  |   | 214.6    |  
|Deferred income taxes                                   |  |         | (88.4    | )          |            |   | 41.5    |              |  |             | 46.9    |   |  |              |         |   |  |   |         |  
|Restricted proceeds from sale of commodity interests    |  |         | 4.0      |            |            |   | 271.8   |              |  |             | 5.0     |   |  |              |         |   |  |   | 280.8    |  
|Personal injury-related insurance recoveries receivable |  |         | 967.0    |            |            |   |        |              |  |             |        |   |  |              |         |   |  |   | 967.0    |  
|Other assets                                            |  |         | 42.2     |            |            |   | .2      |              |  |             | .1      |   |  |              |         |   |  |   | 42.5     |  
|Discontinued operations long-term assets               |  |         |         |            |            |   | 38.9    |              |  |             |        |   |  |              |         |   |  |   | 38.9     |  
|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |         
|                                                        |  | $       | 1,770.5  |            |            | $ | 1,000.7 |              |  | $           | 1,778.5 |   |  | $            | (2,662.0 | ) |  | $ | 1,887.7  |  
|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |         
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Current liabilities                                     |  | $       | 159.9    |            |            | $ | 5.2     |              |  | $           | 24.5    |   |  | $            |         |   |  | $ | 189.6    |  
|Discontinued operations current liabilities            |  |         | 2.1      |            |            |   | 55.2    |              |  |             | .4      |   |  |              |         |   |  |   | 57.7     |  
|Other long-term liabilities                             |  |         | 32.9     |            |            |   | .9      |              |  |             | (.9     | ) |  |              |         |   |  |   | 32.9     |  
|Long-term debt                                          |  |         | 2.8      |            |            |   |        |              |  |             |        |   |  |              |         |   |  |   | 2.8      |  
|Discontinued operations long-term liabilities          |  |         | 26.4     |            |            |   |        |              |  |             |        |   |  |              |         |   |  |   | 26.4     |  
|Liabilities subject to compromise                       |  |         | 3,923.0  |            |            |   | 18.2    |              |  |             | 13.7    |   |  |              |         |   |  |   | 3,954.9  |  
|Stockholders equity                                    |  |         | (2,376.6 | )          |            |   | 921.2   |              |  |             | 1,740.8 |   |  |              | (2,662.0 | ) |  |   | (2,376.6 | )
|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |         
|                                                        |  | $       | 1,770.5  |            |            | $ | 1,000.7 |              |  | $           | 1,778.5 |   |  | $            | (2,662.0 | ) |  | $ | 1,887.7  |  
|                                                        |  |         |          |            |            |   |         |              |  |             |         |   |  |              |         

99



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##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Balance Sheets


December 31, 2003


|                                                         |  |         |          |            |            |   |       |              |  |             |         |   |  |              |          |   |  |   |          |  
|-------------------------------------------------------- |  | ------- | -------- | ---------- | ---------- | - | ----- | ------------ |  | ----------- | ------- | - |  | ------------ | -------- | - |  | - | -------- | -
|                                                         |  |         |          | Subsidiary |            |   | Other |              |  | Eliminating |         |   | 
|                                                         |  | Company |          |            | Guarantors |   |       | Subsidiaries |  |             | Entries |   |  | Consolidated |         
|                                                         |  |         |          |            |            |   |       |              |  |             |         |   |  |              |         
|ASSETS                                                  
|Current assets                                           |  | $       | 174.8    |            |            | $ | 43.9  |              |  | $           | 18.8    |   |  | $            |         |   |  | $ | 237.5    |  
|Discontinued operations current assets                  |  |         | 56.8     |            |            |   | 14.1  |              |  |             | 122.8   |   |  |              |         |   |  |   | 193.7    |  
|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 |  |         | 13.1     |            |            |   |      |              |  |             |        |   |  |              |         |   |  |   | 13.1     |  
|Property and equipment, net                              |  |         | 185.1    |            |            |   | 21.4  |              |  |             | 23.6    |   |  |              |         |   |  |   | 230.1    |  
|Deferred income taxes                                    |  |         | (88.5    | )          |            |   | 41.6  |              |  |             | 46.9    |   |  |              |         |   |  |   |         |  
|Personal injury-related insurance recoveries receivable  |  |         | 465.4    |            |            |   |      |              |  |             |        |   |  |              |         |   |  |   | 465.4    |  
|Other assets                                             |  |         | 54.5     |            |            |   | .2    |              |  |             | .4      |   |  |              |         |   |  |   | 55.1     |  
|Discontinued operations long-term assets                |  |         | 6.5      |            |            |   | 37.7  |              |  |             | 389.6   |   |  |              |         |   |  |   | 433.8    |  
|                                                         |  |         |          |            |            |   |       |              |  |             |         |   |  |              |         
|                                                         |  | $       | 1,281.9  |            |            | $ | 844.8 |              |  | $           | 2,293.2 |   |  | $            | (2,791.2 | ) |  | $ | 1,628.7  |  
|                                                         |  |         |          |            |            |   |       |              |  |             |         |   |  |              |         
|LIABILITIES AND STOCKHOLDERS EQUITY                    
|Current liabilities                                      |  | $       | 127.7    |            |            | $ | 5.1   |              |  | $           | 9.2     |   |  | $            |         |   |  | $ | 142.0    |  
|Discontinued operations current liabilities             |  |         | 33.5     |            |            |   | 39.0  |              |  |             | 105.0   |   |  |              |         |   |  |   | 177.5    |  
|Other long-term liabilities                              |  |         | 59.1     |            |            |   | 1.0   |              |  |             | (.7     | ) |  |              |         |   |  |   | 59.4     |  
|Long-term debt                                           |  |         | 2.2      |            |            |   |      |              |  |             |        |   |  |              |         |   |  |   | 2.2      |  
|Discontinued operations long-term liabilities           |  |         | 50.3     |            |            |   | 11.9  |              |  |             | 41.0    |   |  |              | 105.5    |   |  |   | 208.7    |  
|Liabilities subject to compromise                        |  |         | 2,740.3  |            |            |   | 16.0  |              |  |             | 13.8    |   |  |              |         |   |  |   | 2,770.1  |  
|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  |  
|                                                         |  |         |          |            |            |   |       |              |  |             |         |   |  |              |         

100



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2004


|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |        |        |   |   |        |       | 
|------------------------------------------ | ---------------------------- | ------- | ------ | ---------- | ---------- | - | ----- | ------------ |  | ----------- | ------- | ----- |  | ------------ | ------ | ------ | - | - | ------ | ----- | 
|                                           |                              |         |        | Subsidiary |            |   | Other |              |  | Eliminating |         |       | 
|                                           |                              | Company |        |            | Guarantors |   |       | Subsidiaries |  |             | Entries |       |  | Consolidated |       
|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Net sales                                  |                              | $       | 757.6  |            |            | $ | 41.2  |              |  | $           | 294.8   |       |  | $            | (151.2 | )      |   | $ | 942.4  |      
|Costs and expenses:                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |        |        |   |   |        |      
|                                           | Operating costs and expenses |         |        | 796.8      |            |   |       | 50.9         |  |             |         | 270.1 |  |              |        | (151.2 | ) |   |        | 966.6 | 
|                                           | Other operating charges, net |         |        | 793.2      |            |   |       |             |  |             |         |      |  |              |        |       |   |   |        | 793.2 | 
|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Operating income (loss)                    |                              |         | (832.4 | )          |            |   | (9.7  | )            |  |             | 24.7    |       |  |              |       |        |   |   | (817.4 | )    
|Interest expense                           |                              |         | (9.5   | )          |            |   |      |              |  |             |        |       |  |              |       |        |   |   | (9.5   | )    
|Reorganization items                       |                              |         | (39.0  | )          |            |   |      |              |  |             |        |       |  |              |       |        |   |   | (39.0  | )    
|Other income (expense), net                |                              |         | 5.1    |            |            |   |      |              |  |             | (.9     | )     |  |              |       |        |   |   | 4.2    |      
|Provision for income taxes                 |                              |         | (3.2   | )          |            |   |      |              |  |             | (3.0    | )     |  |              |       |        |   |   | (6.2   | )    
|Equity in loss of subsidiaries             |                              |         | 122.2  |            |            |   |      |              |  |             |        |       |  |              | (122.2 | )      |   |   |       |      
|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|(Loss) from continuing operations          |                              |         | (756.8 | )          |            |   | (9.7  | )            |  |             | 20.8    |       |  |              | (122.2 | )      |   |   | (867.9 | )    
|Income (loss) from discontinued operations |                              |         | 10.2   |            |            |   | 130.3 |              |  |             | (19.2   | )     |  |              |       |        |   |   | 121.3  |      
|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Net loss                                   |                              | $       | (746.6 | )          |            | $ | 120.6 |              |  | $           | 1.6     |       |  | $            | (122.2 | )      |   | $ | (746.6 | )    
|                                           |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       

Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2003


|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |        |        |   |   |        |       | 
|--------------------------------------- | ---------------------------- | ------- | ------ | ---------- | ---------- | - | ----- | ------------ |  | ----------- | ------- | ----- |  | ------------ | ------ | ------ | - | - | ------ | ----- | 
|                                        |                              |         |        | Subsidiary |            |   | Other |              |  | Eliminating |         |       | 
|                                        |                              | Company |        |            | Guarantors |   |       | Subsidiaries |  |             | Entries |       |  | Consolidated |       
|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Net sales                               |                              | $       | 573.4  |            |            | $ | 42.3  |              |  | $           | 238.5   |       |  | $            | (144.0 | )      |   | $ | 710.2  |      
|Costs and expenses:                     |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |        |        |   |   |        |      
|                                        | Operating costs and expenses |         |        | 661.9      |            |   |       | 55.3         |  |             |         | 226.0 |  |              |        | (144.0 | ) |   |        | 799.2 | 
|                                        | Other operating charges, net |         |        | 141.4      |            |   |       | .2           |  |             |         |      |  |              |        |       |   |   |        | 141.6 | 
|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Operating income (loss)                 |                              |         | (229.9 | )          |            |   | (13.2 | )            |  |             | 12.5    |       |  |              |       |        |   |   | (230.6 | )    
|Interest expense                        |                              |         | (9.1   | )          |            |   |      |              |  |             |        |       |  |              |       |        |   |   | (9.1   | )    
|Reorganization items                    |                              |         | (27.0  | )          |            |   |      |              |  |             |        |       |  |              |        |        |   |   | (27.0  | )    
|Other income (expense), net             |                              |         | 6.3    |            |            |   | (.7   | )            |  |             | (10.8   | )     |  |              |       |        |   |   | (5.2   | )    
|Provision for income taxes              |                              |         | (1.8   | )          |            |   |      |              |  |             | .3      |       |  |              |       |        |   |   | (1.5   | )    
|Equity in income (loss) of subsidiaries |                              |         | (126.9 | )          |            |   |      |              |  |             |        |       |  |              | 126.9  |        |   |   |       |      
|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Loss from continuing operations         |                              |         | (388.4 | )          |            |   | (13.9 | )            |  |             | 2.0     |       |  |              | 126.9  |        |   |   | (273.4 | )    
|Loss from discontinued operations       |                              |         | (399.7 | )          |            |   | (78.0 | )            |  |             | (37.0   | )     |  |              |       |        |   |   | (514.7 | )    
|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       
|Net Loss                                |                              | $       | (788.1 | )          |            | $ | (91.9 | )            |  | $           | (35.0   | )     |  | $            | 126.9  |        |   | $ | (788.1 | )    
|                                        |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       

101



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Income (Loss)


For the Year Ended December 31, 2002


|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       |       |   |   |        |       | 
|--------------------------------- | ---------------------------- | ------- | ------ | ---------- | ---------- | - | ----- | ------------ |  | ----------- | ------- | ----- |  | ------------ | ----- | ----- | - | - | ------ | ----- | 
|                                  |                              |         |        | Subsidiary |            |   | Other |              |  | Eliminating |         |       | 
|                                  |                              | Company |        |            | Guarantors |   |       | Subsidiaries |  |             | Entries |       |  | Consolidated |      
|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |      
|Net sales                         |                              | $       | 478.2  |            |            | $ | 76.3  |              |  | $           | 222.7   |       |  | $            | (68.2 | )     |   | $ | 709.0  |      
|Costs and expenses:               |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |       |       |   |   |        |      
|                                  | Operating costs and expenses |         |        | 609.7      |            |   |       | 82.6         |  |             |         | 198.1 |  |              |       | (68.2 | ) |   |        | 822.2 | 
|                                  | Other operating charges, net |         |        | 31.8       |            |   |       |             |  |             |         |      |  |              |       |      |   |   |        | 31.8  | 
|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |      
|Operating income (loss)           |                              |         | (163.3 | )          |            |   | (6.3  | )            |  |             | 24.6    |       |  |              |      |       |   |   | (145.0 | )    
|Interest expense                  |                              |         | (16.6  | )          |            |   |      |              |  |             | (2.4    | )     |  |              |      |       |   |   | (19.0  | )    
|Reorganization items              |                              |         | (33.3  | )          |            |   |      |              |  |             |        |       |  |              |      |       |   |   | (33.3  | )    
|Other income (expense), net       |                              |         | (6.8   | )          |            |   | 6.7   |              |  |             | (.8     | )     |  |              |      |       |   |   | (.9    | )    
|Provision for income taxes        |                              |         | 4.0    |            |            |   | (3.3  | )            |  |             | (4.9    | )     |  |              |      |       |   |   | (4.2   | )    
|Equity in income of subsidiaries  |                              |         | 12.1   |            |            |   |      |              |  |             |        |       |  |              | (12.1 | )     |   |   |       |      
|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |      
|Loss from continuing operations   |                              |         | (203.9 | )          |            |   | (2.9  | )            |  |             | 16.5    |       |  |              | (12.1 | )     |   |   | (202.4 | )    
|Loss from discontinued operations |                              |         | (264.5 | )          |            |   | (21.2 | )            |  |             | 19.7    |       |  |              |      |       |   |   | (266.0 | )    
|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |      
|Net loss                          |                              | $       | (468.4 | )          |            | $ | (24.1 | )            |  | $           | 36.2    |       |  | $            | (12.1 | )     |   | $ | (468.4 | )    
|                                  |                              |         |        |            |            |   |       |              |  |             |         |       |  |              |      

102



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


Condensed Consolidating Statements of Cash Flows


For the Year Ended December 31, 2004


|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |   |   |  |   |        |        |  
|--------------------------------------------------------- | ----------------------- | ------- | ------ | ---------- | ---------- | - | ------ | ------------ | - | ----------- | ------- | ----- | ------------ | - | - | - |  | - | ------ | ------ | -
|                                                          |                         |         |        | Subsidiary |            |   | Other  |              |   | Eliminating |         |      
|                                                          |                         | Company |        |            | Guarantors |   |        | Subsidiaries |   |             | Entries |       | Consolidated |  
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |  
|Net cash provided (used) by:                              |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |   |   |  |   |        |       
|Operating activities                                     |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |   |   |  |   |        |       
|                                                          | Continuing operations   |         | $      | (122.3     | )          |   | $      | (8.1         | ) |             | $       | 28.4  |              |   | $ |  |  |   | $      | (102.0 | )
|                                                          | Discontinued operations |         |        | (5.1       | )          |   |        | 38.4         |   |             |         | 30.7  |              |   |   |  |  |   |        | 64.0   |  
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|                                                          |                         |         | (127.4 | )          |            |   | 30.3   |              |   |             | 59.1    |       |              |   |   |   |  |   | (38.0  | )     
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|Investing activities                                     |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |   |   |  |   |        |       
|                                                          | Continuing operations   |         |        | (4.5       | )          |   |        | (.3          | ) |             |         | (.5   | )            |   |   |  |  |   |        | (5.3   | )
|                                                          | Discontinued operations |         |        | 76.0       |            |   |        | 278.6        |   |             |         | 2.1   |              |   |   |  |  |   |        | 356.7  |  
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|                                                          |                         |         | 71.5   |            |            |   | 278.3  |              |   |             | 1.6     |       |              |   |  |   |  |   | 351.4  |       
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|Financing activities                                     |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |   |   |  |   |        |       
|                                                          | Continued operations    |         |        | (2.4       | )          |   |        |             |   |             |         |      |              |   |   |  |  |   |        | (2.4   | )
|                                                          | Discontinued operations |         |        |           |            |   |        | (271.6       | ) |             |         | (19.5 | )            |   |   |  |  |   |        | (291.1 | )
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|                                                          |                         |         | (2.4   | )          |            |   | (271.6 | )            |   |             | (19.5   | )     |              |   |  |   |  |   | (293.5 | )     
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|Intercompany activity                                     |                         |         | 77.6   |            |            |   | (37.0  | )            |   |             | (40.6   | )     |              |   |  |   |  |   |       |       
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|Net decrease in cash and cash equivalents during the year |                         |         | 19.3   |            |            |   |       |              |   |             | .6      |       |              |   |  |   |  |   | 19.9   |       
|Cash and cash equivalents at beginning of year            |                         |         | 34.7   |            |            |   |       |              |   |             | .8      |       |              |   |  |   |  |   | 35.5   |       
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  
|Cash and cash equivalents at end of year                  |                         | $       | 54.0   |            |            | $ |       |              |   | $           | 1.4     |       |              | $ |  |   |  | $ | 55.4   |       
|                                                          |                         |         |        |            |            |   |        |              |   |             |         |       |              |   |  

103



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continuing operations   |         | $      | (72.3      | )          |   | $     | (.4          | ) |             | $       | 15.3  |              |   | $ |   |  |   | $     | (57.4 | )
|                                                          | Discontinued operations |         |        | (40.1      | )          |   |       | 34.3         |   |             |         | (23.7 | )            |   |   |  |  |   |       | (29.5 | )
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | (112.4 | )          |            |   | 33.9  |              |   |             | (8.4    | )     |              |   |  |   |  |   | (86.9 | )    
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Investing activities                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continuing operations   |         |        | 69.3       |            |   |       | (.1          | ) |             |         | 4.9   |              |   |   |  |  |   |       | 74.1  |  
|                                                          | Discontinued operations |         |        | 1.3        |            |   |       |             |   |             |         | (26.3 | )            |   |   |  |  |   |       | (25.0 | )
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | 70.6   |            |            |   | (.1   | )            |   |             | (21.4   | )     |              |   |  |   |  |   | 49.1  |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Financing activities                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continued operations    |         |        | (4.1       | )          |   |       |             |   |             |         |      |              |   |   |  |  |   |       | (4.1  | )
|                                                          | Discontinued operations |         |        |           |            |   |       |             |   |             |         |      |              |   |   |  |  |   |       |      |  
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | (4.1   | )          |            |   |      |              |   |             |        |       |              |   |  |   |  |   | (4.1  | )    
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Intercompany activity                                     |                         |         | 7.4    |            |            |   | (33.8 | )            |   |             | 26.4    |       |              |   |  |   |  |   |      |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Net decrease in cash and cash equivalents during the year |                         |         | (38.5  | )          |            |   |      |              |   |             | (3.4    | )     |              |   |  |   |  |   | (41.9 | )    
|Cash and cash equivalents at beginning of year            |                         |         | 73.2   |            |            |   |      |              |   |             | 4.2     |       |              |   |  |   |  |   | 77.4  |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Cash and cash equivalents at end of year                  |                         | $       | 34.7   |            |            | $ |      |              |   | $           | .8      |       |              | $ |  |   |  | $ | 35.5  |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  

