##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



---

FORM 20-F



---

(Mark One)

| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM  TO

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

DATE OF EVENT REQUIRING THIS SHELL COMPANY REPORT

Commission file number: 1-10375



---

ALUMINA LIMITED

Australian Business Number 85 004 820 419

(Exact name of Registrant as specified in its charter)



---

COMMONWEALTH OF AUSTRALIA

(Jurisdiction of incorporation or organisation)

Level 12, IBM Centre, 60
City Road, Southbank, Victoria 3006, Australia

(Address of principal executive offices)



---

Securities registered or to be
registered pursuant to Section 12(b) of the Act.



|                               |  |                                          
|------------------------------ |  | -----------------------------------------
|Title of each Class            |  | Name of each exchange on which registered
|Ordinary Shares (1)            |  | New York Stock Exchange                  
|American Depositary Shares (2) |  | New York Stock Exchange                  

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None



---

Indicate the number of outstanding shares of each
of the Issuers classes of capital or common stock as of December 31, 2005.

1,165,645,648 Ordinary Shares

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  x            No ̈

If this report is an annual or transition report, indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ̈No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x            No ̈

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated file. See definition of accelerated filer and large accelerated file in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x            Accelerated filer ̈Non-accelerated filer ̈

Indicate by check mark which financial statement item the registrant has elected to
follow.

Item 17 ̈Item 18  x

If
this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ̈No  x



|(1) | Not for trading but only in connection with the listing of the American Depositary Shares.
|--- | ------------------------------------------------------------------------------------------

|(2) | Evidenced by American Depositary Receipts, each American Depositary Share representing four fully paid Ordinary Shares.
|--- | -----------------------------------------------------------------------------------------------------------------------



---



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F

CONTENTS



|                           |  |                                                                              |  |     
|-------------------------- |  | ---------------------------------------------------------------------------- |  | ----
|                           |  |                                                                             
|                           |  |                                                                              |  | Page
|THE DEMERGER               |  | 1                                                                           
|                           | 
|FORWARD LOOKING STATEMENTS |  | 1                                                                           
|                           | 
|DEFINITIONS                |  | 2                                                                           
|                           |  |                                                                             
|ITEM 1.                    |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS                        |  | 5   
|                           |  |                                                                             
|ITEM 2.                    |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |  | 6   
|                           |  |                                                                             
|ITEM 3.                    |  | KEY INFORMATION                                                              |  | 7   
|                           |  |                                                                             
|ITEM 4.                    |  | INFORMATION ON THE COMPANY                                                   |  | 15  
|                           |  |                                                                             
|ITEM 5.                    |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |  | 28  
|                           |  |                                                                             
|ITEM 6.                    |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |  | 41  
|                           |  |                                                                             
|ITEM 7.                    |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |  | 52  
|                           |  |                                                                             
|ITEM 8.                    |  | FINANCIAL INFORMATION                                                        |  | 55  
|                           |  |                                                                             
|ITEM 9.                    |  | THE OFFER AND LISTING                                                        |  | 59  
|                           |  |                                                                             
|ITEM 10.                   |  | ADDITIONAL INFORMATION                                                       |  | 61  
|                           |  |                                                                             
|ITEM 11.                   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  | 77  
|                           |  |                                                                             
|ITEM 12.                   |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  | 79  
|                           |  |                                                                             
|ITEM 13.                   |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  | 79  
|                           |  |                                                                             
|ITEM 14.                   |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  | 79  
|                           |  |                                                                             
|ITEM 15.                   |  | CONTROLS AND PROCEDURES                                                      |  | 79  
|                           |  |                                                                             
|ITEM 16A.                  |  | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  | 80  
|                           |  |                                                                             
|ITEM 16B.                  |  | CODE OF ETHICS                                                               |  | 80  
|                           |  |                                                                             
|ITEM 16C.                  |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  | 81  
|                           |  |                                                                             
|ITEM 16D.                  |  | EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES                       |  | 82  
|                           |  |                                                                             
|ITEM 16E.                  |  | PURCHASES OF EQUITY SECURITIES BY ALUMINA AND AFFILIATED PURCHASES           |  | 82  
|                           |  |                                                                             
|ITEM 17.                   |  | FINANCIAL STATEMENTS                                                         |  | 83  
|                           |  |                                                                             
|ITEM 18.                   |  | FINANCIAL STATEMENTS                                                         |  | 84  
|                           |  |                                                                             
|ITEM 19.                   |  | EXHIBITS                                                                     |  | 85  



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



THE DEMERGER

On December 11, 2002, Alumina Limited (formerly known as WMC Limited) demerged its interest
in the Alcoa World Alumina and Chemicals joint venture (AWAC) from its nickel, copper/uranium and fertilizer businesses and exploration and development interests. The demerger was effected through an Australian court-approved scheme of
arrangement and associated capital reduction and dividend distribution. As a result of the demerger, Alumina Limited (Alumina) holds the interest in AWAC, and WMC Resources Ltd, which prior to the demerger was a wholly owned subsidiary
of WMC Limited, holds the nickel, copper/uranium and fertilizer businesses and exploration and development interests previously held within the WMC Limited group.

On June 4, 2005 WMC Resources was acquired by BHP Billiton Limited, of which it is now a wholly owned subsidiary.

FORWARD LOOKING STATEMENTS

This Annual Report contains certain forward-looking statements, including
statements regarding (i) certain plans, strategies and objectives of management, (ii) scheduled closure of certain operations or facilities, (iii) anticipated production or construction commencement dates, (iv) expected costs of
construction of projects or products or level of production output, (v) the anticipated productive lives of projects and mines and (vi) estimates of expected dividends to be received from AWAC. Such forward-looking statements are not
guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Alumina, which may cause actual results to differ materially from those expressed in the statements
contained in this Annual Report.

For example, the amount of any future dividends received from the AWAC joint venture will be dependent in
part on the future revenues from AWACs operations, described in this Annual Report which in turn are based in part on the market price of the products and metals produced, which may vary significantly from current levels. Such variations, if
materially adverse, may impact the timing or feasibility of the development of a particular project or the expansion of certain facilities. Other factors that may affect actual construction or production commencement dates, costs or production
output and anticipated lives of operations or facilities of AWAC include the ability of AWAC to profitably produce and transport its products or metals to applicable markets, the impact of foreign currency exchange rates on the market prices of the
products or metals produced and activities of governmental authorities in certain countries where such facilities are being operated including increases in taxes, changes in environmental and other regulations, and political uncertainty. Alumina can
give no assurances that the actual production or commencement dates, cost or production output, revenue, or anticipated lives of the facilities discussed herein will not differ materially from the statements contained in this Annual Report.



- 1 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DEFINITIONS

ADR means an American Depositing Receipt evidencing one or more ADSs.

ADS means an American Depository Share.

Alumina Limited is the registrant, formerly named WMC Limited.

ASX means the Australian Stock Exchange.

AWAC refers to the Alcoa World Alumina and Chemicals venture in which Alumina Limited holds a 40% interest.

Bauxite is an aluminium rich rock, the principal ore of aluminium.

Cash Flow Hedge means a contract which hedges an exposure to changes in cash flows from an expected future transaction related to a forecast purchase or sale or an existing asset or liability.

Commissioned means the bringing into operation of plant and/or equipment at a rate approximating its design capacity.

Company means Alumina Limited at level 12, IBM Centre, 60 City Road, Southbank, Victoria 3006, Australia.

Consolidated means the consolidation of entities controlled by Alumina Limited together with the equity method consolidation of jointly controlled
corporate entities or of corporate entities over which it exerts significant influence but not control. Unincorporated joint ventures are accounted for using the equity method.

Counterparty Credit Risk means the risk of financial loss arising out of holding a particular contract or portfolio of contracts as a result of one or more parties to the relevant contract(s)
failing to fulfil its financial obligations under the contract.

Cross-Currency Swap means the exchange of cash flows in one currency
for those in another, often requiring an exchange of principal.

Currency Forward means an agreement to exchange a specified amount of
one currency for another at a future date at a certain rate.

Demerger means the demerger of WMC Limiteds (Alumina Limiteds)
interest in non-AWAC operating businesses pursuant to an Australian scheme of arrangement and associated capital reduction and dividend distribution.

Depositary means The Bank of New York Company, Inc., 101 Barclay Street, New York, NY 10286.

Derivative
means an instrument or product whose value changes with changes in one or more underlying market variables such as equity or commodity prices, interest rates or foreign exchange rates. Basic derivatives include forwards, futures, swaps, options,
warrants and convertible bonds.

Fair Value means, in the context of commodity, currency and interest rates, the current market value
(mark-to-market) of financial positions.

Fair Value Hedge means a contract which hedges an exposure to the change in fair value of a
recognized asset, liability or an unrecognized firm commitment (or a part thereof) attributable to a particular risk.

Foreign Currency
Hedge means a contract which hedges the foreign exchange exposure of:



| |  |  | an unrecognized firm commitment (fair value hedge);
| | - |  | ---------------------------------------------------



| |  |  | an available for sale security (fair value hedge);
| | - |  | --------------------------------------------------



| |  |  | a forecast transaction (cash flow hedge); or
| | - |  | --------------------------------------------



| |  |  | a net investment in a foreign operation
| | - |  | ---------------------------------------

Grass Roots
Exploration is exploration undertaken at new sites not related to existing operations (also known as green fields exploration).

Hedge means to reduce risk by making transactions that reduce exposure to market fluctuations. A hedge is also the term for the transactions made to effect this reduction.

Hedge Accounting means the practice of deferring accounting recognition of gains and losses on financial market hedges until the corresponding gain or
loss of the underlying exposure is recognized.

HSRA means the Australian/US dollar Hedge Settlement Rate quoted on Reuters Screen HSRA.



- 2 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



Interest Rate Swap means an agreement to exchange net future cash flows. Interest rate swaps most
commonly change the basis on which liabilities are paid on a specified principal. They are also used to transform the interest basis of assets. In its commonest form, the fixed-floating swap, one counter party pays a fixed rate and the other pays a
floating rate based on a reference rate such as LIBOR. There is no exchange of principal  the interest rate payments are made on a notional amount.

LME means the London Metal Exchange.

NYSE means the New York Stock Exchange.

Open-cut or Open-pit means a mine at the earths surface as distinct from an underground mine.

Option means a contract that gives the purchaser the right, but not the obligation, to buy or sell an underlying security or instrument at a certain
price (the exercise or strike price) on or before an agreed date (the exercise period). For this right, the purchaser pays a premium to the seller. The seller (writer) of an option has a duty to buy or sell at the strike price should the purchaser
exercise his right.

Ore means a naturally occurring solid resource (often rock) from which a mineral, or minerals, can be extracted.

SCH means a transfer of securities on the Clearing House Electronic Subregister System operated by ASX Settlement and Transfer
Corporation Pty Ltd.

WMC Limited is the former name of Alumina Limited prior to demerger.

WMC Resources means WMC Resources Ltd, together with its subsidiaries.



- 3 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



Weights and Measures



|                 |  |   |  |                                   
|---------------- |  | - |  | ----------------------------------
|1 troy ounce     |  | = |  | 31.103 grams                      
|                 |  |  
|1 kilogram       |  | = |  | 32.15 troy ounces                 
|                 |  |  
|1 kilogram       |  | = |  | 2.205 pounds                      
|                 |  |  
|1 tonne          |  | = |  | 1,000 kilograms                   
|                 |  |  
|1 tonne          |  | = |  | 2,205 pounds                      
|                 |  |  
|1 gram per tonne |  | = |  | 0.0292 troy ounces per (short) ton
|                 |  |  
|1 kilometre      |  | = |  | 0.6214 miles                      



- 4 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

A. Directors and Senior Management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.



- 5 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A. Offer Statistics

Not applicable.

B. Method and Expected Timetable

Not applicable.



- 6 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

ITEM 3. KEY INFORMATION

A. Selected Financial Data

A-IFRS

The selected financial data
appearing below as at December 31, 2005 and 2004 and for the fiscal years ended December 31, 2005 and 2004 are set forth in Australian dollars (except as otherwise indicated), and are extracted from the audited Consolidated Financial
Statements of Alumina Limited (the Company or Alumina , which, unless the context otherwise requires, includes Alumina Limited and its subsidiaries) which appear elsewhere herein.

The Consolidated Financial Statements for the years ended December 31 2005 and 2004 have been prepared in accordance with International Financial
Reporting Standards as adopted by Australia (A-IFRS) which differ in certain respects from accounting principles generally accepted in the United States (US GAAP). Financial statements until December 31, 2004 had been
prepared in accordance with previous Australian generally accepted accounting principles (Australian GAAP). When preparing Alumina Limited 2005 financial statements, management has amended certain accounting, valuation and consolidation
methods applied in the Australian GAAP financial statements to comply with A-IFRS. With the exception of financial instruments, the comparative figures in respect of 2004 were restated to reflect these adjustments.

US GAAP

As discussed above
US GAAP and A-IFRS differs in certain respects. Note 33 to the Consolidated Financial Statements provides an explanation of these differences as they affect Alumina, and reconciliations from A-IFRS to US GAAP of net income and
shareholders equity.

The selected financial data under US GAAP appearing below as at December 31, 2003, 2002 and 2001 and
for the fiscal years ended December 31, 2003, 2002 and 2001 have been reconciled to US GAAP, and are derived from Alumina audited consolidated financial data, which are not included herein.

Equity Accounting

Equity accounting
is used where the consolidated entity exercises significant influence, but not control, over an investee company (the associate). Under this method, the consolidated entitys share of the post-acquisition profits or losses of associates is
recognized in the consolidated statement of financial performance, and its share of post-acquisition movements in reserves is recognized in consolidated reserves. The cumulative post acquisition movements are adjusted against the cost of the
investment. Aluminas Consolidated Financial Statements are currently prepared in accordance with A-IFRS. The financial statements of Alcoa World Alumina and Chemicals (AWAC), of which Alumina owns 40% of the assets, are prepared in
accordance with US GAAP. The equity share of profit from the non-Australian assets is based on these US GAAP financial statements and adjustments are made for accounting policies not allowed under A-IFRS (refer to Note 33 to the Consolidated
Financial Statements). The equity share of profits of AWACs Australian entity, Alcoa of Australia Ltd, is based on its Australian domestic financial statements.



- 7 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

The principal differences between A-IFRS and US GAAP which affect Aluminas net income for continuing operations and comprehensive income, as well as its shareholders equity, either directly or through
its share of associates on a continuing basis, relate to the treatment of the following items.



|(1) | inventory valuation;
|--- | --------------------



|(2) | compensation expense of employee share plans;
|--- | ---------------------------------------------



|(3) | fair value of accounting for derivatives;
|--- | -----------------------------------------



|(4) | goodwill amortisation;
|--- | ----------------------



|(5) | asset retirement obligations and
|--- | --------------------------------



|(6) | pension liabilities/assets.
|--- | ---------------------------



- 8 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

The following selected financial data should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements, including the Notes thereto.

SELECTED FINANCIAL DATA UNDER A-IFRS



|                                                                   |  |                                     |  |                           
|------------------------------------------------------------------ |  | ----------------------------------- |  | --------------------------
|                                                                   |  | Year EndedDecember 31,2005          |  | Year EndedDecember 31,2004
|                                                                   |  | (A$ million except where indicated)
|Net Sales Revenue from Continuing Operations                       |  |                                    |  |                          
|Net Income from Continuing Operations                              |  | 315.6                               |  | 316.4                     
|Net Income                                                         |  | 315.6                               |  | 316.4                     
|Comprehensive Income                                               |  | 304.1                               |  | 317.7                     
|Net Income from Operations per Ordinary Share (A$/share)           |  | 0.27                                |  | 0.27                      
|Income from Continuing Operations per Ordinary Share (A$/share)(4) |  | 0.27                                |  | 0.27                      
|Diluted Net Income per Ordinary Share (A$/share)(5)                |  | 0.27                                |  | 0.27                      
|Cash Dividends paid per Ordinary Share(1)                          |  |                                     |  |                           
|(A$/share)                                                         |  | 0.20                                |  | 0.20                      
|(US$/share)(2)                                                     |  | 0.15                                |  | 0.14                      



|                         |  |                                     |  |                   
|------------------------ |  | ----------------------------------- |  | ------------------
|                         |  | AtDecember 31,2005                  |  | AtDecember 31,2004
|                         |  | (A$ million except where indicated)
|Total assets             |  | 2,013.5                             |  | 1,823.2           
|Long-term obligations(3) |  | 0.2                                 |  | 0.2               
|Net assets               |  | 1,530.2                             |  | 1,411.9           
|                         |  |                                     |  |                   
|Shareholders equity     |  | 1,530.2                             |  | 1,411.9           
|                         |  |                                     |  |                   
|Capital stock            |  | 415.7                               |  | 404.1             
|                         |  |                                     |  |                   
|                         | 
|                         |  | Millions of shares                 
|Number of shares         |  | 1,165.6                             |  | 1,163.1           
|                         |  |                                     |  |                   

---

|(1) | Fully franked. See Dividends in Item 8A.
|--- | ------------------------------------------

|(2) | These conversions were made using exchange rates applicable at the dates of the dividend
payments.
|--- | --------------------------------------------------------------------------------------------------

|(3) | The debt is a 364 day facility and therefore classified as a short term obligation at
December 31, 2005.
|--- | --------------------------------------------------------------------------------------------------------

|(4) | Basic earnings per share were determined on the basis of the weighted average number of
outstanding Alumina Limited shares for the periods indicated. Refer also to Notes 1(s) and 8 to the Consolidated Financial Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Diluted earnings per share was determined on the basis of the weighted average number of
outstanding Alumina Limited shares for the periods indicated including potential shares from the conversion of partly paid shares and options into shares of Alumina Limited. Refer also to Notes 1(s) and 8 to the Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 9 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

SELECTED FINANCIAL DATA UNDER US GAAP



|                                                                |  |                                     |  |                            |  |                            |  |                               |  |                               
|--------------------------------------------------------------- |  | ----------------------------------- |  | -------------------------- |  | -------------------------- |  | ----------------------------- |  | ------------------------------
|                                                                |  | Year EndedDecember 31,2005          |  | Year EndedDecember 31,2004 |  | Year EndedDecember 31,2003 |  | Year EndedDecember 31,2002(8) |  | Year EndedDecember 31, 2001(8)
|                                                                |  | (A$ million except where indicated)
|Net Sales Revenue from Continuing Operations                    |  |                                    |  |                           |  |                           |  |                              |  |                              
|Income from Continuing Operations                               |  | 328.5                               |  | 331.7                      |  | 237.1                      |  | 244.3                         |  | 294.8                         
|Net Income(7)                                                   |  | 328.5                               |  | 331.7                      |  | 248.2                      |  | 306.7                         |  | 326.5                         
|Income from Continuing Operations per Ordinary Share (A$/share) |  | 0.28                                |  | 0.29                       |  | 0.21                       |  | 0.22                          |  | 0.05                          
|Net Income from Operations per Ordinary Share(3)(A$/share)(5)   |  | 0.28                                |  | 0.29                       |  | 0.22                       |  | 0.28                          |  | 0.30                          
|Diluted Net Income per Ordinary Share (A$/share)(6)             |  | 0.28                                |  | 0.28                       |  | 0.22                       |  | 0.27                          |  | 0.62                          
|Cash Dividends paid per Ordinary Share(1)                       |  |                                     |  |                            |  |                            |  |                               |  |                               
|(A$/share)                                                      |  | 0.20                                |  | 0.20                       |  | 0.23                       |  | 0.18                          |  | 0.31                          
|(US$/share)(2)                                                  |  | 0.15                                |  | 0.14                       |  | 0.14                       |  | 0.09                          |  | 0.18                          



|                         |  |                                     |  |                    |  |                    |  |                       |  |                      
|------------------------ |  | ----------------------------------- |  | ------------------ |  | ------------------ |  | --------------------- |  | ---------------------
|                         |  | AtDecember 31,2005                  |  | AtDecember 31,2004 |  | AtDecember 31,2003 |  | AtDecember 31,2002(8) |  | AtDecember 31,2001(8)
|                         |  | (A$ million except where indicated)
|Total assets             |  | 2,140.1                             |  | 1,920.6            |  | 1,881.3            |  | 1,744.0               |  | 8,402.3              
|Long-term obligations(4) |  | 0.2                                 |  | 0.2                |  | 0.2                |  | 2.4                   |  | 3,476.6              
|Net assets               |  | 1,656.8                             |  | 1,509.3            |  | 1,406.0            |  | 1,202.4               |  | 3,778.5              
|                         |  |                                     |  |                    |  |                    |  |                       |  |                      
|Shareholders equity     |  | 1,656.8                             |  | 1,509.3            |  | 1,406.0            |  | 1,202.4               |  | 3,778.5              
|                         |  |                                     |  |                    |  |                    |  |                       |  |                      
|Capital Stock            |  | 415.7                               |  | 404.1              |  | 384.8              |  | 220.2                 |  | 3,190.9              
|                         |  |                                     |  |                    |  |                    |  |                       |  |                      
|                         | 
|                         |  | Millions of shares                 
|Number of Shares         |  | 1,165.6                             |  | 1,163.1            |  | 1,159.8            |  | 1,128.3               |  | 1,108.8              
|                         |  |                                     |  |                    |  |                    |  |                       |  |                      

---

|(1) | Fully franked. See Dividends in Item 8A.
|--- | ------------------------------------------

|(2) | These conversions were made using exchange rates applicable at the dates of dividend payment.
|--- | ---------------------------------------------------------------------------------------------

|(3) | In 2002, net profit per share was `A$0.31 before the cumulative effect of an accounting change in policy for amortization of mine development and post-production
waste removal costs. In 2003, net profit per share was A$0.20 before the cumulative effect of an accounting change in policy for asset retirement obligations and policy for Associates employee stock options..
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The debt is a 364 day facility and therefore classified as a short term obligation at December 31, 2005.
|--- | --------------------------------------------------------------------------------------------------------

|(5) | Basic earnings per share were determined on the basis of the weighted average number of outstanding Alumina Limited shares for the periods indicated. Refer also to
Notes 1(s) and 6 to the Consolidated Financial Statements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Diluted earnings per share was determined on the basis of the weighted average number of outstanding Alumina Limited shares for the periods indicated including
potential shares from the conversion of partly paid shares and options into shares of Alumina Limited. Refer also to Notes 1(s) and 8 to the Consolidated Financial Statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes income from continuing and discontinuing operations.
|--- | -------------------------------------------------------------

|(8) | The Consolidated Financial Statements for the fiscal year 2001 and the first eleven months of fiscal 2002 include the financial position, results of operations and
cash flows of the discontinued operations of the incumbent nickel, copper/uranium and fertilizer businesses that were transferred to WMC Resources in the demerger. Also reported are the discontinued gold and talc operations of WMC Limited sold
during 2001.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 10 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

Exchange Rates

Alumina publishes its consolidated financial statements in Australian dollars
(A$ or $). In this Annual Report, reference to US$ are to United States dollars.

The following table
sets forth, for the periods and dates indicated, certain information concerning the rates of exchange of A$1.00 into US$ based on the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by
the Federal Reserve Bank of New York (the Noon Buying Rate).



|                             |  |                                 |  |                 |  |        |  |       
|---------------------------- |  | ------------------------------- |  | --------------- |  | ------ |  | ------
|Period                       |  | At Period End                   |  | Average Rate(1) |  | High   |  | Low   
|                             |  | (all figures in US$ per A$1.00)
|November 2005                |  |                                 |  |                 |  | 0.7451 |  | 0.7267
|December 2005                |  |                                 |  |                 |  | 0.7567 |  | 0.7261
|January 2006                 |  |                                 |  |                 |  | 0.7572 |  | 0.7379
|February 2006                |  |                                 |  |                 |  | 0.7548 |  | 0.7363
|March 2006                   |  |                                 |  |                 |  | 0.7458 |  | 0.7056
|April 2006                   |  |                                 |  |                 |  | 0.7593 |  | 0.7177
|                             |  |                                 |  |                
|Year Ended December 31, 2001 |  | 0.5114                          |  | 0.5178          |  | 0.5714 |  | 0.4812
|Year Ended December 31, 2002 |  | 0.5625                          |  | 0.5447          |  | 0.5748 |  | 0.5060
|Year Ended December 31, 2003 |  | 0.7520                          |  | 0.6524          |  | 0.7520 |  | 0.5629
|Year Ended December 31, 2004 |  | 0.7805                          |  | 0.7365          |  | 0.7979 |  | 0.6840
|Year Ended December 31, 2005 |  | 0.7342                          |  | 0.7627          |  | 0.7974 |  | 0.7261

---

|(1) | The average of the noon buying rates on the last day of each month during the financial period.
|--- | -----------------------------------------------------------------------------------------------

On May 31, 2006, the Noon Buying Rate was A$1.00 = US$0.7519.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.



- 11 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

D. Risk Factors

Alumina Limiteds net income is affected by movements in the prices of aluminium and alumina

AWACs revenue is derived from sales of alumina, alumina-based chemicals and aluminium. The price that can be obtained for these
commodities is influenced by the price of aluminium in the world market, and in particular, the LME price of primary aluminium. World aluminium prices are affected by numerous factors outside Alumina Limiteds control, including the overall
performance of world economies and the related cyclicality in particular industries that are significant consumers of aluminium.

The
development of new alumina refineries and aluminium smelters, and increased production by new or existing alumina and aluminium producers may create overcapacity, which could reduce future prices of alumina, alumina-based chemicals and aluminium,
thereby adversely affecting AWACs, and hence Alumina Limiteds, profitability.

AWACs, and hence Alumina Limiteds,
financial performance and ability to service liabilities, pay dividends, undertake capital expenditure and finance further acquisitions would be adversely affected by a sustained material fall in the prices of alumina and aluminium.

Alumina has not sought to separately hedge its exposure to aluminium prices. The Company expects that volatility in prices and demand for AWACs
products will continue for the foreseeable future. For a statement of current hedging, and movements in the selling price of aluminium over the last five years, see Item 11 Quantitative and Qualitative Disclosure about Market Risk.

Fluctuations in the A$/US$ exchange rate can have a significant effect on earnings and profitability.

Alcoa of Australia contributes the majority of AWACs earnings. While a significant proportion of Alcoa of Australias costs are incurred in A$,
sales are denominated in US$. AWACs future profitability, as expressed in A$, and hence that of Alumina Limited may be adversely affected by a strengthening of the A$ against the US$. AWACs profitability may also be adversely affected by
a strengthening against the US$ of other currencies in which operating or capital costs are incurred by AWACs refineries outside Australia.

In the past, AWAC entered foreign exchange hedging contracts to manage its exposure to the US$/A$ exchange rate with those hedging contracts closing in 2003. At present, AWAC has not entered into any foreign exchange hedging contracts.

In addition, certain of the Companys liabilities and assets are denominated in US$, particularly much of the borrowings and certain
equity accounted assets. The accounts of certain self-sustaining foreign subsidiaries are also maintained in US$. Thus a change in the A$/US$ exchange rate may have an effect on the net asset value of the Company.

Fluctuations in the A$/US$ exchange rate will affect the US$ equivalent of the A$ price of the Companys ordinary shares on the Australian Stock
Exchange (ASX) and, as a result, are likely to affect the market price of the Companys American Depositary Receipts (ADRs) in the United States. Such fluctuations would also affect the US$ amounts received by holders of
ADRs on conversion of cash dividends paid in A$ on the Ordinary Shares underlying the ADRs. Alumina is not currently hedging its currency exposures. See Item 11 Quantitative and Qualitative Disclosure about Market Risk.

An increase in AWACs production costs could reduce Aluminas profitability.

Changes in AWACs costs have a major impact on the Companys profitability. AWACs mining, refining and smelting operations are subject to
conditions beyond its or Alumina Limiteds control that can delay deliveries or increase costs for varying lengths of time. These conditions include weather and natural disasters, unexpected maintenance or technical problems, key equipment
failures, disruptions to or other problems with infrastructure, variations in geological conditions and increases in the cost of key inputs or the non-availability of key inputs. In addition, industrial disruptions, work stoppages, refurbishments
and accidents at operations can result in production losses and delays in the delivery of product, which may adversely affect profitability. A key risk in the cost of production of alumina is the sourcing of bauxite and the volatile price of caustic
soda. Approximately 1 tonne of caustic soda is used for every 13 tonnes of alumina produced. Accordingly, an increase in caustic soda prices has the potential to reduce profitability. A further key risk in the cost of production of alumina and
aluminium is the cost of energy. Increases in world oil and gas prices will increase the cost of production of alumina.



- 12 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

Certain costs are also affected by government imposts and regulations in the countries in which AWAC operates. AWACs costs depend upon the efficient design and construction of mining, refining and smelting
facilities and competent operation of those facilities.

Changes to sales agreements could adversely affect Aluminas results.

AWACs revenue from existing sales agreements depends on a variety of factors, such as price adjustments and other contract provisions. The
modification or termination of a substantial portion of AWACs sales agreements could adversely affect its results and financial performance, to the extent that AWAC is unable to renew contracts or find alternate buyers for production at the
same level of profitability.

Availability of bauxite.

AWACs production of alumina is dependant upon continuing availability of bauxite supply. AWAC obtains bauxite from bauxite reserves it holds, under mining leases and under short term and long term contracts.
AWACs present sources of bauxite are sufficient to meet the forecasted requirements of its alumina refining operations for the foreseeable future.

AWAC is exposed to regulatory and court action, each of which could adversely affect Aluminas results.

Governments
extensively regulate AWACs mining operations. National, state and local authorities in Australia and other countries in which AWAC operates regulate the mining industry with respect to matters such as employee health and safety, permitting and
licensing requirements and environmental compliance, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, and the effects that mining has on groundwater quality and availability. Numerous
governmental permits and approvals and leases are required for AWACs mining operations. AWAC is required to prepare and present to national, state or local authorities data pertaining to the effect or impact that any proposed exploration or
production activities may have upon the environment. The costs, liabilities and requirements associated with these regulations may be costly and time-consuming and may delay commencement or continuation of exploration, expansion or production
operations. Failure to comply with the laws regulating AWACs businesses may result in sanctions such as fines or orders requiring positive action by AWAC which may involve capital expenditure or the curtailment of operations. This relates
particularly to environmental regulations.

The possibility exists that new legislation or regulations may be adopted which may materially
adversely affect AWACs mining operations or AWACs cost structure. New legislation or regulations or more stringent interpretations or enforcement of existing laws and regulations may also require AWACs customers to change
operations or incur increased costs. These factors and legislation, if enacted, could have a material adverse effect on AWACs, and hence Alumina Limiteds, financial condition and results of operations.

Political risks exist in some of the countries in which AWAC operates.

AWAC operates in a number of countries, some of which have a higher political risk than Australia. Political activities in these countries may be destabilising and disruptive to AWACs operations. The impact of
any such disruption could range from a minor increase in operating costs or taxes to a material adverse impact, such as the closure of an operation.

Uncertainty of development projects and production performance could adversely affect AWACs ability to sustain production and profitability levels.

AWACs ability to sustain or increase its current level of production, and therefore its (and hence Alumina Limiteds) potential revenues and profits, in the medium to long-term is partly dependent on
efficient operation of its facilities, the development of new projects and on the expansion of existing operations. No assurance can be given that the planned development and expansion projects will result in the anticipated construction cost being
achieved, the entire anticipated additional production or that operation of existing facilities will be at desired rates of production. The economics of any project are based upon, among other factors, estimates of reserves, recovery rates,
production rates, capital and operating costs and future commodity prices and exchange rates.



- 13 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



KEY INFORMATION

Capital costs for development of alumina refinery and other mineral resource projects have increased substantially in recent years, due to higher steel and other raw material prices and significant increase in labour
and contractor costs. In particular, shortages of skilled labour due to an increase in the number of mineral resource project developments, including in Australiaand Brazil, has resulted in cost increases for the development of projects in those
locations. Also, the US dollar has fallen in value against currencies such as the Australian dollar, the Euro and Brazilian Real. Where development projects, such as AWACs Alumar and Juruti projects, incur labour and material costs in the
currency of the project country, a weaker US dollar results in a higher project cost in US dollar terms.

Native title in Australia poses risks to the
status of some of AWACs properties

Native title describes the rights and interests of Aboriginal and Torres Strait
Islander people in land and waters according to their traditional laws and customs that are recognised under Australian law. There are current claimant applications for native title determinations in the Federal Court of Australia over areas that
include Alcoa of Australias operations. Court decisions and various pieces of legislation make it evident that there are complex legal and factual issues affecting existing and future Alcoa of Australia interests. At this stage, we cannot make
any assessment of the impact of the recent and pending court cases on AWACs operations or the current claimant applications for native title over AWACs operations. See Item 8A Legal Proceedings  Native Title in
Australia.

Alumina Limited cash flows depend on the availability of dividends from AWAC

Alumina Limiteds cash flows will be generated, primarily from distributions made by AWAC, by way of dividend or capital return. The Strategic
Council determines the timing and magnitude of AWAC dividends and capital returns, subject to the relevant provisions of the AWAC Agreements. Alumina Limited cannot unilaterally determine AWACs dividend policy or the quantum or timing of
dividends to be paid by AWAC. AWAC must distribute by way of dividends, in each financial year, at least 30% of the net income of the prior year of the entities comprising AWAC, unless the Strategic Council agrees by a super majority vote to pay a
smaller dividend. The practice of AWAC, confirmed by the Strategic Council in September 2002, had been to distribute 100% of free cash flow from the AWAC entities. However, Alcoas current policy is that AWAC should fund growth in production
from internally generated cash flow. This has reduced dividends paid by AWAC and may reduce Alumina Limiteds ability to pay franked dividends to shareholders.

The AWAC joint venture decides certain matters by an 80% supermajority vote (refer Item 10). AWACs decisions are otherwise by majority vote. Alcoa has a 60% interest in AWAC and has a majority vote. Subject
to the application of fiduciary duties, it could occur that AWAC decisions by majority vote are not in the best interests of Alumina Limited.

Alumina
is liable for further capital calls by Alcoa under the AWAC arrangements.

AWAC may make an annual capital request of up to US$1 billion
following approval by a majority vote of AWACs Strategic Council. Alcoa has a majority of the votes on the AWAC Strategic Council. Alumina Limited is required to fund its share of the request subject to the provisions of the agreement. If
Alumina Limited is unable to obtain equity or debt funding to make this capital contribution, it may ultimately run the risk of its equity interest in AWAC being diluted. Accordingly, there is a risk that Alumina Limited will be unable to fund an
AWAC capital request made unilaterally by Alcoa, in the future, and that its interest in AWAC could be diluted.

Constraints on availability of highly
trained employees could have an adverse impact on AWACs operations

AWAC manages its business with a number of key personnel, the
loss of whom could have a material adverse effect on its business. AWACs, and hence Alumina Limiteds, future success will depend on AWACs continued ability to attract and retain highly skilled and qualified personnel. There can be
no assurance that key personnel will continue to be employed by AWAC or that AWAC will be able to attract and retain qualified personnel in the future. Failure to retain or attract key personnel could have a material adverse effect on AWACs,
and hence Alumina Limiteds, business. These same issues exist with respect to Alumina Limiteds key personnel, the loss of whom could have a material adverse effect on Alumina Limiteds business and its ability to manage its joint
venture interests in AWAC.



- 14 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Alumina Limited, previously called WMC Limited until its name change in December 2002 as part of the demerger, was incorporated in 1970. The demerger was
effected through an Australian court-approved scheme of arrangement and associated capital reduction and dividend distribution. In 1979 it became the holding company of the WMC Group which commenced operations in 1933. The Company is listed on the
Australian Stock Exchange. At December 31, 2005, Alumina had total consolidated assets of A$2.0 billion. Aluminas income from continuing operations was A$315.6 million in the year ended December 31, 2005 and A$316.4 million in the
year ended December 31, 2004.

Alumina Limited, incorporated under the laws of the Commonwealth of Australia, has its registered
office and principal executive offices at Level 12, 60 City Road, Southbank, Victoria, 3006, Australia. Its telephone number is +61 3 8699 2600 and facsimile number is +61 3 8699 2699. Enquiries about
Aluminas ADRs should be addressed to its depositary, The Bank of New York, telephone +1 (212) 815 2293 or facsimile +1 (212) 571 3050, located at 101 Barclay Street, New York, NY 10286.

Following the demerger, Alumina Limiteds primary assets comprised the interests in the AWAC joint venture with Alcoa, Inc. AWAC has interests in
bauxite mining, alumina refining and two operating aluminium smelters. Coincident with the demerger, WMC Limited changed its name to Alumina Limited and has maintained its listings on the ASX and the NYSE.



- 15 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Capital and Investment Expenditures

Since January 1, 2003 the
continuing operations of Alumina made the following principal capital and investment expenditures:



| |  |  | In December 2003, Alumina increased its interest in Alcoa of Australia to 40% through purchasing QBE Limiteds 0.75% interest by issuing 18,372,881 shares in Alumina. The
acquisition was accounted for based on Aluminas closing share price on December 12, 2003 of $5.90 (the closing price on the trading day prior to the date when the purchase was agreed).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2004, AWAC completed the sale of the Specialty Chemicals division, resulting in an after-tax profit of $15 million for Alumina Limited. The sale was consistent with AWAC
directing its focus toward expanding its alumina operations.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2004, Alumina Limited acquired a 40 per cent interest in the Juruti bauxite deposit in Brazil at a cost of US$40 million, which is being developed to supply bauxite
to the planned expansion of the Alumar refinery and other AWAC or third-party refineries.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During 2005, Alcoa of Australia declared a special fully franked dividend of A$800 million (Alumina Limited share A$320 million), all of which was immediately subscribed to Alcoa of
Australia for the purchase of new shares.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

AWACs Global Interests as at December 31, 2005

LOGO



|                  |  |                 |  |               |  |                
|----------------- |  | --------------- |  | ------------- |  | ---------------
|Australia         |  | Australia       |  | Australia     |  | Australia      
|- Huntly          |  | - Kwinana       |  | - Point Henry |  | - Kwinana      
|- Willowdale      |  | - Pinjarra      |  | -Portland     |  | Spain          
|Brazil            |  | - Wagerup       |  |               |  | - San Ciprian  
|- Trombetas       |  | Brazil          |  |               |  | USA            
|- Juruti **       |  | - Sao Luis      |  |               |  | - Point Comfort
|Guinea            |  | Jamaica         |  |               |  |                
|- Sangaredi       |  | - Clarendon     |  |               |  |                
|Jamaica           |  | Spain           |  |               |  |                
|- Mocho Mountains |  | - San Ciprian   |  |               |  |                
|Suriname          |  | Suriname        |  |               |  |                
|- Moengo          |  | - Paranam       |  |               |  |                
|- Accaribo        |  | USA             |  |               |  |                
|                  |  | - Point Comfort |  |               |  |                

---

|* | All Alumina Chemical assets were sold 27 February 2004, except for chemical grade alumina refining at Kwinana, San Ciprian and Point Comfort.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------

|** | Under development  1sthalf 2008.
|-- | ---------------------------------



- 16 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

B. Business Overview

Aluminas sole business is
primarily alumina refining, with some minor alumina based chemicals businesses, aluminium smelting and the marketing of those products. All of those business activities are conducted through its 40 per cent investment in AWAC. Aluminas
primary asset is its 40% interest in AWAC. A discussion of AWACs business is set forth below.

Alcoa World Alumina and Chemicals
(AWAC) was formed on January 1, 1995 by Alumina and Alcoa Inc. (Alcoa) combining their respective bauxite, alumina and alumina-based chemicals businesses and investments and some selected smelting operations. AWAC is the
worlds largest producer of alumina. Alumina and Alcoa own 40% and 60% respectively of Alcoa of Australia Ltd (AofA) and the other AWAC entities.

The Strategic Council is the principal forum for Alcoa and Alumina to provide direction and counsel to the AWAC entities in respect of strategic and policy matters. The Alcoa and Alumina representatives on the Boards
of the AWAC entities are required, subject to their general fiduciary duties, to carry out the directions and the decisions of the Strategic Council. The Strategic Council has five members, three appointed by Alcoa (of which one is Chairman) and two
by Alumina (of which one is the Deputy Chairman). Decisions are made by majority vote except for matters which require a super majority vote, which is a vote of 80% of the members appointed to the Strategic Council.

The following decisions require a super majority vote:



| |  |  | change of the scope of AWAC;
| | - |  | ----------------------------



| |  |  | change in the minimum 30% dividend policy;
| | - |  | ------------------------------------------



| |  |  | sale of all or a majority of the assets of AWAC;
| | - |  | ------------------------------------------------



| |  |  | equity calls on behalf of AWAC totaling, in any one year, in excess of US$1 billion; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | loans to Alcoa, Alumina or their affiliates by AWAC entities (including loans between AWAC entities).
| | - |  | -----------------------------------------------------------------------------------------------------

The Strategic Council meets as frequently as the Chairman (after consultation with the Deputy Chairman) determines, but meetings of the Council must be
held at least twice a year. The Deputy Chairman may require additional meetings to be held.

Under the general direction of the Strategic
Council, Alcoa is the industrial leader and provides the operating management of AWAC and of all affiliated operating entities within AWAC.

Alumina is entitled to representation in proportion to its ownership interest on the Board of each entity in the AWAC structure, including Alcoa of Australia. Alumina has proportional representation on the Boards of
the following strategic AWAC companies: Alcoa of Australia and Alcoa World Alumina LLC. In addition to the Strategic Council meetings, Aluminas management and Board will visit and review a number of AWACs operations each year.

Subject to the provisions of the AWAC agreements, AWAC is the exclusive vehicle for the pursuit of Aluminas and Alcoas (and
their related corporations as defined) interests in the bauxite, alumina and inorganic industrial chemicals businesses, and neither party can compete with AWAC so long as they maintain an ownership interest in AWAC.

If either party acquires a new business which has as a secondary component a bauxite, alumina or inorganic industrial chemicals business, that component
must be offered to AWAC for purchase at its acquisition cost or, if not separately valued, at an independently determined value. If the companies within AWAC and the Strategic Council decide not to accept the offer, the component must be divested by
Alcoa or Alumina (as the case may be) to a third party that is not an affiliate.

Smelting is not subject to these exclusivity provisions,
although there are certain smelting assets in AWAC, being those in Alcoa of Australia, in which Alumina already had an interest at the time AWAC was formed.



- 17 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

In November 2001, Alcoa announced that it had finalized agreements for a strategic alliance with the Aluminium Company of China Limited (Chalco). Under
the strategic alliance, it was proposed that Alcoa and Chalco would form a 50/50 joint venture in respect to Chalcos operations at Pingguo, which includes bauxite, alumina and aluminium facilities. In April 2004, approval was received from the
China National Development and Reform Commission (NDRC) to proceed with formation of their proposed joint venture. The Pingguo joint venture includes an 850,000 tonne alumina refinery and bauxite mining operations. Pending successful completion of
negotiations, AWAC would be offered participation in the bauxite mining and alumina refining operations at Pingguo.

In November 2005,
AWAC, Alcan and the Government of Guinea signed a Basic Agreement setting a framework to develop a 1.5 mtpy alumina refinery in Guinea. A detailed feasibility study is expected to be completed by the end of 2006. A decision to proceed to
construction could be made in 2007. AWAC and Alcan together will own at least 80 per cent, with an option for the Government of Guinea to acquire an equity stake. AWAC has a longstanding involvement in bauxite production in Guinea through its
45 per cent equity interest in Halco (Mining) Inc. which has a 51 per cent interest in Compagnie des Bauxites de Guinee. A funding plan and investment and construction timeframe is yet to be determined.

In Ghana, a feasibility study is being conducted that may result in Alcoa, AWAC and the Government of the Republic of Ghana reaching an agreement to
develop bauxite mining, alumina refining, smelting and rail infrastructure. If so, AWAC would participate in the bauxite and alumina operations in Ghana. This study is scheduled for completion by the end of 2006.

The current alumina production capacity of AWAC is approximately 14.0 million tonnes per annum, comprised of Australian operations 
8.2 million tonnes; Point Comfort  2.3 million tonnes; San Ciprian  1.4 million tonnes; Suriname  1.2 million tonnes; Jamaica  0.6 million tonnes and Brazil  0.3 million tonnes. In the year
ended December 31, 2005, AWAC produced approximately 13.7 million tonnes of alumina, compared with approximately 13.6 million tonnes of alumina the previous year, with five refineries achieving annual production records.



- 18 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

ALCOA WORLD ALUMINA AND CHEMICALS - SELECTED FINANCIAL DATA(1)

(Total of AWAC Entities - Figures reflect 100% of AWAC) (2)



|                              |  |                            |  |                            |  |                            |  |                            |  |                           
|----------------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------- |  | --------------------------
|                              |  | Year EndedDecember 31,2005 |  | Year EndedDecember 31,2004 |  | Year EndedDecember 31,2003 |  | Year EndedDecember 31,2002 |  | Year EndedDecember 31,2001
|                              |  | (A$ million)              
|Financial Results             |  |                            |  |                            |  |                            |  |                            |  |                           
|Net Sales Revenue             |  | 5,899.8                    |  | 5,203.0                    |  | 5,089.8                    |  | 5,281.3                    |  | 6,088.4                   
|Depreciation and Amortization |  | 258.0                      |  | 252.1                      |  | 261.6                      |  | 287.3                      |  | 319.7                     
|Profit before Tax             |  | 1,257.0                    |  | 1,203.3                    |  | 957.5                      |  | 1,017.8                    |  | 1,329.2                   
|Profit after Tax              |  | 845.2                      |  | 799.0                      |  | 683.3                      |  | 667.5                      |  | 795.6                     



|                      |  |                       |  |                       |  |                        |  |                         |  |                       
|--------------------- |  | --------------------- |  | --------------------- |  | ---------------------- |  | ----------------------- |  | ----------------------
|                      |  | As atDecember 31,2005 |  | As atDecember 31,2004 |  | As at December 31,2003 |  | As at December 31, 2002 |  | As at December 31,2001
|                      |  | (A$ million)         
|Balance Sheet Summary |  |                       |  |                       |  |                        |  |                         |  |                       
|Current Assets        |  | 2,012.0               |  | 1,499.8               |  | 1,142.6                |  | 1,441.2                 |  | 1,739.3               
|Current Liabilities   |  | 1,708.5               |  | 1,197.4               |  | 1,020.2                |  | 1,093.2                 |  | 1,493.5               
|Total Assets          |  | 6,976.6               |  | 5,601.9               |  | 5,349.9                |  | 5,964.4                 |  | 6,164.4               
|Net Assets            |  | 4,432.0               |  | 3,613.1               |  | 3,379.4                |  | 3,718.2                 |  | 3,429.2               



|                                |  |                            |  |                            |  |                            |  |                            |  |                           
|------------------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------- |  | -------------------------- |  | --------------------------
|                                |  | Year EndedDecember 31,2005 |  | Year EndedDecember 31,2004 |  | Year EndedDecember 31,2003 |  | Year EndedDecember 31,2002 |  | Year EndedDecember 31,2001
|Production                      |  |                            |  |                            |  |                            |  |                            |  |                           
|Alumina (thousands of tonnes)   |  | 13,742                     |  | 13,617                     |  | 13,074                     |  | 12,312                     |  | 11,905                    
|Aluminium (thousands of tonnes) |  | 377.3                      |  | 385.7                      |  | 384.4                      |  | 378.2                      |  | 374.2                     

---

|(1) | Based upon audited financial statements prepared in accordance with US GAAP which are included as part of the Financial Report.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(2) | Alumina Limited holds 40% of AWAC.
|--- | ----------------------------------

AWAC OPERATIONS

i) Smelter-Grade Alumina and Primary Aluminium

Australia

In Australia, AWAC partners own 100% of Alcoa of Australia which operates integrated aluminium facilities,
including mining, refining and smelting facilities. In calendar year 2005, the Australian operations produced 8.1 million tonnes of alumina (2004: 7.8 million tonnes) and 377,000 tonnes of aluminium (2004: 386,000 tonnes).

Alumina produced in Australia by AWAC is shipped either to its smelters at Point Henry and Portland in Victoria, Australia or to overseas customers,
principally in South Africa, the Middle East, South East Asia, Russia, China, South America and North America. Bauxite is sourced from its 100% owned Huntly and Willowdale bauxite mines, each located in the Darling Ranges south of Perth, which
supply AWACs three alumina refineries in Western Australia. Bauxite is transported by rail to the refinery at Kwinana, or by overland conveyor to the Pinjarra and Wagerup refineries. The Kwinana, Pinjarra and Wagerup refineries have capacities
of 2.1 million tonnes, 3.7 million tonnes and 2.4 million tonnes, respectively. An efficiency upgrade to the Pinjarra Refinery that would increase production to 4.2 million tonnes began in early 2004, with full commissioning
expected during quarter 2 and quarter 3 of 2006. A potential expansion of the Wagerup alumina refinery in Western Australia, by over 2 million tonnes, is



- 19 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

currently being considered following a comprehensive public consultation process. The Western Australian Government is expected to make a decision during 2006 about
whether to grant the regulatory approvals for this project. The project has received approval of the Environmental Protection Authority, subject to meeting certain conditions.

A storage and loading facility which handles the majority of shipping for the Pinjarra and Wagerup refineries is located at the port of Bunbury near
Wagerup. Some Pinjarra production is also shipped through the shipping facility at Kwinana, south of Perth.

The rights to operate bauxite
mining and alumina refining operations in Western Australia are provided under agreements with the State Government of Western Australia. The mining leases granted by the Western Australian Government expire in 2044.

AWACs present sources of bauxite are sufficient to meet the expected requirements of its alumina refining operations for the foreseeable future,
based on current production rates and refining capacity.

The bauxite from the Darling Ranges, while low in alumina grade, is also low in
reactive silica. This results in low consumption of caustic soda which in turn contributes to lowering costs of production.

Alumina
refining is energy intensive and AWACs refineries in Australia use natural gas as their energy source. The natural gas requirements of the refineries are supplied primarily under a contract with parties comprising the North West Shelf Gas
Joint Venture. The initial contract was scheduled to expire in 2005 and imposed minimum purchase requirements. In December 1997, these arrangements were extended through a renegotiation of the initial contract and the signing of a new contract
running from 2005 through to 2020.

AWAC is a 20% participant in the consortium that acquired the Western Australian Dampier to Bunbury
Natural Gas Pipeline in 2004. Participation in this acquisition secured energy delivery capacity required to support further capacity growth in AWACs Australian refining system.

AWAC also produces primary aluminium in Victoria, Australia. The aluminium assets include an aluminium smelter at Point Henry, near Geelong, and a 55%
controlling interest in an aluminium smelter at Portland. AWACs interest in the Portland smelter increased from 45% to 55% in 2000 following the acquisition of Eastern Aluminiums 10% interest in the smelter. The Portland smelter has an
annual production capacity of 352,000 tonnes of aluminium and is approximately 240 kilometres west of Geelong. Point Henry has an annual capacity of some 185,000 tonnes.

Electricity for the Portland smelter is purchased under a 30 year electricity supply agreement that expires in 2016. The tariff applicable under the agreement has both a base component, which reflects the cost of
power generation and transmission, and a flexible or adjustable component, which provides for adjustments to the base tariff rate based on the LME price for aluminium. The agreement provides a discount for interruption and a demand charge equal to
about two thirds of the total tariff which may be payable whether or not energy is taken.

Most electricity for the Point Henry smelter is
supplied by Alcoa of Australias generating station at Anglesea, with the balance required available under a 30 year electricity supply agreement that expires in 2014. The rates under that agreement change with the LME price of aluminium
(similar to the Portland power arrangement described above). The contract includes a standby demand charge for the purchase of electricity for periods when the Anglesea generating station is not operating. An additional energy charge is payable when
this standby power is actually used.

United States

Point Comfort Refinery

AWAC owns 100% of an alumina refinery at Point Comfort in Texas. The facility is located
approximately 210 kilometres south of Houston on Port Lavaca Bay. Point Comforts port facilities are linked with the Gulf of Mexico via a 35 kilometre channel. The Point Comfort refinery, which was completed in 1960 and expanded
in 1997, has a nominal capacity of 2.3 million tonnes per annum. In February 2001, AWAC announced the immediate reduction of the operating rate of Point Comfort to between 1.6 to 1.9 million tonnes per year. This rate was further
reduced in the second half of 2001, to an operating rate of 0.7 to 0.8 million tonnes per year, in response to weak markets and high costs. During 2002 the production rate returned to a rate of 1.8 million tonnes per annum. Point Comfort
returned to producing at full capacity during the second quarter of 2003 (2.3 million tonnes per annum).



- 20 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Bauxite for the refinery is sourced from an AWAC affiliate in Guinea and is also purchased in the spot market from Jamaica and French Guiana. Point
Comfort uses gas-fired cogeneration facilities to supply process heat and power to the refinery, and gas is purchased from local suppliers using a mixture of short and medium-term contracts.

The Point Comfort refinery produces both smelter-grade alumina and alumina hydrates (chemical-grade alumina). Most of the refinerys smelter-grade
alumina is sold to Alcoas smelters in the United States.

The Point Comfort refinery is part of an area which has been declared a US
national superfund site. Alcoa has agreed to undertake a remedial investigation and feasibility study at the site in conjunction with the US Environmental Protection Agency to determine rehabilitation requirements. Alumina is indemnified
by Alcoa against environmental liabilities in relation to activities undertaken at Point Comfort prior to January 1, 1995. This indemnity is specifically extended to the contamination that gave rise to the Point Comfort sites
superfund status. Alcoa has also agreed that it will be 100% responsible for remediating the contamination, as well as natural resource damages, which gave rise to the placement of the site on the National Priorities List and the entry
of the Administrative Order on Consent issued on March 31, 1994, and any subsequent Order issued relating to this contamination.

A
collective bargaining agreement (site agreement) between Alcoa and the United Steelworkers Union applies to employees at the AWAC Point Comfort refinery. During 2005 that agreement was extended to May 31, 2008.

A collective bargaining agreement (master agreement) between Alcoa and the United Steelworkers Union expired on May 31, 2006.
Agreement has been reached with the United Steelworkers Union leadership for a successor collective bargaining agreement, subject to ratification by members of the USWU. At the time of writing, that ratification had not been voted on by USWU
members, and if rejected could result in disruptive industrial action affecting many of Alcoas smelters located in USA, to which AWAC supplies alumina. It could also cause industrial action to be taken at AWACs Point Comfort refinery,
notwithstanding the existence of the site agreement referred to earlier.

Republic Of Guinea

Halco Mining Bauxite Operation

AWAC has a 45%
interest in a bauxite company, Halco (Mining) Inc. (Halco) after incorporating Reynolds Metals Companys 6% interest in Halco into AWAC in December 2002. Halco is an international consortium that owns 51% of Compagnie des Bauxites
de Guinée (Compagnie Guinée), the manager of a number of bauxite mines at Boké in Guinea, West Africa. The Republic of Guinea owns the remaining 49% of Compagnie Guinee.

The Boké bauxite mines are located north-west of Conakry in Guinea.

The shareholders of Halco take bauxite in proportion to their equity positions under take-or-pay contracts. Long-term agreements to purchase bauxite mined by Compagnie Guinee expire after 2011. AWAC also purchases
bauxite from other Halco equity holders.

In November 2005, AWAC, Alcan and the Government of Guinea signed a Basic Agreement setting a
framework to develop a 1.5 million tonnes per annum alumina refinery in Guinea. A detailed feasibility study is expected to be completed by the end of 2006. A decision to proceed to construction could be made in 2007. AWAC and Alcan will own at
least 80 per cent, with an option for the Government of Guinea to acquire an equity stake. AWAC has a longstanding involvement in bauxite production in Guinea through its 45 per cent equity interest in Halco (Mining) Inc., which has a
51 per cent interest in Compagnie des Bauxites de Guinea. A funding plan and investment and construction timeframe is yet to be determined.



- 21 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Suriname

Suralco

In Suriname, AWAC owns the Suriname Aluminum Company (Suralco). Suralco began operations in 1916 and currently has interests in an alumina
refinery at Paranam, bauxite mines in north east Suriname and south of Paranam and hydro-electric facilities at Afobaka Lake.

The
2.2 million tonnes-per-annum alumina refinery at Paranam, in the north of Suriname, was constructed in 1968 and sources bauxite from mines in Suriname. The refinery is owned by a joint venture held 55% by Suralco and 45% by an affiliate of BHP
Billiton plc (BHP Billiton). Suralco acts as manager of the joint venture and operates the refinery. The joint venture parties share alumina production from the refinery in proportion to their shareholdings and are separately responsible
for the marketing of their share of this production.

The Moengo mine in north east Suriname is 100% owned by Suralco. Approximately
2.2 million tonnes of bauxite are sourced each year from the Moengo mine. Bauxite is barged approximately 200 kilometers to the refinery at Paranam. Bauxite reserves at the Moengo mine are sufficient, at least until 2007, at current production
levels.

The Accaribo mine joint venture is located south of Paranam in Suriname. Suralco owns a 26% minority interest in the Accaribo
mine. BHP Billiton is the majority owner and manages the mine on behalf of the joint venture. Bauxite is trucked to the refinery at Paranam. The joint venturers are planning that when the Accaribo and Moengo mines are depleted, bauxite mining will
begin at two successor mines, Kaimangrasie and Klaverblad, which have an expected life of several years. Plans for long term bauxite supply beyond that time are being assessed in 2006.

In January 2003, AWAC and BHP Billiton signed a Memorandum of Understanding (MOU) with the government of Suriname providing for (i) continuation and
expansion of mining and refining activities in eastern Suriname and (ii) various exploration and other activities over the following two years relating to the feasibility of bauxite and alumina investments in western Suriname. Under the MOU,
AWAC and BHP Billiton have exclusive rights in western Suriname and have committed to spend up to US$8.5 million over approximately two years to explore this opportunity, shared 55% (AWAC) and 45% (BHP Billiton). The MOU provides that AWAC and BHP
Billiton will seek to negotiate an investment agreement with the Suriname government.

In August 2003, AWAC announced a 250,000 tonne
expansion at the Paranam refinery (AWACs share 55%). The US$65 million expansion was completed in February 2005.

AWAC and BHP
Billiton have also signed an agreement extending the terms of their existing joint venture agreement on bauxite mining and alumina refining in eastern Suriname to 2025.

Hydro-electric facilities at Afobaka Lake in Suriname are also operated by Suralco. The plant was constructed pursuant to the Brokopondo Agreement between Suralco and the Suriname Government which was signed in 1958.
The facilities supply electricity to the alumina refinery at Paranam and sell electricity to the Suriname Government.

Jamaica

Jamalco Refinery

AWAC owns Alcoa Minerals of Jamaica
LLC, a US based company which holds a joint venture interest in Jamaica. The investment comprises a joint venture called Jamalco which is owned 50% by AWAC and 50% by Clarendon Alumina Production Limited (Clarendon), which is a Jamaican Government
company. The joint venture is governed by agreements with the Jamaican Government which were finalized in 1988. Jamalco owns and manages bauxite mines, an alumina refinery and port facilities. Each joint venturer is responsible for marketing its
share of production.

The bauxite mines that feed the refinery are located 40 kilometers to the north of the refinery in the Mocho
Mountains. The bauxite mining rights are owned by Jamalco. The bauxite mined in the Mocho Mountains is transported to the refinery on a railway owned by the joint venture. Jamalco also manages a port at Rocky Point,



- 22 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

located south of the alumina refinery. The port is connected to the refinery by rail. Bauxite is also sourced from leases in Harmons Valley and the Manchester Plateau.
The mining operations on those leases are being undertaken jointly by AWAC and Alpart, a Jamaican bauxite mining joint venture owned by Glencore (65%) and Hydro Aluminium of Norway (35%) with mining activity carried out by a contractor on
behalf of the joint venture.

Jamalcos alumina refinery, completed in 1972, is located 72 kilometers west of Kingston. The
refinerys nominal capacity is 1.25 million tonnes per annum after completion of the 250,000 tonne expansion in November 2003. The completion of the expansion was part of an agreement to invest US$115 million to expand the refinery
and remove from Jamalco the nearly 30-year-old levy on bauxite. The removal of the levy, along with the expansion, reduced operating costs by 30%.

The refinery produces smelter grade alumina, and production was higher in 2005 compared with production for 2004. Energy for the refinery is provided by oil powered turbines. Any surplus power produced is sold into the Jamaican public
electricity grid and the refinery can draw power from the grid if necessary.

In May 2005 AWAC and the Government of Jamaica approved plans
to immediately expand the Jamalco alumina refinery in Clarendon, Jamaica by 150,000 mtpy as part of an overall 1.5 million mtpy capacity expansion. This expansion is to be completed in two phases. The initial phase will add 150,000 mtpy of
capacity by the end of 2006 at a cost of US$77 million; the second phase of 1.35 mtpy is targeted for completion during 2008, at a total estimated project cost of US$1.2 billion, although commencement of construction is conditional upon finalization
of an agreement to bring natural gas from Trinidad to Jamaica and the Jamalco refinery.

On completion of the total project, AWACs
ownership of Jamalco will increase from 50 per cent to approximately 77 per cent. The Government of Jamaica will retain ownership of the remaining 23 per cent.

Brazil

Abalco

Abalco SA (Abalco), an AWAC entity in Brazil, is a participant (18.9%) in a consortium that owns the Alumar alumina refinery at São Luis in north eastern Brazil. The other consortium participants are Alcoa
Aluminio S.A. (35.1%), BHP Billiton Metais SA (36%) and an affiliate of Alcan Aluminio Do Brazil SA (10%). Alcoa Aluminio is the operator of the consortium which is managed on a production and cost sharing basis. Abalco has special
rights to 54% of any expansion of the Alumar refinery.

The refinery has a nominal production capacity of 1.3 million tonnes of
smelter grade alumina per annum. Approximately half of the output is consumed at an adjacent smelter, with the remainder exported to third party customers. The major source of energy for the refinery is low sulphur steaming coal purchased from
Colombia and Venezuela.

