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

                                 FORM 10-K

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

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995   COMMISSION FILE NUMBER 1-3924

                                MAXXAM INC.
           (Exact name of Registrant as Specified in its Charter)

          DELAWARE                             95-2078752
      (State or other                       (I.R.S. Employer
        jurisdiction                     Identification Number)
    of incorporation or
       organization)

5847 SAN FELIPE, SUITE 2600                      77057
       HOUSTON, TEXAS                          (Zip Code)
   (Address of Principal
     Executive Offices)

     Registrant's telephone number, including area code: (713) 975-7600

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

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

                                                 Name of each
            Title of each class                    exchange
                                              on which registered 
[S]                                          [C]
12-1/2% Subordinated Debentures due
December 15, 1999                                  American
14% Senior Subordinated Reset Notes due May
20, 2000                                           American
Common Stock, $.50 par value                  American, Pacific,
                                                 Philadelphia

  Number of shares of common stock outstanding at March 1, 1996: 8,707,847
     Securities registered pursuant to Section 12(g) of the Act:  None.

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

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  /X/

     Based upon the March 1, 1996 American Stock Exchange closing price of
$44.375 per share, the aggregate market value of the Registrant's
outstanding voting stock held by non-affiliates was approximately $267.8
million.

                    DOCUMENTS INCORPORATED BY REFERENCE:

Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1995 are incorporated by reference under
Part II. Certain portions of Registrant's definitive proxy statement, to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the close of the Registrant's fiscal
year, are incorporated by reference under Part III.


                                   PART I


ITEM 1.        BUSINESS

GENERAL

          MAXXAM Inc. and its majority and wholly owned subsidiaries are
collectively referred to herein as the "Company" or "MAXXAM" unless
otherwise indicated or the context indicates otherwise.  The Company,
through Kaiser Aluminum Corporation ("Kaiser") and Kaiser's principal
operating subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC"), is a
fully integrated aluminum company.  The Company's voting interest in Kaiser
is approximately 62% on a fully diluted basis.  See "--Aluminum
Operations."  In addition, the Company is engaged in forest products
operations through its wholly owned subsidiary, MAXXAM Group Inc. ("MGI")
and MGI's wholly owned subsidiaries, The Pacific Lumber Company and its
wholly owned subsidiaries (collectively referred to herein as "Pacific
Lumber," unless the context indicates otherwise), and Britt Lumber Co.,
Inc. ("Britt").  See "--Forest Products Operations."  The Company is also
engaged in (a) real estate investment and development, managed through
MAXXAM Property Company (and its subsidiaries), MCO Properties Inc., Palmas
del Mar Properties, Inc. ("Palmas"), and various other wholly owned
subsidiaries, and (b) other commercial operations through subsidiaries,
including a Class 1 thoroughbred and quarter horse racing facility located
in the greater Houston metropolitan area.  See "--Real Estate and Other
Operations."  See Note 11 to the Consolidated Financial Statements
(contained in the Company's Annual Report to Stockholders--see Item 8) for
certain financial information by industry segment and geographic area.

ALUMINUM OPERATIONS

     INDUSTRY OVERVIEW

          Primary aluminum is produced by the refining of bauxite into
alumina and the reduction of alumina into primary aluminum.  Approximately
two pounds of bauxite are required to produce one pound of alumina, and
approximately two pounds of alumina are required to produce one pound of
primary aluminum.  Aluminum's valuable physical properties include its
light weight, corrosion resistance, thermal and electrical conductivity,
and high tensile strength.

          Demand
          The packaging, transportation and construction industries are the
principal consumers of aluminum in the United States, Japan, and Western
Europe.  In the packaging industry, which accounted for approximately 20%
of aluminum consumption in 1994, aluminum's recyclability and weight
advantages have enabled it to gain market share from steel and glass,
primarily in the beverage container area.  Nearly all beer cans and soft
drink cans manufactured for the United States market are made of aluminum. 
Kaiser believes that growth in the packaging area is likely to continue
through the 1990s due to general population increase and to further
penetration of the beverage container market in Asia and Latin America,
where aluminum cans are a substantially lower percentage of the total
beverage container market than in the United States.  Kaiser believes that
growth in demand for can sheet in the United States will follow the growth
in population, offset in part by the effects of the use of lighter gauge
aluminum for can sheet and of plastic container production from newly
installed capacity.

          In the transportation industry, which accounted for approximately
28% of aluminum consumption in the United States, Japan and Western Europe
in 1994, automotive manufacturers use aluminum instead of steel, ductile
iron or copper for an increasing number of components, including radiators,
wheels, suspension components and engines, in order to meet more stringent
environmental, safety, and fuel efficiency requirements.  Kaiser believes
that sales of aluminum to the transportation industry have considerable
growth potential due to projected increases in the use of aluminum in
automobiles.  In addition, Kaiser believes that consumption of aluminum in
the construction industry will follow the cyclical growth pattern of that
industry, and will benefit from higher growth in Asian and Latin American
economies.

          Supply
          As of year-end 1995, Western world aluminum capacity from 107
smelting facilities was approximately 16.6 million tons(1) per year. 
Western world production of primary aluminum for 1995 increased
approximately 1.8% compared to 1994.  Net exports of aluminum from the
former Sino Soviet bloc increased approximately 250% from 1990 levels
during the period from 1991 through 1994 to approximately 2.2 million tons
per year.  These exports contributed to a significant increase in London
Metal Exchange ("LME") stocks of primary aluminum which peaked in June 1994
at 2.7 million tons.  By the end of 1995, LME stocks of primary aluminum
had declined 2.1 million tons from this peak level and 1.1 million tons
from the beginning of 1995.  See "--Recent Industry Trends."

          Based upon information currently available, the Company believes
that moderate additions will be made during 1996 - 1998 to Western world
alumina and primary aluminum production capacity.  The increases in alumina
capacity during 1996 - 1998 are expected to come from one new refinery
which began operations in 1995 and incremental expansions of existing
refineries.  In addition, Kaiser believes that there is currently
approximately 0.9 million tons of curtailed smelting capacity that could be
restarted by aluminum producers.  The increases in primary aluminum
capacity during 1996-1998 are expected to come from one new smelter  which
began operations in 1995 and is expected to reach its rated capacity of
approximately 466,000 tons per year in 1996, and the remainder principally
from incremental expansions of existing smelters.

          Recent Industry Trends
          Market fundamentals for aluminum improved significantly in 1994
as aluminum producers worldwide curtailed primary aluminum production. 
Western world consumption of aluminum grew strongly, and customers
replenished inventories, particularly in the United States.  In 1995,
production of primary aluminum increased and consumption of aluminum
continued to grow, but at a much lower rate than in 1994.  In general, the
overall aluminum market was strongest in the first half of 1995.  By the
second half of 1995, orders and shipments for certain products had softened
and the rate of decline in LME inventories had leveled off.  By the end of
1995, some small increases in LME inventories occurred, and prices of
aluminum weakened from first-half levels.  The Midwest U.S. transaction
price for primary aluminum in 1995 averaged approximately 86 cents per
pound, compared to a 1994 annual average of approximately 72 cents per
pound.  The Midwest U.S. transaction price for primary aluminum averaged
approximately 79 cents per pound in December 1995.

          Western world demand for alumina, and the price of alumina,
declined in 1994 in response to the curtailment of Western world smelter
production of primary aluminum, partially offset by increased usage of
Western world alumina by smelters in the Commonwealth of Independent States
(the "CIS") and in the People's Republic of China (the "PRC").  Increased
Western world production of primary aluminum, as well as continued imports
of Western world alumina by the CIS and the PRC, during 1995 resulted in
higher demand for Western world alumina and significantly stronger alumina
pricing.  United States shipments of domestic fabricated aluminum products
in 1995 were approximately at 1994 levels, although in 1995 demand for can
sheet in the United States softened relative to 1994.  Overall, Kaiser
believes that the market fundamentals for aluminum will be good for the
near future, barring prolonged economic recession, and that demand is
likely to continue growing at levels sufficient to absorb the output from
restarts of industry smelter capacity and from the limited additions of new
supply under construction.

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

(1)All references to tons in this Report refer to metric tons of 2,204.6
pounds.

    THE COMPANY

          General
          Kaiser is a direct subsidiary of MAXXAM and, through KACC,
operates in all principal aspects of the aluminum industry - the mining of
bauxite, the refining of bauxite into alumina, the production of primary
aluminum from alumina, and the manufacture of fabricated (including semi-
fabricated) aluminum products.  In addition to the production utilized by
KACC in its operations, KACC sells significant amounts of alumina and
primary aluminum in domestic and international markets.  In 1995, KACC
produced approximately 2,838,000 tons of alumina, of which approximately
72% was sold to third parties, and produced 413,600 tons of primary
aluminum, of which approximately 66% was sold to third parties.  KACC is
also a major domestic supplier of fabricated aluminum products.  In 1995,
KACC shipped approximately 368,200 tons of fabricated aluminum products to
third parties, which accounted for approximately 6% of the total tonnage of
United States domestic shipments.  A majority of KACC's fabricated products
are sold to distributors or used by customers as components in the
manufacture and assembly of finished end-use products.  See Note 11 of the
Notes to the Consolidated Financial Statements.

          The following table sets forth total shipments and intracompany
transfers of KACC's alumina, primary aluminum, and fabricated aluminum
operations:

<TABLE>

<CAPTION>

                                                                                 Years Ended December 31,      
                                                                           -----------------------------------
                                                                              1995         1994        1993   
                                                                           ----------   ----------  ----------
                                                                                  (in thousands of tons)
<S>                                                                        <C>          <C>         <C>
ALUMINA:
          Shipments to Third Parties                                           2040.1       2086.7      1997.5
          Intracompany Transfers                                                800.6        820.9       807.5

PRIMARY ALUMINUM:
          Shipments to Third Parties                                            271.7          224       242.5
          Intracompany Transfers                                                217.4        225.1       233.6

FABRICATED ALUMINUM PRODUCTS:
          Shipments to Third Parties                                            368.2          399       373.2

</TABLE>


          Sensitivity to Prices and Hedging Programs
          Kaiser's operating results are sensitive to changes in the prices
of alumina, primary aluminum, and fabricated aluminum products, and also
depend to a significant degree upon the volume and mix of all products sold
and on KACC's hedging strategies.  Fabricated aluminum prices, which vary
considerably among products, are influenced by changes in the price of
primary aluminum and generally lag behind primary aluminum prices for
periods of up to six months.  Changes in the market price of primary
aluminum also affect Kaiser's production costs of fabricated products
because they influence the price of aluminum scrap purchased by Kaiser and
Kaiser's labor costs, to the extent such costs are indexed to primary
aluminum prices.  Through its variable cost structures, forward sales, and
hedging programs, KACC has attempted to mitigate its exposure to possible
declines in the market prices of alumina, primary aluminum and fabricated
aluminum products while retaining the ability to participate in favorable
pricing environments that may materialize.  See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Trends--
Aluminum Operations--Sensitivity to Prices and Hedging Programs" and Note
10 of the Notes to Consolidated Financial Statements.

          Production Operations
          The Company's operations are conducted through KACC's
decentralized business units which compete throughout the aluminum
industry.

     -    The alumina business unit, which mines bauxite and obtains
additional bauxite tonnage under long-term contracts, produced
approximately 8% of Western world alumina in 1995.  During 1995,
KACC third party shipments of bauxite represented approximately
21% of bauxite mined.  In addition, KACC third party shipments of
alumina represented approximately 72% of alumina produced. 
KACC's share of total Western world alumina capacity was
approximately 7% in 1995.

     -    The primary aluminum products business unit operates two domestic
          smelters wholly owned by KACC and two foreign smelters in which
          KACC holds significant ownership interests.  During 1995, KACC
          third party shipments of primary aluminum represented
          approximately 66% of primary aluminum production.  KACC's share
          of total Western world primary aluminum capacity was
          approximately 3% in 1995.

     -    Fabricated aluminum products are manufactured by three business
          units--flat-rolled products, extruded products and engineered
          components.  The products include body, lid, and tab stock for
          beverage containers, sheet and plate products, heat-treated
          products, screw machine stock, redraw rod, forging stock, truck
          wheels and hubs, air bag canisters, engine manifolds and other
          castings, forgings and extruded products, which are manufactured
          at plants located in principal marketing areas of the United
          States and Canada.  The aluminum utilized in KACC's fabricated
          products operations is comprised of primary aluminum, obtained
          both internally and from third parties, and scrap metal purchased
          from third parties.

          Alumina
          The following table lists KACC's bauxite mining and alumina
refining facilities as of December 31, 1995:


<TABLE>

<CAPTION>

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

Bauxite Mining                                        KJBC(1)         Jamaica             49%           4,500,000       4,500,000
                                                     Alpart(2)        Jamaica             65%           2,275,000       3,500,000
                                                                                                   ---------------    ------------
                                                                                                        6,775,000       8,000,000
                                                                                                   ===============    ============

Alumina Refining                                     Gramercy        Louisiana           100%           1,000,000       1,000,000
                                                      Alpart          Jamaica             65%             943,000       1,450,000
                                                        QAL          Australia          28.3%             934,000       3,300,000
                                                                                                   ---------------    ------------
                                                                                                        2,877,000       5,750,000
                                                                                                   ===============    ============

<FN>

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

(1)  Although KACC owns 49% of Kaiser Jamaica Bauxite Company ("KJBC"), it has the right to receive all of such entity's output.
(2)  Alumina Partners of Jamaica ("Alpart") bauxite is refined into alumina at the Alpart refinery.


</TABLE>


          Bauxite mined in Jamaica by KJBC is refined into alumina at
KACC's plant at Gramercy, Louisiana, or is sold to third parties.  In 1979,
the Government of Jamaica granted KACC a mining lease for the mining of
bauxite sufficient to supply KACC's then-existing Louisiana alumina
refineries at their annual capacities of 1,656,000 tons per year until
January 31, 2020.  Alumina from the Gramercy plant is sold to third
parties.

          Alpart holds bauxite reserves and owns a 1,450,000 tons per year
alumina plant located in Jamaica. KACC owns a 65% interest in Alpart and
Hydro Aluminium a.s  ("Hydro") owns the remaining 35% interest.  KACC has
management responsibility for the facility on a fee basis.  KACC and Hydro
have agreed to be responsible for their proportionate shares of Alpart's
costs and expenses.  The Government of Jamaica has granted Alpart a mining
lease and has entered into other agreements with Alpart designed to assure
that sufficient reserves of bauxite will be available to Alpart to operate
its refinery as it may be expanded to a capacity of 2,000,000 tons per year
through the year 2024.  Alpart has entered into an agreement for the supply
of substantially all of its fuel oil through 1996.  The balance of Alpart's
fuel oil requirements through 1996 will be purchased in the spot market.

          KACC owns a 28.3% interest in Queensland Alumina Limited ("QAL"),
which owns the largest and one of the most efficient alumina refineries in
the world, located in Queensland, Australia.  QAL refines bauxite into
alumina, essentially on a cost basis, for the account of its stockholders
under long-term tolling contracts.  The stockholders, including KACC,
purchase bauxite from another QAL stockholder under long-term supply
contracts.  KACC has contracted with QAL to take approximately 792,000 tons
per year of capacity or pay standby charges.  KACC is unconditionally
obligated to pay amounts calculated to service its share ($88.9 million at
December 31, 1995) of certain debt of QAL, as well as other QAL costs and
expenses, including bauxite shipping costs.  QAL's annual production
capacity is approximately 3,300,000 tons, of which approximately 934,000
tons are available to KACC.

          KACC's principal customers for bauxite and alumina consist of
large and small domestic and international aluminum producers that purchase
bauxite and reduction-grade alumina for use in their internal refining and
smelting operations, trading intermediaries who resell raw materials to
end-users, and users of chemical-grade alumina.  In 1995, KACC sold all of
its bauxite to two customers, the largest of which accounted for
approximately 74% of such sales.  KACC also sold alumina to nine customers,
the largest and top five of which accounted for approximately 23% and 90%
of such sales, respectively.  See "--Competition."  Kaiser believes that
among alumina producers it is now the world's second largest seller of
alumina to third parties.  KACC's strategy is to sell a substantial portion
of the bauxite and alumina available to it in excess of its internal
refining and smelting requirements under multi-year sales contracts.

          Primary Aluminum Products
          The following table lists KACC's primary aluminum smelting
facilities as of December 31, 1995:


<TABLE>

<CAPTION>

                                                                      Annual Rated         Total
                                                                        Capacity           Annual              1995
                                                      Company         Available to         Rated            Operating
          Location                  Facility         Ownership        the Company         Capacity             Rate      
----------------------------    ---------------   ---------------   ---------------   ---------------    ---------------
                                                                         (tons)            (tons)
<S>                             <C>               <C>               <C>               <C>                <C>
Domestic
          Washington                  Mead                100%              200,000           200,000             82%   
          Washington                 Tacoma               100%               73,000            73,000             82%   
                                                                    ---------------   ---------------
               Subtotal                                                     273,000           273,000
                                                                    ---------------   ---------------
International                                                                                        
          Ghana                      Valco                 90%              180,000           200,000             68%   
          Wales, United
               Kingdom              Anglesey               49%               55,000           112,000            119%   
                                                                    ---------------   ---------------
               Subtotal                                                     235,000           312,000
                                                                    ---------------   ---------------

               Total                                                        508,000           585,000
                                                                    ===============   ===============


</TABLE>


          KACC owns two smelters located at Mead and Tacoma, Washington,
where alumina is processed into primary aluminum. The Mead facility uses
pre-bake technology and produces primary aluminum.  Approximately 71% of
Mead's 1995 production was used at KACC's Trentwood fabricating facility
and the balance was sold to third parties.  The Tacoma plant uses Soderberg
technology and produces primary aluminum and high-grade, continuous-cast,
redraw rod, which currently commands a premium price in excess of the price
of primary aluminum.  Both smelters have achieved significant production
efficiencies in recent years through retrofit technology, cost controls,
and semi-variable wage and power contracts, leading to increases in
production volume and enhancing their ability to compete with newer
smelters.  At the Mead plant, KACC has converted to welded anode assemblies
to increase energy efficiency, extended the anode life-cycle in the
smelting process, changed from pencil to liquid pitch to produce carbon
anodes which achieved environmental and operating savings, and engaged in
efforts to increase production through the use of improved, higher-
efficiency reduction cells.

          Electric power represents an important production cost for KACC
at its aluminum smelters.  In 1995, electric power purchase agreements for
KACC's facilities in the Pacific Northwest were successfully restructured,
which Kaiser anticipates will result in significantly lower electric power
costs in 1996 and beyond for the Mead and Tacoma, Washington, smelters and
the Trentwood, Washington, rolling mill compared to 1995 electric power
costs.  From 1981 until 1995, electric power for KACC's Mead and Tacoma
smelters was purchased exclusively from the Bonneville Power Administration
(the "BPA") by KACC under a contract which expires in 2001.  In April 1995,
the BPA agreed to allow each of its direct service industrial customers
(the "DSIs"), which include KACC, to purchase a portion of its requirement
for electric power from sources other than the BPA beginning October 1,
1995.  In June 1995, KACC entered into an agreement with The Washington
Water Power Company (the "WWP") to purchase up to 50 megawatts of electric
power for its Pacific Northwest facilities for a five-year term beginning
October 1, 1995.  KACC is receiving power under that contract, which power
displaces a portion of KACC's interruptible power from the BPA.  In
addition, in 1995 KACC entered into a new power purchase contract with the
BPA, which amends the existing BPA power contract and which contemplates
reductions during 1996 in the amount of power which KACC is obligated to
purchase from the BPA and which the BPA is obligated to sell to KACC, and
the replacement of such power with power to be purchased from other
suppliers.  KACC is negotiating power purchase agreements for such power
with suppliers other than the BPA.  Contracts for the purchase of all power
required by KACC's Mead and Tacoma smelters and Trentwood rolling mill for
1996, and for approximately one-half of such power for the period 1997 -
2000, have been finalized.  Two lawsuits were filed in December 1995
against the BPA by various parties, one of which petitions for a review of
the BPA's "Record of Decision on Direct Service Industrial Customer
Requirements Power Sales Contract" issued on September 28, 1995, and one of
which petitions for review of, and to set aside, suspend, or modify the
action of the BPA to decide to offer five-year "block" power sales to the
DSIs.  The effect of such lawsuits, if any, on KACC's new power purchase
contract with the BPA is not known.  Certain of the DSIs, including KACC,
have intervened in the two lawsuits.

          In 1995, KACC also entered into agreements with the BPA and with
the WWP, with terms ending in 2001, under which the BPA and the WWP would
provide to KACC transmission services for power purchased from sources
other than the BPA.  The term of the transmission services agreement with
the BPA was subsequently extended for an additional fifteen years, which
extension has been challenged.  Four lawsuits have been filed against the
BPA by various parties, which lawsuits either challenge the BPA's record of
decision offering such an extension agreement to the DSIs or challenge the
BPA's Business Plan Environmental Impact Statement record of decision in
connection therewith.  Certain of the DSIs, including KACC, have intervened
in the four lawsuits.