104



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND
SUBSIDIARY COMPANIES


(Debtor-in-Possession)


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


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                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continuing operations   |         | $      | (56.3      | )          |   | $     | (3.6         | ) |             | $       | 31.7  |              |   | $ |  |  |   | $     | (28.2 | )
|                                                          | Discontinued operations |         |        | (46.1      | )          |   |       | 41.9         |   |             |         | (19.3 | )            |   |   |  |  |   |       | (23.5 | )
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | (102.4 | )          |            |   | 38.3  |              |   |             | 12.4    |       |              |   |  |   |  |   | (51.7 | )    
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Investing activities-                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continuing operations   |         |        | 20.1       |            |   |       | (1.4         | ) |             |         | (1.1  | )            |   |   |  |  |   |       | 17.6  |  
|                                                          | Discontinued operations |         |        | .5         |            |   |       | (.6          | ) |             |         | (33.7 | )            |   |   |  |  |   |       | (33.8 | )
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | 20.6   |            |            |   | (2.0  | )            |   |             | (34.8   | )     |              |   |  |   |  |   | (16.2 | )    
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Financing activities-                                     |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |   |   |  |   |       |      
|                                                          | Continued operations    |         |        | (8.8       | )          |   |       |             |   |             |         |      |              |   |   |  |  |   |       | (8.8  | )
|                                                          | Discontinued operations |         |        |           |            |   |       |             |   |             |         |      |              |   |   |  |  |   |       |      |  
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|                                                          |                         |         | (8.8   | )          |            |   |      |              |   |             |        |       |              |   |  |   |  |   | (8.8  | )    
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Intercompany activity                                     |                         |         | 10.4   |            |            |   | (35.8 | )            |   |             | 25.4    |       |              |   |  |   |  |   |      |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Net decrease in cash and cash equivalents during the year |                         |         | (80.2  | )          |            |   | .5    |              |   |             | 3.0     |       |              |   |  |   |  |   | (76.7 | )    
|Cash and cash equivalents at beginning of year            |                         |         | 153.4  |            |            |   | (.5   | )            |   |             | 1.2     |       |              |   |  |   |  |   | 154.1 |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  
|Cash and cash equivalents at end of year                  |                         | $       | 73.2   |            |            | $ |      |              |   | $           | 4.2     |       |              | $ |  |   |  | $ | 77.4  |      
|                                                          |                         |         |        |            |            |   |       |              |   |             |         |       |              |   |  

105



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


NOTES TO CONDENSED CONSOLIDATING FINANCIAL INFORMATION


Impact of Cases


Income Taxes


Foreign Currency


Debt Covenants and Restrictions


106



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


QUARTERLY FINANCIAL DATA (Unaudited)


|     |                                            |                          |   |       |          |  |   |               |   |  |              |        |      |  |   |        |     
|---- | ------------------------------------------ | ------------------------ | - | ----- | -------- |  | - | ------------- | - |  | ------------ | ------ | ---- |  | - | ------ | ----
|     |                                            | Quarter Ended            |  
|     |                                            |                          |  
|     |                                            | March 31,                |   |       | June 30, |  |   | September 30, |   |  | December 31, |       
|     |                                            |                          |   |       |          |  |   |               |   |  |              |       
|     |                                            | (In millions of dollars) |  
|2004 |                                            |                          |   |       |          |  |   |               |   |  |              |        |      |  |   |       
|     | Net sales                                  |                          | $ | 210.2 |          |  | $ | 230.1         |   |  | $            | 244.4  |      |  | $ | 257.7  |     
|     | Operating income (loss)                    |                          |   | (10.2 | )        |  |   | (4.4          | ) |  |              | (160.4 | )    |  |   | (642.4 | )   
|     | Loss from continuing operations            |                          |   | (22.5 | )        |  |   | (14.8         | ) |  |              | (173.1 | )(1) |  |   | (657.5 | )(2)
|     | Income (loss) from discontinued operations |                          |   | (41.4 | )        |  |   | 39.0          |   |  |              | 103.7  |      |  |   | 20.0   |     
|     | Net loss                                   |                          |   | (63.9 | )        |  |   | 24.2          |   |  |              | (69.4  | )    |  |   | (637.5 | )   
|2003 |                                            |                          |   |       |          |  |   |               |   |  |              |        |      |  |   |       
|     | Net sales                                  |                          | $ | 176.1 |          |  | $ | 176.3         |   |  | $            | 174.5  |      |  | $ | 183.3  |     
|     | Operating income (loss)                    |                          |   | (11.7 | )        |  |   | (22.3         | ) |  |              | (36.4  | )    |  |   | (160.2 | )   
|     | Loss from continuing operations            |                          |   | (22.3 | )        |  |   | (33.6         | ) |  |              | (51.6  | )    |  |   | (165.9 | )(3)
|     | Loss from discontinued operations          |                          |   | (42.8 | )        |  |   | (27.7         | ) |  |              | (37.0  | )    |  |   | (407.2 | )   
|     | Net loss                                   |                          |   | (65.1 | )        |  |   | (61.3         | ) |  |              | (88.6  | )    |  |   | (573.1 | )   






|    |                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a non-cash pension charge of $155.5 (see Note 6 of
    Notes to Consolidated Financial Statements).                                                                                                                                                                                                                  
|   
|(2) | Includes a non-cash pension charge of $154.5, a non-cash charge
    related to termination of post-retirement medical benefits plan
    of $312.5 and a related non-cash charge of $175.0 related to a
    settlement with the United Steel Workers of America (see
    Note 6 of Notes to Consolidated Financial Statements).
|   
|(3) | Includes a non-cash pension charge of $121.2 and a non-cash
    hearing loss claims charge of $15.8 (see Note 6 of Notes to
    Consolidated Financial Statements).                                                                                                                                                           
|   
|(4) | Earnings (loss) per share and market price may not be meaningful
    because, as part of a plan of reorganization, it is likely that
    the equity interests of the Companys existing stockholders
    will be cancelled without consideration.                                                                             