The consortium has long term bauxite purchase contracts with MRN which has mines located at Trombetas within the
State of Para in northern Brazil. Abalco holds a 9.6% interest in MRN after incorporating Reynolds Metals Companys 5% interest in MRN into AWAC in December 2002. The remaining interest in MRN is jointly owned by affiliates of Alcan, Companhia
Brasileira de Aluminio, Companhia Vale do Rio Doce, BHP Billiton Plc and RC Norsk Hydro. MRNs mines produce approximately 17.4 million tonnes of bauxite each year. Bauxite is transported approximately 1,400 kilometers by ship to the
refinery.

A maritime terminal owned by the consortium and equipped with an alumina ship loader and bulk materials ship unloader is
situated adjacent to the refinery. These facilities are used to ship both bauxite and steaming coal into the refinery and alumina out.

Construction of a 2.1 mtpy expansion of the Alumar alumina refinery has been commenced by the consortium partners. On completion, planned for the second half of 2008, total refinery capacity will increase to 3.5 mtpy. AWAC has a 54 per
cent interest in the expansion, or 1.08 mtpy of capacity.



- 23 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Juruti

In December 2004, Alumina Limited acquired
from Alcoa a 40 per cent interest in the Juruti bauxite deposit in Brazil. A new bauxite mine is being developed at Juruti, owned 100 per cent by AWAC, to supply the Alumar refinery expansion. The Juruti mine will initially produce
2.6 million tones of bauxite per year to supply AWACs requirements for alumina to be produced at the expanded Alumar facility, with the ability for further expansions at incremental investment. The Juruti mine development is an important
part of AWACs strategy to own high-quality, low-cost bauxite deposits that are close to its refineries.

AWACs total investment
for the Alumar refinery expansion and the Juruti mine development is estimated to be US$1.0 billion, to be spent over the 2006-2008 timeframe.

Spain

San Ciprian Refinery

AWAC owns and
operates the San Ciprian alumina refinery, which is located on the western coast of Spain. AWAC acquired the refinery in February 1998 from Alcoa for US$113 million following Alcoas acquisition of the principal alumina and aluminium assets of
Spains state owned aluminium producer, Industria Espanola del Aluminio (Inespal).

The San Ciprian refinery was
commissioned in 1980. It has an annual production capacity of 1.3 million tonnes, having completed a 0.2 million tonne expansion at a cost of US$22.2 million in March 2001. San Ciprian employs a high temperature and pressure technology.
Bauxite for the refinery is shipped from the Boké mine in Guinea. Steam for the refinery is generated by the plants own oil fired boiler, with electrical power coming from the national grid.

Approximately 70% of alumina produced at the San Ciprian refinery is metallurgical grade, which is supplied primarily to Alcoas smelters in Spain.
The balance of production is non-metallurgical grade alumina that is largely sold as commodity hydrate alumina to chemical manufacturers. A small portion of the non-metallurgical grade alumina is also sold as calcined aluminas. The location of
San Ciprian within the European Union allows commodity grade alumina to be sold within Europe without attracting the relatively high tariffs imposed on non-European suppliers.

Ghana

In Ghana, a feasibility study is continuing that may provide Alcoa, AWAC and the Government of
the Republic of Ghana with an agreement to develop bauxite mining, alumina refining, smelting and rail infrastructure. AWAC will participate in the bauxite and alumina operations in Ghana. This study is scheduled for completion by the end of 2006.

Vietnam

Alcoa announced in April 2006
that its AWAC affiliate has signed a memorandum of understanding (MOU) with Vietnam National Coal-Minerals Industries Group (Vinacomin) where the parties will explore the feasibility of creating a joint venture to develop a bauxite mine and alumina
refinery in the Dak Nong Province of Vietnam.

The MOU calls for creation of a joint venture to explore feasibility of construction and
operation of an alumina refinery located in the Gia Nghia bauxite deposit area in Dak Nong Province, with first stage capacity between 1.0 and 1.5 mpty, and expansion opportunities from there.



- 24 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

ii) Alumina Specialty Chemicals

AWAC announced on
27 February 2004 that it had completed the sale of its specialty chemicals business to two private equity firms led by Rhone Capital LLC for approximately US$342 million.

The Specialty Chemicals business consisted of 11 operating facilities in six countries around the world. In addition to facilities in North America,
Europe, Japan, and an equity stake in Australia, Specialty Chemicals operated production and processing centers in China and India. Products were sold into a wide range of end markets including the steel, cement, petrochemical, plastics, automotive,
non-ferrous metal production, ceramics, carpet manufacturing and electronics industries. Specialty Chemicals had annual revenues of approximately US$360 million in 2003, and employed approximately 800 people. AWACs results for 2004 included 2
months of operating profit from Specialty Chemicals.

iii) Shipping

Alcoa Steamship Inc.

AWAC owns and operates a shipping operation that provides transportation
services to AWACs alumina business and to third parties, including Alcoa. Operating both owned and chartered vessels, the shipping business transports dry and liquid bulk cargoes, including bauxite, alumina, caustic soda, fuel oil, petroleum
coke and limestone.

AWAC owns seven combination carriers. AWAC operates two large carriers between Australia and the United States
carrying alumina to smelters on the west coast of the United States and backfilling with raw materials such as petroleum coke and caustic soda for the Australian operations. AWAC operates three smaller vessels in the Caribbean carrying alumina from
Suriname and Jamaica to New Orleans, on the south coast of the United States or Baltimore on the north coast of the United States. These ships are also back filled with raw materials for the Suriname and Jamaican operations. AWAC also charters
carriers for the transport of bauxite, alumina and aluminium (for both AWAC and Alcoa) between its various global operations. AWAC also operates two 30,000 tonne vessels which transport alumina from the West Australian refineries to the Victorian
smelters.

iv) Markets and Competition

The alumina market is competitive, with many active suppliers and commodity traders, although in recent times there has been significant industry rationalisation through the mergers of Alcoa/Inespal, Alcoa/Reynolds Metal Company.
Alcan/Algroup and Alcan/Pechiney. The majority of products are sold in the form of smelter grade alumina with about 10% of total alumina production being used to make alumina based chemicals.

Alumina supply is critical to aluminium smelter operations and, in addition to price, reliability of supply, quality and delivery are key factors in
contract negotiations. Contracts for smelter grade alumina are usually for a multi-year time period. Pricing mechanisms have changed over time from primarily fixed amounts and terms to where a substantial portion of present day contracts are related
wholly or in part to the price of aluminium traded on the LME. Nonetheless, the average price for alumina is less volatile than that for aluminium metal.

Markets

AWACs largest customer for its alumina production is Alcoas primary smelting group in 2005 accounting
for approximately 40% of AWAC alumina production. Remaining sales are usually under long term contracts which are referenced to the LME aluminium price. A small percentage of production has been sold into the spot alumina market.

A majority of world production of alumina is sold under long-term contracts which typically have alumina prices based on a percentage of the recent
aluminium metal prices. The spot market for alumina is limited, with prices tending to be volatile.



- 25 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The price paid for the AWAC production by Alcoa smelters (excluding the Alumax smelters acquired by Alcoa in 1998) is currently determined by applying
the weighted average of:



| |  | the prices received by AWAC from the sale of alumina to unrelated third parties; and
|- |  | ------------------------------------------------------------------------------------



| |  | the contract price paid by the Alumax smelters set under the contracts negotiated when the Alumax smelters were still unrelated to Alcoa.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------

Alcoa and Alumina are reviewing the terms of supply by AWAC of alumina to Alcoas primary smelting group.

Alumina produced in Australia by AWAC is shipped to its primary aluminium smelters at Point Henry and Portland in Victoria, or to overseas customers,
principally in South Africa, the Middle East, South East Asia, Russia, China, South America and North America.

Employees

At the end of 2005, AWAC had approximately 7,219 employees in its locations compared with approximately 7,019 in 2004 and 8,140 in 2003. The number of
employees by segment was:



|                  |  |       |  |       |  |      
|----------------- |  | ----- |  | ----- |  | -----
|                  |  | 2005  |  | 2004  |  | 2003 
|Alumina           |  | 6,148 |  | 5,751 |  | 5,950
|Aluminium         |  | 1,060 |  | 980   |  | 1,130
|Chemicals & Other |  | 11    |  | 288   |  | 1,060

Regulatory and Environment

The possibility exists that new legislation or regulations may be adopted that may materially adversely affect AWACs mining operations or AWACs cost structure. New legislation or regulations, or more
stringent interpretations or enforcement of existing laws and regulations, may also require AWACs customers to change operations or incur increased costs. These factors and legislation, if enacted, could have a material adverse effect on
AWACs, and hence Alumina Limiteds, financial condition and results of operations.

Governments extensively regulate AWACs
mining operations. National, state and local authorities in Australia and other countries in which AWAC operates regulate the mining industry with respect to matters such as employee health and safety, permitting and licensing requirements and
environmental compliance, plant and wildlife protection, reclamation and restoration of mining properties after mining is completed, and the effects that mining has on surface and groundwater quality and availability. Numerous governmental permits
and approvals and leases are required for AWACs mining operations. The costs, liabilities and requirements associated with these regulations may be costly and time-consuming and may delay commencement or continuation of exploration, expansion
or production operations. Failure to comply with the laws regulating AWACs businesses may result in sanctions, such as fines or orders requiring positive action by AWAC which may involve capital expenditure or the curtailment of operations.
This relates particularly to environmental regulations.

At present, Australia does not have in place regulatory requirements to reduce
greenhouse gas emissions. However, it is possible Australia will ratify the Kyoto Protocol, which would require Australia to limit greenhouse gas emissions to 8% over 1990 levels by 2008-2012. Even if the Kyoto Protocol is not ratified, the
Australian Government may still introduce regulations to reduce greenhouse gas emissions to pursue achievement of the Kyoto Protocol targets. To date, the Government has, however, given no indications as to the likelihood, nature or timing of any
such regulations.

At present, it is not possible to predict the impact that future government regulation may have on Alumina Limited. It
is possible, however, that it may increase AWACs capital expenditure and production costs, or may impact on methods of production, depending on the nature of the regulatory requirements introduced. Alumina Limited cannot assess the nature,
magnitude or timing of such costs, including whether these costs would have a material impact on the financial performance of AWAC and consequently, Alumina.



- 26 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Since 1994, Alcoa has supported one of the largest and most comprehensive occupational health studies carried out in Australia. Called Healthwise the
study is being conducted by researchers at Monash University and the University of Western Australia.

This study is designed to assess
whether there is any relationship between certain health outcomes and working at Alcoa in Australia. It consists of three separate studies:



| |  |  | A long-term cancer incidence and mortality study among current and former employees,
| | - |  | ------------------------------------------------------------------------------------



| |  |  | A cross-sectional respiratory health study of existing employees in 1995/96, with results reported in 1996, and
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | A respiratory health study of new employees since 1995.
| | - |  | -------------------------------------------------------

The cancer and Mortality Study compares cancer rates and causes of death among current and former Alcoa employees against the general population by matching employee information with national cancer and death registries. As well as cancer
incidence, it examines the four major causes of death: circulatory disease, respiratory disease, cancer and injury/trauma.

A first search
of the national cancer and death registries until the end of 1996 was reported in 2002, and a second analysis of data to the end of 2002 was completed and reported in 2004, the findings included:



| |  |  | There was a lower overall risk of death in Alcoa employees compared to the general population.
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | Mortality rates for the four major categories of death (circulatory disease, respiratory disease, cancer and injury/trauma) were all lower in Alcoa employees than in the general
population.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The total cancer incidence rate in Alcoa employees was lower than the general population.
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | When individual types of cancers were assessed separately in the refining and smelting operations, most types of cancer occurred only as often as would have been expected based on
general population rates.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For some types of cancer, there were slightly more cases than would have been expected. However,
as this study is still at a relatively early stage and exposure data has not yet been examined, it is neither appropriate nor possible to link any cancer type with a specific work area or exposure.

The next steps in this study are to examine the cancers found to have occurred slightly more frequently than expected and investigate duration of
employment, workplace exposures and the role of smoking. Further analysis has been conducted on cancer incidence data for Kwinana refinery, including analysis for specific work locations. This found Kwinana employees had no more cancers than would
be expected in the general population. This was true across the total refinery and in three work locations alleged by a small group of community activists to be areas of concern. A third round of national cancer and death registry matching will take
place in 3 to 5 years time when further data are available.

Recruitment of new employees into the new starters respiratory health study,
which began in 1995, was completed in 2004. Analysis began in 2005 on the respiratory test data collected annually on these employees since 1995. This includes quantitative exposure data analyses to see if there are associations between any
respiratory function changes and exposures to specific substances. Once analyses are complete, results for this study are expected to be reported in 2006 for the Victorian Operations and in 2007 for the WA Operations.

C. Organisational Structure

The Alumina
Group consists of the parent company, Alumina Limited and its subsidiaries. Alumina is incorporated and listed in Australia. Aluminas sole businesses which are operated through AWAC include bauxite mining, alumina refining and aluminium
smelting operated through the AWAC joint venture with Alcoa Inc.



- 27 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

(Alcoa). While not itself a legal entity, AWAC is the reference term given to an unincorporated joint venture commenced on January 1, 1995 by Alumina
and Alcoa in combining their respective bauxite, alumina and alumina-based chemicals businesses and interests. The assets of the joint venture are held 40% by the Alumina Group and 60% by Alcoa, with the Alumina Groups interests held through
Alumina International Holdings Pty Ltd and Alcoa of Australia Ltd as described below.



| |  |  | Alumina International Holdings Pty Ltd  Incorporated in Australia this company holds all entities in the Alumina Groups AWAC joint venture (except for Alcoa of
Australia Ltd, see below) through its direct and indirect interests, totalling 40% in each of Alcoa World Alumina LLC, Alcoa Caribbean Holdings LLC, Alumina Espanola SA, Abalco SA and Alcoa Chemie Nederland BV (sold in February 2004 as part of the
Alumina Specialty Chemical Sale- refer Item 4B(ii)) and Alcoa Chemie GMBH (sold in February 2004 as part of the Alumina Specialty Chemical Sale- refer Item 4B(ii)). It is wholly owned by Alumina.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Alcoa of Australia Ltd  Incorporated in Australia, and 40% owned by Alumina, this company is a significant entity in the Alumina Groups AWAC joint venture, with
integrated bauxite mining, alumina refining and aluminium smelting facilities in Australia.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The AWAC entities assets
include the following interests:



| |  |  | 100% of the bauxite mining, alumina refining, and aluminium smelting operations of Alcoa of Australia;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | 100% of the refinery assets at Point Comfort, Texas, United States (Point Comfort);
| | - |  | -------------------------------------------------------------------------------------



| |  |  | various interests in mining, refining and smelting assets in Suriname ;
| | - |  | -----------------------------------------------------------------------



| |  |  | a 50% interest in mining and refining assets in Jamaica;
| | - |  | --------------------------------------------------------



| |  |  | an 18.9% interest in the São Luis refinery in Brazil and a 9.6% interest in the bauxite mining operations of Mineracao Rio Do Norte, an international mining consortium. AWAC
also owns disproportionate expansion rights to the São Luis alumina refinery;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 100% of the Juruti bauxite deposit in Brazil;
| | - |  | ---------------------------------------------



| |  |  | 100% of the refinery and alumina-based chemicals assets at San Ciprian, Spain;
| | - |  | ------------------------------------------------------------------------------



| |  |  | A 45% interest in Halco, a bauxite consortium that owns a 51% interest in Compagnie Guinée; and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | 100% of the bauxite and alumina shipping operations (Alcoa Steamship).
| | - |  | ------------------------------------------------------------------------

In December 2003, Alumina increased its interest in Alcoa of Australia to 40% (and AWACs interest to 100%) through purchasing QBE Limiteds 0.75% interest by issuing 18,372,881 shares in Alumina.

D. Property, plant and equipment

Aluminas property, plant & equipment consist only of various pieces of office furniture and equipment.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

As permitted by SEC release No. 33-8567  First-time application of International Financial Reporting Standards  this Annual Report on
Form 20-F for our fiscal year ended December 31, 2005, our first year of reporting under A-IFRS, contains only two, rather than three, years of income statements, balance sheets, changes in shareholders equity and cash flow statements
prepared in accordance with A-IFRS. For a discussion of these items as they relate to prior fiscal years, please refer to our previously filed Annual Reports on Form 20-F.



- 28 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, which are included in
this annual report. Those Consolidated Financial Statements have been prepared in accordance with the A-IFRS, which differs in certain respects from US GAAP. A discussion of the principal differences between A-IFRS and USGAAP as they relate to
Alumina and a reconciliation of net income, comprehensive income, certain balance sheet items, shareholders equity and cash flows to US GAAP is provided in Note 33 to the Consolidated Financial Statements. Unless noted otherwise, amounts
and disclosures of accounting matters made in this section are determined in accordance with A-IFRS. The critical accounting policies adopted by Alumina are described below.

Critical Accounting Policies

Alumina

The critical accounting policy relating to the continuing operations of Alumina is outlined below. This policy is deemed critical as estimates and
judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances to ascertain the various US GAAP adjustments to translate
AWACs net assets and net profit into A-IFRS compliant values. Aluminas significant accounting policies are described in Note 1 to its consolidated financial statements.

Equity accounting Investments in associates are accounted for in the consolidated financial statements using the equity method. Under this
method, the consolidated entitys share of the post-acquisition profits or losses of associates is recognized in the consolidated statement of financial performance, and its share of post-acquisition movements in reserves is recognized in
consolidated reserves.

This accounting treatment is in line with US GAAP. Adjustments are made for GAAP differences which exist in the
underlying profits or losses of the associates prior to the recognition in Aluminas consolidated financial statements.

AWAC

AWACs significant accounting policies are summarized on pages 5 to 10 in the AWAC Combined Financial Statements. Some of AWACs accounting
policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and are based on
AWACs historical experience, terms of existing contracts, managements view on trends in the alumina/aluminium industry and information from outside sources.

Management believes the following critical accounting policies, among others, affect AWACs more significant judgments and estimates used in the preparation of AWACs consolidated financial statements and
could potentially impact AWACs financial results and future financial performance.

AWACs critical accounting policies include
those discussed below.

Derivatives and hedging  The fair values of all outstanding derivative instruments are recorded on the
Statement of Financial Position in other current and non-current assets and liabilities. The ineffective portions are recorded in other income or expense in the current period. Under A-IFRS, realized or unrealized gains and losses on the hedging
contracts are deferred in other assets or other liabilities until the underlying transaction takes place. When the underlying transaction takes place gains, losses, premiums and discounts are taken to the profit and loss as part of sales revenue or
costs. If a contract ceases to qualify as an effective hedge then all premiums, discounts, gains and losses are recognized in the profit and loss.

Inventory valuation Inventories within AWAC are carried at the lower of cost or market value, whereby cost is generally determined under the last in, first out (LIFO) method. This method is not allowed under A-IFRS. Alumina
adopt the first in, first out (FIFO) valuation methodology in the A-IFRS and USGAAP financial statements.

Foreign currency The local currency is the functional currency for AWACs significant operations outside the U.S., except in Brazil, Jamaica and Suriname, which use the U.S. dollar. The determination of the functional currency in these countries is made on
the appropriate economic and management indicators.



- 29 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Goodwill and other intangibles AWAC adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets, effective January 1, 2002. Under this standard, goodwill and intangibles with indefinite lives are no longer amortized. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the
periods benefited, with a weighted average life of 10 years. The carrying values of goodwill and other intangible assets with indefinite useful lives are tested at least annually for impairment. If the carrying value of goodwill or an intangible
asset exceeds its fair values, an impairment loss is recognized. The evaluation of impairment involves comparing the current fair value of the business to the recorded value (including goodwill). AWAC uses a discounted cash flow model (DCF
model) to determine the current fair value of the business. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volume
and prices, costs to produce, and working capital changes. Management considers historical experience and all available information at the time the fair values of its businesses are estimated. However, actual fair values that could be realized in an
actual transaction may differ from those used to evaluate impairment of goodwill.

Asset Retirement Obligations  AWAC
recognizes asset retirement obligations (AROs) related to legal obligations associated with the normal operation of AWACs bauxite mining, alumina refining and aluminium smelting facilities. These AROs consist primarily of costs
associated with spent lining disposal, closure of bauxite residue areas, mine reclamation, and landfill closure. AWAC would also recognize an ARO for any significant lease restoration obligation if required by a lease agreement. The fair value of
these AROs are recorded on a discounted basis, at the time the obligation is incurred, and accreted over time for the change in present value. Additionally, AWAC capitalizes asset retirement costs by increasing the carrying amount of the related
long-lived assets, and depreciating these assets over the remaining useful life.

Mine Development Costs-Mine development costs,
classified on the combined Statement of Financial Position as other non-current assets and deferred charges, are generally, deferred and amortized over the period during which the resources are extracted on a units-of-production basis. Applicable
exploration costs are charged to expense in the year any program is abandoned.

Stock-Based Compensation- Certain employees of AWAC
receive stock options under Alcoas Long Term Incentive Stock Plan and AWAC receives charges for stock option exercises under this plan. AWAC accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employeesand related interpretations using the intrinsic value method.

General Factors

Aluminas financial and operational performance and prospects are influenced by a number of factors which predominantly result
from its 40% interest in AWAC and the level of debt carried by Alumina Limited.

Alumina Limited currently carries modest debt which is
incurred through US dollar denominated 364 day facilities. The amount of interest charged will impact the profitability of Alumina. The interest amount incurred will depend on the amount of debt carried, interest rates and the impact of A$/US$
exchange rate movements.

Alumina Limiteds 40% share of AWACs continuing operations during the three year period to
December 31, 2005 was characterized by a focus upon:



| |  |  | continuing to match AWAC production to market conditions;
| | - |  | ---------------------------------------------------------



- 30 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS



| |  |  | expansion of existing AWAC operations through brownfield expansions and increasing capacity through operational improvements gained by de-bottlenecking operations and improving
efficiencies; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | seeking to increase production where possible to benefit from higher alumina and aluminium prices.
| | - |  | --------------------------------------------------------------------------------------------------

The following is a discussion of the key factors which affect AWAC and Aluminas business and financial performance.

Commodity prices

AWAC sells products
which are commodities and its financial performance is significantly influenced by the prices it obtains for these products and, in particular, the LME price of primary aluminium. The price of a commodity is generally determined by, or linked to,
the price for the product in question in the world markets. World commodity prices are subject to changes in supply and demand, and characterized by significant fluctuations. The volatility of commodity prices means that the sales revenues (and
absent mitigating factors, profit) generated by sales of AWAC products, can vary considerably from period to period, even where production levels and costs remain constant.

Fluctuations in the A$/US$ Exchange Rate

The world commodity prices for the products AWAC sells are denominated in, or linked to, US$. By contrast, a significant portion of AWACs costs are denominated in A$ and Aluminas accounts are prepared in A$. As a consequence,
fluctuations in the rate of exchange between the US$ and A$ may have an effect on the financial results of Alumina. Absent mitigating factors such as foreign currency hedging, an appreciation of the US$ relative to the A$ increases the value of
sales revenues in A$ as compared to costs and has a positive impact on profit. A depreciation in the US$ as compared to the A$ decreases the value of sales revenue in A$ as compared to A$ costs and exerts negative pressure on profit. Alcoa of
Australia contributes the majority of AWACs earnings. However, for those refineries outside Australia, a portion of their costs are denominated in the local currency and movements in those currencies relative to the US$ will have an effect on
the financial results of Alumina.

Production Costs

Changes in AWACs costs have a major impact on its profitability. AWACs mining, refining and smelting operations are subject to conditions beyond its or Alumina Limiteds control that can delay
deliveries or increase costs for varying lengths of time.

AWAC was protected, to some degree, from higher energy prices in 2005 through
its energy price hedging program. In 2006 AWAC will be more exposed to movements in the market prices of oil and gas. Costs of raw materials and energy, particularly oil and gas remain high during 2006, which will increase AWACs production
costs.

Certain costs are also affected by government imposts and regulations in countries in which AWAC operates. AWACs costs depend
upon efficient design and construction of mining, refining and smelting facilities and competent operation of those facilities.

Changes
to Sales Agreements

Long term supply agreements are in place for varying volumes and tenors. As such, AWACs revenue from existing
sales agreements depends on the outcome of periodic renegotiation of these agreements. The modification or termination of a substantial portion of AWACs sales agreements could materially affect its results and financial performance.

Regulatory Environment

The costs, liabilities and requirements associated with the regulations may be costly and time-consuming and may delay commencement or continuation of exploration, expansion or production operations. Of particular importance in Australia is
the impact of environmental regulations and carbon tax/greenhouse gas regulations. The possibility exists that new legislation or regulations may be adopted that may materially adversely affect AWACs operations or cost structure.



- 31 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The electricity supply to AWACs smelters is primarily under 30 year contracts expiring in 2014 and 2016. The cost of electricity is the largest
individual cost in the production of aluminium. The level of electricity tariffs available after the expiry of these contracts is material to the level of smelter production costs and profitability.

Political Risk

AWAC operates in a
number of countries, some of which have a higher political risk than Australia. Political activities in these countries may be destabilizing and disruptive to AWACs operations. The impact of any such disruption could range from a minor
increase in operating costs or taxes to a materially adverse impact, such as the closure of an operation.

Development of Projects and
Production Performance

AWACs ability to sustain or increase its current level of production, and therefore its (and hence Alumina
Limiteds) profits in the medium to long-term, is partially dependent on the development of new projects and on the expansion of existing operations.

Alumina Limiteds Cash Flows

Alumina Limiteds cash flows will be generated primarily from
distributions made by AWAC, by way of dividend or capital return. The Strategic Council, which is 60% controlled by Alcoas nominees, determines the timing and magnitude of AWAC dividends and capital returns, subject to the relevant provisions
of the AWAC Agreements. Alumina Limited cannot unilaterally determine AWACs dividend policy or the quantum or timing of dividends to be paid by AWAC. AWAC must distribute by way of dividends, in each financial year, at least 30% of the net
income of the prior year of each of the entities comprising AWAC, unless the Strategic Council agrees by a super majority vote to pay a smaller dividend. The past practice of AWAC, confirmed by the Strategic Council in September 2002, had been to
distribute 100% of free cash flow from the AWAC entities. Alcoas current policy is that AWAC should fund growth in production from internally generated cash flow. This has reduced dividends paid by AWAC.

2005 Performance Compared to 2004

Overview  Alumina Limited

Aluminas consolidated net profit after tax from continuing
operations was A$315.6 million for the year ended December 31, 2005 compared with A$316.4 million for the year ended December 31, 2004. This decrease in 2005 compared to 2004 was due to the following:

Share of net profits of associates using the equity method

Share of net profit of associates increased by $53.6 million to $337.1 million. Higher US$ sales revenue from a stronger alumina and aluminium prices (average realized alumina third party price of US$239 per tonne in
2005 versus US$207 per tonne in 2004 and an average LME aluminium price of US86c/lb in 2005 versus US78c/lb in 2004) was partially offset by higher maintenance costs, increased prices for energy and raw materials and a stronger average Australian
dollar.

Other income

Other income decreased by $44.5 million to nil. The key points to note are:



| |  |  | profit of $43.4 million on the sale of AWACs Specialty Chemicals business in 2004.
| | - |  | -----------------------------------------------------------------------------------



| |  |  | foreign exchange gains of $1.1 million in 2004.
| | - |  | -----------------------------------------------

Expenses from ordinary activities

Expenses from ordinary activities increased by $1.5 million to $10.2 million. The key
points to note are:



| |  |  | Higher costs in 2005 due to legal and accounting costs associated with the restructure of Alcoa of Australia and accounting costs relating to the implementation of A-IFRS.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 32 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS



| |  |  | Reduction in the provision for the WMC Resources employee stock appreciation plan as a result of the lower Alumina share price offset the above increase.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

Borrowing Costs

Borrowing costs
increased by $7.2 million to $15.3 million due to additional drawdown of debt and to higher average 2005 interest rates on Aluminas US$ borrowings.

Income tax credit/expense on ordinary activities

In 2005 Alumina disclosed an income tax expense of
$nil following an expense of $3.7 million in the prior year. The key points to note are:



| |  |  | Attribution income tax of $4.0 million on Specialty Chemicals business sale during 2004, and;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Offset by $15.2 million expenses which are either non-deductible or against which no income was earned to claim a deduction in 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

Aluminas net cash inflow from operating activities from continuing operations for 2005 was A$72 million, compared to A$148.5 million in
2004. Lower dividends from associates, lower interest revenue from third parties and higher borrowing costs were the main factors driving lower cash from operating activities.

During 2005 Alcoa of Australia declared a special fully franked dividend of A$800 million (Aluminas share A$320 million) all of which was
immediately subscribed to Alcoa of Australia for the purchase of new shares.

Aluminas cash outflow relating to investing activities
from continuing operations was A$8.2 million, compared to a cash inflow of A$73.4 million in 2004. This decrease in cash flows from investing activities in 2005 was principally affected by the $109 million received from the sale of AWACs
Specialty Chemicals business, which was partly offset by the purchase of the 40% interest in the Juruti bauxite deposit, both during 2004.

Aluminas net cash outflow from financing activities for continuing operations decreased to A$168.4 million, compared to A$268.4 million in 2004. Key changes were:



| |  |  | additional drawdown of A$52.8 million (US$40 million) in 2005 compared to a net repayment of borrowings amounting to A$54.6 million in 2004 (comprising drawdown of A$10.1million
(US$8 million) and the repayment of A$64.7 million (US$48 million)).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | proceeds from the issue of shares decreased to A$11.6 million from A$19.3 million in 2004. The shares were issued in connection with the WMC employee option plan discussed below in
Section 6.E; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Aluminas net assets increased in 2005 by $118.3 million to $1,530.2 million. The key points to
note are:



| |  |  | Investment in associates increased by $292.8 million to $1,994.9 million. The increase was attributable to the dividend reinvested as equity in Alcoa of Australia amounting to $320
million, an increase of $37.5 million in AWACs reserves and the impact of the lower Australian dollar. These increases were offset by Aluminas shortfall of equity share of profits over dividends received by $78.8 million.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash decreased by $102.7 million to $15.2 million, for the reasons noted above in the discussion on Aluminas cashflow from operating, investing and financing activities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest Bearing Liabilities increased by $80.8 million to $478.7 million. During 2005 Alumina borrowed an additional US$40 million and the weaker Australian dollar at
December 31, 2005 increased the Australian dollar value of debt by $28 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other liabilities decreased by $9.5 million from $10.7 million. The decrease relates to accrual of costs in 2004 for the second tranche payable on the Juruti acquisition amounting
to $8.4 million paid in 2005.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 33 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Aluminas equity increased by $118.3 million to $1,530.2 million. The key points to note are:



| |  |  | $315.6 million of net profits for 2005.
| | - |  | ---------------------------------------



| |  |  | $35.6 million representing effective hedge adjustments taken to equity.
| | - |  | -----------------------------------------------------------------------



| |  |  | Offset by payment of 20.0 cents per share of dividends ($232.8 million) and an $11.5 million net exchange difference recognized in equity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Former employees of WMC Resources exercised 2,534,600 options (increase in equity by $11.6 million).
| | - |  | ----------------------------------------------------------------------------------------------------

Overview - AWAC

2005 Performance Compared to 2004 Performance

US GAAP (US$ million)



|                       |  |                |  |               
|---------------------- |  | -------------- |  | --------------
|                       |  | 2004 Full Year |  | 2005 Full Year
|Total Sales            |  |                |  |               
|Third-party sales      |  | 2,435.6        |  | 2,829.6       
|Related party sales    |  | 1,396.4        |  | 1,670.2       
|                       |  |                |  |               
|Total Sales            |  | 3,832.0        |  | 4,499.8       
|                       |  |                |  |               
|Net Income (after tax) |  | 588.5          |  | 644.6         
|                       |  |                |  |               

AWACs 2005 sales revenue of US$4,499.8 million (including sales to parties related to AWAC
of US$1,670.2 million) was 17.4% higher than 2004 sales revenue of US$3,832.0 million (including sales to related parties of US$1,396.4 million). The increase in sales revenue in 2005 was principally due to a stronger aluminium market (average
LME aluminium price in 2005 of US86 cents per pound versus 2004 average of US78 cents per pound). Alumina production increased to 13.7 million tonnes (2004: 13.6 million tonnes) with five refineries achieving annual production records.
Aluminium production decreased from 386,000 tonnes in 2004 to 377,000 tonnes in 2005. The following table shows AWACs production information for 2004 and 2005.

AWAC Historical Production (100%) and LME Aluminium Price



|                                    |  |                |  |               
|----------------------------------- |  | -------------- |  | --------------
|AWAC Production Performance         |  | 2004 Full Year |  | 2005 Full Year
|Alumina Production (million tonnes) |  | 13.6           |  | 13.7          
|Aluminium Production (000 tonnes)  |  | 386            |  | 377           
|LME Aluminium Price (US$/lb)        |  | 0.78           |  | 0.86          

AWACs net income of US$644.6 million in 2005 represented an increase of 9.5% compared to
2004. The improvement in 2005 was due largely to the price factors discussed above and increased production of alumina. The total costs of sales for 2005 was 23% higher than 2004. AWAC production costs for alumina rose by US$26 per tonne,
principally due to higher input costs for energy, caustic soda and purchased bauxite, higher freight costs, increased maintenance and a higher A$ exchange rate.



- 34 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The average aluminium price as quoted on the London Metals Exchange (LME) increased 10 per cent in 2005. In December, the three-month LME aluminium
price reached US$1.04 per pound, the highest level since 1989. Higher LME aluminium prices reflect increased worldwide demand, particularly arising from strong economic growth in China, resulting in a tightening global supply/demand balance.

During 2005, consumption of aluminium increased in major markets, with the exception of Japan, where consumption was unchanged. LME
aluminium inventories decreased by 7 per cent during the year to 645,000 tonnes at year end, equivalent to approximately six weeks of worldwide consumption.

Aluminium consumption in China rose by more than 1 million tonnes, an increase of 16 per cent year on year, with strong demand to meet growth in construction, transport infrastructure and industrial
production. Most of the alumina required to supply this Chinese growth is sourced from domestic producers or is imported under long-term contracts, with a significant volume purchased on the spot market.

Increases in the price of alumina sold under long-term contracts were achieved through 2005, due to higher aluminium prices and improved contract pricing
in a tightening worldwide supply/demand balance for alumina. Spot alumina prices also remain high due to increasing demand, particularly from China.

In addition, materially higher power costs continue to have an impact on the aluminium industry, causing several aluminium smelters in Europe and North America to cease production. These market conditions are
favourable to AWAC in renewing customer alumina supply agreements in 2006.

The majority of AWAC customer sales are long-term contracts,
with only a small percentage sold on the spot market.

Alcoa is AWACs largest customer, with sales of alumina from AWAC to Alcoa
being priced at the average of AWACs third-party (non-Alcoa) sales. Third-party sales include those made to Alumax smelters under a long-term contract, which had been entered into before Alcoa purchased Alumax in 1998.

AWACs profit will continue to be most sensitive to changes in the aluminium price and the A$/US$ exchange rate.

AWACs net cash inflow from operating activities increased to US$802.4 million, compared to US$660.8 million in 2004. The 21.4% increase in 2005 was
primarily due to higher aluminium and alumina realised prices.

Net cash outflow from financing operations decreased to US$165.2 million,
compared to US$308.2 million in 2004. Key changes were:



| |  |  | Reduction in level of dividends paid to partners of US$139.2 million.
| | - |  | ---------------------------------------------------------------------



| |  |  | Contribution by partners of US$21.1 million in 2005 compared to US$33.3 million in 2004 following the purchase of Alcoas interest in the Juruti bauxite project in Brazil.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Decrease of debt by US$4.2 million in 2005 compared to US$20.2 million in 2004.
| | - |  | -------------------------------------------------------------------------------

Net cash outflow from investing activities increased in 2005 to US$624.7 million, compared to US$231.7 million in 2004. The increase is due to increased capital expenditure due to the Pinjarra refinery capacity
upgrade and early work on the Jamalco, Alumar and Juruti projects. The increase in capital expenditure supports AWACs strategy to grow low-cost refinery capacity to meet increasing alumina demand and provide long-term growth, and is forecast
to continue over the next three to four years.



- 35 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

B. Liquidity and Capital Resources

The ability of
Alumina and its subsidiaries to generate cash internally is influenced by the following major factors:



| |  |  | the level of world commodity prices and exchange rates to which AWACs revenue is substantially exposed;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | the level of sales and cost performance by AWAC;
| | - |  | ------------------------------------------------



| |  |  | the amount of dividends received from AWAC; and
| | - |  | -----------------------------------------------



| |  |  | the amount of capital expenditure required by AWAC to develop new projects or maintain or expand existing operations, (refer to Item 4 Section B for discussions of the
upgrade/expansions of Pinjarra and Suriname refineries, potential expansions of Wagerup, and Jamalco refineries, development of the Juruti bauxite deposit and Alumar refinery, potential investment in a refinery in Guinea, and potential acquisition
of an interest in the Pingguo bauxite/alumina assets).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We expect these factors will continue to influence Aluminas
liquidity and capital resources in future years.

In addition, because Alumina is a holding company that does not conduct any material
operating businesses, its ability to pay dividends and meet other obligations is dependent almost entirely on, and would be limited by, the amount of dividends received from its subsidiaries and investments.

The AWAC Agreements state a preference to finance its activities from cash flow of the affiliated operating entities and from borrowings. The AWAC
Agreements limit leveraging to a maximum ratio of debt (net of cash) to total capital of 30% (a super majority vote of the Strategic Council is required to exceed this limit). Alcoas stated view is that AWAC should use available cash flow to
meet its financing needs, such as funds needed for expansion commitments. This method of funding expansion projects would reduce dividends paid by AWAC during the period of funding and would require loans between AWAC entities. Such loans require
the agreement of Alcoa and Alumina. The Company and Alcoa are working on a funding plan in respect of AWACs growth projects. Should the aggregate annual capital budget of AWAC still require, after utilising available cash flow, an additional
contribution from Alumina Limited and Alcoa, then the parties contribute their proportionate share thereof subject to the provisions set out in the AWAC Agreements. AWAC may make an annual capital request of up to US$1 billion following a decision
by a majority vote of the Strategic Council, of which Alcoa Inc. has majority voting power.

The upgrade and expansions of the Pinjarra and
Suriname refineries have been funded from operating cashflows. The use of operating cashflows for the Pinjarra upgrade has resulted in a lower payout of dividends from Alcoa of Australia during the period of the upgrade. Notwithstanding that,
Alumina intends, subject to business conditions, to at least maintain dividends to Alumina shareholders at current levels through the current growth phase. Alumina Limiteds preference is that Alcoa of Australia Ltd distributes by dividends its
franking credits as far as possible.

During 2005, Alcoa of Australia, declared a special fully franked dividend of A$800 million (Alumina
Limited share A$320 million), all of which was immediately subscribed to Alcoa of Australia for the purchase of new shares. This transaction, which was the subject of a prior ruling by the Australian Taxation office, has ensured that Alumina Limited
is able to declare dividends, at least at the current levels, on a fully franked basis through until the end of 2007. Alumina is working with Alcoa on a plan which, if agreed and implemented, would meet the Companys objective of increasing
franking credits available to Alumina shareholders and also meet Alcoas funding objectives. The extent to which franking levels can be increased after 2007 beyond that achieved from the dividends representing 30% of AWACs profits, will
depend upon the successful outcome and implementation of this work, or on further dividends being paid by Alcoa of Australia beyond the 30% minimum stipulated in the AWAC Agreements.

Alumina intends utilizing any dividends received in the next 3 to 4 years from AWAC entities other than Alcoa of Australia to fund its corporate and
financing costs and capital requirements.



- 36 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Aluminas gross debt at December 31, 2005 was A$478.7 million offset by cash assets of A$15.2 million. Subsequent to year end Alumina paid a
final 2005 dividend of A$116.6 million and received a dividend from Alcoa of Australia of A$145.6 million. AWAC had a cash surplus net of debt at December 31, 2005 of US$115.4 million. AWAC operating cashflow for 2005 was US$802.4 million.

In relation to the potential expansions of Wagerup and Jamalco refineries, and the development of the Juruti bauxite deposit and Sao Luis
refinery expansion, AWAC has yet to determine the manner in which they will be funded.

Alumina has committed debt facilities in the form
of short term bank debt (364 day facilities) totaling A$700 million extended to December 2006. Aluminas sound financial structure, together with AWACs strong cash flow and ungeared balance sheet, means that Alumina Limited is well placed
to participate in potential expansions.

Funds generated from continuing operating activities were A$72.0 million for the year ended
December 31, 2005, compared with A$148.5 million in 2004. This decrease was a result of lower dividends from associates together with higher borrowing costs.

Working capital was negative A$464.8 million at December 31, 2005, compared to negative working capital of A$290.3 million at December 31, 2004. The negative working capital is primarily due to $478.7
million of short-term borrowings. Alumina Limiteds net debt increased during the year from A$280 million to $A463.5 million, reflecting the lower level of dividends paid by AWAC, as a significant part of AWACs cash flow was invested in
refinery expansions. An additional drawdown of US$40 million was made during the year. The movement in the A$/US$ exchange rate during the year increased Aluminas US$ borrowings by A$28 million when translated into Australian dollars. The
short term loan facilities are available for general corporate purposes. All facilities are 364 day facilities. The short term facilities are expected to be replaced with medium term facilities during 2006.

Gross debt drawn down under the Companys short term debt facilities was A$478.7 million at December 31, 2005 and A$397.9 million at
December 31, 2004 as a result of drawing down a further US$40million (A$52.8 million) and the impact of the A$/US$ exchange rate as stated above.

The maturity of debt is outlined in Note 16 in the Consolidated Financial Statements. Aluminas current debt facilities are short term US dollar borrowings, reflecting the modest debt level and low short term
interest rates. The key funding principles inherent in Aluminas Treasury policies are:



| |  |  | conservative levels of debt should be maintained over the longer term to ensure that the Companys activities and growth are not debt constrained;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | debt should be sourced at the most competitive price available, although this needs to be balanced against having a diversity of sources and a managed maturity profile;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | debt tenor and currency should reflect asset life, currency exposure and overall level of debt.. A core amount of long-term debt would generally be retained with the balance in
short-term and medium-term debt due to its lower cost and repayment flexibility;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | project finance should be utilised where warranted by risk management considerations (country or project specific);
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | where foreign currency assets are acquired, raising debt in that currency should be examined to achieve a balance sheet hedge and reduce foreign exchange translation exposures; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest costs should be minimised if Alumina does not have assessable income for tax purposes.
| | - |  | -----------------------------------------------------------------------------------------------

Cash and current investments was A$15.2 million at December 31, 2005 compared with A$117.9 million at December 31, 2004.

Available sources of liquidity were represented by unused bank facilities at December 31, 2005 of A$221.3 million, as compared to A$302.1
million at December 31, 2004. The decrease was due in part, to Alumina Limited borrowing in US dollars which increased debt in Australian dollar terms by $28.0 million due to the movement in the A$/US$ exchange rate and also by drawing down a
further US$40million (A$52.8 million) of debt during 2005. Alumina Limited will increase its debt facilities to ensure it has sufficient capacity for contribution to the Sao Luis and Jamalco refinery expansion projects. It is intended that these
facilities will be put into place progressively. Aluminas increased debt levels in the future will result in the Companys interest costs rising significantly from 2006.



- 37 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Capital expenditure was A$8.2 million for the year ended December 31, 2005, and A$41.1 million for the year ended December 31, 2004. The
expenditures were attributable to the acquisition of the Juruti bauxite deposit in Brazil during 2004.

Alumina Limited provided a
guarantee in 1998 for foreign exchange transactions and in 2000 for gold derivative transactions undertaken by its wholly owned subsidiary at that time, WMC Finance Limited (WMCF). WMCF was sold to WMC Resources Ltd as part of the
demerger and is no longer a subsidiary of Alumina Limited. On December 4, 2003, WMC Resources announced that it had closedout its currency hedge book for the period 2005 to 2008, eliminating that portion of Aluminas contingent
liability. On December 21, 2004, WMC Resources novated the gold hedging positions to a third party. The guarantee provided by Alumina Limited is no longer applicable.

Prior to the demerger, WMC Finance (USA) Limited (Finance USA) (a wholly-owned subsidiary of WMC Resources) had approximately US$800 million
of long dated bonds issued in four separate tranches (having maturities in 2003, 2006, 2013 and 2026), on issue (the US Bonds)

The obligations of Finance (USA) under the US Bonds were guaranteed by Alumina. In connection with the demerger, Finance USA tendered to repurchase the US Bonds remaining outstanding. The aggregate amount of outstanding bonds not
repurchased was comprised as follows of:



| |  |  | US Bond due December 1, 2006  US$750,000
| | - |  | -----------------------------------------



| |  |  | US Bonds due November 15 2013  US$3,658,000
| | - |  | --------------------------------------------



| |  |  | US Bonds due December 1, 2026  US$115,000
| | - |  | ------------------------------------------

These outstanding
US Bonds continue to be guaranteed by Alumina. The duration of the guarantee is unlimited, and continues as long as amounts are outstanding under the US Bonds.

Under the demerger deed, Alumina and WMC Resources indemnify each other in respect of certain liabilities. Alumina would be entitled to reimbursement from WMC Resources for amounts paid by Alumina under the guarantee
in respect of the US Bonds.

Pursuant to a Power Purchase Agreement dated November 27, 1998 between WMC Resources, WMC Limited (as it
then was) and Southern Cross Energy, Alumina has undertaken to provide Southern Cross Energy with a guarantee or letter of credit for WMCRs payment for power in the event that WMCRs gross assets fall below $250 million in any year.

During 2005, WMC Resources was acquired by BHP Billiton.

New Accounting Pronouncements

Refer to Note 1(w) of the audited financial statements for new
accounting pronouncements.

Australian Accounting Standards Board

The Australian Accounting Standards Board (AASB) has adopted International Financial Reporting Standards (IFRS) for application to reporting periods beginning on or after January 1, 2005. The AASB has
issued Australian equivalents to IFRS (A-IFRS), and the Urgent Issues Group has issued interpretations corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing
Interpretations Committee. The adoption of A-IFRS was reflected in the consolidated entitys financial statements for the half-year ending June 30, 2005 and the year ending December 31, 2005.

Entities complying with A-IFRS for the first time were required to restate their comparative financial statements to amounts reflecting the application
of A-IFRS to that comparative period. Most adjustments required on transition to A-IFRS were made retrospectively against opening retained earnings as at January 1, 2004. Refer to Note 1(a) of the Financial Report for further details.



- 38 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Financial Accounting Standards Board

The Financial
Accounting Standards Board has issued certain Statements of Financial Accounting Standards which are not effective with respect to AWAC and therefore Alumina for the fiscal years presented in the consolidated financial statements. The impact or
potential impact for both AWAC and Alumina is discussed below.

SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
No. 123) was issued in December 2004. This standard requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. AWAC will begin
expensing stock options as it is required, which is the first quarter of 2006, using the modified prospective approach. In addition, the company is required to reflect compensation expense for these individuals using the nonsubstantive vesting
period approach, in which the compensation expense is recognized ratably over the requisite service period following the date of the grant. The accelerated vesting of the 2004 and 2005 stock options will reduce Alumina Limiteds after tax stock
option compensation expense in 2006 and 2007 by $0.8 million.

SFAS No. 153, Exchanges of Nonmonetary Assets  an amendment of
APB Opinion No. 29 (SFAS No. 153), was issued in December 2004. This standard eliminates the exception for nonmonetary exchanges of similar productive assets to be measured based on the fair value of the assets exchanged
and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. This standard is effective January 1, 2006. This standard has no impact on Alumina Limiteds financial statements.

SFAS No. 154, Accounting for Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3
(SFAS No. 154), was issued in June 2005. SFAS No. 154 requires retrospective application to financial statements of prior periods for changes in accounting principle that are not adopted prospectively. This statement is
effective January 1, 2006. This standard has no impact on Alumina Limited.

In 2005, The FASB issued EITF 04-6, Accounting for
Stripping Costs Incurred during Production in the Mining Industry (EITF 04-6). EITF 04-06 requires that stripping costs incurred during the production phase of a mine are to be accounted for as variable production costs that should be
included in the costs of the inventory produced (that is, extracted) during the period that the stripping costs are incurred. EITF 04-6 is effective for the first reporting period in fiscal years beginning after December 15, 2005. Alumina
Limited is currently evaluating the impact of applying this standard



- 39 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



OPERATING AND FINANCIAL REVIEW AND PROSPECTS

C. Research and Development, Patents and Licenses

Not applicable.

D. Trend Information

Relevant industry and market trends are discussed for Alumina and AWAC as a whole in Item 5A Operating Results.

E. Off-
Balance Sheet Arrangements

Not applicable.

F. Tabular Disclosure of Contractual Obligations

An analysis of Aluminas contractual and commercial commitments is
set out in the table below.



|                                               |  |                                          |  |                 |  |           |  |           |  |                 
|---------------------------------------------- |  | ---------------------------------------- |  | --------------- |  | --------- |  | --------- |  | ----------------
|                                               |  | Amount of Commitment  December 31, 2005
|Contractual Obligations                        |  | Total                                    |  | Less than1 year |  | 1-3 years |  | 4-5 years |  | More than5 years
|                                               |  | (A$ million)                            
|Short term debt                                |  | 478.7                                    |  | 478.7           |  |          |  |          |  |                
|Total on-balance sheet contractual obligations |  | 478.7                                    |  | 478.7           |  |          |  |          |  |                
|                                               | 
|                                               |  | Amount of Commitment  December 31, 2005
|Other Commercial Commitments                   |  | Total                                    |  | Less than1 year |  | 1-3 years |  | 4-5 years |  | More than5 years
|                                               |  | (A$ million)                            
|Operating lease commitments                    |  | 0.3                                      |  | 0.1             |  | 0.2       |  |          |  |                

Operating lease commitments relate to the corporate office facilities in Australia.



- 40 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The business of Alumina is managed by a Board of Directors which, in accordance with Aluminas Constitution, may have not fewer than three nor more
than 12 members.

Directors of Alumina are classified as either executive or non-executive Directors, with the former being those Directors
engaged in full-time employment by Alumina.

As at December 31, 2005, the Directors of Alumina were:



|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |                                         |  |     |  |                      |  
|------------------------- |  | --------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | --- |  | -------------------- | -
|Name                      |  | Position                                |  | Summary                                                                                                                                                                                                                                                                                                                                                                                |  | Initially Elected orAppointed aDirector |  | Age |  | Expiry ofCurrentTerm |  
|Executive Directors       |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |                                         |  |     |  |                      |  
|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        | 
|John Marlay               |  | ChiefExecutiveOfficer                   |  | Joined WMC in August 2002, following role as Head of Strategy for RMC Group Plc in London. Mr Marlay was previously Executive General Manager Business Integration, Hanson Plc from 2000 to 2001,
and Executive General Manager, Europe for Pioneer International Ltd from 1997-2000. He has held senior management roles with James Hardie Industries Limited and Esso Australia Ltd. |  | December 2002                           |  | 57  |  |                      |  
|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        | 
|Kenneth A Dean(4)         |  | AlternateDirector/ChiefFinancialOfficer |  | Mr Dean joined Alumina in October 2005 following the resignation of Mr Robert Davies. Mr Dean has extensive financial and resource sector experience gained from a 30-year career with Shell, both
in Australia and overseas. He is also an independent non-executive director of Santos Ltd.                                                                                          |  | October 2005                            |  | 53  |  |                      |  
|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        | 
|Non-Executive Directors   |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        |  |                                         |  |     |  |                      |  
|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        | 
|Donald M. Morley(1)(2)(3) |  | Chairman                                |  | Former Director of WMC as the Director of Finance from 1983 until April 2001, Chief Financial Officer from April 2001-April 2002 and an Executive Officer of WMC from May 2002 to October 2002. Mr
Morley retired from his executive duties on October 31, 2002. Mr Morley is also a director of Iluka Resources Ltd and SPARK Infrastucture Ltd.                                      |  | December 2002                           |  | 66  |  | (5                   | )
|                          |  |                                         |  |                                                                                                                                                                                                                                                                                                                                                                                        | 
|Peter A.F. Hay(1)(2)(3)   |  | Director                                |  | Former Chief Executive Officer from July 2000 to July 2005 and member of the Board, and former Chief Executive Officer, of the national law firm Freehills; Director of Pacifica Group Limited and
Chairman, Investment Banking, Carnegie Wylie and Company.                                                                                                                           |  | December 2002                           |  | 55  |  | (5                   | )



- 41 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



|                            |  |          |  |                                                                                                                                                                                                                                                                                                                                                                              |  |                                         |  |     |  |                     
|--------------------------- |  | -------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | --- |  | --------------------
|Name                        |  | Position |  | Summary                                                                                                                                                                                                                                                                                                                                                                      |  | Initially Elected orAppointed aDirector |  | Age |  | Expiry ofCurrentTerm
|Ronald J. McNeilly(1)(2)(3) |  | Director |  | Deputy Chairman BlueScope Steel Limited; Chairman of Worley Parsons Limited; Chairman of Melbourne Business School Limited; Past Director of BHP Billiton Limited, QCT Resources Limited and
Tubemakers of Australia Limited. Past Executive Director Global Markets BHP Billiton Limited from 2001-2002; past Executive Director and President BHP Minerals from 1999-2001. |  | December 2002                           |  | 62  |  | (5)                 
|                            |  |          |  |                                                                                                                                                                                                                                                                                                                                                                              | 
|Mark R. Rayner(1)(2)(3)     |  | Director |  | Director of Boral Ltd since 1996; Director and CEO of Comalco Limited from 1978-1989, Deputy Chairman of Comalco Limited from 1989 to 1997, Executive Director of CRA Ltd from 1989 to 1995,
Chairman of National Australia Bank 1997 to 2001, Chairman of Mayne Nickless 1997 to 2002, Chairman of Pasminco Limited 1992 to 2003.                                           |  | December 2002                           |  | 68  |  | (5)                 

---

|(1) | Member of Audit Committee
|--- | -------------------------

|(2) | Member of Compensation Committee
|--- | --------------------------------

|(3) | Member of Nomination Committee
|--- | ------------------------------

|(4) | Mr Dean is an alternate director for Mr Rayner
|--- | ----------------------------------------------

|(5) | As explained in Section C, Directors are subject to retirement by rotation. Donald M. Morley
was re-elected as a director at the Companys annual general meeting on May 2, 2003, Peter A.F Hay was re-elected as a director at the Companys annual general meeting on April 21, 2004. Mr McNeilly and Mr Rayner were re-elected
as directors at the 2005 annual general meeting. Mr Morley retired by rotation and was re-elected at the 2006 annual general meeting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the Chief Executive Officer and Chief Financial Officer, there is one other executive officer appointed by and reporting to the Chief Executive Officer responsible for the day to day running of the business. As at
December 31, 2005, the executive officers were:



|                  |  |                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                               
|----------------- |  | -------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------
|Executive Officer |  | Position in2005                  |  | Summary of Experience                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Appointed as Executive officer
|Stephen Foster    |  | GeneralCounsel &CompanySecretary |  | Responsible for legal, company secretarial, shareholder services, insurance and human resources. Mr Foster joined WMC Limited in November 2002 following more than three years with Village
Roadshow Ltd as Business Affairs Manager (Projects). Mr Foster previously held legal positions with WMCs Legal and Treasury department from 1990 to 1999 and with Arthur Robinson & Hedderwicks (now Allens Arthur Robinson) from 1987 to
1990. |  | December 2002                 



- 42 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

B. Compensation

For the year ended December 31,
2005, the aggregate amount of compensation paid and accrued to the Alumina directors and executives of Alumina was A$2,731,319 (compared to A$2,009,293 in 2004 and A$3,311,507 in 2003). The total amounts paid by Alumina in 2005 for retirement,
superannuation or similar benefits amounted to A$0.1 million. There are no other contingent or deferred compensation arrangements accrued for executives or directors. The remuneration of individual directors and executives is presented in the tables
below.



|                                                              |  |                       |  |              |  |         
|------------------------------------------------------------- |  | --------------------- |  | ------------ |  | --------
|Non-executive directors remuneration January to December 2005 |  | Directors fee (1) A$ |  | Other (2) A$ |  | Total A$
|Current Non-executive directors                               |  |                       |  |              |  |         
|Donald M. Morley (from 11/12/02)                              |  | 212,500               |  | 19,125       |  | 231,625 
|Peter A. F. Hay (from 11/12/02)                               |  | 110,000               |  | 9,900        |  | 119,900 
|Ronald J. McNeilly (from 11/12/02)                            |  | 110,000               |  | 9,900        |  | 119,900 
|Mark R. Rayner (from 11/12/02)                                |  | 110,000               |  | 9,900        |  | 119,900 

---

|(1) | Includes board and committee fees.
|--- | ----------------------------------

|(2) | Includes Aluminas contribution to superannuation. All employees of Alumina Limited are members of an accumulation category plan which offers a minimum contribution (subject to certain cashing out options and legislation) of
9 per cent of basic salary to each members account.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                    |  |                         |  |                         |  |                     
|----------------------------------------------------------------------------------- |  | ----------------------- |  | ----------------------- |  | --------------------
|Executive director remuneration and executive remuneration January to December 2005 |  | Fixedremuneration(1) A$ |  | Othercompensation(2) A$ |  | Totalremuneration A$
|Current executive directors                                                         |  |                         |  |                         |  |                     
|John Marlay, Chief Executive Officer                                                |  | 739,500                 |  | 418,321                 |  | 1,157,821           
|Kenneth A Dean, Chief Financial Officer (commence 24 October 2005)                  |  | 104,538                 |  |                        |  | 104,538             
|Robert D.J. Davies, Chief Financial Officer (resigned 31 October 2005)              |  | 364,250                 |  | 42,514                  |  | 406,764             
|Current senior executives                                                           |  |                         |  |                         |  |                     
|Stephen Foster, General Counsel and Company Secretary                               |  | 305,083                 |  | 165,788                 |  | 470,871             

---

|(1) | Includes companys contribution to superannuation. All employees of Alumina Limited are members of an accumulated category plan which offers a minimum company contribution (subject to certain cashing out options and legislation)
of 9 per cent of basic salary to each members account.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other compensation includes incentive, parking, health management and executive indemnity insurance.
|--- | ----------------------------------------------------------------------------------------------------

Prior to the demerger, the establishment of the WMC Employee Share Scheme was approved by shareholders at the Annual General Meeting held on 12 December 1987. Under the Scheme a number of plans operated. Fully paid shares, partly paid
shares and share options were granted to employees since the establishment of the Scheme. Currently one Alumina Limited employee holds such options. These options remain exercisable until such time as their exercise periods expire. No issues have
been made under this Scheme since the demerger.

For the purposes of the US GAAP FAS 123 disclosures in the financial statements
included in this Annual Report, Alumina applies the Black-Scholes Model for valuation of WMC options issued to all employees. No options were granted in 2005, 2004 and 2003. In accordance with Accounting Principles Board Opinion No. 25, the
Company does not recognize a compensation cost for share options because the exercise price equals the market price at the date of measurement on the date of grant. For options that are attached to performance hurdles, a compensation charge will
only be required where the market price up to the measurement date exceeds the grant price.

There will be no further issues of shares or
options under the WMC Employee Share Scheme. In February 2003, a share plan for Alumina employees was introduced. The plan provides rewards for employees based on Aluminas performance against two peer indices. Actual rewards depend upon the
performance of Alumina exceeding the performance of a percentage of companies in an index on a total shareholder return basis. All rewards for employees through this plan are directed to purchasing Alumina shares, with executive officers required to
hold shares equivalent in value to 0.5 times their salary. These Alumina shares may only be released to executives once the multiple is exceeded and then only those shares over the multiple.



- 43 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

From December 2002, short term incentives are payable to management according to key performance indicators applicable to the individual and Alumina.

Prior to Aluminas demerger, all full time Australian based employees and expatriate employees of WMC Limited (including executive
directors and officers) and its subsidiaries were members of the WMC Superannuation Plan (formerly WMC Superannuation Fund).

Aluminas current employees are members of the Alumina Superannuation Plan. This plan is an accumulation plan, which offers a minimum company contribution (subject to certain cashing out options and legislation) of 9 per cent of
basic salary to each members account.

C. Board Practices

The Board, working with senior management, is responsible to shareholders for overall management of Alumina Limited, its business performance and for formulating and establishing its strategic goals. It approves
company goals and directions, strategic plans, operating budgets and performance targets. The Board ensures that appropriate policies, procedures and systems are in place to manage risk, optimise business performance, maintain high standards of
ethical behaviour and legal compliance and protect the interests of shareholders.

The Board comprises a non-executive chairman, three
other non-executive directors and one executive director. Relevant experience, diverse perspectives and complementary business skills are sought when appointing new directors. A balance between independent business experience and industry knowledge
is sought. To assist in the discharge of their duties, the Board collectively and individually have the right to seek independent professional advice.

At least 10 Board meetings are held each year. To increase knowledge of Aluminas business, board visits are made to operational sites.

The Directors (other than a Managing Director) are subject to retirement by rotation, one-third retiring each year (or the number nearest to one-third if
the number of Directors is not a multiple of three), and may not continue to hold office without re-election after the third Annual General Meeting following their last election by the shareholders. Eligible retiring directors may offer themselves
for re-election by the shareholders. The Companys Nominations Committee Charter provides that Non Executive Directors shall retire after 9 years of continuous service as a Non Executive Director (or immediately prior to the next succeeding
annual general meeting of the Company after completion of the 9 year period) unless otherwise requested to continue by the Board. Executive Directors retire at 65 years of age. After once being elected by the shareholders, a Director who is
appointed a Managing Director by the Board is not required to retire by rotation. The Directors may appoint a Director either to fill a casual vacancy or as an addition to their numbers. Such Directors hold office until the next Annual General
Meeting and may be elected by the shareholders at such meeting, but are not taken into account in determining the number of Directors who are to retire by rotation at that meeting.

Each Director has the power to appoint any person approved by a majority of his co-Directors to act as an Alternate Director in his place, whether for a
stated period or periods or until the happening of a specified event or from time to time, whenever by absence or illness or otherwise he shall be unable to attend to his duties as a Director.

