<PAGE>   1

================================================================================

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

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 
For the fiscal year ended December 31, 1999 
Commission file number 1-9447



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

        DELAWARE                                        94-3030279
(State of Incorporation)                    (I.R.S. Employer Identification No.)

             5847 SAN FELIPE, SUITE 2600, HOUSTON, TEXAS 77057-3010
               (Address of principal executive offices) (Zip Code)

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

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


                                                    Name of each exchange  
          Title of each class                        on which registered   
          -------------------                        -------------------   
                                                                           
      Common Stock, $.01 par value                 New York Stock Exchange 
                                                  


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X  NO
                         ---   ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___

As of January 28, 2000, there were 79,405,333 shares of the Common Stock of the
registrant outstanding. Based upon the New York Stock Exchange closing price on
January 28, 2000, the aggregate market value of the registrant's Common Stock
held by non-affiliates was $183.1 million.

Certain portions of the registrant's definitive proxy statement to be filed not
later than 120 days after the close of the registrant's fiscal year are
incorporated by reference into Part III of this Report on Form 10-K.



================================================================================


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                                      NOTE





Kaiser Aluminum Corporation's Report on Form 10-K filed with the Securities and
Exchange Commission includes all exhibits required to be filed with the Report.
Copies of this Report on Form 10-K, including only Exhibit 21 of the exhibits
listed on pages 69 - 75 of this Report, are available without charge upon
written request. The registrant will furnish copies of the other exhibits to
this Report on Form 10-K upon payment of a fee of 25 cents per page. Please
contact the office set forth below to request copies of this Report on Form 10-K
and for information as to the number of pages contained in each of the exhibits
and to request copies of such exhibits:



                                        Corporate Secretary
                                        Kaiser Aluminum Corporation
                                        5847 San Felipe, Suite 2600
                                        Houston, Texas  77057
                                        (713) 267-3777
















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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
--------------------------------------------------------------------------------


                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                                       Page
                                                                                                                       ----

<S>                                                                                                                    <C>

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


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


     ITEM 2.      PROPERTIES..................................................................................           15


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


     ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................           17


PART II.......................................................................................................           17


     ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND
                    RELATED STOCKHOLDER MATTERS...............................................................           17


     ITEM 6.      SELECTED FINANCIAL DATA.....................................................................           17


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


     ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..................................           28


     ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................           30


     ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE.......................................................           61


PART III......................................................................................................           61


     ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........................................           61


     ITEM 11.     EXECUTIVE COMPENSATION......................................................................           61


     ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT............................................................................           61


     ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................           61


PART IV.......................................................................................................           61


     ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                    REPORTS ON FORM 8-K.......................................................................           61

SCHEDULE I        ............................................................................................           64

SIGNATURES        ............................................................................................           68

INDEX OF EXHIBITS.............................................................................................           69

EXHIBIT 21        SUBSIDIARIES................................................................................           76
</TABLE>


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PART I


ITEM 1.       BUSINESS

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

General

Kaiser Aluminum Corporation (the "Company"), a Delaware corporation organized in
1987, is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM and one of its
wholly-owned subsidiaries together own approximately 63% of the Company's Common
Stock, with the remaining approximately 37% publicly held. The Company, through
its wholly-owned subsidiary, Kaiser Aluminum & Chemical Corporation ("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 1999, KACC produced
approximately 2,524,000 tons[1] of alumina, of which approximately 83% was sold
to third parties, and produced approximately 426,400 tons of primary aluminum,
of which approximately 62% was sold to third parties. In 1999, KACC shipped
approximately 389,000 tons of fabricated aluminum products to third parties,
which accounted for approximately 5% of total United States domestic shipments.

The Company's operations are conducted through KACC's business units. The
following table sets forth total shipments and intersegment transfers of KACC's
alumina, primary aluminum, and fabricated aluminum operations:


<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                           ----------------------------------
                                                                             1999         1998         1997
                                                                           --------     --------     --------
                                                                                 (in thousands of tons)
<S>                                                                         <C>          <C>          <C>    
ALUMINA: (1)
              Shipments to Third Parties                                    2,093.9      2,250.0      1,929.8
              Intersegment Transfers                                          757.3        750.7        968.0
                                                                           --------     --------     --------

PRIMARY ALUMINUM:                                                           2,851.2      3,000.7      2,897.8
                                                                           --------     --------     --------
              Shipments to Third Parties                                      295.6        263.2        327.9
              Intersegment Transfers                                          171.2        162.8        164.2
                                                                           --------     --------     --------
                                                                              466.8        426.0        492.1
                                                                           --------     --------     --------
FLAT-ROLLED PRODUCTS                                                          217.9        235.6        247.9

ENGINEERED PRODUCTS                                                           171.1        169.4        152.1
</TABLE>


(1)  As a result of the explosion at the Gramercy alumina refinery in July 1999,
     which completely curtailed production ("the Gramercy incident"), shipments
     to third parties and intersegment transfers for 1999 include approximately
     264,000 tons of

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

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

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ITEM 1.       BUSINESS (CONTINUED)

     alumina purchased and resold to certain unaffiliated customers and 131,000
     tons of alumina purchased and transferred to the Company's primary aluminum
     business unit. See Note 2 of Notes to Consolidated Financial Statements for
     additional information regarding the impact of the Gramercy incident.