107



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


FIVE-YEAR FINANCIAL DATA


CONSOLIDATED BALANCE SHEETS


|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |         |          |         |       |         |          |         |       | 
|------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------- | -------- | -------- | ----- | ------- | -------- | -------- | ----- | ------- | -------- | -------- | ----- | ------- | -------- | ------- | ----- | ------- | -------- | ------- | ----- | 
|                                                        |                                                                                  | December 31,                                                            |                          
|                                                        |                                                                                  |                                                                         |                          
|                                                        |                                                                                  | 2004(1)                                                                 |                           |          | 2003     |       |         | 2002     |          |       | 2001    |          |          | 2000  |        
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  | (In millions of dollars)                                                |                          
|ASSETS                                                 
|Current assets:                                         |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |         |          |         |       |         |         
|                                                        | Cash and cash equivalents                                                        |                                                                         | $                         | 55.4     |          |       | $       | 35.5     |          |       | $       | 77.4     |          |       | $       | 154.1    |         |       | $       | 30.8     |        
|                                                        | Receivables                                                                      |                                                                         |                           | 116.3    |          |       |         | 85.7     |          |       |         | 67.5     |          |       |         | 73.3     |         |       |         | 124.5    |        
|                                                        | Inventories                                                                      |                                                                         |                           | 105.3    |          |       |         | 92.5     |          |       |         | 103.8    |          |       |         | 138.3    |         |       |         | 181.9    |        
|                                                        | Prepaid expenses and other current assets                                        |                                                                         |                           | 19.6     |          |       |         | 23.8     |          |       |         | 27.0     |          |       |         | 20.6     |         |       |         | 88.3     |        
|                                                        | Discontinued operations current assets                                          |                                                                         |                           | 30.6     |          |       |         | 193.7    |          |       |         | 245.9    |          |       |         | 379.4    |         |       |         | 592.8    |        
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  | Total current assets                                                    |                           |          | 327.2    |       |         |          | 431.2    |       |         |          | 521.6    |       |         |          | 765.7   |       |         |          | 1,018.3 |      
|Investments in and advances to unconsolidated affiliate |                                                                                  |                                                                         | 16.7                      |          |          |       | 13.1    |          |          |       | 15.2    |          |          |       | 18.9    |          |         |       | 21.6    |         
|Property, plant, and equipment  net                    |                                                                                  |                                                                         | 214.6                     |          |          |       | 230.1   |          |          |       | 255.3   |          |          |       | 294.4   |          |         |       | 321.8   |         
|Restricted proceeds from sale of commodity interests    |                                                                                  |                                                                         | 280.8                     |          |          |       |        |          |          |       |        |          |          |       |        |          |         |       |        |         
|Deferred income taxes                                   |                                                                                  |                                                                         |                          |          |          |       |        |          |          |       |        |          |          |       |        |          |         |       | 452.3   |         
|Personal injury-related insurance recoveries receivable |                                                                                  |                                                                         | 967.0                     |          |          |       | 465.4   |          |          |       | 484.0   |          |          |       | 501.2   |          |         |       | 406.3   |         
|Other assets                                            |                                                                                  |                                                                         | 42.5                      |          |          |       | 55.1    |          |          |       | 137.7   |          |          |       | 161.3   |          |         |       | 144.6   |         
|Discontinued operations long-term assets               |                                                                                  |                                                                         | 38.9                      |          |          |       | 433.8   |          |          |       | 816.6   |          |          |       | 1,008.7 |          |         |       | 982.5   |         
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  | Total                                                                   |                           | $        | 1,887.7  |       |         | $        | 1,628.7  |       |         | $        | 2,230.4  |       |         | $        | 2,750.2 |       |         | $        | 3,347.4 |      
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                   
|Liabilities not subject to compromise                  |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |         |          |         |       |         |         
|Current liabilities:                                    |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |         |          |         |       |         |         
|                                                        |                                                                                  | Accounts payable and accruals                                           |                           | $        | 173.8    |       |         | $        | 96.8     |       |         | $        | 92.2     |       |         | $        | 273.1   |       |         | $        | 350.8   |      
|                                                        |                                                                                  | Accrued postretirement medical benefit obligation 
    current portion |                           |          |         |       |         |          | 32.5     |       |         |          | 60.2     |       |         |          | 62.0    |       |         |          | 58.0    |      
|                                                        |                                                                                  | Payable to affiliate                                                    |                           |          | 14.6     |       |         |          | 11.4     |       |         |          | 11.1     |       |         |          | 12.2    |       |         |          | 13.3    |      
|                                                        |                                                                                  | Long-term debt  current portion                                        |                           |          | 1.2      |       |         |          | 1.3      |       |         |          | .9       |       |         |          | 173.5   |       |         |          | 31.6    |      
|                                                        |                                                                                  | Discontinued operations current liabilities                            |                           |          | 57.7     |       |         |          | 177.5    |       |         |          | 167.6    |       |         |          | 282.6   |       |         |          | 387.7   |      
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  |                                                                         | Total current liabilities |          |          | 247.3 |         |          |          | 319.5 |         |          |          | 332.0 |         |          |         | 803.4 |         |          |         | 841.4 | 
|                                                        | Long-term liabilities                                                            |                                                                         |                           | 32.9     |          |       |         | 59.4     |          |       |         | 55.7     |          |       |         | 808.9    |         |       |         | 524.0    |        
|                                                        | Accrued postretirement medical benefit obligation                                |                                                                         |                           |         |          |       |         |         |          |       |         |         |          |       |         | 642.2    |         |       |         | 656.9    |        
|                                                        | Long-term debt                                                                   |                                                                         |                           | 2.8      |          |       |         | 2.2      |          |       |         | 20.7     |          |       |         | 678.7    |         |       |         | 901.7    |        
|                                                        | Discontinued operations long-term liabilities, including
    minority interests |                                                                         |                           | 26.4     |          |       |         | 208.7    |          |       |         | 226.4    |          |       |         | 251.0    |         |       |         | 336.4    |        
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  |                                                                         | 309.4                     |          |          |       | 589.8   |          |          |       | 636.8   |          |          |       | 3,184.2 |          |         |       | 3,260.4 |         
|Liabilities subject to compromise                       |                                                                                  |                                                                         | 3,954.9                   |          |          |       | 2,770.1 |          |          |       | 2,673.9 |          |          |       |        |          |         |       |        |         
|Stockholders equity:                                   |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |         |          |         |       |         |         
|                                                        | Preference stock                                                                 |                                                                         |                           | .7       |          |       |         | .7       |          |       |         | .7       |          |       |         | .7       |         |       |         | .7       |        
|                                                        | Common stock                                                                     |                                                                         |                           | 15.4     |          |       |         | 15.4     |          |       |         | 15.4     |          |       |         | 15.4     |         |       |         | 15.4     |        
|                                                        | Additional capital                                                               |                                                                         |                           | 2,452.8  |          |       |         | 2,454.0  |          |       |         | 2,454.8  |          |       |         | 2,437.6  |         |       |         | 2,300.8  |        
|                                                        | Accumulated deficit                                                              |                                                                         |                           | (2,648.3 | )        |       |         | (1,901.7 | )        |       |         | (1,113.6 | )        |       |         | (645.2   | )       |       |         | (188.1   | )      
|                                                        | Accumulated other comprehensive income (loss)                                    |                                                                         |                           | (5.5     | )        |       |         | (107.9   | )        |       |         | (243.9   | )        |       |         | (67.3    | )       |       |         | (1.8     | )      
|                                                        | Note receivable from parent                                                      |                                                                         |                           | (2,191.7 | )        |       |         | (2,191.7 | )        |       |         | (2,191.7 | )        |       |         | (2,175.2 | )       |       |         | (2,040.0 | )      
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  | Total stockholders equity                                              |                           |          | (2,376.6 | )     |         |          | (1,731.2 | )     |         |          | (1,078.3 | )     |         |          | (434.0  | )     |         |          | 87.0    |      
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        
|                                                        |                                                                                  | Total                                                                   |                           | $        | 1,887.7  |       |         | $        | 1,628.7  |       |         | $        | 2,230.4  |       |         | $        | 2,750.2 |       |         | $        | 3,347.4 |      
|                                                        |                                                                                  |                                                                         |                           |          |          |       |         |          |          |       |         |          |          |       |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2004
    balance sheet to the balance sheet of the entity upon emergence.

108



---



##### 



KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


Five-Year Financial Data


Statements of Consolidated Income (Loss)


|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |        |       |        |       |         |       |         |         | 
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ----- | ----- | ------- | ------ | ------ | ----- | ----- | ------ | ------ | ----- | ----- | ------ | ----- | ------ | ----- | ------- | ----- | ------- | ------- | 
|                                                             |                                                                                           | Year Ended December 31,                                                                                                                     |                         
|                                                             |                                                                                           |                                                                                                                                             |                         
|                                                             |                                                                                           | 2004                                                                                                                                        |                          |       | 2003  |         |        | 2002   |       |       | 2001   |        |       | 2000  |       
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|                                                             |                                                                                           | (In millions of dollars, except share amounts)                                                                                              |                         
|Net sales(1)                                                 |                                                                                           | $                                                                                                                                           | 942.4                    |       |       | $       | 710.2  |        |       | $     | 709.0  |        |       | $     | 889.5  |       |        | $     | 1,330.8 |      
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Costs and expenses:                                          |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |        |       |        |       |         |      
|                                                             |                                                                                           | Cost of products sold                                                                                                                       |                          |       | 852.2 |         |        |        | 681.2 |       |        |        | 671.4 |       |        |       | 823.4  |       |         |       | 1,175.8 |        
|                                                             |                                                                                           | Depreciation and amortization                                                                                                               |                          |       | 22.3  |         |        |        | 25.7  |       |        |        | 32.3  |       |        |       | 32.1   |       |         |       | 34.2    |        
|                                                             |                                                                                           | Selling, administrative, research and development, and general                                                                              |                          |       | 92.1  |         |        |        | 92.3  |       |        |        | 118.5 |       |        |       | 93.4   |       |         |       | 92.1    |        
|                                                             |                                                                                           | Other operating charges (benefits), net                                                                                                     |                          |       | 793.2 |         |        |        | 141.6 |       |        |        | 31.8  |       |        |       | 30.1   |       |         |       | 82.1    |        
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|                                                             |                                                                                           |                                                                                                                                             | Total costs and expenses |       |       | 1,759.8 |        |        |       | 940.8 |        |        |       | 854.0 |        |       |        | 979.0 |         |       |         | 1,384.2 | 
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Operating income (loss)                                      |                                                                                           |                                                                                                                                             | (817.4                   | )     |       |         | (230.6 | )      |       |       | (145.0 | )      |       |       | (89.5  | )     |        |       | (53.4   | )    
|Other income (expense):                                      |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |        |       |        |       |         |      
|                                                             |                                                                                           | Interest expense (excluding unrecorded contractual interest
    expense of $95.0, $95.0 and $84.0 in 2004, 2003 and 2002,
    respectively) |                          |       | (9.5  | )       |        |        | (9.1  | )     |        |        | (19.0 | )     |        |       | (106.2 | )     |         |       | (105.8  | )      
|                                                             |                                                                                           | Reorganization items                                                                                                                        |                          |       | (39.0 | )       |        |        | (27.0 | )     |        |        | (33.3 | )     |        |       |       |       |         |       |        |        
|                                                             |                                                                                           | Other  net                                                                                                                                 |                          |       | 4.2   |         |        |        | (5.2  | )     |        |        | (.9   | )     |        |       | (68.7  | )     |         |       | (17.6   | )      
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Income (loss) before income taxes and discontinued operation |                                                                                           |                                                                                                                                             | (861.7                   | )     |       |         | (271.9 | )      |       |       | (198.2 | )      |       |       | (264.4 | )     |        |       | (176.8  | )    
|(Provision) benefit for income taxes                         |                                                                                           |                                                                                                                                             | (6.2                     | )     |       |         | (1.5   | )      |       |       | (4.2   | )      |       |       | (521.5 | )     |        |       | 23.0    |      
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Income (loss) from continuing operations                     |                                                                                           |                                                                                                                                             | (867.9                   | )     |       |         | (273.4 | )      |       |       | (202.4 | )      |       |       | (785.9 | )     |        |       | (153.8  | )    
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Discontinued operations:                                     |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |        |       |        |       |         |      
|                                                             | Income (loss) from discontinued operation, net of income
    taxes and minority interests |                                                                                                                                             |                          | (5.3  | )     |         |        | (514.7 | )     |       |        | (266.0 | )     |       |        | 165.3 |        |       |         | 171.3 |        
|                                                             | Gain from sale of commodity interests                                                     |                                                                                                                                             |                          | 126.6 |       |         |        |       |       |       |        |       |       |       |        | 163.6 |        |       |         |      |        
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Income (loss) from discontinued operations                   |                                                                                           |                                                                                                                                             | 121.3                    |       |       |         | (514.7 | )      |       |       | (266.0 | )      |       |       | 328.9  |       |        |       | 171.3   |      
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       
|Net income (loss)                                            |                                                                                           | $                                                                                                                                           | (746.6                   | )     |       | $       | (788.1 | )      |       | $     | (468.4 | )      |       | $     | (457.0 | )     |        | $     | 17.5    |      
|                                                             |                                                                                           |                                                                                                                                             |                          |       |       |         |        |        |       |       |        |        |       |       |       






|    |                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.

109



---



##### 








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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures.