The Directors may from time to time appoint one or more of their body to be a Managing Director or Managing Directors either for an unlimited period but
not for life, a fixed term not exceeding five years, or a period terminable upon the happening of such specific events as the Directors may stipulate. The Directors may confer upon any Managing Director such of the powers exercisable under
Aluminas Constitution by the Directors as they may elect, without derogating from the exercise of those powers by the Directors. John Marlay is currently the sole Managing Director and Chief Executive Officer of Alumina and was appointed to
such position for an unspecified period.



- 44 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Aluminas Constitution provides that the Directors may elect a Chairman of their meetings and determine the period for which he is to hold office.
Where there is an equality of votes on a question voted on at a meeting, the Chairman has a second or casting vote. Donald M Morley is currently the Non-Executive Chairman of Alumina.

Aluminas most senior employee, the Chief Executive Officer, is selected by the Board and is subject to semi-annual performance reviews by the
non-executive directors. The Chief Executive Officer recommends policy and strategic direction for board approval and is responsible for managing day-to-day operations.

Specific board committees assist the full Board. Charters set out the roles and terms of reference for the Audit, Compensation and Nomination Committees. The Audit Committee, consisting of four non-executive
directors, meets at least four times a year, assists the Board in fulfilling its responsibilities for the Companys accounts and external reporting by ensuring that appropriate processes are in place to support the Board in fulfilling its
responsibilities for:



| |  |  | reporting of financial information to users of Aluminas financial reports;
| | - |  | ---------------------------------------------------------------------------



| |  |  | Aluminas application of accounting policies;
| | - |  | ---------------------------------------------



| |  |  | Aluminas internal financial control systems;
| | - |  | ---------------------------------------------



| |  |  | the independent auditors qualifications and independence;
| | - |  | ---------------------------------------------------------



| |  |  | the performance of Aluminas independent auditors and internal audit function, and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | agreeing the scope and monitor the progress of Aluminas internal audit plan.
| | - |  | -----------------------------------------------------------------------------

Annually, the Audit Committee reviews audit programmes conducted by independent external auditors, and the internal audit function to ensure that its resources are adequate, used effectively and co-ordinated with the
external auditors. It meets regularly with management, and internal and external auditors, to ensure that adequate controls and practices are in place. The Audit Committee is responsible for the appointment and compensation of external auditors. A
process has been established whereby complaints or concerns regarding financial impropriety of employees and others can be confidentially directed to the Chairman of the Audit Committee.

The Compensation Committee of four non-executive directors meets at least two times a year. Its role is to establish and review Aluminas
remuneration and compensation plans, policies and practices, including remuneration of the non-executive directors, the chief executive officer and senior executives, and succession planning. On behalf of the Board, the Committee considers the
remuneration strategy with regard to community and industry standards and, where possible, verifies its appropriateness using external information and advice to ensure that:



| |  |  | employee interests are aligned to corporate objectives;
| | - |  | -------------------------------------------------------



| |  |  | the company can attract, develop and retain motivated and talented employees; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the integrity of the companys reward programme is maintained.
| | - |  | --------------------------------------------------------------

The Compensation Committee also determines actual payments to all directors and reviews director remuneration annually based on independent external advice with regard to market practices, relativities and the duties
and accountabilities of directors.

The Nomination Committee consists of four non-executive directors and meets as necessary. Its role is
to assist the Board in fulfilling its responsibilities to shareholders relating to:



| |  |  | identifying the necessary and desirable competencies of board members;
| | - |  | ----------------------------------------------------------------------



| |  |  | assessing the extent to which the competencies are represented on the board;
| | - |  | ----------------------------------------------------------------------------



| |  |  | the selection and appointment process for directors. and
| | - |  | --------------------------------------------------------



| |  |  | conducting performance evaluations of directors who are retiring and seeking re-election.
| | - |  | -----------------------------------------------------------------------------------------

Board committee meetings are occasionally convened to address predetermined issues, when it is not practical to organise a full Board meeting. A Board
committee comprises two or more directors.



- 45 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The individual and collective performance of directors is evaluated annually. In 2005, the directors conducted a self-assessment process involving the
completion and evaluation of detailed questionnaires on business and management matters. The results were analysed by the Board and used to establish new performance objectives.

It is company policy to not directly or indirectly extend or maintain credit, arrange for the extension of credit in the form of a personal loan to
Directors and Executive Officers. This does not prohibit the use of a corporate credit card for business, with personal expenses being reimbursed.

The directors, executive management and employees have adopted and abide by a Code of Conduct (Ethics) to deter wrongdoing and promote honest and ethical conduct. During 2004, the Company approved and adopted a Whistleblower Policy
providing rights to staff (including contractors and consultants) to report any perceived malpractice, impropriety, serious unethical behaviour, legal or regulatory non-compliance or questionable accounting or audit matter. The Policy provides
disclosing employees protection from any reprisal or detrimental action resulting from such disclosure.

The New York Stock Exchange
(NYSE) Listing Rules, Section 303A, have a broad regime of new corporate governance requirements for NYSE-listed companies. Under the NYSE Listing Rules foreign private issuers, such as Alumina Limited, are permitted to follow home
country practice in lieu of the requirements of Section 303A, except for the Listing Rule relating to compliance with Rule 10A-3 of the Securities Exchange Act of 1934 and certain notification provisions contained in Section 303A of the
Listing Rules. Section 303A.09 of the Listing Rules, however, requires us to disclose any significant ways in which our corporate governance practices differ from those followed by U.S. listed companies under NYSE Listing Rules. We have
compared our corporate governance practices to the requirements of the Section 303A of the NYSE Listing Rules that would otherwise currently apply to foreign private issuers and note the following significant differences:



| |  |  | Our Nomination Committee Charter does not include the mandate to develop and recommend to the Board a set of corporate governance principles applicable to the corporation (which is
largely a Board function).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Nomination Committee charter does not include the mandate to oversee the evaluation of the Board and management. The Board undertakes a self evaluation, non executive directors
evaluate the Chief Executive Officer, and the Chief Executive Officer evaluates other management.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Shareholders are not provided the opportunity to vote on certain new equity compensation plans or material revisions to existing equity compensation plans, such as the
Companys Employee Share Plan, which involves the purchase of shares on market by the Trustee of the Plan.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have not published a set of corporate governance guidelines as set forth in Section 303A.09. However, we do provide information on corporate governance policies and
practices as required by Australian Stock Exchange rules, which are available in our annual report and on the website.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Retirement and
termination benefits

Chief Executive Officer

Under Mr Marlays December 2005 employment contract, which does not have a fixed term, either party may terminate the contract upon giving 12 months notice. The Company may make a payment in lieu of some or all
of the 12 month notice period by payment of the fixed annual reward plus an amount equivalent to an STI payment at target performance, defined as base remuneration. The base remuneration amount will be reduced pro rata to the extent the
notice period is required to be served.

If Mr Marlays employment is terminated on the basis of redundancy of the position or by Mr
Marlay giving written notice to Alumina in the event of a Significant Change (which is defined to be if Alumina ceases to be listed on the Australian Stock Exchange, or if there is a significant change to his status and/or responsibilities which is
detrimental to Mr Marlay, or if Alumina decides the position is no longer required and suitable alternative employment is not offered or Mr Marlay does not accept other employment within Alumina or another employer) then Mr Marlay is entitled to:



| |  |  | statutory annual leave and long service leave entitlements;
| | - |  | -----------------------------------------------------------



- 46 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



| |  |  | the greater of six months base remuneration or the aggregate of; a notice payment of 12 weeks, a severance payment of 2.5 weeks per completed years of service plus an additional
severance payment of 13 weeks.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Mr Marlay is not entitled to the payment outlined above where the reason for a Significant Change is poor
performance or inability to fulfill agreed responsibilities. Mr Marlay is not entitled to retirement benefits other than superannuation entitlements.

In addition to any entitlements conferred on Mr Marlay under his service contract, Mr Marlay is entitled to receive on termination of employment, his statutory entitlements of accrued annual and long service leave,
together with any superannuation benefits. Mr Marlay is not entitled to receive any other additional termination benefits, other than those previously mentioned and any vesting of shares under the Alumina Employee Share Plan.

Senior Executives

In addition to Mr
Marlay, Alumina Limited has entered into a service contract with each Senior Executive (Mr Dean and Mr Foster). The contracts provide for the following retirement and termination benefits.

If Mr Dean or Mr Fosters employment is terminated on the basis of redundancy of their position or if they give written notice to Alumina Limited in
the event of a Significant Change, then Mr Dean and Mr Foster are entitled to:



| |  |  | statutory annual leave and long service leave entitlements (with long service leave paid pro rata if there is 3 years or more continuous service);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the greater of six months base remuneration or the aggregate of; a notice payment of 12 weeks, a severance payment of 2.5 weeks per completed years of service plus an additional
severance payment of 13 weeks.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Mr Dean and Mr Foster are not entitled to payment outlined above where the reason for a
significant change is poor performance or inability to fulfill agreed responsibilities. Mr Dean and Mr Foster are not entitled to retirement benefits other than superannuation entitlements.

Non-Executive Director Retirement Benefits

Non-executive Directors receive, in addition to their fees, a superannuation guarantee contribution which for 2005 was 9 per cent of their fees, being $19,125 for the Chairman and $9,900 for other Non-executive Directors, but do
not receive any other retirement benefits. From January 1, 2006, the Superannuation Guarantee contribution for the Chairman is capped at $12,139.

D. Employees

At December 31, 2005, Alumina employed 10 people directly. All Alumina employees work in the corporate
segment in Australia. For details of the number of AWAC employees for the periods presented refer to Item 4.B.(iv) Employees.

E. Share
Ownership

Employees of Alumina, who were formerly employees of WMC, were eligible to participate in and receive options under the WMC
Employee Option Plan. Following the demerger each WMC employee option became an



- 47 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Alumina Limited option and entitled the holder to subscribe for one Alumina Limited share. The exercise price of options held over at the date of the demerger was
reduced from the previous WMC exercise price at a factor of 0.537. There is no ongoing option plan available to Alumina directors or employees and accordingly, no allotments were made to Alumina employees after the demerger.

The table set forth below shows the options on issue at December 31, 2005 as well as the movements in options during the 2005 fiscal year.

OPTIONS TO ACQUIRE FULLY PAID ALUMINA LIMITED ORDINARY SHARES



|                                         |  |               |  |               |  |                |      |             |                  
|---------------------------------------- |  | ------------- |  | ------------- |  | -------------- | ---- | ----------- | -----------------
|                                         |  | Number Issued |  | Number Quoted |  | Exercise Price |      | Expiry Date
|Balance at December 31, 2005             |  |               |  |               |  |                |      |             |                  
|2001 Option Plan                         |  | 1,971,100     |  | Nil           |  | $              | 5.02 |             | November 30, 2006
|                                         |  |               |  |               |  |                |      |             |                  
|                                         |  | 1,971,100     |  |               |  |                |      |             |                  
|                                         |  |               |  |               |  |                |      |             |                  
|Issued during the current period         |  | Nil           |  |               |  |                |      |             |                  
|                                         |  |               |  |               |  |                |      |             |                  
|Exercised during the current period      |  |               |  |               |  |                |      |             |                  
|                                         |  | 1,209,300     |  | Nil           |  | $              | 4.04 |             | December 18, 2005
|                                         |  | 1,325,300     |  | Nil           |  | $              | 5.02 |             | November 30, 2006
|                                         |  |               |  |               |  |                |      |             |                  
|                                         |  | 2,534,600     |  |               |  |                |      |             |                  
|                                         |  |               |  |               |  |                |      |             |                  
|Expired/lapsed during the current period |  |               |  |               |  |                |      |             |                  
|                                         |  |              |  | Nil           |  | $              | 4.04 |             | December 18, 2005
|                                         |  |              |  | Nil           |  | $              | 5.02 |             | November 30, 2006
|                                         |  |               |  |               |  |                |      |             |                  
|                                         |  |              |  |               |  |                |      |             |                  
|                                         |  |               |  |               |  |                |      |             |                  



- 48 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Options may be exercised and converted to fully paid shares at the exercise price after one year from the date of allotment or on termination of
employment due to retrenchment or age retirement. If the request to exercise options has not been made at the completion of five years, or within 30 days from termination of employment, the options will lapse.

As at December 31, 2005, the aggregate number of Plan Shares, Plan Options and ESPP Shares held by Directors and those officers referred to in
Item 6A was 623,521. All directors and executives own shares or hold options. No director or executive, directly or beneficially holds more than one percent of any class of share.

WMC Employee Share Scheme

The establishment of the WMC Employee Share Scheme (ESS) was
approved by shareholders at the Annual General Meeting held on December 12, 1987. Under the ESS a number of share plans have operated. Fully paid shares, partly paid shares and share options have been granted to employees since establishment of
the ESS. All permanent employees (including executive directors) of Alumina Limited and its subsidiaries who were employed by the company or a subsidiary were eligible to participate in the ESS and were offered options for fully paid shares prior to
demerger. Existing options allotted to Alumina employees remain exercisable until such time as their exercise periods expire. There is no ongoing option plan available to Alumina Limited directors or employees following the demerger. This scheme
expires at the end of 2006.

Impact of demerger on plans

In conjunction with the demerger, WMC Limited and WMC Resources Ltd entered into an employee benefits agreement. This agreement covered the treatment of WMC Limited common stock options issued to WMC Limited and WMC
Resources employees. According to the agreement, each WMC Limited option granted to WMC Limited and WMC Resources employees prior to December 4, 2002, that was outstanding under the ESS as of the demerger date, was adjusted. This adjustment
resulted in each individual who was a holder of a WMC Limited option receiving, immediately after the demerger date, an adjusted WMC Limited option and a WMC Resources option. As part of the demerger from WMC Limited, WMC Limited option holders were
granted one option for Alumina Limited and one for WMC Resources Ltd. The aggregate exercise prices of the Alumina Limited option and the WMC Resources Ltd option is equal to the exercise price of the WMC Limited option prior to demerger. The
Alumina Limited option and WMC Resources option have the same lapse date as the WMC Limited option would have had if the demerger had not proceeded  being the earlier of five years after the option was issued and 30 days after the WMC Limited
option holder ceases to be employed by WMC Limited Group, WMC Resources Group or Alumina Group. The exercise price of a WMC Resources Ltd option was determined by reference to the pre-demerger exercise price of the WMC Limited option (which became
an Alumina option) in respect of which the WMC Resources Ltd option was granted and the volume weighted average price of WMC Resources shares and Alumina Limited shares sold on the ASX over the first five days of trading on the ASX commencing on the
listing date. The Stock Appreciation Plan was treated in the same manner as the Share Scheme, as described above.

Partly Paid Share Plan

The major provisions of the partly paid share plans provide that the employee may request that the shares be made fully paid after one
year from the date of allotment. Partly paid shares are exercisable at the lower of the exercise price and the market price at the date of conversion. All partly paid shares were converted to fully paid shares during 2002, prior to the demerger.

The partly paid shares were granted to a select few employees which makes the plan a compensatory plan under US GAAP. This results in a
stock compensation expense to the company when the market price is greater than the exercise price on date of grant. As a result of non-interest bearing notes granted to the employees to purchase the partly paid shares, the shares were considered
variable grants. Variable grants require the shares to be marked to market and compensation expense to be recognized for the difference between the fair value and the exercise price at each balance sheet date.



- 49 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Stock Appreciation Plan

In various years since
approval of the WMC Employee Share Scheme (ESS) in 1987, until the demerger of the company, the company established Stock Appreciation Plans (SAPs) for the benefit of employees mainly in countries outside Australia. The
purpose of the SAPs was to provide such employees, who due to securities law constraints were not eligible to participate under the Option Plans, with benefits similar to those conferred by the Option Plans.

Under the terms of the WMC Stock Appreciation Plan (SAP), employees were invited to apply for the grant by WMC Limited. The employees were not required
to pay any amount for the grant, but each WMC Limited SAP has a notional allotment exercise price, equal to the weighted average sale price of WMC Limiteds (or, post - demerger Alumina Limited) shares on the ASX on the trading day that the
invitation to apply for the WMC Limited SAP was made to the employee. Subject to certain exceptions, the WMC Limited SAP was not able to be redeemed until after a period of 12 months from the date of allotment and lapse on the fifth anniversary of
the date of allotment. Upon redemption of a WMC Limited SAP before its expiry by the holder, the holder is entitled to a payment equal to the difference between the closing share price of WMC Limited (or, post-demerger Alumina Limited) on the
ASX on the trading day immediately before redemption, and the notional allotment price (assuming the former amount is higher). Compensation cost is measured as the amount by which the quoted market value of the shares covered by the grant exceeds
the allotment price.

The table set forth below shows the SAP Rights on issue at December 31, 2005 and the allotment price for each
right.



|                |  |                   |  |                                     |  |                                                                              
|--------------- |  | ----------------- |  | ----------------------------------- |  | -----------------------------------------------------------------------------
|WMC Limited SAP |  | Expiry Date       |  | AluminaSAP RightAllotmentPrice (A$) |  | Balance ofAlumina SAPRights IssuedUnder
SAPRight Allotmentat December 31,2005
|2001 SAP        |  | November 30, 2006 |  | 5.02                                |  | 57,100                                                                       

Alumina Employee Share Plan

This is a plan under which employees may be invited to participate in the grant of a conditional entitlement to fully paid ordinary shares (a Performance Right). The Boards intention is to make offers to every
employee, but this is subject to annual determination by the Board in respect of each individual for each grant. The CEO of the Company may recommend variation in participation.

A person is only eligible to participate in the Plan and to be granted performance rights under the Plan if they are an employee, and have satisfied the
criteria that the Board decides for participation in the Plan.

Generally, each offer has a three year performance period, with performance
tested at the end of this period to determine the number of performance rights to vest to the employee, if any. 50% of the performance rights not vested at the three year performance test can be re-tested six months after the end of the three year
performance period. The performance testing is carried out by an independent party and is based on the Relative Total Shareholder Returns (TSR) of Alumina Limited, compared to two specific comparator groups.

An invitation is not transferable. An employee may only apply for performance rights in his or her name and not in the name of, or on behalf of, another
person or entity. On vesting, each performance right is an unconditional entitlement to one fully paid ordinary share.

On termination of
employment of any individual, their participation in the Plan is finalized and any performance rights not vested lapse unless the Directors decide otherwise.



- 50 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Set out below are summaries of shares granted under this plan:

2005



|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|---------- |  | ----------- |  | ----------------------------------- |  | ------------------------------ |  | ----------------------------- | - |  | ------------------------------ | - |  | ---------------------------------
|Grant date |  | Expiry date |  | Balance at start of the year Number |  | Granted during the year Number |  | Vested during the year Number |   |  | Expired during the year Number |   |  | Balance at end of the year Number
|26/3/2003  |  | 3/12/2004   |  | 46,500                              |  |                               |  | (11,626                       | ) |  | (34,874                        | ) |  |                                 
|26/3/2003  |  | 3/12/2005   |  | 97,200                              |  |                               |  |                              |   |  | (62,900                        | ) |  | 34,300                           
|19/1/2004  |  | 21/12/2006  |  | 141,050                             |  |                               |  |                              |   |  | (40,300                        | ) |  | 100,750                          
|25/1/2005  |  | 16/12/2007  |  |                                    |  | 139,850                        |  |                              |   |  | (37,000                        | ) |  | 102,850                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|Total      |  |             |  | 284,750                             |  | 139,850                        |  | (11,626                       | ) |  | (175,074                       | ) |  | 237,900                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|           |  |             |  |                                     |  |                               
|2004       |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|           |  |             |  |                                     |  |                               
|Grant date |  | Expiry date |  | Balance at start of the year Number |  | Granted during the year Number |  | Vested during the year Number |   |  | Expired during the year Number |   |  | Balance at end of the year Number
|26/3/2003  |  | 3/12/2004   |  | 95,900                              |  |                               |  |                              |   |  | (49,400                        | ) |  | 46,500                           
|26/3/2003  |  | 3/12/2005   |  | 100,200                             |  |                               |  |                              |   |  | (3,000                         | ) |  | 97,200                           
|19/1/2004  |  | 21/12/2006  |  |                                    |  | 143,550                        |  |                              |   |  | (2,500                         | ) |  | 141,050                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|Total      |  |             |  | 196,100                             |  | 143,550                        |  |                              |   |  | (54,900                        | ) |  | 284,750                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  



- 51 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The issued capital of Alumina is currently constituted by one class of registrable voting securities being ordinary shares.

As at April 28, 2006, Alumina had on issue 1,166,029,748 fully paid ordinary shares, and 1,587,000 Share Options. The Share Options were issued
pursuant to the WMC Employee Option Plan and carry no voting rights. See Item 6 Directors, Senior Management and Employees.

Alumina is not directly or indirectly owned or controlled by another corporation or by any foreign government.

The following
table sets forth, as at April 28, 2006, information in respect of:



|(i) | any person who is known to Alumina to be the registered owner of more than 5% of any class of its voting securities; and
|--- | ------------------------------------------------------------------------------------------------------------------------



|(ii) | the total amount of any class of its voting securities owned by the Directors and Executive General Managers of Alumina as a group.
|---- | -----------------------------------------------------------------------------------------------------------------------------------



|                              |  |                                                        |  |              |  |           
|----------------------------- |  | ------------------------------------------------------ |  | ------------ |  | ----------
|Title of class                |  | Identity of person or group                            |  | Amount owned |  | % of class
|Fully paid Ordinary Shares    |  | National Nominees Ltd                                  |  | 183,605,435  |  | 15.75     
|                              |  | Westpac Custodian Nominees Ltd                         |  | 171,288,046  |  | 14.69     
|                              |  | J P Morgan Nominees Australia Ltd                      |  | 162,300,233  |  | 13.92     
|                              |  | ANZ Nominees Limited                                   |  | 119,875,553  |  | 10.28     
|                              |  |                                                        |  |              |  |           
|Fully paid Ordinary Shares(1) |  | Directors and Executive officers of Alumina as a group |  | 634,735      |  | 0.05      
|                              |  |                                                        |  |              |  |           

---

|(1) | Includes Aluminas ADSs
|--- | ------------------------



- 52 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The nominee companies listed in the previous table hold these fully paid Ordinary Shares on behalf of numerous beneficial owners. Only two beneficial
owners are known to have owned more than 5% of the issued and outstanding fully-paid ordinary shares, the Commonwealth Bank of Australia and NWQ Investment Management Company LLC. Their history of significant changes over the last three years is
outlined below:



|                                      |  |            |  |                  |  |                |  
|------------------------------------- |  | ---------- |  | ---------------- |  | -------------- | -
|Beneficial Owner                      |  | Date       |  | Number of Shares |  | % Shareholding |  
|Commonwealth Bank of Australia        |  | 05/11/2004 |  | 83,562,783       |  | 7.21           | %
|                                      |  | 09/05/2003 |  | 91,652,478       |  | 8.12           | %
|                                      |  | 07/03/2003 |  | 79,861,511       |  | 7.08           | %
|                                      |  | 03/20/2003 |  | 68,434,191       |  | 6.07           | %
|                                      |  | 01/23/2003 |  | 56,346,711       |  | 5.07           | %
|                                      |  |            | 
|NWQ Investment Management Company LLC |  | 05/25/2006 |  | 77,973,304       |  | 6.69           | %
|                                      |  | 03/01/2006 |  | 58,495,938       |  | 5.02           | %

All fully paid shareholders have the same voting rights as any other fully paid shareholder.

There are no arrangements, known to the Company, the operation of which may at a subsequent date result in a change in control of Alumina.

As at December 31, 2005, 356,551 Alumina fully paid Ordinary Shares were registered in the name of 272 residents of the United States
and represented approximately 0.03% of the total number of Alumina fully paid Ordinary Shares issued and outstanding. As at December 31, 2005, 14,635,017 Alumina ADRs were outstanding (representing 58,540,068 Alumina fully paid Ordinary Shares)
and were registered in the name of 315 residents of the United States and represented approximately 5.02% of the total number of fully paid Ordinary Shares issued and outstanding.

B. Related Party Transactions

Loans to directors

No loans were provided in 2004 or 2005, and no balances remain outstanding at 2004 or 2005.

Shareholding transactions of directors

Aluminas directors are also shareholders of the company
and as such, they may purchase or sell Aluminas shares.

Where directors have purchased or sold shares they have done so on normal
commercial terms, on conditions no more favorable than those available to other shareholders.

Directors who were employees of the WMC
Limited group prior to the demerger were eligible to participate in the WMC Employee Share Scheme, and were issued with options, priced at market value. These transactions were conducted on a commercial basis on terms no more beneficial than those
available to other eligible employees.



- 53 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



|                                                                                                                                                         |  |                                                        |  |         |  |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------ |  | ------- |  | -------
|                                                                                                                                                         |  | 2005                                                   |  | 2004    |  | 2003   
|*                                                                                                                                                        |  | Number of Alumina Limited(formerly WMC Limited) shares
|The aggregate number of shares acquired by directors of the parent entity or their director related entities through purchases
was:                      |  |                                                       |  |        |  | 71,000 
|                                                                                                                                                         |  |                                                        | 
|The aggregate number of shares allotted to directors of the parent entity or their director-related entities as a result of the exercise of
options was: |  |                                                       |  | 100,000 |  | 140,000
|                                                                                                                                                         |  |                                                        | 
|The aggregate number of vested shares granted to executives through participation in the Alumina Employee Share Plan was: **                             |  | 11,013                                                 |  |        |  | 103,324
|                                                                                                                                                         |  |                                                        | 
|The aggregate number of shares and options disposed of by directors of the parent entity or their director related entities
was:                         |  |                                                        |  |         |  |        
|- fully paid shares                                                                                                                                      |  |                                                       |  |        |  | 125,000
|- options (lapsed)                                                                                                                                       |  |                                                       |  |        |  |       
|- options ( exercised and shares sold)                                                                                                                   |  | 50,000                                                 |  | 270,000 |  | 52,000 
|                                                                                                                                                         |  |                                                        | 
|Details of shares and share options held by directors of the parent entity or their director- related entities at period end are as
follows:             |  |                                                        |  |         |  |        
|- fully paid shares                                                                                                                                      |  | 594,846                                                |  | 654,259 |  | 527,954
|- options for ordinary shares                                                                                                                            |  |                                                       |  | 50,000  |  | 320,000

---

|* | Individual directors beneficially own less than 1% of total ordinary shares outstanding, the only class of shares issued by Alumina Limited.
|- | --------------------------------------------------------------------------------------------------------------------------------------------

|** | During 2005, no shares were acquired by the Employee Share Plan Trust however 11,626 vested from a prior year grant.
|-- | --------------------------------------------------------------------------------------------------------------------

All other transactions relating to shares and options of WMC Limited prior to the demerger, and Alumina Limited post demerger including the payment and
receipt of dividends, were on the same basis as similar transactions with other shareholders.

Other transactions with key management personnel

A number of the directors of Alumina Limited are also directors of other public companies which may have transactions with the Alumina
group. The relevant directors do not believe that they have the capacity to control or significantly influence the financial or operating policies of either those companies or the Alumina group in their dealings with one another. Those companies are
therefore not considered to be director-related entities for the disclosure requirements of Accounting Standard AASB 1046: Director and Executive Disclosures by Disclosing Entities.

(i) Legal/financial service fees

A director
Mr. P A F Hay was the Chief Executive Officer of Freehills until July 2005. Freehills had provided legal services to Alumina Limited and a number of Alumina Limited controlled entities for several years on normal commercial terms and conditions. No
services were provided during 2005 (2004: $3,279).

C. Interests of Experts and Counsel

Not applicable.



- 54 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL INFORMATION

ITEM 8. FINANCIAL INFORMATION

A. Financial Statements

Refer to Aluminas Consolidated Financial Statements which are included as Item 18.

Legal Proceedings

At the date of this Annual Report
there were no material pending legal proceedings, other than:

(i) those mentioned below; or

(ii) ordinary routine litigation or other legal proceedings incidental to the business.

Native Title in Australia

Native title describes the rights and interests of Aboriginal
and Torres Strait Islander people in land and waters according to their traditional laws and customs as recognized by the common law of Australia.

Native title law has evolved through judicial decisions and the enactment of legislation. The first significant High Court decision on the subject of native title was Mabo v Queensland (No 2) (1992) 175 CLR 1 (the Mabo
decision) in 1992, in which the Court recognized the concept of native title and said that Aboriginal and Torres Strait Islander people who have maintained their connection with their land according to their laws and customs may hold native
title. Proving connection usually involves showing that traditional laws and customs have been passed down through generations of Aboriginal or Torres Strait Islander people to the present day. The native title of a particular group will depend on
the traditional laws and customs of those people. Recent decisions have indicated that native title may change over time.

The Mabo
decision also recognized that native title could be extinguished prior to the enactment of the Racial Discrimination Act 1975 (October 31, 1975) by government legislation or inconsistent executive action. In response to the Mabo decision, the
Commonwealth Government enacted the Native Title Act, 1993 (Cth) (NTA) which validated acts done and granted by it prior to January 1, 1994 (past acts) and allowed the States and Territories to enact their own validation
legislation. Subsequent amendments also validated grants (intermediate period acts) made by the Commonwealth (and allowed the States and Territories to enact similar legislation) relating to certain grants up to December 23, 1996.
The NTA also created the National Native Title Tribunal, responsible for mediation of native title claims and the administration of certain procedures under the NTA. Finally, the NTA specifies the conditions to be satisfied and the procedures to be
followed in order for acts done after January 1, 1994 (future acts) to be valid with respect to native title.

Native
title may exist in areas where it has not been extinguished (removed). Although a determination of native title does not invalidate anothers validly granted, the High Court decision in the Wik Peoples v Queensland (1996) 187 CLR 1
(Wik) case, made it clear that native title may co-exist with other forms of tenure where that tenure is not exclusive, provided the native title rights are not incompatible with the exercise of the other rights.

In August 2002, the High Court handed down its decision in the State of Western Australia v Ward (2002) 213 CLR 1 (Ward). The Court
found, among other things, that native title can be categorized as a bundle of rights, that there could be partial extinguishment of native title rights and that Western Australian and Northern Territory mining and petroleum legislation
extinguishes all native title rights that may have existed over minerals and petroleum in Western Australia and Northern Territory. The High Court also held that a mining lease under the relevant Western Australian legislation extinguished any
native title right to control access to land, or to be asked permission to use, or have access to, land but does not necessarily extinguish all native title rights. This decision, which provides some clarity about the impact of native title on
pastoral leases and mining leases in Western Australia and the Northern Territory is significant to Alcoa of Australia Ltd because its operations are in Western Australia. However the decision also leaves many issues to be decided on a case by case
basis.

There are current native title claims awaiting determination in the Federal Court of Australia over areas that include Alcoa of
Australia Ltds Special Mining Lease MLISA (Western Australia) (the Alcoa Lease) and a portion of the conveyor associated with Alcoas 45% interest in the Portland Smelter (Victoria).



- 55 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL INFORMATION

(a) Western Australia

Alcoa of Australia Ltds operations fall within the Gnaala Karla Booja native
title claim (Federal Court file number WG6274/98), which is yet to be determined.

However, as a result of the Ward decision, the potential
exposure of Alcoa of Australia Ltd to this claim is significantly reduced by the High Courts finding that any native title right in minerals (if it could be established on the evidence) has been extinguished.

(b) Victoria

Alcoa of Australia Ltds interest in
Portland Smelter falls within the Gournditch-Mara native title claim  Federal Court file number VID6004/98 which is yet to be determined.

However, the Portland Smelter is situated on a validly granted freehold title which has been excluded by the claimants from this claim. Therefore the claim only affects a small portion of the land on which the Portland Conveyor is situated
pursuant to a Conveyor Licence Agreement.

While native title may still exist in the above Western Australian and Victorian claim areas,
the Alcoa Lease and the Conveyor Licence Agreement are valid and Alcoa of Australia Ltds rights will prevail to the extent of any inconsistency. Accordingly, Alcoa of Australia Ltd is entitled to continue its operations without interference
from native title claimants.

Other Events

On May 25, 2005, Alcoa Inc. (Alcoa) received from the Antitrust Division of the U.S. Department of Justice a grand jury subpoena issued by the U.S. District Court for the Northern District of Illinois. The subpoena relates to an
investigation concerning the aluminum fluoride industry and calls for Alcoas production of certain documents. Also, on May 25, 2005, Alcoas Canadian subsidiary, Alcoa Ltée, received an order from the Competition Bureau Canada
issued by the Federal Court of Canada in Vancouver, British Columbia. The order relates to an inquiry pursuant to the Competition act into the sale and supply of aluminum fluoride in Canada and elsewhere and calls for the production of certain
records and information in the possession of or under the control of Alcoa Ltée, Alcoa and/or Alcoa World Alumina LLC. In addition, by letter dated May 26, 2005, the Australian Competition and Consumer Commission (ACCC) requested
Alcoas Australian subsidiary, Alcoa of Australia Limited, to provide certain information and documents to assist in the ACCCs investigation of possible anti-competitive conduct by suppliers of aluminum fluoride. Alcoa and its
subsidiaries have cooperated fully in these investigations.

AWAC Litigation

In the ordinary course of its business, AWAC is involved in a number of lawsuits and claims, both actual and potential, including some that it has
asserted against others. While the amounts claimed may be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. It is possible that results of operations or liquidity in a particular
period could be materially affected by certain contingencies.

AWACs Point Comfort alumina refinery is part of an area which has been
declared a US Environmental Protection Agency superfund site.

There has also been publicity in respect of complaints by some
nearby residents of the Wagerup refinery that there is a link between their various health problems and odours and emissions from the refinery and, in particular, from the liquor burner. Legal proceedings have been filed by some nearby residents of
the Wagerup refinery in the District court in Western Australia claiming unspecified damages and alleging that emissions from the Wagerup refinery have harmed their health.

In September 1998, Hurricane Georges struck the U.S. Virgin Islands, including the St. Croix Alumina LLC facility on the island of St. Croix. The
wind and rain associated with the hurricane caused material at the location to be blown into neighbouring residential areas. Various clean-up and remediation efforts were undertaken by or on behalf of St. Croix Alumina. A Notice of
Violation was issued by the Division of Environmental Protection of the Department of Planning and Natural Resources of the Virgin Islands Government, and has been contested by the



- 56 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL INFORMATION

company. A civil suit was commenced in the Territorial Court of the Virgin Islands by certain residents of St. Croix in February 1999 seeking compensatory and punitive damages and injunctive relief for alleged
personal injuries and property damages associated with bauxite or red dust from the St. Croix Alumina facility. The suit, which has been removed to the District Court of the Virgin Islands, names St. Croix Alumina LLC, Alcoa Inc.
and Glencore Ltd. as defendants and in August 2000 was accorded class action treatment. The class is defined to include persons in various defined neighbourhoods who suffered damages and/or injuries as a result of exposure during and
after Hurricane Georges to red dust and red mud blown during Hurricane Georges. All of the defendants have denied liability, and discovery and other pretrial proceedings have been underway since 1999. In October 2003, the defendants
received plaintiffs expert reports. These reports claim that the material blown during Hurricane Georges consisted of bauxite and red mud, and contained crystalline silica, chromium and other substances. The reports go on to claim,
among other things, that the population of the six subject neighbourhoods as of the 2000 census (a total of 3,730 people) has been exposed to toxic substances through the fault of the defendants, and hence will be able to show entitlement to
lifetime medical monitoring as well as other compensatory and punitive relief. These opinions have been contested by the defendants expert reports, that state, among other things, that plaintiffs were not exposed to the substances alleged
and that in any event the level of alleged exposure does not justify lifetime medical monitoring. Alcoas and St. Croix Alumina LLCs motion to decertify the plaintiff class is pending. Alcoa and St. Croix Alumina LLC have turned
over this matter to their insurance carriers who are providing a defence. Glencore Ltd. is jointly defending the case with Alcoa and St. Croix Alumina LLC and has a pending motion to dismiss.

In May 2005, Alcoa World Alumina LLC and St. Croix Alumina L.L.C. were among the defendants listed in a lawsuit brought by the Commissioner of the
Department of Planning and Natural Resources, Dean Plaskett, in his capacity as Trustee for Natural Resources of the Territory of the United States Virgin Islands in the District Court of the Virgin Islands, Division of St. Croix. The complaint
seeks damages for alleged injuries to natural resources caused by alleged releases from an alumina refinery facility in St. Croix that was owned by St. Croix Alumina from 1995 to 2002. Also listed in the lawsuit are previous and subsequent owners of
the alumina refinery and the owners of an adjacent oil refinery. Claims are brought under CERCLA, U.S. Virgin Islands law, and common law. The plaintiff has not specified in the complaint the amount it seeks in damages.



- 57 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL INFORMATION

Other Financial Information

Dividend Policy

Alumina Limited intends, subject to business conditions, to maintain dividends to Alumina shareholders at current levels through the current period of
substantial growth. Dividends are paid twice a year. An interim dividend is paid in September or October and the final dividend is paid in March or April.

The dividends paid to shareholders are determined by the Board of Directors, based on Aluminas performance and current business conditions.

During the 12 month period January 1, 2005 to December 31, 2005, Alumina paid cash dividends to its shareholders of A$0.20 (franked to A$0.175)
a fully paid ordinary share. This compares to cash dividends provided for the 12 months to December 31, 2004 of A$0.20 (fully franked) a fully paid ordinary share. For a discussion on the taxation of the dividends, see Item 10E
Additional Information  Taxation.

Financing and Corporate Items

Net financing and corporate expenses for the year ended December 31, 2005 totalled A$21.5 million compared to A$7.6 million for the year ended
December 31, 2004. The principal components were:



|                                                                    |  |                             |   |  |                             |  
|------------------------------------------------------------------- |  | --------------------------- | - |  | --------------------------- | -
|                                                                    |  | Year EndedDecember 31, 2005 |   |  | Year EndedDecember 31, 2004 |  
|Loss/(Gain) on revaluation of foreign currency assets & liabilities |  |                            |   |  |                            |  
|Interest received / receivable                                      |  | (4.0                        | ) |  | (8.9                        | )
|Interest paid / payable                                             |  | 15.3                        |   |  | 8.1                         |  
|Corporate expenditure                                               |  | 10.2                        |   |  | 8.7                         |  

Net interest charged to profit was A$11.3 million for the year ended December 31, 2005
compared to A$0.8 million credit for the year ended December 31, 2004, reflecting higher interest rates and a higher level of US dollar debt.

B.
Significant Changes

Up until the end of April 2006, average LME aluminium prices have been higher in 2006 than in 2005, which has had a
positive effect on the Companys profit. The average Australian US dollar exchange rate in 2006 has been lower than in 2005, which has also had a positive effect upon profit. The Brazilian Real and the Euro have strengthened in 2006 which
adversely affects AWACs operating and capital costs.

Cost of raw materials and energy, particularly oil prices and US natural gas,
are expected to remain high, which would increase AWAC costs by approximately US$14 per tonne over 2005 levels.



- 58 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



THE OFFER AND LISTING

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Market Prices

The following table sets forth, for the
periods indicated, the highest and lowest market closing prices of Aluminas fully paid Ordinary Shares based upon information provided by the ASX and the highest and lowest bid prices for Aluminas American Depositary Shares (ADSs) based
on information provided by the NYSE. In the United States, ADSs evidenced by American Depositary Receipts (ADRs) represent fully paid ordinary shares of Alumina. Each ADR represents four fully paid ordinary shares. Alumina commenced trading (as AWC)
on the ASX and NYSE on December 4, 2002 on a post-demerger basis.



|                                |  |                |  |                 |  |                           |  |          |  |        
|------------------------------- |  | -------------- |  | --------------- |  | ------------------------- |  | -------- |  | -------
|                                |  |                |  | Ordinary Shares |  | AmericanDepositary Shares
|Period                          |  |                |  | A$ High         |  | A$ Low                    |  | US$ High |  | US$ Low
|Month ended April 30, 2006      |  |                |  | 7.98            |  | 7.16                      |  | 23.70    |  | 21.60  
|Month ended March 31, 2006      |  |                |  | 7.53            |  | 6.46                      |  | 21.25    |  | 19.01  
|Month ended February 28, 2006   |  |                |  | 8.01            |  | 6.93                      |  | 23.97    |  | 20.43  
|Month Ended January 31, 2006    |  |                |  | 7.82            |  | 7.08                      |  | 23.40    |  | 21.63  
|Month Ended December 31, 2005   |  |                |  | 7.47            |  | 6.71                      |  | 22.23    |  | 18.78  
|Month Ended November 30, 2005   |  |                |  | 6.63            |  | 5.76                      |  | 19.46    |  | 17.22  
|                                |  |                |  |                 | 
|Year Ended December 31, 2005    |  | First Quarter  |  | 6.37            |  | 5.65                      |  | 20.31    |  | 17.81  
|                                |  | Second Quarter |  | 6.20            |  | 5.29                      |  | 19.06    |  | 15.99  
|                                |  | Third Quarter  |  | 6.28            |  | 5.42                      |  | 19.43    |  | 16.72  
|                                |  | Fourth Quarter |  | 7.47            |  | 5.47                      |  | 22.23    |  | 17.01  
|                                |  |                |  |                 | 
|Year Ended December 31, 2004    |  | First Quarter  |  | 6.80            |  | 5.13                      |  | 21.16    |  | 15.30  
|                                |  | Second Quarter |  | 5.55            |  | 4.87                      |  | 16.87    |  | 13.47  
|                                |  | Third Quarter  |  | 5.74            |  | 5.01                      |  | 16.39    |  | 14.28  
|                                |  | Fourth Quarter |  | 5.96            |  | 5.14                      |  | 18.62    |  | 15.18  
|                                |  |                |  |                 | 
|Year Ended December 31, 2003    |  | First Quarter  |  | 5.21            |  | 3.90                      |  | 11.84    |  | 9.53   
|                                |  | Second Quarter |  | 4.48            |  | 4.03                      |  | 11.70    |  | 9.72   
|                                |  | Third Quarter  |  | 5.51            |  | 4.14                      |  | 14.25    |  | 11.38  
|                                |  | Fourth Quarter |  | 6.57            |  | 5.07                      |  | 20.06    |  | 13.93  
|                                |  |                |  |                 | 
|Year Ended December 31, 2002(1) |  | First Quarter  |  | 10.26           |  | 9.24                      |  | 20.97    |  | 18.95  
|                                |  | Second Quarter |  | 9.92            |  | 8.73                      |  | 22.00    |  | 19.52  
|                                |  | Third Quarter  |  | 9.22            |  | 7.09                      |  | 20.57    |  | 15.55  
|                                |  | Fourth Quarter |  | 8.51            |  | 3.79                      |  | 19.45    |  | 10.60  
|                                |  |                |  |                 | 
|Year Ended December 31, 2001(1) |  | Full Year      |  | 10.09           |  | 6.58                      |  | 20.90    |  | 13.60  

---

|(1) | These share prices relate to the Company prior to the demerger except for the fourth quarter
of 2002, which includes share prices prior to and after the demerger.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

The closing price of Aluminas fully paid
Ordinary Shares on December 31, 2005 was A$7.42 and on April 30, 2006 was A$7.16. The closing price of Aluminas ADRs on December 31, 2005 was US$21.83 and on April 30, 2006 was US$22.07.



- 59 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



THE OFFER AND LISTING

B. Plan of Distribution

Not applicable.

C. Markets

Ordinary Shares

All of Aluminas fully paid ordinary shares are listed on the ASX which presently constitutes the principal trading market for Aluminas
ordinary shares. The ASX is a nationally operated stock exchange with trading being carried out on automatic computer trading systems (SEATS). Aluminas fully paid ordinary shares are also listed on the New York Stock Exchange
(traded as American Depositary Shares). WMC Limited was also listed on the Swiss Stock Exchange until mid 2002 and the Frankfurt Stock Exchange until January 2003.

In accordance with the terms of the WMC demerger approved by shareholders on November 29, 2002 WMC shares ceased trading on the ASX on December 3, 2002. WMC Resources Ltd and Alumina Limited shares commenced
trading on December 4, 2002 on the ASX.

American Depositary Shares

In the United States, American Depositary Shares (ADSs) evidenced by American Depositary Receipts (ADRs) represent fully paid
ordinary shares of Alumina. Each ADR represents four fully paid ordinary shares. The ADRs are issued pursuant to a Deposit Agreement, dated October 6, 1989, as amended and restated on December 4, 2002 between Alumina and the
Depositary. On January 2, 1990, trading of Aluminas ADSs commenced on the New York Stock Exchange (NYSE) under the symbol WMC. WMCs ADS ceased trading on the NYSE on December 3, 2002 and
recommenced trading on December 4, 2002 under the name of WMC Resources Ltd (WMC) and Alumina Limited (AWC).

As at April 30, 2006, 347,943 Alumina fully paid ordinary shares were registered in the name of 269 residents of the United States and represented approximately 0.03% of the total number of Alumina fully paid ordinary shares issued and
outstanding. As at April 30, 2006, 20,673,606 Alumina ADRs were outstanding (representing 82,694,424 Alumina fully paid ordinary shares) and were registered in the name of 311 residents of the United States and represented approximately 7.09%
of the total number of fully paid ordinary shares issued and outstanding.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.



- 60 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Constitution

Aluminas corporate organisation and conduct are governed by its constitution (the Constitution). Set forth below is a summary of the
provisions of the principal terms of the Constitution.

Company Objects & Purposes

Alumina is taken to be registered as a public company limited by shares under the Corporations Act 2001 of the Commonwealth of Australia (the
Corporations Act) and is registered with Australian Business Number 85 004 820 419.

The Constitution was adopted by
shareholders at the Annual General Meeting held on April 15, 1999 and subsequently amended by shareholders at the general meeting held on November 29, 2002 and April 21, 2004. The Constitution does not specify Aluminas objects
and purposes. Rather, under section 124 of the Corporations Act, Alumina has the legal capacity and powers of an individual person.

Directors
Powers & Qualifications



|(a) | No director is permitted to vote or be counted in the quorum as a director in respect of any contract or arrangement in which the director has a material interest. Subject to the
Corporations Act, this prohibition can be relaxed or suspended by an ordinary resolution passed in general meeting (rule 85(b)).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Directors remuneration is to be determined by them from time to time and in such proportions and manner as they determine, provided that the aggregate remuneration paid to directors
in any year must not exceed the amount approved in general meeting (rule 82).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, every director is entitled to be
paid all reasonable travelling, hotel and other expenses incurred in attending meetings of Alumina and if any director is called upon to perform extra services or provide special professional skill for any purpose of Alumina, the director may be
paid travelling outlays and such additional sum by way of remuneration fixed by the directors (rule 83).



|(c) | Directors may, from time to time, at their discretion raise or borrow any sum or sums of money for the purposes of Alumina with or without security (rule 47).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



|(d) | The Constitution does not contain any age limit requirement on the retirement of directors.
|--- | -------------------------------------------------------------------------------------------



|(e) | A director does not need to own shares in Alumina as a qualification for office (rule 80).
|--- | ------------------------------------------------------------------------------------------



|(f) | At each Annual General Meeting one third of the directors (or the nearest number to one third) retire from the office and are subject to re-election. In any event, a director, other
than the managing director, shall retire from office at the conclusion of the third Annual General Meeting after the general meeting at which he or she was elected or re-elected.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rights & Restrictions Attaching to Each Class of Shares



|(a) | Alumina has only one class of shares, the ordinary class. The rights attached to ordinary shares include the right to dividends in the event that the directors declare them.
Directors may determine that a dividend is payable, fix the amount, the date at which the entitlement accrues, date for payment and the method of payment.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends which have not been claimed for one year after having been declared may be invested or otherwise made use of by the directors for the benefit of Alumina until claimed or disposed of according to law (rule
125).



|(b) | The voting right attached to ordinary shares is the right to vote in person, by representative, attorney or proxy in general meeting.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



- 61 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

On a show of hands each shareholder (regardless of the number of shares held) has one vote. On a poll each shareholder may exercise one vote for each
fully paid ordinary share held. In respect of partly paid shares, the shareholder has a vote equivalent to the proportion which the amount paid up bears to the total issue price of the share at the date the poll is taken.

For the purposes of determining voting entitlements at a general meeting, shares will be taken to be held by those persons recorded in the register of
members at the time and date determined by the directors under regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001 of the Commonwealth of Australia.



|(c) | Dividends are only payable out of the profits (rule 114).
|--- | ---------------------------------------------------------



|(d) | In the event of a winding up, ordinary shares rank equally in the division of any surplus.
|--- | ------------------------------------------------------------------------------------------



|(e) | Shareholders cannot redeem ordinary shares.
|--- | -------------------------------------------



|(f) | The holders of fully paid ordinary shares have no further liability to Alumina in respect of those shares. The holders of partly paid shares are liable to Alumina once a call is
made for the payment of the unpaid amount.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(g) | There is no provision in the Constitution which discriminates against an existing or prospective shareholder as a result of that shareholder owning a substantial number of shares
unless such ownership leads to a partial takeover bid (see heading Partial Takeover Approval below) or the directors exercise their discretion under Rule 144 in regard to foreign persons (see sub-heading Foreign Persons under the
heading Limitations on the Right to Own Securities).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(h) | To vary or cancel the rights attached to ordinary shares, a special resolution approving the variation or cancellation must be passed at a special meeting of the holders of ordinary
shares, or by consent in writing signed by the holders of a least three-fourths of the issued ordinary shares within two calendar months from the date of such special meeting (rule 11).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

General Meetings of the Company

The Board may
convene general meetings of Alumina to be held at such times and places and in the manner determined by the Board (rule 52). No shareholder or director may convene a general meeting unless entitled to do so under the Corporations Act.

Subject to the Corporations Act and the Listing Rules of the Australian Stock Exchange, notices of general meetings convened by the Board may be given in
the form and in the manner determined by the Board (rule 54).

At least 28 days notice must be given of a general meeting (section 249HA of
the Corporations Act).

All shareholders may attend general meetings in person, or be represented by the attendance of a representative,
attorney or by proxy (who need not be shareholders of Alumina in their own right).

The quorum for a general meeting is three members
present in person, by proxy or attorney or by representative (rule 57). If within 15 minutes of the time appointed for holding the meeting a quorum is not present, the meeting, if convened by requisition, is dissolved, but in all other cases stands
adjourned to the same day in the next week at the same time and place (rule 58). If at the adjourned meeting a quorum is not present within 15 minutes from the time appointed for holding the meeting, the meeting is dissolved.

Limitations on the Right to Own Securities

Aluminas Constitution does not impose limitations on the right to own securities except those provisions relating to foreign persons who seek to acquire a substantial interest in Alumina.

Foreign Persons

Directors have the
discretion to refuse to allot shares or to register any transfer or transmission of shares to any person, if the allotment, transfer or transmission results in a foreign person (as defined in the Foreign Acquisitions and Takeovers Act 1975 of the
Commonwealth of Australia) acquiring a substantial interest (defined as 15% of the voting power), or two or more foreign persons, alone or together with any associate or associates, acquiring an aggregate substantial interest (defined as 40% of
the voting power) in Alumina (rule 144).



- 62 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

Other Takeover Limitations

The
rights of non-resident or foreign shareholders to hold or exercise voting rights on Aluminas securities are subject to the Foreign Acquisitions and Takeovers Act 1975. The Treasurer of the Australian Federal Government has the power to
prohibit the acquisition of a controlling interest in any Australian company by a foreign person or foreign persons, if the Treasurer is of the opinion that the acquisition would be contrary to the national interest. For this purpose, a shareholding
of 15% or more held by a single foreign person or 40% or more held by two or more foreign persons is deemed to constitute a controlling interest.

Section 50 of the Trade Practices Act 1974 of the Commonwealth of Australia prohibits an acquisition of shares that would have the effect, or be likely to have the effect, of substantially lessening competition in a substantial
market for goods or services, unless the acquisition is authorised by the Australian Competition and Consumer Commission.

Partial Takeover Approval

In the event that there is an offer made under a proportional takeover bid (within the meaning given to that expression by
Chapter 6 of the Corporations Act) to acquire shares in Alumina, the registration of a transfer giving effect to a contract resulting from the acceptance of the offer, is prohibited unless and until a resolution to approve the proportional takeover
bid is passed in accordance with rule 139 of the Constitution. This resolution is to be voted on at a meeting convened and conducted by Alumina, of the persons entitled to vote on the resolution. The resolution is taken to have been passed if the
proportion that the number of votes in favour of the resolution bears to the total number of votes on the resolution is greater than one-half. The provision with respect to partial takeover bids (ie rule 139) cease to have effect on the third
anniversary of the date of their adoption or last renewal. The provisions were last adopted by shareholders on April 27, 2005.

Disclosure of Share
Ownership

The Constitution does not prescribe an ownership threshold above which shareholders must disclose their holding to Alumina.
However, Part 6C.1 of the Corporations Act imposes disclosure requirements on persons who acquire or cease to hold a substantial holding (see section 9 of the Corporations Act) in Alumina. The disclosure must be given to Alumina and the Australian
Stock Exchange within the prescribed time.

The directors may at any time by written notice require a member within 14 days of receiving
the notice to provide Alumina with full particulars of the name and address of every person who has an interest in any of the shares held by the member, including full particulars of that interest and of the circumstances by reason of which the
other person has that interest (rule 144(c)). On receiving particulars of a person holding an interest in any shares of Alumina (other than as registered holder), Alumina may give that person written notice requiring that person to provide Alumina
with a statement in writing setting out full particulars of that persons interest and of the circumstances by reason of which that interest is held.

Changes in Share Capital

Alumina by resolution passed in general meeting may from time to time alter its share capital in
one or more of the ways provided for, and in the manner prescribed by, the Corporations Act (rule 44).

Subject to the Constitution,
Alumina may reduce its share capital (rule 46) or buy back shares (rule 141) in accordance with the Corporations Act.

B. Material Contracts

Formation Agreement among Aluminium Company of America, Alcoa International Holdings Corporation, ASC Aluminium Inc., the Company and certain
subsidiaries of the Companies that established AWAC.

On 21 December 1994, Alcoa and WMC finalised and executed the AWAC
Agreements establishing and governing the operation of AWAC, with the Formation Date of AWAC being 1 January 1995. The main AWAC Agreements are the agreements known respectively as the Formation Agreement and the Charter of
the Strategic Council. Key aspects of the AWAC Agreements are set out below. Copies of the main AWAC Agreements are also annexed to this Report as exhibits.



- 63 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

(a) Enterprise

AWAC is comprised of a series of affiliated operating entities in which Alcoa has a
60% interest and Alumina a 40% interest. Alcoa acquired 9% of Alcoa of Australia and Alumina acquired a 40% interest in the other Alcoa affiliated operating entities and assets included within AWAC, upon its formation. Alumina has acquired a 40%
interest in AWAC entities and assets acquired (such as that of San Ciprian) since AWACs formation.

(b) Consideration

On 1 January 1995, Alumina paid to Alcoa approximately US$386 million and transferred 9% of Alcoa of Australia to Alcoa. Alumina contributed an
additional sum of approximately US$120 million to AWAC which was repaid during the course of initial establishment and operation of AWAC and for further acquisitions. Alcoa was also to receive additional compensation based upon the future earnings
of AWACs alumina-based industrial chemicals operations if the earnings exceeded performance targets for the period 1995-1999 (inclusive). Since the growth plan for the alumina-based chemicals business was not achieved, this additional
compensation was not required to be paid by WMC.

(c) Scope

The scope of AWAC includes the following:

Bauxite and alumina: the exploration, searching and
prospecting for and the mining of bauxite and other aluminous ores as well as the refining and other processing of these ores into alumina and other necessary but ancillary facilities.

Industrial chemicals: the research, development, production, marketing and sale of industrial chemicals, comprised initially of the output of the
existing Alcoa and Alcoa of Australia facilities for industrial alumina-based chemicals and other agreed mineral-based chemicals or as may be agreed from time to time.

Integrated operations: the ownership and operation of certain primary aluminium smelting, aluminium fabricating and other necessary but ancillary facilities that are run as part of an integrated operation at
certain of the locations existing on the formation of AWAC.

(d) Formation

The formation of AWAC was completed on 1 January 1995.

(e) Role of the parties

Industrial leader

Under the general direction of the Strategic Council, Alcoa is the industrial leader and provides the operational management of AWAC and of
all affiliated operating entities within AWAC, unless Alcoa requests Alumina to manage a particular operation.

Strategic Council

The Strategic Council is the principal forum for Alcoa and Alumina to provide direction and counsel to the AWAC entities in respect of
strategic and policy matters. The Alcoa and Alumina representatives on the boards of the AWAC entities are required, subject to their general fiduciary duties, to carry out the directions and the decisions of the Strategic Council. The Strategic
Council has five members, three appointed by Alcoa (of which one is Chairman) and two by Alumina (of which one is the Deputy Chairman). Decisions are made by majority vote except for matters which require a super majority vote, which is
a vote of 80% of the members appointed to the Strategic Council.

The following decisions require a super majority vote:



| |  | a change of the scope of AWAC;
|- |  | ------------------------------



| |  | a change in the dividend policy;
|- |  | --------------------------------



| |  | sale of all or a majority of the assets of AWAC;
|- |  | ------------------------------------------------



| |  | equity calls on behalf of AWAC totalling in any one year in excess of US$1 billion; and
|- |  | ---------------------------------------------------------------------------------------



| |  | loans to Alcoa or Alumina, or their respective affiliates by AWAC.
|- |  | ------------------------------------------------------------------



- 64 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

The Strategic Council meets as frequently as the Chairman after consultation with the Deputy Chairman determines, but meetings of the Council must be
held at least twice a year. The Deputy Chairman may require additional meetings to be held.

Other management and personnel roles

Alumina is entitled to representation in proportion to its ownership interest on the board of each entity in the AWAC structure,
including Alcoa of Australia. In addition to the Strategic Council meetings, Operation meetings (with representatives from Alcoa and Alumina) are held typically up to four times a year (usually two in Australia and two at
operations/offices outside Australia).

(f) Exclusive Vehicle

AWAC is the exclusive vehicle for the pursuit of Aluminas and Alcoas (and their affiliates as defined) interests in the bauxite, alumina and inorganic industrial (alumina-based) chemicals businesses
included within the scope of AWAC, and neither party can compete, within that scope, with AWAC so long as they maintain an ownership interest in AWAC.

If either party acquires a new business which has as a secondary component a bauxite, alumina or inorganic industrial chemicals business included within the scope of AWAC, that component must be offered to AWAC for
purchase at its acquisition cost or, if not separately valued, at an independently determined value. If the companies within AWAC and the Strategic Council decide not to accept the offer, the component must be divested by Alcoa or Alumina (as the
case may be) to a third party that is not an affiliate.

Smelting is not subject to these exclusivity provisions, although there are
certain smelting assets in AWAC, primarily those in Alcoa of Australia in which Alumina already had an interest at the time AWAC was formed.

It should be noted that the AWAC Agreements do not expressly address the position of an acquirer of Alumina or Alcoa, where that acquirer already operates a bauxite, alumina or industrial (alumina-based) chemicals business. Such an acquirer
would be an affiliate of Alumina or Alcoa (as relevant) and therefore the exclusive vehicle provisions of the AWAC agreements would apply. However, the agreements are silent on the action that Alumina or Alcoa (as relevant) and the
acquirer must take. The relevant business could be offered to AWAC for purchase, with the value to be agreed. Alternatively, the acquirer might divest itself of the relevant business or undertake some other action consistent with the exclusive
vehicle provisions of the AWAC Agreements.

(g) Capital requirements

The cash flow of AWAC and borrowings are the preferred sources of funding for the needs of AWAC. Should the aggregate annual capital budget of AWAC require an equity contribution from Alcoa and Alumina, the following
limits apply:



|(i) | With respect to amounts up to US$500 million in annual equity requested to be contributed in total by Alcoa and Alumina to AWAC (including amounts requested pursuant to paragraphs
(g)(ii) and (g)(iii)), each party must contribute its proportionate share based on its current ownership in AWAC. If either party does not contribute its proportionate share, the other party may make up the contribution, in addition to its own
contribution, and the non-contributing partys interest in AWAC will be diluted in accordance with an agreed formula.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | With respect to annual equity requests in excess of US$500 million but less than US$1 billion, each party must declare within 30 days of when the equity request is made if it has
the ability to fund its share of the request and, if so, each party must contribute its proportionate share. Should Alumina be unable to contribute the full amount of the equity in the year required, the parties will work together to find
alternative interim external financing arrangements reasonably acceptable to Alumina for AWAC or for Alumina, or Alumina may choose to have its interest in AWAC diluted in accordance with the formula noted above. If alternative external financing is
not acceptable to Alumina, Alcoa may fund the Alumina proportionate share and this contribution will be deemed to be a loan by Alcoa to Alumina at the current market rate for Alcoas long-term borrowings. Alumina must repay the amount
contributed on its behalf in a period not to exceed one year. If either party does not contribute its share or Alumina does not repay the loan after one year and contribute its share, the dilution provision referred to above applies.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 65 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION



|(iii) | With respect to annual equity requests in excess of US$1 billion approved by a super majority vote, each party must contribute its proportionate share. However, if Alumina is unable
to contribute the full amount of the equity in the year required, the parties must work together to find alternative financing arrangements reasonably acceptable to Alumina for AWAC or for Alumina. If Alumina does not contribute the balance of its
full proportionate share, Alcoa may make, and must be compensated for, all or part of the remaining contribution in Aluminas place. However, if this occurs, Aluminas interest in AWAC will only be diluted in accordance with the dilution
provision referred to in paragraph (i) above in respect of Alcoas contribution to the capital requirements up to US$1 billion. If Alcoa elects to proceed, Alcoa and Alumina will review the mechanism to compensate Alcoa for its excess
contribution, which may include a disproportionate allocation of returns associated with the excess contribution.
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(h) Dividend policy

AWAC must distribute by way of dividends, in each financial year, at least 30% of the net income of the prior year of each of the
entities comprising AWAC, unless the Strategic Council agrees by a super majority vote to pay a smaller dividend. AWAC must also endeavour to distribute dividends above 30% of the net income of AWAC, consistent with prudent financial management and
in the context of the strategic and business objectives of AWAC.