See Note 12 of Notes to Consolidated Financial Statements for segment and
geographical financial information.

Incident at Gramercy Facility

On July 5, 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. Twenty-four
employees were injured in the incident, several of them severely. As a result of
the incident, alumina production at the facility was completely curtailed.
Production at the plant is currently expected to remain completely curtailed
until the third quarter of 2000 when KACC expects to begin partial production.
Based on current estimates, full production is expected to be achieved during
the first quarter of 2001 or shortly thereafter. KACC has received the
regulatory permit required to operate the plant once the facility is ready to
resume production. In the interim, KACC is purchasing alumina from third
parties, in excess of the amounts of alumina available from other KACC-owned
facilities, to supply major customers' needs and to meet intersegment
requirements.

The cause of the incident is under investigation by KACC and governmental
agencies. In January 2000, the U.S. Mine Safety and Health Administration
("MSHA") issued 21 citations in connection with its investigation of the
incident. The citations allege, among other things, that certain aspects of the
plant's operations were unsafe and that such mode of operation contributed to
the explosion. To date, no monetary penalty has been proposed by MSHA. Although
the Company expects that a fine will be levied, the Company cannot predict the
amount of any such fine(s). It is possible that other civil or criminal fines or
penalties could be levied against KACC. KACC has previously announced that it
disagrees with the substance of the citations and has challenged them. However,
as more fully explained below, based on what is known to date and discussions
with the Company's advisors, the Company believes that the financial impact of
this incident (in excess of insurance deductibles and self-retention provisions)
will be largely offset by insurance coverage. Deductibles and self-retention
provisions under the insurance coverage for the incident total $5.0 million,
which amounts have been charged to Cost of products sold in 1999.

As of December 31, 1999, the Company had recorded estimated recoveries for
clean-up, site preparation and business interruption costs incurred of
approximately $55.0 million. As of December 31, 1999, approximately $50.0
million of insurance recoveries had been received. Additionally through February
29, 2000, KACC had received approximately $25.0 million of additional insurance
recoveries. Also, based on discussions with the insurance carriers and their
representatives and third party engineering reports, KACC recorded a pretax gain
of $85.0 million, representing the difference between the minimum expected
property damage reimbursement amount and the net carrying value of the damaged
property of $15.0 million. KACC continues to work with the insurance carriers to
maximize the amount of recoveries and to minimize, to the extent possible, the
period of time between when KACC expends funds and when it is reimbursed.
However, KACC will likely have to fund an average of 30 - 60 days of property
damage and business interruption activity, unless some other arrangement is
agreed with the insurance carriers, and such amounts will be significant. The
Company believes it has sufficient financial resources to fund the construction
and business interruption costs on an interim basis. However, no assurances can
be given in this regard. If insurance recoveries were to be delayed or if there
were to be other significant uses of KACC's existing Credit Agreement capacity,
delays in the rebuilding of the Gramercy refinery could occur and could have a
material adverse impact on the Company's and KACC's liquidity and operating
results.

See Note 2 of Notes to Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Financing Activities and Liquidity" for more detailed information regarding the
impacts of the Gramercy incident.

Labor Matters

Substantially all of KACC's hourly workforce at the Gramercy, Louisiana, alumina
refinery, Mead and Tacoma, Washington, aluminum smelters, Trentwood, Washington,
rolling mill, and Newark, Ohio, extrusion facility were covered by a master
labor agreement with the United Steelworkers of America (the "USWA") which
expired on September 30, 1998. The parties did not reach an agreement prior to
the expiration of the master agreement and the USWA chose to strike. In January
1999, KACC declined an offer by the USWA to have the striking workers return to
work at the five plants without a new agreement. KACC imposed a lock-out to
support its bargaining position and continues to operate the plants with
salaried employees and other workers as it has since the strike began.

                                        2


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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1.       BUSINESS (CONTINUED)

While the Company initially experienced an adverse strike-related impact on its
profitability, the Company currently believes that KACC's operations at the
affected facilities, excluding the Gramercy facility (see "- Incident at
Gramercy Facility" above), have been substantially stabilized and will be able
to run at, or near, full capacity, and that the incremental costs associated
with operating the affected plants during the dispute were virtually eliminated
in early 1999 (excluding the impacts of the restart costs and the effect of
market factors such as the continued partial curtailment at the Tacoma smelter
(see " - Business Operations - Primary Aluminum Business Unit" in this Report).
However, no assurances can be given that KACC's efforts to run the plants on a
sustained basis, without a significant business interruption or material adverse
impact on the Company's operating results, will be successful.

Further, the Company believes that charges of unfair labor practices made
against KACC by the USWA are without merit. See Note 10 of Notes to Consolidated
Financial Statements.

KACC and the USWA continue to communicate. The objective of KACC has been, and
continues to be, to negotiate a fair labor contract that is consistent with its
business strategy and the commercial realities of the marketplace.

See Note 1 of Notes to Consolidated Financial Statements, "- Labor Related
Costs," Note 10 of Notes to Consolidated Financial Statements, "- Labor Matters"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Labor Matters" for additional information with respect to the USWA
dispute.

Strategic Initiatives

KACC's strategy is to improve its financial results by: increasing the
competitiveness of its existing plants; continuing its cost reduction
initiatives; adding assets to businesses it expects to grow; pursuing
divestitures of non-core businesses; and strengthening its financial position.