Changes in Internal Control.







|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



|                        |  |                                                                
|----------------------- |  | ---------------------------------------------------------------
|Name                    |  | Positions and Offices with the Company and Kaiser*             
|                        |  |                                                                
|Jack A. Hockema         |  | President, Chief Executive Officer and Director                
|John Barneson           |  | Senior Vice President and Chief Administrative Officer         
|Edward F. Houff         |  | Senior Vice President and Chief Restructuring Officer          
|John M. Donnan          |  | Vice President, Secretary and General Counsel                  
|W. Scott Lamb           |  | Vice President, Investor Relations and Corporate Communications
|Daniel D. Maddox        |  | Vice President and Controller                                  
|Daniel J. Rinkenberger  |  | Vice President and Treasurer                                   
|Kerry A. Shiba          |  | Vice President and Chief Financial Officer                     
|Robert J. Cruikshank    |  | 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.


110



---



##### 





John Barneson.


Edward F. Houff.


John M. Donnan.


W. Scott Lamb.


Daniel D. Maddox.


Daniel J. Rinkenberger.


111



---



##### 





Kerry A. Shiba.


Robert J. Cruikshank.


George T. Haymaker, Jr.


Charles E. Hurwitz.


Ezra G. Levin.


112



---



##### 





John D. Roach.


Audit Committee Financial Expert




Code of Ethics






| |                                       
| | --------------------------------------
| | Corporate Secretary                   
| | Kaiser Aluminum & Chemical Corporation
| | 27422 Portola Parkway, Suite 350      
| | Foothill Ranch, California 92610-2831 

Section 16(a) Beneficial Ownership Reporting
Compliance









|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

Summary Compensation Table




113



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##### 





|                   |                         |      |      |                     |     |  |         |         |  |                        |            |         |          |            |   |          |        |  |         |           |     |              |        |     |  |  |     |         |     |  |         |         |        
|------------------ | ----------------------- | ---- | ---- | ------------------- | --- |  | ------- | ------- |  | ---------------------- | ---------- | ------- | -------- | ---------- | - | -------- | ------ |  | ------- | --------- | --- | ------------ | ------ | --- |  |  | --- | ------- | --- |  | ------- | ------- | -------
|                   |                         |      |      |                     |     |  |         |         |  | Long-Term Compensation |            |         |         
|                   |                         |      |      |                     |     |  |         |         |  |                        |            |         |         
|                   |                         |      |      | Annual Compensation |     |  | Awards  |         |  | Payouts                |            |         |         
|                   |                         |      |      |                     |     |  |         |         |  |                        |            |         |         
|(a)                |                         | (b)  |      |                     | (c) |  |         | (d)     |  |                        | (e)        |         |          | (f)        |   |          | (g)    |  |         | (h)       |     |              | (i)    |    
|                   |                         |      |      |                     |     |  |         | Other   |  |                        | Restricted |         |          | Securities |   |          |        |  |        
|                   |                         |      |      |                     |     |  |         | Annual  |  |                        | Stock      |         |          | Underlying |   |          | LTIP   |  |         | All Other |    
|Name and Principal |                         |      |      | Salary              |     |  | Bonus   |         |  | Compensation           |            |         | Award(s) |            |   | Options/ |        |  | Payouts |           |     | Compensation |       
|Position           |                         | Year |      |                     | ($) |  |         | ($)     |  |                        | ($)(1)     |         |          | ($)        |   |          | SARS # |  |         | ($)       |     |              | ($)(2) |    
|                   |                         |      |      |                     |     |  |         |         |  |                        |            |         |          |            |   |          |        |  |         |           |     |              |        |    
|Jack A. Hockema    |                         |      | 2004 |                     |     |  | 730,000 |         |  |                        |           | (3)     |          |            |  |          |        |  | -0-     |           |     |              | -0-    |     |  |  | -0- |         |     |  | 182,793 | (4)(5) 
|                   | President and Chief     |      |      | 2003                |     |  |         | 730,000 |  |                        |            | -0-     |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 365,000 | (4)    
|                   | Executive Officer       |      |      | 2002                |     |  |         | 730,000 |  |                        |            | -0-     |          |            |   |         |        |  |         | 116,495   | (6) |              |        | -0- |  |  |     | 236,200 | (7) |  |         | 346,750 | (4)    
|Edward F. Houff    |                         |      | 2004 |                     |     |  | 431,250 |         |  |                        | 125,000    | (3)     |          |            |  |          |        |  | -0-     |           |     |              | -0-    |     |  |  | -0- |         |     |  | 100,000 | (4)    
|                   | Senior Vice President   |      |      | 2003                |     |  |         | 400,000 |  |                        |            | 125,000 |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 200,000 | (4)    
|                   | and Chief               |      |      | 2002                |     |  |         | 400,000 |  |                        |            | 125,000 |          |            |   | 3,439    |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 168,909 | (4)(8) 
|                   | Restructuring Officer   |      |      |                     |     |  |         |         |  |                        |            |         |          |            |   |          |        |  |         |           |     |              |        |     |  |  |     |         |     |  |         |         |        
|John Barneson      |                         |      | 2004 |                     |     |  | 275,000 |         |  |                        |           | (3)     |          |            |  |          |        |  | -0-     |           |     |              | -0-    |     |  |  | -0- |         |     |  | 62,500  | (4)    
|                   | Senior Vice President   |      |      | 2003                |     |  |         | 275,000 |  |                        |            | -0-     |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 125,000 | (4)    
|                   | and Chief               |      |      | 2002                |     |  |         | 252,500 |  |                        |            | -0-     |          |            |   | 72,248   | (9)    |  |         | -0-       |     |              |        | -0- |  |  |     | 13,627  | (7) |  |         | 233,102 | (4)(8) 
|                   | Administrative Officer  |      |      |                     |     |  |         |         |  |                        |            |         |          |            |   |          |        |  |         |           |     |              |        |     |  |  |     |         |     |  |         |         |        
|Kerry A. Shiba     |                         |      | 2004 |                     |     |  | 242,500 |         |  |                        |           | (3)     |          |            |  |          |        |  | -0-     |           |     |              | -0-    |     |  |  | -0- |         |     |  | 95,000  | (4)    
|                   | Vice President and      |      |      | 2003                |     |  |         | 190,000 |  |                        |            | -0-     |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 190,000 | (4)    
|                   | Chief Financial Officer |      |      | 2002                |     |  |         | 187,500 |  |                        |            | -0-     |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | 54,090  | (7) |  |         | 97,032  | (4)(10)
|Daniel D. Maddox   |                         |      | 2004 |                     |     |  | 200,000 |         |  |                        |           | (3)     |          |            |  |          |        |  | -0-     |           |     |              | -0-    |     |  |  | -0- |         |     |  | 100,000 | (4)    
|                   | Vice President and      |      |      | 2003                |     |  |         | 200,000 |  |                        |            | -0-     |          |            |   | 24,721   | (11)   |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 200,000 | (4)    
|                   | Controller              |      |      | 2002                |     |  |         | 187,500 |  |                        |            | -0-     |          |            |   |         |        |  |         | -0-       |     |              |        | -0- |  |  |     | -0-     |     |  |         | 130,000 | (4)    






| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Except as otherwise indicated for Mr. Barneson in 2002 and
    Mr. Maddox in 2003, 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) | The Company did not contribute amounts to its Supplemental
    Savings and Retirement Plan and Supplemental Benefits Plan for
    Named Executive Officers or any other salaried employees for
    2002, 2003 or 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | (3) | The Company has not completed the calculation of amounts payable
    for the year 2004 under the Companys short-term incentive
    plan. Such amounts will be included in the appropriate column of
    the Summary Compensation Table next year. For additional
    information concerning the Companys short-term incentive
    plan, see Employment Contracts, Retention Plan and
    Agreements and Termination of Employment and Change-in-Control
    Arrangements  Short-Term Incentive Planbelow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | (4) | Includes retention payments made during 2004, 2003 and 2002,
    respectively, under the Companys key employee retention
    plans in the amount of $182,500, $365,000 and $346,750 for
    Mr. Hockema; $100,000, $200,000 and $160,000 for
    Mr. Houff; $62,500, $125,000 and $118,750 for
    Mr. Barneson; $95,000, $190,000 and $95,000 for
    Mr. Shiba; and $100,000, $200,000 and $130,000 for
    Mr. Maddox. 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 years
    2004, 2003 and 2002, respectively, for each of
    Messrs. Hockema, Houff, and Barneson as follows: $273,500,
    $547,500 and $273,750 for Mr. Hockema; $150,000, $300,000
    and $150,000 for Mr. Houff; and $93,750, $187,500 and
    $93,750 for Mr. Barneson. Payment of such additional
    retention amounts 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.
|
| | (5) | Includes $293 paid to Mr. Hockema for unused allowances
    under the Companys benefit program.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (6) | In connection with Mr. Hockemas promotion to
    President and Chief Executive Officer, he was granted 95,488
    restricted shares of Kaisers Common Stock effective as of
    January 25, 2002, vesting at the rate of
    33-1/3% per
    year, beginning October 11, 2002. The above table includes
    the value of such restricted shares determined by multiplying
    the number of shares in the grant by the closing market price of
    a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

114



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##### 



| |     |                                                                                                                                                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | share of Kaisers Common Stock on the New York Stock
    Exchange on the effective date of the grant. Mr. Hockema
    elected to cancel all of the restricted shares granted to him in
    2002 prior to their respective vesting dates. As of
    December 31, 2004, Mr. Hockema owned no restricted
    shares of Kaisers Common Stock.
|
| | (7) | Amounts reflect the cash awards actually received by
    Messrs. Hockema, Barneson and Shiba in 2002 under the
    long-term incentive program for the Companys Fabricated
    Products business unit for the rolling three-year performance
    period 1999-2001.                                                                       
|
| | (8) | Includes moving-related items of $8,909 for Mr. Houff in
    2002 and $114,352 for Mr. Barneson in 2002.                                                                                                                                                                                                                                  
|
| | (9) | Includes an auto allowance of $28,301 and club membership fees
    and expenses of $11,215.                                                                                                                                                                                                                                               



|     |                                                                                       
|---- | --------------------------------------------------------------------------------------
|(10) | Includes a temporary living allowance of $2,032.                                      
|    
|(11) | Includes an auto allowance of $22,217 and personal use of a
    company car of $2,504.