(i) Leveraging policy

The affiliated operating entities within AWAC must maintain a limit of debt (net of cash) in the aggregate equalling not more than 30% of total capital,
where total capital is defined as the sum of debt (net of cash) plus any minority interest plus shareholder equity.

(j) Pre-formation liabilities

Where AWAC sustains an extraordinary liability (described below), Alcoa and Alumina must, to the extent of their preformation ownership
interest, indemnify, reimburse and hold harmless AWAC for such extraordinary liability. Certain matters including litigation, environmental and industrial hygiene matters, and non-compliances with government regulations or permits are identified and
responsibility allocated in the AWAC Agreements. An extraordinary liability is:



| |  | a liability to a third party claim at law or in equity;
|- |  | -------------------------------------------------------



| |  | a claim by any government or governmental agency;
|- |  | -------------------------------------------------



| |  | an environmental liability; or
|- |  | ------------------------------



| |  | an industrial disease or personal injury.
|- |  | -----------------------------------------

which relates
to an act or omission that occurred totally or partially during a period prior to Formation date.

To be subject to the indemnity a claim
or a series of quarterly related claims (other than those specifically identified and referred to in the AWAC Agreements) must exceed an initial threshold amount of US$250,000. For liabilities that involve both activities or operations before and
after the formation of AWAC, the liabilities are allocated by applicable methods as provided in schedules to the AWAC Agreements or, if none of those methods are relevant, by a fair and reasonable allocation of the responsibility for the
extraordinary liability (based on an assessment of the respective contributions to the extraordinary liability by pre-formation and post-formation activities among AWAC, Alcoa and Alumina).

(k) Alumina pre-payment for Alcoa of Australia liabilities

By an amending agreement dated 31 December 1995, Alcoas purchase price for Aluminas 9% of Alcoa of Australia was adjusted, with such adjustment being in full satisfaction of Aluminas indemnity obligations for
environmental extraordinary liabilities (as defined in the AWAC Agreements and described above) that should reasonably have been known, or for known environmental extraordinary liabilities, at plants in Australia, except for the cost of
reclaiming spent pot lining stored at Portland. Alcoa assumed obligations to indemnify Alumina for any such extraordinary liabilities.

(l) Dispute
resolution

The AWAC Agreements mechanism prescribes for the resolution of all disputes, difference, controversies or
claims between the parties in relation to AWAC. The mechanism employs an escalating procedure for resolution.



- 66 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

(m) Transfer of interests

Rights of first refusal apply in relation to Alumina and Alcoas
interests in AWAC, or their affiliated holding interests in AWAC.

In addition, without the other partys consent, neither party can
transfer its interests in AWAC to a competitor. For these purposes, a competitor is any person engaged in the mining of bauxite, the processing of alumina or inorganic chemicals or the production of primary aluminium, either directly
itself or indirectly through any company in which it holds, legally or beneficially, either 10% or more of the issued capital or 10% or more of the voting power.

Any increase or decrease in AWAC interests must be proportionate across all entities in AWAC unless the increase or decrease was the involuntary consequence of government action, in which case Alumina and Alcoa must
consult as to the appropriate course of action.

There is no change of control clause triggered by an upstream change of control of Alumina
or Alcoa.

(n) Material inequity

A
principle agreed on the original formation of AWAC was that if either Alumina Limited or Alcoa believed eight years after the formation of AWAC that a material inequity had resulted to them which substantially altered the value of a partys
original contribution to AWAC, they could commence a procedure for making an adjustment to their contributions. Alcoa and Alumina Limited have agreed, subsequent to a joint review in January 2003, that no such material inequity has occurred and no
adjustment is to be made.

Demerger Deed

(a) Nature of
contract

In connection with the demerger, WMC Resources and Alumina Limited entered into the Demerger Deed. The Demerger Deed deals with
transitional and miscellaneous commercial and legal issues arising in connection with the legal and economic separation from WMC Resources.

(b) Key terms

(i) Fundamental demerger principle

The fundamental principle of the separation from WMC Resources is that, following the demerger, WMC Resources has the entire economic benefit, risk and liabilities of all of WMC Resources businesses, companies and assets as if WMC Resources
had owned and operated those businesses, companies and assets at all times. Alumina continues to have the entire economic benefit, risk and liabilities of its companies and assets following the demerger.

(ii) Acknowledgement

Consistent with the
fundamental demerger principle outlined above, WMC Resources and Alumina acknowledged in the Deed that once the demerger was complete, WMC Resources would not have any rights against Alumina, and Alumina would not have any rights against WMC
Resources, except in specified circumstances. Neither WMC Resources nor Alumina has any right to make a claim for loss or damage arising directly or indirectly in relation to the demerger, WMC Resources internal restructure and the operation of WMC
Resources businesses prior to the demerger, unless expressly permitted by the Demerger Deed or any other document or agreement between the parties.

(iii) Business restructure

Aluminas non-AWAC business and companies have been substantially restructured pursuant to a
series of separate restructure agreements prior to the demerger so that an identifiable corporate group has come into existence comprising the companies that constitute WMC Resources assets and our businesses. The Demerger Deed makes provision for:



| |  | the approach to be adopted by the parties to the restructure of WMCs non-AWAC businesses and companies prior to the demerger;
|- |  | ------------------------------------------------------------------------------------------------------------------------------



| |  | the practical, economic and legal effect of WMC Resources separation from Alumina;
|- |  | ----------------------------------------------------------------------------------



| |  | the mechanism under which WMC Resources and Alumina can transfer to the other group any asset or contract which a group member owns or holds after the demerger date but which at the
demerger date was most directly used in the other groups business, or was incorrectly transferred as part of the restructure of WMC Limiteds non-AWAC businesses; and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 67 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION



| |  | if any asset or share transfers required to establish WMC Resources were not completed prior to the date of execution of the Demerger Deed, the principles in accordance with which
the parties are to conduct their arrangements pending each transfer, so as to ensure that, to the extent possible, each transferee gets the benefit and all risks of the asset or company being transferred as from the accounting effective date;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(iv) Accounting separation

The Demerger Deed confirms that, for accounting purposes, Alumina and WMC Resources will be treated as being demerged as from November 30, 2002, or on such other date as may be agreed between WMC Resources and
Alumina Limited, with the intention that it be the date of the closest month end preceding the effective date of the demerger;

(v) Access
to records

Records held by each of WMC Resources and Alumina at the effective date of the demerger that relate to the other are to be
maintained. Each of WMC Resources and Alumina must allow the other to access those records and must notify the other prior to any destruction of those records so that they can be copied or retrieved;

(vi) Financial and tax assistance

WMC
Resources and Alumina will assist each other in relation to future and past financial and tax matters and each will allow the other access to financial and other records in connection with the preparation of tax returns or tax audits by the
Australian Taxation Office of either WMC Resources or Alumina;

(vii) Employees and superannuation

The Demerger Deed addresses matters relating to the transfer of certain of WMC Resources employees to Alumina. Alumina is obliged to indemnify WMC
Resources against all costs and expenses relating to the transfer. WMC Resources and Alumina are each obliged to indemnify the other against all costs and expenses (including claims) relating to any redundancy, retrenchment or termination of a
former Alumina employee or employee of WMC Resources (as applicable);

In accordance with the fundamental demerger principle, each of WMC
Resources and Alumina are required to meet all costs relating to the provision of retirement savings or retirement income benefits and other related benefits for their employees. The Demerger Deed also requires Alumina to assume responsibility for
the superannuation arrangements of those employees transferring to it from WMC Resources;

(viii) Use of intellectual property

The Demerger Deed sets out the general principles that determine ownership of intellectual property by WMC Resources and Alumina (other than trade
marks and business names). The Demerger Deed also sets out the restrictions on the use of jointly-owned intellectual property.

Under the
Demerger Deed, Alumina is required as soon as practicable, and in any event within one month, after the demerger date to cease the use of the WMC name (and derivatives) and the WMC logo and to arrange for the change of
Alumina group company names including the WMC name (or derivatives);

(ix) Litigation management

WMC Resources and Alumina will assist each other in relation to the management of current and new litigation matters involving Alumina (other than in
respect of litigation between WMC Resources and Alumina). Each of WMC Resources and Alumina indemnifies the other in respect of liability or loss suffered in connection with a claim where that liability relates to the business of the other; and

(x) Insurance

WMC Resources
are to provide their own group business insurance and insurance for directors and officers from the effective date of the demerger. However, WMC Resources and their directors and officers will have access to the existing directors and
officers insurance policy maintained by Alumina for the remaining life of that policy in respect of matters which occurred on or before the effective date of the demerger.



- 68 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

Transitional Services Agreement

(a) Nature of contract

In connection with the demerger, WMC Resources and Alumina entered into the Transitional Services Agreement. Under the agreement, WMC Resources provided,
or procured the provision of, certain services to the Alumina group for a period of up to 6 months after the demerger date.

(b) Services

WMC Resources provided the following services to Alumina and to members of the Alumina group:

General corporate services

Accounting and
Finance

IT support

Legal and
company secretariat

Human resources

(c)
Charges for Services

WMC Resources charged Alumina a fixed fee of A$360,000 for providing, or procuring the provision of, the services
described above.

(d) Protection of information

The agreement imposes obligations on each of WMC Resources and Alumina to protect all information, records, reports and other data and other agreements or documents relating to or used in connection with the agreement.

(e) Indemnity

WMC Resources must indemnify Alumina against
all claims and losses (as defined in the agreement) which may be made or brought against Alumina or incurred or suffered by Alumina as a result of WMC Resources willful misconduct (as defined in the Agreement) or the misconduct of WMC Resources
directors, employees, officers, agents or contractors.

D. Exchange Controls

(a) The Banking (Foreign Exchange) Regulations 1956 (Cth) and other Australian legislation and regulations control the import and export of capital and remittance of payments involving non-residents of Australia.
Alumina is not restricted from receiving funds into or transferring funds from Australia to the credit of non-residents of Australia but in certain cases is required to:



| | (i) | withhold Australian taxes;
| | --- | --------------------------



| | (ii) | obtain the Reserve Banks authority -
| | ---- | -------------------------------------

to place any
sum in Australia to the credit of, or make any payment in Australia to, by order of or on behalf of:



| |  | certain entities related to the Federal Republic of Yugoslavia (in limited circumstances) and certain named individuals associated with the former Milosevic regime;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | certain ministers and senior officials of the Government of Zimbabwe
| | - | --------------------------------------------------------------------



| |  | the Taliban or any undertaking owned or controlled, directly or indirectly by the Taliban or specific associated individuals, entities, agencies associated with the Taliban, Osama
bin Laden, al-Qaida or other terrorists or their sponsors; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



- 69 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

to sell or purchase foreign currency or take or send from Australia any Australian currency where that transaction relates to:



| |  | property, securities or funds belonging either directly or indirectly to certain entities related to the Federal Republic of Yugoslavia or their agencies (in limited circumstances)
and certain named individuals associated with the former Milosevic regime;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | property, securities or funds in Australia owned or controlled, directly or indirectly, by or otherwise relating to payments to certain ministers and senior officials of the
government of Zimbabwe; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | property, securities or funds owned or controlled directly or indirectly by, or otherwise relating to payments to, or for the benefit of, the Taliban or any undertaking owned or
controlled, directly or indirectly, by the Taliban or specific associated individuals, entities, agencies associated with the Taliban, Osama bin Laden, Al-Qaida or other terrorists or their sponsors; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | lodge a report of the transaction details.
| | ----- | ------------------------------------------

(b) Limitations under
Australian laws, on the right of non-residents to acquire, hold or vote Ordinary Shares in the Company, exist under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (the Foreign Acquisitions Act) And section 606 of the Corporations
Act 2001 (Cth) (the Corporations Act). The Charter of the United Nations Act 1945 (Cth) and the Charter of the United Nations (Terrorism and Dealings with Assets) Regulations 2002 (Cth) also regulate certain transactions.

Under the Foreign Acquisitions Act, any acquisition or issue of shares (including the acquisition of an option to acquire shares) which would increase or
alter beyond 15% in the case of any single foreign interest, or 40% in the case of more than one foreign interest, the level of foreign ownership in a corporation that carries on an Australian business is subject to review and approval by the
Treasurer of the Commonwealth of Australia.

The Foreign Acquisitions Act permits the Treasurer to deny or refuse proposals where such
proposals would be contrary to the Australian national interest.

Section 606 of the Corporations Act provides that, subject to
certain exceptions, a person must not acquire a relevant interest in voting shares in a company, if as a result a persons voting power in the company increases to more than 20%, or from a starting point that is above 20% and below 90%.
Section 606 also prohibits a person acquiring a legal or equitable interest in shares if, because of the acquisition, another person acquires a relevant interest in shares and someones voting power increases to more than 20%, or from a
starting point that is above 20% and below 90%. Section 608 of the Corporations Act provides that a person has a relevant interest in shares if that person holds the shares, or has power or control over the voting rights attaching
to them or their disposal, whether directly or indirectly.

Transactions that involve a transfer assets (which would include Ordinary
Shares in the Company) to or from persons or entities listed under the Charter of the United Nations Act 1945 (Cth) or the Charter of the United Nations (Terrorism and Dealings with Assets) Regulations 2002 (Cth) (the Terrorism
Regulations) require ministerial approval.

The Charter of the United Nations Act 1945 (Cth) enables Australia to give effect to
decisions made by the United Nations Security Council. The Terrorism Regulations give effect to United Nations Security Council Resolutions 1390 (2002), 1373 (2001), 1333 (2000) and 1267 (1999), which impose obligations on member states to
prevent use of or dealings with assets by, or making of assets available to, certain persons and entities engaged in terrorist acts or who are subject to international sanctions.

The Terrorism Regulations apply to the Taliban, Osama bin Laden and any member of the Al-Qaida organization pursuant to the United Nations Security
Council Resolution 1390 (2002). The Charter of the United Nations Act 1945 (Cth) also applies to other persons or entities identified in relation to terrorist activities, as identified in regulations enacted by the Governor General of the
Commonwealth of Australia or as listed by the Minister for Foreign Affairs of the Commonwealth of Australia from time to time. The list maintained by the Minister for Foreign Affairs of the Commonwealth of Australia includes the Kurdistan
Peoples Congress, the Al-Aqsa Foundation, Ansar al-Islam and the Orange Volunteers. Regulations most recently enacted by the Governor General have applied to former Liberian President Charles Taylor and his associates.



- 70 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the applicable legislation and to the
Constitution. A copy of the Constitution is filed as Exhibit 1 to this Annual Report on Form 20-F.

E. Taxation

The following is a summary of the principal Australian and United States federal income tax consequences to United States holders (as defined below) of
the acquisition, ownership and disposition of ADS or Ordinary Shares and is based on the laws in force as at the date of this Annual Report. Holders are advised to consult their own tax advisers concerning the overall tax consequences of the
acquisition, ownership and disposition of ADS or Ordinary Shares in their particular circumstances. This discussion relies in part on representations by the Depositary in the Deposit Agreement and related documents.

Commonwealth of Australia Taxation

With effect from
July 1, 2002, Australia rewrote dividend imputation legislation system relating to company tax. Broadly, the legislation rewrites the old dividend system. It is intended to produce a similar tax outcome as the old system with some noted
differences. The dividend imputation system of company tax relieves double taxation on dividends paid by Australian resident corporations. Under this system, companies are required to identify dividends paid as either franked or unfranked dividends.
Franked dividends are those paid out of profits which have borne Australian corporate tax (ie. to which franking credits have been allocated) while unfranked dividends are paid out of untaxed profits. The Australian corporate tax rate is 30%.
Franked dividends paid to non-residents are exempt from withholding tax but unfranked (or partly franked) dividends are subject to withholding tax, generally at 15% on the unfranked amount. Notices are provided to shareholders which specify the
amount (if any) of dividend withholding tax deducted.

The current Australian tax rules require taxpayers to hold shares at
risk for certain periods before obtaining the benefit of the dividend imputation system. The minimum period for holding ordinary shares at risk is currently 45 days. Failure to satisfy these requirements may result in the deduction
of Australian withholding tax from dividends paid to non-residents of Australia. There is an exemption from these rules for defined small transactions.

The tax rules classify interests which satisfy a financial arrangements test as either debt or equity. An interest that is classified as equity will be frankable, whereas an interest that is classified as debt will
not be frankable. ADS and Ordinary Shares are likely to be classified as equity on the basis that the return is contingent on our performance or at our discretion. These rules apply from July 1, 2001.

Under the provisions of the Convention between the Government of the United States of America and the Government of Australia for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Treaty) from July 1 2003 the withholding tax rate on dividends is 5% of the gross amount of the dividends where the beneficial corporate shareholder
entitled to the dividends holds directly at least 10% of the voting power in the company. This rate is reduced to nil for certain corporate beneficial shareholders who own at least 80% of the voting shares. For other shareholders the withholding tax
rate will be 15% by virtue of the Treaty and domestic law. As mentioned above, franked dividends will not be subject to withholding tax.

A
United States citizen who is resident in Australia, or a United States corporation that is resident in Australia (by reason of carrying on business in Australia and being managed or controlled in Australia or having its voting power controlled by
shareholders who are residents of Australia) holding ADS or ordinary shares as capital assets, may be liable for Australian capital gains tax (CGT) on the disposal of our ADS or ordinary shares.

In calculating the amount of a capital gain that may be subject to Australian CGT, special rules apply to individuals, trusts, certain superannuation
funds and shareholders of certain listed investment companies. For ADS or ordinary shares acquired after September 21, 1999 and held for at least 12 months, individuals and trusts will pay tax on half of the gain (calculated in nominal terms)
or two-thirds of the gain for certain superannuation funds after allowing for any offsetting capital losses which are applied against the whole nominal gain. For ADS or Ordinary Shares acquired before that time and held for at least 12 months,
individuals, trusts and certain superannuation funds may choose between paying CGT on half of the gain (or two-thirds of the gain for certain superannuation funds), or paying CGT on all of the gain with the gain being calculated on the basis of the
cost of the ADS or shares being



- 71 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

indexed for inflation up to September 30, 1999. For all types of taxpayers, the legislation freezes the indexation (for inflation) of the cost of ADS and Ordinary Shares as at September 30, 1999, and
abolishes such indexation for ADS and ordinary shares acquired after September 21, 1999.

Under current Australian law, no income or
other tax is payable on any profit on disposal of the ADS or ordinary shares held by persons who are residents of the United States within the meaning of the Treaty except:



| |  |  | if the person (together with associates, if any) owns or owned ADS and/or Ordinary Shares at any time during the period of five years preceding the disposal, representing 10%
or more of our issued share capital (excluding share capital carrying no right to participate beyond a specified amount in distribution of profits or capital); or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if the ADS or Ordinary Shares have been used by the person in carrying on a trade or business wholly or partly at or through a permanent establishment in Australia.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Different rules will apply to persons and corporations which are not residents of the United States.

The Federal Government announced on May 10, 2005 its intention to remove the application of Australian Capital Gains Tax from non-residents except
for real property and Australian business assets of Australian branches of non-residents. Australia CGT will also continue to apply to non-portfolio interests in shares where the value of such interests is wholly or principally attributed to
Australian Real Property. Australian Real Property will include mining rights.

The change is to apply to capital gains occurring on or
after passing of the relevant legislation which is yet to be introduced into Parliament. At this stage it is not clear the precise impact that the proposed measure will have on the holding of Alumina ADS or ordinary shares held by U.S. residents.

Australia does not impose gift, estate or inheritance taxes in relation to gifts of shares or upon the death of a shareholder.

Neither the issue or transfer of an ADS or our Ordinary Shares or the payment of a dividend will give rise to a liability to goods and services tax in
Australia.

Australian Stamp Duty

No
Australian stamp duty will be payable on the issue or transfer of an ADS or the transfer of our Ordinary Shares.

United States Federal Income Tax
Consequences

The following discussion is a summary of the material United States federal income tax consequences of owning Ordinary
Shares or ADS. The discussion below, except where specifically noted, does not address the effects of any state, local or non-United States tax laws. In addition, it applies to you only if you hold your Ordinary Shares or ADS as a capital asset, and
does not address the tax consequences that may be relevant to you in light of your particular circumstances. Moreover, it does not apply to you if you are not a U.S. person, as defined below, or if you are subject to special treatment under the
United States federal income tax laws, including if you are:

a dealer in securities or currencies;

a trader in securities if you elect to use a mark-to-market method of accounting for your securities holdings;

a financial institution;

an insurance
company;

a tax-exempt organization;

a person liable for alternative minimum tax;

a person that holds Ordinary Shares or ADS as part of a straddle or a hedging or
conversion transaction;

a person that actually or constructively owns 10% or more of the voting shares of Alumina; or

a person whose functional currency is not the United States dollar.



- 72 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

This discussion is based on the Internal Revenue Code of 1986, as amended (the Code), existing and proposed regulations, published rulings
and court decisions, all as currently in effect, as well as the Convention Between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect
to Taxes on Income (the Treaty). These laws are subject to change, possibly on a retroactive basis.

You are a U.S. person if
you are:

a citizen or resident of the United States;

a corporation created or organized in the United States or under the law of the United States or any state of the United States;

an estate, the income of which is subject to United States federal income taxation regardless of its source; or

a trust if a United States court can exercise primary supervision over the trusts administration and one or more United States persons are authorized to control all substantial decisions of the trust.

For purposes of this discussion an eligible U.S. holder is a U.S. person that:

is a resident of the United States for purposes of the Treaty;

does not maintain, for purposes of the Treaty, a permanent establishment or fixed base in Australia to which Ordinary Shares or ADS are attributable and through which the U.S. person carries on or has carried on
business (or, in the case of an individual, performs or has performed independent personal services); and

is otherwise eligible for
benefits under the Treaty with respect to income or gain from ordinary shares or ADS.

The tax consequences to you of the ownership of
Ordinary Shares or ADS will depend upon the facts of your particular situation. We encourage you to consult your own tax advisors with regard to the application of the federal income tax laws, as well as to the applicability and effect of any state,
local or foreign tax laws to which you may be subject. In particular you should confirm your status as an eligible US holder with your advisors and should discuss any possible consequence of failing to qualify as an eligible U.S. holder.

In general, and taking into account the earlier assumptions, for United States federal income tax purposes, if you hold ADS, you will be treated as
the owner of the Ordinary Shares represented by those ADS. Exchanges of Ordinary Shares for ADS, and ADS for Ordinary Shares, generally will not be subject to United States federal income tax.

Distributions

Subject to the passive foreign
investment company rules discussed below, distributions made to you on or with respect to Ordinary Shares or ADS will be treated as dividends and will be taxable as ordinary income to the extent that those distributions are made out of our current
or accumulated earnings and profits as determined for United States federal income tax purposes. You must include the gross amount of the dividend payment (including, in the case of unfranked or partially unfranked dividends, any Australian tax
withheld) as income at the time you receive it, actually or constructively. Subject to the passive foreign investment company rules discussed below, to the extent that the amount of any distribution exceeds our current or accumulated earnings and
profits for a taxable year, the excess will be treated as a tax-free return of capital which reduces your tax basis in the Ordinary Shares or ADS to the extent of the tax basis, and any remaining amount will be treated as capital gain. If you are a
corporation you generally will not be entitled to claim dividends received deduction with respect to distributions paid with respect to your Ordinary Shares or ADS.

The amount of the dividend distribution that you must include in your income will be the US dollar value of the Australian dollar payments made, determined at the spot Australian dollar/US dollar rate on the date the
dividend distribution is includible in your income, regardless of whether the payment is in fact converted into US dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the
dividend payment in income to the date you convert the payment into US dollars will be treated as ordinary income or loss. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation
purposes.



- 73 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

With effect for dividends paid from January 1, 2003 through December 31, 2008, the United States reduced the maximum tax rate on certain
qualifying dividend distributions to 15% for non corporate U.S. persons. In order for dividends paid by foreign corporations to qualify for the reduced rates, the foreign corporation must meet certain requirements, including that it not be
classified as a passive foreign investment company for United States federal income tax purposes in either the taxable year of the distribution or the preceding taxable year. The Company believes that its Ordinary Shares or ADS will not be treated
as shares of a passive foreign investment company, but this conclusion is a factual determination that is made annually and thus may be subject to change.

The company believes that dividends on ADS will qualify for these lower tax rates if the taxpayer meets the required holding period. In order for the dividends on the ADS to qualify, taxpayers must hold the ADS for at
least 61 days during the 121-day period beginning 60 days before the ex-dividend date.

Dividends paid to eligible U.S. holders with
respect to our Ordinary Shares or ADS and that are unfranked or partially unfranked are subject to Australian withholding tax at a maximum rate of 15% with respect to the unfranked portion of the dividend payment. Subject to certain limitations, the
Australian tax withheld in accordance with the Treaty and paid over to Australia generally will be creditable against your United States federal income tax liability.

Dividends will be income from sources outside the United States, but dividends paid in taxable years beginning before January 1, 2007 generally will be passive income or financial services
income and dividends paid in taxable years beginning after December 31, 2006 will, depending on your circumstances, be passive income or general income which, in either case, is treated separately from other types
of income for purposes of computing the foreign tax credit allowable to you. Dividends qualifying for the special 15% maximum U.S. tax rate are subject to special rules in determining a taxpayers foreign tax credit limitation.

Disposition

Subject to the passive foreign
investment company rules discussed below, any gain or loss you realize on the sale, exchange or other taxable disposition of Ordinary Shares or ADS will be subject to United States federal income taxation as a capital gain or loss in an amount equal
to the difference between the US dollar value of the amount that you realize on that sale, exchange or other disposition and your adjusted tax basis, determined in US dollars, in the Ordinary Shares or ADS surrendered. The gain or loss will be long
term capital gain or loss if your holding period for the ordinary shares or ADS is more than one year. A noncorporate U.S. person is generally taxed at a maximum rate of 15% on long term capital gain that is recognized on or after May 6, 2003
and before January 1, 2009. Any capital gain or loss so realized will generally be United States source gain or loss. Your ability to deduct capital losses is subject to limitations.

Passive Foreign Investment Company Rules

Alumina
believes that its Ordinary Shares or ADS will not be treated as shares of a passive foreign investment company, or PFIC, for United States federal income tax purposes, but this conclusion is a factual determination that is made annually
and thus may be subject to change. Moreover, the application of the PFIC rules to a corporation such as Alumina that is primarily engaged in the active business of mining and processing metals is not entirely clear.

In general, if you are a U.S. holder, we will be a PFIC with respect to you if for any taxable year in which you held our ADS or Ordinary Shares:

at least 75% of our gross income for the taxable year is passive income or

at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the
production of passive income.

Passive income generally includes dividends, interest, royalties, rents (other than certain rents and
royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the shares of another corporation, the foreign corporation is
treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporations income.

If the company is treated as a PFIC, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will be subject to
special rules with respect to:

any gain you realize on the sale or other disposition of your Ordinary Shares or ADS and



- 74 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

any excess distribution that the company makes to you (generally, any distributions to you during a single taxable year that are greater than 125% of the
average annual distributions received by you in respect of the Ordinary Shares or ADS during the three preceding taxable years or, if shorter, your holding period for the Ordinary Shares or ADS).

Under these rules:

the gain or excess
distribution will be allocated rateably over your holding period for the Ordinary Shares or ADS,

the amount allocated to the taxable year
in which you realized the gain or excess distribution will be taxed as ordinary income,

the amount allocated to each prior year, with
certain exceptions, will be taxed at the highest tax rate in effect for that year, and

the interest charge generally applicable to
underpayments of tax will be imposed in respect of the tax attributable to each such year.

Special rules apply for calculating the amount
of the foreign tax credit with respect to excess distributions by a PFIC.

If you own Ordinary Shares or ADS in a PFIC that are treated as
marketable shares, you may also make a mark-to-market election. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair
market value of your Ordinary Shares or ADS at the end of the taxable year over your adjusted basis in your Ordinary Shares or ADS. You will also be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of your
Ordinary Shares or ADS over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). Your basis in the Ordinary Shares or ADS will be
adjusted to reflect any such income or loss amounts.

If you own Ordinary Shares or ADS during any year that we are a PFIC, you must file
Internal Revenue Service Form 8621.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

It is possible to read and copy documents referred to in this Annual Report on Form 20-F that have been filed with the Securities and Exchange
Commission (SEC) at the SECs public reference room located at 450 Fifth Street, NW, Washington DC 20549. Please telephone the SEC at 1-800-SEC-0330 or access the SEC website (www.sec.gov) for further information.



- 75 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ADDITIONAL INFORMATION

I. Subsidiary Information

All controlled entities are wholly owned, unless otherwise indicated.
Aluminas significant subsidiaries are described in Item 4C  Key Information  Organizational Structure. The following is a list of all entities controlled by Alumina as of May 26, 2006.



|                                         |  |                       
|---------------------------------------- |  | ----------------------
|Controlled Entities                      |  | Place of Incorporation
|Alumina Holdings (USA) Inc.              |  | Delaware, USA         
|Alumina (U.S.A.) Inc.                    |  | Delaware, USA         
|Westminer (Investments) B.V.             |  | Netherlands           
|Westminer Acquisition (U.K.) Limited     |  | UK                    
|Westminer International (U.K.) Limited   |  | UK                    
|Alumina International Holdings Pty. Ltd. |  | VIC, Australia        
|Butia Participaçoes SA                   |  | Brazil                



- 76 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative Information about Market Risk

Continuing operations

Aluminas policy currently is not to hedge its commodity or currency exposure other than to secure the Australian dollar value of foreign currency bank accounts. This policy will be reviewed periodically. AWAC has previously sought to
manage its exposure to both the aluminium price and the A$/US$ exchange rate through the use of derivative products. There were no aluminium hedge positions in place at December 31, 2005.

The Group is exposed to commodity price risk through its investment in AWAC. AWAC manages commodity price risk through long-term purchase contracts for
some input costs. Energy price risk is managed through short-term commodity hedges. AWAC does not hedge its aluminium price risk.

Commodity Price Risk

A table showing the movement in the selling price of aluminium over the last five years is set
out below.

AVERAGE QUARTERLY PRICES



|                       |  |                                    
|---------------------- |  | -----------------------------------
|Financial Year Ended   |  | AluminiumLondonMetal ExchangeUS$/lb
|December 31, 2001      |  |                                    
|First Quarter          |  | 0.70                               
|Second Quarter         |  | 0.68                               
|Third Quarter          |  | 0.63                               
|Fourth Quarter         |  | 0.60                               
|                       | 
|December 31, 2002      |  |                                    
|First Quarter          |  | 0.63                               
|Second Quarter         |  | 0.62                               
|Third Quarter          |  | 0.59                               
|Fourth Quarter         |  | 0.61                               
|                       | 
|December 31, 2003      |  |                                    
|First Quarter          |  | 0.63                               
|Second Quarter         |  | 0.63                               
|Third Quarter          |  | 0.64                               
|Fourth Quarter         |  | 0.68                               
|                       | 
|December 31, 2004      |  |                                    
|First Quarter          |  | 0.76                               
|Second Quarter         |  | 0.77                               
|Third Quarter          |  | 0.78                               
|Fourth Quarter         |  | 0.83                               
|                       | 
|December 31, 2005      |  |                                    
|First Quarter          |  | 0.86                               
|Second Quarter         |  | 0.81                               
|Third Quarter          |  | 0.84                               
|Fourth Quarter         |  | 0.94                               
|                       | 
|Prices on May 24, 2006 |  | 1.29                               

As at December 31, 2005, the group had no outstanding hedge contracts over future sales of alumina or
aluminium.



- 77 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Exchange Rate Risk

Foreign
currency risk relates to Aluminas exposure to changes in exchange rates. Aluminas revenue streams were significantly derived from the sale of its commodity production in US dollars and the amount of Australian dollar revenue it would
receive fluctuated with the moving AUD/USD exchange rate.

Interest rate hedging

Interest rate risk refers to Aluminas exposure to movements in interest rates. Alumina is primarily exposed to interest rate risk on its outstanding
interest bearing liabilities. As the interest rates fluctuate, the amount of interest payable on debt balances where the interest rate is not fixed will also fluctuate.

Interest rate risk

As at December 31, 2005 the group had short term bank debt outstanding
totaling A$478.7 million or US$351.0 million which is due in December 2006. It is intended this debt will be refinanced prior to maturity and converted to medium and short term bank debt.

As at December 31, 2004 the group had short term bank debt outstanding totaling A$397.9 million or US$311.0 million which was refinanced in December
2005.

Interest rate and cross-currency swaps

At December 31, 2005 and at December 31 2004, Alumina had no outstanding interest rate hedging contracts in relation to its debt.

As at 31 December 2005 and at December 31 2004, the group had no cross currency swaps in place.

Qualitative Information About Market Risk

Qualitative information on price risk management, and commodity and
currency hedging, is included in the discussion above in Item 11 Quantitative Information on Price Risk Management. Qualitative information on treasury management and exchange rate and interest rate risk is discussed in Item 5B
Operating and Financial Review and Prospects  Liquidity and Capital Resources.



- 78 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

A. Evaluation of Disclosure Controls and Procedures

For its fiscal year 2005, Alumina management, including the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the
effectiveness of the design and operation of Aluminas disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that the material financial and non-financial information required to be disclosed in Form 20-F
and filed with the U.S. Securities and Exchange Commission is recorded, processed, summarized and reported in a timely manner. The evaluation was performed under the supervision of, and was reviewed by, our Chief Executive Officer and our Chief
Financial Officer. In designing and evaluating the disclosure controls and procedures, Alumina management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute,
assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of the possible controls and procedures. Based on the foregoing, Aluminas
management, including Chief Executive Officer and Chief Financial Officer, concluded that Aluminas disclosure controls and procedures were effective as of December 31, 2005.

B. Internal Controls

Alumina management, including the Chief Executive Officer and Chief Financial
Officer, have reviewed whether or not there have been significant changes in internal controls or in other factors that could significantly affect the internal controls of Alumina subsequent to the date of their most recent evaluation. Based on that
review, the Chief Executive Officer and Chief Financial Officer have concluded that there have been no such significant changes.

There
have been no changes in Aluminas internal control over financial reporting during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, Aluminas internal control over
financial reporting.



- 79 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ITEM 16.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The board has determined that Mr Donald M Morley is an
audit committee financial expert as required by the New York Stock Exchange listing standards. Mr Morley is not independent under New York Stock Exchange rules until October 31, 2005 which was three years from the end of his
employment with the Company. Mr Morley is from November 2005 considered independent under the independence requirements of the New York Stock Exchange corporate governance standards. Although the board of directors has determined that Mr Morley has
the requisite attributes defined under the rules of the Securities and Exchange Commission, his responsibilities are the same as those of the other audit committee members. He is not an auditor or accountant, does not perform field work
and is not a full-time employee. The SEC has determined that an audit committee member who is designated as an audit committee financial expert will not be deemed to be an expert for any purpose as a result of being identified as an
audit committee financial expert. The audit committee is responsible for oversight of management in the preparation of our financial statements and financial disclosures. The audit committee relies on the information provided by management and the
independent auditors. The audit committee does not have the duty to plan or conduct audits or to determine that our financial statements and disclosures are complete and accurate. A copy of our Audit Committee Charter is available from our web site
at www.aluminalimited.com. This link is an inactive textual link for reference only.

ITEM 16B. CODE OF ETHICS

Alumina has adopted a code of conduct that applies to its directors, executive
officers and employees. The Code of Conduct covers matters such as compliance with laws and regulations, protection of Aluminas assets, conflict of interest, protection of corporate privilege of information, maintenance of records and
reporting of questionable activities in good faith.

During 2005 the following amendments were made to Alumina Limiteds code of
conduct:



| |  |  | Any request for a waiver of the provisions of this Code may only be considered by the Companys Board of Directors. Any waiver granted will be promptly disclosed on the
Companys website.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Any suspected violations of this Code should be reported promptly to the Chairman of the Companys Board of Directors. Violations will be investigated by the Board or persons
designated by the Board and appropriate action will be taken in the event of any violations of the Code.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

This code of
conduct is available from our web site at www.aluminalimited.com. This link is an inactive textual link for reference only.



- 80 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Summary of Fees



|                                                                                               |  |           |  |     
|---------------------------------------------------------------------------------------------- |  | --------- |  | ----
|                                                                                               |  | $Thousand
|                                                                                               |  | 2005      |  | 2004
|(a)    Fees for audit or review of the parent entity or any entity in the consolidated entity: |  |           |  |     
|Audit of parent entity  PricewaterhouseCoopers  fees for annual audit                        |  | 283       |  | 252 
|Additional 2003 costs incurred in 2004                                                         |  |          |  | 2   
|Audit of Annual Report on US Form 20-F  fees for annual audit                                 |  | 105       |  | 112 
|Additional costs due to changes in accounting standards (principally the transition to A-IFRS) |  | 321       |  | 30  
|                                                                                               |  |           |  |     
|                                                                                               |  | 709       |  | 396 
|                                                                                               |  |           |  |     
|(b)    Remuneration for other assurance services:                                              |  |           |  |     
|Other                                                                                          |  |          |  | 5   
|                                                                                               |  |          
|(c)    Remuneration for taxation services:                                                     |  |           |  |     
|Overseas tax services                                                                          |  | 101       |  | 174 
|                                                                                               |  |           |  |     
|Total                                                                                          |  | 810       |  | 575 
|                                                                                               |  |           |  |     

Audit Fees

The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for the
audit of the annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filing engagements for those fiscal years are approximately $283,000 and $254,000, respectively.

Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of Aluminas
financial statements and not reported under Audit Fees are $105,000 and $112,000 respectively. The nature of services comprising the fees disclosed under this category were the audit of the 20-F.

Tax Fees

The
aggregate fees billed in each of the last two fiscal years for tax services by the principal accountant that are not related to the performance of the audit or review of Aluminas financial statements and are not reported under Audit Fees are
$101,000 and $174,000 respectively. The nature of services comprising the fees disclosed under this category are for tax compliance work in relation to Aluminas significant subsidiaries incorporated in the UK and the Netherlands.

All Other Fees

The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported under Audit Fees, Audit-Related Fees and Tax Fees are $321,000 and $35,000,
respectively. The nature of services comprising the fees disclosed under this category is advice on the application of A-IFRS, including USGAAP and International Financial Reporting Standards and other sundry agreed upon procedures engagements.



- 81 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



Pre-Approval Policies

The policy Alumina has adopted for pre-approval of non-audit services to be performed by our independent auditor, PricewaterhouseCoopers (PwC) is as follows:



| |  |  | PwC services which have fees of up to A$100,000 shall require the prior approval of the Audit Committee Chairman. Such approval shall include the scope of the services and the
approximate amount of fees and shall be reported to the next Audit Committee meeting;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For PwC services of more than A$100,000 and less than A$250,000, the provision of such services requires the prior approval of the Audit Committee;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | For PwC services of more than A$250,000, the proposed services are to be put to competitive tender with requirement for CFO, CEO and Audit Committee Chairmans approval of
inclusion of PwC in tender list. The provision of such services also require the prior approval of the Audit Committee.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 16D. EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY ALUMINA AND AFFILIATED PURCHASERS

Not applicable.



- 82 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ITEM 17. FINANCIAL STATEMENTS

Not applicable, as Alumina complies with Item 18.



- 83 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL STATEMENTS

ITEM 18. FINANCIAL STATEMENTS

Financial Statements and Financial Statement Schedules

The attached financial statements and financial statement schedules, pages F1-F88, with a full index on page F2, together with the Reports of Independent
Accountants thereon, are filed as part of this Annual Report and are incorporated herein by reference.



|                                                        |  |           
|------------------------------------------------------- |  | ----------
|Income Statements                                       |  | F-3       
|                                                        | 
|Balance Sheets                                          |  | F-4       
|                                                        | 
|Statements of Changes in Equity                         |  | F-5       
|                                                        | 
|Cash Flow Statements                                    |  | F-6       
|                                                        | 
|Notes to Consolidated Financial Statements              |  | F-7  F-56
|                                                        | 
|Report of Independent Registered Public Accounting Firm |  | F-57      
|                                                        | 
|Schedule A  AWAC                                       |  |           
|                                                        | 
|Report of Independent Registered Public Accounting Firm |  | F-58      
|                                                        | 
|Combined Balance Sheets                                 |  | F-59      
|                                                        | 
|Combined Statements of Income                           |  | F-60      
|                                                        | 
|Combined Statements of Cash Flows                       |  | F-61      
|                                                        | 
|Notes to Combined Financial Statements                  |  | F-62-F-85 



- 84 -



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



ITEM 19. EXHIBITS

Exhibit 1  Constitution of Alumina*

Exhibit 4  Material contracts 4.1The Alcoa World Alumina and Chemicals (AWAC) Joint Venture Agreements (incorporated* by reference to Exhibit 4
to Alumina Limiteds (formerly known as WMC Limited) Annual Report on Form 20-F for the fiscal year ended December 31, 2001, as filed with the Commission on April 4, 2002.). These Agreements comprise:



| | 4.1.1 | Heads of Agreement, dated July 6, 1994 between Aluminum Company of America and Western Mining Corporation Holdings Limited.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------



| | 4.1.2 | Charter of the Strategic Council, dated December 21, 1994 between Aluminum Company of America and Western Mining Corporation Holdings Limited.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.3 | Formation Agreement, dated December 21, 1994 among Aluminum Company of America, Alcoa International Holdings Corporation, ASC Alumina Inc., Western Mining Corporation Holdings
Limited, Westminer International Holdings Limited and WMC Alumina (USA) Inc.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.4 | Amended and Restated Limited Liability Company Agreement of Alcoa Alumina & Chemicals, L.L.C., dated December 31, 1994 among Aluminum Company of America, ASC Alumina
Inc., Westminer International Holdings Limited and WMC Alumina (USA) Inc.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.5 | Loan Agreement, dated January 3, 1995 between Alcoa Alumina & Chemicals, L.L.C. and WMC Alumina (USA) Inc.
| | ----- | ----------------------------------------------------------------------------------------------------------



| | 4.1.6 | Administrative and Services Agreement, dated January 1, 1995 between Alcoa Alumina & Chemicals, L.L.C. and Aluminum Company of America.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.7 | AAC-ACOA Employee Services Agreement dated January 1, 1995 between Alcoa Alumina & Chemicals, L.L.C. and Aluminum Company of America.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.8 | WMC-ACOA Employee Services Agreement dated January 1, 1995 between Aluminum Company of America and Western Mining Holdings Limited.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------



| | 4.1.9 | Master Hedging Agreement dated December 31, 1994 among Aluminum Company of America, Alcoa of Australia Limited, Alcoa Alumina & Chemicals L.L.C., Suriname Aluminum
Company L.L.C. and Alcoa Minerals of Jamaica.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.10 | Assignment Agreement dated February 1, 1995 among Aluminum Company of America and Alcoa Alumina & Chemicals, L.L.C. regarding the Bauxite Contract with Compagnie des
Bauxites de Guinée.
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1.11 | Abalco Shareholders Agreement, dated March 29, 1995 among Alcoa Alumina & Chemicals, L.L.C., Alcoa Brazil Holdings Company and Westminer International (UK) Limited.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.2 | Demerger Deed between Alumina Limited and WMC Resources Limited dated March 5, 2003.*
|--- | -------------------------------------------------------------------------------------



|4.3 | Transitional Services Agreement between Alumina Limited and WMC Resources Limited dated 18 December 2002.*
|--- | ----------------------------------------------------------------------------------------------------------



|4.4 | Management Contracts
|--- | --------------------



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



Exhibit 8  Significant Subsidiaries

Alumina Limiteds significant subsidiaries are as follows:



| |  |  | Alumina International Holdings Pty Ltd  Incorporated in Australia this company holds all entities in the Alumina Groups AWAC joint venture (except for Alcoa of
Australia Ltd, see below) through its indirect 40% interest in each of Alcoa World Alumina LLC, Alcoa Caribbean Holdings LLC, Alumina Espanola SA, Alcoa Chemie Nederland BV, Alcoa Chemie GMBH and Abalco SA. It is wholly owned by Alumina.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Alcoa of Australia Ltd  Incorporated in Australia, and 40% owned by Alumina, this company is a significant entity in the Alumina Groups AWAC joint venture, with
integrated bauxite mining, alumina refining and aluminium smelting facilities in Australia.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Exhibit 12  Certifications



|12.1 | Certification by CEO, John Marlay
|---- | ---------------------------------



|12.2 | Certification by CFO, Ken Dean
|---- | ------------------------------

Exhibit 13  Certifications



|13.1 | Certification by CEO, John Marlay
|---- | ---------------------------------



|13.2 | Certification by CFO, Ken Dean
|---- | ------------------------------



* Previously filed as an exhibit to Alumina Limiteds Form 20-F for year ended 31 December 2002



---

##### Table of Contents

ALUMINA LIMITED

2005 FORM 20-F



FINANCIAL STATEMENTS

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorised.



|                   |  |                 |  |                        
|------------------ |  | --------------- |  | -----------------------
|                   |  | ALUMINA LIMITED
|                   |  |                
|                   |  | Signed:         |  | /s/  Kenneth Dean      
|                   |  |                
|Date: June 6, 2006 |  |                 |  |                        
|                   |  |                
|                   |  | Name:           |  | Kenneth Dean           
|                   |  | Title:          |  | Chief Financial Officer



---

##### Table of Contents

ALUMINA LIMITED

(Australian Business Number 85 004 820 419)

AND CONTROLLED ENTITIES

U.S. FINANCIAL REPORT

AS OF AND
FOR THE YEAR ENDED

31 DECEMBER 2005

Prepared in accordance

with Australian equivalents to

International Financial Reporting Standards (A-IFRS)

except where noted

Amounts are stated in Australian dollars (A$) except where noted



---

##### Table of Contents

Alumina Limited and controlled entities

Financial report for the year ended 31 December 2005



|                                |  |                                                             |  |   
|------------------------------- |  | ----------------------------------------------------------- |  | --
|CONTENTS                        |  | PAGE                                                       
|Financial statements            |  |                                                            
|Income statements               |  | 3                                                          
|Balance sheets                  |  | 4                                                          
|Statements of changes in equity |  | 5                                                          
|Cash flow statements            |  | 6                                                          
|Notes                           |  |                                                            
|1                               |  | Summary of significant accounting policies                  |  | 7 
|2                               |  | Financial risk management                                   |  | 14
|3                               |  | Critical accounting estimates and assumptions               |  | 15
|4                               |  | Revenue                                                     |  | 15
|5                               |  | Other income                                                |  | 15
|6                               |  | Expenses                                                    |  | 15
|7                               |  | Income tax expense                                          |  | 16
|8                               |  | Earnings per share                                          |  | 17
|9                               |  | Dividends                                                   |  | 18
|Balance sheet                   |  |                                                            
|10                              |  | Current assets - cash and cash equivalents                  |  | 19
|11                              |  | Current assets - receivables                                |  | 19
|12                              |  | Investments accounted for using the equity method           |  | 20
|13                              |  | Non-current assets - property, plant & equipment            |  | 22
|14                              |  | Current liabilities - payables                              |  | 22
|15                              |  | Current liabilities - interest bearing liabilities          |  | 22
|16                              |  | Current liabilities - provisions                            |  | 22
|17                              |  | Non-current liabilities - provisions                        |  | 22
|Equity                          |  |                                                            
|18                              |  | Contributed equity                                          |  | 23
|19                              |  | Share-based payments                                        |  | 23
|20                              |  | Reserves, retained profits and treasury shares              |  | 26
|Other                           |  |                                                            
|21                              |  | Notes to the statements of cash flows                       |  | 27
|22                              |  | Financing facilities                                        |  | 27
|23                              |  | Financial instruments                                       |  | 28
|24                              |  | Investments in controlled entities                          |  | 29
|25                              |  | Contingent liabilities                                      |  | 31
|26                              |  | Commitments for expenditure                                 |  | 31
|27                              |  | Related party transactions                                  |  | 32
|28                              |  | Key management personnel disclosures                        |  | 33
|29                              |  | Remuneration of Auditors                                    |  | 43
|30                              |  | Events occurring after balance sheet date                   |  | 43
|31                              |  | Financial reporting by segment                              |  | 44
|32                              |  | Explanation of Transition to Australian equivalents to IFRS |  | 45
|33                              |  | Reconciliation to US GAAP                                   |  | 51
|34                              |  | Recently issued Financial Accounting Standards              |  | 56
|35                              |  | (Schedule I)                                                |  | 56
|                                |  | Report of Independent Registered Public Accounting Firm     |  | 57

The financial report covers the consolidated entity of Alumina Limited and its subsidiaries. The financial report
is presented in the Australian currency.

Alumina Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:

Alumina Limited

Level 12, IBM Centre

60 City Road, Southbank

Victoria 3006

Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum cost to the company. All press releases, financial reports and other information are
available at our Shareholders Centre on our website: www.aluminalimited.com.



F-2



---

##### Table of Contents

Alumina Limited and controlled entities

Income statements for the year ended 31 December 2005



|                                                                                                                     |  |       |      |          |   |      |       |  
|-------------------------------------------------------------------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ----- | -
|                                                                                                                     |  | Notes |      | $Million |  
|                                                                                                                     |  |       | 2005 |          |   | 2004 |      
|Revenue from continuing operations                                                                                   |  | 4     |      | 4.0      |   |      | 8.9   |  
|Other income                                                                                                         |  | 5     |      |         |   |      | 44.5  |  
|General and administrative expenses                                                                                  |  |       |      | (10.2    | ) |      | (8.7  | )
|Other expenses                                                                                                       |  | 6     |      |         |   |      |      |  
|Finance costs                                                                                                        |  | 6(a)  |      | (15.3    | ) |      | (8.1  | )
|Share of net profits of associates accounted for using the equity method                                             |  | 12(h) |      | 337.1    |   |      | 283.5 |  
|                                                                                                                     |  |       |      |          |   |      |       |  
|Profit from continuing operations before income tax                                                                  |  |       |      | 315.6    |   |      | 320.1 |  
|Income tax expense                                                                                                   |  | 7(a)  |      |         |   |      | (3.7  | )
|                                                                                                                     |  |       |      |          |   |      |       |  
|Net profit attributable to members of Alumina Limited                                                                |  |       |      | 315.6    |   |      | 316.4 |  
|                                                                                                                     |  |       |      |          |   |      |       |  
|Earnings per share for profit from continuing operations attributable to the ordinary equity holders of the Company: |  |       |      |          |   |      |       |  
|Basic earnings per share                                                                                             |  | 8     |      | 27.1c    |   |      | 27.2c |  
|Diluted earnings per share                                                                                           |  | 8     |      | 27.1c    |   |      | 27.2c |  

The above income statements should be read in conjunction with the accompanying notes.



F-3



---

##### Table of Contents

Alumina Limited and controlled entities

Balance sheets as at 31 December 2005



|                                                  |  |       |      |          |   |      |         |  
|------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ------- | -
|                                                  |  | Notes |      | $Million |  
|                                                  |  |       | 2005 |          |   | 2004 |        
|CURRENT ASSETS                                    |  |       |      |          |   |      |         |  
|Cash and cash equivalents                         |  | 10    |      | 15.2     |   |      | 117.9   |  
|Receivables                                       |  | 11    |      | 0.5      |   |      | 0.8     |  
|Deferred tax assets                               |  |       |      | 2.1      |   |      | 2.1     |  
|Other financial assets                            |  |       |      | 0.5      |   |      |        |  
|                                                  |  |       |      |          |   |      |         |  
|Total current assets                              |  |       |      | 18.3     |   |      | 120.8   |  
|                                                  |  |       |      |          |   |      |         |  
|NON-CURRENT ASSETS                                |  |       |      |          |   |      |         |  
|Investments accounted for using the equity method |  | 12    |      | 1,994.9  |   |      | 1,702.1 |  
|Property, plant and equipment                     |  | 13    |      | 0.3      |   |      | 0.3     |  
|                                                  |  |       |      |          |   |      |         |  
|Total non-current assets                          |  |       |      | 1,995.2  |   |      | 1,702.4 |  
|                                                  |  |       |      |          |   |      |         |  
|TOTAL ASSETS                                      |  |       |      | 2,013.5  |   |      | 1,823.2 |  
|                                                  |  |       |      |          |   |      |         |  
|CURRENT LIABILITIES                               |  |       |      |          |   |      |         |  
|Payables                                          |  | 14    |      | 3.1      |   |      | 2.4     |  
|Interest-bearing liabilities                      |  | 15    |      | 478.7    |   |      | 397.9   |  
|Provisions                                        |  | 16    |      | 0.1      |   |      | 0.1     |  
|Other                                             |  |       |      | 1.2      |   |      | 10.7    |  
|                                                  |  |       |      |          |   |      |         |  
|Total current liabilities                         |  |       |      | 483.1    |   |      | 411.1   |  
|                                                  |  |       |      |          |   |      |         |  
|NON-CURRENT LIABILITIES                           |  |       |      |          |   |      |         |  
|Provisions                                        |  | 17    |      | 0.2      |   |      | 0.2     |  
|                                                  |  |       |      |          |   |      |         |  
|Total non-current liabilities                     |  |       |      | 0.2      |   |      | 0.2     |  
|                                                  |  |       |      |          |   |      |         |  
|TOTAL LIABILITIES                                 |  |       |      | 483.3    |   |      | 411.3   |  
|                                                  |  |       |      |          |   |      |         |  
|NET ASSETS                                        |  |       |      | 1,530.2  |   |      | 1,411.9 |  
|                                                  |  |       |      |          |   |      |         |  
|EQUITY                                            |  |       |      |          |   |      |         |  
|Parent entity interest:                           |  |       |      |          |   |      |         |  
|Contributed equity                                |  | 18    |      | 415.7    |   |      | 404.1   |  
|Treasury shares                                   |  | 20(f) |      | (0.6     | ) |      | (0.6    | )
|Reserves:                                         |  |       |      |          |   |      |         |  
|- Group                                           |  |       |      | 41.4     |   |      | 52.6    |  
|- Associates                                      |  | 12(d) |      | 37.5     |   |      | 2.4     |  
|Retained profits:                                 |  |       |      |          |   |      |         |  
|- Group                                           |  | 20    |      | 608.7    |   |      | 441.5   |  
|- Associates                                      |  | 12(c) |      | 427.5    |   |      | 511.9   |  
|                                                  |  |       |      |          |   |      |         |  
|TOTAL EQUITY                                      |  |       |      | 1,530.2  |   |      | 1,411.9 |  
|                                                  |  |       |      |          |   |      |         |  

The above balance sheets should be read in conjunction with the accompanying notes.



F-4



---

##### Table of Contents

Alumina Limited and controlled entities

Statements of changes in equity for the year ended 31 December 2005



|                                                                      |  |       |      |          |   |      |         |  
|--------------------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ------- | -
|                                                                      |  | Notes |      | $Million |  
|                                                                      |  |       | 2005 |          |   | 2004 |        
|Total equity at the beginning of the year                             |  |       |      | 1,411.9  |   |      | 1,307.0 |  
|                                                                      |  |       |      |          |   |      |         |  
|Adjustment on adoption of AASB 2, net of tax, to Reserves             |  | 20(c) |      | (0.2     | ) |      | 1.6     |  
|Adjustment on adoption of AASB 139, net of tax to Reserves            |  | 20(b) |      | 35.6     |   |      |        |  
|Exchange differences on translation of foreign operations             |  | 20(a) |      | (11.5    | ) |      | 1.3     |  
|                                                                      |  |       |      |          |   |      |         |  
|Net income recognised directly in equity                              |  |       |      | 23.9     |   |      | 2.9     |  
|Profit from continuing operations after income tax                    |  |       |      | 315.6    |   |      | 316.4   |  
|                                                                      |  |       |      |          |   |      |         |  
|Total recognised income and expense for the year                      |  |       |      | 339.5    |   |      | 319.3   |  
|                                                                      |  |       |      |          |   |      |         |  
|Transactions with equity holders in their capacity as equity holders: |  |       |      |          |   |      |         |  
|Contributions of equity, net of transaction costs                     |  |       |      | 11.6     |   |      | 19.3    |  
|Treasury shares                                                       |  |       |      |         |   |      | (0.6    | )
|Dividends provided for or paid                                        |  |       |      | (232.8   | ) |      | (233.1  | )
|                                                                      |  |       |      |          |   |      |         |  
|                                                                      |  |       |      | (221.2   | ) |      | (214.4  | )
|                                                                      |  |       |      |          |   |      |         |  
|Total equity at the end of the financial year                         |  |       |      | 1,530.2  |   |      | 1,411.9 |  
|                                                                      |  |       |      |          |   |      |         |  

The above statements of changes in equity should be read in conjunction with the accompanying notes.



F-5



---

##### Table of Contents

Alumina Limited and controlled entities

Cash Flow Statements for the year ended 31 December 2005



|                                                                          |  |       |      |          |   |      |        |  
|------------------------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ------ | -
|                                                                          |  | Notes |      | $Million |  
|                                                                          |  |       | 2005 |          |   | 2004 |       
|CASH FLOWS FROM OPERATING ACTIVITIES                                      |  |       |      |          |   |      |        |  
|Payments to suppliers and employees (inclusive of goods and services tax) |  |       |      | (14.3    | ) |      | (13.5  | )
|GST refund received                                                       |  |       |      | 0.5      |   |      | 0.3    |  
|Dividends received from associates                                        |  |       |      | 95.9     |   |      | 160.4  |  
|Interest received                                                         |  |       |      | 4.5      |   |      | 8.6    |  
|Interest paid                                                             |  |       |      | (14.3    | ) |      | (7.8   | )
|Income taxes refunded/(paid)                                              |  |       |      | 0.1      |   |      | 0.5    |  
|Other                                                                     |  |       |      | (0.4     | ) |      |       |  
|                                                                          |  |       |      |          |   |      |        |  
|Net cash inflow from operating activities                                 |  | 21(a) |      | 72.0     |   |      | 148.5  |  
|                                                                          |  |       |      |          |   |      |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                      |  |       |      |          |   |      |        |  
|Proceeds from sale of Specialty Chemicals Business                        |  |       |      |         |   |      | 109.0  |  
|Proceeds from share of premium reduction in associates                    |  |       |      |         |   |      | 2.0    |  
|Payments for investment in associates                                     |  |       |      | (8.2     | ) |      | (41.1  | )
|Other                                                                     |  |       |      |         |   |      | 3.5    |  
|                                                                          |  |       |      |          |   |      |        |  
|Net cash (outflow)/inflow from investing activities                       |  |       |      | (8.2     | ) |      | 73.4   |  
|                                                                          |  |       |      |          |   |      |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                      |  |       |      |          |   |      |        |  
|Proceeds from issues of shares                                            |  |       |      | 11.6     |   |      | 19.3   |  
|Proceeds from borrowings                                                  |  |       |      | 52.8     |   |      | 10.1   |  
|Repayment of borrowings                                                   |  |       |      |         |   |      | (64.7  | )
|Dividends paid                                                            |  |       |      | (232.8   | ) |      | (233.1 | )
|                                                                          |  |       |      |          |   |      |        |  
|Net cash outflow from financing activities                                |  |       |      | (168.4   | ) |      | (268.4 | )
|                                                                          |  |       |      |          |   |      |        |  
|Net decrease in cash and cash equivalents                                 |  |       |      | (104.6   | ) |      | (46.5  | )
|Cash and cash equivalents at the beginning of the financial year          |  |       |      | 117.9    |   |      | 165.3  |  
|Effects of exchange rate changes on cash and cash equivalents             |  |       |      | 1.9      |   |      | (0.9   | )
|                                                                          |  |       |      |          |   |      |        |  
|Cash and cash equivalents at the end of the financial year                |  | 10(a) |      | 15.2     |   |      | 117.9  |  
|                                                                          |  |       |      |          |   |      |        |  

The above cash flow statements should be read in conjunction with the accompanying notes.



F-6



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31
December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

The
principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes financial statements
for the consolidated entity consisting of Alumina Limited and its subsidiaries.



|(a) | BASIS OF PREPARATION
|--- | --------------------

This general purpose
financial report has been prepared in conformity with International Financial Reporting Standards as adopted by Australia (A-IFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations
and the Corporations Act 2001. A reconciliation of the differences between these principles and those applicable under A-IFRS and those generally accepted in the United States of America (US GAAP), is included as Note 33.

Compliance with IFRS

Australian
Accounting Standards include Australian equivalents to International Financial Reporting Standards. Compliance with A-IFRS ensures the consolidated financial statements and notes of Alumina Limited comply with International Financial Reporting
Standards (IFRS).

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards

These financial statements are the first Alumina Limited financial statements to be prepared in accordance with A-IFRS. AASB 1
First-time Adoption of Australian Equivalents to International Financial Reporting Standardshas been applied in preparing these financial statements.

Financial statements of Alumina Limited until 31 December 2004 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from
A-IFRS. When preparing Alumina Limited 2005 financial statements, management has amended certain accounting, valuation and consolidation methods applied in the AGAAP financial statements to comply with A-IFRS. With the exception of financial
instruments, the comparative figures in respect of 2004 were restated to reflect these adjustments. The Group has taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments: Disclosure and Presentationand AASB
139 Financial Instruments: Recognition and Measurementfrom 1 January 2005.

Reconciliations and descriptions of the effect of
transition from previous AGAAP to A-IFRS on the Groups equity and its net income are given in Note 32.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets
and liabilities including derivative instruments at fair value through profit and loss.

Critical accounting estimates

The preparation of financial statements in conformity with A-IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Groups accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in Note 3.



|(b) | PRINCIPLES OF CONSOLIDATION
|--- | ---------------------------

(i) Subsidiaries

The consolidated financial report is prepared on a consolidated entity basis for Alumina Limited (parent entity) and the entities it
controls (controlled entities). A-IFRS defines controlled entities as existing where the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities,
generally accompanying a shareholding of more than one-half of the voting rights. All material controlled entities in the consolidated entity are companies. The economic entity consisting of Alumina Limited and its controlled entities is referred to
in the financial report as the Group. In preparing the consolidated financial statements, the effects of all transactions between entities within the Group are eliminated in full, including unrealised profits and losses on transactions
with associates accounted for on an equity basis.