In 1999, KACC completed the acquisition of the remaining 45% interest in Kaiser
LaRoche Hydrate Partners ("KLHP"), an alumina marketing venture, for a purchase
price of approximately $10.0 million and the sale of its 50% interest in AKW L.
P. ("AKW") to its partner for $70.4 million. The strategic analysis process also
resulted in the Company's agreement in January 2000 to sell KACC's Micromill(TM)
assets and technology. See Notes 3 and 4 of Notes to Consolidated Financial
Statements for information on the AKW and Micromill sales.

Another area of emphasis has been a continuing focus on managing the Company's
legacy liabilities. The Company believes that KACC has insurance coverage
available to recover certain incurred and future environmental costs and a
substantial portion of its asbestos-related costs and is actively pursuing
claims in this regard. During 1998, KACC received recoveries totaling
approximately $35.0 million from certain of its insurers related to current and
future environmental claims. The timing and amount of future recoveries of
asbestos-related claims from insurance carriers remains a major priority of the
Company, but will depend on the pace of claims review and processing by such
carriers and the resolution of any disputes regarding coverage under the
insurance policies that may arise. However, during 1999, KACC reached
preliminary agreements under which it expects to collect a substantial portion
of its 2000 expected asbestos-related payments from certain insurance carriers.
See Note 10 of Notes to Consolidated Financial Statements for additional
information regarding the legacy liabilities and related insurance coverages.

Sensitivity to Prices and Hedging Programs

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. Primary
aluminum prices have historically been subject to significant cyclical
fluctuations. Alumina prices, as well as fabricated aluminum product prices
(which vary considerably among products), are significantly influenced by
changes in the price of primary aluminum and generally lag behind primary
aluminum prices by up to three months. In addition, the Company's operations are
exposed to risks from fluctuating energy prices for fuels used in the production
process and from foreign currency movements in respect of material cash
commitments to foreign subsidiaries and affiliates. From time to time in the
ordinary course of business, KACC enters into



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ITEM 1.       BUSINESS (CONTINUED)

hedging transactions to provide risk management in respect of its net exposure
of earnings and cash flow related to the above items. While such hedging
activities typically are designed to provide protection against unfavorable
price charges, they can, in certain circumstances, limit the Company's ability
to realize favorable price changes and can also impact the Company's liquidity.
See Note 1 of Notes to Consolidated Financial Statements, " - Derivative
Financial Instruments," Note 11 of Notes to Consolidated Financial Statements
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Financial Activities and Liquidity," for additional information.

Business Operations

KACC conducts its business through four main business units, each of which is
discussed below.

o  Alumina Business Unit

The following table lists KACC's bauxite mining and alumina refining facilities
as of December 31, 1999:



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

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

Alumina Refining                     Gramercy(2)      Louisiana               100.0%            1,075,000          1,075,000
                                     Alpart           Jamaica                  65.0%              942,500          1,450,000
                                     QAL              Australia                28.3%            1,032,950          3,650,000
                                                                                                ---------          ---------

                                                                                                3,050,450          6,175,000
                                                                                                =========          =========
</TABLE>


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

(1)      Alumina Partners of Jamaica ("Alpart") bauxite is refined into alumina
         at the Alpart refinery.

(2)      Production is currently completely curtailed. See discussion below.

KACC is a major producer of alumina and sells significant amounts of its alumina
production in domestic and international markets. KACC's strategy is to sell a
substantial portion of the alumina available to it in excess of its internal
smelting requirements under multi-year sales contracts with prices linked to the
price of primary aluminum. See "- Competition" and "- Sensitivity to Prices and
Hedging Programs" in this Report.

The Government of Jamaica has granted KACC a mining lease for the mining of
bauxite which will, at a minimum, satisfy the bauxite requirements of KACC's
Gramercy, Louisiana alumina refinery so that it will be able to produce at its
current rated capacity until 2020. Kaiser Jamaica Bauxite Company ("KJBC") mines
bauxite from the land which is subject to the mining lease as an agent for KACC.
Although KACC owns 49% of KJBC, it is entitled to, and generally takes, all of
its bauxite output. A substantial majority of the bauxite mined by KJBC is
refined into alumina at the Gramercy facility and the remainder is sold to a
third party. KJBC's operations have been impacted by the Gramercy incident.
Subject to the rebuilding of the Gramercy facility with a double digest bauxite
system, the Government of Jamaica has recently agreed to grant KACC an
additional bauxite mining lease. The new mining lease will be effective upon the
expiration of the current lease in 2020 and will enable the Gramercy facility to
produce at its rated capacity for an additional ten year period. See Note 2 of
Notes to Consolidated Financial Statements for a detailed discussion of the
Gramercy incident.