Option/SAR Grants in Last Fiscal Year




Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/ SAR Values




|                 |  |             |     |  |              |                        |                             |             |                      |                        |               |     |  |             |        |     |               |  |     |     |  |  |     |    
|---------------- |  | ----------- | --- |  | ------------ | ---------------------- | --------------------------- | ----------- | -------------------- | ---------------------- | ------------- | --- |  | ----------- | ------ | --- | ------------- |  | --- | --- |  |  | --- | ---
|(a)              |  | (b)         |     |  | (c)          |                        |                             | (d)         |                      |                        | (e)           |    
|                 |  |             |     |  |              | Number of Securities   |                             |             | Value of Unexercised |                       
|                 |  |             |     |  |              | Underlying Unexercised |                             |             | in-the-Money         |                       
|                 |  | Shares      |     |  |              |                        | Options/SARs at Fiscal Year |             |                      | Options/SARs at Fiscal |              
|                 |  | Acquired on |     |  |              |                        | End (#)                     |             |                      | Year-End ($)           |              
|                 |  | Exercise    |     |  | Value        |                        |                             |             |                      |                        |               |    
|Name             |  | (#)         |     |  | Realized ($) |                        |                             | Exercisable |                      |                        | Unexercisable |     |  | Exercisable |        |     | Unexercisable | 
|                 |  |             |     |  |              |                        |                             |             |                      |                        |               |     |  |             |        |     |               | 
|Jack A. Hockema  |  |             | -0- |  |              |                        | -0-                         |             |                      |                        | 375,770       | (1) |  |             | 28,184 | (1) |               |  |    | (2) |  |  |    | (2)
|Edward F. Houff  |  |             | -0- |  |              |                        | -0-                         |             |                      |                        | 222,772       | (1) |  |             | -0-    |     |               |  |    | (2) |  |  |    | (2)
|John Barneson    |  |             | -0- |  |              |                        | -0-                         |             |                      |                        | -0-           |     |  |             | -0-    |     |               |  | -0- |     |  |  | -0- |    
|Kerry A. Shiba   |  |             | -0- |  |              |                        | -0-                         |             |                      |                        | -0-           |     |  |             | -0-    |     |               |  | -0- |     |  |  | -0- |    
|Daniel D. Maddox |  |             | -0- |  |              |                        | -0-                         |             |                      |                        | 35,715        | (1) |  |             | -0-    |     |               |  |    | (2) |  |  |    | (2)






|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents shares of Kaisers Common Stock underlying stock
    options.                                                                                                         
|   
|(2) | No value is shown because the exercise price is higher than the
    closing price of $0.09 per share of Kaisers Common
    Stock on the OTC Bulletin Board on December 30, 2004.

Long-Term Incentive Plans  Awards in Last Fiscal
Year




115



---



##### 



Long-Term
Incentive Plan


|                 |  |              |     |             |               |                                   |    |           |  |  |              |   |  |               |           |     |  |   |           |    
|---------------- |  | ------------ | --- | ----------- | ------------- | --------------------------------- | -- | --------- |  |  | ------------ | - |  | ------------- | --------- | --- |  | - | --------- | ---
|                 |  |              |     |             |               | Estimated Future Payouts          |   
|                 |  |              |     |             |               | Under Non-Stock Price-Based Plans |   
|                 |  |              |     |             |               |                                   |   
|(a)              |  | (b)          |     |             | (c)           |                                   |    | (d)       |  |  | (e)          |   |  | (f)           |          
|                 |  |              |     | Performance |               |                                   |    |           |  |  |             
|                 |  | Number       |     |             | or Other      |                                   |    |           |  |  |              |  
|                 |  | of Shares,   |     |             | Periods Until |                                   |    |           |  |  |              |  
|                 |  | Units or     |     |             | Maturation    |                                   |    |           |  |  |              |  
|Name             |  | Other Rights |     |             | or Payout     |                                   |    | Threshold |  |  | Target(1)(3) |   |  | Maximum(1)(3) |          
|                 |  |              |     |             |               |                                   |    |           |  |  |              |   |  |               |          
|Jack A. Hockema  |  |              | N/A |             |               |                                   | (2 | )         |  |  | (3           | ) |  | $             | 1,500,000 |     |  | $ | 4,500,000 |    
|Edward F. Houff  |  |              | N/A |             |               |                                   | (2 | )         |  |  | (3           | ) |  |               | 300,000   |     |  |   | 900,000   |    
|John Barneson    |  |              | N/A |             |               |                                   | (2 | )         |  |  | (3           | ) |  |               | 350,000   |     |  |   | 1,050,000 |    
|Kerry A. Shiba   |  |              | N/A |             |               |                                   | (2 | )         |  |  | (3           | ) |  |               | 258,000   | (4) |  |   | 774,000   | (4)
|Daniel D. Maddox |  |              | N/A |             |               |                                   | (2 | )         |  |  | (3           | ) |  |               | 100,000   |     |  |   | 300,000   |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The target and maximum payout amounts in the table are per annum.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | 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 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) | The initial target and maximum for Mr. Shiba were $90,000
    and $270,000, respectively. These amounts were increased to
    $250,000 and $750,000, respectively, effective April 2004 in
    connection with Mr. Shibas promotion to Chief
    Financial Officer, and to the current levels indicated in the
    table effective January 2005.                                                                                                                      

Defined Benefit Plans


Kaiser Retirement Plan.


116



---



##### 





|               |           |                  |    |   |         |    |  |   |         |  |  |    |         |  |    |   |         |  |  |   |         | 
|-------------- | --------- | ---------------- | -- | - | ------- | -- |  | - | ------- |  |  | -- | ------- |  | -- | - | ------- |  |  | - | ------- | 
|               |           | Years of Service |   
|Average Annual |           |                  |    |  
|Remuneration   |           |                  | 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 | 









Kaiser Supplemental Benefits Plan.


117



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##### 







Kaiser Termination Payment Policy.


Director Compensation










118



---



##### 









Employment Contracts, Retention Plan and Agreements and
Termination of Employment and Change-in-Control Arrangements


Employment Agreement with Edward F. Houff.


Kaiser Retention
Plan and Agreements, Kaiser Severance Plan and Agreements, and
Kaiser Change in Control Severance Program




119



---



##### 



1 3


Kaiser Key Employee Retention Program.


Kaiser Retention Plan and Agreements.




1 3 1 3 2 3 2 3


Kaiser Severance Plan and Agreements.




120



---



##### 







Kaiser Change in Control Severance Program.






121



---



##### 







Short-Term Incentive Plan.




Long-Term Incentive Plan. Long-Term Incentive
Plans  Awards for Last Fiscal Year








Compensation Committee Interlocks and Insider
Participation




122



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##### 














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



Ownership of Kaiser


Reorganization
Proceedings


|                                                                                |  |                |              |  |                |  |            |            |  |  |      | 
|------------------------------------------------------------------------------- |  | -------------- | ------------ |  | -------------- |  | ---------- | ---------- |  |  | ---- | 
|Name of Beneficial Owner                                                        |  | Title of Class |              |  | # of Shares(1) |  |            | % of Class | 
|                                                                                |  |                |              |  |                |  |            |            | 
|MAXXAM Inc.                                                                     |  |                | Common Stock |  |                |  | 50,000,000 | (2)        |  |  | 62.8 | 
|John Barneson                                                                   |  |                | Common Stock |  |                |  | 10,700     |            |  |  | *    | 
|Robert J. Cruikshank                                                            |  |                | Common Stock |  |                |  | 15,009     | (3)        |  |  | *    | 
|George T. Haymaker, Jr.                                                         |  |                | Common Stock |  |                |  | 9,685      | (3)        |  |  | *    | 
|Jack A. Hockema                                                                 |  |                | Common Stock |  |                |  | 393,621    | (3)        |  |  | *    | 
|Edward F. Houff                                                                 |  |                | Common Stock |  |                |  | 222,772    | (3)        |  |  | *    | 
|Charles E. Hurwitz                                                              |  |                | Common Stock |  |                |  | -0-        | (4)        |  |  | *    | 
|Ezra G. Levin                                                                   |  |                | Common Stock |  |                |  | 13,009     | (3)        |  |  | *    | 
|Daniel D. Maddox                                                                |  |                | Common Stock |  |                |  | 40,144     | (3)        |  |  | *    | 
|John D. Roach                                                                   |  |                | Common Stock |  |                |  | -0-        |            |  |  | *    | 
|Kerry A. Shiba                                                                  |  |                | Common Stock |  |                |  | -0-        |            |  |  | *    | 
|All directors and executive officers of the Company as a group
    (13 persons) |  |                | Common Stock |  |                |  | 733,922    | (5)        |  |  | *    | 

123



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##### 








|    |                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | 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, 2005 to acquire such shares.                                      
|   
|(2) | Includes 27,938,250 shares beneficially owned by MGHI. The
    address of MAXXAM is 1330 Post Oak Blvd., Suite 2000,
    Houston, Texas 77056.                                                                                                                                      
|   
|(3) | Includes options exercisable within 60 days of
    March 28, 2005 to acquire shares of Kaisers Common
    Stock as follows: Mr. Cruikshank  13,009;
    Mr. Haymaker  7,143;
    Mr. Hockema  375,770; Mr. Houff 
    222,772; Mr. Levin  13,009; and
    Mr. Maddox  35,715.
|   
|(4) | 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.                                                                                                                        
|   
|(5) | Includes options exercisable within 60 days of
    March 28, 2005, to acquire 690,633 shares of
    Kaisers Common Stock.                                                                                                                                                          