The purchase method of accounting is used to account for the acquisition of subsidiaries
by the Group.

Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement
from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.



F-7



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------

(ii) Associates

Associates are those entities over which the consolidated entity exercises significant influence but not
control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the financial statements of the parent entity using the cost method and in the consolidated financial
statements using the equity method of accounting, after initially being recognised at cost. The consolidated entitys investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.

The Groups share of its associates post acquisition profits or losses is recognised in the income statement, and its share of post-acquisition
movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entitys income statement,
while in the consolidated financial statements they reduce the carrying amount of the investment.

When the Groups share of losses in
an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the
Group.

The Group uses the cost method to account for any entities of which it holds less than 20% ownership.



|(c) | INCOME TAX
|--- | ----------

The income tax expense or revenue for
the period is the tax payable on the current periods taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax
bases of assets and liabilities and their carrying amounts in the financial statements, and changes attributable to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences using the balance sheet liability method, at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax assets or liabilities. An exception is made
for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are
recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled
entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

Tax consolidation legislation

Alumina Limited and its wholly-owned Australian controlled entities have implemented tax consolidation under the applicable legislation as of 1 January 2004.

The head entity, Alumina Limited, and the controlled entities in the tax consolidated Group continue to account for their own current and deferred tax amounts. These tax amounts are measured using the separate tax
payer within Group approach.

In addition to its own current and deferred tax amounts, Alumina Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group.

Assets and liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement
are disclosed in Note 7.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

The company completed a detailed review of
the tax bases and carrying value of its investment in associates and concluded that recognition of deferred taxes was not required at transition.



F-8



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



|(d) | FOREIGN CURRENCY TRANSLATION
|--- | ----------------------------

Functional and
presentation currency

Items included in the financial statements of each of the Groups entities are measured using the currency
of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is Alumina Limiteds functional and presentation currency.

Transactions and balances

Foreign currency transactions are initially translated into Australian currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment
hedges.

Controlled foreign entities

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:



| |  |  | assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | income and expenses for each income statement are translated at average rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all resulting exchange differences are recognised as a separate component of equity.
| | - |  | ------------------------------------------------------------------------------------

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to
the translation reserve in shareholders equity. When a foreign operation is sold or borrowings are repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate.



|(e) | PROPERTY, PLANT AND EQUIPMENT
|--- | -----------------------------

Owned Assets

Items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items.

Leased Assets

The company leases office facilities under an operating lease agreement. Payments made under this agreement are recognised in the income statement on a
straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease.



|(f) | RECEIVABLES
|--- | -----------

All trade debtors are recognised at
amortised cost less provision for doubtful debts, which in practice will equal the amounts receivable upon settlement. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A
provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the
assets carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.



|(g) | CASH AND CASH EQUIVALENTS
|--- | -------------------------

Cash and cash
equivalents comprise cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.



|(h) | IMPAIRMENT OF ASSETS
|--- | --------------------

Assets that have an
indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).



F-9



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



|(i) | ACQUISITION OF ASSETS
|--- | ---------------------

The purchase method of
accounting is used for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or
liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of
exchange, unless the published market price is an unreliable indicator of fair value and other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised
directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as
goodwill (refer to Note 1(j). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and
measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future
are discounted to their present value as at the date of exchange. The discount rate used is the entitys incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable
terms and conditions.



|(j) | INTANGIBLE ASSETS
|--- | -----------------

Goodwill

Business combinations prior to 1 January 2004

Alumina has elected not to apply AASB 3 Business Combinations retrospectively to business combinations that occurred before the date of transition to A-IFRS (1 January 2004). Alumina has applied the same classification as used under its
previous GAAP financial report. There were no assets and liabilities recognised under previous GAAP that did not qualify for recognition as an asset or liability under A-IFRS. There were no resulting changes in the subsequent measurement of some
assets and liabilities on the transition to A-IFRS. The carrying amount of goodwill in the opening A-IFRS balance sheet is its carrying amount under previous GAAP at the date of transition to A-IFRS. There were no adjustments required to goodwill in
the opening A-IFRS balance sheet.

Business combinations since 1 January 2004

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary/associate at
the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates.

Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes
in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

Negative goodwill arising on an acquisition is recognised directly in profit or loss.



|(k) | DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
|--- | ---------------------------------------------

Depreciation is calculated on a straight line basis to write off the net cost of each item of property, plant and equipment (excluding land and investment properties) over its expected useful life to the consolidated entity.



|                                     |  |        
|------------------------------------ |  | -------
|Office furniture                     |  | 8 years
|Computers and other office equipment |  | 4 years



|(l) | BORROWINGS
|--- | ----------

Borrowings are initially recognised at
fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the amortised cost (net of transaction costs) and the redemption amount is recognised in the income statement over the
period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.



F-10



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



|(m) | BORROWING COSTS
|--- | ---------------

Borrowing costs comprise interest
payable on borrowings calculated using the effective interest rate method and certain foreign exchange differences arising from foreign currency borrowings. Borrowing costs incurred for the construction of any qualifying asset are capitalised during
the time required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.



|(n) | TRADE AND OTHER PAYABLES
|--- | ------------------------

These amounts represent
liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. These amounts are unsecured and are usually paid within thirty days of recognition.



|(o) | REVENUE
|--- | -------

Revenue is measured at the fair value of
the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

Interest income is recognised in the income statement as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entitys right to receive payments is established.



|(p) | EMPLOYEE BENEFITS
|--- | -----------------

(i) Salaries and annual leave

Liabilities for salaries and annual leave are recognised in current provisions (i.e. expected to be settled in 12 months), and are
measured as the amount unpaid at reporting date at expected pay rates in respect of employees services up to that date, including related on-costs.

(ii) Long service leave

Long service leave is an additional form of compensated leave to which
Australian employees become entitled after a qualifying period of generally ten years of continuous service. It accrues at the rate of 1.3 weeks leave per year of service.

A liability for long service leave is recognised in non current provisions (i.e. not expected to be settled within 12 months), and is measured as the present value based on expected pay rates in respect of services
provided by employees up to the reporting date. A discount rate equalling the yield at the balance sheet date on government bonds that have maturity dates approximately to the terms of the Groups obligations is used.

(iii) Share-based payments

Shares
options granted before or after 7 November 2002 and vested before 1 January 2005

No expense is recognised in respect of these
options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital.

Shares options
granted after 7 November 2002 and vested after 1 January 2005

The fair value of options granted is recognised as an employee
benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate
for the term of the option.

Upon the exercise of options, the balance of the share-based payments reserve relating to those options is
transferred to share capital.

The market value of shares issued to employees for no cash consideration under the employee share scheme is
recognised as an employee benefits expense with a corresponding increase in equity when the employees become entitled to the shares.

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become
exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

(iv) Superannuation

Since 27 July 2001, all employer contributions and ongoing management of employees superannuation entitlements have been
managed by the WMC Superannuation Plan, an independently managed sub-plan of the Plum Superannuation Fund, except where the relevant employees elect for those contributions to be paid to an alternate fund. Alumina employees are members of a sub-plan
of the WMC Superannuation Plan, created specifically for Alumina. The plan is an accumulation category plan which offers a minimum company contribution (subject to certain cashing out options and legislation) of 9 per cent of basic salary to
each members account. Members also have the option to make voluntary contributions to their account. Employer contributions to these funds are recognised as an operating cost.



F-11



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------

(v) Defined Benefit Plans

Alumina Limiteds associates have defined benefit plans in place. The associates net
obligation in respect of defined benefit plans, is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to
determine its present value, and the fair value of any plan assets is deducted.

The discount rate is the yield at the balance sheet date on
government bonds that have maturity dates approximating the terms of the associated entitys obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the
income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement.

All actuarial gains and losses are recognised in earnings of the associates.

When the calculation results in plan assets exceeding liabilities to the Group, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any
future refunds from the plan or reductions in future contributions to the plan.

Past service cost is the increase in the present value of
the defined benefit obligation for employee services in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service costs may either be positive
(where benefits are introduced or improved) or negative (where existing benefits are reduced).



|(q) | DERIVATIVES
|--- | -----------

From 1 January 2004 to
31 December 2004

The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 from 1 January 2005.
The Group has applied previous AGAAP in the comparative information on financial instruments within the scope of AASB 132 and AASB 139.

Adjustments on transition date: 1 January 2005

The nature of the main adjustments to make this information comply with
AASB 132 and AASB 139 are that derivatives are measured on a fair value basis. Changes in fair value are either taken to the income statement or an equity reserve. At the date of transition changes in the carrying amounts of derivatives are taken to
retained earnings or reserves, depending on whether the criteria for hedge accounting are satisfied at the transition date.

From
1 January 2005

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value. The method of recognising gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue
to be highly effective in offsetting changes in fair value or cash flows of hedged items.

Cash flow hedge

The portion of a gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge is
recognised directly in equity. The ineffective portion is recognised immediately in the income statement.

Embedded Derivatives

Under A-IFRS, sale and purchase contracts may be considered to have financial derivative instruments embedded within them. This occurs
when future transactions under such contracts are to be executed at prices which will depend on the market prices at the time of specified financial instruments which themselves are not closely related to the commodities which are the subjects of
the contracts. AWAC has in place a number of long term contracts for the purchase of energy which have within their pricing formulae mechanisms to vary the price depending on the LME aluminium price at the time. Such contracts are considered to have
embedded derivatives. A-IFRS requires the future purchases under these contracts to be marked-to-market at each balance date on the basis of the then-current best indicator of future LME aluminium price over the remaining terms of the contracts. The
embedded derivative in relevant AWAC contracts has been assessed and marked to market on the balance date. Changes in the mark to market valuation from the opening of the period to the balance date are accounted for as gains or losses, as
appropriate, in the accounts of the relevant AWAC entity. Alumina Limited accounts for its share of such transactions within its equity share of net profits of associates.



F-12



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



|(r) | DIVIDENDS
|--- | ---------

Provision is made for the amount of any
dividend declared on or before the end of the financial year but not distributed at balance date.



|(s) | EARNINGS PER SHARE
|--- | ------------------

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings
per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.



|(t) | SEGMENT REPORTING
|--- | -----------------

A business segment is a group of
assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular
economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.



|(u) | PROVISIONS
|--- | ----------

Provisions for legal claims and service
warranties are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that
an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be
small.

AWAC is required to rehabilitate bauxite mines and refineries upon cessation of operations.

Closedown and restoration costs include the costs of dismantling and demolition of infrastructure or decommissioning, the removal of residual material and
the remediation of disturbed areas. Closedown and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during the mine development or during the production
phase, based on the net present value of estimated future costs.

The costs are estimated on the basis of a closure model. The cost
estimates are calculated annually during the life of the operation to reflect known developments, and are subject to regular reviews.

The
amortisation or unwinding of the discount applied in establishing the net present value of provisions is charged to the profit and loss account in each accounting period. The amortisation of the discount is shown as a financing item. Other movements
in the provisions for closedown and restoration costs, including those resulting from new disturbance, updated cost estimates, changes to lives of operations and revisions to discount rates are capitalised within fixed assets. These costs are then
depreciated over the lives of the assets to which they relate.

Where rehabilitation is conducted systematically over the life of the
operation, rather than at the time of closure, provision is made for the outstanding continuous rehabilitation work at each balance date. All costs of continuous rehabilitation work are charged to the provision as incurred.



|(v) | CONTRIBUTED EQUITY
|--- | ------------------

Ordinary shares are classified
as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are not included in the cost of the acquisition as part of the purchase consideration.



F-13



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|-- | ------------------------------------------------------



|(w) | NEW ACCOUNTING STANDARDS AND UIG INTERPRETATIONS
|--- | ------------------------------------------------

The standards issued as at 31 December 2005 which are not yet mandatory are:



|      |  |               |  |                                                                                                                                             
|----- |  | ------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|i)    |  | AASB 7:       |  | Financial Instruments  Disclosures                                                                                                         
|ii)   |  | AASB 2005-1:  |  | Amendments to AASB 139: cash flow hedge accounting of forecast intra-group transactions                                                     
|iii)  |  | AASB 2005-4:  |  | Amendments to AASB 139, 132, 1, 1023, and 1038  fair value option                                                                          
|iv)   |  | AASB 2005-6:  |  | Amendments to AASB 3  business combinations involving entities under common control                                                        
|v)    |  | AASB 2005-9:  |  | Amendments to AASB 4, 1023, 139, 142                                                                                                        
|vi)   |  | AASB 2005-10: |  | Amendments to AASB 132, 101, 114, 117, 133, 139, 1, 4, 1023 and 1028  consequential amendments arising as a result of the release of AASB 7
|vii)  |  | AASB 2006-1:  |  | Amendments to AASB 121  clarification regarding monetary items forming part of the net investment in a foreign operation                   
|viii) |  | UIG 4:        |  | Determining whether an asset contains a lease                                                                                               
|ix)   |  | UIG 5:        |  | Rights to interests from decommissioning restoration and environmental rehabilitation funds.                                                

Alumina Limited has not yet adopted these new standards, nor has their impact on the group been
fully assessed.



|(x) | ROUNDING OF AMOUNTS
|--- | -------------------

The company is of a kind
referred to in Class Order 98/0100, issued by the Australian Securities & Investments Commission (ASIC), relating to the rounding off of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest hundred thousand dollars, or as otherwise indicated.



|2. | FINANCIAL RISK MANAGEMENT
|-- | -------------------------

The Groups
activities expose it to a variety of financial risks including market risk, credit risk and interest rate risk. The Groups overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Group.

Risk management is carried out by the Chief Financial Officer under policies
approved by the Board of Directors.



| | (a) | Market risk
| | --- | -----------



| | (i) | Foreign exchange risk
| | --- | ---------------------

Foreign exchange risk arises
when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entitys functional currency. The Group manages this risk by borrowing in US dollars to provide a hedge for its US dollar
denominated assets.

The Group operates internationally and is exposed to foreign exchange risk arising from exposures to various
currencies, especially to the US dollar. The Group does not hedge its exposures other than through the near-term forward purchase of currency to meet operating requirements.



| | (ii) | Price risk
| | ---- | ----------

The Group is exposed to commodity price
risk through its investment in the AWAC joint venture. AWAC manages commodity price risk through long-term purchase contracts for some input costs. Energy price risk is managed through short-term commodity hedges. AWAC does not hedge its Aluminium
price risk.



| | (b) | Credit risk
| | --- | -----------

The Group has a significant
concentration of credit risk to companies controlled by Alcoa Inc. This concentration is accepted as a consequence of the Groups participation in the AWAC joint venture. The Group has policies in place to ensure that sales of products and
services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to financial institutions of high credit quality. The Group has policies that limit the amount of credit exposure to any
one financial institution.



| | (c) | Cash flow and fair value interest rate risk
| | --- | -------------------------------------------

The
Groups interest-rate risk arises from short-term borrowings. When managing interest rate risk, the Group seeks to reduce the overall cost of funds. A preference for floating rate exposure is sought by the Group.



| | (d) | Liquidity risk
| | --- | --------------

Prudent liquidity management
requires maintaining sufficient cash and credit facilities to ensure the Groups commitments and plans can be met. This is managed by maintaining committed undrawn credit facilities to cover reasonably expected forward cash requirements.



F-14



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|3. | CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
|-- | ---------------------------------------------

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Embedded derivatives

The Group has
recognised a liability for derivative financial instruments through its equity investment in AWAC in accordance with AASB 139. In the determination of the fair value of this liability, AWAC has applied management estimates for long term commodity
prices.

Retirement benefit obligations

The Group recognised a net liability for retirement benefit obligations under the defined superannuation arrangements, through its investment in AWAC. All plans are valued in accordance with AASB 119. These valuations
require actuarial assumptions to be made.

Asset retirement obligations

The estimated costs of rehabilitating mined areas and restoring operating sites is reviewed annually and fully provided at the present value. The amount
of obligations recognised includes the costs of mined areas and residue areas rehabilitation and reclamation, plant closure and subsequent monitoring of the environment. Where rehabilitation and remediation is anticipated to occur within the next 12
months the provision is carried as a current liability. Any outflow greater than 12 months is held as a non-current liability.

For mine
reclamation and residue areas the asset retirement obligations are based on detailed studies of useful lives. The provisions have been estimated using existing technology, at current prices inflated by estimated future CPI and discounted at a rate
appropriate for the asset location.



|    |  |                                                                    |  |       |      |          |   |      |      |  
|--- |  | ------------------------------------------------------------------ |  | ----- | ---- | -------- | - | ---- | ---- | -
|    |  |                                                                    |  | Notes |      | $Million |  
|    |  |                                                                    |  |       | 2005 |          |   | 2004 |     
|4.  |  | REVENUE                                                            |  |       |      |          |   |      |      |  
|    |  | From continuing operations                                         |  |       |      |          |   |      |      |  
|    |  | Other revenue                                                      |  |       |      |          |   |      |      |  
|    |  | Interest received/receivable                                       |  |       |      | 4.0      |   |      | 8.9  |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  | Total revenue                                                      |  |       |      | 4.0      |   |      | 8.9  |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|5.  |  | OTHER INCOME                                                       |  |       |      |          |   |      |      |  
|    |  | Net gain on sale of investments in Specialty Chemical assets       |  |       |      |         |   |      | 43.4 |  
|    |  | Foreign exchange gains                                             |  |       |      |         |   |      | 1.1  |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  | Total other income                                                 |  |       |      |         |   |      | 44.5 |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|6.  |  | EXPENSES                                                           |  |       |      |          |   |      |      |  
|    |  |                                                                    |  |      
|    |  | Profit before income tax includes the following specific expenses: |  |       |      |          |   |      |      |  
|    |  |                                                                    |  |      
|    |  | Depreciation on plant and equipment                                |  |       |      |         |   |      | 0.1  |  
|    |  | Finance costs                                                      |  | 6(a)  |      | 15.3     |   |      | 8.1  |  
|    |  | Contributions to the superannuation fund:                          |  |       |      |          |   |      |      |  
|    |  | -accumulation category                                             |  |       |      | 0.2      |   |      | 0.2  |  
|    |  | Operating lease rentals                                            |  |       |      | 0.1      |   |      | 0.1  |  
|    |  |                                                                    |  |      
|(a) |  | Finance costs                                                      |  |       |      |          |   |      |      |  
|    |  | Interest and finance charges paid/payable:                         |  |       |      |          |   |      |      |  
|    |  | - unrelated corporations                                           |  |       |      | 15.3     |   |      | 8.1  |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  |                                                                    |  |       |      | 15.3     |   |      | 8.1  |  
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  | Interest received/receivable:                                      |  |       |      |          |   |      |      |  
|    |  | - unrelated corporations                                           |  |       |      | (4.0     | ) |      | (8.9 | )
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  |                                                                    |  | 4     |      | (4.0     | ) |      | (8.9 | )
|    |  |                                                                    |  |       |      |          |   |      |      |  
|    |  | Net finance cost/(income)                                          |  |       |      | 11.3     |   |      | (0.8 | )
|    |  |                                                                    |  |       |      |          |   |      |      |  



F-15



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|7. | INCOME TAX EXPENSE
|-- | ------------------



|                                                                                                                                  |  |          |   |  |        |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------- | - |  | ------ | -
|                                                                                                                                  |  | $Million |  
|                                                                                                                                  |  | 2005     |   |  | 2004   |  
|(a) Income tax expense                                                                                                            |  |          |   |  |        |  
|Current tax                                                                                                                       |  |         |   |  | (1.7   | )
|Deferred tax                                                                                                                      |  |         |   |  | (2.0   | )
|                                                                                                                                  |  |          |   |  |        |  
|                                                                                                                                  |  |         |   |  | (3.7   | )
|                                                                                                                                  |  |          |   |  |        |  
|Income tax expense is attributable to:                                                                                            |  |          |   |  |        |  
|Profit from continuing operations                                                                                                 |  |         |   |  | (3.7   | )
|                                                                                                                                  |  |          |   |  |        |  
|Aggregate income tax expense for the year                                                                                         |  |         |   |  | (3.7   | )
|                                                                                                                                  |  |          |   |  |        |  
|(b) Numerical reconciliation of income tax expense to prima facie tax payable                                                     |  |          |   |  |        |  
|Profit from continuing operations before income tax expense                                                                       |  | 315.6    |   |  | 320.1  |  
|Shortfall/(excess) of dividends received/receivable over equity share of profits                                                  |  | 78.8     |   |  | (123.1 | )
|                                                                                                                                  |  |          |   |  |        |  
|Profit from continuing operations before income tax expense                                                                       |  | 394.4    |   |  | 197.0  |  
|                                                                                                                                  |  |          |   |  |        |  
|Prima facie tax expense at the rate of 30% (2004  30%)                                                                           |  | (118.3   | ) |  | (59.1  | )
|                                                                                                                                  |  |          |   |  |        |  
|The following items caused the total charge for income tax to vary from the above:                                                |  |          |   |  |        |  
|Rebateable and exempt dividends                                                                                                   |  | 415.9    |   |  | 160.4  |  
|Non-assessable capital gains                                                                                                      |  |         |   |  | 43.4   |  
|Tax losses not recognised                                                                                                         |  | (6.3     | ) |  |       |  
|Expenses which are either non-deductible or against which no income was earned to claim a deduction                               |  | (15.2    | ) |  | (8.2   | )
|                                                                                                                                  |  |          |   |  |        |  
|Net movement                                                                                                                      |  | 394.4    |   |  | 195.6  |  
|                                                                                                                                  |  |          |   |  |        |  
|Tax effect of the above adjustments at 30% (2004: 30%)                                                                            |  | 118.3    |   |  | 58.7   |  
|Attribution income tax on Specialty Chemical asset sale                                                                           |  |         |   |  | (4.0   | )
|Withholding tax                                                                                                                   |  |         |   |  | (1.1   | )
|Tax losses from prior years brought to account                                                                                    |  |         |   |  | 1.8    |  
|                                                                                                                                  |  |          |   |  |        |  
|Consequent reduction in charge for income tax                                                                                     |  | 118.3    |   |  | 55.4   |  
|                                                                                                                                  |  |          |   |  |        |  
|Aggregate income tax expense for the year                                                                                         |  |         |   |  | (3.7   | )
|                                                                                                                                  |  |          |   |  |        |  
|(c) Tax losses and other timing differences                                                                                       |  |          |   |  |        |  
|As at 31 December the following after tax effect of deferred tax assets has not been brought to account, and are attributable
to: |  |          |   |  |        |  
|- income tax losses*                                                                                                              |  | 90.3     |   |  | 55.5   |  
|- capital losses                                                                                                                  |  | 321.3    |   |  | 321.3  |  
|                                                                                                                                  |  |          |   |  |        |  
|                                                                                                                                  |  | 411.6    |   |  | 376.8  |  
|                                                                                                                                  |  |          |   |  |        |  

---

|* | The majority of the income tax losses and all the capital losses reported above are
attributable to the Groups U.S. subsidiaries.
|- | ----------------------------------------------------------------------------------------------------------------------------------



F-16



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|7. | INCOME TAX EXPENSE (continued)
|-- | ------------------------------

The benefits for
tax losses will only be obtained if:



| | (i) | the consolidated entity derives future assessable income within the prescribed time limit of a nature and of an amount sufficient to enable the benefit from the deductions for the
losses to be realised;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and
| | ---- | ---------------------------------------------------------------------------------------------------------



| | (iii) | no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the deductions for the losses.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------



| | (d) | Tax consolidation legislation
| | --- | -----------------------------

Alumina Limited and
its wholly-owned Australian subsidiaries have implemented tax consolidation under the applicable legislation as of 1 January 2004. The accounting policy in relation to this legislation is set out in Note 1(c).

As provided for under the tax consolidation legislation, the entities in the tax consolidated Group entered into a tax sharing agreement to limit the
joint and several liability of the wholly-owned entities in the case of a default by the head entity, Alumina Limited.

The entities have
also entered into a tax funding agreement under which the wholly-owned entities fully compensate Alumina Limited for the assumption of any current tax payable and are compensated by Alumina Limited for any current tax receivable, and for any
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Alumina Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned
entities financial statements.

The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding
advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. The funding amounts
are recognised as current intercompany receivables or payables.

The parent entity has not recognised tax balances relating to subsidiary
losses in 2004 and 2005, as these losses did not meet the recognition criteria.



|    |  |                                                                                                                                  |  |       |  |      |  |     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ---- |  | ----
|    |  |                                                                                                                                  |  |       |  | 2005 |  | 2004
|8.  |  | EARNINGS PER SHARE                                                                                                               |  |       |  |      |  |     
|    |  |                                                                                                                                  |  |      
|(a) |  | Basic earnings per share based on profit from continuing operations attributable to the ordinary equity holders of the company   |  | cents |  | 27.1 |  | 27.2
|    |  |                                                                                                                                  |  |       |  |      |  |     
|(b) |  | Diluted earnings per share based on profit from continuing operations attributable to the ordinary equity holders of the company |  | cents |  | 27.1 |  | 27.2
|    |  |                                                                                                                                  |  |       |  |      |  |     



|                                                                                                                                           |  |  |  |                  |  |              
|------------------------------------------------------------------------------------------------------------------------------------------ |  |  |  | ---------------- |  | -------------
|                                                                                                                                           |  | 
|                                                                                                                                           |  |  |  | Number of Shares
|                                                                                                                                           |  |  |  | 2005             |  | 2004         
|Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share                                 |  |  |  | 1,164,075,671    |  | 1,161,164,129
|Adjustments for calculation of diluted earnings per share:                                                                                 |  |  |  |                  |  |              
|Options                                                                                                                                    |  |  |  | 637,553          |  | 897,367      
|                                                                                                                                           |  |  |  |                  |  |              
|Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per
share |  |  |  | 1,164,713,224    |  | 1,162,061,496



|(c) | Information concerning classification of securities
|--- | ---------------------------------------------------

Options granted to employees under the WMC Employee Share Scheme, prior to the Companys demerger, are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent
to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in Note 21. There were no options issued to employees in the current year.



|(d) | Conversion, call, subscription or issue after 31 December 2005
|--- | --------------------------------------------------------------

In the period from 1 January 2006 to 28 February 2006, the following movements in share capital and options on issue have taken place:



|                  |  |                   |  |                |     
|----------------- |  | ----------------- |  | -------------- | ----
|                  |  | Number of options |  | Exercise price
|Options exercised |  | 344,500           |  | $              | 5.02



|(e) | Reconciliations of earnings used in calculating earnings per share
|--- | ------------------------------------------------------------------



|                                                                                                                                                      |  |          |  |      
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -----
|                                                                                                                                                      |  | $Million
|                                                                                                                                                      |  | 2005     |  | 2004 
|Profit from continuing operations attributable to the ordinary equity holders of the company used in calculating basic and diluted earnings
per share |  | 315.6    |  | 316.4
|                                                                                                                                                      |  |          |  |      



F-17



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|   |  |                                                                                                                                                                                                                     |  |          |  |      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -----
|   |  |                                                                                                                                                                                                                     |  | $Million
|   |  |                                                                                                                                                                                                                     |  | 2005     |  | 2004 
|9. |  | DIVIDENDS                                                                                                                                                                                                           |  |          |  |      
|   |  |                                                                                                                                                                                                                     | 
|   |  | Interim dividend No. 52 of 10 cents fully franked at 30% per fully paid share declared 4 August 2005 and paid 31 October 2005 (2004: 10 cents fully franked at 30% per fully paid share, paid
on 6 September 2004). |  | 116.5    |  | 116.1
|   |  |                                                                                                                                                                                                                     | 
|   |  | Final dividend No. 51 of 10 cents franked to 7.5 cents at 30% per fully paid share, paid on 31 March 2005 (2004: 10 cents fully franked at 30% per fully paid share, paid on 30 March
2004).                        |  | 116.3    |  | 116.1
|   |  |                                                                                                                                                                                                                     |  |          |  |      
|   |  |                                                                                                                                                                                                                     |  | 232.8    |  | 232.2
|   |  |                                                                                                                                                                                                                     |  |          |  |      
|   |  | Dividends paid per share                                                                                                                                                                                            |  | 20.0c    |  | 20.0c



|(a) | Dividends paid during the year
|--- | ------------------------------

Dividend
No. 52, paid on 31 October 2005, was the interim dividend for 2005. Dividend No. 51, paid on 31 March 2005, was the final dividend for 2004.



|(b) | Dividends not recognised at year end
|--- | ------------------------------------

In addition
to the above dividends, since year end the Directors have recommended the payment of a final dividend No. 53 of 10 cents a share fully franked, declared 1 February 2006 and payable on 31 March 2006. The aggregate amount of the
proposed dividend expected to be paid out of retained profits at 31 December 2005, but not recognised as a liability at year end (refer Note 1(r)) is $116.6 million.



|    |  |                                                                                                                                                       |  |          |  |      
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -----
|    |  |                                                                                                                                                       |  | $Million
|    |  |                                                                                                                                                       |  | 2005     |  | 2004 
|(c) |  | Franked dividends                                                                                                                                     |  |          |  |      
|    |  | The fully franked dividends received from Alcoa of Australia Limited (AofA) in the financial year were                                              |  | 411.6    |  | 148.0
|    |  |                                                                                                                                                       | 
|    |  | Balance of franking account adjusted for franking credits which will arise from the payment of income tax provided for in these financial statements: |  |          |  |      
|    |  | Class C (30%) franking credits available for subsequent financial years, based on a tax rate of 30% (2004: 30%)                                     |  | 93.5     |  | 1.9  

The above amounts represent the balance of the franking account as at the end of the financial
year, adjusted for:



| | (a) | franking credits that will arise from the payment of the current tax liability;
| | --- | -------------------------------------------------------------------------------



| | (b) | franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
| | --- | --------------------------------------------------------------------------------------------------------------



| | (c) | franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
| | --- | -------------------------------------------------------------------------------------------------------------------



| | (d) | franking credits that may be prevented from being distributed in subsequent financial years.
| | --- | --------------------------------------------------------------------------------------------



F-18



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----- | ---- | -------- | ---- | -----
|    |  |                                                                                                                                                                                |  | Notes |      | $Million
|    |  |                                                                                                                                                                                |  |       | 2005 |          | 2004
|10. |  | CURRENT ASSETS  CASH AND CASH EQUIVALENTS                                                                                                                                     |  |       |      |          |      |      
|    |  | Cash at bank and on hand                                                                                                                                                       |  |       |      | 15.2     |      | 17.7 
|    |  | Money market deposits (maturity of three months or less)                                                                                                                       |  |       |      |         |      | 100.2
|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |       |      | 15.2     |      | 117.9
|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|(a) |  | Reconciliation of cash at the end of the year                                                                                                                                  |  |       |      |          |      |      
|    |  | For the purposes of the statements of cash flows, cash represents cash on hand, at the bank and on short-term deposit (maturity of three
months or less) less bank overdrafts: |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |      
|    |  | Balances as above                                                                                                                                                              |  |       |      | 15.2     |      | 117.9
|    |  | Bank overdrafts                                                                                                                                                                |  |       |      |         |      |     
|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|    |  | Balances as per statement of cash flows                                                                                                                                        |  |       |      | 15.2     |      | 117.9
|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|(b) |  | Cash at bank and on hand                                                                                                                                                       |  |       |      |          |      |      
|    |  | Average interest rate on cash holdings during 2005 was 4.9 % (2004: 4.7%)                                                                                                      |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |      
|(c) |  | Money market deposits                                                                                                                                                          |  |       |      |          |      |      
|    |  | There were no interest bearing deposits at 31 December 2005. (2004: floating interest rates between 5.4% and 5.5%).                                                            |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |      
|11. |  | CURRENT ASSETS  RECEIVABLES                                                                                                                                                   |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |      
|    |  | Interest Receivable                                                                                                                                                            |  |       |      |         |      | 0.5  
|    |  | Other debtors                                                                                                                                                                  |  |       |      | 0.5      |      | 0.3  
|    |  |                                                                                                                                                                                |  |       |      |          |      |      
|    |  |                                                                                                                                                                                |  |       |      | 0.5      |      | 0.8  
|    |  |                                                                                                                                                                                |  |       |      |          |      |      



F-19



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|--- |  | ----------------------------------------------------------------------------------------------- |  | ----- |  | -------- | - |  | ------- | -
|    |  |                                                                                                 |  |       |  | $Million |  
|    |  |                                                                                                 |  | Notes |  | 2005     |   |  | 2004    |  
|12. |  | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD                                               |  |       |  |          |   |  |         |  
|    |  |                                                                                                 |  |      
|(a) |  | Securities not quoted on a prescribed stock exchange                                            |  |       |  |          |   |  |         |  
|    |  |                                                                                                 |  |      
|    |  | (i)     Securities in entities forming Alcoa World Alumina and Chemicals (AWAC) with Alcoa
Inc. |  |       |  |          |   |  |         |  
|    |  |                                                                                                 |  |      
|    |  | Securities at cost:                                                                             |  |       |  |          |   |  |         |  
|    |  | Balance brought forward                                                                         |  |       |  | 1,187.8  |   |  | 1,217.3 |  
|    |  | Alcoa of Australia reinvestment of dividend                                                     |  |       |  | 320.0    |   |  |        |  
|    |  | Investment in Juruti bauxite reserves in Brazil                                                 |  |       |  |         |   |  | 51.1    |  
|    |  | Decrease in investment following sale of Chemical assets                                        |  |       |  |         |   |  | (62.2   | )
|    |  | Foreign currency revaluation                                                                    |  |       |  | 22.1     |   |  | (18.4   | )
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | Equity accounted cost of AWAC                                                                   |  |       |  | 1,529.9  |   |  | 1,187.8 |  
|    |  | Equity in retained profits of AWAC                                                              |  | 12(c) |  | 427.5    |   |  | 511.9   |  
|    |  | Equity in reserves of AWAC                                                                      |  | 12(d) |  | 37.5     |   |  | 2.4     |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | Equity accounted carrying value of AWAC                                                         |  |       |  | 1,994.9  |   |  | 1,702.1 |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|(b) |  | Equity accounted share of profits and dividends                                                 |  |       |  |          |   |  |         |  
|    |  | Equity share of profits before tax                                                              |  |       |  | 501.1    |   |  | 460.2   |  
|    |  | Equity share of tax                                                                             |  |       |  | (164.0   | ) |  | (148.7  | )
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | Equity accounted share of profit after tax                                                      |  |       |  | 337.1    |   |  | 311.5   |  
|    |  | Loss on sale of Specialty Chemical assets directly held by AWAC subsidiaries (net of tax)       |  |       |  |         |   |  | (28.0   | )
|    |  | Dividends received/receivable by the Group                                                      |  |       |  | (415.9   | ) |  | (160.4  | )
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | (Shortfall)/excess of AWAC equity accounted profit over dividends received/receivable           |  | 12(c) |  | (78.8    | ) |  | 123.1   |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|(c) |  | Share of retained profits                                                                       |  |       |  |          |   |  |         |  
|    |  | (Shortfall)/excess of AWAC equity accounted profit over dividends received/receivable           |  |       |  | (78.8    | ) |  | 123.1   |  
|    |  | Transition to A-IFRS adjustments                                                                |  |       |  | (5.6     | ) |  |        |  
|    |  | Balance brought forward                                                                         |  |       |  | 511.9    |   |  | 388.8   |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | Total equity share in retained profits carried forward                                          |  |       |  | 427.5    |   |  | 511.9   |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|(d) |  | Equity accounted share of reserves of associated entities                                       |  |       |  |          |   |  |         |  
|    |  | Opening balance                                                                                 |  |       |  | 2.4      |   |  | 1.1     |  
|    |  | Share based payments reserve                                                                    |  |       |  | (0.5     | ) |  | 1.3     |  
|    |  | Unrealised gains on derivatives, net of tax                                                     |  |       |  | 35.6     |   |  |        |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  
|    |  | Total equity share of reserves                                                                  |  |       |  | 37.5     |   |  | 2.4     |  
|    |  |                                                                                                 |  |       |  |          |   |  |         |  



|(e) | Accounting policies
|--- | -------------------



|i. | The audited consolidated financial statements of the entities forming AWAC are prepared in accordance with US Generally Accepted Accounting Principles (US GAAP). Except for Alcoa of
Australia Limited (AofA), the reported profit after tax of AWAC is based on these US GAAP financial statements. Financial statements in US dollars have been translated to Australian dollars using average exchange rates for the
period for profit and loss items, and closing rates for balance sheet items. Adjustments are made for accounting policies not allowed under Australian equivalents to International Financial Reporting Standards. The principal adjustments are to the
valuation of inventories from last-in-first-out basis to a basis equivalent to weighted average cost, to treat the cost of stock options issued under the Alcoa employee long term incentive plan as a charge against profit, create an additional asset
retirement obligation for dismantling, removal and restoration of each refinery, and to reverse any excesses or shortfalls of the superannuation fund assets over accrued membership benefits taken to the Income Statement.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ii. | Included in the equity accounted carrying amount at which the equity investment in AWAC is recorded, are amounts for goodwill, including profits realised in forming AWAC, which is
unchanged from 2004 amounting to A$152.7 million (2004: A$152.7 million). Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it may be impaired, and is carried at cost less
accumulated impairment losses. Refer Note 1(j).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-20



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|12. | INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued)
|--- | -------------------------------------------------------------



|(f) | Additional information on associated entities
|--- | ---------------------------------------------



|                                     |  |                                                 |      |                          |      |                   |  |   
|------------------------------------ |  | ----------------------------------------------- | ---- | ------------------------ | ---- | ----------------- |  | --
|Name                                 |  | Principal activities                            |      | Country of incorporation |      | Percentage equity
|                                     |  |                                                 | 2005 |                          | 2004
|(i) Entities forming AWAC            |  |                                                 |      |                          |      |                   |  |   
|Alcoa of Australia Ltd               |  | Fully integrated aluminium production           |      | Australia                |      | 40                |  | 40
|Alcoa World Alumina LLC              |  | Production of alumina & alumina based chemicals |      | America                  |      | 40                |  | 40
|Abalco S.A.                          |  | Production of bauxite and alumina               |      | Brazil                   |      | 40                |  | 40
|Alcoa Caribbean Alumina Holdings LLC |  | Holding company                                 |      | America                  |      | 40                |  | 40
|Alumina Espanola S.A.                |  | Production of alumina & alumina based chemicals |      | Spain                    |      | 40                |  | 40
|Omnia Minerios Ltda.                 |  | Hold bauxite exploration rights                 |      | Brazil                   |      | 40                |  | 40
|Matapu Sociedade de Mineracao Ltda.  |  | Hold bauxite exploration rights                 |      | Brazil                   |      | 40                |  | 40
|Mineracao Sao Jorge Ltda.            |  | Hold bauxite exploration rights                 |      | Brazil                   |      | 40                |  | 40
|(ii) Other associates                |  |                                                 |      |                          |      |                   |  |   
|Agnew Pastoral Company Pty. Ltd.     |  | Manage pastoral leases                          |      | Australia                |      | 40                |  | 40
|Weebo Pastoral Company Pty. Ltd.     |  | Manage pastoral leases                          |      | Australia                |      | 40                |  | 40

AWAC has a governing strategic council of five members of which Alumina appoints two members,
including the Deputy Chairman.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          |  |        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- |  | -------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $Million
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 2005     |  | 2004   
|(g) |  | Expenditure commitments and contingent liabilities                                                                                                                                                                                                                                                                                                                                                                 |  |          |  |        
|    |  |        other expenditure commitments contracted for, including
long term commitments for gas and electricity  Alcoa of Australia Ltd
(AofA) is party to a number of natural gas and electricity contracts that expire between 2005 and 2025. Under these take or pay contracts, AofA is obligated to pay for a minimum of natural gas or electricity even if these commodities are
not required for operations. |  | 2,854.4  |  | 2,279.2

Unascertainable unsecured contingent liabilities

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

Pursuant to the terms of the AWAC Formation Agreement, Alcoa and
Alumina Limited have agreed to remain liable for Extraordinary Liabilities (as defined in the agreement) as well as for certain other pre-formation liabilities, such as existing environmental conditions, to the extent of their pre-formation
ownership of the company or asset with which the liability is associated.



|                                                |  |       |      |          |   |      |          |  
|----------------------------------------------- |  | ----- | ---- | -------- | - | ---- | -------- | -
|                                                |  | Notes |      | $Million |  
|                                                |  |       | 2005 |          |   | 2004 |         
|(h)    Aluminas share of aggregate associates: |  |       |      |          |   |      |          |  
|Current assets                                  |  |       |      | 834.7    |   |      | 616.9    |  
|Non-current assets                              |  |       |      | 1,942.9  |   |      | 1,658.6  |  
|Current liabilities                             |  |       |      | (661.3   | ) |      | (438.7   | )
|Non-current liabilities                         |  |       |      | (419.7   | ) |      | (432.6   | )
|                                                |  |       |      |          |   |      |          |  
|Net assets                                      |  |       |      | 1,696.6  |   |      | 1,404.2  |  
|Mineral rights and bauxite assets               |  |       |      | 145.6    |   |      | 145.2    |  
|Goodwill                                        |  |       |      | 152.7    |   |      | 152.7    |  
|                                                |  |       |      |          |   |      |          |  
|Carrying value                                  |  | 12(a) |      | 1,994.9  |   |      | 1,702.1  |  
|                                                |  |       |      |          |   |      |          |  
|Revenues                                        |  |       |      | 2,451.0  |   |      | 2,080.9  |  
|Expenses                                        |  |       |      | (1,949.9 | ) |      | (1,620.7 | )
|                                                |  |       |      |          |   |      |          |  
|Profit before income tax                        |  |       |      | 501.1    |   |      | 460.2    |  
|Loss on sale of Specialty Chemicals Business    |  |       |      |         |   |      | (28.0    | )
|Income tax charge                               |  |       |      | (164.0   | ) |      | (148.7   | )
|                                                |  |       |      |          |   |      |          |  
|Profit after income tax                         |  |       |      | 337.1    |   |      | 283.5    |  
|                                                |  |       |      |          |   |      |          |  



F-21



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ------ | -
|    |  |                                                                                                                                                                                                                                                            |  | Notes |      | $Million |  
|    |  |                                                                                                                                                                                                                                                            |  |       | 2005 |          |   | 2004 |       
|13. |  | NON-CURRENT ASSETS  PROPERTY, PLANT AND EQUIPMENT                                                                                                                                                                                                         |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |      
|    |  | Plant and equipment                                                                                                                                                                                                                                        |  | 13(a) |      | 0.3      |   |      | 0.3    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|(a) |  | Plant and equipment                                                                                                                                                                                                                                        |  |       |      |          |   |      |        |  
|    |  | Cost                                                                                                                                                                                                                                                       |  |       |      | 0.5      |   |      | 0.5    |  
|    |  | Accumulated depreciation                                                                                                                                                                                                                                   |  |       |      | (0.2     | ) |      | (0.2   | )
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      | 0.3      |   |      | 0.3    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|(b) |  | Reconciliations                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  | Reconciliation of the carrying amount at the beginning and end of the current financial year is set out below:                                                                                                                                             |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |      
|    |  | Carrying amount at 1 January 2005                                                                                                                                                                                                                          |  |       |      | 0.3      |   |      | 0.4    |  
|    |  | Depreciation expense                                                                                                                                                                                                                                       |  |       |      |         |   |      | (0.1   | )
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  | Carrying amount at 31 December 2005                                                                                                                                                                                                                        |  |       |      | 0.3      |   |      | 0.3    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|14. |  | CURRENT LIABILITIES  PAYABLES                                                                                                                                                                                                                             |  |       |      |          |   |      |        |  
|    |  | Trade payables                                                                                                                                                                                                                                             |  |       |      | 1.1      |   |      | 1.5    |  
|    |  | Other payables                                                                                                                                                                                                                                             |  |       |      | 2.0      |   |      | 0.9    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      | 3.1      |   |      | 2.4    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|15. |  | CURRENT LIABILITIES  INTEREST-BEARING LIABILITIES                                                                                                                                                                                                         |  |       |      |          |   |      |        |  
|    |  | Unsecured:                                                                                                                                                                                                                                                 |  |       |      |          |   |      |        |  
|    |  | Borrowings                                                                                                                                                                                                                                                 |  | 15(a) |      | 478.7    |   |      | 397.9  |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  | These borrowings are under two 364 day rolling facilities, both of which have a three monthly maturity cycle. As a result all borrowings have been classified as being current liabilities.
These facilities will be refinanced during the course of 2006. |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |      
|(a) |  | Description                                                                                                                                                                                                                                                |  |       |      |          |   |      |        |  
|    |  | Bank loans at floating interest rates applicable in the United States of America (Weighted average rate of 3.5% (2004  1.7%) and are repayable in one year or less.                                                                                       |  |       |      | 478.7    |   |      | 397.9  |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|(b) |  | Currencies                                                                                                                                                                                                                                                 |  |       |      |          |   |      |        |  
|    |  | The above borrowings are due in the following currency:                                                                                                                                                                                                    |  |       |      |          |   |      |        |  
|    |  | US dollars                                                                                                                                                                                                                                                 |  |       |      | 351.0    |   |      | 311.0  |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  | A$ equivalent of above currency                                                                                                                                                                                                                            |  |       |      | 478.7    |   |      | 397.9  |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|(c) |  | Exchange rates                                                                                                                                                                                                                                             |  |       |      |          |   |      |        |  
|    |  | Exchange rates at balance date used in translations:                                                                                                                                                                                                       |  |       |      | 0.7333   |   |      | 0.7819 |  
|    |  | A$1 = US$                                                                                                                                                                                                                                                  |  |       |      |          |   |      |        |  
|    |  |                                                                                                                                                                                                                                                            |  |      
|16. |  | CURRENT LIABILITIES  PROVISIONS                                                                                                                                                                                                                           |  |       |      |          |   |      |        |  
|    |  | Employee benefits - provision for annual leave                                                                                                                                                                                                             |  |       |      | 0.1      |   |      | 0.1    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|17. |  | NON-CURRENT LIABILITIES - PROVISIONS                                                                                                                                                                                                                       |  |       |      |          |   |      |        |  
|    |  | Employee benefits - provision for long service leave                                                                                                                                                                                                       |  |       |      | 0.2      |   |      | 0.2    |  
|    |  |                                                                                                                                                                                                                                                            |  |       |      |          |   |      |        |  
|    |  | The aggregate of provisions for employee benefits as shown in Notes 17 and 19 are $0.3 million (2004: $0.3 million).                                                                                                                                       |  |       |      |          |   |      |        |  



F-22



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|                                             |  |       |      |          |      |      
|-------------------------------------------- |  | ----- | ---- | -------- | ---- | -----
|                                             |  | Notes |      | $Million
|                                             |  |       | 2005 |          | 2004
|18.    CONTRIBUTED EQUITY                    |  |       |      |          |      |      
|Ordinary share capital issued and fully paid |  |       |      |          |      |      
|Balance brought forward                      |  |       |      | 404.1    |      | 384.8
|Shares issued                                |  |       |      | 11.6     |      | 19.3 
|                                             |  |       |      |          |      |      
|Total issued capital                         |  |       |      | 415.7    |      | 404.1
|                                             |  |       |      |          |      |      

Movements in ordinary share capital



|                                      |  |    |     |  |                             |  |              
|------------------------------------- |  | -- | --- |  | --------------------------- |  | -------------
|                                      |  |    |     |  | Number of fully paid shares
|                                      |  |    |     |  | 2005                        |  | 2004         
|Opening number of shares              |  |    |     |  | 1,163,111,048               |  | 1,159,557,148
|Issued under WMC Employee Option Plan |  | 18 | (a) |  | 2,534,600                   |  | 3,553,900    
|                                      |  |    |     |  |                             |  |              
|Closing number of shares              |  |    |     |  | 1,165,645,648               |  | 1,163,111,048
|                                      |  |    |     |  |                             |  |              

WMC Employee Share Scheme



|              |  |                 |  |                   |  |                                   |  |                |      |             |                 
|------------- |  | --------------- |  | ----------------- |  | --------------------------------- |  | -------------- | ---- | ----------- | ----------------
|Year of issue |  | Granted in 2005 |  | Exercised in 2005 |  | Outstanding as at31 December 2005 |  | Exercise Price |      | Expiry Date
|2000          |  |                |  | 1,209,300         |  |                                  |  | $              | 4.04 |             | 18 December 2005
|2001          |  |                |  | 1,325,300         |  | 1,971,100                         |  | $              | 5.02 |             | 30 November 2006
|              |  |                 |  |                   |  |                                   |  |                |      |             |                 
|Total         |  |                |  | 2,534,600         |  | 1,971,100                         |  |                |      |             |                 
|              |  |                 |  |                   |  |                                   |  |                |      |             |                 

---

|(a) | Prior to the demerger, the establishment of the WMC Employee Share Scheme was approved by shareholders at the Annual General Meeting held on 12 December 1987. Under the Scheme
a number of share plans operated. Fully paid shares, partly paid shares and share options were granted to employees since establishment of the Scheme. Currently one Alumina Limited employee holds such options. These options remain exercisable until
such time as their exercise periods expire. No issues have been made under this Scheme since the demerger.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There is no
ongoing option plan available to Alumina Limited directors or employees.



|(b) | Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of, and amounts paid on, the shares held.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|19. | SHARE-BASED PAYMENTS
|--- | --------------------



|(a) | Alumina Employee Share Plan
|--- | ---------------------------

This is a plan under which employees
may be invited to participate in the grant of a conditional entitlement to fully paid ordinary shares (a Performance Right). The Boards intention is to make offers to every employee, but this is subject to annual determination by the Board in
respect of each individual for each grant. The CEO of the Company may recommend variation in participation.

A person is only eligible to participate in
the Plan and to be granted performance rights under the Plan if they are an employee, and have satisfied the criteria that the Board decides for participation in the Plan.

Generally, each offer has a three year performance period, with performance tested at the end of the period to determine the number of performance rights to vest to the employee, if any. 50% of the performance rights
not vested at the three year performance test can be re-tested six months after the end of the three year performance period. The performance testing is carried out by an independent party and is based on the relative Total Shareholder Returns (TSR)
of Alumina Limited, compared to two specific comparator groups.

An invitation is not transferable. An employee may only apply for performance rights in
his or her name and not in the name of, or on behalf of, another person or entity. On vesting, each performance right is an unconditional entitlement to one fully paid ordinary share.

On termination of employment of any individual, their participation in the Plan is finalised and any performance rights not vested lapse unless the Directors decide otherwise.

Set out below are summaries of performance rights granted under the Plan:

2005



|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|---------- |  | ----------- |  | ----------------------------------- |  | ------------------------------ |  | ----------------------------- | - |  | ------------------------------ | - |  | ---------------------------------
|Grant date |  | Expiry date |  | Balance at start of the year Number |  | Granted during the year Number |  | Vested during the year Number |   |  | Expired during the year Number |   |  | Balance at end of the year Number
|26/3/2003  |  | 3/12/2004   |  | 46,500                              |  |                               |  | (11,626                       | ) |  | (34,874                        | ) |  |                                 
|26/3/2003  |  | 3/12/2005   |  | 97,200                              |  |                               |  |                              |   |  | (62,900                        | ) |  | 34,300                           
|19/1/2004  |  | 21/12/2006  |  | 141,050                             |  |                               |  |                              |   |  | (40,300                        | ) |  | 100,750                          
|25/1/2005  |  | 16/12/2007  |  |                                    |  | 139,850                        |  |                              |   |  | (37,000                        | ) |  | 102,850                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  
|Total      |  |             |  | 284,750                             |  | 139,850                        |  | (11,626                       | ) |  | (175,074                       | ) |  | 237,900                          
|           |  |             |  |                                     |  |                                |  |                               |   |  |                                |   |  |                                  



F-23



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|19. | SHARE-BASED PAYMENTS (continued)
|--- | --------------------------------

2004



|           |  |             |  |                                     |  |                                |  |                               |  |                                |   |  |                                  
|---------- |  | ----------- |  | ----------------------------------- |  | ------------------------------ |  | ----------------------------- |  | ------------------------------ | - |  | ---------------------------------
|Grant date |  | Expiry date |  | Balance at start of the year Number |  | Granted during the year Number |  | Vested during the year Number |  | Expired during the year Number |   |  | Balance at end of the year Number
|26/3/2003  |  | 3/12/2004   |  | 95,900                              |  |                               |  |                              |  | (49,400                        | ) |  | 46,500                           
|26/3/2003  |  | 3/12/2005   |  | 100,200                             |  |                               |  |                              |  | (3,000                         | ) |  | 97,200                           
|19/1/2004  |  | 21/12/2006  |  |                                    |  | 143,550                        |  |                              |  | (2,500                         | ) |  | 141,050                          
|           |  |             |  |                                     |  |                                |  |                               |  |                                |   |  |                                  
|Total      |  |             |  | 196,100                             |  | 143,550                        |  |                              |  | (54,900                        | ) |  | 284,750                          
|           |  |             |  |                                     |  |                                |  |                               |  |                                |   |  |                                  

Expenses arising from share-based payment transactions in the Alumina Employee Share Plan

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:



|                                                                 |  |          |  |     
|---------------------------------------------------------------- |  | -------- |  | ----
|                                                                 |  | $Million
|                                                                 |  | 2005     |  | 2004
|Performance rights granted under the Alumina Employee Share Plan |  | 0.3      |  | 0.3 
|                                                                 |  |          |  |     



|(b) | WMC Employee Share Scheme
|--- | -------------------------

The establishment of the WMC Employee
Share Scheme was approved by shareholders at the Annual General Meeting held on 12 December 1987. Under the Scheme a number of share plans have operated. Fully paid shares, partly paid shares and share options have been granted to employees
since establishment of the Scheme.

Employee option plan

All permanent employees (including executive directors) of Alumina Limited and its subsidiaries who were employed, prior to demerger, by the company or a subsidiary were eligible to participate in the WMC Employee Share Scheme and be
offered options for fully paid shares. Options allotted, prior to the demerger, to Alumina employees remain exercisable until such time as their exercise periods expire. There is no ongoing option plan available to Alumina Limited directors or
employees. Under the scheme, no issues have been made during the current year.

The major provisions of the option plans provide that the employee may
request that the options be converted after one year from the date of allotment. Options are exercisable at their strike price. Restrictions exist for certain employees on the number of options which can be exercised in any year. If the request to
convert the options to shares has not been made, the Company must make the call at the completion of five years from the date of issue or termination of employment. Certain designated officers are not permitted to exercise options or buy and sell
shares in the period between the end of the companys half or full financial year and the release of the respective result.

Employee share options
carry no rights to dividends and no voting rights. When exercised, each option results in a beneficial entitlement to one ordinary fully paid share.



|                                    |  |             |      |                |      |                                     |   |                                |  |                                  |  |  |                                |      |                                   |   |                                       |  |           |  |  |          
|----------------------------------- |  | ----------- | ---- | -------------- | ---- | ----------------------------------- | - | ------------------------------ |  | -------------------------------- |  |  | ------------------------------ | ---- | --------------------------------- | - | ------------------------------------- |  | --------- |  |  | ---------
|Year of issue                       |  | Expiry date |      | Exercise price |      | Balance at start of the year Number |   | Granted during the year Number |  | Exercised during the year Number |  |  | Expired during the year Number |      | Balance at end of the year Number |   | Exercisable at end of the year Number
|Consolidated and parent entity-2005
|2000                                |  | 18 Dec 2005 |      | $              | 4.04 |                                     |   | 1,209,300                      |  |                                 |  |  | (1,209,300                     | )    |                                   |  |                                       |  |          |  |  |         
|2001                                |  | 30 Nov 2006 |      | $              | 5.02 |                                     |   | 3,296,400                      |  |                                 |  |  | (1,325,300                     | )    |                                   |  |                                       |  | 1,971,100 |  |  | 1,971,100
|                                    |  |             |      |                |      |                                     |   |                                |  |                                  |  |  |                                |      |                                   |   |                                       |  |           |  |  |          
|Total                               |  |             |      |                |      |                                     |   | 4,505,700                      |  |                                 |  |  | (2,534,600                     | )    |                                   |  |                                       |  | 1,971,100 |  |  | 1,971,100
|                                    |  |             |      |                |      |                                     |   |                                |  |                                  |  |  |                                |      |                                   |   |                                       |  |           |  |  |          
|Weighted average exercise price:    |  | $           | 4.76 |                |      |                                     | $ | 4.55                           |  |                                  |  |  | $                              | 5.02 |                                   | $ | 5.02                                 
|                                    |  |             |      |               
|Consolidated and parent entity-2004 |  |             |      |                |      |                                     |   |                                |  |                                  |  | 
|1999                                |  | 20 Dec 2004 |      | $              | 4.52 |                                     |   | 1,495,600                      |  |                                 |  |  | (1,495,600                     | )    |                                   |  |                                       |  |          |  |  |         
|2000                                |  | 18 Dec 2005 |      | $              | 4.04 |                                     |   | 1,986,400                      |  |                                 |  |  | (777,100                       | )    |                                   |  |                                       |  | 1,209,300 |  |  | 1,209,300
|2001                                |  | 30 Nov 2006 |      | $              | 5.02 |                                     |   | 4,577,600                      |  |                                 |  |  | (1,281,200                     | )    |                                   |  |                                       |  | 3,296,400 |  |  | 3,296,400
|                                    |  |             |      |                |      |                                     |   |                                |  |                                  |  |  |                                |      |                                   |   |                                       |  |           |  |  |          
|Total                               |  |             |      |                |      |                                     |   | 8,059,600                      |  |                                 |  |  | (3,553,900                     | )    |                                   |  |                                       |  | 4,505,700 |  |  | 4,505,700
|                                    |  |             |      |                |      |                                     |   |                                |  |                                  |  |  |                                |      |                                   |   |                                       |  |           |  |  |          
|Weighted average exercise price:    |  | $           | 4.69 |                |      |                                     | $ | 4.60                           |  |                                  |  |  | $                              | 4.76 |                                   | $ | 4.76                                 



F-24



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|19. | SHARE-BASED PAYMENTS (continued)
|--- | --------------------------------

Stock appreciation plan

In various years since approval of the WMC Employee Share Scheme in 1987, until the demerger of the company, the company established stock appreciation
plans (SAPs) for the benefit of employees mainly in countries outside Australia. The purpose of the SAPs was to provide such employees, who due to securities law constraints were not eligible to participate under the Options Plans, with benefits
similar to those conferred by the Option Plans.

Under the terms of the WMC Stock Appreciation Plan (SAP), employees were invited to apply for the grant by
WMC Limited. The employees were not required to pay any amount for the grant, but each WMC Limited SAP has a notional allotment exercise price, equal to the weighted average sale price of WMC shares on the ASX on the trading day that the invitation
to apply for the WMC Limited SAP was made to the employee. Subject to certain exceptions, the WMC Limited SAP was not able to be redeemed until after a period of 12 months from the date of allotment and lapse on the fifth anniversary of the date of
allotment. Upon redemption of a WMC Limited SAP before its expiry by the holder, the holder is entitled to a payment equal to the difference between the closing share price of WMC Limited (or, post-demerger Alumina Limited) on the ASX on the trading
day immediately before redemption, and the notional allotment price (assuming the former is higher).