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ITEM 1.       BUSINESS (CONTINUED)

Alumina produced by the Gramercy plant is primarily sold to third parties but a
portion is used by KACC in its operations. Production at the Gramercy refinery
is currently completely curtailed as it was extensively damaged by an explosion
in the digestion area of the plant in July 1999. Production at the plant is
currently expected to remain curtailed until the third quarter of 2000 when
partial production is expected to begin. Based on current estimates, full
production is expected to be achieved during the first quarter of 2001 or
shortly thereafter. In the interim, KACC is purchasing alumina from third
parties, in excess of the amounts of alumina available from other KACC-owned
facilities, to supply major customers' needs as well as to meet intersegment
requirements. The Company believes that the cost to rebuild the Gramercy
facility and the adverse impact of the incident on operations will be largely
offset by insurance coverage. See Note 2 of Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Financing Activities and Liquidity" for additional
information regarding the impacts of the Gramercy incident. Also, the Gramercy
refinery is one of the five KACC plants which is subject to the continuing USWA
dispute. See Note 10 of Notes to Consolidated Financial Statements, "- Labor
Matters" for a discussion of the labor dispute.

In February 1999, KACC, through a subsidiary, purchased its partner's 45%
interest in KLHP, a partnership which markets chemical grade alumina
manufactured at KACC's Gramercy facility. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Overview - Strategic
Initiatives" for additional information. Chemical grade alumina is sold at a
premium price over smelter grade alumina, and this acquisition will permit KACC
to expand its market position in this business in North America. However, these
operations have been impacted by the Gramercy incident. KACC has entered into
the necessary arrangements to allow it to supply a significant portion of its
customers' chemical grade alumina needs. The Company believes that any
incremental costs incurred in connection with such arrangements, as well as lost
profits, will be substantially covered by KACC's insurance.

Alpart holds bauxite reserves and owns a 1,450,000 ton 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 up to a
capacity of 2,000,000 tons per year, through the year 2024.

In 1999, Alpart and JAMALCO, a joint venture between affiliates of Alcoa Inc.
and the Government of Jamaica, agreed to form a bauxite mining operation joint
venture that will consolidate their bauxite mining operations in Jamaica, with
the objective of optimizing mining operating and capital costs. The joint
venture agreement also grants Alpart certain rights to acquire bauxite mined
from JAMALCO's reserves. The joint venture will commence operations in the first
quarter of 2000.

KACC owns a 28.3% interest in Queensland Alumina Limited ("QAL"), which owns the
largest and one of the most competitive alumina refineries in the world, located
in Queensland, Australia. QAL refines bauxite into alumina, essentially on a
cost basis, for the account of its shareholders under long-term tolling
contracts. The shareholders, including KACC, purchase bauxite from another QAL
shareholder under long-term supply contracts. KACC has contracted with QAL to
take approximately 868,000 tons per year of alumina or pay standby charges. KACC
is unconditionally obligated to pay amounts calculated to service its share
($103.6 million at December 31, 1999) of certain debt of QAL, as well as other
QAL costs and expenses, including bauxite shipping costs.

In 1999, KACC sold alumina to approximately 21 customers, the largest and top
five of which accounted for approximately 23% and 72% of net sales,
respectively. All of KACC's third-party sales of bauxite in 1999 were made to
one customer, which sales represent approximately 7% of total bauxite and
alumina third party net sales. KACC's principal customers for bauxite and
alumina consist of other aluminum producers that purchase bauxite and smelter
grade alumina, trading intermediaries who resell raw materials to end-users, and
users of chemical grade alumina.



                                        5


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ITEM 1.       BUSINESS (CONTINUED)

o  Primary Aluminum Business Unit

The following table lists KACC's primary aluminum smelting facilities as of
December 31, 1999:



<TABLE>
<CAPTION>
                                                                            Annual Rated            Total            1999
                                                                                Capacity           Annual         Average
                                                           Company         Available to             Rated       Operating
Location                                 Facility        Ownership           the Company         Capacity            Rate
--------                                 --------        ---------         -------------         --------       ---------
                                                                                  (tons)           (tons)
<S>                                    <C>               <C>               <C>                   <C>            <C> 
United States
   Washington                          Mead                   100%               200,000          200,000            102%(1)
   Washington                          Tacoma                 100%                73,000           73,000             73%(1)
                                                                                 -------          -------

       Subtotal                                                                  273,000          273,000
                                                                                 -------          -------

International
   Ghana                               Valco                   90%               180,000          200,000             57%(2)
   Wales, United Kingdom               Anglesey                49%                66,150          135,000            102%
                                                                                 -------          -------

       Subtotal                                                                  246,150          335,000
                                                                                 -------          -------

              Total                                                              519,150          608,000
                                                                                 =======          =======
</TABLE>




--------

(1)      1999 operating rates were affected by the continuing USWA dispute. See
         discussion below.

(2)      See "Management's Discussion and Analysis of Financial Condition and
         Results of Operations - Overview - Valco Operating Level" for
         additional information regarding recent and future operating levels.

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, anodes and bus that conduct
electricity through reduction cells, improved feed systems that add alumina to
the cells, computerized process control and energy management systems, and
furnace technology for baking of anode carbon - has significantly contributed to
increased and more efficient production of primary aluminum and enhanced KACC's
ability to compete more effectively with the industry's newer smelters.

The Mead facility uses pre-bake technology. Approximately 77% of Mead's 1999
production was used at KACC's Trentwood, Washington, rolling mill, and the
balance was sold to third parties. KACC has modernized and expanded the carbon
baking furnace at its Mead smelter. The project has improved the reliability of
the carbon baking operations, increased productivity, enhanced safety, and
improved the environmental performance of the facility. The first stage of this
project, the construction of a new 90,000 ton per year furnace, was completed in
1997. The remaining modernization work was completed in early 1999. The Tacoma
facility 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 through retrofit technology and a variety of cost
controls, leading to increases in production volume and enhancing their ability
to compete with newer smelters. The business unit maintains specialized
laboratories and a miniature carbon plant in the state of Washington which
concentrate on the development of cost-effective technical innovations such as
equipment and process improvements.