          KACC began operating its Mead and Tacoma smelters in Washington
at approximately 75% of their full capacity in January 1993, when three
reduction potlines were removed from production (two at Mead and one at
Tacoma) in response to a power reduction imposed by the BPA.  In March
1995, the BPA offered to its industrial customers, including KACC, surplus
firm power at a discounted rate for the period April 1, 1995, through July
31, 1995, to enable such customers to restart idle industrial loads.  In
April 1995, KACC and the BPA entered into a contract for an amount of such
power, and thereafter KACC restarted one-half of an idle potline
(approximately 9,000 tons of annual capacity) at its Tacoma, Washington,
smelter.  The Tacoma smelter was returned to full production in October
1995.  In 1995, KACC entered into a one-year power supply contract with the
BPA, for a term ending September 30, 1996, in connection with the restart
of idled capacity at its Mead smelter.  The Mead smelter returned to full
production in December 1995.

          KACC manages, and owns a 90% interest in, the Volta Aluminium
Company Limited ("Valco") aluminum smelter in Ghana.  The Valco smelter
uses pre-bake technology and processes alumina supplied by KACC and the
other participant into primary aluminum under long-term tolling contracts
which provide for proportionate payments by the participants in amounts
intended to pay not less than all of Valco's operating and financing costs.
KACC's share of the primary aluminum is sold to third parties.  Power for
the Valco smelter is supplied under an agreement which expires in 2017. 
The agreement indexes two-thirds of the price of the contract quantity of
power to the market price of primary aluminum.  The agreement also provides
for a review and adjustment of the base power rate and the price index
every five years.  The most recent review was completed in April 1994 for
the 1994 - 1998 period.  Valco has entered into an agreement with the
government of Ghana under which Valco has been assured (except in cases of
force majeure) that it will receive sufficient electric power to operate at
its current level of three and one-half potlines through December 31, 1996. 
Kaiser believes that assuming normal rainfall during 1996, Valco should
have available sufficient electric power to operate at its current level
through 1996.

          KACC owns a 49% interest in the Anglesey Aluminium Limited
("Anglesey") aluminum smelter and port facility at Holyhead, Wales.  The
Anglesey smelter uses pre-bake technology.  KACC supplies 49% of Anglesey's
alumina requirements and purchases 49% of Anglesey's aluminum output.  KACC
sells its share of Anglesey's output to third parties.  Power for the
Anglesey aluminum smelter is supplied under an agreement which expires in
2001.

          KACC has developed and installed proprietary retrofit and control
technology in all of its smelters, as well as at third party locations. 
This technology--which includes the redesign of the cathodes and anodes
that conduct electricity through reduction cells, improved feed systems
that add alumina to the cells, and a computerized system that controls
energy flow in the cells--enhances KACC's ability to compete more
effectively with the industry's newer smelters.  KACC is actively engaged
in efforts to license this technology and sell technical and managerial
assistance to other producers worldwide, and may participate in joint
ventures or similar business partnerships which employ KACC's technical and
managerial knowledge.  See "--Research and Development."

          KACC's principal primary aluminum customers consist of large
trading intermediaries and metal brokers, who resell primary aluminum to
fabricated product manufacturers, and large and small international
aluminum fabricators.  In 1995, KACC sold its primary aluminum production
not utilized for internal purposes to approximately 35 customers, the
largest and top five of which accounted for approximately 25% and 62% of
such sales, respectively.  See "--Competition."  Marketing and sales
efforts are conducted by a small staff located at the business unit's
headquarters in Pleasanton, California, and by senior executives of KACC
who participate in the structuring of major sales transactions.  A majority
of the business unit's sales are based upon long-term relationships with
metal merchants and end-users.

          Fabricated Aluminum Products
          KACC manufactures and markets fabricated aluminum products for
the packaging, transportation, construction, and consumer durables markets
in the United States and abroad. Sales in these markets are made directly
and through distributors to a large number of customers.  In 1995, four
domestic beverage container manufacturers were among the leading customers
for KACC's fabricated products and accounted for approximately 12% of
Kaiser's sales revenue.

          KACC's fabricated products compete with those of numerous
domestic and foreign producers and with products made of steel, copper,
glass, plastic, and other materials.  Product quality, price, and
availability are the principal competitive factors in the market for
fabricated aluminum products.  KACC has focused its fabricated products
operations on selected products in which KACC has production expertise,
high-quality capability, and geographic and other competitive advantages.

          Flat-Rolled Products.  The flat-rolled products business unit,
the largest of KACC's fabricated products businesses, operates the
Trentwood sheet and plate mill at Spokane, Washington.  The Trentwood
facility is KACC's largest fabricating plant and accounted for
approximately 64% of its 1995 fabricated aluminum products shipments.  The
business unit supplies the beverage container market (producing body, lid,
and tab stock), the aerospace market, and the tooling plate, heat-treated
alloy and common alloy coil markets, both directly and through
distributors.  During 1995, KACC successfully completed the two year
restructuring of its flat-rolled products operation at its Trentwood plant
to reduce that facility's annual operating costs by at least $50.0 million.

          KACC's flat-rolled products are sold primarily to beverage
container manufacturers located in the western United States and in the
Asian Pacific Rim countries where the Trentwood plant's location provides
KACC with a transportation advantage.  Quality of products for the beverage
container industry and timeliness of delivery are the primary bases on
which KACC competes.  Kaiser believes that capital improvements at
Trentwood have enhanced the quality of KACC's products for the beverage
container industry and the capacity and efficiency of KACC's manufacturing
operations, and that KACC is one of the highest quality producers of
aluminum beverage can stock in the world.

          In 1995, the flat-rolled products business unit had 31 domestic
and foreign can stock customers, including the five major domestic beverage
can manufacturers.  The largest and top five of such customers accounted
for approximately 14% and 41%, respectively, of the business unit's
revenue.  See "--Competition."  In 1995, the business unit shipped products
to approximately 150 customers in the aerospace, transportation, and
industrial ("ATI") markets, most of which were distributors who sell to a
variety of industrial end-users.  The top five customers in the ATI markets
for flat-rolled products accounted for approximately 13% of the business
unit's revenue.  The marketing staff for the flat-rolled products business
unit is located at the Trentwood facility and in Pleasanton, California. 
Sales are made directly to customers (including distributors) from eight
sales offices located throughout the United States.  International
customers are served by sales offices in the Netherlands and Japan and by
independent sales agents in Asia and Latin America.

          Extruded Products.  The extruded products business unit is
headquartered in Dallas, Texas, and operates soft-alloy extrusion
facilities in Los Angeles, California; Santa Fe Springs, California;
Sherman, Texas; and London, Ontario, Canada; a cathodic protection business
located in Tulsa, Oklahoma, that also extrudes both aluminum and magnesium;
rod and bar facilities in Newark, Ohio, and Jackson, Tennessee, which
produce screw machine stock, redraw rod, forging stock, and billet; and a
facility in Richland, Washington, which produces seamless tubing in both
hard and soft alloys for the automotive, other transportation, export,
recreation, agriculture, and other industrial markets.  Each of the soft-
alloy extrusion facilities has fabricating capabilities and provides
finishing services.

          The extruded products business unit's major markets are in the
transportation industry, to which it provides extruded shapes for
automobiles, trucks, trailers, cabs, and shipping containers, and in the
distribution, durable goods, defense, building and construction, ordnance
and electrical markets.  In 1995, the extruded products business unit had
approximately 825  customers for its products, the largest and top five of
which accounted for approximately 6% and 20%, respectively, of its revenue. 
See "--Competition."  Sales are made directly from plants as well as
marketing locations across the United States.

          Engineered Components.  The engineered components business unit
operates forging facilities at Erie, Pennsylvania; Oxnard, California; and
Greenwood, South Carolina; a machine shop at Greenwood, South Carolina; and
a casting facility in Canton, Ohio.  The engineered components business
unit is one of the largest producers of aluminum forgings in the United
States and is a major supplier of high-quality forged parts to customers in
the automotive, commercial vehicle and ordnance markets.  The high
strength-to-weight properties of forged and cast aluminum make it
particularly well-suited for automotive applications.  The business unit's
casting facility manufactures aluminum engine manifolds for the automobile,
truck and marine markets.

          In 1995, the engineered components business unit had
approximately 250 customers, the largest and top five of which accounted
for approximately 34% and 77%, respectively, of the business unit's
revenue.  See "--Competition."  The engineered components business unit's
headquarters is located in Erie, Pennsylvania, and there is a sales and
engineering office located in Detroit, Michigan, which works with car
makers and other customers, the Center for Technology (see "--Research and
Development") and plant personnel to create new automotive component
designs and improve existing products.

          Competition
          Aluminum competes in many markets with steel, copper, glass,
plastic, and numerous other materials.  In recent years, plastic containers
have increased and glass containers have decreased their respective shares
of the soft drink sector of the beverage container market.  In the United
States, beverage container materials, including aluminum, face increased
competition from plastics as increased polyethylene ("PET") container
capacity is brought on line by plastics manufacturers.  Within the aluminum
business, KACC competes with both domestic and foreign producers of
bauxite, alumina and primary aluminum, and with domestic and foreign
fabricators.  Many of KACC's competitors have greater financial resources
than KACC.  KACC's principal competitors in the sale of alumina include
Alcoa Alumina and Chemicals LLC, Billiton Marketing and Trading BV, and
Alcan Aluminium Limited.  KACC competes with most aluminum producers in the
sale of primary aluminum.

          Primary aluminum and, to some degree, alumina are commodities
with generally standard qualities, and competition in the sale of these
commodities is based primarily upon price, quality and availability.  KACC
also competes with a wide range of domestic and international fabricators
in the sale of fabricated aluminum products.  Competition in the sale of
fabricated products is based upon quality, availability, price and service,
including delivery performance.  KACC concentrates its fabricating
operations on selected products in which KACC has production expertise,
high-quality capability, and geographic and other competitive advantages. 
Kaiser believes that, assuming the current relationship between worldwide
supply and demand for alumina and primary aluminum does not change
materially, the loss of any one of KACC's customers, including
intermediaries, would not have a material adverse effect on Kaiser's
financial condition or results of operations.

          Research and Development
          KACC conducts research and development activities principally at
three facilities--the Center for Technology ("CFT") in Pleasanton,
California; the Primary Aluminum Products Division Technology Center
("DTC") adjacent to the Mead smelter in Washington; and the Alumina
Development Laboratory ("ADL") at the Gramercy, Louisiana, refinery, which
supports Kaiser Alumina Technical Services ("KATS") and the facilities of
the alumina business unit.  Net expenditures for Company-sponsored research
and development activities were $18.5 million in 1995, $16.7 million in
1994, and $18.5 million in 1993.  KACC's research staff totaled 157 at
December 31, 1995.  KACC estimates that research and development net
expenditures will be approximately $22.5 million in 1996.

          CFT performs research and development across a range of aluminum
process and product technologies to support KACC's business units and new
business opportunities.  It also selectively offers technical services to
third parties.  Significant efforts are directed at product and process
technology for the can stock, aircraft and automotive markets, and aluminum
reduction cell models which are applied to improving cell designs and
operating conditions.  The largest and most notable single project being
developed at CFT is a strip-casting micromill process for producing can
sheet.  The conversion and capital costs of these micromills are expected
to be significantly lower than conventional rolling mills and to result in
improved economics compared with historical manufacturing and
transportation costs for can stock.  A pilot facility has been constructed
and operated at CFT.  The first micromill is being constructed in Nevada as
a demonstration production facility, and KACC expects operational startup
of the facility at the end of 1996.  KACC currently intends to finance the
cost of the construction of the Nevada micromill, estimated to be
approximately $45.0 million, from general corporate funds, including
possible borrowings under the 1994 Credit Agreement (defined below),
although KACC is in discussions with third parties which might provide some
or all of such funding.  DTC maintains specialized laboratories and a
miniature carbon plant where experiments with new anode and cathode
technology are performed.  DTC supports KACC's primary aluminum smelters,
and concentrates on the development of cost-effective technical innovations
such as equipment and process improvements. KATS provides improved alumina
process technology to KACC's facilities and technical support to new
business ventures in cooperation with KACC's international business
development group.

          KACC is actively engaged in efforts to license its technology and
sell technical and managerial assistance to other producers worldwide. 
KACC's technology has been installed in alumina refineries, aluminum
smelters and rolling mills located in the United States, Jamaica, Sweden,
Germany, Russia, India, Australia, Korea, New Zealand, Ghana, United Arab
Emirates, and the United Kingdom.  KACC's revenue from technology sales and
technical assistance to third parties was $5.7 million in 1995, $10.0
million in 1994, and $12.8 million in 1993.

          KACC has entered into agreements with respect to the Krasnoyarsk
smelter in Russia under which KACC has licensed certain of its technology
for use in such facility and agreed to provide purchasing services in
obtaining Western-sourced technology and equipment to be used in such
facility.  These agreements were entered into in November 1990, and the
services under them are expected to be completed in 1996.  In addition, in
1993 KACC entered into agreements with respect to the Nadvoitsy smelter in
Russia and the Korba smelter of the Bharat Aluminum Co. Ltd., in India,
under which KACC has licensed certain of its technology for use in such
facilities.  Services under the Nadvoitsy agreement were completed in 1995,
and KACC expects that services under the Korba agreement will be completed
in 1996.

          Operations in China
          In 1994, KACC commenced efforts to increase its activities in
certain countries that are expected to be important suppliers of aluminum
and large customers for aluminum and alumina.  KACC intends to use its
technical skills, together with capital investments, to form joint ventures
or acquire equity in facilities in such countries.

          In 1995, Kaiser Yellow River Investment Limited ("KYRIL"), a
subsidiary of the Company, was formed to participate in the privatization,
modernization, expansion, and operation of aluminum smelting facilities in
the PRC.  KYRIL has entered into a Joint Venture Agreement and related
agreements (the "Joint Venture Agreements") with the Lanzhou Aluminum
Smelters ("LAS") of the China National Nonferrous Metals Industry
Corporation relating to the formation and operation of Yellow River
Aluminum Industry Company Limited, a Sino-foreign joint equity enterprise
organized under PRC law (the "Joint Venture").

          The Joint Venture constitutes the first large-scale privatization
in the Chinese aluminum smelting industry.  The Joint Venture's assets and
operations are located primarily in the industrial city of Lanzhou, the
capital of Gansu Province in northwestern China, and in nearby Lianhai, a
special economic zone also in Gansu Province.  The smelter at Lanzhou is
the fifth largest aluminum smelter in the PRC and produces approximately
55,000 tons of primary aluminum per year.  The smelter at Lianhai produces
approximately 30,000 tons of primary aluminum per year.  LAS's capital
contribution to the Joint Venture consisted primarily of the Lanzhou and
Lianhai smelters.

          The Joint Venture Agreements include provisions for KYRIL to
contribute up to $59.7 million to the Joint Venture in exchange for up to a
49% interest in the Joint Venture (the "Capital Contribution") and
contemplate that such capital may be used to expand the annual production
capacity of LAS from 85,000 to 115,000 tons, construct a dry Soderberg
paste plant, install and upgrade pollution control equipment, and provide
for general corporate purposes, including working capital. KYRIL
contributed $9.0 million as a contribution to the capital of the Joint
Venture in July 1995.  The parties to the Joint Venture are currently
engaged in discussions concerning the amount, timing and other conditions
relating to KYRIL's additional contributions to the Joint Venture. 
Governmental approval in the PRC will be necessary in order to implement
any arrangements agreed to by the parties, and there can be no assurance
such approvals will be obtained.

          KACC, through its extruded products business unit, has entered
into contracts to form two small joint venture companies in the PRC.  KACC
will indirectly acquire equity interests of approximately 45% and 49%,
respectively, in these two companies which will manufacture aluminum
extrusions, in exchange for the contribution to those companies of certain
used equipment, technology, services and cash.  The majority equity
interests in the two companies will be owned by affiliates of Guizhou Guang
Da Construction Company.

          Employees
          During 1995, KACC employed an average of approximately 9,550
persons, compared with an average of 9,740 employees in 1994, and 10,220
employees in 1993.  At December 31, 1995, KACC's work force was
approximately 9,620, including a domestic work force of approximately
5,950, of whom approximately 4,010 were paid at an hourly rate.  Most
hourly paid domestic employees are covered by collective bargaining
agreements with various labor unions.  Approximately 74% of such employees
are covered by a master agreement (the "Labor Contract") with the United
Steelworkers of America ("USWA") expiring September 30, 1998.  The Labor
Contract covers KACC's plants in Spokane (Trentwood and Mead) and Tacoma,
Washington; Gramercy, Louisiana; and Newark, Ohio.  The Labor Contract
replaced a contract that expired October 31, 1994, and was reached after an
eight-day work stoppage by the USWA at these plants in February 1995.

          The Labor Contract provides for base wages at all covered plants.
In addition, workers covered by the Labor Contract may receive quarterly
bonus payments based on various indices of profitability, productivity,
efficiency, and other aspects of specific plant performance, as well as, in
certain cases, the price of alumina or primary aluminum.  Pursuant to the
Labor Contract, base wage rates were raised effective January 2, 1995, were
raised again effective November 6, 1995, and will be raised an additional
amount effective November 3, 1997, and an amount in respect of the cost of
living adjustment under the previous master agreement will be phased into
base wages during the term of the Labor Contract.  In the second quarter of
1995, KACC acquired up to $2,000 of preference stock held in a stock plan
for the benefit of each of approximately 82% of the employees covered by
the Labor Contract and in the first half of 1998 will acquire up to an
additional $4,000 of such preference stock held in such plan for the
benefit of substantially the same employees. In addition, a profitability
test was  satisfied and, therefore, KACC will acquire during 1996 up to an
additional $1,000 of such preference stock held in such plan for the
benefit of substantially the same employees.  KACC made and will make
comparable acquisitions of preference stock held for the benefit of each of
certain salaried employees.

          In February 1995, Alpart's employees engaged in a six-day work
stoppage by its National Workers Union, which was settled by a new
contract.

          Kaiser considers KACC's employee relations to be satisfactory.

          Environmental Matters
          Kaiser and KACC are subject to a wide variety of international,
federal, state and local environmental laws and regulations (the
"Environmental Laws").  From time to time the Environmental Laws are
amended and new ones are adopted.  The Environmental Laws regulate, among
other things, air and water emissions and discharges; the generation,
storage, treatment, transportation, and disposal of solid and hazardous
waste; the release of hazardous or toxic substances, pollutants and
contaminants into the environment; and, in certain instances, the
environmental condition of industrial property prior to transfer or sale. 
In addition, Kaiser and KACC are subject to various federal, state, and
local workplace health and safety laws and regulations ("Health Laws").

          From time to time, KACC is subject, with respect to its current
and former operations, to fines or penalties assessed for alleged breaches
of the Environmental and Health Laws and to claims and litigation brought
by federal, state or local agencies and by private parties seeking remedial
or other enforcement action under the Environmental and Health Laws or
damages related to alleged injuries to health or to the environment,
including claims with respect to certain waste disposal sites and the
remediation of sites presently or formerly operated by KACC.  See Item 3. "
Legal Proceedings--Kaiser Litigation--Environmental Litigation."  KACC
currently is subject to a number of lawsuits under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"). 
KACC, along with certain other entities, has been named as a Potentially
Responsible Party ("PRP") for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA and, in certain
instances, may be exposed to joint and several liability for those costs or
damages to natural resources. KACC's Mead, Washington, facility has been
listed on the National Priorities List under CERCLA.  In addition, in
connection with certain of its asset sales, KACC has agreed to indemnify
the purchasers with respect to certain liabilities (and associated
expenses) resulting from acts or omissions arising prior to such
dispositions, including environmental liabilities.  While uncertainties are
inherent in the final outcome of these matters, and it is presently
impossible to determine the actual costs that ultimately may be incurred,
Kaiser believes that the resolution of such uncertainties should not have a
material adverse effect on KACC's liquidity, consolidated financial
position or results of operations.

          Environmental capital spending was $9.2 million in 1995, $11.9
million in 1994, and $12.6 million in 1993.  Annual operating costs for
pollution control, not including corporate overhead or depreciation, were
approximately $26.0 million in 1995, $23.1 million in 1994, and $22.4
million in 1993.  Legislative, regulatory, and economic uncertainties make
it difficult to project future spending for these purposes.  However,
Kaiser currently anticipates that in the 1996 - 1997 period, environmental
capital spending will be within the range of $27.0 - $33.0 million per
year, and operating costs for pollution control will be within the range of
$28.0 - $29.0 million per year.  In addition, $4.5 million in cash
expenditures in 1995,  $3.6 million in 1994, and $7.2 million in 1993 were
charged to previously established reserves relating to environmental costs. 
Approximately $8.4 million is expected to be charged to such reserves in 1996.