Set out below are
summaries of allotments made under SAPs:



|                                    |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |      |  |         |  |  |        
|----------------------------------- |  | ----------- | ---- | ------------------- | ---- | ----------------------------------- | - | ------------------------------- |  | ------------------------------- | - | ---- | ------------------------------ | - | - | --------------------------------- | ------ | ------------------------------------- | ---- |  | ------- |  |  | -------
|Year of issue                       |  | Expiry date |      | SAP allotment price |      | Balance at start of the year Number |   | Allotted during the year
Number |  | Redeemed during the year Number |   |      | Expired during the year
Number |   |   | Balance at end of the year Number |        | Exercisable at end of the year Number
|Consolidated and parent entity-2005 |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                  
|2000                                |  | 18 Dec 2005 |      | $                   | 4.04 |                                     |   | 15,400                          |  |                                |   |      | (15,400                        | ) |   |                                   |       |                                       |      |  |        |  |  |       
|2001                                |  | 30 Nov 2006 |      | $                   | 5.02 |                                     |   | 113,900                         |  |                                |   |      | (56,800                        | ) |   |                                   |       |                                       |      |  | 57,100  |  |  | 57,100 
|2002                                |  | 30 Nov 2006 |      | $                   | 5.02 |                                     |   | 400,000                         |  |                                |   |      | (400,000                       | ) |   |                                   |       |                                       |      |  |        |  |  |       
|                                    |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |      |  |         |  |  |        
|Total                               |  |             |      |                     |      |                                     |   | 529,300                         |  |                                |   |      | (472,200                       | ) |   |                                   |       |                                       |      |  | 57,100  |  |  | 57,100 
|                                    |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |      |  |         |  |  |        
|Weighted average exercise price:    |  | $           | 4.99 |                     |      |                                     | $ | 4.99                            |  |                                 |   |      |                                |   | $ | 5.02                              |        | $                                     | 5.02
|                                    |  |             |      |                     |      |                                    
|Consolidated and parent entity-2004 |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |     
|1999                                |  | 20 Dec 2004 |      | $                   | 4.52 |                                     |   | 11,000                          |  |                                |   |      | (10,000                        | ) |   |                                   | (1,000 | )                                     |      |  |        |  |  |       
|2000                                |  | 18 Dec 2005 |      | $                   | 4.04 |                                     |   | 58,300                          |  |                                |   |      | (42,900                        | ) |   |                                   |       |                                       |      |  | 15,400  |  |  | 15,400 
|2001                                |  | 30 Nov 2006 |      | $                   | 5.02 |                                     |   | 197,600                         |  |                                |   |      | (83,700                        | ) |   |                                   |       |                                       |      |  | 113,900 |  |  | 113,900
|2002                                |  | 30 Nov 2006 |      | $                   | 5.02 |                                     |   | 650,000                         |  |                                |   |      | (250,000                       | ) |   |                                   |       |                                       |      |  | 400,000 |  |  | 400,000
|                                    |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |      |  |         |  |  |        
|Total                               |  |             |      |                     |      |                                     |   | 916,900                         |  |                                |   |      | (386,600                       | ) |   |                                   | (1,000 | )                                     |      |  | 529,300 |  |  | 529,300
|                                    |  |             |      |                     |      |                                     |   |                                 |  |                                 |   |      |                                |   |   |                                   |        |                                       |      |  |         |  |  |        
|Weighted average exercise price:    |  | $           | 4.95 |                     |      |                                     | $ | 4.90                            |  |                                 | $ | 4.52 |                                |   | $ | 4.99                              |        | $                                     | 4.99



F-25



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|    |  |                                                          |  |       |      |          |   |      |     
|--- |  | -------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ----
|    |  |                                                          |  | Notes |      | $Million
|    |  |                                                          |  |       | 2005 |          |   | 2004
|20. |  | RESERVES, RETAINED PROFITS AND TREASURY SHARES           |  |       |      |          |   |      |     
|    |  |                                                          |  |      
|    |  | Reserves                                                 |  |       |      |          |   |      |     
|    |  | Asset revaluation reserve                                |  |       |      | 34.3     |   |      | 34.3
|    |  | Asset realisation reserve                                |  |       |      |         |   |      |    
|    |  | Capital reserve                                          |  |       |      | 16.5     |   |      | 16.5
|    |  | Foreign currency translation reserve                     |  | 20(a) |      | (10.2    | ) |      | 1.3 
|    |  | Cash-flow hedge reserve                                  |  | 20(b) |      | 35.6     |   |      |    
|    |  | Share-based payments reserve                             |  | 20(c) |      | 2.7      |   |      | 2.9 
|    |  |                                                          |  |       |      |          |   |      |     
|    |  |                                                          |  |       |      | 78.9     |   |      | 55.0
|    |  |                                                          |  |       |      |          |   |      |     
|(a) |  | Foreign currency translation reserve                     |  |       |      |          |   |      |     
|    |  | Balance brought forward                                  |  |       |      | 1.3      |   |      |    
|    |  | Currency translation differences arising during the year |  |       |      | (11.5    | ) |      | 1.3 
|    |  |                                                          |  |       |      |          |   |      |     
|    |  | Balance carried forward                                  |  |       |      | (10.2    | ) |      | 1.3 
|    |  |                                                          |  |       |      |          |   |      |     
|(b) |  | Cash flow hedge reserve                                  |  |       |      |          |   |      |     
|    |  | Balance brought forward                                  |  |       |      |         |   |      |    
|    |  | Gains for the period                                     |  |       |      | 35.6     |   |      |    
|    |  |                                                          |  |       |      |          |   |      |     
|    |  | Balance carried forward                                  |  |       |      | 35.6     |   |      |    
|    |  |                                                          |  |       |      |          |   |      |     
|(c) |  | Share-based payments reserve                             |  |       |      |          |   |      |     
|    |  | Balance brought forward                                  |  |       |      | 2.9      |   |      | 1.3 
|    |  | Option expense                                           |  |       |      | (0.2     | ) |      | 1.6 
|    |  |                                                          |  |       |      |          |   |      |     
|    |  | Balance carried forward                                  |  |       |      | 2.7      |   |      | 2.9 
|    |  |                                                          |  |       |      |          |   |      |     



|(d) | Nature and purpose of reserves
|--- | ------------------------------



| | (i) | Asset revaluation reserve
| | --- | -------------------------

The balance standing to
the credit of the reserve may be used to satisfy the distribution of bonus shares and is only available for the payment of cash dividends in limited circumstances as permitted by law.



| | (ii) | Foreign currency translation reserve
| | ---- | ------------------------------------

Exchange
differences arising on translation of self sustaining controlled foreign entities are taken to the foreign currency translation reserve as described in accounting policy Note 1(d).



| | (iii) | Cash flow hedge reserve
| | ----- | -----------------------

Gains on instruments used
to hedge a net investment in a foreign operation determined to be an effective hedge as described in accounting policy Note 1 (q).



| | (iv) | Share-based payments reserve
| | ---- | ----------------------------

The share-based
payments reserve is used to recognise the fair value of options issued but not exercised.



|                                                          |  |       |      |          |   |      |        |  
|--------------------------------------------------------- |  | ----- | ---- | -------- | - | ---- | ------ | -
|                                                          |  | Notes |      | $Million |  
|                                                          |  |       | 2005 |          |   | 2004 |       
|(e)    Retained profits                                   |  |       |      |          |   |      |        |  
|Retained profits at the beginning of the financial year:  |  |       |      |          |   |      |        |  
|- Group                                                   |  |       |      | 441.5    |   |      | 481.3  |  
|- Associates                                              |  |       |      | 511.9    |   |      | 388.8  |  
|                                                          |  |       |      |          |   |      |        |  
|                                                          |  |       |      | 953.4    |   |      | 870.1  |  
|Net profit attributable to the members of Alumina Limited |  |       |      | 315.6    |   |      | 316.4  |  
|Dividend provided for or paid                             |  |       |      | (232.8   | ) |      | (233.1 | )
|                                                          |  |       |      |          |   |      |        |  
|Retained profits at the end of the financial year         |  |       |      | 1,036.2  |   |      | 953.4  |  
|                                                          |  |       |      |          |   |      |        |  
|Retained profits at the end of the financial year:        |  |       |      |          |   |      |        |  
|- Group                                                   |  |       |      | 608.7    |   |      | 441.5  |  
|- Associates                                              |  | 12(c) |      | 427.5    |   |      | 511.9  |  
|                                                          |  |       |      |          |   |      |        |  
|                                                          |  |       |      | 1,036.2  |   |      | 953.4  |  
|                                                          |  |       |      |          |   |      |        |  



F-26



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|20. | RESERVES, RETAINED PROFITS AND TREASURY SHARES (continued)
|--- | ----------------------------------------------------------



|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | ---- | -------- | ---- | ---- | ------ | -
|                        |  |                                                                                                                                                                                                                                                                                             |  | Notes |      | $Million |     
|                        |  |                                                                                                                                                                                                                                                                                             |  |       | 2005 |          |      | 2004 |       
|(f)                     |  | Treasury shares 1                                                                                                                                                                                                                                                                           |  |       |      |          |      |      |        |  
|Balance brought forward |  |                                                                                                                                                                                                                                                                                             |  | (0.6  | )    |          |     |     
|Movement for the period |  |                                                                                                                                                                                                                                                                                             |  |      |      |          | (0.6 | )   
|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  
|Balance carried forward |  |                                                                                                                                                                                                                                                                                             |  | (0.6  | )    |          | (0.6 | )   
|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  
|___________             |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |     
|1                       |  | Under AASB 132, if an entity reacquires its own
equity instruments, those instruments shall be deducted from equity. Alumina Limited purchased shares for its long term incentive plan. As at 31 December 2005, 84,274 shares are held by Alumina Limited for the long term incentive
plan. |  |       |      |         
|                        |  |                                                                                                                                                                                                                                                                                             |  |      
|21.                     |  | NOTES TO THE STATEMENTS OF CASH FLOWS                                                                                                                                                                                                                                                       |  |       |      |          |      |      |        |  
|                        |  |                                                                                                                                                                                                                                                                                             |  |      
|(a)                     |  | Reconciliation of operating profit after income tax to net cash inflow from operating activities                                                                                                                                                                                            |  |       |      |          |      |      |        |  
|                        |  | Operating profit from continuing operations after income tax                                                                                                                                                                                                                                |  |       |      | 315.6    |      |      | 316.4  |  
|                        |  | Shortfall/(excess) of equity accounted profits over dividends received                                                                                                                                                                                                                      |  |       |      | 78.8     |      |      | (123.1 | )
|                        |  | Depreciation and amortisation                                                                                                                                                                                                                                                               |  | 6     |      |         |      |      | 0.1    |  
|                        |  | Non-cash employee benefits expense-share based payments                                                                                                                                                                                                                                     |  |       |      | 0.3      |      |      | 0.3    |  
|                        |  | Non-cash dividends received                                                                                                                                                                                                                                                                 |  |       |      | (320.0   | )    |      |       |  
|                        |  | Profit on sale of Specialty Chemical assets                                                                                                                                                                                                                                                 |  | 5     |      |         |      |      | (43.4  | )
|                        |  | Net exchange differences                                                                                                                                                                                                                                                                    |  | 5,6   |      |         |      |      | (1.1   | )
|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  
|                        |  | Sub total                                                                                                                                                                                                                                                                                   |  |       |      | 74.7     |      |      | 149.2  |  
|                        |  | Change in assets and liabilities adjusted for effects of purchase and disposal of controlled entities during the financial
year:                                                                                                                                                            |  |       |      |          |      |      |        |  
|                        |  | (Increase)/decrease in:                                                                                                                                                                                                                                                                     |  |       |      |          |      |      |        |  
|                        |  | -receivables                                                                                                                                                                                                                                                                                |  |       |      | 0.3      |      |      | 0.2    |  
|                        |  | -deferred tax assets                                                                                                                                                                                                                                                                        |  |       |      |         |      |      | 2.7    |  
|                        |  | -other assets                                                                                                                                                                                                                                                                               |  |       |      | (0.5     | )    |      | (0.3   | )
|                        |  | (Decrease)/increase in:                                                                                                                                                                                                                                                                     |  |       |      |          |      |      |        |  
|                        |  | -payables                                                                                                                                                                                                                                                                                   |  |       |      | 0.7      |      |      | (0.8   | )
|                        |  | -current tax liabilities                                                                                                                                                                                                                                                                    |  |       |      |         |      |      | (2.5   | )
|                        |  | -other liabilities                                                                                                                                                                                                                                                                          |  |       |      | (3.2     | )    |      |       |  
|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  
|                        |  | Net cash inflow from operating activities                                                                                                                                                                                                                                                   |  |       |      | 72.0     |      |      | 148.5  |  
|                        |  |                                                                                                                                                                                                                                                                                             |  |       |      |          |      |      |        |  



|(b) | Acquisition/disposal of controlled entities
|--- | -------------------------------------------

During
the year the Company did not acquire or dispose of any material controlled entities.



|(c) | Financing facilities
|--- | --------------------

Refer to Note 22.



|(d) | Non-cash financing and investing activities
|--- | -------------------------------------------



|                                   |  |          |   |  |     
|---------------------------------- |  | -------- | - |  | ----
|                                   |  | $Million
|                                   |  | 2005     |   |  | 2004
|Dividend received from associate * |  | 320.0    |   |  |    
|Investment in associate *          |  | (320.0   | ) |  |    

---

|* | During 2005 Alcoa of Australia, of which Alumina Limited owns 40% declared a special dividend of A$800 million (Alumina Limited share A$320 million), all of which was immediately
subscribed to Alcoa of Australia for the purchase of new shares.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|    |  |                                                                 |  |       |      |          |      |      
|--- |  | --------------------------------------------------------------- |  | ----- | ---- | -------- | ---- | -----
|    |  |                                                                 |  | Notes |      | $Million
|    |  |                                                                 |  |       | 2005 |          | 2004
|22. |  | FINANCING FACILITIES                                            |  |       |      |          |      |      
|    |  | The total facilities available at balance date were as follows: |  |       |      |          |      |      
|    |  |                                                                 |  |      
|    |  | Short-term loan facilities                                      |  | 22(b) |      | 700.0    |      | 700.0
|    |  | Used at balance date                                            |  |       |      | 478.7    |      | 397.9
|    |  | Available at balance date                                       |  |       |      | 221.3    |      | 302.1
|    |  |                                                                 |  |      
|(a) |  | The loan facilities are denominated in currencies as follows:   |  |       |      |          |      |      
|    |  |                                                                 |  |      
|    |  | Short-term loan facilities                                      |  |       |      |          |      |      
|    |  | Australian dollar facility                                      |  |       |      | 50.0     |      | 50.0 
|    |  | Multi-currency facility1                                        |  |       |      | 650.0    |      | 650.0

---

|1 | Comprising two multi-currency facilities drawn in US dollars with an aggregate limit of A$650 million.
|- | ------------------------------------------------------------------------------------------------------



|(b) | The short term bank loan facilities are available for general corporate purposes. All facilities are 364 day facilities. The short term facilities will be refinanced during the
course of 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-27



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|23. | FINANCIAL INSTRUMENTS
|--- | ---------------------



|A. | Interest rate risk
|-- | ------------------

The Group is exposed to
interest rate risk on its outstanding interest bearing liabilities and investments.

Interest rate risk exposure

The consolidated entitys exposure to interest rate risk and the effective weighted interest rate for classes of financial assets and liabilities is
set out below:

As at 31 December 2005



Fixed interest maturing in:$ million

Notes

Floating interest


1 year orless

Over 1 to5 years

More than5 years

Non- interestbearing


TotalFinancial AssetsCash and cash equivalents

10

15.2











15.2Receivables

11










0.5


0.515.2








0.5


15.7Weighted average interest rate



4.9
%Financial LiabilitiesPayables

14










3.1


3.1Bank loans

15

478.7











478.7478.7








3.1


481.8Weighted average interest rate



3.5
%Net financial (liabilities)



(463.5
)







(2.6
)

(466.1
)As at 31 December 2004Fixed interest maturing in:$ million

Notes

Floating interest


1 year orless

Over 1 to5 years

More than5 years

Non- interestbearing


TotalFinancial AssetsCash and cash equivalents

10

117.9











117.9Receivables

11










0.8


0.8117.9








0.8


118.7Weighted average interest rate



5.3
%Financial LiabilitiesPayables

14










2.4


2.4Bank loans

15

397.9











397.9397.9








2.4


400.3Weighted average interest rate



1.7
%Net financial (liabilities)



(280.0
)







(1.6
)

(281.6
)




F-28



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|23. | FINANCIAL INSTRUMENTS (continued)
|--- | ---------------------------------



|B. | Carrying amounts and estimated fair values of financial instruments
|-- | -------------------------------------------------------------------

The carrying amounts and estimated fair values of the companys financial instruments, referred to in Note 23A above were as follows:



Carrying amount

Fair value

Carryingamount

Fair valueNotes

$Million

$Million2005

2005

2004

2004Recognised in the Balance SheetFinancial assetsCash and cash equivalents

10

15.2

15.2

117.9

117.9Current receivables

11

0.5

0.5

0.8

0.8Financial liabilitiesCurrent payables

14

3.1

3.1

2.4

2.4Short term interest bearing liabilities

15

478.7

478.7

397.9

397.9


The following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate a value:

Cash and cash equivalents

The carrying amount approximates fair value because of the short maturity of these instruments.

Debtors and creditors

Other
current debtors and creditors mainly represent financial obligations incurred in exchange for goods and services provided and received by the Group in the normal course of its operations, net of provisions for doubtful debts. Due to the short term
nature of these financial obligations, their carrying values are estimated to equal their fair values.



|24. | INVESTMENTS IN CONTROLLED ENTITIES
|--- | ----------------------------------



|                                                                     |  |       |  |                       
|-------------------------------------------------------------------- |  | ----- |  | ----------------------
|Entities consolidated                                                |  | Notes |  | Place of Incorporation
|NAME                                                                 |  |       |  |                       
|Alumina Limited                                                      |  |       |  | VIC, Australia        
|                                                                     |  |      
|All controlled entities are wholly-owned, unless otherwise indicated |  |       |  |                       
|                                                                     |  |      
|Controlled entities                                                  |  |       |  |                       
|Albion Downs Pty. Ltd.                                               |  | C,F   |  | WA, Australia         
|Alumina Holdings (USA) Inc.                                          |  | A,D   |  | Delaware, USA         
|Alumina International Holdings Pty. Ltd.                             |  | B,E   |  | VIC, Australia        
|Alumina (U.S.A.) Inc.                                                |  | A,D   |  | Delaware, USA         
|Westminer (Investments) B.V.                                         |  | A,D   |  | Netherlands           
|Westminer Acquisition (U.K.) Limited                                 |  | D     |  | UK                    
|Butia Participaçoes SA                                               |  | A,D,G |  | Brazil                
|Westminer International (U.K.) Limited                               |  | D     |  | UK                    

---

These controlled entities:



|A) | have not prepared audited accounts as they are non-operating or audited accounts are not required in their country of incorporation;
|-- | ------------------------------------------------------------------------------------------------------------------------------------

|B) | have been granted relief from the necessity to prepare accounts pursuant to Australian Securities and Investment Commission (ASIC) Class Order 98/1418. This company,
which is also referred to in the Directors Declaration is, with Alumina Limited, a member of a Closed Group as defined in the Class Order and are parties to a deed of cross guarantee which has been lodged with and approved by ASIC.
Under the deed of cross guarantee, each of these companies guarantees the debts of the other companies party to the deed of cross guarantee. The consolidated assets and liabilities of these companies, and their consolidated net profits after tax for
the year then ended (after eliminating inter-company investments and other inter-company transactions) are set out in the table below;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-29



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|24. | INVESTMENTS IN CONTROLLED ENTITIES (continued)
|--- | ----------------------------------------------



|C) | this is a small proprietary company, and is not required to prepare a financial report;
|-- | ---------------------------------------------------------------------------------------

|D) | has been translated as a self-sustaining entity;
|-- | ------------------------------------------------

|E) | this company, while a small proprietary company, is included on the deed of cross guarantee;
|-- | --------------------------------------------------------------------------------------------

|F) | this company is deemed to be a controlled entity because of an option held by Alumina Limited to purchase all of the shares in the Company;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------

|G) | On 30 December 2004, Alumina Limited, through a controlled subsidiary (Westminer (Investments) B.V.), acquired 100% interest in Butia Participaçoes SA, a Brazilian
entity for a nominal amount. Ownership of Butia Participaçoes SA was transferred from Westminer (Investments) B.V. to Alumina Limited on 16 September 2005.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                                                                                 |  |          |  |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------- |  | -------
|                                                                                                                                                                                                 |  | $Million
|                                                                                                                                                                                                 |  | 2005     |  | 2004   
|Deed of cross guarantee                                                                                                                                                                          |  |          |  |        
|Entities which are party to a Deed of Cross Guarantee, entered into in accordance with ASIC Class Order 98/1418 are indicated above in this
note. A consolidated balance sheet is set out below: |  |          |  |        
|                                                                                                                                                                                                 |  |         
|Balance sheets of closed Group                                                                                                                                                                   |  |          |  |        
|                                                                                                                                                                                                 |  |         
|Current assets                                                                                                                                                                                   |  |          |  |        
|Cash and cash equivalents                                                                                                                                                                        |  | 9.0      |  | 107.7  
|Receivables                                                                                                                                                                                      |  | 8.2      |  | 51.3   
|Deferred tax assets                                                                                                                                                                              |  | 2.1      |  | 2.1    
|Other assets                                                                                                                                                                                     |  | 0.5      |  |        
|                                                                                                                                                                                                 |  |          |  |        
|Total current assets                                                                                                                                                                             |  | 19.8     |  | 161.1  
|                                                                                                                                                                                                 |  |          |  |        
|Non-current assets                                                                                                                                                                               |  |          |  |        
|Investments in associates/subsidiaries                                                                                                                                                           |  | 1,474.3  |  | 1,101.7
|Property, plant and equipment                                                                                                                                                                    |  | 0.3      |  | 0.3    
|                                                                                                                                                                                                 |  |          |  |        
|Total non-current assets                                                                                                                                                                         |  | 1,474.6  |  | 1,102.0
|                                                                                                                                                                                                 |  |          |  |        
|Total assets                                                                                                                                                                                     |  | 1,494.4  |  | 1,263.1
|                                                                                                                                                                                                 |  |          |  |        
|Current liabilities                                                                                                                                                                              |  |          |  |        
|Payables                                                                                                                                                                                         |  | 3.1      |  | 2.3    
|Interest-bearing liabilities                                                                                                                                                                     |  | 478.7    |  | 397.9  
|Provisions                                                                                                                                                                                       |  | 0.1      |  | 0.1    
|Other                                                                                                                                                                                            |  | 1.2      |  | 2.1    
|                                                                                                                                                                                                 |  |          |  |        
|Total current liabilities                                                                                                                                                                        |  | 483.1    |  | 402.4  
|                                                                                                                                                                                                 |  |          |  |        
|Non-current liabilities                                                                                                                                                                          |  |          |  |        
|Payables                                                                                                                                                                                         |  | 120.1    |  | 119.3  
|Provisions                                                                                                                                                                                       |  | 0.2      |  | 0.2    
|                                                                                                                                                                                                 |  |          |  |        
|Total non-current liabilities                                                                                                                                                                    |  | 120.3    |  | 119.5  
|                                                                                                                                                                                                 |  |          |  |        
|Total liabilities                                                                                                                                                                                |  | 603.4    |  | 521.9  
|                                                                                                                                                                                                 |  |          |  |        
|Net assets                                                                                                                                                                                       |  | 891.0    |  | 741.2  
|                                                                                                                                                                                                 |  |          |  |        
|Equity                                                                                                                                                                                           |  |          |  |        
|Contributed equity                                                                                                                                                                               |  | 415.7    |  | 404.1  
|Reserves                                                                                                                                                                                         |  | 241.0    |  | 240.7  
|Retained profits                                                                                                                                                                                 |  | 234.3    |  | 96.4   
|                                                                                                                                                                                                 |  |          |  |        
|Total equity                                                                                                                                                                                     |  | 891.0    |  | 741.2  
|                                                                                                                                                                                                 |  |          |  |        



F-30



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|24. | INVESTMENTS IN CONTROLLED ENTITIES (continued)
|--- | ----------------------------------------------

Set out below is a consolidated statement of financial performance for the closed Group:



|                                                                                              |  |          |   |  |        |  
|--------------------------------------------------------------------------------------------- |  | -------- | - |  | ------ | -
|                                                                                              |  | $Million |  
|                                                                                              |  | 2005     |   |  | 2004   |  
|Income statements of closed Group                                                             |  |          |   |  |        |  
|Revenue from ordinary activities                                                              |  | 416.8    |   |  | 204.2  |  
|General and administrative expenses                                                           |  | (10.2    | ) |  | (7.8   | )
|Other expenses                                                                                |  | (17.6    | ) |  | (10.1  | )
|Borrowing costs                                                                               |  | (18.3    | ) |  | (10.6  | )
|                                                                                              |  |          |   |  |        |  
|Profit from ordinary activities before income tax                                             |  | 370.7    |   |  | 175.7  |  
|                                                                                              |  |         
|Income tax expense                                                                            |  |         |   |  | (0.5   | )
|                                                                                              |  |          |   |  |        |  
|Net profit                                                                                    |  | 370.7    |   |  | 175.2  |  
|                                                                                              |  |          |   |  |        |  
|Set out below is a summary of movements in consolidated retained profits of the closed Group: |  |          |   |  |        |  
|                                                                                              |  |         
|Retained profits at the beginning of the financial year                                       |  | 96.4     |   |  | 154.3  |  
|Net profit                                                                                    |  | 370.7    |   |  | 175.2  |  
|Dividend provided for or paid                                                                 |  | (232.8   | ) |  | (233.1 | )
|                                                                                              |  |          |   |  |        |  
|Retained profits at the end of the financial year                                             |  | 234.3    |   |  | 96.4   |  
|                                                                                              |  |          |   |  |        |  



|25. | CONTINGENT LIABILITIES
|--- | ----------------------

There have been no changes
to contingent liabilities during the reporting period.

Cross guarantees given by Alumina Limited and Alumina International Holdings Pty.
Ltd are described in Note 24. There are no deficiencies of assets in any of these companies.

These guarantees may give rise to liabilities
in the parent entity if the subsidiary does not meet their obligations under the terms of the overdrafts, loans or other liabilities subject to the guarantees.

No material losses are anticipated in respect of any of the above contingent liabilities.



|26. | COMMITMENTS FOR EXPENDITURE
|--- | ---------------------------



|                                                                                                                   |  |          |  |     
|------------------------------------------------------------------------------------------------------------------ |  | -------- |  | ----
|                                                                                                                   |  | $Million
|                                                                                                                   |  | 2005     |  | 2004
|Lease commitments                                                                                                  |  |          |  |     
|                                                                                                                   |  |         
|Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable: |  |          |  |     
|Within one year                                                                                                    |  | 0.1      |  | 0.1 
|Later than one year but not later than 5 years                                                                     |  | 0.2      |  | 0.2 
|                                                                                                                   |  |          |  |     
|                                                                                                                   |  | 0.3      |  | 0.3 
|                                                                                                                   |  |          |  |     

The company leases office facilities under non-cancellable operating leases expiring within two to
five years. The office lease on expiry is expected to be renewed or replaced by another lease.



F-31



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|27. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

Related parties of the
Group fall under the following categories:

Wholly-owned Group

The wholly-owned Group consists of Alumina Limited and its wholly-owned controlled entities as disclosed in Note 24. Transactions between Alumina Limited
and other entities in the wholly-owned Group during the years ended 31 December 2005 and 2004 consisted of:



| |  |  | loan advanced/repaid to/by Alumina Limited
| | - |  | ------------------------------------------



| |  |  | interest paid/received on the above loans
| | - |  | -----------------------------------------



| |  |  | the payment of dividends to Alumina Limited
| | - |  | -------------------------------------------



| |  |  | payment of administrative/general expenses on behalf of Alumina Limited
| | - |  | -----------------------------------------------------------------------

The above transactions were made on normal commercial terms and conditions and at market rates.

Aggregate
amounts included in the determination of profit from ordinary activities before income tax that resulted from transactions with entities in the wholly-owned Group:



|                                                                                 |  |          |   |  |      
|-------------------------------------------------------------------------------- |  | -------- | - |  | -----
|                                                                                 |  | $Million
|                                                                                 |  | 2005     |   |  | 2004 
|Interest expense                                                                 |  | 0.2      |   |  | 0.2  
|Interest income                                                                  |  | (1.3     | ) |  |     
|Aggregate amounts payable to entities in the wholly-owned Group at balance date: |  |          |   |  |      
|Non-current payables                                                             |  | 181.6    |   |  | 132.4

Directors and Other Key Management Personnel

Disclosures relating to directors and other key management personnel are set out in Note 28.

Other Related Parties

There are no
other related party transactions.

Ownership Interests in Related Parties

Interests held in the following classes of related parties are set out in the following notes:

(a) controlled entities  Note 24; and

(b) associates  Note 12.



F-32



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES
|--- | ------------------------------------

(a) Directors

The following persons were directors of Alumina Limited during the financial year:

Chairman  non-executive

D M Morley

Executive directors

J Marlay, Chief Executive Officer

K A Dean, Chief Financial Officer (Alternate director from 1 November 2005)1

R D J Davies, Chief Financial Officer (Alternate director until 31 October 2005)



---

|1 | Mr Ken Dean succeeded Mr Bob Davies as Chief Financial Officer on 1 November 2005
|- | ---------------------------------------------------------------------------------

Non-executive directors

P A F Hay

R J McNeilly

M R Rayner

(b) Other key management
personnel

In addition to executive directors, the following person also had authority for the strategic direction and management of the company and the
consolidated entity during the financial year:



|           |  |                                       |  |                
|---------- |  | ------------------------------------- |  | ---------------
|Name       |  | Position                              |  | Employer       
|S C Foster |  | General Counsel and Company Secretary |  | Alumina Limited

Except as noted above, all of the persons above were also key management persons during the year ended
31 December 2004.

(c) Remuneration of key management personnel

(i) Principles used to determine the nature and amount of remuneration

Alumina Limiteds remuneration
policy is to establish a clear link between performance and remuneration. In doing so we committed to ensuring that our remuneration process is aligned with shareholder interests and is also designed to reward and recognise superior Senior Executive
performance.

The process ensures that specific and measurable individual objectives and targets that are consistent with business objectives are set for
executives and employees.

Senior executive remuneration is reviewed annually by the Compensation Committee. Senior Executive rewards are influenced by
three factors: individual performance, Company performance, and market position.

The CEO, Chief Financial Officer and General Counsel/Company Secretary
are the executives who exercise the greatest control over the management and strategic direction of the Group and are the most highly remunerated executives of the Company and the Alumina Group. These executives are the only employees of the Company
who exercise control over the Groups management and strategic direction and therefore fewer than five executives are listed in this report.

Individual performance

Remuneration reflects individual performance based on the Senior Executives performance
against specific goals and individual objectives set for each Senior Executive for the year under review.

The performance of individual Senior Executives,
against their objectives is assessed half yearly and yearly. The Compensation Committee also obtains independent remuneration information for comparative purposes. Salary reviews and short-term incentives (STIs) are determined by assessing
performance against both individual performance objectives and peer group total shareholder return (TSR) performance. Long-term incentives (LTIs) are assessed against the Companys TSR compared with that of Australian and international peer
group companies.

Company performance

A percentage component of both total cash and share-based remuneration for Senior Executives is based on the performance of the company measured against peer group companies TSR.

Market position

Accordingly,
Alumina Limiteds remuneration levels need to be competitive with comparable Australian organisations to ensure that the company can attract and retain high performing employees. The Board Compensation Committee appoints external compensation
advisers to provide appropriate salary and benefits reviews on an annual basis.



F-33



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

Non-executive directors

Alumina Limiteds non-executive directors receive a fee for fulfilling their directors duties. No
additional fees are paid to directors for participating on Board Committees. Non-executive directors fees are reviewed annually and are determined by the committee based on comparative analysis and advice received from remuneration
consultants, and take into account the directors responsibilities and time spent on company business. The level of fees reflects the need to attract directors with the necessary skills and experience.

Total remuneration for non-executive directors is determined by resolution of shareholders. The maximum aggregate remuneration approved for non-executive directors is
$950,000 per annum. A total of $591,325 was paid to Alumina Limited directors in non-executive Director fees in 2005.

There were no fee increases to
non-executive Directors from March 2002 until 1 January 2005. Non-executive directors (other than the Chairman) fees were increased from $85,000 per annum to $110,000 per annum as from 1 January 2005. The Chairmans fee remained
unchanged for 2005.

In 2005, the Compensation Committee approved an increase in non-executive Directors fees of 5 per cent, effective from
1 January 2006. The Chairmans fee was set in 2002 at $212,500, at a multiple of approximately 2.5 times of non-executive Directors fees. The Chairmans fee had not been changed since early 2002. In the course of the review
undertaken in 2005, it was decided, based on the remuneration consultants advice, that the Chairmans fee level should be $287,500 from 1 January 2006, which bore the same proportion to non-executive Directors current fees as
that which applied to the fees when originally set in 2002.

Retirement benefits

Non-executive directors receive, in addition to their fees, a superannuation guarantee contribution which for 2005 was 9 per cent of their fees, being $19,125 for
the Chairman and $9,900 for other non-executive Directors, but do not receive any other retirement benefits. From 1 January 2006, the superannuation guarantee contribution is capped at $12,139 for the Chairman.

Share acquisitions

Alumina Limiteds
non-executive Directors participate in a share plan that requires the Directors to allocate a minimum of 10 per cent of their annual fees to acquiring shares in the Company. Those shares are purchased on-market on behalf of the Directors and
all expenses in relation to the purchase are paid by the Directors. Shares are not allocated on performance but in lieu of receiving cash remuneration.

Senior Executives

Senior executive remuneration comprises:



|(1) | fixed remuneration fixed annual reward (FAR) is the component of total remuneration specified in an employees contract of employment and in periodic
salary reviews. It includes salary and superannuation contributions (both company and salary sacrifice contributions).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | variable (incentive) payments -contracts for Senior Executives and professional employees include a component of remuneration linked to short-term incentives (STIs) and
long-term incentives (LTIs). Policies defining STIs and LTIs are established by the Board Compensation Committee and reviewed annually.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(1) | Fixed Remuneration
|--- | ------------------

The Committee reviews and determines the FAR
for the CEO. The CEO annually reviews and recommends to the Committee the FAR for the other Senior Executives.

The Committee undertook a review in 2005 of
CEO and Senior Executive remuneration. The remuneration structure for the Companys CEO and Senior Executives had previously been set in 2002, prior to the Companys demerger. As part of the review in 2005, the responsibilities and
requirements of these positions were updated and advice was sought from a remuneration consultant to ensure CEO and Senior Executive remuneration continues to be appropriate, taking into account the Companys size, market movements and the
complexity of executive responsibilities. Given the small number of employees at Alumina Limited, it is critical that Senior Executives perform at a high level. For Senior Executives, the Company seeks to set FAR at the third quartile of comparable
companies.

The Committee determined that, the CEOs FAR be increased from $750,000 per annum to $850,000 per annum, effective
1 January 2006 (further details of the CEOs remuneration are provided below). Mr Davies FAR increased from $378,000 per annum to $575,000 per annum, and Mr Fosters FAR increased from
$273,000 per annum to $350,000 per annum, effective 1 August 2005.

The FAR of Mr Ken Dean, appointed as Chief Financial Officer
to succeed Mr Davies effective 1 November 2005, is $540,000 per annum.



|(2) | Variable Payments
|--- | -----------------

During the year, the Company arranged for an
independent consultant to review the structure of its STI and LTI plans. After considering the review, the structure of the STI and LTI were modified, to be effective from 1 January 2006. Details of the arrangements applying during 2005 are set
out below. Changes implemented from 1 January 2006 are outlined in a separate paragraph below.

Short-term incentives

The amount of STI awarded varies according to a combination of individual and Company performance criteria. For the STI, Company
performance has been measured using the TSR for a one year period.



F-34



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

Short-term incentive opportunities are calculated as a percentage of the Senior Executives fixed remuneration and are paid in the form of cash. The Committee reviews performance assessments and approves all STI payments to all
employees. In 2005, the maximum payable to Senior Executives was 45 per cent of FAR, of which 25 per cent related to performance against individual objectives, and 20 per cent related to the Companys relative TSR performance
during the 2005 year. The STI was designed to encourage superior performance and link Senior Executive remuneration to the returns achieved by shareholders.

Performance against individual objectives links achievement reward for Senior Executives for meeting or exceeding measurable objectives in their work. Specific tasks and objectives relate to AWAC joint venture matters
and strategy, capital management and dividends which ultimately support Alumina Limiteds objectives and shareholder interests.

These
objectives in 2005 related to completion of the acquisition of the Juruti bauxite deposit, implementing a funding plan to ensure Aluminas participation in AWACs growth projects, undertaking action to release franking credits from Alcoa
of Australia, the basis for any participation in the Pingguo bauxite and alumina assets and implementation of A-IFRS.

Performance is
measured against a scorecard of agreed objectives and targets. Individual performance against the measures was assessed for each Senior Executive for 2005 and an average of 20 per cent of FAR was awarded for this component of STI.

The TSR component of the 2005 STI plan was measured against the same two comparator peer groups used for the 2005 LTI plan (see below).

The STI reward attributed to the TSR performance fluctuates according to the relative performance of the Company. An entitlement is triggered according to
the scale set out in the following table.



|                      |  |                                               |  |                      |  |                                   
|--------------------- |  | --------------------------------------------- |  | -------------------- |  | ----------------------------------
|EXECUTIVE STI REWARDS |  | Scorecard                                     |  | Performance Measures |  | Potential STI per cent of FAR 2005
|Company Performance   |  | Company 12 month TSR comparison to peer
group |  | TSR in top quartile  |  | 20                                
|                      |  | TSR in third quartile                         |  | 12                  
|                      |  | TSR in second quartile                        |  | 8                   
|                      |  | TSR in bottom quartile                        |  | 0                   

For 2005, an STI component of 8 per cent of FAR was attributed to short-term relative TSR
performance, with Company relative performance registering in the second quartile against peer group performance.

Company TSR and
individual performance objectives provide an incentive to achieve high levels of personal performance and contribute to high levels of Company performance. TSR has been used as a performance hurdle in the STI plan because it was considered an
appropriate means of measuring Company performance. The STI is paid in December in respect of the performance within that year.

Long-term Incentives

Senior Executives are invited to participate in the Alumina Employee Share Plan (ESP). The ESP is
designed to link Alumina employee rewards with the long-term goals and performance of Alumina Limited, and the generation of shareholder returns.

Each year Senior Executives may be offered (at the Boards discretion) a conditional entitlement (a performance right) under the ESP, to fully paid ordinary shares in the Company, which are purchased on market. The performance rights
vest to Senior Executives at the end of the performance period if the performance tests are achieved over that performance period.

An
initial grant of three tranches of performance rights, approved by the Board in early 2003, covered a three year period 2003-2005. The first tranche was tested in December 2003, the second tranche in December 2004 and the third tranche was tested in
December 2005. Beyond the initial grant, future grants have a three year performance period, with performance tests at the end of this period. The LTI grant value for Senior Executives was set at 30 per cent of FAR for the initial three year
grant and 55 per cent for the subsequent grant in December 2004, when the STI percentage was reduced to 45 per cent. The LTI grant value is divided by the prevailing Company share price at the time of the offer to determine the number of
performance rights offered to Senior Executives under the ESP.

The performance criteria and testing period for each annual offer under the
ESP are determined by the Committee at the time of issue of each tranche of performance rights.



F-35



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

Re-testing

If less than 100 per cent of the performance rights in a tranche vest when tested initially, a second test is conducted six months after the
initial test. No further testing is undertaken after this second test six months after the initial test. This second test applies only to 50 per cent of the performance rights that did not initially vest (for example, if 60 per cent
of the performance rights initially vest, the second test will apply only to half of the 40 per cent of performance rights that did not initially vest). The remaining 50 per cent of the performance rights that did not vest will lapse.

The number of performance rights of the re-tested portion that vest will be determined according to Alumina Limiteds relative TSR performance over
the period from the commencement of the performance period to the re-test date, according to the same scale used at the initial test.

Entitlements will
generally lapse on cessation of employment. Mr Davies performance rights that had not vested, lapsed on the date of his resignation in October 2005.

In the event of a change in control, the Board shall determine whether any outstanding performance rights for which performance hurdles are met at that time shall vest to Senior Executives. A change of control is generally an entity
acquiring more than 50 per cent of the issued shares of the Company.

Overview of ESP Performance Measurement

Two comparator group tests are applied to determine the number of performance rights which vest under the ESP, with each accounting for 50 per cent of the maximum
possible grant of performance rights under the ESP. The performance tests compare Alumina Limiteds TSR performance with the TSR performance of each of the entities in two comparator groups over the performance period. The results of the
performance tests are calculated by a consultant engaged for this purpose.

TSR was chosen as the performance measure because it is the most appropriate
means of measuring Company performance, as it incorporates both capital growth and dividends.

The comparator groups selected by the Committee include
companies which are in similar industries to the Company or compete for capital with the Company, taking into account the size of the Company. The methodology behind tests 1 and 2 is identical, apart from the difference in the comparator groups. The
performance tests are defined as follows:

Test 1 relates to performance of Alumina Limited against a comparator group of 50 Australian-listed entities
(i.e. 50 entities/securities excluding Alumina Limited and Property Trusts) (Test 1 - ASX Comparator Group).

Test 2 relates to
performance against a comparator group of 30 international metals and mining entities listed on stock exchanges inside and outside Australia (i.e. 30 entities excluding Alumina Limited) (Test 2 - International Comparator Group).

Under the performance tests, the TSR for each entity in the comparator groups and for Alumina Limited is calculated according to a standard methodology
decided upon and applied by remuneration consultants Mercer Human Resource Consulting, engaged for this purpose. The entities (or securities, as appropriate) in the comparator group are then ranked by TSR performance. The number of performance
rights for which senior executives receive an Alumina Limited share (i.e. that vest) is then determined according to the following scale:

Performance Right Vesting Treatment



|                                                                                                                                                                |  |             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|Alumina Limited TSR compared to median of comparator groups                                                                                                     |  | Vesting     
|If Alumina Limiteds TSR is less than the TSR of the company at the 50th percentile of the comparator group, ranked by TSR
performance                          |  | 0 per cent  
|If Alumina Limiteds TSR is equal to the TSR of the company at the 50th percentile of the comparator group, ranked by TSR
performance*                          |  | 50 per cent 
|If Alumina Limiteds TSR is equal to or greater than the TSR of the company entities at the 75th percentile of the comparator group,
ranked by TSR performance* |  | 100 per cent

---

|* | If Alumina Limiteds TSR performance is between that of the entities (or securities, as appropriate) at the median (i.e. the 50th percentile) and the 75th percentile of
the comparator group ranked by TSR performance, the number of performance rights in a tranche that vest will increase by 2 per cent for each 1 per cent by which Alumina Limiteds percentile ranking is higher than the 50th percentile.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-36



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

Changes to
Variable Remuneration from 2006

The structure of the STI and LTI plans were reviewed in 2005 to ensure they were meeting the intended purpose and to
take account of changes in market practice and executive responsibilities. As a result of the review of the structure of the STI and LTI plans, the variable incentive payments for Executives have been weighted more to the LTI, with the LTI
percentage increasing to 60 per cent of FAR (from 55 per cent) and the STI percentage reducing to 40 per cent of FAR (from 45 per cent), effective 1 January 2006. The CEOs remuneration structure has also been weighted
more to the LTI, with the LTI percentage increasing to 75 per cent of FAR (from 55 per cent) and the STI increasing to 50 per cent of FAR (from 45 per cent), effective 1 January 2006.

The STI structure has also been modified to reduce duplication of performance criteria under both the STI and LTI. The element of the STI award relating to the
Companys TSR performance (up to 20 per cent) has been replaced for senior executives with measurement against achievement of two financial objectives (up to 15 per cent). The remaining 25% of the STI relates to performance against
individual objectives. The STI structure for the Chief Executive Officer from 1 January 2006 is for an STI of 50 per cent of FAR, with 30 per cent relating to performance against personal objectives and 20 per cent measured
against achievement of the same two financial objectives specified for Senior Executives. These are the achievement of the AWAC Operating Plan return on capital for the twelve month performance period and on earnings per share target for Alumina
Limited, based on the AWAC operating plan and Alumina Limiteds corporate budget for the period (normalised for changes in the aluminium price index and AUD/USD effects).



F-37



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

(ii)
Details of remuneration



|                             |  |           |  |           |  
|---------------------------- |  | --------- |  | --------- | -
|                             |  | 2005      |  | 2004      |  
|Short-term employee benefits |  | 2,448,785 |  | 1,970,021 |  
|Post-employment benefits     |  | 84,411    |  | 75,954    |  
|Share based payments         |  | 198,123   |  | (36,682   | )
|                             |  |           |  |           |  
|                             |  | 2,731,319 |  | 2,009,293 |  
|                             |  |           |  |           |  

Details of the remuneration of the directors and key management personnel of Alumina Limited and the Alumina
Limited Group, including their personally-related entities, are set out in the following tables.

Directors of Alumina Limited



|                         |  |                        |  |                 |  |                          |   |                    |           |                       |  |                                   |   |  |           |   
|------------------------ |  | ---------------------- |  | --------------- |  | ------------------------ | - | ------------------ | --------- | --------------------- |  | --------------------------------- | - |  | --------- | --
|2005                     |  | Short term             |  | Post-employment |  | Share based              |   |                    |           |                      
|Name                     |  | Cash salary and fees $ |  | Cash bonus $    |  | Non- monetary benefits $ |   | Super- annuation $ |           | Retirement benefits $ |  | SAP/ Performance rights/Options $ |   |  | Total $   |   
|D M Morley               |  | 191,250                |  |                |  | 21,250                   |   | 19,125             |           |                      |  |                                  |   |  | 231,625   |   
|P A F Hay                |  |                       |  |                |  | 110,000                  |   | 9,900              |           |                      |  |                                  |   |  | 119,900   |   
|R J McNeilly             |  | 82,500                 |  |                |  | 27,500                   |   | 9,900              |           |                      |  |                                  |   |  | 119,900   |   
|M R Rayner               |  | 99,000                 |  |                |  | 11,000                   |   | 9,900              |           |                      |  |                                  |   |  | 119,900   |   
|J Marlay                 |  | 727,638                |  | 217,500         |  |                         |   | 11,862             |           |                      |  | 200,821                           |   |  | 1,157,821 |   
|K A Dean                 |  | 102,515                |  |                |  |                         |   | 2,023              |           |                      |  |                                  |   |  | 104,538   |   
|R D J Davies             |  | 354,411                |  | 120,000         |  |                         |   | 9,839              |           |                      |  | (77,486                           | ) |  | 406,764   |   
|                         |  |                        |  |                 |  |                          |   |                    |           |                       |  |                                   |   |  |           |   
|Total for each component |  | 1,557,314              |  | 337,500         |  | 169,750                  |   | 72,549             |           |                      |  | 123,335                           |   |  | 2,260,448 |   
|                         |  |                        |  |                 |  |                          |   |                    |           |                       |  |                                   |   |  |           |   
|Total by category        |  | 2,064,564              |  | 72,549          |  | 123,335                  |   |                    | 2,260,448 |                      
|                         |  |                        |  |                 |  |                          |   |                    |           |                      
|                         |  |                        |  |                
|2004                     |  | Short term             |  | Post-employment |  | Share based              |   |                    |           |                      
|Name                     |  | Cash salary and fees $ |  | Cash bonus $    |  | Non-monetary benefits $  |   | Super- annuation $ |           | Retirement benefits $ |  | SAP/ Performance rights/Options $ |   |  | Total $   |   
|D M Morley               |  | 191,250                |  |                |  | 21,250                   |   | 19,125             |           |                      |  | (254,113                          | ) |  | (22,488   | )*
|P A F Hay                |  |                       |  |                |  | 85,000                   |   | 7,650              |           |                      |  |                                  |   |  | 92,650    |   
|R J McNeilly             |  | 63,750                 |  |                |  | 21,250                   |   | 7,650              |           |                      |  |                                  |   |  | 92,650    |   
|M R Rayner               |  | 76,500                 |  |                |  | 8,500                    |   | 7,650              |           |                      |  |                                  |   |  | 92,650    |   
|J Marlay                 |  | 688,707                |  | 126,000         |  |                         |   | 11,293             |           |                      |  | 115,297                           |   |  | 941,297   |   
|R D J Davies             |  | 348,707                |  | 54,000          |  |                         |   | 11,293             |           |                      |  | 59,206                            |   |  | 473,206   |   
|                         |  |                        |  |                 |  |                          |   |                    |           |                       |  |                                   |   |  |           |   
|Total for each component |  | 1,368,914              |  | 180,000         |  | 136,000                  |   | 64,661             |           |                      |  | (79,610                           | ) |  | 1,669,965 |   
|                         |  |                        |  |                 |  |                          |   |                    |           |                       |  |                                   |   |  |           |   
|Total by category        |  | 1,684,914              |  | 64,661          |  | (79,610                  | ) |                    | 1,669,965 |                      
|                         |  |                        |  |                 |  |                          |   |                    |           |                      

---

|* | Mr Morley, a previous employee of WMC Limited, held 250,000 stock appreciation rights at an allocation price of $5.02 per right which were due to lapse in October 2004. Mr Morley
redeemed his rights for a total redemption value of $133,150. The average redemption value was $0.51 per right. In 2003 the cost of the SAP rights for Mr Morley was accrued and reported based on the Alumina Limited closing share price at
31 December 2003 of $6.57. The difference between the accrued amount reported in 2003 and the actual redemption value was $254,113.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-38



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

Key
management personnel of Alumina Limited and the Group



|                         |  |                       |  |                 |  |                          |  |                  |  |                      |  |                      |  |        
|------------------------ |  | --------------------- |  | --------------- |  | ------------------------ |  | ---------------- |  | -------------------- |  | -------------------- |  | -------
|2005                     |  | Short term            |  | Post-employment |  | Share based              |  |                 
|Name                     |  | Cash salaryand fees$  |  | Cashbonus$      |  | Non- monetary benefits $ |  | Super-annuation$ |  | Retirement benefits$ |  | Performancerights $  |  | Total $
|S C Foster               |  | 293,221               |  | 91,000          |  |                         |  | 11,862           |  |                     |  | 74,788               |  | 470,871
|                         |  |                       |  |                 |  |                          |  |                  |  |                      |  |                      |  |        
|Total for each component |  | 293,221               |  | 91,000          |  |                         |  | 11,862           |  |                     |  | 74,788               |  | 470,871
|                         |  |                       |  |                 |  |                          |  |                  |  |                      |  |                      |  |        
|Total by category        |  | 384,221               |  | 11,862          |  | 74,788                   |  | 470,871         
|                         |  |                       |  |                 |  |                          |  |                 
|                         |  |                       |  |                
|2004                     |  | Short term            |  | Post-employment |  | Share based              |  |                 
|Name                     |  | Cash salary and fees$ |  | Cashbonus$      |  | Non- monetary benefits$  |  | Super-annuation$ |  | Retirement benefits$ |  | Performance rights $ |  | Total $
|S C Foster               |  | 248,707               |  | 36,400          |  |                         |  | 11,293           |  |                     |  | 42,928               |  | 339,328
|                         |  |                       |  |                 |  |                          |  |                  |  |                      |  |                      |  |        
|Total for each component |  | 248,707               |  | 36,400          |  |                         |  | 11,293           |  |                     |  | 42,928               |  | 339,328
|                         |  |                       |  |                 |  |                          |  |                  |  |                      |  |                      |  |        
|Total by category        |  | 285,107               |  | 11,293          |  | 42,928                   |  | 339,328         
|                         |  |                       |  |                 |  |                          |  |                 

(iii) Service agreements

Remuneration and other terms of employment for the Chief Executive Officer, Chief Financial Officer and the General Counsel and Company Secretary are formalised in service agreements. Each of these agreements provides
for performance-related incentives and other benefits including car parking. Other major provisions of the agreements relating to remuneration are set out below.

J Marlay, Chief Executive Officer



| |  | Initial agreement for a three-year term, expired in August 2005.
|- |  | ----------------------------------------------------------------



| |  | From August 2005, employment contract became a continuing contract subject to 12 months notice to terminate, from either the Company or Mr Marlay.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Fixed annual reward (FAR) increased to $732,000 on 1 January 2005, with a further increase to $750,000 in August 2005.
|- |  | ----------------------------------------------------------------------------------------------------------------------



| |  | In December 2005, Mr Marlay entered into a new employment contract with a FAR, inclusive of superannuation, of $850,000, an STI of up to 50 per cent of FAR (with at
target performance likely to achieve 30-42 per cent), and potential for an annual grant of performance rights at the Boards discretion with a value up to 75 per cent of FAR per annum (which will vest according to the extent to
which the performance tests are satisfied).
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | If employment is terminated, benefits will be available in accordance with Alumina Limiteds redundancy policy. Contract can be terminated by either party by providing 12
months notice.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

K A Dean, Chief Financial Officer



| |  | Term commenced 24 October 2005 and is an ongoing agreement.
|- |  | -----------------------------------------------------------



| |  | Fixed annual reward, inclusive of superannuation, for the year ending 31 December 2005 of $540,000 per annum, to be reviewed annually by the Compensation Committee.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | If employment is terminated, benefits will be available in accordance with Alumina Limiteds redundancy policy. Contract can be terminated by the Company providing six months
notice to terminate the contract, or three months written notice of termination by Mr Dean.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

S C
Foster, Group Counsel and Company Secretary



| |  | Term commenced 6 November 2002 and is an ongoing agreement.
|- |  | -----------------------------------------------------------



| |  | Mr Fosters fixed annual reward inclusive of superannuation, increased from $273,000 per annum to $350,000 on 1 August 2005.
|- |  | ----------------------------------------------------------------------------------------------------------------------------



| |  | If employment is terminated, benefits will be available in accordance with Alumina Limiteds redundancy policy. Contract can be terminated by the Company providing six months
notice to terminate the contract, or three months written notice of termination by Mr Foster.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

R D J
Davies, Chief Financial Officer (resigned 31 October 2005)



| |  | Term of agreement  commenced 6 November 2002 and resigned 31 October 2005.
|- |  | ---------------------------------------------------------------------------



| |  | Mr Davies fixed annual reward inclusive of superannuation, increased from $378,000 per annum to $575,000 per annum on 1 August 2005.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  | Total remuneration for the period until resignation amounted to $406,764.
|- |  | -------------------------------------------------------------------------



F-39



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

(d) Equity
instrument disclosures relating to key management personnel

(i) Options

Alumina Limited does not have any ongoing option plans available to non-executive directors, directors, executive and senior managers or staff. Some former WMC Limited employees who are continuing employment in or are
otherwise engaged by Alumina Limited, including the Chairman Mr Morley and former CFO, Mr Davies held options in Alumina Limited that were granted under the WMC Employee Share Scheme prior to the demerger of WMC Limited in December 2002. During the
course of 2004, Mr Morley exercised all of his remaining options. During the course of 2005, Mr Davies exercised all of his remaining options.

(ii)
Stock appreciation plan

Prior to the demerger of WMC Limited, stock appreciation plans (SAPs) were established primarily for, but not restricted to
employees in countries outside Australia. The purpose of the SAPs was to provide such employees, who due to securities law constraints were not eligible to participate under the option plans, with benefits similar to those conferred by the
option plans.

Employees were not required to pay any amount for the grant of the SAP Rights. Each has a notional allotment price, which is equal to
the weighted average sale price of WMC Limiteds shares on the ASX on the trading day that the invitation to apply for the relevant SAP Right was made to the relevant employee (as adjusted as part of the demerger). Upon redemption of a
SAP Right before its expiry by the holder, the holder is entitled to a payment equal to the difference between the closing price of WMC Limited (or, post-demerger Alumina Limited) shares on the ASX on the trading day immediately before
redemption, and the allotment price (assuming the former amount is higher). Compensation cost is measured as the amount by which the quoted market value of the shares covered by the grant exceeds the allotment price.

(iii) Alumina Employee Share Plan

Senior Executives may be
invited (at the Boards discretion) to participate in the Alumina Employee Share Plan (ESP). The ESP is designed to link Alumina employee rewards with the long-term goals and performance of Alumina Limited, and the generation of shareholder
returns.

Each year Senior Executives may be offered (at the Boards discretion) a conditional entitlement (a performance right) under the ESP, to
fully paid ordinary shares in the Company, which are purchased on market. The performance rights vest to Senior Executives at the end of the performance period if the performance tests are achieved over that performance period.

The terms and conditions of each grant or right affecting remuneration in the previous, this and future reporting periods are as follows:



|           |  |                           |  |                                
|---------- |  | ------------------------- |  | -------------------------------
|Grant date |  | End of performance period |  | Value per right at grant date 1
|26/3/2003  |  | 3/12/2003                 |  | 2.44                           
|26/3/2003  |  | 3/12/2004                 |  | 2.49                           
|26/3/2003  |  | 3/12/2005                 |  | 2.49                           
|19/1/2004  |  | 21/12/2006                |  | 3.01                           
|25/1/2005  |  | 16/12/2007                |  | 3.68                           

---

|1 | Value is determined by a calculation performed by Mercer Finance and Risk Consulting using an
option pricing model which accommodates the exercise, forfeiture and performance hurdle conditions of Alumina Limiteds ESP.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Performance rights do not carry dividend or voting rights prior to any vesting of the performance rights.

When vesting, each performance right
results in a beneficial entitlement to one ordinary share.

Details of performance rights over ordinary shares in the company provided as remuneration to
each director of Alumina Limited and each of the key management personnel of the Group are set out below.



|                                            |      |                                          |      |                                         |      |       |      |  
|------------------------------------------- | ---- | ---------------------------------------- | ---- | --------------------------------------- | ---- | ----- | ---- | -
|Name                                        |      | Number of rights granted during the year |      | Number of rights vested during the year
|                                            | 2005 |                                          | 2004 |                                         | 2005 |       | 2004
|Directors of Alumina Limited                |      |                                          |      |                                         |      |       |      |  
|R D J Davies                                |      | 36,500                                   |      | 37,300                                  |      | 3,000 |      | 
|J Marlay                                    |      | 70,600                                   |      | 72,500                                  |      | 5,838 |      | 
|K A Dean                                    |      |                                         |      |                                        |      |      |      | 
|                                            |      |                                          |      |                                        
|Other key management personnel of the Group |      |                                          |      |                                         |      |       |      |  
|S C Foster                                  |      | 26,300                                   |      | 27,000                                  |      | 2,175 |      | 



F-40



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

(iv)
Options and performance rights holdings

The number of options and performance rights over ordinary shares in the company held during the financial
year by each director of Alumina Limited and the key management personnel of the company and the consolidated entity, including their personally related entities, is set out below:

2005



|             |  |                                |  |                                                               |  |                                               |  |                                       |      |  |                                |   |  |                               |  |                                           
|------------ |  | ------------------------------ |  | ------------------------------------------------------------- |  | --------------------------------------------- |  | ------------------------------------- | ---- |  | ------------------------------ | - |  | ----------------------------- |  | ------------------------------------------
|Name         |  | Type of equity-basedinstrument |  | Number ofperformancerights oroptions heldat 1 January2005 (1) |  | Numbergrantedduring theyear asremuneration(2) |  | Numbervested/exercisedduring the year |      |  | Numberlapsedduring theyear (3) |   |  | Numberheld at 31 December2005 |  | Vested andexercisableat the end ofthe year
|J Marlay     |  | Share Option                   |  |                                                              |  |                                              |  |                                      |      |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  | 144,750                                                       |  | 70,600                                        |  | (5,838                                | )    |  | (41,962                        | ) |  | 167,550                       |  |                                          
|R D J Davies |  | Share Option                   |  | 50,000                                                        |  |                                              |  | (50,000                               | )(4) |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  | 74,300                                                        |  | 36,500                                        |  | (3,000                                | )    |  | (107,800                       | ) |  |                              |  |                                          
|S C Foster   |  | Share Option                   |  |                                                              |  |                                              |  |                                      |      |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  | 53,900                                                        |  | 26,300                                        |  | (2,175                                | )    |  | (15,625                        | ) |  | 62,400                        |  |                                          
|K A Dean     |  | Share Option                   |  |                                                              |  |                                              |  |                                      |      |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  |                                                              |  |                                              |  |                                      |      |  |                               |   |  |                              |  |                                          

---

|(1) | Includes the number of performance rights granted for testing in December 2004 (re-tested in
June 2005), December 2005, December 2006 but not yet vested.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Performance rights granted in January 2005 for the 3 year performance test period concluding
in December 2007.
|--- | --------------------------------------------------------------------------------------------------------------

|(3) | Performance right conditions were not met for tranche 3 of the March 2003 grant and under the ESP Rules 50 per cent of the entitlement lapsed with the remaining
50 per cent to be re-tested in June 2006. In addition, a portion of tranche 2 of the March 2003 grant re-tested in June 2005 lapsed. Mr Davies remaining performance rights lapsed on his resignation on 31 October 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr Davies exercised his options and sold the shares he obtained from exercising his options.
|--- | --------------------------------------------------------------------------------------------

2004



|             |  |                                |  |                                                               |  |                                               |  |                               |  |                                |   |  |                               |  |                                           
|------------ |  | ------------------------------ |  | ------------------------------------------------------------- |  | --------------------------------------------- |  | ----------------------------- |  | ------------------------------ | - |  | ----------------------------- |  | ------------------------------------------
|Name         |  | Type of equity-basedinstrument |  | Number ofperformancerights oroptions heldat 1 January2004 (1) |  | Numbergrantedduring theyear asremuneration(2) |  | Number vested during the year |  | Numberlapsedduring theyear (3) |   |  | Numberheld at 31 December2004 |  | Vested andexercisableat the end ofthe year
|J Marlay     |  | Share Option                   |  |                                                              |  |                                              |  |                              |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  | 95,600                                                        |  | 72,500                                        |  |                              |  | (23,350                        | ) |  | 144,750                       |  |                                          
|R D J Davies |  | Share Option                   |  | 50,000                                                        |  |                                              |  |                              |  |                               |   |  | 50,000                        |  | 50,000                                    
|             |  | Performance rights             |  | 49,000                                                        |  | 37,300                                        |  |                              |  | (12,000                        | ) |  | 74,300                        |  |                                          
|S C Foster   |  | Share Option                   |  |                                                              |  |                                              |  |                              |  |                               |   |  |                              |  |                                          
|             |  | Performance rights             |  | 35,600                                                        |  | 27,000                                        |  |                              |  | (8,700                         | ) |  | 53,900                        |  |                                          

---

|(1) | The number of performance rights granted for testing in December 2004, December 2005 and
December 2006 but not yet vested.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Performance rights granted in 2004 for the 3 year performance test period concluding in
December 2006.
|--- | ------------------------------------------------------------------------------------------------------

|(3) | Performance right conditions were not met for tranche 2 of the March 2003 grant and under the ESP Rules 50 per cent of the rights lapsed with the remaining
50 per cent to be re-tested in June 2005.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-41



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

(v) Shareholdings

The numbers of shares in the company held during the financial year by each director of Alumina
Limited and the key management personnel of the company and consolidated entity, including their personally-related entities, are set out below.