The Mead and Tacoma, Washington, smelters are two of the five KACC plants which
are subject to the continuing USWA dispute. KACC temporarily curtailed three out
of a total of eleven potlines at its Mead and Tacoma, Washington, aluminum
smelters at September 30, 1998, as a result of the USWA strike. The curtailed
potlines represented approximately 70,000 tons of annual production capacity out
of a total combined production capacity of 273,000 tons per year at the
facilities. Restarts of the two Mead potlines were completed during mid-1999.
While a portion of the curtailed potline at Tacoma has been restarted to meet
internal requirements, the timing for a complete restart of the potline
(representing approximately 10,000 tons of idle production capacity) has yet to
be determined and will depend upon market conditions and other factors. See Note
10 of Notes to Consolidated Financial Statements, " - Labor Matters" for a
discussion of the labor dispute on smelting production rates.


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ITEM 1.       BUSINESS (CONTINUED)

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 tolling contracts which provide for proportionate payments by the
participants. KACC's share of the primary aluminum is sold to third parties.
Valco's operating level has been subject to fluctuations resulting from the
amount of power it is allocated by the Volta River Authority ("VRA"). The
operating level over the last five years has ranged from one to four out of a
total of five potlines. During 1999, Valco operated an average of three
potlines. The Company expects Valco to operate four potlines during 2000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview - Valco Operating Level" for additional information
regarding past and future operating levels.

KACC owns a 49% interest in the Anglesey Aluminium Limited ("Anglesey") aluminum
smelter 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.

KACC's principal primary aluminum customers consist of large trading
intermediaries and metal brokers. In 1999, KACC sold its primary aluminum
production not utilized for internal purposes to approximately 42 customers, the
largest and top five of which accounted for approximately 29% and 68% of net
sales, respectively. See "- Competition" in this Report. Marketing and sales
efforts are conducted by personnel located in Houston, Texas; and Tacoma and
Spokane, Washington.

   Electric Power

Electric power represents an important production cost for KACC at its aluminum
smelters. For information on this subject, see " - Factors Affecting Future
Performance - The operations of KACC's smelters depend on attaining reliable and
affordable electric power" in this Report.

o  Flat-Rolled Products Business Unit

The flat-rolled products business unit operates the Trentwood, Washington,
rolling mill. The business unit sells to the aerospace and general engineering
markets (producing heat treat sheet and plate products), the beverage container
market (producing body, lid, and tab stock), and the specialty coil markets
(producing automotive brazing sheet, wheel, and tread products), both directly
and through distributors. The Trentwood facility is one of the five KACC plants
which is subject to the continuing USWA dispute. See Note 10 of Notes to
Consolidated Financial Statements, "- Labor Matters" for additional information
on the labor dispute.

KACC continues to shift the product mix of its Trentwood rolling mill away from
beverage can body stock toward higher value added product lines, such as heat
treat, beverage can lid and tab stock, automotive, and other niche businesses in
an effort to maximize its profitability. Global sales of KACC's heat treat
products are made primarily to the aerospace and general engineering markets. In
1999, the business unit shipped products to approximately 147 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 18% of the business unit's net sales.

KACC's flat-rolled products are also sold to beverage container manufacturers
located primarily in western North America and in the Asian Pacific Rim
countries. Quality of products for the beverage container industry, service,
price, and timeliness of delivery are the primary bases on which KACC competes.
In 1999, the business unit had approximately 25 domestic and foreign can stock
customers, supplying approximately 35 can plants worldwide. The largest and top
five of such customers accounted for approximately 12% and 36%, respectively, of
the business unit's net sales. See "- Competition" in this Report. The marketing
staff for the business unit is located at the Trentwood facility. Sales are made
directly to end-use customers and distributors from four sales offices in the
United States, from a sales office in England, and by independent sales agents
in Asia and Latin America.


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ITEM 1.       BUSINESS (CONTINUED)

o  Engineered Products Business Unit

The engineered products business unit operates soft-alloy and hard-alloy
extrusion facilities and engineered component (forgings) facilities in the
United States and Canada. Major markets for extruded products are in the
transportation industry, to which the business unit sells extruded shapes for
automobiles, light-duty vehicles, heavy duty trucks and trailers, and shipping
containers, and in the distribution, durable goods, defense, building and
construction, ordnance and electrical markets.

The business unit sells forged parts to customers in the automotive, heavy-duty
truck, general aviation, rail, machinery and equipment, and ordnance markets.
The high strength-to-weight properties of forged aluminum make it particularly
well-suited for automotive applications. The business unit maintains a sales and
engineering office in Southfield, Michigan, which works with automobile makers
and other customers and plant personnel to create new automotive component
designs and to improve existing products.