Ownership of MAXXAM




|                                                             |  |                |                 |  |                |      |           |           |               |  |                 |  |  |  |      | 
|------------------------------------------------------------ |  | -------------- | --------------- |  | -------------- | ---- | --------- | --------- | ------------- |  | --------------- |  |  |  | ---- | 
|                                                             |  |                |                 |  |                | % of |           |           | % of Combined | 
|Name of Beneficial Owner                                     |  | Title of Class |                 |  | # of Shares(1) |      |           | Class     |               |  | Voting Power(2) | 
|                                                             |  |                |                 |  |                |      |           |           |               |  |                 | 
|Charles E. Hurwitz                                           |  |                | Common Stock    |  |                |      | 3,233,700 | (3)(4)    |               |  | 50.9            |  |  |  | 76.8 | 
|                                                             |  |                | Preferred Stock |  |                |      | 707,441   | (4)(5)    |               |  | 99.2            |  |  |  |      | 
|Robert J. Cruikshank                                         |  |                | Common Stock    |  |                |      | 4,900     | (6)       |               |  | *               |  |  |  | *    | 
|Ezra G. Levin                                                |  |                | Common Stock    |  |                |      | 4,900     | (6)       |               |  | *               |  |  |  | *    | 
|All directors and executive officers as a group (13 persons) |  |                | Common Stock    |  |                |      | 3,243,500 | (3)(4)(7) |               |  | 51.0            |  |  |  |      | 
|                                                             |  |                | Preferred Stock |  |                |      | 707,441   | (4)(5)    |               |  | 99.2            |  |  |  | 76.5 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | 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, 2005, 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) 46,276 shares of
    MAXXAM common stock held by the Charles E. Hurwitz 2004 Grantor
    Retained Annuity Trust; (b) 46,277 shares of MAXXAM
    common stock held by the Barbara Hurwitz 2004 Grantor Retained
    Annuity Trust, as to which Mr. Hurwitz disclaims beneficial
    ownership; (c) 46,500 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

124



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | transfer to such limited partnership and as to which
    Mr. Hurwitz disclaims beneficial ownership,
    (d) 256,808 shares of MAXXAM common stock held
    directly by Mr. Hurwitz, (e) 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),
    (f) options to purchase 21,029 shares of MAXXAM
    common stock held by Gilda, and (g) options held by
    Mr. Hurwitz to purchase 352,496 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
    3,233,700 shares of MAXXAM common stock and
    707,441 shares of MAXXAM Preferred Stock, aggregating
    approximately 76.5% 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 1330 Post Oak Blvd.,
    Suite 2000, Houston, Texas 77056. The address of the
    Stockholder Group is Giddeon Holdings, Inc., 1330 Post Oak
    Blvd., Suite 2000, Houston, Texas 77056.
|   
|(5) | Includes options exercisable by Mr. Hurwitz within
    60 days of March 28, 2005, to acquire
    45,000 shares of MAXXAM Preferred Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(6) | Includes options exercisable within 60 days of
    March 28, 2005, to acquire shares of MAXXAM common stock as
    follows: Mr. Cruikshank  3,900; and
    Mr. Levin  3,900.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Includes options exercisable within 60 days of
    March 28, 2005, to acquire 8300 shares of MAXXAM
    common stock, held by directors and executive officers not in
    the Stockholder Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Equity Compensation Plan Information




|                                                           |       |                            |         |         |                               |                                |                       |                                 |  |  |           |           | 
|---------------------------------------------------------- | ----- | -------------------------- | ------- | ------- | ----------------------------- | ------------------------------ | --------------------- | ------------------------------- |  |  | --------- | --------- | 
|                                                           |       |                            |         |         |                               | Number of securities           |                      
|                                                           |       |                            |         |         |                               | remaining available for future |                      
|                                                           |       | Number of securities to be |         |         |                               |                                | issuance under equity |                                
|                                                           |       | issued upon exercise of    |         |         | Weighted-average exercise     |                                |                       | compensation plans              | 
|                                                           |       | outstanding options,       |         |         | price of outstanding options, |                                |                       | (excluding securities reflected | 
|                                                           |       | warrants and rights        |         |         | warrants and rights           |                                |                       | in column (a))                  | 
|Plan Category                                              |       | (a)                        |         |         | (b)                           |                                |                       | (c)                             | 
|                                                           |       |                            |         |         |                               |                                |                       |                                 | 
|Equity compensation plans approved by security holders     |       |                            | 810,040 | (1)     |                               | $                              | 3.14                  |                                 |  |  | 4,536,855 | (2)      
|Equity compensation plans not approved by security holders |       |                            |        |         |                               |                                |                      |                                 |  |  |          |          
|                                                           | Total |                            |         | 810,040 |                               |                                | $                     | 3.14                            |  |  |           | 4,536,855 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents shares of Kaisers 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, 1,698,951 may
    be made in the form of restricted stock.

125



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|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees




Audit-Related Fees




Tax Fees




All Other Fees






Audit Committee Pre-Approved Policies and Procedures








126



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##### 









| |                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 and Financial Statement Schedules

|   |  |                                                                                               |  |      |     | 
|-- |  | --------------------------------------------------------------------------------------------- |  | ---- | --- | 
|   |  |                                                                                               |  | Page |    
|   |  |                                                                                               |  |      |    
|1. |  | Financial Statements                                                                          |  |      |     | 
|   |  | Report of Independent Registered Public Accounting Firm                                       |  |      | 42  | 
|   |  | Consolidated Balance Sheets                                                                   |  |      | 43  | 
|   |  | Statements of Consolidated Income (Loss)                                                      |  |      | 44  | 
|   |  | Statements of Consolidated Stockholders Equity (Deficit)
    and Comprehensive Income (Loss) |  |      | 45  | 
|   |  | Statements of Consolidated Cash Flows                                                         |  |      | 46  | 
|   |  | Notes to Consolidated Financial Statements                                                    |  |      | 47  | 
|   |  | Quarterly Financial Data (Unaudited)                                                          |  |      | 107 | 
|   |  | Five-Year Financial Data                                                                      |  |      | 108 | 
|2. |  | Financial Statement Schedules                                                                 |  |      |     | 







127



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##### 






SIGNATURES




|                     |  |                                                                                    
|-------------------- |  | -----------------------------------------------------------------------------------
|                    
|                     |  | KAISER ALUMINUM & CHEMICAL CORPORATION                                             
|Date: March 31, 2005 |  | By /s/ Jack A. HockemaJack
    A. Hockema
    President and Chief Executive Officer



|                     |  |                                                                                                                             
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|                    
|Date: March 31, 2005 |  | /s/ Jack A. HockemaJack
    A. Hockema
    President, Chief Executive Officer and Director
    (Principal Executive Officer)
|                    
|Date: March 31, 2005 |  | /s/ Kerry A. ShibaKerry
    A. Shiba
    Vice President and Chief Financial Officer
    (Principal Financial Officer)       
|                    
|Date: March 31, 2005 |  | /s/ Daniel D. MaddoxDaniel
    D. Maddox
    Vice President and Controller
    (Principal Accounting Officer)               
|                    
|Date: March 31, 2005 |  | /s/ George T. Haymaker, Jr.George
    T. Haymaker, Jr.
    Chairman of the Board and Director                               
|                    
|Date: March 31, 2005 |  | /s/ Robert J. CruikshankRobert
    J. Cruikshank
    Director                                                               
|                    
|Date: March 31, 2005 |  | /s/ Charles E. HurwitzCharles
    E. Hurwitz
    Director                                                                   
|                    
|Date: March 31, 2005 |  | /s/ Ezra G. LevinEzra
    G. Levin
    Director                                                                             
|                    
|Date: March 31, 2005 |  | /s/ John D. RoachJohn
    D. Roach
    Director                                                                             

128



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##### 






INDEX OF EXHIBITS


|        |   |    |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | - | -- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |            
|Number  |   |    | Description
|        |   |    |            
|        | 2 | .1 |             | Purchase Agreement, dated as of June 8, 2004, among Kaiser
    Aluminum & Chemical Corporation (KACC),
    Kaiser Aluminium International, Inc., Kaiser Bauxite Company
    (KBC), Kaiser Jamaica Corporation and Alpart Jamaica
    Inc. and Quality Incorporations I Limited (incorporated by
    reference to Exhibit 2.1 to the Report on Form 8-K,
    dated as of July 1, 2004, filed by Kaiser Aluminum
    Corporation (KAC), File No. 1-9447).
|        | 2 | .2 |             | Purchase Agreement, dated as of May 17, 2004, among KACC,
    KBC, Gramercy Alumina LLC and St. Ann Bauxite Limited
    (incorporated by reference to Exhibit 2.1 to the Report on
    Form 8-K, dated as of October 1, 2004, filed by KAC,
    File No. 1-9447).                                                                                                                                                                                            
|        | 2 | .3 |             | Purchase Agreement, dated as of October 29, 2004, between
    KACC, and the Government of Ghana (incorporated by reference to
    Exhibit 2.1 to the Report on Form 8-K, dated as of
    October 29, 2004, filed by KAC, File No. 1-9447).                                                                                                                                                                                                                   
|        | 2 | .4 |             | Purchase Agreement, dated as of September 22, 2004, between
    KACC, Kaiser Alumina Australia Corporation (KAAC)
    and Comalco Aluminium Limited (incorporated by reference to
    Exhibit 2.3 to the Report on Form 10-Q for the
    quarterly period ended September 30, 2004, filed by KAC,
    File No. 1-9447).                                                                                                                                    
|        | 2 | .5 |             | Agreement to Submit Qualified Bid for QAL, dated as of
    September 22, 2004, between KACC, KAAC and Glencore AG
    (incorporated by reference to Exhibit 2.4 to the Report on
    Form 10-Q for the quarterly period ended September 30,
    2004, filed by KAC, File No. 1-9447).                                                                                                                                                                        
|        | 2 | .6 |             | Purchase Agreement, dated as of October 28, 2004, among
    KACC, KAAC and Alumina & Bauxite Company Ltd.
    (incorporated by reference to Exhibit 2.5 to the Report on
    Form 10-Q for the quarterly period ended September 30,
    2004, filed by KAC, File No. 1-9447).                                                                                                                                                                                
|        | 3 | .1 |             | Restated Certificate of Incorporation of 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 KACC, as
    Issuer, KAAC, Alpart Jamaica Inc., and Kaiser Jamaica
    Corporation, as Subsidiary Guarantors, and The First National
    Bank of Boston, as Trustee, regarding KACCs
    123/4% 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).                                                                                                                                                                               

129



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##### 



|        |   |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | - | --- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |     |            
|Number  |   |     | Description
|        |   |     |            
|        | 4 | .6  |             | Indenture, dated as of February 17, 1994, among KACC, as
    Issuer, KAAC, Alpart Jamaica Inc., Kaiser Jamaica Corporation,
    and Kaiser Finance Corporation, as Subsidiary Guarantors, and
    First Trust National Association, as Trustee, regarding
    KACCs
    97/8% 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, KAAC, 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
    107/8%
    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, KAAC, 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
    107/8%
    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).