          Based on Kaiser's evaluation of these and other environmental
matters, Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters.  See Item 7.  "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Financial Condition and Investing and
Financing Activities--Aluminum Operations" and Note 9 of the Notes to
Consolidated Financial Statements.

          Other
          See "--Kaiser" above for a description of the locations and
general character of the principal plants, mines, and other materially
important physical properties relating to KACC's operations.  KACC owns in
fee or leases all the real estate and facilities used in connection with
its business. Plants and equipment and other facilities are generally in
good condition and suitable for their intended uses, subject to changing
environmental requirements. Although KACC's domestic aluminum smelters and
alumina facility were initially designed early in KACC's history, they have
been modified frequently over the years to incorporate technological
advances in order to improve efficiency, increase capacity, and achieve
energy savings. KACC believes that KACC's domestic plants are cost
competitive on an international basis. Due to KACC's variable cost
structure, the plants' operating costs are relatively lower in periods of
low primary aluminum prices and relatively higher in periods of high
primary aluminum prices.

          KACC's obligations under its 1994 Credit Agreement are secured
by, among other things, mortgages on Kaiser's major domestic plants (other
than the Gramercy alumina plant).

FOREST PRODUCTS OPERATIONS

     GENERAL

          The Company also engages in forest products operations through
MGI and its wholly owned subsidiaries, Pacific Lumber and Britt.  Pacific
Lumber, which has been in continuous operation for over 125 years, engages
in several principal aspects of the lumber industry--the growing and
harvesting of redwood and Douglas-fir timber, the milling of logs into
lumber products and the manufacturing of lumber into a variety of value-
added finished products.  Britt manufactures redwood and cedar fencing and
decking products from small diameter logs, a substantial portion of which
Britt acquires from Pacific Lumber (which cannot efficiently process them
in its own mills).

     PACIFIC LUMBER OPERATIONS

          Timberlands
          Pacific Lumber owns and manages approximately 192,000 acres of
commercial timberlands.  These timberlands are located in Humboldt County
along the northern California coast which has very favorable soil and
climate conditions.  These timberlands contain approximately three-quarters
redwood and one-quarter Douglas-fir timber.  Pacific Lumber's acreage is
virtually contiguous, is located in close proximity to its sawmills and
contains an extensive (1,100 mile) network of roads.  These factors
greatly facilitate Pacific Lumber's operations and forest management
techniques.  The extensive roads throughout Pacific Lumber's timberlands
facilitate log hauling, serve as fire breaks and allow Pacific Lumber's
foresters access to employ forest stewardship techniques which protect the
trees from forest fires, erosion, insects and other damage.

          Approximately 179,000 acres of Pacific Lumber's timberlands are
owned by Scotia Pacific Holding Company (the "Scotia Pacific Timberlands"),
a special purpose Delaware corporation and wholly owned subsidiary of
Pacific Lumber ("Scotia Pacific").  Pacific Lumber has the exclusive right
to harvest (the "Pacific Lumber Harvest Rights") approximately 8,000 non-
contiguous acres of the Scotia Pacific Timberlands consisting substantially
of virgin old growth redwood and virgin old growth Douglas-fir timber
located on numerous small parcels throughout the Scotia Pacific
Timberlands.  Substantially all of Scotia Pacific's assets, including the
Scotia Pacific Timberlands and the GIS (defined below), are pledged as
security for Scotia Pacific's 7.95% Timber Collateralized Notes due 2015
(the "Timber Notes").  Pacific Lumber harvests and purchases from Scotia
Pacific all of the logs harvested from the Scotia Pacific Timberlands.  See
"--Relationships With Scotia Pacific and Britt" for a description of this
and other relationships among Pacific Lumber, Scotia Pacific and Britt.

          The forest products industry grades lumber in various
classifications according to quality.  The two broad categories within
which all grades fall, based on the absence or presence of knots, are
called "upper" and "common" grades, respectively.  "Old growth" trees,
often defined as trees which have been growing for approximately 200 years
or longer, have a higher percentage of upper grade lumber than "young
growth" trees (those which have been growing for less than 200 years). 
"Virgin" old growth trees are located in timber stands that have not
previously been harvested.  "Residual" old growth trees are located in
timber stands which have been partially harvested in the past.

          Pacific Lumber has engaged in extensive efforts to supplement
the natural regeneration of timber and increase the amount of timber on its
timberlands.  Pacific Lumber is required to comply with California
forestry regulations regarding reforestation, which generally require that
an area be reforested to specified standards within an established period
of time.  Pacific Lumber also actively engages in efforts to establish
timberlands from open areas such as pasture land.  During 1995, Pacific
Lumber planted approximately 676,000 redwood and Douglas-fir seedlings. 
Regeneration of redwood timber generally is accomplished through the
natural growth of new redwood sprouts from the stump remaining after a
redwood tree is harvested.  Such new redwood sprouts grow quickly, thriving
on existing mature root systems.  In addition, Pacific Lumber supplements
natural redwood regeneration by planting redwood seedlings.  Douglas-fir
timber grown on Pacific Lumber's timberlands is regenerated almost entirely
by planting seedlings.

     HARVESTING PRACTICES

          The ability of Pacific Lumber to sell logs or lumber products
will depend, in part, upon its ability to obtain regulatory approval of
timber harvesting plans ("THPs").  THPs are required to be developed by
registered professional foresters and must be filed with, and approved by,
the California Department of Forestry ("CDF") prior to the harvesting of
timber.  Each THP is designed to comply with applicable environmental laws
and regulations.  The CDF's evaluation of proposed THPs incorporates review
and analysis of such THPs by several California and federal agencies and
public comments received with respect to such THPs.  An approved THP is
applicable to specific acreage and specifies the harvesting method and
other conditions relating to the harvesting of the timber covered by such
THP.  See "--Regulatory and Environmental Factors" for information
regarding proposed critical habitat designation, sustained yield
regulations and related matters.  Pacific Lumber maintains a detailed
geographical information system covering its timberlands (the "GIS").  The
GIS covers numerous aspects of Pacific Lumber's properties, including
timber type, tree class, wildlife data, roads, rivers and streams.  By
carefully monitoring and updating this data base and conducting field
studies, Pacific Lumber's foresters are able to develop detailed THPs
addressing the various regulatory requirements.  Pacific Lumber also
utilizes a Global Positioning System ("GPS") which allows precise location
of geographic features through satellite positioning.  Use of the GPS
greatly enhances the quality and efficiency of GIS data.

          Pacific Lumber employs a variety of well-accepted methods of
selecting trees for harvest.  These methods, which are designed to achieve
optimal regeneration, are referred to as "silvicultural systems" in the
forestry profession.  Silvicultural systems range from very light thinnings
aimed at enhancing the growth rate of retained trees to clear cutting which
results in the harvest of all trees in an area and replacement with a new
forest stand.  In between are a number of varying levels of partial
harvests which can be employed.  Pacific Lumber's foresters select the
appropriate silvicultural system for any given site based upon the specific
conditions of that site.  Pacific Lumber customarily employs silvicultural
systems that involve thinnings followed by a variety of partial cuttings to
achieve a high degree of natural regeneration.  Partial harvesting allows
the remaining trees to obtain more light, nutrients and water, thereby
promoting faster growth rates.  Pacific Lumber uses a variety of factors,
including the size and density of the remaining trees, to determine when to
again submit a THP with respect to a given area.  Clear cutting is only
used under specific circumstances where it is advisable due to specific
site conditions (such as undesirable tree species composition for natural
regeneration, topographic difficulties which preclude partial cuttings or
the need to create more diverse wildlife habitats within watersheds as
recommended by Pacific Lumber's wildlife biologists).  Due to the magnitude
of its timberlands and conservative application of silvicultural systems
that retain substantial numbers of trees on areas that are harvested,
Pacific Lumber has historically conducted harvesting operations on
approximately 5% of its timberlands in any given year.

     PRODUCTION FACILITIES

          Pacific Lumber owns four highly mechanized sawmills and related
facilities located in Scotia, Fortuna and Carlotta, California.  The
sawmills historically have been supplied almost entirely from timber
harvested from Pacific Lumber's timberlands.  Since 1986, Pacific Lumber
has implemented numerous technological advances which have increased the
operating efficiency of its production facilities and the recovery of
finished products from its timber.  Over the past three years, Pacific
Lumber's annual lumber production has averaged approximately 268 million
board feet, with approximately 290, 286, and 228 million board feet
produced in 1995, 1994 and 1993, respectively.  The Fortuna sawmill, built
by Pacific Lumber in 1972, produces primarily common grade lumber.  During
1995, the Fortuna mill produced approximately 94 million board feet of
lumber.  The Carlotta sawmill was acquired in 1986 and produces both common
and upper grade redwood lumber.  During 1995, the Carlotta mill produced
approximately 67 million board feet of lumber.  Sawmill "A," located in
Scotia, was remodeled in 1983 and processes Douglas-fir logs while Sawmill
"B," also located in Scotia, primarily processes large diameter redwood
logs.   During 1995, Sawmills "A" and "B" produced 79 and 51 million board
feet of lumber, respectively.

          Pacific Lumber operates a finishing plant which processes rough
lumber into a variety of finished products such as trim, fascia, siding and
paneling.  These finished products include the industry's largest variety
of customized trim and fascia patterns.  Pacific Lumber also enhances the
value of some grades of common grade lumber by assembling knot-free pieces
of narrower and shorter lumber into wider or longer pieces in its state-of-
the-art end and edge glue plant.  The result is a standard sized upper
grade product which can be sold at a significant premium over common grade
products.

          Pacific Lumber dries the majority of its upper grade lumber
before it is sold.  Upper grades of redwood lumber are generally air-dried
for six to eighteen months and then kiln-dried for seven to twenty-four
days to produce a dimensionally stable and high quality product which
generally commands higher prices than "green" lumber (which is lumber sold
before it has been dried).  Upper grade Douglas-fir lumber is generally
kiln-dried immediately after it is cut.  Pacific Lumber owns and operates
34 kilns, having an annual capacity of approximately 95 million board feet,
to dry its upper grades of lumber efficiently in order to produce a
quality, premium product.  Pacific Lumber also maintains several large
enclosed storage sheds which hold approximately 25 million board feet of
lumber.

          In addition, Pacific Lumber owns and operates a modern 25-
megawatt cogeneration power plant which is fueled almost entirely by the
wood residue from its milling and finishing operations.  This power plant
generates substantially all of the energy requirements of Scotia,
California, the town adjacent to Pacific Lumber's timberlands where several
of its manufacturing facilities are located.  Pacific Lumber sells surplus
power to Pacific Gas and Electric Company.  In 1995, the sale of surplus
power accounted for approximately 1% of Pacific Lumber's total revenues.

     PRODUCTS

          The following table sets forth the distribution of Pacific
Lumber's lumber production (on a net board foot basis) and revenues by
product line:


<TABLE>

<CAPTION>

                                                          Year Ended December 31, 1995            Year Ended December 31, 1994    
                                                      ------------------------------------    ------------------------------------
                                                      % of Total                              % of Total
                                                        Lumber      % of Total                  Lumber     % of Total
                                                      Production      Lumber     % of Total   Production     Lumber     % of Total
                                                        Volume       Revenues     Revenues      Volume      Revenues     Revenues 
                      Product                         ----------    ----------   ----------   ----------   ----------   ----------
<S>                                                   <C>           <C>          <C>          <C>          <C>          <C>
Upper grade redwood lumber                                   17%           38%          31%          17%          41%          33%
Common grade redwood lumber                                  54%           40%          32%          58%          36%          30%
                                                      ----------    ----------   ----------   ----------   ----------   ----------
     Total redwood lumber                                    71%           78%          63%          75%          77%          63%
                                                      ----------    ----------   ----------   ----------   ----------   ----------
Upper grade Douglas-fir lumber                                3%            5%           4%           3%           7%           5%
Common grade Douglas-fir lumber                              23%           14%          11%          20%          13%          10%
                                                      ----------    ----------   ----------   ----------   ----------   ----------
     Total Douglas-fir lumber                                26%           19%          15%          23%          20%          15%
                                                      ----------    ----------   ----------   ----------   ----------   ----------
Other grades of lumber                                        3%            3%           4%           2%           3%           4%
                                                      ----------    ----------   ----------   ----------   ----------   ----------
     Total lumber                                           100%          100%          82%         100%         100%          82%
                                                      ==========    ==========   ==========   ==========   ==========   ==========
Logs                                                                                     7%                                     9%
                                                                                 ==========                             ==========
Hardwood chips                                                                           4%                                     4%
Softwood chips                                                                           5%                                     4%
                                                                                 ----------                             ----------
     Total wood chips                                                                    9%                                     8%
                                                                                 ==========                             ==========

</TABLE>


          Lumber
          Pacific Lumber primarily produces and markets lumber.  In 1995,
Pacific Lumber sold approximately 277 million board feet of lumber, which
accounted for approximately 82% of Pacific Lumber's total revenues.  Lumber
products vary greatly by the species and quality of the timber from which
it is produced.  Lumber is sold not only by grade (such as "upper" grade
versus "common" grade), but also by board size and the drying process
associated with the lumber.

          Redwood lumber is Pacific Lumber's largest product category. 
Redwood is commercially grown only along the northern coast of California
and possesses certain unique characteristics which permit it to be sold at
a premium to many other wood products.  Such characteristics include its
natural beauty, superior ability to retain paint and other finishes,
dimensional stability and innate resistance to decay, insects and
chemicals.  Typical applications include exterior siding, trim and fascia
for both residential and commercial construction, outdoor furniture, decks,
planters, retaining walls and other specialty applications.  Redwood also 
has a variety of industrial applications because of its chemical 
resistance and because it does not impart any taste or odor to liquids 
or solids.

          Upper grade redwood lumber, which is derived primarily from old
growth trees and is characterized by an absence of knots and other defects
and a very fine grain, is used primarily in more costly and distinctive
interior and exterior applications.  The overall supply of upper grade
lumber has been diminishing due to increasing environmental and regulatory
restrictions and other factors.  While Pacific Lumber's competitive
position with respect to upper grade lumber has been improving due to the
quality of its timberlands, Pacific Lumber's supply of upper grade lumber
has decreased in some premium product categories.  See Item 7. 
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations--Forest Products Operations."  Common
grade redwood lumber, Pacific Lumber's largest volume product, has many of
the same aesthetic and structural qualities of redwood uppers, but has some
knots, sapwood and a coarser grain.  Such lumber is commonly used for
construction purposes, including outdoor structures such as decks, hot tubs
and fencing.

          Douglas-fir lumber is used primarily for new construction and
some decorative purposes and is widely recognized for its strength, hard
surface and attractive appearance.  Douglas-fir is grown commercially along
the west coast of North America and in Chile and New Zealand.  Upper grade
Douglas-fir lumber is derived primarily from old growth Douglas-fir timber
and is used principally in finished carpentry applications.  Common grade
Douglas-fir lumber is used for a variety of general construction purposes
and is largely interchangeable with common grades of other whitewood
lumber.

          Logs
          Pacific Lumber currently sells certain logs that, due to their
size or quality, cannot be efficiently processed by its mills into lumber. 
The purchasers of these logs are largely Britt, and surrounding mills which
do not own sufficient timberlands to support their mill operations.  See "-
-Relationships With Scotia Pacific and Britt" below.  Except for the
agreement with Britt described below, Pacific Lumber does not have any
significant contractual relationships with any third parties relating to
the purchase of logs.  Pacific Lumber has historically not purchased
significant quantities of logs from third parties; however, Pacific Lumber
may from time to time purchase logs from third parties for processing in
its mills or for resale to third parties if, in the opinion of management,
economic factors are advantageous to Pacific Lumber.

          Wood Chips
          Pacific Lumber uses a whole-log chipper to produce wood chips
from hardwood trees which would otherwise be left as waste.  These chips
are sold to third parties primarily for the production of facsimile and
other specialty papers.  Pacific Lumber also produces softwood chips from
the wood residue and waste from its milling and finishing operations. 
These chips are sold to third parties for the production of wood pulp and
paper products.

     BACKLOG AND SEASONALITY

          Pacific Lumber's backlog of sales orders at December 31, 1995 and
1994 was approximately $11.5 million and $11.9 million, respectively, the
substantial portion of which was delivered in the first quarter of the next
fiscal year.  Pacific Lumber has historically experienced lower first
quarter sales due largely to the general decline in construction-related
activity during the winter months.  As a result, Pacific Lumber's results
in any one quarter are not necessarily indicative of results to be expected
for the full year.

     MARKETING

          The housing, construction and remodeling markets are the primary
markets for Pacific Lumber's lumber products.  Pacific Lumber's policy is
to maintain a wide distribution of its products both geographically and in
terms of the number of customers.  Pacific Lumber sells its lumber products
throughout the country to a variety of accounts, the large majority of
which are wholesalers, followed by retailers, industrial users, exporters
and manufacturers.  Upper grades of redwood and Douglas-fir lumber are sold
throughout the entire United States, as well as to export markets.  Common
grades of redwood lumber are sold principally west of the Mississippi
River, with California accounting for approximately 63% of these sales in
1995.  Common grades of Douglas-fir lumber are sold primarily in
California.  In 1995, no single customer accounted for more than 4% of
Pacific Lumber's total revenues.  Exports of lumber accounted for
approximately 4% of Pacific Lumber's total revenues in 1995.  Pacific
Lumber markets its products through its own sales staff which focuses
primarily on domestic sales.

          Pacific Lumber actively follows trends in the housing,
construction and remodeling markets in order to maintain an appropriate
level of inventory and assortment of product.  Due to its high quality
products, large inventory, competitive prices and long history, Pacific
Lumber believes that it has a strong degree of customer loyalty.

     COMPETITION

          Pacific Lumber's lumber is sold in highly competitive markets. 
Competition is generally based upon a combination of price, service,
product availability and product quality.  Pacific Lumber's products
compete not only with other wood products but with metals, masonry, plastic
and other construction materials made from non-renewable resources.  The
level of demand for Pacific Lumber's products is dependent on such broad
factors as overall economic conditions, interest rates and demographic
trends.  In addition, competitive considerations, such as total industry
production and competitors' pricing, as well as the price of other
construction products, affect the sales prices for Pacific Lumber's lumber
products.  Pacific Lumber currently enjoys a competitive advantage in the
upper grade redwood lumber market due to the quality of its timber holdings
and relatively low cost production operations.  Competition in the common
grade redwood and Douglas-fir lumber market is more intense, and Pacific
Lumber competes with numerous large and small lumber producers.

     EMPLOYEES

          As of March 1, 1996, Pacific Lumber had approximately 1,600
employees, none of whom are covered by a collective bargaining agreement.

     RELATIONSHIPS WITH SCOTIA PACIFIC AND BRITT

          In March 1993, Pacific Lumber consummated its offering of $235
million of 10-1/2% Senior Notes due 2003 (the "Pacific Lumber Senior
Notes") and Scotia Pacific consummated its offering of $385 million of
Timber Notes.  Upon the closing of such offerings, Pacific Lumber, Scotia
Pacific and Britt entered into a variety of agreements.  Pacific Lumber and
Scotia Pacific entered into a Services Agreement (the "Services Agreement")
and an Additional Services Agreement (the "Additional Services Agreement"). 
Pursuant to the Services Agreement, Pacific Lumber provides operational,
management and related services with respect to the Scotia Pacific
Timberlands containing timber of Scotia Pacific ("Scotia Pacific Timber")
not performed by Scotia Pacific's own employees.  Such services include the
furnishing of all equipment, personnel and expertise not within Scotia
Pacific's possession and reasonably necessary for the operation and
maintenance of the Scotia Pacific Timberlands containing Scotia Pacific
Timber.  In particular, Pacific Lumber is required to regenerate Scotia
Pacific Timber, prevent and control loss of Scotia Pacific Timber by fires,
maintain a system of roads throughout the Scotia Pacific Timberlands, take
measures to control the spread of disease and insect infestation affecting
Scotia Pacific Timber and comply with environmental laws and regulations,
including measures with respect to waterways, habitat, hatcheries and
endangered species.  Pacific Lumber is also required (to the extent
necessary) to assist Scotia Pacific personnel in updating the GIS and to
prepare and file, on Scotia Pacific's behalf, all pleadings and motions and
otherwise diligently pursue appeals of any denial of any THP and related
matters.  As compensation for these and the other services to be provided
by Pacific Lumber, Scotia Pacific pays a fee which is adjusted on January 1
of each year based on a specified government index relating to wood
products.  The fee was approximately $115,100 per month in 1995 and is
expected to be approximately $112,100 per month in 1996.  Pursuant to the
Additional Services Agreement, Scotia Pacific provides Pacific Lumber with
a variety of services, including (a) assisting Pacific Lumber to operate,
maintain and harvest its own timber properties, (b) updating and providing
access to the GIS with respect to information concerning Pacific Lumber's
own timber properties, and (c) assisting Pacific Lumber with its statutory
and regulatory compliance.  Pacific Lumber pays Scotia Pacific a fee for
such services equal to the actual cost of providing such services, as
determined in accordance with generally accepted accounting principles.