Soft-alloy extrusion facilities are located in Los Angeles, California; Sherman,
Texas; Richmond, Virginia; and London, Ontario, Canada. Each of the soft-alloy
extrusion facilities has fabricating capabilities and provides finishing
services. Products manufactured at these facilities include rod, bar, tube,
shapes, and billet. The Richmond, Virginia, facility was acquired in mid- 1997
and increased KACC's extruded products capacity and enhanced its existing
extrusion business due to that facility's ability to manufacture seamless tubing
and large circle size extrusions and to serve the distribution and ground
transportation industries. A 1999 acquisition of an extrusion press in the Los
Angeles area also increased capacity in both seamless tube and rod and bar
products. Hard-alloy rod and bar extrusion facilities are located in Newark,
Ohio, and Jackson, Tennessee, and produce screw machine stock, redraw rod,
forging stock, and billet. The Newark facility is one of the five KACC plants
which is subject to the continuing USWA dispute. See Note 10 of Notes to
Consolidated Financial Statements, "- Labor Matters" for additional information
on the labor dispute. A facility located in Richland, Washington, produces
seamless tubing in both hard and soft alloys. The business unit also operates an
aluminum cathodic protection business located in Tulsa, Oklahoma. The business
unit operates forging facilities at Oxnard, California, and Greenwood, South
Carolina, and a machine shop at Greenwood, South Carolina. KACC sold a small
casting operations in Canton, Ohio in May 1999.

In 1997, KACC and Accuride Corporation ("Accuride") formed AKW to design,
manufacture and sell heavy aluminum truck wheels. In April 1999, KACC sold its
50% interest in AKW to Accuride for $70.4 million, which resulted in a net
pre-tax gain of $50.5 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Strategic Initiatives" and Note
3 of Notes to Consolidated Financial Statements.

In 1999, the engineered products business unit had approximately 400 customers,
the largest and top five of which accounted for approximately 5% and 18%,
respectively, of the business unit's net sales. See "- Competition" below. Sales
are made directly from plants and from marketing locations elsewhere in the
United States.

Competition

KACC competes globally with producers of bauxite, alumina, primary aluminum, and
fabricated aluminum products. Many of KACC's competitors have greater financial
resources than KACC. Primary aluminum and, to some degree, alumina are
commodities with generally standard qualities, and competition in the sale of
these commodities is based primarily upon price, quality and availability.
Aluminum competes in many markets with steel, copper, glass, plastic, and other
materials. Beverage container materials, including aluminum, face increased
competition from plastics as increased polyethylene terephthalate ("PET")
container capacity is brought on line by plastics manufacturers. KACC competes
with numerous domestic and international fabricators in the sale of fabricated
aluminum products. KACC manufactures and markets fabricated aluminum products
for the transportation, packaging, 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. 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 it believes it has production expertise, high-quality
capability, and geographic and other competitive advantages. The Company
believes that, assuming the current relationship between worldwide supply and
demand for alumina and primary aluminum does not change materially, the loss of
any one of KACC's customers, including intermediaries, would not have a material
adverse effect on the Company's financial condition or results of operations.


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ITEM 1.       BUSINESS (CONTINUED)

See the discussion of competitive conditions, markets, and principal methods of
competition in the description of each business unit under the headings
"-Alumina Business Unit," "-Primary Aluminum Business Unit," "-Flat-Rolled
Products Business Unit," and "-Engineered Products Business Unit" in this
Report.

Research and Development

Net expenditures for Company-sponsored research and development activities were
$11.0 million in 1999, $13.7 million in 1998, and $19.7 million in 1997.
Approximately $.8 million of the 1999 research and development net expenditures
were attributable to the development of the Micromill assets and technology,
which were sold in January 2000 (see Note 4 of Notes to Consolidated Financial
Statements). KACC's research staff totaled 50 at December 31, 1999. KACC
estimates that research and development net expenditures will be in the range of
$9.0 million to $11.0 million in 2000.

Employees

During 1999, KACC employed an average of approximately 8,600 persons, compared
with an average of approximately 9,200 persons in 1998 and approximately 9,600
persons in 1997. At December 31, 1999, KACC employed approximately 8,300
persons. The foregoing employee counts for 1999 and 1998 include the USWA
workers who are currently subject to the lockout imposed by KACC as a result of
the continuing labor dispute. Since the inception of the labor dispute, KACC has
operated the five affected facilities with temporary workers who are not
included in the employee counts for 1999 and 1998. The average number of
temporary workers employed during 1999 at the five plants affected by the USWA
labor dispute was approximately 25% less than the average number of USWA workers
employed prior to the labor dispute.

The labor agreements with employees at the Alpart refinery in Jamaica and the
Valco smelter in Ghana both expire in 2001.

Environmental Matters

The Company and KACC are subject to a wide variety of international, federal,
state and local environmental laws and regulations. For a discussion of this
subject, see "Factors Affecting Future Performance - KACC's current or past
operations subject it to environmental compliance, clean-up and damage claims
that may be costly" below.

Factors Affecting Future Performance

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

o  Our earnings are sensitive to a number of variables

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

The commodity price of primary aluminum significantly affects our financial
results. Primary aluminum prices historically have been subject to significant
cyclical price fluctuations. The Company believes the timing of changes in the
market price of aluminum are largely unpredictable. Since 1993, the Average
Midwest United States transaction price (the "AMT price") has ranged from
approximately $.50 to $1.00 per pound. During 1999, the AMT price averaged $.66
per pound. At January 28, 2000, the AMT price was $.84 per pound. Although KACC
attempts to mitigate the impact of low prices through hedging activity (as
described below), changes in market prices for primary aluminum typically
influence the realized prices for KACC's products, most directly in the alumina
and primary aluminum businesses.