2005



|                                                                      |  |                                 |  |                                                        |  |                            |   |  |                             
|--------------------------------------------------------------------- |  | ------------------------------- |  | ------------------------------------------------------ |  | -------------------------- | - |  | ----------------------------
|Name                                                                  |  | Balanceat the start ofthe year  |  | Received duringthe year on theexercise ofoption/rights |  | Otherchangesduring theyear |   |  | Balanceat the end ofthe year
|Directors of Alumina Limited                                          |  |                                 |  |                                                        |  |                            |   |  |                             
|Ordinary shares                                                       |  |                                 |  |                                                        |  |                            |   |  |                             
|                                                                      |  |                                 |  |                                                       
|D M Morley                                                            |  | 413,796                         |  |                                                       |  | 3,548                      |   |  | 417,344                     
|P A F Hay                                                             |  | 15,430                          |  |                                                       |  | 16,270                     |   |  | 31,700                      
|R J McNeilly                                                          |  | 23,304                          |  |                                                       |  | 4,066                      |   |  | 27,370                      
|M R Rayner                                                            |  | 26,467                          |  |                                                       |  | 1,627                      |   |  | 28,094                      
|J Marlay                                                              |  | 84,500                          |  | 5,838                                                  |  |                           |   |  | 90,338                      
|R D J Davies1                                                         |  | 90,762                          |  | 53,000                                                 |  | (143,762                   | ) |  |                            
|_________                                                             |  |                                 |  |                                                        |  |                            |   |  |                             
|1Mr Davies resigned from the company on 31 October 2005.              |  |                                 |  |                                                        |  |                            |   |  |                             
|                                                                     
|Other key management personnel of the company and consolidated entity
|Ordinary shares                                                       |  |                                 |  |                                                        |  |                            |   |  |                             
|                                                                      |  |                                 |  |                                                       
|S C Foster                                                            |  | 26,500                          |  | 2,175                                                  |  |                           |   |  | 28,675                      
|                                                                      |  |                                 |  |                                                       
|2004                                                                  |  |                                 |  |                                                        |  |                            |   |  |                             
|                                                                      |  |                                 |  |                                                       
|Name                                                                  |  | Balance at the start ofthe year |  | Received duringthe year on theexercise ofoption/rights |  | Otherchangesduring theyear |   |  | Balanceat the end ofthe year
|Directors of Alumina Limited                                          |  |                                 |  |                                                        |  |                            |   |  |                             
|Ordinary shares                                                       |  |                                 |  |                                                        |  |                            |   |  |                             
|                                                                      |  |                                 |  |                                                       
|D M Morley                                                            |  | 310,492                         |  | 100,000                                                |  | 3,304                      |   |  | 413,796                     
|P A F Hay                                                             |  | 2,200                           |  |                                                       |  | 13,230                     |   |  | 15,430                      
|R J McNeilly                                                          |  | 20,000                          |  |                                                       |  | 3,304                      |   |  | 23,304                      
|M R Rayner                                                            |  | 20,000                          |  |                                                       |  | 6,467                      |   |  | 26,467                      
|J Marlay                                                              |  | 84,500                          |  |                                                       |  |                           |   |  | 84,500                      
|R D J Davies                                                          |  | 90,762                          |  |                                                       |  |                           |   |  | 90,762                      
|                                                                     
|Other key management personnel of the company and consolidated entity
|Ordinary shares                                                      
|                                                                      |  |                                 |  |                                                       
|S C Foster                                                            |  | 26,500                          |  |                                                       |  |                           |   |  | 26,500                      



F-42



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|28. | KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
|--- | ------------------------------------------------

(e) Loans to
directors and executives

No loans were made to directors or specified executives of Alumina Limited and other key management personnel of the Group,
including their personally-related entities in 2005 and 2004.

(f) Other transactions with key management personnel

Directors of Alumina Limited

A director Mr P A F Hay, was the
Chief Executive Officer of Freehills until 30 June 2005. Freehills has previously provided legal services to Alumina Limited and a number of Alumina Limited controlled entities on normal commercial terms and conditions. No services were
provided during 2005 (2004: $3,279).

Aggregate amounts of each of the above types of transactions were:



|                              |  |        |  |       
|----------------------------- |  | ------ |  | ------
|                              |  | 2005 $ |  | 2004 $
|Amounts recognised as expense |  |        |  |       
|Legal fees                    |  |       |  | 3,279 



|29. | REMUNERATION OF AUDITORS
|--- | ------------------------

During the year the
following fees were paid or payable for services provided by the auditor of the parent entity, and its related practices:



|    |  |                                                                                                 |  |           |  |     
|--- |  | ----------------------------------------------------------------------------------------------- |  | --------- |  | ----
|    |  |                                                                                                 |  | $Thousand
|    |  |                                                                                                 |  | 2005      |  | 2004
|(a) |  | Remuneration for audit or review of the parent entity or any entity in the consolidated entity: |  |           |  |     
|    |  | Audit of parent entity  PricewaterhouseCoopers  fees for annual audit                         |  | 283       |  | 252 
|    |  | Additional 2003 costs incurred in 2004                                                          |  |          |  | 2   
|    |  | Audit of Annual Report on US Form 20-F  fees for annual audit                                  |  | 105       |  | 112 
|    |  | Advice on accounting standards (including transition to A-IFRS)                                 |  | 321       |  | 30  
|    |  |                                                                                                 |  |           |  |     
|    |  |                                                                                                 |  | 709       |  | 396 
|    |  |                                                                                                 |  |           |  |     
|(b) |  | Remuneration for other assurance services:                                                      |  |           |  |     
|    |  | Other                                                                                           |  |          |  | 5   
|    |  |                                                                                                 | 
|(c) |  | Remuneration for taxation services:                                                             |  |           |  |     
|    |  | Overseas tax services                                                                           |  | 101       |  | 174 
|    |  |                                                                                                 |  |           |  |     
|    |  | Total                                                                                           |  | 810       |  | 575 
|    |  |                                                                                                 |  |           |  |     

It is the consolidated entitys policy only to employ PricewaterhouseCoopers on assignments additional to
their statutory audit duties where PricewaterhouseCoopers expertise and experience with the consolidated entity are important or where PricewaterhouseCoopers is awarded assignments on a competitive basis.



|30. | EVENTS OCURRING AFTER BALANCE SHEET DATE
|--- | ----------------------------------------

There
have been no significant events since 31 December 2005.



F-43



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|31. | FINANCIAL REPORTING BY SEGMENT
|--- | ------------------------------



|(a) | Business segments
|--- | -----------------

Year ended 31 December
2005 and 31 December 2004

Alumina Limiteds primary assets are its 40% interest in the series of operating entities forming
AWAC. The company operates in the alumina/aluminium business through its equity interests in AWAC.



|(b) | Geographical segments
|--- | ---------------------



|                                          |  |           |  |               |  |        |  |                                |  |        
|----------------------------------------- |  | --------- |  | ------------- |  | ------ |  | ------------------------------ |  | -------
|Consolidated                              |  | Australia |  | North America |  | Europe |  | Caribbean,Sth America& Africa* |  | Total  
|Segment revenue by location of customer** |  |          |  |              |  |       |  |                               |  |       
|Unallocated revenue                       |  | 4.0       |  |              |  |       |  |                               |  | 4.0    
|                                          |  |           |  |               |  |        |  |                                |  |        
|Consolidated revenue                      |  |           |  |               |  |        |  |                                |  | 4.0    
|                                          |  |           |  |               |  |        |  |                                |  |        
|Investments in Associates                 |  | 1,030.2   |  | 356.0         |  | 54.8   |  | 553.9                          |  | 1,994.9
|Segment assets                            |  | 12.6      |  | 1.3           |  | 4.7    |  |                               |  | 18.6   
|Segment liabilities                       |  | 483.2     |  | 0.1           |  |       |  |                               |  | 483.3  
|                                          |  |           |  |               |  |        |  |                                |  |        
|Consolidated net assets                   |  |           |  |               |  |        |  |                                |  | 1,530.2
|                                          |  |           |  |               |  |        |  |                                |  |        
|Acquisitions of non-current assets        |  |          |  |              |  |       |  |                               |  |       
|                                          |  |           |  |               |  |        |  |                                |  |        
|Total acquisitions of non-current assets  |  |           |  |               |  |        |  |                                |  |       
|                                          |  |           |  |               |  |        |  |                                |  |        
|                                          |  |           |  |               | 
|Consolidated                              |  | Australia |  | North America |  | Europe |  | Caribbean,Sth America& Africa* |  | Total  
|Segment revenue by location of customer** |  |          |  |              |  |       |  |                               |  |       
|Unallocated revenue                       |  | 8.9       |  |              |  |       |  |                               |  | 8.9    
|                                          |  |           |  |               |  |        |  |                                |  |        
|Consolidated revenue                      |  |           |  |               |  |        |  |                                |  | 8.9    
|                                          |  |           |  |               |  |        |  |                                |  |        
|Investments in Associates                 |  | 758.0     |  | 352.3         |  | 50.9   |  | 540.9                          |  | 1,702.1
|Segment assets                            |  | 110.9     |  | 1.4           |  | 0.4    |  | 8.4                            |  | 121.1  
|Segment liabilities                       |  | 402.8     |  | 0.1           |  |       |  | 8.4                            |  | 411.3  
|                                          |  |           |  |               |  |        |  |                                |  |        
|Consolidated net assets                   |  |           |  |               |  |        |  |                                |  | 1,411.9
|                                          |  |           |  |               |  |        |  |                                |  |        
|Acquisitions of non-current assets        |  |          |  |              |  |       |  | 51.1                           |  | 51.1   
|                                          |  |           |  |               |  |        |  |                                |  |        
|Total acquisitions of non-current assets  |  |           |  |               |  |        |  |                                |  | 51.1   
|                                          |  |           |  |               |  |        |  |                                |  |        

---

|* | Predominantly includes assets in Jamaica, Brazil, Suriname and Guinea.
|- | ----------------------------------------------------------------------

|** | The Group had no sale of goods and services for the year; therefore no segment revenue is disclosed.
|-- | ----------------------------------------------------------------------------------------------------



F-44



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS
|--- | -----------------------------------------------------------



|(1) | Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRS (A-IFRS)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(a) | At the date of transition to A-IFRS: 1 January 2004
|--- | ---------------------------------------------------



|                                                  |  |                 |  |                |  |                              |    |  |        
|------------------------------------------------- |  | --------------- |  | -------------- |  | ---------------------------- | -- |  | -------
|                                                  |  |                 |  | $Million      
|                                                  |  | Notes           |  | Previous AGAAP |  | Effect oftransitionto A-IFRS |    |  | A-IFRS 
|CURRENT ASSETS                                    |  |                 |  |                |  |                              |    |  |        
|Cash and cash equivalents                         |  |                 |  | 165.3          |  |                             |    |  | 165.3  
|Receivables                                       |  |                 |  | 4.0            |  |                             |    |  | 4.0    
|Deferred tax assets                               |  | (d)             |  | 4.1            |  | 0.7                          |    |  | 4.8    
|Other                                             |  |                 |  | 0.3            |  |                             |    |  | 0.3    
|                                                  |  |                 |  |                |  |                              |    |  |        
|Total current assets                              |  |                 |  | 173.7          |  | 0.7                          |    |  | 174.4  
|                                                  |  |                 |  |                |  |                              |    |  |        
|NON-CURRENT ASSETS                                |  |                 |  |                |  |                              |    |  |        
|Investments accounted for using the equity method |  | (b),(f),(g)     |  | 1,625.0        |  | (17.5                        | )1 |  | 1,607.5
|Property, plant and equipment                     |  |                 |  | 0.4            |  |                             |    |  | 0.4    
|                                                  |  |                 |  |                |  |                              |    |  |        
|Total non-current assets                          |  |                 |  | 1,625.4        |  | (17.5                        | )  |  | 1,607.9
|                                                  |  |                 |  |                |  |                              |    |  |        
|TOTAL ASSETS                                      |  |                 |  | 1,799.1        |  | (16.8                        | )  |  | 1,782.3
|                                                  |  |                 |  |                |  |                              |    |  |        
|CURRENT LIABILITIES                               |  |                 |  |                |  |                              |    |  |        
|Payables                                          |  |                 |  | 3.2            |  |                             |    |  | 3.2    
|Interest bearing liabilities                      |  |                 |  | 467.0          |  |                             |    |  | 467.0  
|Current tax liabilities                           |  |                 |  | 2.5            |  |                             |    |  | 2.5    
|Provisions                                        |  |                 |  | 0.1            |  |                             |    |  | 0.1    
|Other                                             |  |                 |  | 2.3            |  |                             |    |  | 2.3    
|                                                  |  |                 |  |                |  |                              |    |  |        
|Total current liabilities                         |  |                 |  | 475.1          |  |                             |    |  | 475.1  
|                                                  |  |                 |  |                |  |                              |    |  |        
|NON-CURRENT LIABILITIES                           |  |                 |  |                |  |                              |    |  |        
|Provisions                                        |  |                 |  | 0.2            |  |                             |    |  | 0.2    
|                                                  |  |                 |  |                |  |                              |    |  |        
|Total non-current liabilities                     |  |                 |  | 0.2            |  |                             |    |  | 0.2    
|                                                  |  |                 |  |                |  |                              |    |  |        
|TOTAL LIABILITIES                                 |  |                 |  | 475.3          |  |                             |    |  | 475.3  
|                                                  |  |                 |  |                |  |                              |    |  |        
|NET ASSETS                                        |  |                 |  | 1,323.8        |  | (16.8                        | )  |  | 1,307.0
|                                                  |  |                 |  |                |  |                              |    |  |        
|EQUITY                                            |  |                 |  |                |  |                              |    |  |        
|Parent entity interest:                           |  |                 |  |                |  |                              |    |  |        
|Contributed equity                                |  |                 |  | 384.8          |  |                             |    |  | 384.8  
|Reserves:                                         |  |                 |  |                |  |                              |    |  |        
|- Group                                           |  | (a),(b),(f),(g) |  | 131.0          |  | (80.3                        | )  |  | 50.7   
|- Associates                                      |  | (b)             |  |               |  | 1.4                          |    |  | 1.4    
|Retained profits:                                 |  |                 |  |                |  |                              |    |  |        
|- Group                                           |  | (b),(i)         |  | 400.3          |  | 81.0                         |    |  | 481.3  
|- Associates                                      |  | (i)             |  | 407.7          |  | (18.9                        | )  |  | 388.8  
|                                                  |  |                 |  |                |  |                              |    |  |        
|TOTAL EQUITY                                      |  |                 |  | 1,323.8        |  | (16.8                        | )  |  | 1,307.0
|                                                  |  |                 |  |                |  |                              |    |  |        



F-45



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (continued)
|--- | -----------------------------------------------------------------------



|(1) | Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRS (A-IFRS)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | At the end of the last reporting period under previous AGAAP: 31 December 2004
|--- | ------------------------------------------------------------------------------



|                                                  |  |                 |  |                |  |                              |    |  |         |  
|------------------------------------------------- |  | --------------- |  | -------------- |  | ---------------------------- | -- |  | ------- | -
|                                                  |  |                 |  | $Million       | 
|                                                  |  | Notes           |  | Previous AGAAP |  | Effect oftransitionto A-IFRS |    |  | A-IFRS  |  
|CURRENT ASSETS                                    |  |                 |  |                |  |                              |    |  |         |  
|Cash and cash equivalents                         |  |                 |  | 117.9          |  |                             |    |  | 117.9   |  
|Receivables                                       |  |                 |  | 0.8            |  |                             |    |  | 0.8     |  
|Deferred tax assets                               |  | (d)             |  |               |  | 2.1                          |    |  | 2.1     |  
|Other                                             |  | (e)             |  | 0.6            |  | (0.6                         | )  |  |        |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|Total current assets                              |  |                 |  | 119.3          |  | 1.5                          |    |  | 120.8   |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|NON-CURRENT ASSETS                                |  |                 |  |                |  |                              |    |  |         |  
|Investments accounted for using the equity method |  | (b),(c),(f),(g) |  | 1,721.7        |  | (19.6                        | )1 |  | 1,702.1 |  
|Property, plant and equipment                     |  |                 |  | 0.3            |  |                             |    |  | 0.3     |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|Total non-current assets                          |  |                 |  | 1,722.0        |  | (19.6                        | )  |  | 1,702.4 |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|TOTAL ASSETS                                      |  |                 |  | 1,841.3        |  | (18.1                        | )  |  | 1,823.2 |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|CURRENT LIABILITIES                               |  |                 |  |                |  |                              |    |  |         |  
|Payables                                          |  |                 |  | 2.4            |  |                             |    |  | 2.4     |  
|Interest bearing liabilities                      |  |                 |  | 397.9          |  |                             |    |  | 397.9   |  
|Provisions                                        |  |                 |  | 0.1            |  |                             |    |  | 0.1     |  
|Other                                             |  |                 |  | 10.7           |  |                             |    |  | 10.7    |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|Total current liabilities                         |  |                 |  | 411.1          |  |                             |    |  | 411.1   |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|NON-CURRENT LIABILITIES                           |  |                 |  |                |  |                              |    |  |         |  
|Provisions                                        |  |                 |  | 0.2            |  |                             |    |  | 0.2     |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|Total non-current liabilities                     |  |                 |  | 0.2            |  |                             |    |  | 0.2     |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|TOTAL LIABILITIES                                 |  |                 |  | 411.3          |  |                             |    |  | 411.3   |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|NET ASSETS                                        |  |                 |  | 1,430.0        |  | (18.1                        | )  |  | 1,411.9 |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|EQUITY                                            |  |                 |  |                |  |                              |    |  |         |  
|Parent entity interest:                           |  |                 |  |                |  |                              |    |  |         |  
|Contributed equity                                |  |                 |  | 404.1          |  |                             |    |  | 404.1   |  
|Treasury shares                                   |  | (e)             |  |               |  | (0.6                         | )  |  | (0.6    | )
|Reserves:                                         |  |                 |  |                |  |                              |    |  |         |  
|- Group                                           |  | (a),(b),(f),(g) |  | 133.2          |  | (80.6                        | )  |  | 52.6    |  
|- Associates                                      |  | (b)             |  |               |  | 2.4                          |    |  | 2.4     |  
|Retained profits:                                 |  |                 |  |                |  |                              |    |  |         |  
|- Group                                           |  | (i)             |  | 358.5          |  | 83.0                         |    |  | 441.5   |  
|- Associates                                      |  | (i)             |  | 534.2          |  | (22.3                        | )  |  | 511.9   |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  
|TOTAL EQUITY                                      |  |                 |  | 1,430.0        |  | (18.1                        | )  |  | 1,411.9 |  
|                                                  |  |                 |  |                |  |                              |    |  |         |  



F-46



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (continued)
|--- | -----------------------------------------------------------------------



|(1) | Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRS (A-IFRS)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | Adjustments on transition to AASB 132Financial Instruments: Disclosures and Presentationand AASB 139Financial Instruments: Recognition and
Measurement:1 January 2005
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                  |  |       |  |                         |   |  |            |  |                |  
|------------------------------------------------- |  | ----- |  | ----------------------- | - |  | ---------- |  | -------------- | -
|                                                  |  |       |  | $Million                |  
|                                                  |  | Notes |  | A-IFRS 31 December 2004 |   |  | Adjustment |  | 1 January 2005 |  
|CURRENT ASSETS                                    |  |       |  |                         |   |  |            |  |                |  
|Cash and cash equivalents                         |  |       |  | 117.9                   |   |  |           |  | 117.9          |  
|Receivables                                       |  |       |  | 0.8                     |   |  |           |  | 0.8            |  
|Deferred tax assets                               |  |       |  | 2.1                     |   |  |           |  | 2.1            |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|Total current assets                              |  |       |  | 120.8                   |   |  |           |  | 120.8          |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|NON-CURRENT ASSETS                                |  |       |  |                         |   |  |            |  |                |  
|Investments accounted for using the equity method |  | (h)   |  | 1,702.1                 |   |  | 2.1        |  | 1,704.2        |  
|Property, plant and equipment                     |  |       |  | 0.3                     |   |  |           |  | 0.3            |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|Total non-current assets                          |  |       |  | 1,702.4                 |   |  | 2.1        |  | 1,704.5        |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|TOTAL ASSETS                                      |  |       |  | 1,823.2                 |   |  | 2.1        |  | 1,825.3        |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|CURRENT LIABILITIES                               |  |       |  |                         |   |  |            |  |                |  
|Payables                                          |  |       |  | 2.4                     |   |  |           |  | 2.4            |  
|Interest bearing liabilities                      |  |       |  | 397.9                   |   |  |           |  | 397.9          |  
|Provisions                                        |  |       |  | 0.1                     |   |  |           |  | 0.1            |  
|Other                                             |  |       |  | 10.7                    |   |  |           |  | 10.7           |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|Total current liabilities                         |  |       |  | 411.1                   |   |  |           |  | 411.1          |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|NON-CURRENT LIABILITIES                           |  |       |  |                         |   |  |            |  |                |  
|Provisions                                        |  |       |  | 0.2                     |   |  |           |  | 0.2            |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|Total non-current liabilities                     |  |       |  | 0.2                     |   |  |           |  | 0.2            |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|TOTAL LIABILITIES                                 |  |       |  | 411.3                   |   |  |           |  | 411.3          |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|NET ASSETS                                        |  |       |  | 1,411.9                 |   |  | 2.1        |  | 1,414.0        |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|EQUITY                                            |  |       |  |                         |   |  |            |  |                |  
|Parent entity interest:                           |  |       |  |                         |   |  |            |  |                |  
|Contributed equity                                |  |       |  | 404.1                   |   |  |           |  | 404.1          |  
|Treasury shares                                   |  |       |  | (0.6                    | ) |  |           |  | (0.6           | )
|Reserves:                                         |  |       |  |                         |   |  |            |  |                |  
|- Group                                           |  |       |  | 52.6                    |   |  |           |  | 52.6           |  
|- Associates                                      |  | (h)   |  | 2.4                     |   |  | 2.1        |  | 4.5            |  
|Retained profits:                                 |  |       |  |                         |   |  |            |  |                |  
|- Group                                           |  |       |  | 441.5                   |   |  |           |  | 441.5          |  
|- Associates                                      |  |       |  | 511.9                   |   |  |           |  | 511.9          |  
|                                                  |  |       |  |                         |   |  |            |  |                |  
|TOTAL EQUITY                                      |  |       |  | 1,411.9                 |   |  | 2.1        |  | 1,414.0        |  
|                                                  |  |       |  |                         |   |  |            |  |                |  



F-47



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (continued)
|--- | -----------------------------------------------------------------------



|(2) | Reconciliation of profit for the year ended 31 December 2004
|--- | ------------------------------------------------------------



|                                                                         |  |                 |  |                |   |  |                              |   |  |        |  
|------------------------------------------------------------------------ |  | --------------- |  | -------------- | - |  | ---------------------------- | - |  | ------ | -
|                                                                         |  |                 |  | $Million       |  
|                                                                         |  | Notes           |  | Previous AGAAP |   |  | Effect oftransitionto A-IFRS |   |  | A-IFRS |  
|Revenue from ordinary activities                                         |  |                 |  | 8.9            |   |  |                             |   |  | 8.9    |  
|Other income                                                             |  | (a)             |  | 47.9           |   |  | (3.4                         | ) |  | 44.5   |  
|General and administrative expenses                                      |  | (b)             |  | (8.4           | ) |  | (0.3                         | ) |  | (8.7   | )
|Borrowing costs                                                          |  |                 |  | (8.1           | ) |  |                             |   |  | (8.1   | )
|Share of net profits of associates accounted for using the equity method |  | (b),(c) (f),(g) |  | 286.9          |   |  | (3.4                         | ) |  | 283.5  |  
|                                                                         |  |                 |  |                |   |  |                              |   |  |        |  
|Profit from ordinary activities before tax                               |  |                 |  | 327.2          |   |  | (7.1                         | ) |  | 320.1  |  
|Income tax expense                                                       |  | (d)             |  | (5.1           | ) |  | 1.4                          |   |  | (3.7   | )
|                                                                         |  |                 |  |                |   |  |                              |   |  |        |  
|Net profit attributable to members of Alumina Limited                    |  |                 |  | 322.1          |   |  | (5.7                         | ) |  | 316.4  |  
|                                                                         |  |                 |  |                |   |  |                              |   |  |        |  



|(3) | Reconciliation of cash flow statement for the year ended 31 December 2004
|--- | -------------------------------------------------------------------------

The adoption of A-IFRS has not resulted in any material adjustments to the cash flow statement.



|(4) | Notes to the reconciliations
|--- | ----------------------------



|(a) | Foreign currency translation reserve: cumulative translation differences
|--- | ------------------------------------------------------------------------

The Group has elected to apply the exemption in AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards. The cumulative translation differences for all foreign operations represented in the
foreign currency translation reserve are deemed to be zero at the date of transition to A-IFRS. The effect is:

(i) At 1 January 2004

For the Group the balance of the $80.5 million credit in the foreign currency translation reserve is reduced to zero. Retained earnings are increased
by this amount.

(ii) At 31 December 2004

For the
Group the balance of the $82.4 million credit in the foreign currency translation reserve is reduced to a credit of $1.3 million, representing the movement in the translation reserve for 2004. Retained earnings are increased by this amount.

(iii) For the year ended 31 December 2004

A-IFRS
requires the cumulative translation reserve to be recycled through the income statement on the disposal of a foreign operation when the gain or loss on disposal is recognised. Given that Alumina Limited sold its investment in the Specialty Chemical
assets, there is an impact of $3.4 million for the comparative period, and $0.9 million against retained earnings.



|(b) | Share-based payments
|--- | --------------------

Under AASB 2 Share-based Payment from
1 July 2004 the Group is required to recognise an expense for those performance share rights that were issued to employees under the Alumina Employee Share Plan after 7 November 2002 but had not vested by 1 January 2005 and for two
significant share based payment schemes in place in AWA Atlantic. The effect of this is:

(i) At 1 January 2004

For the Group there has been a decrease in retained earnings of $1.3 million and a corresponding increase in reserves. For the Group there has also been an increase in
Aluminas investment in associates and a corresponding increase in retained earnings of $11.9 million.

(ii) At 31 December 2004

For the Group there has been an increase in retained earnings of $2.2 million, a corresponding increase in reserves of $3.0 million and an increase in
Aluminas investments in associates of $5.2 million.

(iii) For the year ended 31 December 2004

For the Group there has been an increase in employee benefits expense of $0.3 million and a decrease in Aluminas share of net profits of associates accounted for
under the equity method of $7.9 million.



F-48



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (continued)
|--- | -----------------------------------------------------------------------



|(4) | Notes to the reconciliations (continued)
|--- | ----------------------------------------



|(c) | Business combinations
|--- | ---------------------

Under AASB 3, amortisation of goodwill is
prohibited, and replaced by impairment testing performed at least annually. Previously, goodwill was amortised on a straight line basis over 20 years. AASB 3 requires prior period information, presented as comparative information, to be restated as
if the requirements of this Standard had always applied. The treatment of past business combinations (business combinations that occurred before the date of transition to Australian equivalents to IFRS) would be restated to comply with AASB 3.
Goodwill at transition date (1 January 2004) is fixed and used as deemed cost given that the exemption option in AASB 3 not to restate past business combinations is taken. The effect of this is:

(i) At 1 January 2004

There is
no effect on the Group.

(ii) At 31 December 2004

For the Group there has been an increase in Aluminas Investments in associates of $16.2 million. Retained earnings also increased by this amount.

(iii) For the year ended 31 December 2004

For the Group there has been an increase in Aluminas share of net profits of
associates accounted for under the equity method of $16.2 million.



|(d) | Deferred tax assets
|--- | -------------------

Under AASB 112, a deferred tax asset shall be
recognised for the carry forward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. The effect of
this is:

(i) At 1 January 2004

For the Group, $2.4 million of Group losses will be recognised as a deferred tax asset of $0.7 million.

(ii) At
31 December 2004

For the Group, $7.1 million of Group losses will be recognised as a deferred tax asset of $2.1
million.

(iii) For the year ended 31 December 2004

For the Group, there has been recognition of $4.8 million of Group losses resulting in a deferred tax asset of $1.4 million with a resulting decrease in income tax expense.



|(e) | Treasury shares
|--- | ---------------

Under AASB 132, if an entity reacquires its own
equity instruments those instruments (treasury shares) shall be deducted from equity. Alumina Limited had purchased shares for its long term incentive plan and classified the cost as other assets. Under A-IFRS, a separate component in equity is
required to disclose treasury shares. The effect of this is:

(i) At 1 January 2004

There is no effect on the Group.

(ii)
At 31 December 2004

For the Group there has been a decrease in other current assets of $0.6 million and a
corresponding decrease in equity.

(iii) For the year ended 31 December 2004

There is no effect on the Group.



|(f) | Retirement benefit obligations
|--- | ------------------------------

Alcoa of Australia and AWA Atlantic
are both sponsors of superannuation plans with defined benefit entitlements. Under previous AGAAP, cumulative gains and losses on the defined benefit section were not recognised on the balance sheet by Alumina Limited.

At the date of transition, a liability is recognised in the provision for employee benefits. It is measured as the difference between the present value of the
employees accrued benefits at that date and the net market value of the superannuation funds assets at that date.

Alumina Limited will early
adopt AASB 119 using the full recognition of actuarial gains and losses through profit approach. The effect of this is:

(i) At
1 January 2004

For the Group, there has been a decrease in Aluminas investments in associates of $1.1 million with a resulting increase in
retained earnings of $0.5 million and a corresponding decrease in the translation reserve of $1.6 million.

(ii) At 31 December 2004

For the Group, there has been a decrease in Aluminas investments in associates of $11.9 million with a resulting decrease in retained earnings of
$10.3 million and a corresponding decrease in the translation reserve of $1.6 million.

(iii) For the year ended 31 December 2004

For the Group there has been a reduction in Aluminas share of net profits of associates accounted for under the equity method of $10.9 million.



F-49



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|32. | EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO IFRS (continued)
|--- | -----------------------------------------------------------------------



|(4) | Notes to the reconciliations (continued)
|--- | ----------------------------------------



|(g) | Asset retirement obligations
|--- | ----------------------------

The provisions for dismantling,
removal and restoration of each refinery owned by Aluminas associates are required to be recalculated in the light of AASB 116 and AASB 138. This will impact the associates property, plant and equipment, accumulated depreciation, deferred tax
balances and provisions at transition date. The effect of this is:

(i) At 1 January 2004

For the Group, there has been a decrease in Aluminas investments in associates of $28.2 million with a resulting decrease in retained earnings of $30.2 million and
a corresponding increase in the translation reserve of $2.0 million.

(ii) At 31 December 2004

For the Group, there has been a decrease in Aluminas investments in associates of $29.1 million with a resulting decrease in retained earnings of $31.0 million and
a corresponding increase in the translation reserve of $0.1 million.

(iii) For the year ended 31 December 2004

For the Group there has been a decrease in Aluminas share of net profits of associates accounted for under the equity method of $0.9 million.



|(h) | Financial instruments
|--- | ---------------------

The Group has elected to apply the exemption
from restatement of comparatives for AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement. It has therefore continued to apply the previous AGAAP rules to
derivatives, financial assets and financial liabilities and also to hedge relationships for the comparative periods. The adjustments required for differences between AGAAP and AASB 132 and AASB 139 have been determined and recognised at
1 January 2005. Refer to section 1 of this note and Note 1 for further details.



|(i) | Retained earnings
|--- | -----------------

The effect on
retained earnings of the changes set out above are as follows:



|                                     |  |       |  |                        |   |  |                          |  
|------------------------------------ |  | ----- |  | ---------------------- | - |  | ------------------------ | -
|                                     |  | Notes |  | 1 January 2004$Million |   |  | 31 December 2004$Million |  
|Foreign currency translation reserve |  | (a)   |  | 80.5                   |   |  | 81.4                     |  
|Share-based payments                 |  | (b)   |  | 10.6                   |   |  | 2.2                      |  
|Business combinations                |  | (c)   |  |                       |   |  | 16.2                     |  
|Deferred tax assets                  |  | (d)   |  | 0.7                    |   |  | 2.1                      |  
|Retirement benefit obligations       |  | (f)   |  | 0.5                    |   |  | (10.3                    | )
|Asset retirement obligations         |  | (g)   |  | (30.2                  | ) |  | (30.9                    | )
|                                     |  |       |  |                        |   |  |                          |  
|                                     |  |       |  | 62.1                   |   |  | 60.7                     |  
|                                     |  |       |  |                        |   |  |                          |  
|Attributable to:                     |  |       |  |                        |   |  |                          |  
|Retained profits-Group               |  |       |  | 81.0                   |   |  | 83.0                     |  
|Retained profits-Associates          |  |       |  | (18.9                  | ) |  | (22.3                    | )
|                                     |  |       |  |                        |   |  |                          |  
|                                     |  |       |  | 62.1                   |   |  | 60.7                     |  
|                                     |  |       |  |                        |   |  |                          |  



|(j) | Tax consolidation
|--- | -----------------

Alumina Limited and its wholly-owned Australian
controlled entities implemented the tax consolidation legislation as of 1 January 2004. Under previous AGAAP, the parent entity did not recognise tax amounts relating to transactions, events and balances of the tax consolidated entities as if
these were its own.

Under A-IFRS, the parent entity only recognises the current tax payable and deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidation Group.

(i) At 1 January 2004

There is no effect on the Group.

(ii)
At 31 December 2004

There is no effect on the Group.

(iii) For the year ended 31 December 2004

There is no effect on the Group.



F-50



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|33. | RECONCILIATION TO US GAAP
|--- | -------------------------

The accounting
policies and accounting standards under which the consolidated financial statements of the Group are prepared are in accordance with A-IFRS. The major differences between A-IFRS and US GAAP are summarized and reconciled below.



|(a) | Associates
|--- | ----------

The major associated companies
accounted for using the equity method of accounting are those entities forming Alcoa World Alumina and Chemicals (AWAC) which prepares its financial statements in U.S. dollars in accordance with US GAAP. However, one of those entities is an
Australian based company which Alumina accounts for using as a basis its Australian domestic financial statements. The net income and shareholders equity concerned have been adjusted to conform to US GAAP.

Effective 1 January 2002, Alumina adopted APB 18, The Equity Method of Accounting for Investments in Common Stock for existing goodwill
assets. This resulted in a cumulative adjustment.

The principal differences between A-IFRS and US GAAP that affect Aluminas net
income for associates, as well as its shareholders equity, either directly or through its share of associates on a continuing basis relate to the treatment of the following items:



| |  |  | inventory valuation;
| | - |  | --------------------



| |  |  | compensation expense of employee share plans;
| | - |  | ---------------------------------------------



| |  |  | fair value of accounting for derivatives;
| | - |  | -----------------------------------------



| |  |  | goodwill amortization;
| | - |  | ----------------------



| |  |  | pension liabilities/assets;
| | - |  | ---------------------------



| |  |  | asset retirement obligations
| | - |  | ----------------------------



|(b) | Share-based payments
|--- | --------------------

Under A-IFRS, the Group is
required to recognize an expense for those performance share rights that were issued to employees under the Alumina Employee Share Plan after 7 November 2002 but had not vested by 1 January 2005.

Under US GAAP, specifically APB 25, no compensation charge is recognized for options when the fair value is equal to the exercise price on grant
date.



|(c) | Cash flow
|--- | ---------

There are no A-IFRS to US GAAP
reconciling items for the cash flow statement in either the current or prior year.



|(d) | Income tax
|--- | ----------

Under A-IFRS, deferred taxes are
provided for using the liability method on a similar basis to FAS 109, therefore there has been no adjustment to the method by which income taxes have been calculated. Under US GAAP, the recognition and carry forward of future income tax
benefits differs from A-IFRS in the following areas:



| |  |  | Tax assets and liabilities relating to temporary (timing) differences are all classed as non-current under A-IFRS. Under US GAAP the future income tax benefits and liabilities
would be required to be allocated in the balance sheet between current and non-current items. This allocation would not have a significant effect. Refer also to Note 7.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tax assets relating to tax losses are not brought to account under A-IFRS unless their ultimate realization is probable. Under US GAAP, tax assets relating to tax losses are
all brought to account and a valuation allowance raised against the asset if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under A-IFRS, a deferred tax asset shall be recognized for the carry forward of unused tax losses and unused tax credits to the extent that it is probable
that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. For the year ended 31 December 2004, there has been recognition of $4.8 million of Group losses resulting in a deferred tax
asset of $1.4 million with a resulting decrease in income tax expense.



F-51



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|33. | RECONCILIATION TO US GAAP (continued)
|--- | -------------------------------------



|(e) | Stock Options
|--- | -------------

Alumina Limited accounts for the
Option Scheme as a non-compensatory plan for purposes of US GAAP in accordance with Accounting Principles Board Opinion No. 25, under which no compensation expense has been recognized for share options because the exercise price equals the
market price on the date of the grant.

The SAP scheme is accounted for as a variable plan in accordance with APB 25, under which a
compensation charge is recognized for the difference between exercise price and market value at each balance sheet date.

Pro forma
information regarding net income and earnings per share is required by SFAS 123, and has been determined as if the Group had accounted for its employee stock options under the fair value method of SFAS 123. No options were granted in 2005 and 2004.
For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense on a straight line basis over the options vesting period.



|                                                  |  |                        |   |  |                        |  
|------------------------------------------------- |  | ---------------------- | - |  | ---------------------- | -
|                                                  |  | Year to 31 Dec 2005A$m |   |  | Year to 31 Dec 2004A$m |  
|The Groups pro forma information is as follows : |  |                        |   |  |                        |  
|Net Income                                        |  |                        |   |  |                        |  
|As reported US GAAP                               |  | 328.5                  |   |  | 331.7                  |  
|Pro forma                                         |  | 328.2                  |   |  | 331.4                  |  
|                                                  |  |                       
|Basic earnings per share                          |  |                        |   |  |                        |  
|As reported US GAAP                               |  | 0.28                   |   |  | 0.29                   |  
|Pro forma                                         |  | 0.28                   |   |  | 0.29                   |  
|                                                  |  |                       
|Diluted earnings per share                        |  |                        |   |  |                        |  
|As reported US GAAP                               |  | 0.28                   |   |  | 0.28                   |  
|Pro forma                                         |  | 0.28                   |   |  | 0.28                   |  
|                                                  |  |                       
|Assumptions :                                     |  |                        |   |  |                        |  
|Risk free interest rates                          |  | 5.41                   | % |  | 5.45                   | %
|Dividend yield                                    |  | 2.69                   | % |  | 3.37                   | %
|Volatility                                        |  | 29.78                  | % |  | 29.78                  | %
|Expected life in years                            |  | 1.0                    |   |  | 1.69                   |  



|(f) | Business combinations
|--- | ---------------------

Under A-IFRS, amortization
of goodwill is prohibited, and replaced by impairment testing performed at least annually. Previously (up to date of transition to A-IFRS), goodwill was amortized on a straight line basis over 20 years. A-IFRS requires that prior period information,
presented as comparative information, to be restated as if the requirements of the A-IFRS had always applied. Effective 1 January 2002, Alumina adopted APB 18, The Equity Method of Accounting for Investments in Common Stock for
existing goodwill assets.



|(g) | Sale of Specialty Chemical Assets
|--- | ---------------------------------

A$21.8 million
of goodwill in relation to these assets was previously amortized up to January 2004 under A-IFRS through the income statement. Under US GAAP, goodwill is not amortized. On disposal this resulted in a greater net asset figure being disposed of
in relation to the Chemical assets resulting in a lower profit being recognized under US GAAP.



|(h) | Exemptions
|--- | ----------

The Group has elected to apply the
exemption in AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards. The cumulative translation differences for all foreign operations represented in the foreign currency translation reserve are deemed to
be zero at the date of transition to A-IFRS. US GAAP does not permit the foreign currency translation reserve to be adjusted in this manner.

The Group has also elected to apply the exemption from restatement of comparatives for AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement. It has therefore continued
to apply the previous AGAAP rules to derivatives, financial assets and financial liabilities and also to hedge relationships for the comparative periods.



F-52



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|33. | RECONCILIATION TO US GAAP (continued)
|--- | -------------------------------------



|                                                                                   |  |                         |   |  |                         |  
|---------------------------------------------------------------------------------- |  | ----------------------- | - |  | ----------------------- | -
|                                                                                   |  | Year to 31 Dec 2005 A$m |   |  | Year to 31 Dec 2004 A$m |  
|INCOME STATEMENT  US GAAP RECONCILIATION                                          |  |                         |   |  |                         |  
|                                                                                   |  |                        
|Net income attributable to members of the holding company as reported under A-IFRS |  | 315.6                   |   |  | 316.4                   |  
|                                                                                   |  |                        
|Adjustments required to conform with US GAAP:                                      |  |                         |   |  |                         |  
|- Equity in US GAAP adjustments of associates (net of tax) (a)                     |  | 10.5                    |   |  | 39.1                    |  
|- Share based payments (b)                                                         |  | 0.3                     |   |  | 0.3                     |  
|- Sale of Specialty Chemical Assets (g)                                            |  |                        |   |  | (22.7                   | )
|- Recognition of deferred tax asset (d)                                            |  | 2.1                     |   |  | (1.4                    | )
|                                                                                   |  |                        
|Income tax effect of above adjustments (excluding tax of associates)               |  |                        |   |  |                        |  
|                                                                                   |  |                         |   |  |                         |  
|Total adjustments                                                                  |  | 12.9                    |   |  | 15.3                    |  
|                                                                                   |  |                         |   |  |                         |  
|Net income in accordance with US GAAP                                              |  | 328.5                   |   |  | 331.7                   |  
|                                                                                   |  |                         |   |  |                         |  
|This is represented by :                                                           |  |                         |   |  |                         |  
|Net income from continuing operations                                              |  | 328.5                   |   |  | 331.7                   |  
|                                                                                   |  |                         |   |  |                         |  
|                                                                                   | 
|                                                                                   |  | As at 31 December       |  
|                                                                                   |  | 2005A$m                 |   |  | 2004A$m                 |  
|SHAREHOLDERS EQUITY  US GAAP RECONCILIATION                                      |  |                         |   |  |                         |  
|                                                                                   |  |                        
|Shareholders equity as reported under A-IFRS                                      |  | 1,530.2                 |   |  | 1,411.9                 |  
|                                                                                   |  |                        
|Adjustments required to conform with US GAAP:                                      |  |                         |   |  |                         |  
|                                                                                   |  |                        
|- Equity in earnings and reserves of associates (net of tax) (a)                   |  | 112.4                   |   |  | 85.3                    |  
|- Accumulated amortization of goodwill upon adoption of A-IFRS (f)                 |  | 13.6                    |   |  | 13.6                    |  
|- Other                                                                            |  | 0.6                     |   |  | (1.5                    | )
|                                                                                   |  |                         |   |  |                         |  
|Alumina Limited shareholders equity according to US GAAP                          |  | 1,656.8                 |   |  | 1,509.3                 |  
|                                                                                   |  |                         |   |  |                         |  
|ROLL FORWARD ANALYSIS OF SHAREHOLDERS EQUITY UNDER US GAAP:                        |  |                         |   |  |                         |  
|                                                                                   |  |                        
|Opening Alumina Limited shareholders equity according to US GAAP                  |  | 1,509.3                 |   |  | 1,406.0                 |  
|Net income in accordance with US GAAP                                              |  | 328.5                   |   |  | 331.7                   |  
|Other comprehensive income                                                         |  | 40.4                    |   |  | (15.5                   | )
|Dividends                                                                          |  | (232.8                  | ) |  | (233.1                  | )
|Options exercised and then converted                                               |  | 11.6                    |   |  | 19.3                    |  
|Other reserves                                                                     |  | (0.2                    | ) |  | 0.9                     |  
|                                                                                   |  |                         |   |  |                         |  
|Closing Alumina Limited shareholders equity according to US GAAP                  |  | 1,656.8                 |   |  | 1,509.3                 |  
|                                                                                   |  |                         |   |  |                         |  



F-53



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|33. | RECONCILIATION TO US GAAP (continued)
|--- | -------------------------------------



|                                                      |  |                         |   |  |                         |  
|----------------------------------------------------- |  | ----------------------- | - |  | ----------------------- | -
|                                                      |  | Year to 31 Dec 2005 A$m |   |  | Year to 31 Dec 2004 A$m |  
|NON-CURRENT ASSETS  DEFERRED TAX ASSETS              |  |                         |   |  |                         |  
|                                                      |  |                        
|Future income tax benefit                             |  |                        |   |  |                        |  
|                                                      |  |                         |   |  |                         |  
|Future income tax benefit - US GAAP                   |  |                         |   |  |                         |  
|Future income tax benefit before valuation allowance: |  |                         |   |  |                         |  
|- Income tax losses                                   |  | 110.3                   |   |  | 84.3                    |  
|- Income tax timing differences                       |  | (20.0                   | ) |  | (28.8                   | )
|- Capital losses                                      |  | 321.3                   |   |  | 321.3                   |  
|                                                      |  |                         |   |  |                         |  
|                                                      |  | 411.6                   |   |  | 376.8                   |  
|                                                      |  |                         |   |  |                         |  
|Valuation allowance:                                  |  |                         |   |  |                         |  
|(A-IFRS, Income tax benefits not brought to account)  |  |                         |   |  |                         |  
|- Income tax losses                                   |  | (110.3                  | ) |  | (84.3                   | )
|- Income tax timing differences                       |  | 20.0                    |   |  | 28.8                    |  
|- Capital losses                                      |  | (321.3                  | ) |  | (321.3                  | )
|                                                      |  |                         |   |  |                         |  
|                                                      |  | (411.6                  | ) |  | (376.8                  | )
|                                                      |  |                         |   |  |                         |  



|                                                                                       |  |               |  |      
|-------------------------------------------------------------------------------------- |  | ------------- |  | -----
|OPERATING TAX LOSSES  Operating tax losses carried forward expire as summarized below: |  |               |  |      
|                                                                                       |  |              
|                                                                                       |  | Year ofExpiry |  | A$m  
|Australia                                                                              |  | Indefinitely  |  | 36.6 
|United States of America                                                               |  | 2007          |  | 1.5  
|                                                                                       |  | 2008          |  | 6.5  
|                                                                                       |  | 2009          |  | 8.4  
|                                                                                       |  | 2010          |  | 22.4 
|                                                                                       |  | 2019          |  | 9.7  
|                                                                                       |  | 2020          |  | 1.7  
|                                                                                       |  | 2021          |  | 56.8 
|                                                                                       |  | 2022          |  | 39.2 
|                                                                                       |  | 2023          |  | 58.4 
|                                                                                       |  | 2024          |  | 37.9 
|                                                                                       |  | 2025          |  | 64.5 
|                                                                                       |  |               |  |      
|                                                                                       |  |               |  | 307.0
|                                                                                       |  |               |  |      
|Other countries                                                                        |  | Indefinitely  |  | 0.2  
|                                                                                       |  |               |  |      
|Total operating income tax losses                                                      |  |               |  | 343.8
|                                                                                       |  |               |  |      

Capital losses and timing differences relate mainly to losses which have not yet been realized or
where they are realized and can be carried forward indefinitely.



F-54



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|33. | RECONCILIATION TO US GAAP (continued)
|--- | -------------------------------------

EARNINGS PER SHARE



|                                                                                |  |                                    |  |                        
|------------------------------------------------------------------------------- |  | ---------------------------------- |  | -----------------------
|                                                                                |  | Year to 31 Dec 2005Cents per share |  | Year to 31 Dec 2004    
|Basic earnings per share calculated on net income in accordance with US GAAP(2) |  | 28.2                               |  | 28.6                   
|                                                                                |  |                                   
|Diluted earnings per share calculated on net income in accordance with US GAAP  |  | 28.2                               |  | 28.5                   
|                                                                                |  |                                    |  |                        
|_________                                                                       |  |                                    |  |                        
|(2)Earnings per share from continuing operations                                |  | 28.2                               |  | 28.6                   
|                                                                                |  |                                   
|                                                                                |  | Year to 31 Dec 2005 A$m            |  | Year to 31 Dec 2004 A$m
|Reconciliation of earnings used in the calculation of earnings per share        |  |                                    |  |                        
|                                                                                |  |                                   
|Net Income                                                                      |  | 315.6                              |  | 316.4                  
|Nominal interest from the conversion of partly paid shares and options          |  |                                   |  |                       
|                                                                                |  |                                    |  |                        
|Potential diluted earnings                                                      |  | 315.6                              |  | 316.4                  
|                                                                                |  |                                    |  |                        
|Net US GAAP earnings                                                            |  | 328.5                              |  | 331.7                  
|                                                                                |  |                                    |  |                        
|                                                                                |  |                                   
|INTEREST BEARING LIABILITIES                                                    |  |                                    |  |                        
|                                                                                |  | Year to 31 Dec 2005 A$m            |  | Year to 31 Dec 2004 A$m
|(a) Analysis of repayments                                                      |  |                                    |  |                        
|Current liabilities:                                                            |  |                                    |  |                        
|In one year or less                                                             |  | 478.7                              |  | 397.9                  

(b) Current liabilities - borrowings and overdrafts



|                                            |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|------------------------------------------- |  | ------------------------- |  | ------------------------------------------------------ |  | ------------------------------------------- |  | -------------------------------------------- |  | -----------------------------------------------
|Category of aggregate short term borrowings |  | Balance at endof year A$m |  | Weightedaverageinterest rateon
balancedateborrowings % |  | Maximumamountoutstandingduringperiod(i) A$m |  | Averageamountoutstandingduringperiod(ii) A$m |  | Weightedaverageinterestrateduringperiod (iii) %
|                                            |  |                           |  |                                                       
|Year ended 31 December 2005                 |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|Other loans                                 |  | 478.7                     |  | 4.4                                                    |  | 484.9                                       |  | 419.4                                        |  | 3.5                                            
|                                            |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|                                            |  | 478.7                     |  |                                                        |  |                                             |  |                                              |  |                                                
|                                            |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|Year ended 31 December 2004                 |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|Other loans                                 |  | 397.9                     |  | 2.0                                                    |  | 467.4                                       |  | 421.9                                        |  | 1.7                                            
|                                            |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                
|                                            |  | 397.9                     |  |                                                        |  |                                             |  |                                              |  |                                                
|                                            |  |                           |  |                                                        |  |                                             |  |                                              |  |                                                

---

|(i) | Based on bank statement balances.
|--- | ---------------------------------

|(ii) | Based on average monthly balances.
|---- | ----------------------------------

|(iii) | Based on weighted average monthly interest rates.
|----- | -------------------------------------------------

|(iv) | There are no significant unused committed lines of credit for short-term financing.
|---- | -----------------------------------------------------------------------------------



F-55



---

##### Table of Contents

Alumina Limited and controlled entities

Notes to and forming part of the financial statements for the year ended 31 December 2005



|34. | RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
|--- | ----------------------------------------------

The
Financial Accounting Standards Board has issued certain Statements of Financial Accounting Standards (SFAS) which are not effective with respect to the fiscal years presented in the financial statements.

SFAS No. 123 (revised 2004), Share-Based Payment(SFAS No. 123) was issued in December 2004. This standard requires companies
to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. AWAC will begin expensing stock options as it is required, which is the first quarter of 2006, using
the modified prospective approach. In addition, the company is required to reflect compensation expense for these individuals using the nonsubstantive vesting period approach, in which the compensation expense is recognized ratably over the
requisite service period following the date of the grant. The accelerated vesting of the 2004 and 2005 stock options will reduce Alumina Limiteds after tax stock option compensation expense in 2006 and 2007 by $0.8 million.

SFAS No. 153, Exchanges of Nonmonetary Assets  an amendment of APB Opinion No. 29 (SFAS No. 153), was
issued in December 2004. This standard eliminates the exception for nonmonetary exchanges of similar productive assets to be measured based on the fair value of the assets exchanged and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. This standard is effective January 1, 2006. This standard has no impact on Alumina Limiteds financial statements.

SFAS No. 154, Accounting for Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3(SFAS
No. 154), was issued in June 2005. SFAS No. 154 requires retrospective application to financial statements of prior periods for changes in accounting principle that are not adopted prospectively. This statement is effective
January 1, 2006. This standard has no impact on Alumina Limited.

In 2005, The FASB issued EITF 04-6, Accounting for Stripping Costs
Incurred during Production in the Mining Industry(EITF 04-6). EITF 04-06 requires that stripping costs incurred during the production phase of a mine are to be accounted for as variable production costs that should be included in
the costs of the inventory produced (that is, extracted) during the period that the stripping costs are incurred. EITF 04-6 is effective for the first reporting period in fiscal years beginning after December 15, 2005. Alumina Limited is
currently evaluating the impact of applying this standard.



|35. | (Schedule I)
|--- | ------------

ALUMINA LIMITED

VALUATION AND QUALIFYING ACCOUNTS

(A$m)



|                                                |  |                              |  |                                      |     |  |            |  |                     
|----------------------------------------------- |  | ---------------------------- |  | ------------------------------------ | --- |  | ---------- |  | --------------------
|Description                                     |  | Balance atbeginningof year   |  | Additionscharged tocosts andExpenses |     |  | Deductions |  | Balanceat endof year
|                                                |  | Year ended 31 December, 2005
|Future income tax benefit valuation allowance   |  | 376.8                        |  | 34.8                                 | (a) |  |           |  | 411.6               
|Provision for doubtful debts                    |  |                             |  |                                     |     |  |           |  |                    
|Provision for obsolescence and loss             |  |                             |  |                                     |     |  |           |  |                    
|Provision for diminution in value of investment |  |                             |  |                                     |     |  |           |  |                    
|                                                |  |                              |  |                                      |     |  |            |  |                     
|                                                |  | 376.8                        |  | 34.8                                 |     |  |           |  | 411.6               
|                                                |  |                              |  |                                      |     |  |            |  |                     
|                                                | 
|                                                |  | Year ended 31 December, 2004
|Future income tax benefit valuation allowance   |  | 356.7                        |  | 20.1                                 | (a) |  |           |  | 376.8               
|Provision for doubtful debts                    |  |                             |  |                                     |     |  |           |  |                    
|Provision for obsolescence and loss             |  |                             |  |                                     |     |  |           |  |                    
|Provision for diminution in value of investment |  |                             |  |                                     |     |  |           |  |                    
|                                                |  |                              |  |                                      |     |  |            |  |                     
|                                                |  | 356.7                        |  | 20.1                                 |     |  |           |  | 376.8               
|                                                |  |                              |  |                                      |     |  |            |  |                     

---

|(a) | Charged/(Credited) to income tax expense.
|--- | -----------------------------------------



F-56



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Alumina Limited

We have audited the accompanying consolidated balance sheets of Alumina Limited and its subsidiaries, (the Group), as of 31 December
2005 and 2004, and the related consolidated income statements, cash flow statements and statements of changes in shareholders equity for each of the two years in the period ended 31 December 2005. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alumina Limited and its subsidiaries at 31 December 2005 and 2004, and the results of their
operations and their cash flows for each of the two years in the period ended 31 December 2005 in conformity with International Financial Reporting Standards as adopted by Australia.

International Financial Reporting Standards as adopted by Australia vary in certain significant respects from accounting principles generally accepted in the United
States of America. Information relating to the nature and effect of such differences is presented in Note 33 to the consolidated financial statements.

In 2005, the Company has elected to apply the exemption from restatement of comparatives for AASB 132 Financial Instruments: Disclosures and Presentation and AASB 139 Financial Instruments: Recognition and Measurement, and therefore
continues to apply AGAAP rules to derivatives, financial assets and financial liabilities and hedging relationships for the comparative period. See Note 32 (h), for more information.



|                       |  |                     
|---------------------- |  | --------------------
|PricewaterhouseCoopers |  | Melbourne, Australia
|Chartered Accountants  |  | June 15, 2006       



F-57



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Members of the Strategic
Council of

Alcoa World Alumina and Chemicals (AWAC)

In our opinion, the accompanying combined balance sheets and the related
combined statements of income, comprehensive income, members equity and cash flows present fairly, in all material respects, the financial position of Alcoa World Alumina and Chemicals at December 31, 2005 and 2004, and the results of
their operations and their cash flows for each of the two years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility
of AWACs management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

As discussed in Note D to the combined financial statements, AWAC changed its method of
accounting for conditional asset retirement obligations in 2005.

LOGO

Pittsburgh, Pennsylvania

February 27, 2006



F-58



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Combined Balance Sheets

December 31, 2005 and 2004

(in millions)



|                                                               |  |      |         |      |   |        
|-------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                               |  | 2005 |         | 2004
|Assets                                                         |  |      |         |      |   |        
|Current assets                                                 |  |      |         |      |   |        
|Cash and cash equivalents (A and M)                            |  | $    | 229.3   |      | $ | 226.5  
|Receivables from customers, less allowance of $0.1 in 2004 (I) |  |      | 556.9   |      |   | 457.4  
|Other receivables                                              |  |      | 116.6   |      |   | 27.2   
|Inventories (A and E)                                          |  |      | 423.2   |      |   | 365.5  
|Prepaid expenses and other current assets                      |  |      | 151.2   |      |   | 94.0   
|                                                               |  |      |         |      |   |        
|Total current assets                                           |  |      | 1,477.2 |      |   | 1,170.6
|Properties, plants and equipment (A and F)                     |  |      | 2,853.1 |      |   | 2,509.8
|Investments (A, B and O)                                       |  |      | 187.7   |      |   | 165.8  
|Other assets (A and G)                                         |  |      | 604.2   |      |   | 526.1  
|                                                               |  |      |         |      |   |        
|Total assets                                                   |  | $    | 5,122.2 |      | $ | 4,372.3
|                                                               |  |      |         |      |   |        
|Liabilities                                                    |  |      |         |      |   |        
|Current liabilities                                            |  |      |         |      |   |        
|Short-term borrowings (A, H, I and M)                          |  | $    | 113.9   |      | $ | 106.2  
|Accounts payable, trade (A and I)                              |  |      | 649.5   |      |   | 443.1  
|Accrued compensation and retirement costs                      |  |      | 106.4   |      |   | 106.6  
|Taxes, including taxes on income (L)                           |  |      | 132.4   |      |   | 131.4  
|Deferred income taxes (L)                                      |  |      | 95.4    |      |   | 87.6   
|Other current liabilities                                      |  |      | 156.8   |      |   | 59.7   
|                                                               |  |      |         |      |   |        
|Total current liabilities                                      |  |      | 1,254.4 |      |   | 934.6  
|Long-term debt (A and M)                                       |  |      |        |      |   | 12.2   
|Accrued pension benefits (K)                                   |  |      |        |      |   | 2.3    
|Accrued postretirement benefits (K)                            |  |      | 63.6    |      |   | 64.4   
|Deferred alumina sales revenue (A)                             |  |      | 164.3   |      |   | 174.1  
|Other noncurrent liabilities and deferred charges              |  |      | 171.9   |      |   | 142.1  
|Deferred income taxes (L)                                      |  |      | 214.0   |      |   | 222.6  
|                                                               |  |      |         |      |   |        
|Total liabilities                                              |  |      | 1,868.2 |      |   | 1,552.3
|                                                               |  |     
|Contingencies and commitments (O)                              |  |      |         |      |   |        
|Members equity (Q)                                            |  |      |         |      |   |        
|Enterprise capital                                             |  |      | 3,254.0 |      |   | 2,820.0
|                                                               |  |      |         |      |   |        
|Total liabilities and equity                                   |  | $    | 5,122.2 |      | $ | 4,372.3
|                                                               |  |      |         |      |   |        

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



F-59



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Combined Statements of Income

Years Ended December 31, 2005 and 2004

(in millions)



|                                                                                |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                |  | 2005 |         |   | 2004 |  
|Revenues (A)                                                                    |  |      |         |   |      |   |         |  
|Sales                                                                           |  | $    | 2,829.6 |   |      | $ | 2,435.6 |  
|Sales to related parties (I)                                                    |  |      | 1,670.2 |   |      |   | 1,396.4 |  
|                                                                                |  |      |         |   |      |   |         |  
|                                                                                |  |      | 4,499.8 |   |      |   | 3,832.0 |  
|                                                                                |  |      |         |   |      |   |         |  
|Costs and expenses                                                              |  |      |         |   |      |   |         |  
|Cost of goods sold                                                              |  |      | 3,284.4 |   |      |   | 2,673.7 |  
|Selling, general administrative, and other expenses                             |  |      | 62.4    |   |      |   | 64.9    |  
|Research and development expenses                                               |  |      | 18.3    |   |      |   | 14.7    |  
|Provision for depreciation, depletion and amortization (A)                      |  |      | 196.8   |   |      |   | 185.7   |  
|Restructuring and other charges (C and R)                                       |  |      | 1.2     |   |      |   | 38.8    |  
|Interest expense                                                                |  |      | 2.7     |   |      |   | 2.3     |  
|Other income, net (S)                                                           |  |      | (24.7   | ) |      |   | (34.3   | )
|                                                                                |  |      |         |   |      |   |         |  
|                                                                                |  |      | 3,541.1 |   |      |   | 2,945.8 |  
|                                                                                |  |      |         |   |      |   |         |  
|Income from continuing operations before cumulative effect of accounting change |  |      | 958.7   |   |      |   | 886.2   |  
|Provision for taxes on income (L)                                               |  |      | 313.9   |   |      |   | 297.5   |  
|                                                                                |  |      |         |   |      |   |         |  
|Income from continuing operations before minority interest                      |  |      | 644.8   |   |      |   | 588.7   |  
|Less: Minority interests share                                                 |  |      |        |   |      |   | .2      |  
|                                                                                |  |      |         |   |      |   |         |  
|Income before cumulative effect of accounting change                            |  |      | 644.8   |   |      |   | 588.5   |  
|Cumulative effect of accounting change (A and D)                                |  |      | (.2     | ) |      |   |        |  
|                                                                                |  |      |         |   |      |   |         |  
|Net income                                                                      |  | $    | 644.6   |   |      | $ | 588.5   |  
|                                                                                |  |      |         |   |      |   |         |  

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



F-60



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Combined Statements of Cash Flows

Years Ended December 31, 2005 and 2004

(in millions)



|                                                                 |  |      |        |   |      |   |        |  
|---------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                 |  | 2005 |        |   | 2004 |  
|Cash from operations                                             |  |      |        |   |      |   |        |  
|Net income                                                       |  | $    | 644.6  |   |      | $ | 588.5  |  
|Adjustments to reconcile net income to cash from operations      |  |      |        |   |      |   |        |  
|Depreciation, depletion and amortization                         |  |      | 196.8  |   |      |   | 185.7  |  
|Change in deferred income taxes                                  |  |      | (0.5   | ) |      |   | 6.8    |  
|Equity income, net of dividends                                  |  |      | (5.0   | ) |      |   | (0.9   | )
|Noncash restructuring and other charges (B, C and R)             |  |      | 1.3    |   |      |   | 38.8   |  
|Noncash contributions (B and N)                                  |  |      |       |   |      |   | 11.0   |  
|Accounting change (A and D)                                      |  |      | 0.2    |   |      |   |       |  
|Minority interests                                               |  |      |       |   |      |   | 0.2    |  
|Changes in assets and liabilities                                |  |      |        |   |      |   |        |  
|(Increase) in receivables                                        |  |      | (99.5  | ) |      |   | (127.3 | )
|(Increase) in inventories                                        |  |      | (57.7  | ) |      |   | (36.2  | )
|(Increase) in prepaid expenses and other current assets          |  |      | (144.8 | ) |      |   | (11.5  | )
|Increase in accounts payable and accrued expenses (A and H)      |  |      | 302.0  |   |      |   | 103.9  |  
|Increase in taxes, including taxes on income                     |  |      | 1.0    |   |      |   | 92.7   |  
|Net change in noncurrent assets and liabilities                  |  |      | (36.0  | ) |      |   | (163.3 | )
|Net change in net assets held for sale (C)                       |  |      |       |   |      |   | (27.6  | )
|                                                                 |  |      |        |   |      |   |        |  
|Cash provided from operations                                    |  |      | 802.4  |   |      |   | 660.8  |  
|                                                                 |  |      |        |   |      |   |        |  
|Cash from financing activities                                   |  |      |        |   |      |   |        |  
|Net changes to short-term borrowings (A, H and I)                |  |      | 7.9    |   |      |   | (21.2  | )
|Capital contribution (B and N)                                   |  |      | 21.1   |   |      |   | 33.3   |  
|Dividends paid and return of capital to members (B, C and I)     |  |      | (182.1 | ) |      |   | (321.3 | )
|Additions to long-term debt                                      |  |      | 94.7   |   |      |   | 221.0  |  
|Payments on long-term debt                                       |  |      | (106.8 | ) |      |   | (220.0 | )
|                                                                 |  |      |        |   |      |   |        |  
|Cash used for financing activities                               |  |      | (165.2 | ) |      |   | (308.2 | )
|                                                                 |  |      |        |   |      |   |        |  
|Cash from investing activities                                   |  |      |        |   |      |   |        |  
|Capital expenditures                                             |  |      | (603.9 | ) |      |   | (332.2 | )
|Net changes in short-term investments excluding cash equivalents |  |      |       |   |      |   | 3.0    |  
|Additions to investments (B and O)                               |  |      | (20.8  | ) |      |   | (22.9  | )
|Sale of investment and capital assets held for sale (C)          |  |      |       |   |      |   | 120.4  |  
|                                                                 |  |      |        |   |      |   |        |  
|Cash used for investing activities                               |  |      | (624.7 | ) |      |   | (231.7 | )
|                                                                 |  |      |        |   |      |   |        |  
|Effect of exchange rate changes on cash                          |  |      | (9.7   | ) |      |   | 7.3    |  
|                                                                 |  |      |        |   |      |   |        |  
|Net change in cash and cash equivalents                          |  |      | 2.8    |   |      |   | 128.2  |  
|                                                                 |  |     
|Cash and cash equivalents                                        |  |      |        |   |      |   |        |  
|Beginning of year                                                |  |      | 226.5  |   |      |   | 98.3   |  
|                                                                 |  |      |        |   |      |   |        |  
|End of year                                                      |  | $    | 229.3  |   |      | $ | 226.5  |  
|                                                                 |  |      |        |   |      |   |        |  

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



F-61



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



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

Basis of Presentation

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

Principles of Combination

The
combined financial statements of Alcoa World Alumina and Chemicals (AWAC) have been prepared pursuant to a Formation Agreement dated December 21, 1994 between Alcoa Inc. (Alcoa) and WMC Limited of Melbourne, Australia
(WMC), as amended. Investments in other entities are accounted for principally on the equity basis.