130



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##### 



|        |   |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | - | --- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |     |            
|Number  |   |     | Description
|        |   |     |            
|        | 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, 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 4.22 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 as of February 12, 2002, among KACC, KAC, certain
    financial institutions and Bank of America, N.A., as Agent
    (incorporated by reference to Exhibit 4.2 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 as of February 12, 2002, among KACC, KAC, certain
    financial institutions and Bank of America, N.A., as Agent
    (incorporated by reference to Exhibit 4.1 to the Report on
    Form 10-Q for the quarterly period ended September 30,
    2003, filed by KAC, File No. 1-9447).                                                                                                  
|        | 4 | .27 |             | Waiver Letter with Respect to Post-Petition Credit Agreement
    dated March 29, 2004, 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 4.1 to Report
    on Form 10-Q for the quarterly period ended March 31,
    2004, filed by KAC, File No. 1-9447).                                                                                                

131



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##### 



|                                              |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------------------------------------------- | -- | --- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit                                       |    |     |            
|Number                                        |    |     | Description
|                                              |    |     |            
|                                              | 4  | .28 |             | Waiver Letter with Respect to Post-Petition Credit Agreement
    dated May 21, 2004, 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 4.1 to Report
    on Form 10-Q for the quarterly period ended June 30,
    2004, filed by KAC, File No. 1-9447).                                                                                                  
|                                              | 4  | .29 |             | Waiver Letter with Respect to Post-Petition Credit Agreement
    dated September 29, 2004, 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 4.2 to Report
    on Form 10-Q for the quarterly period ended
    September 30, 2004, filed by KAC, File No. 1-9447).                                                                                       
|                                              | 4  | .30 |             | Seventh Amendment to Post-Petition Credit Agreement dated
    October 28, 2004, 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 4.1 to Report
    on Form 10-Q for the quarterly period ended
    September 30, 2004, filed by KAC, File No. 1-9447).                                                                                                  
|                                              | 4  | .31 |             | Secured Super-Priority Debtor-In-Possession Revolving Credit and
    Guaranty Agreement Among KAC, KACC and certain of their
    subsidiaries, as Borrowers, and certain Subsidiaries of KAC and
    KACC, as Guarantors, and certain financial institutions and
    JP Morgan Chase Bank, National Association, as
    Administrative Agent, dated as of February 11, 2005
    (incorporated by reference to Exhibit 99.1 to Report on
    Form 8-K, dated as of February 11, 2005, filed by KAC,
    File No. 1-9447).
|                                              | 4  | .32 |             | Intercompany Note dated as of December 21, 1989, 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  | .33 |             | 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  | .34 |             | 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  | .35 |             | 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  | .36 |             | 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 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 10.3 - 10.21, inclusive]           
|                                              | 10 | .3  |             | 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 | .4  |             | 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).                                                                                                                                                                                                                                  

132



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##### 



|        |     |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | --- | --- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |     |            
|Number  |     |     | Description
|        |     |     |            
|        | *10 | .5  |             | Non-Executive Chairman of the Boards Agreement, dated
    January 7, 2005, among KAC, KACC and George T.
    Haymaker, Jr.                                                                                                                                                                                                                                                                                                  
|        | 10  | .6  |             | Amended Employment Agreement, dated October 1, 2004,
    between KACC and Edward F. Houff (incorporated by reference to
    Exhibit 10.1 to the Report on Form 10-Q for the period
    ended September 30, 2004, filed by KAC, File
    No. 1-9447).                                                                                                                                                                        
|        | 10  | .7  |             | 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  | .8  |             | 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  | .9  |             | 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  | .10 |             | 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  | .11 |             | 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  | .12 |             | 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  | .13 |             | 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  | .14 |             | Form of Retention Agreement for the Kaiser Aluminum &
    Chemical Corporation Key Employee Retention Plan (effective
    September 3, 2002) for John Barneson, Jack A. Hockema
    and Edward F. Houff (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  | .15 |             | Form of Retention Agreement for the Kaiser Aluminum &
    Chemical Corporation Key Employee Retention Plan (effective
    September 3, 2002) for Certain Executive Officers including
    Kerry A. Shiba and Daniel D. Maddox (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  | .16 |             | 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  | .17 |             | 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, Kerry
    A. Shiba and Daniel D. Maddox 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  | .18 |             | 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  | .19 |             | Form of Kaiser Aluminum & Chemical Corporation Change
    in Control Severance Agreement for Kerry A. Shiba and Daniel D.
    Maddox 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).                                                                                        

133



---



##### 



|        |     |     |             |                                                                                                                                                                                                                                                                            
|------- | --- | --- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |     |            
|Number  |     |     | Description
|        |     |     |            
|        | *10 | .20 |             | Description of KACC Short-Term Incentive Plan.                                                                                                                                                                                                                             
|        | *10 | .21 |             | Description of KACC Long-Term Incentive Plan.                                                                                                                                                                                                                              
|        | 10  | .22 |             | Settlement and Release Agreement dated October 5, 2004 by
    and among the Debtors and the Creditors Committee
    (incorporated by reference to Exhibit 10.2 to the Report on
    Form 10-Q for the period ended September 30, 2004,
    filed by KAC, File No. 1-9447).
|        | *10 | .23 |             | Amendment, dated as of January 27, 2005, to Settlement and
    Release Agreement dated as of October 5, 2004, by and among
    the Debtors and the Creditors Committee.                                                                                                   
|        | 10  | .24 |             | Settlement Agreement dated October 14, 2004, between KACC
    and the Pension Benefit Guaranty Corporation (incorporated by
    reference to Exhibit 10.3 to the Report on Form 10-Q
    for the period ended September 30, 2004, filed by KAC, File
    No. 1-9447).      
|        | *21 |     |             | Significant Subsidiaries of KACC.                                                                                                                                                                                                                                          
|        | *31 | .1  |             | Certification of Jack A. Hockema pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                            
|        | *31 | .2  |             | Certification of Kerry A. Shiba 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 Kerry A. Shiba pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                              
|        | *99 | .1  |             | Third Amended Joint Plan of Liquidation for Alpart Jamaica Inc.
    and Kaiser Jamaica Corporation, dated February 25, 2005.                                                                                                                                               
|        | *99 | .2  |             | Disclosure Statement Pursuant to Section 1125 of the
    Bankruptcy Code with Respect to the Third Amended Joint Plan of
    Liquidation for Alpart Jamaica Inc. and Kaiser Jamaica
    Corporation, dated February 28, 2005.                                              
|        | *99 | .3  |             | Third Amended Joint Plan of Liquidation for Kaiser Alumina
    Australia Corporation and Kaiser Finance Corporation, dated
    February 25, 2005.                                                                                                                          
|        | *99 | .4  |             | Disclosure Statement Pursuant to Section 1125 of the
    Bankruptcy Code with respect to the Third Amended Joint Plan of
    Liquidation for Kaiser Alumina Australia Corporation and Kaiser
    Finance Corporation, dated February 28, 2005.                             






|  |  |               
|- |  | --------------
|* |  | Filed herewith

134



---



##### 



Exhibit 21


KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY
COMPANIES


(Debtor-in-Possession)


SUBSIDIARIES




|                                                |  |                  |                | 
|----------------------------------------------- |  | ---------------- | -------------- | 
|                                                |  | Place of         |               
|                                                |  | Incorporation or |               
|Name                                            |  | Organization     |               
|                                                |  |                  |               
|Continuing entities                            |  |                  |                | 
|Anglesey Aluminium Limited (49%)                |  |                  | United Kingdom | 
|Kaiser Aluminium International, Inc.(1)         |  |                  | Delaware       | 
|Kaiser Aluminum & Chemical of Canada Limited(1) |  |                  | Ontario        | 
|Kaiser Bellwood Corporation(1)                  |  |                  | Delaware       | 
|Liquidating entities                           |  |                  |                | 
|Alpart Jamaica Inc.(1)(2)(3)                    |  |                  | Delaware       | 
|Kaiser Jamaica Corporation(1)(2)(3)             |  |                  | Delaware       | 
|Kaiser Alumina Australia Corporation(1)(2)(3)   |  |                  | Delaware       | 
|Kaiser Finance Corporation(1)(2)(3)             |  |                  | Delaware       | 






|    |                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed a voluntary petition for reorganization under the Code.                                                                                                                       
|   
|(2) | Entities that have been materially affected as a result of the
    commodity asset sales, as discussed more fully in Note 1
    and 5 of Notes to Consolidated Financial Statements.
|   
|(3) | Entities are being liquidated as more fully discussed in
    Note 1 of Notes to Consolidated Financial Statements.                                                                  

135