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ITEM 1.       BUSINESS (CONTINUED)

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

o    Our profits and cash flows may be adversely impacted by the results of
     KACC's hedging programs

We are exposed to the risk of fluctuating aluminum prices, which influence the
prices at which KACC sells its products. KACC enters into hedging transactions
to limit its net exposure resulting from (1) its anticipated sales of alumina,
primary aluminum, and fabricated aluminum products, less (2) its expected costs
of purchasing certain items such as aluminum scrap, bauxite and rolling ingot,
whose prices fluctuate with the price of primary aluminum. Such hedging
transactions may involve the use of forward sales contracts, which effectively
fix the price at which KACC sells its products, or the use of option contracts,
which set a floor or a ceiling or both on the price at which KACC sells its
products. To the extent that the prices for primary aluminum exceed the fixed or
ceiling prices established by KACC's hedging transactions, our profits and cash
flow would be lower than they otherwise would have been. As a result of KACC's
hedging activities, at December 31, 1999, approximately 70% and 40% of KACC's
net hedgeable volume with respect to 2000 and 2001, respectively, is subject to
minimum and maximum contract prices. The average minimum contract price with
respect to each period is significantly below the average AMT price for the week
ended January 28, 2000. The average maximum contract price with respect to 2000
is below the average AMT price for the week ended January 28, 2000. The average
maximum contract price with respect to 2001 approximates the AMT price for the
week ended January 28, 2000. Because the average maximum contract price of our
2000 and 2001 hedging positions approximates or is below the AMT price for the
week ended January 28, 2000, we will not realize the full benefit of such AMT
price or any subsequent price increases that may occur with respect to the
volumes covered by our 2000 and 2001 hedging positions.

Hedging activities can also have a temporary adverse impact on our and KACC's
liquidity. KACC has established credit limits with certain counterparties
related to open forward sales and option contracts. When unrealized gains or
losses on open positions are in excess of such credit limits, KACC is entitled
to receive margin advances from the counterparties or is required to make margin
advances to counterparties, as the case may be. At December 31, 1999, KACC had
made margin advances of $38.0 million and had posted letters of credit totaling
$40.0 million in lieu of making margin advances. Increases in primary aluminum
prices subsequent to December 31, 1999, could result in KACC having to make
additional margin advances or post additional letters of credit and such amounts
could be significant. KACC's exposure to margin advances is expected to improve
throughout 2000 as its year 2000 positions, which have a lower average maximum
contract price than KACC's 2001 positions, expire. KACC is considering various
financing and hedging strategies to limit its exposure to further margin
advances in the event of aluminum price increases. However, we cannot assure you
KACC will be successful in this regard.

A portion of the metal hedging transactions KACC has entered into do not qualify
for "hedge" accounting under current accounting guidelines, even though they are
consistent with its hedging objectives. Accordingly, we must reflect the change
in the market value of these transactions in each period's earnings. This can
cause material swings in our reported financial results when period-end to
period-end movements in prices are large. A total of approximately $32.8 million
of net pre-tax mark-to-market charges was reflected in the Company's 1999
results. If the forward price for primary aluminum were to increase further from
the year-end price, additional mark-to-market charges would be required and the
charges could be significant.

KACC from time to time in the ordinary course of business also enters into
hedging transactions with major suppliers of energy and energy related financial
instruments to reduce its exposure to the energy price risk from fluctuating
prices for fuel oil and diesel oil used in its production process. In addition,
KACC enters into foreign exchange contracts to hedge its cash commitments in
respect of foreign subsidiaries and affiliates. However, we cannot assure you
that KACC's hedging strategies will reduce our exposure to the risk of
fluctuating prices for fuel oil, diesel oil and foreign currencies or that the
results of such hedging transactions will be more favorable than if KACC had not
entered into such transactions.

o    KACC's substantial indebtedness and high leverage could adversely affect us

KACC is highly leveraged and has significant debt services requirements. As of
December 31, 1999, KACC's total debt was approximately $972.8 million which does
not give effect to $103.6 million of our guaranteed debt of unconsolidated
affiliates and


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ITEM 1.       BUSINESS (CONTINUED)

$57.6 million of other guarantees and letters of credit. The ratio of our total
debt to stockholders' equity was approximately 15 to 1. In addition, we expect
KACC to borrow additional amounts under its credit agreement, as amended (the
"Credit Agreement"), or from other sources in the future, if available.

KACC's high level of debt affects our operations in several important ways:

o    a large portion of the cash KACC generates is used to pay interest;

o    the agreements governing such debt may limit KACC's and our flexibility in
     planning for and reacting to changes in our business conditions;

o    KACC and we may be more vulnerable in the event of a downturn in our
     business, the aluminum industry or general economic conditions;

o    some or all of the agreements governing such debt limit KACC's and/or our
     ability to borrow additional money, to pay dividends and to consolidate or
     merge with other companies;

o    a high level of debt may impair KACC's and our ability to obtain additional
     financing for working capital, capital expenditures, acquisitions, general
     corporate and other purposes;

o    KACC may experience a competitive disadvantage because it is more highly
     leveraged than some of its competitors; and

o    the agreements governing such debt permit KACC's and our creditors to
     accelerate payments if KACC or we default or experience a change in the
     control of our ownership as set forth in such agreements.