          Pacific Lumber and Scotia Pacific also entered into a Master
Purchase Agreement (the "Master Purchase Agreement").  The Master Purchase
Agreement governs all purchases of logs by Pacific Lumber from Scotia
Pacific.  Each purchase of logs by Pacific Lumber  from Scotia Pacific is
made pursuant to a separate log purchase agreement (which incorporates the
terms of the Master Purchase Agreement) for the Scotia Pacific Timber
covered by an approved THP.  Each log purchase agreement generally
constitutes an exclusive agreement with respect to the timber covered
thereby, subject to certain limited exceptions.  The purchase price must be
at least equal to the SBE Price (as defined below).  The Master Purchase
Agreement provides that if the purchase price equals or exceeds (i) the
price for such species and category thereof set forth on the structuring
schedule applicable to the Timber Notes and (ii) the SBE Price, then such
price shall be deemed to be the fair market value of such logs.  The Master
Purchase Agreement defines the "SBE Price," for any species and category of
timber, as the stumpage price for such species and category as set forth in
the most recent "Harvest Value Schedule" published by the California State
Board of Equalization ("SBE") applicable to the timber sold during the
period covered by such Harvest Value Schedule.  Such Harvest Value
Schedules are published for purposes of computing yield taxes and generally
are released every six months.  As Pacific Lumber purchases logs from
Scotia Pacific pursuant to the Master Purchase Agreement, Pacific Lumber is
responsible, at its own expense, for harvesting and removing the standing
Scotia Pacific Timber covered by approved THPs and, thus, the purchase
price thereof is based upon "stumpage prices."  Title to the harvested logs
does not pass to Pacific Lumber until the logs are transported to Pacific
Lumber's log decks and measured.  Substantially all of Scotia Pacific's
revenues are derived from the sale of logs to Pacific Lumber under the
Master Purchase Agreement.

          Pacific Lumber, Scotia Pacific and Salmon Creek Corporation
("Salmon Creek," a wholly owned subsidiary of Pacific Lumber) also entered
into a Reciprocal Rights Agreement granting to each other certain
reciprocal rights of egress and ingress through their respective properties
in connection with the operation and maintenance of such properties and
their respective businesses.  In addition, Pacific Lumber entered into an
Environmental Indemnification Agreement with Scotia Pacific pursuant to
which Pacific Lumber agreed to indemnify Scotia Pacific from and against
certain present and future liabilities arising with respect to hazardous
materials, hazardous materials contamination or disposal sites, or under
environmental laws with respect to the Scotia Pacific Timberlands.

          Pacific Lumber entered into an agreement with Britt (the "Britt
Agreement") which governs the sale of logs by Pacific Lumber and Britt to
each other, the sale of hog fuel (wood residue) by Britt to Pacific Lumber
for use in Pacific Lumber's cogeneration plant, the sale of lumber by
Pacific Lumber and Britt to each other, and the provision by Pacific Lumber
of certain administrative services to Britt (including accounting,
purchasing, data processing, safety and human resources services).  The
logs which Pacific Lumber sells to Britt and which are used in Britt's
manufacturing operations are sold at approximately 75% of applicable SBE
prices (to reflect the lower quality of these logs).  Logs which either
Pacific Lumber or Britt purchases from third parties and which are then
sold to each other are transferred at the actual cost of such logs.  Hog
fuel is sold at applicable market prices, and administrative services are
provided by Pacific Lumber based on Pacific Lumber's actual costs and an
allocable share of Pacific Lumber's overhead expenses consistent with past
practice.

     BRITT LUMBER OPERATIONS

          Business
          Britt is located in Arcata, California, approximately 45 miles
north of Pacific Lumber's headquarters.  Britt's primary business is the
processing of small diameter redwood logs into wood fencing products for
sale to retail and wholesale customers.  Britt was incorporated in 1965 and
operated as an independent manufacturer of fence products until July 1990,
when it was purchased by a subsidiary of the Company.  Britt purchases
small diameter (6 to 11 inch) and short length (6 to 12 feet) redwood logs
from Pacific Lumber and a variety of different diameter and different
length logs from various timberland owners.  Britt processes logs at its
mill into a variety of different fencing products, including "dog-eared" 1"
x 6" fence stock in six and eight foot lengths, 4" x 4" fence posts in 6
through 12 foot lengths, and other fencing products in 6 through 12 foot
lengths.  Britt's purchases of logs from third parties are generally
consummated pursuant to short-term contracts of twelve months or less.  See
"--Pacific Lumber Operations--Relationships With Scotia Pacific and Britt"
for a description of Britt's log purchases from Pacific Lumber.

          Marketing
          In 1995, Britt sold approximately 78 million board feet of lumber
products to approximately 100 different  customers.  Over one-half of its
lumber sales were in northern California.  The remainder of its 1995 sales
were in southern California and ten other western states.  The largest and
top five of such customers accounted for approximately 33% and 72%,
respectively, of such 1995 sales.  Britt markets its products through its
own salesmen to a variety of customers, including distribution centers,
industrial remanufacturers, wholesalers and retailers and is expanding its
market eastward.

          Britt's backlog of sales orders at December 31, 1995 and 1994 was
approximately $3.2 million and $3.6 million, respectively, the substantial
portion of which was delivered in the first quarter of the next fiscal
year.

          Facilities and Employees
          Britt's manufacturing operations are conducted on 12 acres of
land, 10 acres of which are leased on a long-term fixed-price basis from an
unrelated third party.  Fence production is conducted in a 46,000 square
foot mill.  An 18 acre log sorting and storage yard is located one quarter
of a mile away.  The mill was constructed in 1980, and capital expenditures
to enhance its output and efficiency are made periodically.  Britt's
(single shift) mill capacity, assuming 40 production hours per week, is
estimated at 35.5 million board feet of fencing products per year.  As of
March 1, 1996, Britt employed approximately 110 people, none of whom are
covered by a collective bargaining agreement.

          Competition
          Management estimates that Britt accounted for approximately one-
third of the redwood fence market in 1995 in competition with the northern
California mills of Louisiana Pacific, Georgia Pacific and Eel River.

     REGULATORY AND ENVIRONMENTAL FACTORS

          Regulatory and environmental issues play a significant role in
Pacific Lumber's forest products operations.  Pacific Lumber's forest
products operations are subject to a variety of California and federal laws
and regulations dealing with timber harvesting, endangered species and
critical habitat, and air and water quality.  These laws include the
California Forest Practice Act (the "Forest Practice Act"), which requires
that timber harvesting operations be conducted in accordance with detailed
requirements set forth in the Forest Practice Act and in the regulations
promulgated thereunder by the California Board of Forestry (the "BOF"). 
The federal Endangered Species Act (the "ESA") and California Endangered
Species Act (the "CESA") provide in general for the protection and
conservation of specifically listed fish, wildlife and plants which have
been declared to be endangered or threatened.  The California Environmental
Quality Act ("CEQA") provides, in general, for protection of the
environment of the state, including protection of air and water quality and
of fish and wildlife.  In addition, the California Water Quality Act
requires, in part, that Pacific Lumber's operations be conducted so as to
reasonably protect the water quality of nearby rivers and streams.  The
Company does not expect that compliance with such existing laws and
regulations will have a material adverse effect on its future liquidity,
consolidated operating results or financial position; however, these laws
and regulations are modified from time to time and there can be no
assurance that certain pending or future legislation, governmental
regulations or judicial or administrative decisions would not materially
adversely affect the Company (see below).

          In 1994, the BOF adopted certain regulations regarding compliance
with long-term sustained yield objectives.  These regulations require
timber companies to project the average annual growth they will have on
their timberlands during the last decade of a 100-year planning period
("Projected Annual Growth").  During any rolling ten-year period, the
average annual harvest over such ten-year period may not exceed Projected
Annual Growth.  The first ten-year period began in May 1994.  Pacific
Lumber is required to submit, by October 1996, a plan setting forth, among
other things, its Projected Annual Growth.  Pacific Lumber has not
completed its analysis of the projected productivity of its timberlands and
is therefore unable to predict the impact that these regulations will have
on its future timber harvesting practices; however, the final results of
this analysis could require Pacific Lumber to reduce (or permit it to
increase) its timber harvest in future years from the average annual
harvest that it has experienced in recent years.  Pacific Lumber believes
that it would be able to mitigate the effect of any required reduction in
harvest level by acquisitions of additional timberlands and by increasing
the productivity of its timberlands.

          In March 1992, the marbled murrelet was approved for listing as
endangered under the CESA.  In October 1992, the United States Fish and
Wildlife Service ("USFWS") issued its final rule listing the marbled
murrelet as a threatened species under the ESA in the tri-state area of
Washington, Oregon and California.  Pacific Lumber has incorporated, and
will continue to incorporate as required, mitigation measures into its THPs
to protect and maintain habitat for the marbled murrelet on its
timberlands.  The BOF requires Pacific Lumber to conduct pre-harvest
marbled murrelet surveys to provide certain site specific mitigations in
connection with THPs covering virgin old growth timber and unusually dense
stands of residual old growth timber.  Such surveys can only be conducted
during a portion of the murrelet's nesting and breeding season, which
extends from April through mid-September.  Accordingly, such surveys are
expected to delay the review and approval process with respect to certain
of the THPs filed by Pacific Lumber.  The results of such surveys to date
(based upon current survey protocols) have indicated that Pacific Lumber
has approximately 6,000 acres of occupied marbled murrelet habitat.  A
substantial portion of this land contains virgin and residual old growth
timber and the bulk of it falls within the areas proposed to be designated
as critical habitat for the marbled murrelet (see below).  Pacific Lumber
is unable to predict when or if it will be able to harvest this acreage.

          In January 1994, the USFWS proposed designation of critical
habitat for the marbled murrelet under the ESA (which proposed designation
did not include any of Pacific Lumber's timberlands).  In July 1995, in a
case entitled Marbled Murrelet v. Babbitt (Case No. C-91-522R), a U.S.
District Court in Seattle ordered the USFWS to make its final designation
of critical habitat for the marbled murrelet by January 29, 1996 and to
issue its proposed final designation of critical habitat by August 1, 1995. 
On August 10, 1995, the USFWS published its proposed final designation of
critical habitat for the marbled murrelet (the "Proposed Designation"),
seeking to designate over four million acres as critical habitat for the
marbled murrelet, including approximately 33,000 acres of Pacific Lumber's
timberlands.  The Proposed Designation was subject to a 60-day comment
period and Pacific Lumber filed comments vigorously opposing the Proposed
Designation.  In February 1996, the Court extended until May 15, 1996 the
deadline for final designation of critical habitat for the marbled
murrelet.  The USFWS has not yet published its final designation of
critical habitat for the marbled murrelet.  Pacific Lumber is unable to
predict when or if it would be able to harvest on any acreage finally
designated as critical habitat.  Furthermore, it is impossible to determine
the future adverse impact of such designation on the Company's liquidity,
consolidated financial position or results of operations until such time as
the Proposed Designation is finalized and related regulatory and legal
issues are fully resolved.  However, if Pacific Lumber is unable to
harvest, or is severely limited in harvesting, on timberlands designated as
marbled murrelet critical habitat, such restrictions could have a material
adverse effect on the Company's liquidity, consolidated financial condition
and results of operations.  If Pacific Lumber is unable to harvest or is
severely limited in harvesting, it intends to seek full compensation from
the appropriate governmental agencies on the grounds that such restrictions
constitute a taking.

          Pacific Lumber's wildlife biologists are conducting research
concerning the marbled murrelet on its timberlands and are currently
developing a habitat conservation plan for the marbled murrelet (the
"Murrelet HCP").  The Murrelet HCP, which is designed to mitigate the
impact of the Proposed Designation, has been submitted to the USFWS. 
Pacific Lumber is working with the USFWS and other government agencies on
the Murrelet HCP.  It is uncertain when the Murrelet HCP review process
will be completed or what the outcome will be of the review process or its
effect upon the Company's liquidity, consolidated financial position or
results of operations.

          There also continue to be other regulatory actions and lawsuits
seeking to have various other species listed as threatened or endangered
under the ESA and/or the CESA and to designate critical habitat for such
species.  It is uncertain what effect any such other listings and/or
designations of critical habitat would have on the Company's liquidity,
consolidated financial position or results of operations.

          Various groups and individuals have filed objections with the CDF
and the BOF regarding the CDF's and the BOF's actions and rulings with
respect to certain of Pacific Lumber's THPs, and Pacific Lumber expects
that such groups and individuals will continue to file objections to
certain of Pacific Lumber's THPs.  In addition, lawsuits are pending which
seek to prevent Pacific Lumber from implementing certain of its approved
THPs and other harvesting operations.  These challenges have severely
restricted Pacific Lumber's ability to harvest virgin old growth timber on
its property (and to a lesser extent, its residual old growth timber).  To
date, challenges with respect to Pacific Lumber's THPs relating to young
growth and residual old growth timber have been limited; however, no
assurance can be given as to the extent of such challenges in the future. 
Pacific Lumber believes that environmentally focused challenges to its THPs
are likely to occur in the future, particularly with respect to virgin and
residual old growth timber.  Although such challenges have delayed or
prevented Pacific Lumber from conducting a portion of its operations, to
date such challenges have not had a material adverse effect on the
Company's liquidity, consolidated financial position or results of
operations.  It is, however, impossible to predict the future nature or
degree of such challenges or their ultimate impact on the liquidity,
consolidated operating results or financial position of the Company.  See
also Item 3. "Legal Proceedings--Pacific Lumber Litigation" for a
description of the pending Marbled Murrelet action.

          In June 1990, the USFWS designated the northern spotted owl as
threatened under the ESA.  The owl's range includes all of Pacific Lumber's
timberlands.  The ESA and its implementing regulations (and related
California regulations) generally prohibit harvesting operations in which
individual owls might be killed, displaced or injured or which result in
significant habitat modification that could impair the survival of
individual owls or the species as a whole.  Since 1988, biologists have
conducted inventory and habitat utilization studies of northern spotted
owls on Pacific Lumber's timberlands.  Pacific Lumber has developed and the
USFWS has given its full concurrence to a comprehensive wildlife management
plan for the northern spotted owl (the "Owl Plan").  The Owl Plan was
recently updated through 1999 and the USFWS expressed its agreement that
operations consistent with the Owl Plan would not result in the take of any
owls.  By incorporating the Owl Plan into each THP filed with the CDF,
Pacific Lumber is able to expedite the approval time with respect to its
THPs.  Both federal and state agencies continue to review and consider
possible additional regulations regarding the northern spotted owl.  It is
uncertain if such additional regulations will become effective or their
ultimate content.  The plaintiffs in the Marbled Murrelet action have
requested injunctive relief with respect to the Owl Plan.  See Item 3.
"Legal Proceedings--Pacific Lumber Litigation."

          Laws and regulations dealing with Pacific Lumber's operations are
subject to change and new laws and regulations are frequently introduced
concerning the California timber industry.  From time to time, bills are
introduced in the California legislature and the U.S. Congress which relate
to the business of Pacific Lumber, including the protection and acquisition
of old growth and other timberlands, endangered species, environmental
protection, air and water quality, and the restriction, regulation and
administration of timber harvesting practices.  For example, a bill has
been introduced in the California legislature which would, among other
things, initiate negotiations by the California Resources Agency for the
public acquisition of approximately 4,700 acres of Pacific Lumber's
timberlands, 3,000 acres of which is a contiguous block of virgin old
growth redwood forest often referred to as the "Headwaters Forest." In
addition, the U.S. Congressman from the congressional district in which
Pacific Lumber is located has introduced a bill which would, among other
things, authorize public acquisition of the Headwaters Forest and up to
1,700 contiguous acres.  The bill would authorize the Secretary of the
Interior to exchange government-owned timberlands and other property for
the appraised fair market value of the Headwaters Forest and any contiguous
acreage to be acquired.  Because such bills are subject to amendment, it is
premature to assess the ultimate content of these bills, the likelihood of
any of the bills passing or the impact of any of these bills on the future
liquidity, consolidated financial position or operating results of the
Company.  Furthermore, any bills which are passed are subject to executive
veto and court challenge.  In addition to existing and possible new or
modified statutory enactments, regulatory requirements and administrative
and legal actions, the California timber industry remains subject to
potential California or local ballot initiatives and evolving federal and
California case law which could affect timber harvesting practices.  It is,
however, impossible to assess the effect of such matters on the future
liquidity, consolidated financial position or operating results of the
Company.

REAL ESTATE AND OTHER OPERATIONS

     REAL ESTATE AND RESORT OPERATIONS

          General
          The Company, principally through its wholly owned subsidiaries,
is also engaged in the business of residential and commercial real estate
investment and development, primarily in Arizona, California, Texas and
Puerto Rico.  At December 31, 1995, the Company had approximately $23.1
million of outstanding receivables derived from the financing of real
estate sales in its developments and may continue to finance such real
estate sales in the future. As of December 31, 1995, these receivables had
a weighted average interest rate of approximately 9.4%, a weighted average
maturity of less than four years and average borrower equity of
approximately 45%. As of December 31, 1995, the Company also held $8.4
million of other receivables as a portion of the RTC Portfolio (defined
below).

          Principal Properties
          Texas.   In June 1991, a wholly owned subsidiary of the Company
purchased from the RTC at an auction, for approximately $122.3 million, 27
parcels of income producing real property and 28 loans secured by real
property, fifteen of which have subsequently been converted to income-
producing real property through either foreclosure or contractual agreement
with the borrower (the "RTC Portfolio").  Substantially all of the real
property was located in Texas, with the largest concentration in the
vicinity of San Antonio, Houston, Austin and Dallas. From 1992 to December
31, 1995, an aggregate of approximately $28.7 million in loans (which
represented nine loans) were sold or paid off and thirty-one properties
were sold for aggregate consideration of approximately $157.5 million.
These transactions resulted in aggregate gains of $77.3 million. As of
December 31, 1995, the Company held six loans (including two resulting from
property sales) and eleven properties (including five acquired via
foreclosures), which had an aggregate net book value of $32.1 million. All
of the remaining assets are being managed (and marketed for sale or
disposition as appropriate) by the Company.

          Palmas del Mar.  Palmas del Mar, a time-sharing and land
development and sales business with resort amenities, located on the
southeastern coast of Puerto Rico near Humacao, was acquired in 1984. 
Palmas del Mar consists of approximately 1,919 acres of undeveloped land,
100 condominiums utilized in its time-sharing program (comprising 5,300
time-share intervals of which approximately 1,036 remain to be sold), a
100-room hotel and adjacent executive convention center known as the
Candelero Hotel, a 23-room luxury hotel known as the Palmas Inn, a casino,
a Gary Player-designed 18-hole golf course, 20 tennis courts, golf and
tennis pro shops, restaurants, beach and pool facilities, an equestrian
center and a marina.  Certain stores and restaurants and the equestrian
center are operated by third parties.  Approximately 1,300 private
residences and a marina are owned by third parties.  A number of these
private residences are made available to Palmas del Mar by their owners
throughout the year for rental to vacationers.  Since 1985, the Company has
been actively engaged in the development and sale of condominiums, estate
lots and villas.  During 1995, Palmas sold 31 condominium units and 65
time-share intervals.  Additionally, Palmas completed a sale and leaseback
transaction on July 14, 1995 of 33 furnished condominium units for
approximately $8.4 million.  As of December 31, 1995, the net book value of
Palmas' assets was approximately $16.2 million

          Fountain Hills.  In 1968, a subsidiary of the Company purchased
and began developing approximately 12,100 acres of real property at
Fountain Hills, Arizona, which is located near Phoenix and adjacent to
Scottsdale, Arizona. As of December 31, 1995, Fountain Hills had
approximately 3,910 acres of undeveloped residential land, 101 developed
commercial and industrial lots, 121 acres of undeveloped commercial and
industrial land and 102 developed residential lots available for sale. The
population of Fountain Hills is approximately 13,000. The Company is
planning the development of certain of the remaining acreage at Fountain
Hills.  Future sales are expected to consist mainly of undeveloped acreage,
semi-developed parcels and fully-developed lots, although the Company may
engage in limited construction and direct sale of residential units. During
1995, approximately 115 residential lots, 22 commercial parcels and 103
acres were sold for an aggregate of $14.5 million.

          Additionally, in 1994 a subsidiary of the Company entered into a
venture to develop 950 acres in Fountain Hills in an area known as SunRidge
Canyon. The development of SunRidge Canyon contemplates a residential golf-
oriented, upscale master-planned community. The project includes 950 acres,
of which 185 have been developed into a championship-quality, public golf
course which opened for play in November 1995. The remaining 765 acres are
being developed into approximately 860 single family lots. Sales of the
individual lots began in November 1995. The development is being undertaken
by SunRidge Canyon L.L.C., an Arizona limited liability company organized
by a subsidiary of the Company and SunCor Development Company. A subsidiary
of the Company holds a 50% equity interest in the venture.

          The Company intends to continue development of its remaining
acreage at Fountain Hills in a manner that will allow it to maintain recent
sales levels, although there can be no assurance that it will be able to do
so.