Effective December 11,
2002, WMC shareholders voted to create two entities, WMC Resources Ltd and Alumina Limited, resulting in existing WMC Shareholders receiving shares in a new listed entity WMC Resources Ltd, which holds the non-AWAC businesses. Alumina
Limiteds (formerly WMC) only significant asset is the 40% interest in AWAC.

The amounts presented within AWAC are stated
at historical cost. All transactions between entities included in the combined financial statements have been eliminated.

Effective
December 31, 2004, AWAC adopted Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN46), Consolidation of Variable Interest Entities.FIN46 addresses consolidation and disclosure by business
enterprises of variable interest entities. This standard has no impact on AWACs financial statements.

Cash and Cash Equivalents

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

Inventory Valuation

Inventories are
carried at the lower of cost or market, with cost for a substantial portion of U.S. inventories determined under the last-in, first-out (LIFO) method. The cost of other inventories is principally determined under the average-cost method.
See Note E for additional information.

Properties, Plants and Equipment

Properties, plants and equipment are recorded at cost. Depreciation is recorded principally on the straight-line method at rates based on the estimated
useful lives of the assets, averaging 33 years for structures and between 5 and 25 years for machinery and equipment. Gains or losses from the sale of assets are generally recorded in other income. Repairs and maintenance are charged to expense as
incurred. Interest related to construction of qualifying assets is capitalized as part of construction costs. Depletion related to mineral reserves is recorded using the units or production method. See Note F for additional information.



F-62



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Properties, plants, and
equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets (asset group) may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted
net cash flows of the operations to which the assets (asset group) related to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the estimated undiscounted net cash flows. The
amount of the impairment loss to be recorded is calculated as the excess of the carrying value of the assets (asset group) over their fair value, with fair value generally determined using a discounted cash flow analysis.

Goodwill and Other Intangibles

Goodwill and intangibles with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the periods benefited, with a weighted average useful life of 10
years. Goodwill and indefinite-lived intangibles are tested annually for impairment and whenever events or circumstances change, such as a significant adverse change in business climate or the decision to sell a business, that would make it more
likely than not that an impairment may have occurred. If the carrying value of goodwill or an indefinite-lived intangible asset exceeds its fair values, an impairment loss is recognized. The evaluation of impairment involves comparing the current
fair value of the business to the recorded value, including goodwill. AWAC uses a discounted cash flow model (DCF model) to determine the current fair value of the business. A number of significant assumptions and estimates are involved
in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volume and prices, costs to produce, and working capital changes. Management considers historical experience and all available
information at the time the fair values of its reporting units are estimated. However, actual fair values that could be realized in an actual transaction may differ from those used to evaluate impairment of goodwill. See Note G for additional
information.

Accounts Payable Arrangements

AWAC participates in computerized payable settlement arrangements with certain vendors and third-party intermediaries. The arrangements provide that, at the vendors request, the third-party intermediary advances
the amount of the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date. AWAC makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its
vendors. The amounts outstanding under these arrangements that will be paid through the third-party intermediaries have been classified as short-term borrowings in the combined balance sheet and as cash provided from financing activities in the
combined statement of cash flows. See Note H for additional information.

Long-Term Debt

Long-term debt consists of mortgages that mature over time and amounts owed to the Government of Jamaica related to its 50% ownership in Jamalco. Jamalco
is a joint venture between Alcoa Minerals of Jamaica, L.L.C. and Clarendon Alumina Production Ltd, a wholly owned subsidiary of the Government of Jamaica.

Revenue Recognition

AWAC recognizes revenue when title, ownership, and risk of loss pass to the
customer.



F-63



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Deferred Alumina Sales
Revenue

AWAC periodically enters into long-term supply contracts with alumina and aluminum customers and receives advance payments for
product to be delivered in future periods. These advance payments are recorded as deferred revenue, and revenue is recognized as shipments are made and title, ownership, and risk of loss pass to the customer during the term of the contracts. A
prepayment of $240.0 related to an agreement with a third party customer is being amortized over the life of the contract based on the tonnage shipped.

Environmental Expenditures

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

Asset Retirement Obligations

AWAC recognizes asset retirement obligations (AROs) related to legal obligations associated with the normal operation of AWACs bauxite
mining, alumina refining and aluminum smelting facilities. These AROs consist primarily of costs associated with spent pot lining disposal, closure of bauxite residue areas, mine reclamation, and landfill closure. AWAC would also recognize an ARO
for any significant lease restoration obligation if required by a lease agreement. The fair values of these AROs are recorded on a discounted basis, at the time the obligation is incurred, and accreted over time for the change in present value.
Additionally, AWAC capitalizes asset retirement costs by increasing the carrying amount of the related long-lived assets, and depreciating these assets over the remaining useful life. See Note D for additional information.

Mine Development Costs

Mine
development costs, classified on the combined balance sheet as other noncurrent assets and deferred charges, are generally deferred and amortized over the period during which the resources are extracted on a units of production basis. Applicable
mine development costs are charged to expense in the year any program is abandoned. See Note G for additional information.

Income
Taxes

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable during the current
year plus the change in deferred taxes during the year. Deferred taxes result from the differences between financial and tax bases of AWACs assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.



F-64



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

AWAC consists of a variety of
different tax-paying legal entities. Income taxes are accrued and recorded on the financial statements of entities within AWAC except for entities that are limited liability companies (LLC). LLC income is taxable to the members that hold
the LLC interest (for U.S. federal and most state income tax purposes). Therefore, current and deferred U.S. and most state tax assets and liabilities of the LLCs are recorded in the financial statements of the members and, thus, are not
reflected in AWACs financial statements. See Note L for additional information.

Stock-Based Compensation

Certain employees of AWAC receive stock options under Alcoas Long Term Incentive Stock Plan and AWAC receives charges for stock option exercises
under this plan. AWAC accounts for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations using the intrinsic value
method which resulted in no compensation costs for options granted. Net income would have been reduced to the pro forma amounts shown below if compensation cost had been determined based on the fair value at the grant dates in accordance with
Statement of Financial Accounting Standards (SFAS) Nos. 123 and 148, Accounting for Stock Based Compensation(SFAS Nos. 123 and 148).



|                                                                           |  |      |       |      |   |      
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                           |  | 2005 |       | 2004
|Net income, as reported                                                    |  | $    | 644.6 |      | $ | 588.5
|Less: Compensation cost determined under the fair value method, net of tax |  |      | 4.8   |      |   | 2.4  
|                                                                           |  |      |       |      |   |      
|Pro forma net income                                                       |  | $    | 639.8 |      | $ | 586.1
|                                                                           |  |      |       |      |   |      

Upon adoption of SFAS No. 123 (revised 2004), Share-Based Payment (SFAS
No. 123 (R)), the company is required to recognize compensation expense for those employees using the nonsubstantive vesting period approach, in which the compensation expense is recognized ratably over the requisite service period
following the date of grant. The impact of this change on the attribution period would not have had a material impact on the results of operations for the periods presented herein.

On December 31, 2005, AWAC accelerated the vesting of 0.8 million unvested stock options granted to employees in 2004 and on January 13,
2005. The 2004 and 2005 accelerated options have weighted average exercise prices of $35.60 and $29.54, respectively. The decision to accelerate vesting of the 2004 and 2005 options was made primarily to avoid recognizing the related compensation
cost in future financial statements upon adoption of SFAS No. 123 (R), which AWAC will adopt on January 1, 2006 when it is required. The accelerated vesting of the 2004 and 2005 stock options will reduce AWACs after-tax stock
option compensation expense in 2006 and 2007 by $2.1.

In addition to stock option awards described above, beginning in 2004 the company
granted stock awards and performance share awards that vest in three years from the grant date. Compensation expense is calculated based on the fair value at the grant dates, and the after tax expense recognized on these awards in 2005 and 2004 were
$1.2 and $0.7, respectively.



F-65



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

In anticipation of the
adoption of SFAS No. 123 (R), AWAC switched from the Black-Scholes pricing model to a lattice model to estimate fair value at grant date for options granted in 2005. The financial impact of this change is not material. AWAC will begin
expensing stock options as it is required, which is currently in the first quarter of 2006, using the modified prospective application.

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



|                                |  |          |   |  |      |  
|------------------------------- |  | -------- | - |  | ---- | -
|                                |  | 2005     |   |  | 2004 |  
|Average risk-free interest rate |  | 2.65-4.2 | % |  | 2.1  | %
|Expected dividend yield         |  | 1.8      | % |  | 1.6  | %
|Expected volatility             |  | 27-35    | % |  | 32.0 | %
|                                |  |         
|Expected life (years)           |  |          |   |  |      |  
|New option grants               |  | 3.8      |   |  | 3.0  |  
|Reload option grants            |  |         |   |  | 3.0  |  

The weighted average fair value per option granted was $6.18 in 2005 and $7.72 in 2004.

Derivatives and Hedging

Derivatives are held as part of a formally documented risk management program. All derivatives are straightforward and are held for purposes other than trading. For derivatives designated as cash flow hedges, AWAC measures hedge
effectiveness by formally assessing, at least quarterly, the probable high correlation of the expected future cash flows of the hedged item and the derivative hedging instrument. The ineffective portions, if any, are recorded in revenues or other
income or expense in the current period. If the hedging relationship ceases to be highly effective or it becomes probable that an expected transaction will no longer occur, future gains or losses on the derivative are recorded in other income or
expense.

AWAC accounts for hedges of foreign currency exposures and certain forecasted transactions, principally purchases of natural gas
and fuel oil, as cash flow hedges. The fair values of the derivatives are recorded in other current and noncurrent assets and liabilities in the combined balance sheet. The effective portions of the changes in fair values of these derivatives are
recorded in other comprehensive income and are reclassified to sales, cost of goods sold or other income in the period that the transaction no longer qualifies as a cash flow hedge. These contracts cover the same periods as known or expected
exposures, generally within three years. Assuming market rates remain constant with the rates at December 31, 2005, $56.8 of the $66.2 gain included in other comprehensive income is expected to be recognized in earnings over the next twelve
months. See Note Q for additional information regarding accumulated other comprehensive income.

If no hedging relationship is
designated, the derivative is marked to market through earnings.

Cash flows from financial instruments are recognized in the combined
statement of cash flows in a manner consistent with the underlying transactions. See Note M for additional information.

Foreign
Currency

The local currency is the functional currency for AWACs significant operations outside the U.S., except in Brazil,
Jamaica and Suriname, which use the U.S. dollar. The determination of the functional currency in these countries is made based on the appropriate economic and management indicators.

Recently Adopted Accounting Standards

AWAC adopted Financial Accounting Standards Board (FASB) Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (FIN 47), effective December 31, 2005. See Note D for
additional information.



F-66



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Recently Issued Accounting
Standards

SFAS No. 123 (R), Share-Based Payment(SFAS No. 123),was issued in
December 2004. This standard requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. AWAC will begin expensing stock options as it is
required, which is the first quarter of 2006, using the modified prospective approach. In addition, the company is required to reflect compensation expense for these individuals using the nonsubstantive vesting period approach, in which the
compensation expense is recognized ratably over the requisite service period following the date of grant.

SFAS No. 154, Accounting
for Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3(SFAS No. 154), was issued in June 2005. SFAS No. 154 requires retrospective application to financial statements
of prior periods for changes in accounting principle that are not adopted prospectively. This statement is effective January 1, 2006. This standard has no impact on AWACs financial statements.

SFAS No. 153, Exchanges of Nonmonetary Assets  an amendment of APB Opinion No. 29 (SFAS No. 153), was issued in
December 2004. This standard eliminates the exception for nonmonetary exchanges of similar productive assets to be measured based on the fair value of the assets exchanged and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. This standard is effective January 1, 2006. This standard has no impact on AWACs financial statements.

In 2005, the FASB issued EITF 04-6, Accounting for Stripping Costs Incurred during Production in the Mining Industry (EITF 04-6). EITF 04-6 requires that stripping costs incurred during the
production phase of a mine are to be accounted for as variable production costs that should be included in the costs of the inventory produced (that is, extracted) during the period that the stripping costs are incurred. EITF 04-6 is effective for
the first reporting period in fiscal years beginning after December 15, 2005. AWAC is currently evaluating the impact of this statement on the company.

Reclassification

Certain amounts in the previously issued financial statements were reclassified to
conform to the 2005 presentations.



F-67



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|B. | Nature of Operations
|-- | --------------------

In December 1994 and
January 1995, Alcoa and Alumina Limited entered into a multi-step transaction to restructure and combine the ownership of their respective worldwide bauxite, alumina and alumina-based chemicals businesses and investments into a group of
companies known collectively as AWAC. AWAC is owned 60% by Alcoa and 40% by Alumina Limited.

Primarily all bauxite mined by AWAC entities
is refined into alumina by AWAC through a chemical process. The alumina is then further processed into alumina-based chemicals (see Note C) or is sold to customers to be smelted into primary aluminum. Approximately 49% and 54% of AWACs
respective 2005 and 2004 alumina production was sold to Alcoa. In addition, Alcoa of Australia (AofA), the largest entity within AWAC, operates integrated aluminum facilities in Australia including mining, refining and smelting
operations. Approximately 70% and 77% of AofAs 2005 and 2004 revenues of $2,842.6 and $2,194.3, respectively, were derived from alumina, and the balance was derived principally from primary aluminum.

AWAC consists of the following entities within the noted worldwide markets:



| | 1. | Two LLCs, which hold all of Alcoas and Alumina Limiteds bauxite, alumina and industrial chemicals operations in Guinea, India, Japan, China and the U.S.; all of
Alcoas interest in the bauxite and alumina operations in Jamaica and the majority of Alcoas bauxite and alumina shipping operations. In February 2004, the industrial chemicals operations in India, Japan, China, and the U.S. were
sold. See Note C for additional information.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Alcoas and Alumina Limiteds interest in AofA, including its aluminum smelting operations and Alumina Espanola S.A., an alumina-based chemicals business located in Spain.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | All of Alcoas and Alumina Limiteds interest in Alcoa Chemie GmbH and Alcoa Chemie Nederland, which represent Alcoas and Alumina Limiteds alumina-based
chemicals businesses located in Germany and the Netherlands. These facilities were sold by Alcoa and Alumina Limited in February 2004. See Note C for additional information.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | Abalco, S.A. (Abalco), an entity formed in Brazil to hold 35% of Alcoa Aluminios (Aluminio) interest in the Alumar alumina refinery
(Alumar) and 35% of Aluminios interest in Mineracao Rio do Norte S.A. (MRN), a bauxite mine that supplies bauxite to the Alumar refinery. The 35% interest is the estimated capacity necessary to fulfill Aluminios
export alumina sales.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Effective December 30, 2004, Alcoa sold 40% of its interest in the Juruti bauxite project in Brazil to Alumina Limited. In exchange, Alumina Limited contributed to AWAC $33.3
in cash, $2.2 in net assets and $6.7 in assumed debt. The $33.3 was subsequently distributed to Alcoa. Alcoa contributed to AWAC $3.3 in net assets and $9.3 in debt. In January 2005, Alcoa and Alumina Limited together contributed cash of $16.5
which was used to repay the outstanding debt. AWACs interest in the Juruti bauxite project is held by the following entities, Omnia Minerios, Mineracao Sao Jorge Ltda, and Matapu Sociedade De Mineracao Ltda, which have been included in
these financial statements, as of the effective date of this transaction.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-68



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



| | 6. | On June 28, 2004, AWAC increased its ownership stake in Halco Mining, Inc. (Halco) from 43% to 45%. AWAC paid $5.9 for the additional 2% interest in Halco which is
accounted for as an equity investment in the combined balance sheet.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7. | On December 23, 2005, AofA exercised its pre-emptive rights to acquire minority partner AngloGolds equity position in the Cape Bougainville and Mitchell Plateau joint
ventures in Western Australia for $1.6, which is accounted for as an equity investment in the combined balance sheet.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
following summarizes the concentrations of sales and net assets by major geographic region.



|                 |  |      |         |      |   |        
|---------------- |  | ---- | ------- | ---- | - | -------
|                 |  | 2005 |         | 2004
|Sales            |  |      |         |      |   |        
|Australia        |  | $    | 2,831.3 |      | $ | 2,050.6
|U.S.             |  |      | 960.7   |      |   | 1,452.1
|Other            |  |      | 707.8   |      |   | 329.3  
|                 |  |      |         |      |   |        
|Total sales      |  | $    | 4,499.8 |      | $ | 3,832.0
|                 |  |      |         |      |   |        
|Net assets       |  |      |         |      |   |        
|Australia        |  | $    | 2,352.8 |      | $ | 2,012.4
|U.S.             |  |      | 508.4   |      |   | 505.3  
|Other            |  |      | 392.8   |      |   | 302.3  
|                 |  |      |         |      |   |        
|Total net assets |  | $    | 3,254.0 |      | $ | 2,820.0
|                 |  |      |         |      |   |        



|C. | Assets Held for Sale
|-- | --------------------

In February 2004, Alcoa
Specialty Chemicals (ASC) was sold to two private equity firms led by Rhone Capital LLC for an enterprise value of $342.0, which included the assumption of debt and other unfunded obligations. As of the date of the transaction, the
shares of Alcoa Chemie Nederland (CAN), and Alcoa Chemie GmbH (ACG) were owned by Alcoa Automotive GmbH (Automotive), Alcoa Europe Holding, BV (AEH) and an affiliate of Alumina Limited, Westminer
International Holdings Limited (Westminer). The proceeds and the gain on the sale of ACN and ACG have not been reflected in the AWAC financial statements because Automotive, AEH and Westminer are not components of AWAC as defined in the
Formation Agreement. The net assets of these entities were reflected as contributions to Automotive, AEH and Westminer who then sold their respective interests directly to Rhone Capital LLC. However, AWAC received cash of $120.4 and recognized a
pre-tax loss of approximately $35.8 on the sale of the components of ASC that it owned directly. The loss is included in restructuring and other charges in the combined statement of income, comprehensive income and members equity. The
reduction in net assets associated with the contribution of ACN and ACG has been reflected as a distribution of members equity of $61.3.

There were no assets or liabilities held for sale at December 31, 2005 or 2004.



F-69



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|D. | Asset Retirement Obligations
|-- | ----------------------------

AWAC adopted FIN 47,
effective December 31, 2005. FIN 47 clarifies the accounting for conditional asset retirement obligations (CAROs), as referenced in SFAS No. 143, Accounting for Asset Retirement Obligations(SFAS
No. 143). A CARO is a legal obligation to perform an asset retirement activity in which the obligation is unconditional, but uncertainty exists about the timing and (or) method of settlement, which may or may not be under the control of
AWAC, and which prevents the reasonable estimation of the fair value of the CARO. Upon adoption, AWAC recognized a cumulative effect adjustment of $0.2, consisting primarily of costs related to the restoration of a leased facility. Pro forma amounts
related to 2004 are not presented, as there is no impact on prior period financial statements.

Historically, AWAC has either operated
locations or sold them and in certain circumstances, has curtailed them for possible future use while continuing with ongoing security, utility and other maintenance costs as deemed necessary. In the event of decision to permanently shutdown and
(or) demolish a facility, AWAC would record an ARO for the removal, treatment, transportation, storage and (or) disposal of various regulated assets and hazardous materials such as asbestos, underground and aboveground storage tanks, PCBs, various
process residuals, solid wastes, electronic equipment waste and various other materials.

AROs have not been recorded in the financial
statements for any AWAC operating location  other than those with specific legal obligations for spent pot lining disposal, closure of bauxite residue areas, mine reclamation, landfill closure and specific lease restoration requirements 
because the fair value of such potential retirement obligations cannot be measured as the settlement dates for these operating locations cannot be estimated. Such amounts may be material to the financial statements in the period in which they are
recorded.

Effective January 1, 2003, Alcoa adopted SFAS No. 143. The cumulative effect adjustment recognized upon adoption of
this standard was a gain of $15.7. The following table details the changes in the carrying amounts of AROs at December 31:



|                             |  |      |      |   |      |   |      |  
|---------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|                             |  | 2005 |      |   | 2004 |  
|Balance at beginning of year |  | $    | 64.1 |   |      | $ | 51.7 |  
|Accretion expense            |  |      | 4.7  |   |      |   | 4.5  |  
|Liabilities incurred         |  |      | 30.6 |   |      |   | 12.2 |  
|Payments                     |  |      | (7.9 | ) |      |   | (6.0 | )
|Translation and other        |  |      | (.3  | ) |      |   | 1.7  |  
|                             |  |      |      |   |      |   |      |  
|Balance at end of year       |  | $    | 91.2 |   |      | $ | 64.1 |  
|                             |  |      |      |   |      |   |      |  



F-70



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|E. | Inventories
|-- | -----------



|                        |  |      |       |      |   |      
|----------------------- |  | ---- | ----- | ---- | - | -----
|                        |  | 2005 |       | 2004
|Finished goods          |  | $    | 11.2  |      | $ | 23.2 
|Work-in-process         |  |      | 33.3  |      |   | 20.5 
|Bauxite and alumina *   |  |      | 159.8 |      |   | 138.7
|Purchased raw materials |  |      | 114.8 |      |   | 83.3 
|Operating supplies      |  |      | 104.1 |      |   | 99.8 
|                        |  |      |       |      |   |      
|                        |  | $    | 423.2 |      | $ | 365.5
|                        |  |      |       |      |   |      

---

|* | Consists of 32% and 29% in the raw material state, 39% and 41% in work-in-process and 29% and 30% in finished goods at December 31, 2005 and 2004, respectively.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Approximately 19% of total inventories at December 31, 2005, were valued on a LIFO basis. If valued on an average cost
basis, total inventories would have been $59.6 and $42.7 higher at the end of 2005 and 2004, respectively.



|F. | Properties, Plants and Equipment
|-- | --------------------------------



|                                             |  |      |         |      |   |        
|-------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                             |  | 2005 |         | 2004
|Land and land rights, including mines        |  | $    | 112.6   |      | $ | 106.0  
|Structures                                   |  |      | 1,670.1 |      |   | 1,653.4
|Machinery and equipment                      |  |      | 3,688.3 |      |   | 3,752.4
|                                             |  |      |         |      |   |        
|                                             |  |      | 5,471.0 |      |   | 5,511.8
|Less: Accumulated depreciation and depletion |  |      | 3,297.0 |      |   | 3,265.4
|                                             |  |      |         |      |   |        
|                                             |  |      | 2,174.0 |      |   | 2,246.4
|Construction work in progress                |  |      | 679.1   |      |   | 263.4  
|                                             |  |      |         |      |   |        
|                                             |  | $    | 2,853.1 |      | $ | 2,509.8
|                                             |  |      |         |      |   |        



|G. | Other Assets
|-- | ------------



|                           |  |      |       |      |   |      
|-------------------------- |  | ---- | ----- | ---- | - | -----
|                           |  | 2005 |       | 2004
|Deferred mine development  |  | $    | 122.4 |      | $ | 98.7 
|Deferred income taxes      |  |      | 83.6  |      |   | 95.8 
|Prepaid pension benefit    |  |      | 135.3 |      |   | 70.4 
|Deferred charges and other |  |      | 226.4 |      |   | 223.0
|Goodwill                   |  |      | 34.9  |      |   | 36.3 
|Intangibles                |  |      | 1.6   |      |   | 1.9  
|                           |  |      |       |      |   |      
|                           |  | $    | 604.2 |      | $ | 526.1
|                           |  |      |       |      |   |      



F-71



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|H. | Short-Term Borrowings
|-- | ---------------------

In May 2001, Alcoa
entered into a loan agreement with AAC LLC whereby AAC LLC may borrow funds from Alcoa in various installments or draw downs. Each individual draw down has its own maturity not to exceed 60 days, and bears interest at the
rate for deposits in U.S. dollars as determined by the British Bankers Association on the day of the borrowing. Outstanding amounts for this agreement were $76.1 and $58.5 at December 31, 2005 and 2004, respectively.

Other amounts due to Alcoa, classified as short-term borrowings, totaled $0.2 and $25.7 as of December 31, 2005 and 2004, respectively. A portion of
the 2004 balance was contributed to AWAC by Alcoa and Alumina Limited in the amount of $12.0. These amounts were repaid during January 2005. See Notes B and I for additional information.

AWAC participates in computerized payable settlement arrangements with certain vendors and third-party intermediaries. As of December 31, 2005 and
2004, short-term borrowings included $36.5 and $21.4, respectively, of amounts that will be paid through the third-party intermediaries. The arrangements provide that, at the vendors request, the third-party intermediary advances the amount of
the scheduled payment to the vendor, less an appropriate discount, before the scheduled payment date. AWAC makes payment to the third-party intermediary on the date stipulated in accordance with the commercial terms negotiated with its vendors.
Imputed interest on the borrowings in 2004 was insignificant for reclassification to interest expense. See Note A for additional information.



|I. | Related Party Transactions
|-- | --------------------------

AWAC is controlled by
its majority owner, Alcoa. AWAC receives related party sales revenues for alumina and chemical products sold to:



|      |  |      |         |      |   |        
|----- |  | ---- | ------- | ---- | - | -------
|      |  | 2005 |         | 2004
|Alcoa |  | $    | 1,643.1 |      | $ | 1,358.8
|Other |  |      | 27.1    |      |   | 37.6   
|      |  |      |         |      |   |        
|      |  | $    | 1,670.2 |      | $ | 1,396.4
|      |  |      |         |      |   |        

The terms for all transactions and agreements between related parties and AWAC are established by
negotiation between the parties.

Certain entities within AWAC have entered into contractual agreements with Alcoa for employee services
(principally related to employees of the U.S. operations), an administrative services agreement, a commodity and foreign exchange hedging agreement and an alumina sales agreement. Total costs incurred by AWAC for these agreements were approximately
$77.9 in 2005 and $78.2 in 2004. AWAC also has a long-term bauxite purchase agreement with a partially-owned entity. Total purchases under this agreement were approximately $124.8 and $108.1 during 2005 and 2004 respectively.



F-72



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Receivables from Alcoa,
included in receivables from customers, totaled $240.1 and $198.5 as of December 31, 2005 and 2004, respectively, while trade accounts payable to Alcoa totaled $149.3 and $38.1 at December 31, 2005 and 2004, respectively. Short-term
borrowings include $76.3 and $84.2 as of December 31, 2005 and 2004, respectively, that were due to Alcoa. See Note H for additional information.

In 2005 and 2004, AWAC was charged and paid $0.7 and $6.0, respectively for stock option exercises under Alcoas Long Term Stock Incentive Plan. These amounts were reflected as a dividend paid to partners, net of
a tax benefit of $0.3 in 2005 and $2.0 in 2004. See Note A for additional information.



|J. | Lease Expense
|-- | -------------

Certain equipment, including process
control hardware and software, as well as warehousing, office space, and ocean going vessels are under operating lease agreements. Total expense from continuing operations for all leases was $51.2 in 2005 and $26.9 in 2004. Under long-term leases,
minimum annual rentals are $43.1 in 2006, $40.6 in 2007, $35.3 in 2008, $32.1 in 2009, $29.5 in 2010 and a total of $27.2 for 2011 and thereafter.



|K. | Pension Plans and Other Postretirement Benefits
|-- | -----------------------------------------------

Entities within AWAC maintain pension plans covering certain non-U.S. employees. Pension benefits generally depend upon length of service, job grade, and remuneration. Substantially all benefits are paid through pension trusts that are
sufficiently funded to ensure that all plans can pay benefits to retirees as they become due.

Entities within AWAC maintain health care and
life insurance benefit plans covering certain non-U.S. retired employees. Generally, the medical plans pay a percentage of medical expenses, reduced by deductibles and other coverages. Life benefits are generally provided by insurance contracts. The
entities retain the right, subject to existing agreements, to change or eliminate these benefits.



F-73



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

The table below reflects the
status of AWACs pension and postretirement benefit plans.



|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|-------------------------------------------------- |  | ---------------- | ----- | - | ----------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                   |  | Pension Benefits |       |   | Postretirement Benefits |  
|                                                   |  | 2005             |       |   | 2004                    |   |       | 2005 |  |   | 2004  |  
|Change in benefit obligation                       |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Benefit obligation at beginning of year            |  | $                | 679.5 |   |                         | $ | 628.6 |      |  | $ | 38.0  |   |  | $ | 34.6  |  
|Service cost                                       |  |                  | 32.0  |   |                         |   | 27.7  |      |  |   | .6    |   |  |   | .5    |  
|Interest cost                                      |  |                  | 33.8  |   |                         |   | 31.5  |      |  |   | 2.4   |   |  |   | 2.1   |  
|Amendments                                         |  |                  |      |   |                         |   | 1.3   |      |  |   | 2.5   |   |  |   |      |  
|Actuarial losses                                   |  |                  | 29.3  |   |                         |   | 57.0  |      |  |   | 2.6   |   |  |   | 1.9   |  
|Divestitures                                       |  |                  |      |   |                         |   | (10.3 | )    |  |   |      |   |  |   |      |  
|Benefits paid, net of participants contributions  |  |                  | (36.7 | ) |                         |   | (39.9 | )    |  |   | (.9   | ) |  |   | (1.1  | )
|Other transfers, net                               |  |                  | 1.9   |   |                         |   | (22.0 | )    |  |   |      |   |  |   |      |  
|Exchange rate                                      |  |                  | (26.8 | ) |                         |   | 5.6   |      |  |   |      |   |  |   |      |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Benefit obligation at end of year                  |  | $                | 713.0 |   |                         | $ | 679.5 |      |  | $ | 45.2  |   |  | $ | 38.0  |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Change in plan assets                              |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Fair value of plan assets at beginning of year     |  | $                | 678.5 |   |                         | $ | 637.3 |      |  | $ |      |   |  | $ |      |  
|Actual return on plan assets                       |  |                  | 119.2 |   |                         |   | 66.1  |      |  |   |      |   |  |   |      |  
|Divestitures                                       |  |                  |      |   |                         |   | (1.3  | )    |  |   |      |   |  |   |      |  
|Employer contributions                             |  |                  | 28.1  |   |                         |   | 38.3  |      |  |   |      |   |  |   |      |  
|Participants contributions                        |  |                  | 13.6  |   |                         |   | 12.2  |      |  |   |      |   |  |   |      |  
|Benefits paid                                      |  |                  | (50.3 | ) |                         |   | (52.1 | )    |  |   |      |   |  |   |      |  
|Administrative expenses                            |  |                  | (8.5  | ) |                         |   | (1.6  | )    |  |   |      |   |  |   |      |  
|Other transfers, net                               |  |                  | 1.9   |   |                         |   | (22.0 | )    |  |   |      |   |  |   |      |  
|Exchange rate                                      |  |                  | (25.0 | ) |                         |   | 1.6   |      |  |   |      |   |  |   |      |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Fair value of plan assets at end of year           |  | $                | 757.5 |   |                         | $ | 678.5 |      |  | $ |      |   |  | $ |      |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Funded status                                      |  | $                | 44.5  |   |                         | $ | (1.0  | )    |  | $ | (45.2 | ) |  | $ | (38.0 | )
|Unrecognized net actuarial (gain) loss             |  |                  | 67.8  |   |                         |   | 102.1 |      |  |   | (25.3 | ) |  |   | (29.8 | )
|Unrecognized net prior service cost                |  |                  | 11.3  |   |                         |   | 13.3  |      |  |   | 2.5   |   |  |   |      |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Net amount recognized                              |  | $                | 123.6 |   |                         | $ | 114.4 |      |  | $ | (68.0 | ) |  | $ | (67.8 | )
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Amount recognized in the balance sheet consists of |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Prepaid benefit                                    |  | $                | 141.3 |   |                         | $ | 70.4  |      |  | $ |      |   |  | $ |      |  
|Accrued benefit liability (1)                      |  |                  | (17.7 | ) |                         |   | (26.7 | )    |  |   | (68.0 | ) |  |   | (67.8 | )
|Intangible asset                                   |  |                  |      |   |                         |   | 3.3   |      |  |   |      |   |  |   |      |  
|Accumulated other comprehensive loss               |  |                  |      |   |                         |   | 67.4  |      |  |   |      |   |  |   |      |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Net amount recognized                              |  |                  | 123.6 |   |                         |   | 114.4 |      |  |   | (68.0 | ) |  |   | (67.8 | )
|Amounts attributed to joint venture partners       |  |                  | (5.3  | ) |                         |   |      |      |  |   | 3.4   |   |  |   | 3.4   |  
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  
|Net amount recognized                              |  | $                | 118.3 |   |                         | $ | 114.4 |      |  | $ | (64.6 | ) |  | $ | (64.4 | )
|                                                   |  |                  |       |   |                         |   |       |      |  |   |       |   |  |   |       |  

---

|(1) | Amount includes both current and long-term portions of the liability.
|--- | ---------------------------------------------------------------------



F-74



---

##### Table of Contents

|                                         |  |                  |       |   |                         |   |       |      |  |   |      |   |  |   |     |  
|---------------------------------------- |  | ---------------- | ----- | - | ----------------------- | - | ----- | ---- |  | - | ---- | - |  | - | --- | -
|                                         |  | Pension Benefits |       |   | Postretirement Benefits |  
|                                         |  | 2005             |       |   | 2004                    |   |       | 2005 |  |   | 2004 |  
|Components of net periodic benefit costs |  |                  |       |   |                         |   |       |      |  |   |      |   |  |   |     |  
|Service cost                             |  | $                | 32.0  |   |                         | $ | 27.7  |      |  | $ | .6   |   |  | $ | .5  |  
|Interest cost                            |  |                  | 33.8  |   |                         |   | 31.5  |      |  |   | 2.4  |   |  |   | 2.1 |  
|Expected return on plan assets           |  |                  | (53.6 | ) |                         |   | (48.3 | )    |  |   |     |   |  |   |    |  
|Amortization of prior service cost       |  |                  | 1.9   |   |                         |   | 1.9   |      |  |   | .4   |   |  |   |    |  
|Recognized actuarial gains               |  |                  | (.2   | ) |                         |   | 2.1   |      |  |   | (1.9 | ) |  |   | (.9 | )
|                                         |  |                  |       |   |                         |   |       |      |  |   |      |   |  |   |     |  
|Net periodic benefit costs               |  | $                | 13.9  |   |                         | $ | 14.9  |      |  | $ | 1.5  |   |  | $ | 1.7 |  
|                                         |  |                  |       |   |                         |   |       |      |  |   |      |   |  |   |     |  

The projected benefit obligation for all defined benefit pension plans was $713.0 and $679.5 at
December 31, 2005 and 2004, respectively.

The accumulated benefit obligations for all defined benefit pension plans were $659.3 and
$630.0 at December 31, 2005 and 2004, respectively.

The aggregate projected benefit obligation and fair value of plan assets for the
pension plan with benefit obligations in excess of plan assets were $490.3 and $458.1, respectively, as of December 31, 2005 and $484.1 and $417.0, respectively, as of December 31, 2004. The aggregate accumulated benefit obligation and
fair value of plan assets with accumulated benefit obligations in excess of plan assets were $0.0 and $0.0, respectively, as of December 31, 2005 and $445.0 and $417.0, respectively, at December 31, 2004.

At December 31, 2005 and 2004, the long-term accrued pension benefits on the combined balance sheet were $0.0 and $2.3, respectively. The total
accrued benefit liability was $17.7 in 2005 and $26.7 in 2004, which included the current portion of the liability of $17.0 in 2005 and $24.4 in 2004 and the amounts attributed to joint venture partners of $0.7 in 2005. At December 31, 2005 and
2004, the prepaid pension benefit on the combined balance sheet was $135.3 and $70.4, respectively. The total prepaid benefit was $141.3 in 2005 and $70.4 in 2004, which included amounts attributed to joint venture partners of $6.0 in 2005.

The unrecognized net actuarial loss for pension benefits at December 31, 2005 of $67.8 has primarily resulted from the decline in
interest rates over the past four years. To the extent those losses exceed certain thresholds, the excess will continue to be recognized as prescribed under SFAS No. 87, Employers Accounting for Pensions. Generally, these amounts are
amortized over the estimated future service plan of participants, which is 10 years.

The benefit obligation for postretirement benefit
plans and net amount recognized were $45.2 and $68.0, respectively, as of December 31, 2005, and $38.0 and $67.8, respectively as of December 31, 2004. Of the net amount recognized, the long-term, current and amounts attributed to joint
venture partners were $63.6, $1.0, and $3.4, respectively as of December 31, 2005, and $64.4, $0.0 and $3.4, respectively, as of December 31, 2004.



F-75



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

The unrecognized actuarial
gain for postretirement benefit plans at December 31, 2005 of $25.3 primarily resulted from benefit payment projection exceeding actual payments. To the extent those gains exceed certain thresholds, the excess will continue to be recognized.
Generally, these amounts are amortized over the estimated future service plan of participants, which is 14 years.

Assumptions

Weighted average assumptions used to determine benefit obligations at December 31:



|                              |  |      |   |  |      |  
|----------------------------- |  | ---- | - |  | ---- | -
|                              |  | 2005 |   |  | 2004 |  
|Weighted average assumptions  |  |      |   |  |      |  
|Discount rate, at year end    |  | 5.00 | % |  | 4.79 | %
|Rate of compensation increase |  | 3.63 | % |  | 4.14 | %

The discount rate is based upon a yield available on government bonds with a term suitable to
match the liabilities.

Weighted average assumptions used to determine the net cost for years ended December 31:



|                                         |  |      |   |  |      |  
|---------------------------------------- |  | ---- | - |  | ---- | -
|                                         |  | 2005 |   |  | 2004 |  
|Weighted average assumptions             |  |      |   |  |      |  
|Discount rate, at year end               |  | 4.79 | % |  | 5.33 | %
|Expected long-term return on plan assets |  | 7.77 | % |  | 7.77 | %
|Rate of compensation increase            |  | 4.14 | % |  | 3.95 | %

The expected return on plan assets is based on historical performance as well as expected future
rates of return on plan assets considering the current investment portfolio mix and the long-term investment strategy. On average, the actual return over the past 10 years has exceeded 8%.

Assumed health care cost trend rates at December 31:



|                                                            |  |      |   |  |      |  
|----------------------------------------------------------- |  | ---- | - |  | ---- | -
|                                                            |  | 2005 |   |  | 2004 |  
|Health care cost trend rate assumed for next year           |  | 8.0  | % |  | 8.0  | %
|Rate that the cost trend rate gradually declines to         |  | 5.0  | % |  | 5.0  | %
|Year that the rate reaches the rate it is assumed to remain |  | 2010 |   |  | 2009 |  

The health care cost trend rate in the calculation of the 2004 benefit obligations was 8.0% from
2004 to 2005 and 8.0% from 2005 to 2006. Actual annual company health care trend experience over the past three year has ranged from 5.0% to 7.5%. The 8% trend rate will be maintained for 2006.



F-76



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

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



|                                                        |  |            |     |            |   |      |  
|------------------------------------------------------- |  | ---------- | --- | ---------- | - | ---- | -
|                                                        |  | 1%Increase |     | 1%Decrease |  
|Effect on total of service and interest cost components |  | $          | 0.4 |            | $ | (0.3 | )
|Effect on postretirement benefit obligations            |  |            | 5.6 |            |   | (4.5 | )

Plan Assets

AWACs pension plans investment policy, weighted-average asset allocations at December 31, 2005 and 2004, and target allocations for 2006, by asset category, are as follows:



|                  |  |             |      |  |                            |      |  |             |   |  |     |  
|----------------- |  | ----------- | ---- |  | -------------------------- | ---- |  | ----------- | - |  | --- | -
|                  |  | PolicyRange |      |  | Plan Assets atDecember 31, |      |  | Target 2006 |  
|                  |  |             | 2005 |  |                            | 2004 |  |            
|Asset Category    |  |             |      |  |                            |      |  |             |   |  |     |  
|Equity securities |  | 35-60       | %    |  | 59                         | %    |  | 60          | % |  | 59  | %
|Debt securities   |  | 30-55       | %    |  | 29                         | %    |  | 31          | % |  | 29  | %
|Real estate       |  | 5-15        | %    |  | 8                          | %    |  | 6           | % |  | 10  | %
|Other             |  | 0-15        | %    |  | 4                          | %    |  | 3           | % |  | 2   | %
|                  |  |             |      |  |                            |      |  |             |   |  |     |  
|                  |  |             |      |  | 100                        | %    |  | 100         | % |  | 100 | %
|                  |  |             |      |  |                            |      |  |             |   |  |     |  

The basic goal underlying pension plan investment policy is to ensure that the assets of the plan,
along with expected plan sponsor contributions, will be invested in a prudent manner to meet the obligations of the plan as those obligations come due. Investment practices must comply with applicable laws and regulations.

Numerous asset classes with differing expected rates of return, return volatility and correlations are utilized to reduce risk by providing
diversification. Debt securities comprise a significant portion of the portfolio due to their plan-liability-matching characteristics and to address the plans cash flow requirements. Additionally, diversification of investments within each
asset class is utilized to further reduce the impact of losses in single investments. The use of derivative instruments is permitted where appropriate and necessary for achieving overall investment policy objectives.

Cash Flows

The minimum required cash
contribution to the pension plan in 2006 is estimated to be $17.0.



F-77



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Benefit payments expected to
be paid to plan participants are as follows:



|                          |  |                 |       |                         |   |     
|------------------------- |  | --------------- | ----- | ----------------------- | - | ----
|Years Ending December 31, |  | PensionBenefits |       | Post-RetirementBenefits
|2006                      |  | $               | 59.4  |                         | $ | 1.5 
|2007                      |  |                 | 56.0  |                         |   | 1.7 
|2008                      |  |                 | 59.4  |                         |   | 1.8 
|2009                      |  |                 | 62.4  |                         |   | 1.9 
|2010                      |  |                 | 65.4  |                         |   | 2.0 
|2011 through 2014         |  |                 | 350.3 |                         |   | 11.7
|                          |  |                 |       |                         |   |     
|                          |  | $               | 652.9 |                         | $ | 20.6
|                          |  |                 |       |                         |   |     

Other Plans

AWAC sponsors a number of defined contribution pension plans. Expenses were $18.8 in 2005 and $15.2 in 2004.



|L. | Income Taxes
|-- | ------------

The components of income from
continuing operations before taxes on income were:



|        |  |      |         |   |      |   |       |  
|------- |  | ---- | ------- | - | ---- | - | ----- | -
|        |  | 2005 |         |   | 2004 |  
|U.S.    |  | $    | (59.1   | ) |      | $ | (57.0 | )
|Foreign |  |      | 1,017.8 |   |      |   | 943.2 |  
|        |  |      |         |   |      |   |       |  
|        |  | $    | 958.7   |   |      | $ | 886.2 |  
|        |  |      |         |   |      |   |       |  

The provision for taxes on income from continuing operations consisted of:



|             |  |      |       |   |      |   |      
|------------ |  | ---- | ----- | - | ---- | - | -----
|             |  | 2005 |       |   | 2004
|Current      |  |      |       |   |      |   |      
|U.S. federal |  | $    | 16.2  |   |      | $ | 10.4 
|Foreign      |  |      | 298.2 |   |      |   | 280.3
|             |  |      |       |   |      |   |      
|             |  |      | 314.4 |   |      |   | 290.7
|             |  |     
|Deferred     |  |      |       |   |      |   |      
|U.S. federal |  |      | (2.1  | ) |      |   | .3   
|Foreign      |  |      | 1.6   |   |      |   | 6.5  
|             |  |      |       |   |      |   |      
|             |  |      | (.5   | ) |      |   | 6.8  
|             |  |      |       |   |      |   |      
|             |  | $    | 313.9 |   |      | $ | 297.5
|             |  |      |       |   |      |   |      



F-78



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Reconciliation of the U.S.
federal statutory rate to AWACs effective tax rate for continuing operations follows:



|                            |  |      |   |  |      |  
|--------------------------- |  | ---- | - |  | ---- | -
|                            |  | 2005 |   |  | 2004 |  
|U.S. federal statutory rate |  | 35.0 | % |  | 35.0 | %
|Loss not taxed to AWAC      |  | 3.3  |   |  | 3.5  |  
|Taxes on foreign income     |  | (5.9 | ) |  | (4.9 | )
|Other                       |  | .3   |   |  |     |  
|                            |  |      |   |  |      |  
|Effective tax rate          |  | 32.7 | % |  | 33.6 | %
|                            |  |      |   |  |      |  

The components of net deferred tax assets and liabilities at December 31 follow:



|                        |  |                   |      |                        |   |                   |  |                        |      |  |   |      
|----------------------- |  | ----------------- | ---- | ---------------------- | - | ----------------- |  | ---------------------- | ---- |  | - | -----
|                        |  | 2005              |      | 2004                  
|                        |  | DeferredTaxAssets |      | DeferredTaxLiabilities |   | DeferredTaxAssets |  | DeferredTaxLiabilities
|Depreciation            |  | $                 |     |                        | $ | 182.3             |  | $                      |     |  | $ | 184.3
|Employee benefits       |  |                   | 14.1 |                        |   |                  |  |                        | 9.9  |  |   |     
|Loss provisions         |  |                   | 23.5 |                        |   |                  |  |                        | 19.5 |  |   |     
|Deferred income/expense |  |                   | 21.0 |                        |   | 93.8              |  |                        | 17.6 |  |   | 75.8 
|Tax loss carryforward   |  |                   |     |                        |   |                  |  |                        | 6.6  |  |   |     
|Other                   |  |                   | 1.5  |                        |   | 2.8               |  |                        | 1.8  |  |   | 13.0 
|                        |  |                   |      |                        |   |                   |  |                        |      |  |   |      
|                        |  | $                 | 60.1 |                        | $ | 278.9             |  | $                      | 55.4 |  | $ | 273.1
|                        |  |                   |      |                        |   |                   |  |                        |      |  |   |      

The $6.6 loss carryforward that existed at December 31, 2004, related to Discovery Alumina,
an entity that was sold in February 2004 as part of the sale of the specialty chemicals business. The carryforward loss was retained by AWAC and not included in the sale. See Note C for additional information. During 2005, the entire loss
carryforward benefit was utilized by AWAC.



|M. | Derivatives and Other Financial Instruments
|-- | -------------------------------------------

The
carrying values and fair values of AWACs financial instruments at December 31 follow:



|                          |  |               |       |           |   |               |  |           |       |  |   |      
|------------------------- |  | ------------- | ----- | --------- | - | ------------- |  | --------- | ----- |  | - | -----
|                          |  | 2005          |       | 2004     
|                          |  | CarryingValue |       | FairValue |   | CarryingValue |  | FairValue
|Cash and cash equivalents |  | $             | 229.3 |           | $ | 229.3         |  | $         | 226.5 |  | $ | 226.5
|Notes receivable          |  |               | 1.1   |           |   | 1.1           |  |           |      |  |   |     
|Short-term debt           |  |               | 123.6 |           |   | 123.6         |  |           | 106.2 |  |   | 106.2
|Long-term debt            |  |               |      |           |   |              |  |           | 12.2  |  |   | 12.2 



F-79



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

The methods used to estimate
the fair value of certain financial instruments follow:

Cash and Cash Equivalents and Short-Term Borrowings

The carrying amount approximates fair value because of the short maturity of the instruments. The short-term borrowings weighted average interest rate is
4.66% in 2005 and 1.05% in 2004.

Noncurrent Receivables

The fair value of noncurrent receivables is based on anticipated cash flows which approximates carrying value.

Long-Term Debt

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

Cash
Flow Hedges

AWAC uses derivative financial instruments for purposes other than trading. Fair value gains of material hedging contracts
at December 31 were:



|                                                        |  |      |      |      |   |     
|------------------------------------------------------- |  | ---- | ---- | ---- | - | ----
|                                                        |  | 2005 |      | 2004
|Other commodities, principally natural gas and fuel oil |  | $    | 66.2 |      | $ | 14.6

Commodities

AWAC anticipates the continued requirement to purchase other commodities such as natural gas, and fuel oil for its operations. AWAC enters into futures and options contracts to reduce volatility in the price of these
commodities.

AWAC is exposed to credit loss in the event of nonperformance by counterparties on the above instruments. Although
nonperformance is possible, AWAC does not anticipate nonperformance by any of the parties. Contracts are with creditworthy counterparties and are further supported by cash, treasury bills or irrevocable letters of credit issued by carefully chosen
banks. In addition, various master netting arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

For further information on AWACs hedging and derivative activities, see Note A.



|N. | Cash Flow Information
|-- | ---------------------

Cash payments for interest
and taxes follow:



|             |  |      |       |      |   |      
|------------ |  | ---- | ----- | ---- | - | -----
|             |  | 2005 |       | 2004
|Interest     |  | $    | 2.3   |      | $ | 1.2  
|Income taxes |  |      | 310.1 |      |   | 248.9
|             |  |      |       |      |   |      
|             |  | $    | 312.4 |      | $ | 250.1
|             |  |      |       |      |   |      



F-80



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

Noncash Items

There were no significant noncash items at December 31, 2005.

Net assets sold as part of the ACN and ACG sale totaled $61.3 at February 29, 2004, the effective date of the sale. The net deficit contributed from
Alcoa and Alumina Limited as part of the sale of Alcoas interest in the Juruti bauxite project totaled $(11.0) at December 31, 2004. See Notes B and C for additional information.



|O. | Commitments and Contingencies
|-- | -----------------------------

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

Pursuant to the terms of the Formation Agreement, Alcoa and Alumina Limited have agreed to remain liable for Extraordinary Liabilities (as defined in the
agreement) as well as for certain other pre-formation liabilities, such as existing environmental conditions, to the extent of their pre-formation ownership of the company or asset with which the liability is associated.

In October 2004, AWAC agreed to acquire a 20% interest in a consortium formed to acquire the Dampier to Bunbury Natural Gas Pipeline
(DBNGP) in Western Australia exchange for an initial cash investment of $17.0, which was classified as an equity investment. AWAC has made additional contributions of $19.2 in 2005 and committed to invest an additional $53.0 to be paid
as the pipeline expands through 2008. The investment in DBNGP was made in order to secure a competitively priced long-term supply of power to AWACs refineries in Western Australia. In addition to its equity ownership, AWAC has an agreement to
purchase gas transmission services from the DBNGP with the ability to terminate the agreement at its discretion. AWACs maximum exposure to loss on the investment and related contract is approximately $300.0.

In November 2005, AWA LLC and Alcan announced the signing of a Basic Agreement with the Government of Guinea that sets the framework for development
of a 1.5 million metric tons per year (mtpy) alumina refinery in Guinea, West Africa. This agreement sets out the items and framework for the alumina refinery project that were a part of the protocol signed in November 2004 and
a part of the memorandum of understanding (MOU) signed by AWA LLC and Alcan in May 2004. A detailed feasibility study for the refinery is expected to begin immediately after ratification of the Basic Agreement by the Guinean
National Assembly. The refinery, which would be operated by AWAC, would be expected to have an initial 1.5 million mtpy capacity, with expansion capability. Production is expected by early 2009.



F-81



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)

In June 2005,
AWACs expansion plan was approved by Alcoas Board of Directors for the planned expansion of the Jamalco alumina refinery in Clarendon, Jamaica, which follows the agreement in principle signed by AWAC and the Government of Jamaica in
December 2004. Pending finalization of definitive documents, which is expected in due course, this project will add 1.5 million mtpy to Jamalco, more than doubling the refinerys capacity to at least 2.8 million mtpy. The
1.5 million mtpy expansion is expected to cost approximately $1.2 billion. As a result of this expansion, AWACs ownership in the refinery will increase from 50% to 77% with the Government of Jamaica continuing to own the remaining
minority interest.

In connection with the sale of ASC, AWAC entered into an agreement to supply ASC with approximately 488,000 tons of
alumina feedstock annually at a fixed price for 20 years. After three years and through the tenth year of the contract, the agreement provides for adjustments in pricing to the extent certain of AWACs costs fluctuate outside of agreed upon
thresholds.

AWAC has entered into other purchase commitments for energy and raw materials which total $587.1 in 2006, $470.1 in 2007,
$425.7 in 2008. $353.7 in 2009, $302.0 in 2010, and $3,094.1 thereafter.

During 2001, AWAC entered into a ten-year agreement with a vendor
to provide process control hardware and software at a ten-year cost of approximately $146.0. At December 31, 2005, amounts remaining to be paid on this agreement was approximately $104.7.



|P. | Environmental Matters
|-- | ---------------------

AWAC continues to
participate in environmental assessments and cleanups at a number of locations. A liability is recorded for environmental remediation costs or damages when a cleanup program becomes probable and the costs or damages can be reasonably estimated. See
Note A for additional information. As assessments and cleanups proceed, the liability is adjusted based on progress in determining the extent of remedial actions and related costs and damages. The liability can change substantially due to
factors such as the nature and extent of contamination, changes in remedial requirements and technological changes. Therefore, it is not possible to determine the outcomes or estimate with any degree of accuracy the potential costs for certain of
these matters.

AWACs remediation reserve balance at the end of 2005 and 2004 was $28.7 and $24.4, respectively, and reflects the most
probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. Of the $28.7 reserve at December 31, 2005, $24.0 million is classified as current on the combined balance sheet.



F-82



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|Q. | Comprehensive Income and Members Equity
|-- | ----------------------------------------

AWACs capital represents the excess of AWACs assets over liabilities and minority interest. The components of capital consist of common stock, participants equity, additional capital, accumulated other comprehensive loss
and retained earnings.



|                                                                          |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                          |  | 2005 |         |   | 2004 |  
|Other comprehensive income (loss)                                         |  |      |         |   |      |   |         |  
|Net Income                                                                |  | $    | 644.6   |   |      | $ | 588.5   |  
|Change in minimum pension liability, net of tax                           |  |      | 47.2    |   |      |   | (24.2   | )
|Currency translation adjustments                                          |  |      | (148.4  | ) |      |   | 89.2    |  
|Unrecognized gains (losses) on derivatives, net of tax                    |  |      |         |   |      |   |         |  
|Net change from periodic revaluations                                     |  |      | 131.7   |   |      |   | 17.3    |  
|Net amount reclassified to income                                         |  |      | (80.1   | ) |      |   | (24.0   | )
|                                                                          |  |      |         |   |      |   |         |  
|Net recognized income (loss) on derivatives                               |  |      | 51.6    |   |      |   | (6.7    | )
|                                                                          |  |      |         |   |      |   |         |  
|Other comprehensive (loss) income                                         |  |      | (49.6   | ) |      |   | 58.3    |  
|                                                                          |  |      |         |   |      |   |         |  
|Comprehensive income                                                      |  | $    | 595.0   |   |      | $ | 646.8   |  
|                                                                          |  |      |         |   |      |   |         |  
|Members equity                                                           |  |      |         |   |      |   |         |  
|Balance at the beginning of the year                                      |  | $    | 2,820.0 |   |      | $ | 2,533.5 |  
|Net income                                                                |  |      | 644.6   |   |      |   | 588.5   |  
|Capital contribution (B and N)                                            |  |      | 21.1    |   |      |   | 22.3    |  
|Dividends paid and return of capital to members (I)                       |  |      | (182.1  | ) |      |   | (321.3  | )
|Combined investment in divested entities distributed to members (C and N) |  |      |        |   |      |   | (61.3   | )
|Other comprehensive (loss) income                                         |  |      | (49.6   | ) |      |   | 58.3    |  
|                                                                          |  |      |         |   |      |   |         |  
|Balance at the end of the year                                            |  | $    | 3,254.0 |   |      | $ | 2,820.0 |  
|                                                                          |  |      |         |   |      |   |         |  

The components of accumulated other comprehensive loss included in members equity were as
follows:



|                                                 |  |      |        |   |      |   |       |  
|------------------------------------------------ |  | ---- | ------ | - | ---- | - | ----- | -
|                                                 |  | 2005 |        |   | 2004 |  
|Additional minimum pension liability, net of tax |  | $    |       |   |      | $ | (47.2 | )
|Cumulative currency translation adjustments      |  |      | (155.8 | ) |      |   | (7.4  | )
|Unrealized gains on derivatives, net of tax      |  |      | 66.2   |   |      |   | 14.6  |  
|                                                 |  |      |        |   |      |   |       |  
|                                                 |  | $    | (89.6  | ) |      | $ | (40.0 | )
|                                                 |  |      |        |   |      |   |       |  



F-83



---

##### Table of Contents

Alcoa World Alumina and Chemicals

Notes to Combined Financial Statements

December 31, 2005 and 2004

(dollars in millions)



|R. | Restructuring and Other Charges
|-- | -------------------------------

Restructuring and
other charges were comprised of the following at December 31:



|                                             |  |      |     |   |      |   |     
|-------------------------------------------- |  | ---- | --- | - | ---- | - | ----
|                                             |  | 2005 |     |   | 2004
|Restructuring charges                        |  | $    | 1.3 |   |      | $ | 3.0 
|Other charges                                |  |      | (.1 | ) |      |   |    
|Loss on sale of specialty chemicals business |  |      |    |   |      |   | 35.8
|                                             |  |      |     |   |      |   |     
|                                             |  | $    | 1.2 |   |      | $ | 38.8
|                                             |  |      |     |   |      |   |     

Restructuring and other charges was comprised of the following components: $1.3 and $3.0 during
2005 and 2004, respectively, of charges for the early retirement during 2005 of approximately 44 employees at AofA and Alumina Espanola S.A. as well as other severance agreements, and during 2004 of approximately 19 employees at Alumina Espanola
S.A. Additionally, during 2005 and 2004, AofA and Alumina Espanola S.A. recorded severance charges of $9.9 and $4.9, respectively, through costs of goods sold on the combined statement of income, comprehensive income and members equity, for
the early retirement of 67 employees.

During 2004, AWAC recorded a loss of $35.8 on the sale of the ASC business. See Note C for
additional information.

Activity and reserve balances related to employee termination and severance costs are as follows:



|                                     |  |                                      |      |  
|------------------------------------ |  | ------------------------------------ | ---- | -
|                                     |  | EmployeeTerminationandSeveranceCosts |     
|2004                                 |  |                                      |      |  
|Reserve balance at January 1, 2004   |  | $                                    | 5.6  |  
|Cash payments                        |  |                                      | (7.8 | )
|Restructuring charges                |  |                                      | 3.0  |  
|Ongoing early retirement and other   |  |                                      | 4.9  |  
|                                     |  |                                      |      |  
|Reserve balance at December 31, 2004 |  | $                                    | 5.7  |  
|                                     |  |                                      |      |  
|2005                                 |  |                                      |      |  
|Cash payments                        |  | $                                    | (6.3 | )
|Restructuring charges                |  |                                      | 1.3  |  
|Ongoing early retirement and other   |  |                                      | 9.9  |  
|                                     |  |                                      |      |  
|Reserve balance at December 31, 2005 |  | $                                    | 10.6 |  
|                                     |  |                                      |      |  



F-84



---

##### Table of Contents

|S. | Other (Income) Expense
|-- | ----------------------

The net (income) expense
recorded during 2005 and 2004 of $(24.7) and $1.2, respectively, was comprised of exchange differences, interest income, equity income of unconsolidated subsidiaries, and various other expenses.

During 2004, AWAC entered into an agreement to terminate its Alusaf Toll Conversion Agreement in exchange for a cash payment of $35.5. The payment has
been recognized in other (income) expense on the combined statements of income, comprehensive income and members equity. AWAC does not have any further performance or other obligations under this agreement



F-85