          Lake Havasu City.  In 1963, a subsidiary of the Company purchased
and began developing approximately 16,700 acres of real property at Lake
Havasu City, Arizona, which were offered for sale in the form of subdivided
single and multiple family residential, commercial and industrial sites.
The Company has sold substantially all of its lot inventory in Lake Havasu
City and is currently planning the development of the remaining 145 acres.

          Rancho Mirage.  In 1991, a subsidiary of the Company acquired
Mirada, a 195-acre luxury resort-residential project located in Rancho
Mirage, California. Mirada is a master planned community built into the
Santa Rosa Mountains, 650 feet above the Coachella Valley floor. Two of the
five parcels have been developed, one of which is a custom lot subdivision
of 46 estate lots with home prices ranging from $1.5 million to $3.0
million. The other parcel was developed by Ritz-Carlton hotels and an
affiliate of the Company as the Ritz-Carlton Rancho Mirage, a hotel with
views of the Palm Springs area. The three remaining parcels encompass
nearly 150 acres with entitlements allowing a variety of residential
options. The Company is currently marketing the project's 23 fully-
developed lots.

          Other.  The Company, through its subsidiaries, owns a number of
other properties in Arizona, New Mexico, Texas and Colorado. Efforts are
underway to sell most of these properties. Most notably, in June 1995 the
Company sold approximately 6,000 acres at its Waterwood National Resort and
Country Club project in Texas, for an aggregate of $4.1 million.

          Marketing
          The Company is engaged in marketing and sales programs of varying
magnitudes at its real estate developments. In recent years, the Company
has constructed residential units and sold time-share intervals at certain
of its real estate developments. The Company intends to continue selling
land to builders and developers and lots to individuals and expects to
continue to construct and sell completed residential units at certain of
its developments. It also expects to sell certain of its commercial real
estate assets. All sales are made directly to purchasers through the
Company's marketing personnel, independent contractors or through
independent real estate brokers who are compensated through the payment of
customary real estate brokerage commissions.

          Competition and Regulation and Other Industry Factors
          There is intense competition among companies in the real estate
investment and development business. Sales and payments on real estate
sales obligations depend, in part, on available financing and disposable
income and, therefore, are affected by changes in general economic
conditions and other factors. The real estate development business and
commercial real estate business are subject to other risks such as shifts
in population, fluctuations in the real estate market, and unpredictable
changes in the desirability of residential, commercial and industrial
areas. The resort and time-sharing business of Palmas competes with similar
businesses in the Caribbean, Florida and other locations.

          The Company's real estate operations are subject to comprehensive
federal, state and local regulation. Applicable statutes and regulations
may require disclosure of certain information concerning real estate
developments and credit policies of the Company and its subsidiaries.
Periodic approval is required from various agencies in connection with the
layout and design of developments, the nature and extent of improvements,
construction activity, land use, zoning, and numerous other matters.
Failure to obtain such approval, or periodic renewal thereof, could
adversely affect the real estate development and marketing operations of
the Company and its subsidiaries. Various jurisdictions also require
inspection of properties by appropriate authorities, approval of sales
literature, disclosure to purchasers of specific information, bonding for
property improvements, approval of real estate contract forms and delivery
to purchasers of a report describing the property.

          Employees
          As of March 1, 1996, the Company's real estate operations had
approximately 800 employees, of which approximately 720 were employed by
Palmas. On July 20, 1995, a majority of the employees of Palmas voted to
have a local union represent them for collective bargaining purposes. The
Company and the union are engaged in collective bargaining negotiations.
Until the collective bargaining process is completed, the Company is unable
to estimate the impact, if any, the union representation of its employees
may have on its resort operations at Palmas.  The union is encouraging a
24-hour work stoppage.  The Company is uncertain if a work stoppage  will
occur; however, Palmas is taking steps to ensure an adequate employment
force if a work stoppage does take place.

     SAM HOUSTON RACE PARK

          General
          In July 1993, the Company, through subsidiaries, acquired various
interests in Sam Houston Race Park, Ltd., a Texas limited partnership
("SHRP, Ltd.") which owns and operates Sam Houston Race Park (the "Race 
Park"), a Texas Class 1 horse racing facility located within the greater
Houston metropolitan area. On January 15, 1995, SHRP, Ltd. defaulted on the
$4.4 million semi-annual interest payment due on its 11-3/4% Senior Secured
Notes. On April 17, 1995, SHRP, Ltd. and two affiliated entities
(collectively, the "Debtors") filed voluntary petitions, each seeking to
reorganize under the provisions of Chapter 11 of the United States
Bankruptcy Code. The bankruptcy cases were consolidated and transferred to
the United States Bankruptcy Court (the "Bankruptcy Court") for the
Southern District of Texas, Houston Division (Case No. 95-43739-H3-11). On
September 22, 1995, the Bankruptcy Court confirmed the Debtors's plan of
reorganization and on October 6, 1995, the transactions called for by the
plan of reorganization (the "Plan") were completed.

          The Plan provided for, among other things, a significant
modification of SHRP, Ltd.'s 11-3/4% Senior Secured Notes (the "Original
Notes" and, as modified, the "Extendible Notes"), an additional capital
infusion and a reorganization of SHRP, Ltd.  The Extendible Notes have an
aggregate initial principal amount of $37.5 million, mature on September 1,
2001 and bear interest at the rate 11% per annum.  The maturity date of the
Extendible Notes may be extended to September 1, 2003 (with an increase in
the rate of interest to 13% per annum) if the Texas legislature passes
significant gaming legislation (as defined) during the 2001 legislative
session.  Interest on the Extendible Notes will accrue in-kind and will not
be payable in cash until a certain level of cash flow from operations has
been achieved.  Once cash interest payments commence, interest payments may
not thereafter be paid in-kind.  The indenture governing the Extendible
Notes provides additional latitude for SHRP, Ltd. to incur indebtedness and
make investments in gaming, entertainment and other ventures.

          A new investor group (the "New SHRP Investor Group") made a
capital contribution of cash in the aggregate amount of $5.9 million
(wholly owned subsidiaries of the Company contributed $5.8 million).
Additionally, a wholly owned subsidiary of the Company contributed to SHRP,
Ltd. an adjoining approximately 87 acre tract of land (having a fair market
value of $2.3 million).  A wholly owned subsidiary of the Company is the
new managing general partner of SHRP, Ltd.  Each member of the New SHRP
Investor Group provided its pro rata share of a $1.7 million line of
credit, should the initial cash contributed to SHRP, Ltd. prove
insufficient to fund the future operating and working capital requirements
of SHRP, Ltd.  The Company has guaranteed its subsidiaries' share of the
line of credit, which totaled $1.6 million.  On October 20, 1995, a wholly
owned subsidiary of the Company purchased, for $7.3 million, $14.6 million
of the Extendible Notes and the corresponding shares of common stock of
SHRP Equity, Inc. (a Delaware corporation and an additional general partner
of the reorganized SHRP, Ltd.) to which one noteholder was entitled.  Such
shares of common stock represent approximately 39.0% of the shares of
common stock of SHRP Equity, Inc. After giving effect to these
transactions, wholly owned subsidiaries of the Company hold, directly or
indirectly, approximately 78.8% of the equity in the reorganized SHRP, Ltd.

          The Race Park has sustained substantial operating losses since it
began operations in April 1994.  The cash contribution made by the New SHRP
Investor Group was intended to provide sufficient capital to enable the
Race Park to meet is obligations for a three-year period.  During such
period the Race Park must develop a market for horse racing and compete
with other forms of entertainment in the greater Houston metropolitian
area. The only continuing obligation the Company has with respect to the
Race Park is limited to its $1.6 million commitment under the line of
credit agreement, as previously described.  Accordingly, the ability of the
Race Park to continue in existence is largely dependent upon its ability to
achieve a level of cash flow from operations sufficient to enable it to
meet its operating and financing obligations as they become due.  In this
regard, management has undertaken a number of steps designed to improve the
Race Park's operations.  These steps include but are not limited to: (i)
the reorganization of SHRP, Ltd. which provided new equity capital and a
reduction and restructuring of its principal indebtedness, (ii)
renegotiating contracts with vendors, (iii) reducing staffing and other
administrative costs, and (iv) strengthening management with experienced
race track personnel.  However, there can be no assurance that the
operating changes and the capital infusion (together with the $1.7 million
line of credit) will be sufficient to enable the Race Park to achieve the
level of cash flow from operations necessary to enable it to meet its long-
term operating and financing obligations as they become due.  Should the
Race Park be unable to achieve sufficient levels of cash flows from its
operations, it will be required to seek additional capital, which may or
may not be available.

          Racing Operations and Race Park Facilities
          The Race Park offers pari-mutuel wagering on live thoroughbred or
quarter horse racing or simulcast racing generally seven days a week
throughout the year. Simulcasting is the process by which live races held
at one facility are broadcast simultaneously to other locations at which
additional wagers are placed on the race being broadcast.  The Race Park's
principal sources of revenue are its statutory and contractual share of
total wagering on  live and simulcast racing.  The Race Park also derives
revenues from admission fees, food services, club memberships, luxury
suites, advertising sales and other sources. The Race Park is located on
approximately 300 acres of land in northwest Harris County approximately 18
miles from the Houston central business district and approximately 15 miles
from Houston Intercontinental Airport.

          Regulation of Racing Operations
          The ownership and operation of horse racetracks in Texas are
subject to significant regulation by the Texas Racing Commission (the
"Racing Commission") under the Texas Racing Act and related regulations
(collectively, the "Racing Act").  The Racing Act provides, among other
things, for how wagering proceeds are to be allocated among betting
participants, horsemen's purses, racetracks, the State of Texas and for
other purposes, and empowers the Racing Commission to license and regulate
substantially all aspects of horse racing in the state. The Racing
Commission must approve the number of live race days that may be offered at
the Race Park each year, as well as all simulcast agreements.  Class 1
racetracks in Texas are entitled to conduct at least seventeen weeks of live
racing for each breed of horses (thoroughbreds and quarter horses).

          Marketing and Competition
          The Race Park believes that the majority of the patrons for the
Race Park reside within a 50-mile radius of the Race Park, which includes
the greater Houston metropolitan area, and that a secondary market of
occasional patrons can be developed outside the 50-mile radius but within a
100-mile radius of the Race Park.  The Race Park uses a number of marketing
strategies in an attempt to reach these people and make them more frequent
visitors to the Race Park.  The Race Park competes with other forms of
entertainment, including casinos located approximately 125 to 150 miles
from Houston, a greyhound racetrack located 60 miles from the Race Park
and a wide range of sporting events and other entertainment activities in
the Houston area.  The Race Park could in the future also compete with
other forms of gambling in Texas, including casino gambling on Indian
reservations or otherwise.  While the Race Park believes that the location
of the Race Park is a competitive advantage over the other more distant
gaming ventures mentioned above, the most significant challenge for the
Race Park is to develop and educate new racing fans in a market where pari-
mutuel wagering has been absent since the 1930's.  Other competitive
factors faced by the Race Park include the allocation of sufficient live
race days by the Racing Commission and attraction of sufficient race horses
to run at the Race Park.  The Race Park has been able to obtain sufficient
number of live race days (102) for 1996.  The Race Park believes that it
will be able to attract sufficient horses to conduct its live racing during
1996.

EMPLOYEES

          At March 1, 1996, the Company and its subsidiaries employed
approximately 2,500 persons, exclusive of those involved in Aluminum
Operations.


ITEM 2.        PROPERTIES

          For information concerning the principal properties and
operations of the Company, see Item 1. "Business."

ITEM 3.        LEGAL PROCEEDINGS

GENERAL 

          The following describes certain legal proceedings in which the
Company or its subsidiaries are involved.  The Company and certain of its
subsidiaries are also involved in various claims, lawsuits and other
proceedings not discussed herein which relate to a wide variety of matters. 
Uncertainties are inherent in the final outcome of those and the below-
described matters and it is presently impossible to determine the actual
costs that ultimately may be incurred.  Nevertheless, the Company believes
(unless otherwise indicated below) that the resolution of such
uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's liquidity, consolidated financial position
or results of operations.

          Certain present  and former directors and officers of the Company
are defendants in certain of the actions described below.  The Company's
bylaws provide for indemnification of its officers and directors to the
fullest extent permitted by Delaware law.  The Company is obligated to
advance defense costs to its officers and directors, subject to the
individual's obligation to repay such amount if it is ultimately determined
that the individual was not entitled to indemnification.  In addition, the
Company's indemnity obligation can under certain circumstances include
amounts other than defense costs, including judgments and settlements.

USAT MATTERS 

          In October 1994, the Company learned that the United States
Department of Treasury's Office of Thrift Supervision ("OTS") had commenced
an investigation into United Financial Group, Inc. ("UFG") and the
insolvency of its wholly owned subsidiary, United Savings Association of
Texas ("USAT").  In December 1988, the Federal Home Loan Bank Board
("FHLBB") placed USAT into receivership and appointed the Federal Savings &
Loan Insurance Corp. ("FSLIC") as receiver.  At the time of the
receivership, the Company owned approximately 13% of the voting stock of
UFG.  The OTS, successor to the FHLBB for some purposes, subsequently
requested certain documents from the Company which the Company has been
working to provide.  The OTS also has deposed certain current and former
officers and/or directors of the Company.

          On December 26, 1995, the OTS initiated formal administrative
proceedings (the "OTS action") against the Company and others by filing a
Notice of Charges (the "Notice").  The Notice alleges misconduct by the
Company, Federated Development Company ("Federated"), Mr. Charles Hurwitz
and others (the "respondents") with respect to the failure of USAT.  Mr.
Hurwitz is the Chairman of the Board, Chief Executive Officer and President
of the Company.  Mr. Hurwitz is also the Chairman of the Board and Chief
Executive Officer of Federated, a New York business trust wholly owned by
Mr. Hurwitz, members of his immediate family and trusts for the benefit
thereof.  Mr. Hurwitz and a wholly owned subsidiary of Federated
collectively own approximately 60.7% of the aggregate voting power of the
Company.  The Notice claims that the Company was a savings and loan holding
company, that with others it controlled USAT, and that it was therefore
obligated to maintain the net worth of USAT.  The Notice makes numerous
other allegations against the Company and the other respondents, including
allegations that through USAT it was involved in prohibited transactions
with Drexel, Burnham, Lambert Inc. ("Drexel").  The OTS, among other
things, seeks unspecified damages in excess of $138.0 million from the
Company and Federated, civil money penalties and a removal from, and
prohibition against the Company and the other respondents engaging in, the
banking industry.  On February 20, 1996, the respondents filed their
responses to the Notice.  The administrative law judge has set this matter
for hearing on January 21, 1997.  It is impossible to predict the ultimate
outcome of the foregoing matter or its potential impact on the Company's
liquidity, consolidated financial position or results of operations.

          In a separate but related matter, on December 7, 1995, the
Company filed a petition for review in the U.S. Fifth Circuit Court of
Appeals alleging various statutory violations by certain predecessor
agencies to the OTS and seeking to modify, terminate or set aside the
December 30, 1988 order awarding the bid to acquire USAT to a bidder other
than the Company, whose bid was lower than the Company's bid (i.e. more
costly to the government and taxpayers).  The action is entitled MAXXAM
Inc. v. Office of Thrift Supervision, Department of the Treasury (No.
95-60753) (the "MAXXAM v. OTS action").  The bidder that was awarded USAT
subsequently filed a motion to intervene in this action and on March 6,
1996, the Court granted the motion.

          In another separate but related matter, on February 21, 1996, the
Company filed an action, pursuant to the Freedom of Information Act,
entitled MAXXAM Inc. v. FDIC (No. H-96-6041) (the "MAXXAM v. FDIC action")
in the U.S. District Court for the Southern District of Texas seeking to
compel the Federal Deposit Insurance Corporation ("FDIC") to produce
certain documents concerning the bidding process for and award of USAT.

          On August 2, 1995, the FDIC filed a civil action entitled Federal
Deposit Insurance Corporation, as manager of the FSLIC Resolution Fund v.
Charles E. Hurwitz (No. H-95-3936) (the "FDIC action") in the U.S. District
Court for the Southern District of Texas.  This action did not name the
Company as a defendant.  The suit against Mr. Hurwitz seeks damages in
excess of $250.0 million based on the allegation that Mr. Hurwitz was a
controlling shareholder, de facto senior officer and director of USAT, and
was involved in certain decisions which contributed to the insolvency of
USAT.  The FDIC further alleges, among other things, that Mr. Hurwitz was
obligated to ensure that UFG, Federated and the Company maintained the net
worth of USAT.  On October 24, 1995, Mr. Hurwitz filed a motion to dismiss
this action.  On November 14, 1995, Mr. Hurwitz filed a motion to join the
OTS to this action.  The Company and certain other respondents in the OTS
action subsequently filed motions to intervene in this action; the Company
conditioned its motion on the Court joining the OTS to this action. The
Company filed with its motion to intervene a proposed complaint which
alleges that the OTS violated the Administrative Procedures Act by
rejecting the Company's bid for USAT.  The FDIC is opposing the motion to
join the OTS and the intervention motions and is seeking to stay  this
action pending the outcome of the OTS action or proceed in this case only
against Mr. Hurwitz.  It is impossible to predict the ultimate outcome of
the foregoing matter or its potential impact on the Company's liquidity,
consolidated financial position or results of operations.

          In January 1995, an action entitled U.S., ex rel., Martel v.
Hurwitz, et al. was filed in the U.S. District Court for the Northern
District of California (No. C950322) and names as defendants the Company,
Mr. Hurwitz, MGI, Federated, UFG and a former director of the Company. 
This action is purportedly brought by plaintiff on behalf of the U.S.
government; however, the U.S. government has declined to participate in the
suit.  The suit alleges that defendants made false statements and claims in
violation of the Federal False Claims Act in connection with USAT. 
Plaintiff alleges, among other things, that defendants used the federally
insured assets of USAT to acquire junk bonds from Michael Milken and Drexel
and that, in exchange, Mr. Milken and Drexel arranged financing for
defendants' various business ventures, including the acquisition of Pacific
Lumber.  Plaintiff alleges that USAT became insolvent in 1988 and that
defendants should be required to pay $1.6 billion (subject to trebling) to
cover USAT's losses.  The Company's alleged portion of such damages has not
been specified.  Plaintiff seeks, among other things, that the Court impose
a constructive trust upon the fruits of the alleged improper use of USAT
funds.  On March 22, 1996, the Court granted defendants' motion to have
this case transferred to the U.S. District Court for the Southern District
of Texas.

ZERO COUPON NOTE LITIGATION

          In April 1989, an action was filed against the Company, MGI,
MAXXAM Properties Inc. ("MPI"), a wholly owned subsidiary of MGI, and
certain of the Company's directors in the Court of Chancery of the State of
Delaware, entitled Progressive United Corporation v. MAXXAM Inc., et al.,
Civil Action No. 10785.  Plaintiff purports to bring this action as a
stockholder of the Company derivatively on behalf of the Company and MPI.
In May 1989, a second action containing substantially similar allegations
was filed in the Court of Chancery of the State of Delaware, entitled Wolf
v. Hurwitz, et al. (No. 10846) and the two cases were consolidated
(collectively, the "Zero Coupon Note actions").  The Zero Coupon Note
actions relate to a Put and Call Agreement entered into between MPI and Mr.
Hurwitz, as well as a predecessor agreement (the "Prior Agreement").  Among
other things, the Put and Call Agreement provided that Mr. Hurwitz had the
option (the "Call") to purchase from MPI certain notes (or the Company's
common stock into which they were converted) for $10.3 million.  In July
1989, Mr. Hurwitz exercised the Call and acquired 990,400 shares of the
Company's common stock.  The Zero Coupon Note actions generally allege that
in entering into the Prior Agreement Mr. Hurwitz usurped a corporate
opportunity belonging to the Company, that the Put and Call Agreement
constituted a waste of corporate assets of the Company and MPI, and that
the defendant directors breached their fiduciary duties in connection with
these matters.  Plaintiffs seek to have the Put and Call Agreement declared
null and void, among other remedies.

RANCHO MIRAGE LITIGATION

          In May 1991, a derivative action entitled Progressive United
Corporation v. MAXXAM Inc., et al. (No. 12111) (the "Progressive United
action") was filed in the Court of Chancery, State of Delaware against the
Company, Federated, MCO Properties Inc., a wholly owned subsidiary of the
Company ("MCOP"), and the Company's Board of Directors.  The action alleges
abuse of control and breaches of fiduciary obligations based on, and unfair
consideration for, the Company's Agreement in Principle with Federated to
(a) forgive payments of principal and interest of approximately $32.2
million due from Federated under two loan agreements entered into between
MCOP and Federated in 1987 (and later assigned by MCOP to the Company), and
(b) grant an additional $11.0 million of consideration to Federated, in
exchange for certain real estate assets valued at approximately $42.9
million in Rancho Mirage, California, held by Federated (the "Mirada
transactions").  Plaintiff seeks, among other things, an accounting under
the loan agreements, repayment of any losses or damages suffered by the
Company or MCOP, costs and attorneys fees.

          The following six additional lawsuits, similar to the Progressive
United action, were filed in 1991 and 1992 in Delaware Chancery Court
challenging the Mirada transactions: NL Industries, et al. v. MAXXAM Inc.,
et al. (No. 12353); Kahn, et al. v. Federated Development Company, et al.
(No. 12373); Thistlethwaite, et al. v. MAXXAM Inc., et al. (No. 12377);
Glinert, et al. v. Hurwitz, et al. (No. 12383); Friscia, et al. v. MAXXAM
Inc., et al. (No. 12390); and Kassoway, et al. v. MAXXAM Inc., et al. (No.
12404).  The Kahn, Glinert, Friscia and Kassoway actions have been
consolidated with the Progressive United action into In re MAXXAM
Inc./Federated Development Shareholders Litigation (No. 12111); the NL
Industries action has been "coordinated" with the consolidated actions; and
the Thistlethwaite action has been stayed pending the outcome of the
consolidated actions.  In January 1994, a derivative action entitled NL
Industries, Inc., et al. v. Federated Development Company, et al. (No.
94-00630) was filed in the District Court of Dallas County, Texas, against
the Company (as nominal defendant) and Federated.  This action contains
allegations and seeks relief similar to that contained in the In re MAXXAM
Inc./Federated Development Shareholders Litigation.  The parties have
agreed to stay this action in light of the In re MAXXAM Inc./Federated
Development Shareholders Litigation.  With respect to the In re MAXXAM
Inc./Federated Development Shareholders Litigation, on February 10, 1995,
the Court issued its decision disapproving a previously announced proposed
settlement and on June 23, 1995, the Court denied defendants' motion to
dismiss certain of plaintiffs' claims.  This matter was tried before the
Court commencing January 29, 1996.  The Court has scheduled a hearing for
April 2, 1996 on various trial-related matters, including defendants'
motion to dismiss the claims relating to the 1987 loan transactions.

KAISER LITIGATION

     ENVIRONMENTAL LITIGATION

          Aberdeen Pesticide Dumps Site Matter
          The Aberdeen Pesticide Dumps Site, listed on the Superfund
National Priorities List, is composed of five separate sites around the
town of Aberdeen, North Carolina (collectively, the"Sites").  The Sites are
of concern to the United States Environmental Protection Agency (the"EPA")
because of their past use as either pesticide formulation facilities or
pesticide disposal areas from approximately the mid-1930's through the
late-1980's.  The United States filed a cost recovery complaint (the
"Complaint") in the United States District Court for the Middle District of
North Carolina, Rockingham Division, No. C-89-231-R, which, as amended,
includes KACC and a number of other defendants.  The Complaint, as amended,
seeks reimbursement for past and future response costs and a determination
of liability of the defendants under Section 107 of CERCLA.  The EPA has
performed a Remedial Investigation/Feasibility Study and issued a Record of
Decision ("ROD") for the Sites in September 1991.  The estimated cost of
the major soil remediation remedy selected for the Sites is approximately
$32 million.  Other possible remedies described in the ROD would have
estimated costs of approximately $53 million and $222 million,
respectively.  The EPA has stated that it has incurred past costs at the
Sites in the range of $7.5 - $8.0 million as of February 9, 1993, and
alleges that response costs will continue to be incurred in the future.

          On May 20, 1993, the EPA issued three unilateral Administrative
Orders under Section 106(a) of CERCLA ordering the respondents, including
KACC, to perform the soil remedial design and remedial action described in
the ROD for three of the Sites.  The estimated cost as set forth in the ROD
for the remedial action at the three Sites is approximately $27 million.  A
number of other companies are also named as respondents.  KACC has entered
into a PRP Participation Agreement with certain of the respondents (the
"Aberdeen Site PRP Group" or the "Group") to participate jointly in
responding to the Administrative Orders dated May 20, 1993, regarding soil
remediation, to share costs incurred on an interim basis, and to seek to
reach a final allocation of costs through agreement or to allow such final
allocation and determination of liability to be made by the United States
District Court.  By letter dated July 6, 1993, KACC has notified the EPA of
its ongoing participation with such group of respondents which, as a group,
are intending to comply with the Administrative Orders to the extent
consistent with applicable law.  By letters dated December 30, 1993, the
EPA notified KACC of its potential liability for, and requested that KACC,
along with a number of other companies, undertake or agree to finance
groundwater remediation at certain of the Sites.  The ROD-selected remedy
for the groundwater remediation selected by EPA includes a variety of
techniques.  The EPA has estimated the total present worth cost, including
thirty years of operation and maintenance, at approximately $11.8 million. 
On June 22, 1994, the EPA issued two unilateral Administrative Orders under
Section 106(a) of CERCLA ordering the respondents, including KACC, to
undertake the groundwater remediation at three of the Sites.  A PRP
Participation Agreement with respect to groundwater remediation has been
entered into by certain of the respondents, including KACC.

          By letter dated March 6, 1996, KACC gave notice of withdrawal
from the Aberdeen Site PRP Group pursuant to the provisions of the PRP
Participation Agreement.  KACC advised the Group and the EPA that even if
it were liable for cleanup at the Sites, which is expressly denies, it had
already contributed far more than its allocable potential share of response
costs.  KACC has advised the Group and the EPA that it has fully complied
with the Unilateral Orders and that should additional evidence be presented
which demonstrates KACC's liability in excess of the amount contributed to
date, KACC would be willing to discuss the matter further at that time. 

          United States of America v. Kaiser Aluminum & Chemical
Corporation
          In February 1989, a civil action was filed by the United States
Department of Justice (the "DOJ") at the request of the EPA against KACC in
the United States District Court for the Eastern District of Washington,
Case No. C-89-106-CLQ.  The complaint alleged that emissions from certain
stacks at KACC's Trentwood facility in Spokane, Washington intermittently
violated the opacity standard contained in the Washington State
Implementation Plan ("SIP"), approved by the EPA under the federal Clean
Air Act.  The complaint sought injunctive relief, including an order that
KACC take all necessary action to achieve compliance with the SIP opacity
limit and the assessment of civil penalties of not more than $25,000 per
day.

          KACC and the EPA, without adjudication of any issue of fact or
law, and without any admission of the violations alleged in the underlying
complaint, have entered into a Consent Decree, which was approved by a
Consent Order entered by United States District Court for the Eastern
District of Washington in January 1996.  As approved, the Consent Decree
settles the underlying disputes and requires KACC to (i) pay a $.5 million
civil penalty (which penalty has been paid), (ii) complete a program of
plant improvements and operational changes that began in 1990 at its
Trentwood facility, including the installation of an emission control
system to capture particulate emissions from certain furnaces, and (iii)
achieve and maintain furnace compliance with the opacity standard in the
SIP by no later than February 28, 1997.  Kaiser anticipates that capital
expenditures for the environmental upgrade of the furnace operation at its
Trentwood facility, including the improvements and changes required by the
Consent Decree, will be approximately $20.0 million.

          Catellus Development Corporation v. Kaiser Aluminum & Chemical
               Corporation and James L. Ferry & Son Inc.
          In January 1991, the City of Richmond, et al. (the "Plaintiffs")
filed a Second Amended Complaint for Damages and Declaratory Relief against
the United States, Catellus Development Corporation ("Catellus") and other
defendants (collectively, the "Defendants") alleging, among other things,
that the Defendants caused or allowed hazardous substances, pollutants,
contaminants, debris and other solid wastes to be discharged, deposited,
disposed of or released on certain property located in Richmond, California
(the "Property") formerly owned by Catellus and leased to KACC for the
purpose of shipbuilding activities conducted by KACC on behalf of the
United States during World War II.  The Plaintiffs sought recovery of
response costs and natural resource damages under CERCLA.  Certain of the
Plaintiffs alleged they had incurred or expected to incur costs and damages
of approximately $49 million.  Catellus subsequently filed a third party
complaint (the "Third Party Complaint") against KACC in the United States
District Court for the Northern District of California, Case No. C-89-2935
DLJ.  Thereafter, the Plaintiffs filed a separate complaint against KACC,
Case No C-92-4176.  The Plaintiffs settled their CERCLA and tort claims
against the United States for $3.5 million plus thirty-five percent (35%)
of future response costs.

          The trial involving this case commenced in March 1995.  During
the trial, the Plaintiffs settled their claims against Catellus in exchange
for payment of approximately $3.25 million.  Subsequently, on June 2, 1995,
the United States District Court for the Northern District of California
issued an order on the remaining claims in that action.  On December 7,
1995, the District Court issued the Final Judgment on those claims
concluding that KACC is liable for various costs and interest, aggregating
approximately $2.2 million, fifty percent (50%) of the future costs of
cleaning up certain parts of the Property and certain fees and costs
associated specifically with the claim by Catellus against KACC.  In
January 1996, Catellus filed a notice of appeal with respect to its
indemnity judgment against KACC.  KACC has since filed a notice of cross
appeal as to the Court's decision adjudicating that KACC is obligated to
indemnify Catellus.  In February 1996, the Plaintiffs filed motions, which
KACC intends to contest, seeking reimbursement of fees and costs from KACC
in the aggregate amount of $2.76 million.

          Waste Inc. Superfund Site
          On December 8, 1995, the EPA issued a unilateral Administrative
Order for Remedial Design and Remedial Action under CERCLA to KACC and
thirty-one other respondents for remedial design and action at the Waste
Inc. Superfund Site at Michigan City, Indiana.  This site was operated as a
landfill from 1965 to 1982.  KACC is alleged to have arranged for the
disposal of waste from its formerly-owned plant at Wanatah, Indiana, during
the period from 1964 to 1972.  In its Record of Decision, the EPA estimated
the cost of the work to be performed to have a present value of $15.7
million.  KACC's share of the total waste sent to the site is unknown.  A
consultant retained by a group of PRPs estimated that KACC contributed 2.0%
of the waste sent to the site by the forty-one largest contributors. 
KACC's ultimate exposure will depend on the number of PRPs that participate
and the volume of waste properly allocable to KACC.  Based on the EPA's
cost estimate, KACC believes that its financial exposure for remedial
design and remedial action at this site is less than $.5 million.  A PRP
participation agreement is under negotiation.

          Asbestos-Related Litigation
          KACC is a defendant in a number of lawsuits, some of which
involve claims of multiple persons, in which the plaintiffs allege that
certain of their injuries were caused by, among other things, exposure to
asbestos during, and as a result of, their employment or association with
KACC or exposure to products containing asbestos produced or sold by KACC. 
The lawsuits generally relate to products KACC has not manufactured for at
least fifteen years.  At December 31, 1995, the number of such claims
pending was approximately 59,700, as compared with 25,200 at December 31,
1994.  In 1995, approximately 41,700 of such claims were received and 7,200
settled or dismissed.  KACC has been advised by its regional counsel that,
although there can be no assurance, the recent increase in pending claims
may be attributable in part to tort reform legislation in Texas which was
passed by the legislature in March 1995 and which became effective on
September 1, 1995.  The legislation, among other things, is designed to
restrict, beginning September 1, 1995, the filing of cases in Texas that do
not have a sufficient nexus to that jurisdiction, and to impose, generally
as of September 1, 1996, limitations relating to joint and several
liability in tort cases.  A substantial portion of the asbestos-related
claims that were filed and served on KACC between June 30, 1995 and
November 30, 1995 were filed in Texas prior to September 1, 1995.  For
additional information, see Item 7. "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Financial Condition and
Investing and Financing Activities--Aluminum Operations" for additional
information.  See also Note 9 to the Company's Consolidated Financial
Statements under the heading "Asbestos Contingencies."

     OTHER KAISER PROCEEDINGS 

          Recapitalization Litigation
          On September 11, 1995, Kaiser announced that it had appointed an
independent committee of its Board of Directors to consider a possible
recapitalization transaction. On February 5, 1996, Kaiser publicly
announced that it had filed a preliminary proxy statement with the
Securities and Exchange Commission relating to a proposed recapitalization. 
A special shareholders' meeting to consider the recapitalization was
subsequently scheduled for April 10, 1996 and the definitive proxy
statement was mailed to shareholders commencing on March 20, 1996.  See
Note 7 to the Consolidated Financial Statements of the Company under Item 8
for a description of the proposed recapitalization.  On March 19, 1996, a
lawsuit was filed against the Company, Kaiser and Kaiser's directors
challenging and seeking to enjoin the recapitalization and the April 10,
1996 special shareholders' meeting.  The suit, which is entitled Matheson
et. al. v. Kaiser Aluminum Corporation et. al. (No. 14900) and was filed in
the Delaware Court of Chancery, purports to be a class action by persons
who as of March 18, 1996 (the record date for the April 10, 1996 meeting)
owned Kaiser's outstanding common stock and 8.255% PRIDES, Convertible
Preferred Stock ("PRIDES").  Plaintiffs allege, among other things,
breaches of fiduciary duties by certain defendants and that the proposed
recapitalization violates Delaware law and the certificate of designation
for the PRIDES.  Plaintiffs seek injunctive relief, rescission, rescissory
damages and other relief.  A hearing on the motion for injunctive relief is
presently scheduled for April 8, 1996.

          Hammons Action
          On March 5, 1996, a class action complaint was filed in
California against the Company, Alcan Aluminum Corp., Aluminum Company of
America, Alumax, Inc. Reynolds Metal Company, the Aluminum Association and
others in the Superior Court of California for the County of Los Angeles,
Case No. BC145612.  The complaint claims that the defendants conspired, in
violation of state antitrust laws, to raise, stabilize and maintain the
price of primary aluminum and aluminum products through cuts in production
allegedly in connection with the ratification of a Memorandum of
Understanding in 1994 by representatives of the authorities of Australia,
Canada, the European Union, Norway, the Russian Federation and the United
States.  The complaint seeks certification of a class consisting of persons
who at any time between January 1, 1994, and the date of the complaint
purchased aluminum or aluminum products manufactured by one or more of the
defendants and estimates damages sustained by the class to be $4.4 billion,
before trebling.

          DOJ Investigation
          On August 24, 1994, the DOJ issued Civil Investigative Demand No.
11356 ("CID No. 11356") requesting information from Kaiser regarding (i)
its production, capacity to produce, and sales of primary aluminum from
January 1, 1991, to the date of the response; (ii) any actual or
contemplated reduction in its production of primary aluminum during that
period; and (iii) any communications with others regarding any actual,
contemplated, possible or desired reductions in primary aluminum production
by Kaiser or any of its competitors during that period.  Management
believes that Kaiser's actions have at all times been appropriate, and
Kaiser has submitted documents and interrogatory answers to the DOJ
responding to CID No. 11356.

          On March 27, 1995, the DOJ issued Civil Investigative Demand No.
12503 ("CID No. 12503"), as part of an industry-wide investigation,
requesting information from KACC regarding (i) any actual or contemplated
changes in its method of pricing can stock from January 1, 1994, through
March 31, 1995; (ii) the percentage of aluminum scrap and primary aluminum
ingot used by KACC to produce can stock and the manner in which KACC's cost
of acquiring aluminum scrap is factored into its can stock prices; and
(iii) any communications with others regarding any actual or contemplated
changes in its method of pricing can stock from January 1, 1994, through
March 31, 1995.  Kaiser believes that KACC's actions have at all times been
appropriate, and KACC has submitted documents and interrogatory answers to
the DOJ responding to CID No. 12503.

PACIFIC LUMBER LITIGATION

          In September 1989, seven past and present employees of Pacific
Lumber brought an action against Pacific Lumber, the Company, MGI, and
certain current and former directors and officers of the Company, Pacific
Lumber and MGI, in the United States District Court, Northern District of
California, entitled Kayes, et al. v. Pacific Lumber Company, et al. (No.
C89-3500) (the "Kayes action").  Plaintiffs purport to be participants in
or beneficiaries of Pacific Lumber's former Retirement Plan (the
"Retirement Plan") for whom a group annuity contract was purchased from
Executive Life Insurance Company ("Executive Life") in 1986 after
termination of the Retirement Plan.  The Kayes action alleges that the
Company, Pacific Lumber and MGI defendants breached their ERISA fiduciary
duties to participants and beneficiaries of the Retirement Plan by
purchasing the group annuity contract from Executive Life and selecting
Executive Life to administer the annuity payments.  Plaintiffs seek, among
other things, a new group annuity contract on behalf of the Retirement Plan
participants and beneficiaries.  This case was dismissed on April 14, 1993
and was refiled as Jack Miller, et al. v. Pacific Lumber Company, et al.
(No. C-89-3500-SBA) (the "Miller action") on April 26, 1993.  The Miller
action was dismissed on May 14, 1993.  On October 22, 1994, the President
signed the Pension Annuitants' Protection Act of 1994, which is intended,
in part, to overturn the District Court's dismissal of the Miller action
and to make available certain remedies not previously provided under ERISA. 
On April 10, 1995, the U.S. Ninth Circuit Court of Appeals reversed the
dismissal of the Miller action.  On August 7, 1995, the defendants
requested the U.S. Supreme Court to review the case by filing a petition
for writ of certiorari.  The U.S. Supreme Court denied defendants' petition
for writ of certiorari.

          In June 1991, the U.S. Department of Labor filed a civil action
entitled Lynn Martin, Secretary of the U.S. Department of Labor v. The
Pacific Lumber Company, et al. (No. 91-1812-RHS) (the "DOL civil action")
in the United States District Court, Northern District of California,
against the Company, Pacific Lumber, MGI and certain of their current and
former officers and directors.  The allegations in the DOL civil action are
substantially similar to that in the Kayes action.

          On December 8, 1995, the parties in the Kayes/Miller actions and
DOL civil action reached an agreement in principle to settle these matters
(for an amount which would not result in any additional charge to the
Company's results of operations).  The proposed settlement is subject to
execution of a definitive agreement and other contingencies.  A status
conference is scheduled for April 12, 1996 in the Kayes/Miller action and
the DOL civil action.  A special committee of the Board of Directors of the
Company has been appointed to review the proposed settlement and a related
derivative action.  The Company believes the settlement of this litigation
will not have a material adverse effect on the Company's liquidity,
consolidated financial position or results of operations.

          On September 15, 1995, an action entitled Marbled Murrelet, et
al. v. Bruce Babbitt, et al. (No. C-95-3261) (the "Marbled Murrelet
action") was filed in the U.S. District Court for the Northern District of
California.  This action relates to exemptions for forest health which
Pacific Lumber and its subsidiaries had previously filed covering their
entire timberlands.  As amended, the complaint alleges, among other things,
violations of the ESA, the National Environmental Protection Act ("NEPA")
and the Administrative Procedures Act ("APA").  Plaintiffs claim, among
other things, that the timber harvesting operations pursuant to the forest
health exemptions will contribute to the destruction of habitat for the
marbled murrelet and the northern spotted owl.  Following a hearing on
September 28, 1995, the Court dissolved a temporary restraining order
("TRO") and issued a preliminary injunction enjoining Pacific Lumber and
its subsidiaries from conducting timber harvesting operations under
portions of the forest health exemptions until a trial on the merits of the
case.  The majority of the timberlands which are subject to the injunction
are timberlands which have been proposed as critical habitat for the
marbled murrelet.  In October 1995, Pacific Lumber appealed the issuance of
the preliminary injunction to the U.S. Ninth Circuit Court of Appeals; oral
argument in the appeal was held March 14, 1996.  On March 6, 1996, the
plaintiffs asked for leave to amend their pleadings to add additional
claims and seek additional injunctive relief concerning, among other
things, Pacific Lumber's Owl Plan and up to eight other THPs (only two of
which are presently approved).  The eight THPs cover approximately 1,360
acres of the Company's timberlands and represent a substantial portion of
the volume Pacific Lumber and its subsidiaries are planning to utilize in
their operations for 1996.  On March 15, 1996, the Court granted
plaintiffs' motion to file an amended complaint and issued a TRO enjoining
Pacific Lumber and its subsidiaries from harvesting pursuant to the eight
THPs. On March 20, 1996, the Court held a hearing on plaintiffs' motion for
preliminary injunction and extended the TRO for ten additional days while
it considers the motion.  In view of the recent developments in the Marbled
Murrelet action, the Company is uncertain as to whether or not this matter
will have a material adverse effect on the liquidity, results of
operations, or financial position of Pacific Lumber.  

          Judicial or regulatory actions adverse to Pacific Lumber,
increased regulatory delays and inclement weather in northern California,
independently or collectively, could impair Pacific Lumber's ability to
maintain adequate log inventories and force Pacific Lumber to temporarily
idle or curtail operations at certain of its lumber mills from time to
time.

OTHER LITIGATION MATTERS

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

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

          Not applicable.

                                  PART II


ITEM 5.        MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
               STOCKHOLDER MATTERS

          Reference is made to this section in the portions of the
Company's 1995 Annual Report to Stockholders (the "Annual Report") which
are included as part of Exhibit 13.1 hereto and incorporated herein by
reference.

ITEM 6.        SELECTED FINANCIAL DATA

          Reference is made to this section in the portions of the Annual
Report which are included as part of Exhibit 13.1 hereto and incorporated
herein by reference.

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

          Reference is made to this section in the portions of the Annual
Report which are included as part of Exhibit 13.1 hereto and incorporated
herein by reference.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          Reference is made to the Consolidated Financial Statements and
Notes thereto and the quarterly financial information in the portions of
the Annual Report which are included as part of Exhibit 13.1 hereto and
incorporated herein by reference.

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

          None.

                                  PART III


          Information required under Part III (Items 10, 11, 12 and 13) has
been omitted from this report since the Company intends to file with the
Securities and Exchange Commission, not later than 120 days after the close
of its fiscal year, a definitive proxy statement pursuant to Regulation 14A
which involves the election of directors.

                                  PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A)  INDEX TO FINANCIAL STATEMENTS

          1.        FINANCIAL STATEMENTS (INCLUDED UNDER ITEM 8):

                    The Consolidated Financial Statements and the
                    Report of Independent Public Accountants are
                    included on pages 39 to 72 of the Annual Report
                    which are included as part of Exhibit 13.1 hereto
                    and incorporated herein by reference.

          2.        FINANCIAL STATEMENT SCHEDULES:                     PAGE


<TABLE>

<CAPTION>
                    <S>                                                                                                      <C>  
                    Report of Independent Public Accountants on Financial Statement Schedule                                    40
                    Schedule I - Condensed Financial Information of Registrant at December 31, 1995
                       and 1994 and for the years ended December 31, 1995, 1994 and 1993                                     41-44

</TABLE>


                    All other schedules are inapplicable or the
                    required information is included in the
                    Consolidated Financial Statements or the Notes
                    thereto.

(B)  REPORTS ON FORM 8-K

          None.

(C)  EXHIBITS

          Reference is made to the Index of Exhibits immediately preceding
the exhibits hereto (beginning on page 46), which index is incorporated
herein by reference.

                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Stockholders and Board of Directors of MAXXAM Inc.:

          We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in MAXXAM Inc.'s
1995 Annual Report to Stockholders incorporated by reference in this Form
10-K, and have issued our report thereon dated February 16, 1996.  Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole.  The schedule listed in the index on page 39 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not
part of the basic consolidated financial statements.  This schedule has
been subjected to the auditing procedures applied in the audits of the
basic consolidated financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as
a whole.


                                        ARTHUR ANDERSEN LLP


Houston, Texas
February 16, 1996

         SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                       BALANCE SHEET (UNCONSOLIDATED)


<TABLE>

<CAPTION>

                                                                                   December 31,      
                                                                             -----------------------
                                                                                1995         1994   
                                                                             ----------   ----------
                                                                                 (In millions of
                                                                                      dollars)
<S>                                                                          <C>          <C>
                                  ASSETS

Current assets:
     Cash and cash equivalents                                               $    20.4    $    15.5 
     Marketable securities                                                         9.3         20.8 
     Other current assets                                                          1.8          4.4 
                                                                             ----------   ----------
          Total current assets                                                    31.5         40.7 
Deferred income taxes                                                             64.2         68.4 
Other assets                                                                       3.7          4.6 
                                                                             ----------   ----------
                                                                             $    99.4    $   113.7 
                                                                             ==========   ==========

                  LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued liabilities                                $     7.4    $    10.5 
     Long-term debt, current maturities                                             .2          2.4 
                                                                             ----------   ----------
          Total current liabilities                                                7.6         12.9 
Long-term debt, less current maturities                                           41.6         44.6 
Losses recognized in excess of investment in subsidiaries                         12.4        198.9 
Notes payable to subsidiaries, net of notes receivable and advances               18.8         12.2 
Other noncurrent liabilities                                                     102.8        120.4 
                                                                             ----------   ----------
          Total liabilities                                                      183.2        389.0 
                                                                             ----------   ----------

Stockholders' deficit:
     Preferred stock, $.50 par value; 12,500,000 shares authorized; Class
          A $.05 Non-Cumulative Participating Convertible Preferred
          Stock; shares issued: 1995 - 669,701 and 1994 - 669,957                   .3           .3 
     Common stock, $.50 par value; 28,000,000 shares authorized; shares
          issued: 10,063,359                                                       5.0          5.0 
     Additional capital                                                          155.0         53.2 
     Accumulated deficit                                                        (208.5)      (302.9)
     Pension liability adjustment                                                (16.1)       (11.4)
     Treasury stock, at cost (shares held: preferred - 845; common: 1995
          - 1,355,512 and 1994 - 1,355,768)                                      (19.5)       (19.5)
                                                                             ----------   ----------
          Total stockholders' deficit                                            (83.8)      (275.3)
                                                                             ----------   ----------
                                                                             $    99.4    $   113.7 
                                                                             ==========   ==========

</TABLE>

                    STATEMENT OF OPERATIONS (UNCONSOLIDATED)

<TABLE>

<CAPTION>
                                                                                Years Ended December 31,      
                                                                          ------------------------------------
                                                                             1995         1994         1993   
                                                                          ----------   ----------   ----------
                                                                                (In millions of dollars)
<S>                                                                       <C>          <C>          <C>
Investment, interest and other income                                     $     5.6    $    12.6    $     3.0 
Interest expense                                                               (6.2)       (11.7)       (13.7)
General and administrative expenses                                           (18.9)       (11.0)       (15.4)
Equity in earnings (losses) of subsidiaries                                    43.6       (132.0)      (615.5)
                                                                          ----------   ----------   ----------
Income (loss) before income taxes and cumulative effect of changes in
     accounting principles                                                     24.1       (142.1)      (641.6)
Credit (provision) for income taxes                                            33.4         20.0         (3.1)
                                                                          ----------   ----------   ----------
Income (loss) before cumulative effect of changes in accounting
     principles                                                                57.5       (122.1)      (644.7)
Cumulative effect of changes in accounting principles:
     Postretirement benefits other than pensions, net of related
          credit for income taxes of $.2                                          -            -          (.4)
     Accounting for income taxes                                                  -            -         44.9 
                                                                          ----------   ----------   ----------
Net income (loss)                                                         $    57.5    $  (122.1)   $  (600.2)
                                                                          ==========   ==========   ==========

</TABLE>

                         STATEMENT OF CASH FLOWS (UNCONSOLIDATED)


<TABLE>

<CAPTION>
                                                                                Years Ended December 31,      
                                                                          ------------------------------------
                                                                             1995         1994         1993   
                                                                          ----------   ----------   ----------
                                                                                (In millions of dollars)
<S>                                                                       <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                    $    57.5    $  (122.1)   $  (600.2)
     Adjustments to reconcile net income (loss) to net cash provided
          by (used for) operating activities:
          Equity in losses (earnings) of subsidiaries                         (43.6)       132.0        615.5 
          Net sales of marketable securities                                   14.5          6.8         18.3 
          Amortization of deferred financing costs and discounts on
               long-term debt                                                    .3           .3           .5 
          Cumulative effect of changes in accounting principles, net              -            -        (44.5)
          Decrease in receivables                                                .6          1.1           .8 
          Increase in accrued and deferred income taxes                       (18.9)        (7.9)       (13.1)
          Increase (decrease) in accounts payable and other
               liabilities                                                    (14.5)        (5.3)        24.3 
          Other                                                                 2.3          (.2)         2.6 
                                                                          ----------   ----------   ----------
               Net cash provided by (used for) operating activities            (1.8)         4.7          4.2 
                                                                          ----------   ----------   ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of Kaiser Depositary Shares                             7.6         10.3            - 
     Dividends received from subsidiaries                                       4.8          7.5         66.1 
     Investments in and net advances from (to) subsidiaries                      .4        (27.5)       (22.2)
     Capital expenditures                                                       (.2)         (.4)         (.3)
                                                                          ----------   ----------   ----------
               Net cash provided by (used for) investing activities            12.6        (10.1)        43.6 
                                                                          ----------   ----------   ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Redemption, repurchase of and principal payments on long-term
          debt                                                                 (5.9)        (5.8)       (24.3)
                                                                          ----------   ----------   ----------
               Net cash used for financing activities                          (5.9)        (5.8)       (24.3)
                                                                          ----------   ----------   ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            4.9        (11.2)        23.5
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                 15.5         26.7          3.2 
                                                                          ----------   ----------   ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                  $    20.4    $    15.5    $    26.7 
                                                                          ==========   ==========   ==========

SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
     Reduction of stockholders' deficit due to redemption of Kaiser
          preferred stock                                                 $   136.2    $       -    $       - 
     Distribution received from subsidiary of the Company's payable             8.0        132.0            - 
     Assumption by the Company of subsidiary's payables to the Company
          and affiliates                                                          -        (63.1)           - 
     Net assets transferred (to) from subsidiary                              (14.5)           -         30.5 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid                                                        $     6.0    $     7.0    $     6.8 
     Income taxes paid (refunded)                                               (.3)         1.1          (.5)

</TABLE>


                       NOTES TO FINANCIAL STATEMENTS
                          (IN MILLIONS OF DOLLARS)


A.   DEFERRED INCOME TAXES

          The deferred income tax assets and liabilities reported in the
accompanying unconsolidated balance sheet are determined by computing such
amounts on a consolidated basis, for the Company and members of its
consolidated federal income tax return group, and then reducing such
consolidated amounts by the amounts recorded by the Company's subsidiaries
pursuant to their respective tax allocation agreements with the Company. 
The Company's net deferred income tax assets relate primarily to the excess
of the tax basis over financial statement basis with respect to timber and
timberlands and real estate held for sale by various subsidiaries.  The
Company has concluded that it is more likely than not that these net
deferred income tax assets will be realized based in part upon the
estimated values of the underlying assets which are in excess of their tax
basis.

B.   LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>

<CAPTION>

                                                                                   December 31,      
                                                                             -----------------------
                                                                                1995         1994   
                                                                             ----------   ----------
<S>                                                                          <C>          <C>
14% Senior Subordinated Reset Notes due May 20, 2000                         $    25.0    $    25.0 
12-1/2% Subordinated Debentures due December 15, 1999, net of discount of
     $1.1 and $1.7 at December 31, 1995 and 1994, respectively                    16.5         20.9 
Other                                                                               .3          1.1 
                                                                             ----------   ----------
                                                                                  41.8         47.0 
Less: current maturities                                                           (.2)        (2.4)
                                                                             ----------   ----------
                                                                             $    41.6    $    44.6 
                                                                             ==========   ==========

</TABLE>


          Scheduled maturities of long-term debt outstanding at December
31, 1995 are as follows: years ending December 31, 1996 - $.2; 1997 - $3.3;
1998 - $3.3; 1999 - $11.1; 2000 - $25.0.

C.   NOTES PAYABLE TO SUBSIDIARIES, NET OF NOTES RECEIVABLE AND ADVANCES

          At December 31, 1995, the Company's indebtedness to its
subsidiaries, which includes accrued interest, consists of the following:

<TABLE>

<CAPTION>

                                                                                   December 31,      
                                                                             -----------------------
                                                                                1995         1994   
                                                                             ----------   ----------
<S>                                                                          <C>          <C>
Unsecured note payable, interest at 6%                                       $    18.3    $    60.9 
Unsecured notes payable, interest at 7%                                           13.7         12.9 
Secured notes receivable, interest at 12% on first $15.0, at prime plus
     1% to 2% on remainder                                                           -        (43.6)
Net advances                                                                     (13.2)       (18.0)
                                                                             ----------   ----------
                                                                             $    18.8    $    12.2 
                                                                             ==========   ==========

</TABLE>


          In August 1995, the notes receivable reflected above were
canceled to reduce the 6% unsecured note payable by $45.5 ($43.6 plus
accrued interest).

                                 SIGNATURES


          Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized,
who has signed this report on behalf of the Registrant and as the chief
financial officer of the Registrant.

                                          MAXXAM INC.


Date: March 28, 1996          By:      PAUL N. SCHWARTZ         
                                       Paul N. Schwartz
                              Executive Vice President and Chief
                                       Financial Officer
                                 (Principal Financial Officer)


          Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.


Date: March 28, 1996          By:     CHARLES E. HURWITZ        
                                      Charles E. Hurwitz
                               Chairman of the Board, President
                                              and
                                    Chief Executive Officer


Date: March 28, 1996          By:    ROBERT J. CRUIKSHANK       
                                     Robert J. Cruikshank
                                           Director


Date: March 28, 1996          By:        EZRA G. LEVIN           
                                         Ezra G. Levin
                                           Director


Date: March 28, 1996          By:    STANLEY D. ROSENBERG       
                                     Stanley D. Rosenberg
                                           Director


Date: March 28, 1996          By:      TERRY L. FREEMAN         
                                       Terry L. Freeman
                                     Assistant Controller
                                (Principal Accounting Officer)

                                MAXXAM INC.

                             INDEX OF EXHIBITS


 Exhibit
 Number                          Description                      

     3.1   Restated Certificate of Incorporation of MAXXAM Inc.
           (the "Company" or "MAXXAM") dated April 10, 1989
           (incorporated herein by reference to Exhibit 3.1 to
           the Company's Annual Report on Form 10-K for the year
           ended December 31, 1989)

     3.2   Certificate of Powers, Designations, Preferences and
           Relative, Participating, Optional and Other Rights of
           the Company's Class B Junior Participating Preferred
           Stock (incorporated herein by reference to Exhibit 3.2
           to the Company's Annual Report on Form 10-K for the
           year ended December 31, 1989)

    3.3    Certificate of Designations of Class A $.05 Non-
           Cumulative Participating Convertible Preferred Stock
           of the Company, dated July 6, 1994 (incorporated
           herein by reference to Exhibit 4(c) to the
           Registration Statement of the Company on Form S-8,
           Registration No. 33-54479)

     3.4   By-laws of the Company, as amended on October 6, 1988
           (incorporated herein by reference to Exhibit 3.3 to
           the Company's Annual Report on Form 10-K for the year
           ended December 31, 1988)

     4.1   Indenture between the Company and The Bank of New
           York, Trustee, regarding the Company's 14% Senior
           Subordinated Reset Notes due May 20, 2000
           (incorporated herein by reference to Exhibit 4.1 to
           the Company's Registration Statement on Form S-4,
           Registration No. 33-20096)

     4.2   Indenture dated as of November 15, 1979 between the
           Company and Chemical Bank, Trustee, regarding the
           Company's 12-1/2% Subordinated Debentures due December
           15, 1999 (incorporated herein by reference to Exhibit
           4.2 to the Company's Annual Report on Form 10-K for
           the year ended December 31, 1980)

    4.3    Loan and Pledge Agreement, dated as of October 10,
           1994, between Custodial Trust Company and the Company
           (incorporated herein by reference to Exhibit 4.3 to
           the Company's Annual Report on Form 10-K for the year
           ended December 31, 1994)

     4.4   Indenture, dated as of August 4, 1993, between Shawmut
           Bank, N.A. and MAXXAM Group Inc. ("MGI") regarding
           MGI's 11-1/4% Senior Secured Notes due 2003 and
           12-1/4% Senior Secured Discount Notes due 2003
           (incorporated herein by reference to Exhibit 4.1 to
           MGI's Annual Report on Form 10-K for the year ended
           December 31, 1993, File No. 1-8857; the "MGI 1993 Form
           10-K")

     4.5   Indenture, dated as of February 1, 1993, among Kaiser
           Aluminum & Chemical Corporation ("KACC"), certain
           related corporations and State Street Bank and Trust
           Company (as successor trustee to The First National
           Bank of Boston; "State Street"), regarding KACC's
           12-3/4% Senior Subordinated Notes due 2003 (the "KACC
           Senior Subordinated Note Indenture") (incorporated
           herein by reference to Exhibit 4.1 to KACC's Annual
           Report on Form 10-K for the year ended December 31,
           1993, File No. 1-3605)

     4.6   First Supplemental Indenture, dated as of May 1, 1993,
           to the KACC Senior Subordinated Note Indenture
           (incorporated herein by reference to Exhibit 4.2 to
           KACC's Quarterly Report on Form 10-Q for the quarter
           ended June 30, 1993, File No. 1-3605)

    4.7    Second Supplemental Indenture, dated as of February 1,
           1996, among KACC, certain related corporations and
           State Street, Trustee, regarding KACC's 12-3/4% Senior
           Subordinated Notes due 2003 (incorporated here in by
           reference to Exhibit 4.3 to Kaiser's Annual Report on
           Form 10-K for the year ended December 31, 1995, File
           No. 1-9447)

     4.8   Indenture, dated as of February 17, 1994, among KACC,
           certain related corporations and First Trust National
           Association, Trustee, regarding KACC's 9-7/8% Senior
           Notes due 2002 (incorporated herein by reference to
           Exhibit 4.3 to KACC's Annual Report on Form 10-K for
           the year ended December 31, 1993, File No. 1-3605; the
           "KACC 1993 Form 10-K")

    4.9    First Supplemental Indenture, dated as of February 1,
           1996, among KACC, certain related corporations and
           First Trust National Association, Trustee, regarding
           KACC's 9-7/8% Senior Notes due 2002 (incorporated
           hereby by reference to Exhibit 4.5 to Kaiser's Annual
           Report on Form 10-K for the year ended December 31,
           1995, File No. 1-9447)

    4.10   Credit Agreement, dated as of February 17, 1994 (the
           "Kaiser Credit Agreement"), among Kaiser Aluminum
           Corporation ("Kaiser"), KACC, certain financial
           institutions and BankAmerica Business Credit, Inc., as
           Agent (incorporated herein by reference to Exhibit 4.4
           to the KACC 1993 Form 10-K)

    4.11   First Amendment, dated July 21, 1994, to the Kaiser
           Credit Agreement (incorporated herein by reference to
           Exhibit 4.1 to the Quarterly Report on Form 10-Q of
           Kaiser for the quarter ended June 30, 1994, File No.
           1-9447)

    4.12   Second Amendment, dated March 10, 1995, to the Kaiser
           Credit Agreement (incorporated herein by reference to
           Exhibit 4.6 to the Annual Report on Form 10-K of
           Kaiser for the year ended December 31, 1994, File No.
           1-9447)

    4.13   Third Amendment, dated as of July 20, 1995, to the
           Kaiser Credit Agreement (incorporated herein by
           reference to Exhibit 4.1 to Kaiser's Quarterly Report
           on Form 10-Q for the quarter ended June 30, 1995, File
           No. 1-9447)

    4.14   Fourth Amendment, dated as of October 17, 1995, to the
           Kaiser Credit Agreement (incorporated herein by
           reference to Exhibit 4.1 to Kaiser's Quarterly Report
           on Form 10-Q for the quarter ended September 30, 1995,
           File No. 1-9447)

    4.15   Fifth Amendment, dated December 11, 1995, to the
           Kaiser Credit Agreement (incorporated herein by
           reference to Exhibit 4.11 to Kaiser's Annual Report on
           Form 10-K for the year ended December 31, 1995, File
           No. 1-9447)

    4.16   Certificate of Designation of Series A Mandatory
           Conversion Premium Dividend Preferred Stock of Kaiser,
           dated June 28, 1993 (incorporated herein by reference
           to Exhibit 4.3 to Kaiser's Quarterly Report on Form
           10-Q for the quarter ended June 30, 1993, File No.
           1-9447; the "Kaiser 1993 Third Quarter Form 10-Q")

    4.17   Certificate of Retirement of Kaiser, dated October 24,
           1995, and filed in the state of Delaware Office of the
           Secretary of State on October 25, 1995 (incorporated
           herein by reference to Exhibit 3.2 to Kaiser's Annual
           Report on Form 10-K for the year ended December 31,
           1995, File No. 1-9447)

     4.18  Deposit Agreement between Kaiser and The First
           National Bank of Boston, dated as of June 30, 1993
           (incorporated herein by reference to Exhibit 4.4 to
           the Kaiser 1993 Third Quarter Form 10-Q)

     4.19  Certificate of Designation of 8.255% Preferred
           Redeemable Increased Dividend Equity Securities of
           Kaiser, dated February 17, 1994 (incorporated herein
           by reference to Exhibit 4.21 to Kaiser's Annual Report
           on Form 10-K for the year ended December 31, 1993,
           File No. 1-9447; the "Kaiser 1993 Form 10-K")

     4.20  Indenture, dated as of March 23, 1993, between The
           Pacific Lumber Company ("Pacific Lumber") and State
           Street (as successor trustee to The First National
           Bank of Boston) regarding Pacific Lumber's 10-1/2%
           Senior Notes due 2003 (incorporated herein by
           reference to Exhibit 4.1 to Pacific Lumber's Annual
           Report on Form 10-K for the year ended December 31,
           1993, File No. 1-9204)

     4.21  Indenture, dated as of March 23, 1993, between Scotia
           Pacific Holding Company ("Scotia Pacific") and State
           Street, as Trustee, regarding Scotia Pacific's 7.95%
           Timber Collateralized Notes due 2015 (incorporated
           herein by reference to Exhibit 4.1 to Scotia Pacific's
           Annual Report on Form 10-K for the year ended December
           31, 1993, File No. 33-55538; the "Scotia Pacific 1993
           Form 10-K")

     4.22  Form of Deed of Trust, Security Agreement, Financing
           Statement, Fixture Filing and Assignment, dated as of
           March 23, 1993, among Scotia Pacific, State Street, as
           Trustee, and State Street, as the Collateral Agent
           (incorporated herein by reference to Exhibit 4.2 to
           the Scotia Pacific 1993 Form 10-K)

    4.23   Amended and Restated Credit Agreement of Pacific
           Lumber, dated November 10, 1995 (the "Pacific Lumber
           Credit Agreement") (incorporated herein by reference
           to Exhibit 4.1 to Pacific Lumber's Quarterly Report on
           Form 10-Q for the quarter ended September 30, 1995,
           File No. 1-9204)

    4.24   Form of Deed of Trust, Assignment of Rents, Grant of
           Easement and Fixture Filing with respect to the
           Pacific Lumber Credit Agreement (incorporated herein
           by reference to Exhibit 4.2 to Pacific Lumber's
           Quarterly Report on Form 10-Q for the quarter ended
           September 30, 1995, File No. 1-9204)

   *4.25   Second Amended and Restated Credit and Security
           Agreement, dated July 15, 1995, among the First
           National Bank of Boston, MCO Properties, Inc.,
           Westcliff Development Corporation, Horizon
           Corporation, Horizon Properties Corporation and MCO
           Properties L.P.

     4.26  Loan Agreement, dated June 17, 1991, by and between
           General Electric Capital Corporation ("GECC") and MXM
           Mortgage Corp. (the "GECC Loan Agreement")
           (incorporated herein by reference to Exhibit 10(dd) to
           Amendment No. 4 to MGI's Registration Statement on
           Form S-4 on Form S-2, Registration No. 33-42300; the
           "MGI 1991 Registration Statement")

     4.27  First Renewal, Extension and Modification Agreement,
           dated as of June 17, 1992, among GECC, MXM Mortgage
           Corp. and the Company (incorporated herein by
           reference to Exhibit 4.3 to the Company's Quarterly
           Report on Form 10-Q for the quarter ended September
           30, 1992)

     4.28  Loan Increase, Extension and Modification Agreement,
           dated as of December 30, 1992, among GECC, MXM
           Mortgage Corp. and the Company (incorporated herein by
           reference to Exhibit 4.23 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1992

     4.29  Consent and Assumption Agreement, dated as of December
           10, 1993, among GECC, MXM Mortgage Corp., MXM Mortgage
           L.P., the Company and MGI (incorporated herein by
           reference to Exhibit 4.36 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1993; the "Company 1993 Form 10-K")

     4.30  Third Modification Agreement, dated as of December 30,
           1993, among GECC, MXM Mortgage Corp. and MXM Mortgage
           L.P. (incorporated herein by reference to Exhibit 4.37
           to the Company 1993 Form 10-K)

     4.31  Fourth Amendment to Loan Agreement, dated as of
           December 30, 1993, among GECC, MXM Mortgage Corp. and
           MXM Mortgage L.P. (incorporated herein by reference to
           Exhibit 4.39 to the Company 1993 Form 10-K)

     4.32  Fourth Modification Agreement, dated as of March 31,
           1994, by and among GECC, MXM Mortgage Corp. and MXM
           Mortgage L.P. (incorporated herein by reference to
           Exhibit 4.3 to the Company's Quarterly Report on Form
           10-Q for the quarter ended June 30, 1994; the "Company
           1994 Second Quarter Form 10-Q")

     4.33  Fifth Modification Agreement, dated as of January 13,
           1995, among GECC, MXM Mortgage Corp. and MXM Mortgage
           L.P. (incorporated herein by reference to Exhibit 4.31
           to the Company's Annual Report on Form 10-K for the
           year ended December 31, 1994)

     4.34  Sixth Amendment to Loan Agreement, dated as of January
           13, 1995, among GECC, MXM Mortgage Corp. and MXM
           Mortgage L.P. (incorporated herein by reference to
           Exhibit 4.32 to the Company's Annual Report on Form
           10-K for the year ended December 31, 1994)

   *4.35   Eighth Amendment to Loan Agreement, dated October 21,
           1995, among GECC, MXM Mortgage, L.P. and MXM Mortgage
           Corp.

    4.36   Amended and Restated Indenture dated October 6, 1995
           by and among Sam Houston Race Park, Ltd. ("SHRP"), New
           SHRP Capital Corp., SHRP General Partner, Inc. and
           First Bank National Association, Trustee (incorporated
           herein by reference to Exhibit 4.1 to the Quarterly
           Report on Form 10-Q of SHRP for the quarter ended June
           30, 1995; the "SHRP 1995 Second Quarter Form 10-Q"

    4.37   Amended and Restated Deed of Trust, Assignment,
           Security Agreement and Financing Statement, dated
           October 6, 1995, among SHRP, Richard Prokosch, as
           Trustee, and First Bank National Association, as
           Mortgagee (incorporated herein by reference to Exhibit
           4.2 to the SHRP 1995 Second Quarter Form 10-Q)

    4.38   Deed of Trust, Assignment, Security Agreement and
           Financing Statement, dated October 6, 1995, among
           SHRP, Richard Prokosch, as Trustee, and First Bank
           National Association, as Mortgagee (incorporated
           herein by reference to Exhibit 4.3 to the SHRP 1995
           Second Quarter Form 10-Q)

    4.39   Amended and Restated License Negative Pledge, dated
           October 6, 1995, executed by SHRP in favor of Trustee
           (incorporated herein by reference to Exhibit 4.4 to
           the SHRP 1995 Second Quarter Form 10-Q)

    4.40   Senior Subordinated Intercompany Note between KACC and
           the Company, dated as of January 14, 1993
           (incorporated herein by reference to Exhibit 4.13 to
           Amendment No. 5 to the Form S-1 on Form S-2
           Registration Statement of KACC, Registration No. 33-
           48260

    4.41   Senior Subordinated Intercompany Note between Kaiser
           and KACC, dated February 15, 1994 (incorporated herein
           by reference to Exhibit 4.22 to the Kaiser 1993 Form
           10-K)

    4.42   Senior Subordinated Intercompany Note between Kaiser
           and KACC, dated March 17, 1994 (incorporated herein by
           reference to Exhibit 4.23 to the Kaiser 1993 Form
           10-K)

    4.43   Senior Subordinated Intercompany Note between Kaiser
           and KACC, dated June 30, 1993 (incorporated herein by
           reference to Exhibit 4.24 to the Kaiser 1993 Form
           10-K)

    4.44   Intercompany Note between Kaiser and KACC
           (incorporated herein by reference to Exhibit 4.2 to
           Amendment No. 5 to the Registration Statement of KACC
           on Form S-1, Registration No. 33-30645)

           Note: Pursuant to Regulation Section 229.601, Item
           601(b)(4)(iii) of Regulation S-K, upon request of the
           Securities and Exchange Commission, the Company hereby
           agrees to furnish a copy of any unfiled instrument
           which defines the rights of holders of long-term debt
           of the Company and its consolidated subsidiaries (and
           for any of its unconsolidated subsidiaries for which
           financial statements are required to be filed) wherein
           the total amount of securities authorized thereunder
           does not exceed 10 percent of the total consolidated
           assets of the Company.

   10.1    Tax Allocation Agreement among the Company and KACC
           dated as of December 21, 1989 (incorporated herein by
           reference to Exhibit 10.21 to Amendment No. 6 to the
           Registration Statement of KACC on Form S-1,
           Registration No. 33-30645)

   10.2    Tax Allocation Agreement between Kaiser and the
           Company (incorporated herein by reference to Exhibit
           10.23 to Amendment No. 2 to the Registration Statement
           of Kaiser on Form S-1, Registration No. 33-37895)

   10.3    Tax Allocation Agreement between the Company and MGI,
           dated August 4, 1993 (incorporated herein by reference
           to Exhibit 10.6 to Amendment No. 2 to the Form S-2
           Registration Statement of MGI, Registration No.
           33-56332

   10.4    Tax Allocation Agreement dated as of May 21, 1988
           among the Company, MGI, Pacific Lumber and the
           corporations signatory thereto (incorporated herein by
           reference to Exhibit 10.8 to Pacific Lumber's Annual
           Report on Form 10-K for the year ended December 31,
           1988, File No. 1-9204)

   10.5    Tax Allocation Agreement among Pacific Lumber, Scotia
           Pacific, Salmon Creek Corporation and the Company,
           dated as of March 23, 1993 (incorporated herein by
           reference to Exhibit 10.1 to Amendment No. 3 to the
           Form S-1 Registration Statement of Scotia Pacific,
           Registration No. 33-55538

   10.6    Tax Allocation Agreement between the Company and Britt
           Lumber Co., Inc. (incorporated herein by reference to
           Exhibit 10.4 to the MGI 1993 Form 10-K)

   10.7    Assumption Agreement, dated as of October 28, 1988
           (incorporated herein by reference to Exhibit HHH to
           the Final Amendment to the Schedule 13D of MGI and
           others in respect of the common stock of the Company)

   10.8    Agreement, dated as of June 30, 1993, between Kaiser
           and the Company (incorporated herein by reference to
           Exhibit 10.2 to KACC's Quarterly Report on Form 10-Q
           for the quarter ended June 30, 1993, File No. 1-3605)

   10.9    Undertaking, dated as of August 4, 1993, by the
           Company in favor of MGI (incorporated herein by
           reference to Exhibit 10.27 to the MGI 1993 Form 10-K)

   10.10   Form of Master Purchase Agreement between Pacific
           Lumber and Scotia Pacific, dated as of March 23, 1993
           (incorporated herein by reference to Exhibit 10.1 to
           the Scotia Pacific 1993 Form 10-K)

   10.11   Form of Services Agreement between Pacific Lumber and
           Scotia Pacific, dated as of March 23, 1993
           (incorporated herein by reference to Exhibit 10.2 to
           the Scotia Pacific 1993 Form 10-K)

   10.12   Form of Additional Services Agreement between Pacific
           Lumber and Scotia Pacific, dated as of March 23, 1993
           (incorporated herein by reference to Exhibit 10.3 to
           the Scotia Pacific 1993 Form 10-K)

   10.13   Form of Reciprocal Rights Agreement among Pacific
           Lumber, Scotia Pacific and Salmon Creek Corporation,
           dated as of March 23, 1993 (incorporated herein by
           reference to Exhibit 10.4 to the Scotia Pacific 1993
           Form 10-K)

   10.14   Form of Environmental Indemnification Agreement
           between Pacific Lumber and Scotia Pacific, dated as of
           March 23, 1993 (incorporated herein by reference to
           Exhibit 10.5 to the Scotia Pacific 1993 Form 10-K)

   10.15   Purchase and Services Agreement between Pacific Lumber
           and Britt Lumber Co., Inc., dated as of March 23, 1993
           (incorporated herein by reference to Exhibit 10.17 to
           Amendment No. 2 to the Form S-2 Registration Statement
           of Pacific Lumber, Registration Statement No. 33-56332

   10.16   Exchange Agreement dated as of May 20, 1991 by and
           among the Company, MCO Properties Inc. ("MCOP") and
           Federated Development Company (incorporated by
           reference from Exhibit 10(ff) to the MGI 1991
           Registration Statement)

   10.17   Revolving Credit and Term Loan Agreement, dated as of
           August 27, 1987, as amended, between MCOP and
           Federated Development Company (incorporated herein by
           reference to Exhibit 10.82 to the Company's
           Registration Statement on Form S-4, Registration No.
           33-20096)

   10.18   Term Loan Agreement, dated as of November 17, 1987,
           between MCOP and Federated Development Company
           (incorporated herein by reference to Exhibit 10.83 to
           the Company's Registration Statement on Form S-4,
           Registration No. 33-20096)

   10.19   Put and Call Agreement, dated November 16, 1987 (the "Put 
           and Call Agreement") between Charles E. Hurwitz and MAXXAM 
           Properties Inc. ("MPI") (incorporated herein by reference 
           to Exhibit C to Schedule 13D dated November 24, 1987, 
           filed by MGI with respect to the Company's common stock)

   10.20   Amendment to Put and Call Agreement, dated May 18,
           1988, (incorporated herein by reference to Exhibit D
           to the Final Amendment to Schedule 13D dated May 20,
           1988, filed by MGI relating to the Company's common
           stock)

   10.21   Amendment to Put and Call Agreement, dated as of
           February 17, 1989 (incorporated herein by reference to
           Exhibit 10.35 to the Company's Annual Report on Form
           10-K for the year ended December 31, 1988)

   10.22   Note Purchase Agreement dated July 26, 1982, as
           amended, between the Company and Drexel Burnham
           Lambert Incorporated, relating to the Company's Zero
           Coupon Senior Subordinated Notes due 2007
           (incorporated herein by reference to Exhibit B to
           Schedule 13D dated November 24, 1987, filed by MGI
           relating to the Company's common stock)

   10.23   Third Amended and Restated Limited Partnership
           Agreement of Sam Houston Race Park, Ltd., dated as of
           October 6, 1995 (incorporated herein by reference to
           Exhibit 3.1 to the SHRP 1995 Second Quarter 10-Q)





                Executive Compensation Plans and Arrangements


   10.24   MAXXAM 1994 Omnibus Employee Incentive Plan
           (incorporated herein by reference to Exhibit 99 to the
           Company's Proxy Statement dated April 29, 1994; the
           "Company 1994 Proxy Statement")

   10.25   Form of Stock Option Agreement under the MAXXAM 1994
           Omnibus Employee Incentive Plan (incorporated herein
           by reference to Exhibit 10.30 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1994)

   10.26   MAXXAM 1994 Non-Employee Director Plan (incorporated
           herein by reference to Exhibit 99 to the Company 1994
           Proxy Statement)

   10.27   Form of Stock Option Agreement under the MAXXAM 1994
           Non-Employee Director Plan (incorporated herein by
           reference to Exhibit 10.32 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1994)

   10.28   Form of Deferred Fee Agreement under the MAXXAM 1994
           Non-Employee Director Plan (incorporated herein by
           reference to Exhibit 10.1 to the Company's Quarterly
           Report on Form 10-Q for the quarter ended September
           30, 1994)

   10.29   MAXXAM 1994 Executive Bonus Plan (incorporated herein
           by reference to Exhibit 99 to the Company 1994 Proxy
           Statement)

   10.30   MAXXAM Revised Capital Accumulation Plan of 1988, as
           amended December 12, 1988 (incorporated herein by
           reference to Exhibit 10.1 to the Company's Quarterly
           Report on Form 10-Q for the quarter ended June 30,
           1995)

   10.31   The Company's 1984 Phantom Share Plan, as amended (the
           "Company Phantom Share Plan") (incorporated herein by
           reference to Exhibit 10.6 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1990; the "Company 1990 Form 10-K")

   10.32   Amendment, dated as of March 8, 1990, relating to the
           Company Phantom Share Plan (incorporated herein by
           reference to Exhibit 10.7 to the Company 1990 Form
           10-K)

   10.33   Form of Phantom Share Agreement relating to the
           Company Phantom Share Plan (incorporated herein by
           reference to Exhibit 10.20 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1988)

   10.34   MAXXAM Supplemental Executive Retirement Plan
           (incorporated herein by reference to Exhibit 10(jj) to
           the 1991 MGI Registration Statement)

  *10.35   Form of Company Deferred Compensation Agreement

   10.36   Kaiser 1993 Omnibus Stock Incentive Plan (incorporated
           herein by reference to Exhibit 10.1 to KACC's
           Quarterly Report on Form 10-Q for the quarter ended
           June 30, 1993, File No. 1-3605)

   10.37   Form of Stock Option Agreement under the Kaiser 1993
           Omnibus Stock Incentive Plan (incorporated herein by
           reference to Exhibit 10.41 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1994)

   10.38   KACC's Bonus Plan (incorporated herein by reference to
           Exhibit 10.25 to Amendment No. 6 to the Registration
           Statement of KACC on Form S-1, Registration No. 33-
           30645)

   10.39   Kaiser 1995 Employee Incentive Compensation Program
           (incorporated herein by reference to Exhibit 10.1 to
           Kaiser's Quarterly Report on Form 10-Q for the quarter
           ended March 31, 1995; the "Kaiser 1995 First Quarter
           Form 10-Q")

   10.40   Kaiser 1995 Executive Incentive Compensation Program
           (incorporated herein by reference to Exhibit 99 to
           Kaiser's Proxy Statement dated April 26, 1995)

   10.41   Promissory Note dated February 1, 1989 by Anthony R.
           Pierno and Beverly J. Pierno to the Company (the "1989
           Pierno Note") (incorporated herein by reference to
           Exhibit 10.30 to the Company 1990 Form 10-K)

   10.42   Letter amendment, dated February 28, 1995, to the 1989
           Pierno Note (incorporated herein by reference to
           Exhibit 10.44 to the Company's Annual Report on Form
           10-K for the year ended December 31, 1994)

   10.43   Promissory Note dated July 19, 1990 by Anthony R.
           Pierno to the Company (the "1990 Pierno Note")
           (incorporated herein by reference to Exhibit 10.31 to
           the Company 1990 Form 10-K)

   10.44   Letter amendment, dated February 28, 1995, to the 1990
           Pierno Note (incorporated herein by reference to
           Exhibit 10.46 to the Company's Annual Report on Form
           10-K for the year ended December 31, 1994)

   10.45   Real Estate Lien Note dated July 3, 1990 by Paul N.
           Schwartz and Barbara M. Schwartz, Trustee, to the
           Company (the "Schwartz Note") and related Deed of
           Trust and Letter Agreement (incorporated herein by
           reference to Exhibit 10.35 to the Company 1990 Form
           10-K)

   10.46   Amendment to the Schwartz Note, dated January 25, 1995
           (incorporated herein by reference to Exhibit 10.48 to
           the Company's Annual Report on Form 10-K for the year
           ended December 31, 1994)

   10.47   Real Estate Lien Note dated September 27, 1990 by
           Diane M. Dudley to the Company and related Deed of
           Trust and Letter Agreement (incorporated herein by
           reference to Exhibit 10.41 to the Company 1990 Form
           10-K)

   10.48   Promissory Note, dated July 20, 1993, between the
           Company and Byron L. Wade (incorporated herein by
           reference to Exhibit 10.59 to the Company 1993 Form
           10-K)

   10.49   Promissory Note dated October 4, 1990 by Robert W.
           Irelan and Barbara M. Irelan to KACC (incorporated
           herein by reference to Exhibit 10.54 to the Company
           1990 Form 10-K)

   10.50   Employment Agreement, dated August 20, 1993 between
           KACC and Robert E. Cole (incorporated herein by
           reference to Exhibit 10.63 to the Company's Annual
           Report on Form 10-K for the year ended December 31,
           1993)

   10.51   Employment Agreement, dated as of March 8, 1990,
           between the Company and Anthony R. Pierno
           (incorporated herein by reference to Exhibit 10.28 to
           the Company 1990 Form 10-K)

   10.52   Commercial Guaranty, dated February 22, 1993, executed
           by the Company in favor of Charter National Bank--
           Houston with respect to a loan of Anthony R. Pierno
           (incorporated herein by reference to Exhibit 10.27 to
           Kaiser's Annual Report on Form 10-K for the year ended
           December 31, 1992, File No. 1-9447)

   10.53   Commercial Guaranty, dated January 24, 1994, between
           the Company and Charter National Bank-Houston with
           respect to a loan of Anthony R. Pierno, and a related
           letter agreement (incorporated herein by reference to
           Exhibit 10.50 to the Company's Annual Report on Form
           10-K for the year ended December 31, 1993)

   10.54   Employment Agreement, dated as of March 8, 1990,
           between the Company and Paul N. Schwartz (incorporated
           herein by reference to Exhibit 10.32 to the Company
           1990 Form 10-K)

   10.55   Employment Agreement, dated as of March 8, 1990,
           between the Company and Diane M. Dudley (incorporated
           herein by reference to Exhibit 10.37 to the Company
           1990 Form 10-K)

   10.56   Employment Agreement, dated as of March 8, 1990,
           between the Company and Byron L. Wade (incorporated
           herein by reference to Exhibit 10.50 to the Company
           1990 Form 10-K)

  *11      Computation of Net Income Per Common and Common
           Equivalent Share Information

  *13.1    The portions of the Company's Annual Report to
           Stockholders for the year ended December 31, 1995
           which are incorporated herein by reference

   13.2    Footnote 11 to the consolidated financial statements
           of KACC, entitled Subsidiary Guarantors, (incorporated
           herein by reference to KACC's Annual Report on Form
           10-K for the year ended December 31, 1995, File No. 1-
           3605)

  *21      List of the Company's Subsidiaries

  *23      Consent of Independent Public Accountants by Arthur
           Andersen LLP

  *27      Financial Data Schedule

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* Included with this filing.