KACC's ability to make payments on and to refinance such debt depends on its
ability to generate cash in the future. This, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors beyond KACC's control.

KACC will need to refinance all or a substantial portion of such debt on or
before its maturity. KACC has a $325.0 million Credit Agreement which expires in
August 2001. As of February 29, 2000, KACC had $212.6 million of unused
availability remaining under the Credit Agreement after allowing for $30.0
million of outstanding borrowings and $82.4 million for outstanding letters of
credit. In addition, as of December 31, 1999, KACC had $850.2 million of public
notes outstanding, of which $224.6 million principal amount of senior notes are
due in 2002, $400.0 million principal amount of senior subordinated notes are
due in 2003 and $225.6 million principal amount of senior notes are due in 2006.
We cannot assure you that KACC will be able to refinance such debt on acceptable
terms, if at all.

o    The explosion at the Gramercy alumina refinery could result in adverse
     consequences to us

On July 5, 1999, KACC's Gramercy, Louisiana, alumina refinery was extensively
damaged by an explosion. The cause of the explosion is under investigation by
various governmental agencies. In January 2000, the U.S. Mine Safety and Health
Administration ("MSHA") issued 21 citations in connection with its investigation
of the Gramercy incident. The citations allege, among other things, that certain
aspects of the plant's operations were unsafe and that such mode of operation
contributed to the explosion. Additional civil or criminal fines or penalties
are still possible. To date, no monetary penalty has been proposed by MSHA.
Although the Company expects that a fine will be levied, the Company cannot
predict the amount of any such fine(s). It is possible that other civil or
criminal fines or penalties could be levied against KACC. KACC has previously
announced that it disagrees with the substance of the citations and has
challenged them. Twenty-four employees were injured in the incident, several of
them severely. KACC may be liable for claims relating to the injured employees.
The incident has also resulted in thirty-six class action lawsuits being filed
against KACC alleging, among other things, property damage and personal injury.
The aggregate amount of damages sought in the lawsuits cannot be determined at
this time. While we believe KACC's insurance will cover the majority of these
lawsuits and claims relating to the injured employees, it is anticipated that
any civil or criminal fines or penalties will not be covered by such insurance.


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ITEM 1.       BUSINESS (CONTINUED)

Production at the plant is expected to be completely curtailed until the third
quarter of 2000 when we expect partial production to begin and, based on our
current estimates, we expect full production to be achieved during the first
quarter of 2001 or shortly thereafter. KACC has received the regulatory permit
required to operate the plant once the facility is ready to resume production.

In addition, shortly after the incident, KACC declared force majeure with
respect to certain of its sales contracts with customers. KACC could experience
the loss of one or more customers as a result of the Gramercy incident. Such a
loss would adversely affect the plant's competitive position unless KACC is able
to gain new customers. KACC is working with its customers to ensure a continued
supply of alumina by purchasing alumina for its customers in the open market at
prices in excess of the prices KACC is currently receiving from its customers.
KACC is also currently purchasing alumina in the open market for a portion of
its internal requirements. While the excess cost of such open market purchases
is expected to be substantially offset by insurance recoveries, if, in the
future, KACC is not successful in assuring an adequate supply of alumina at a
competitive price for its smelters or if delays in the rebuild were to occur and
certain sublimits within  its insurance coverage were deemed to apply, our
results could be negatively affected.

KACC continues to work with the insurance carriers to maximize the amount of
recoveries and to minimize, to the extent possible, the period of time between
when KACC expends funds and when it is reimbursed. However, KACC will likely
have to fund an average of 30 - 60 days of property damage and business
interruption activity, unless some other arrangement is agreed with the
insurance carriers, and such amounts could be significant. If insurance
recoveries were to be delayed or if there were other significant uses of KACC's
existing Credit Agreement capacity, delays in the rebuilding of the Gramercy
refinery could occur and could have a material adverse impact on KACC's and our
liquidity and operating results.

Based on what is known to date and discussions with our advisors, we believe
that the financial impact of this incident (in excess of the $5 million of
insurance deductibles and self-retention provisions, which has already been
recorded) will be largely offset by insurance coverage. However, delays in
receiving insurance proceeds could adversely affect the timing of rebuilding the
Gramercy refinery and could have an adverse impact on KACC's and our operating
results and liquidity.

o    KACC's labor dispute could adversely affect us

Substantially all of KACC's hourly work force at its Gramercy, Louisiana,
alumina refinery; Mead and Tacoma, Washington aluminum smelters, Trentwood,
Washington, rolling mill; and Newark, Ohio, extrusion facility were covered by a
master labor agreement with the USWA which expired on September 30, 1998. The
parties did not reach an agreement prior to the expiration of the master
agreement and the USWA chose to strike. In January 1999, KACC declined an offer
by the USWA to have the striking workers return to work at the five plants
without a new agreement. KACC imposed a lock-out to support its bargaining
position and continues to operate the plants (excluding our Gramercy facility)
with salaried employees and other workers as it has since the strike began.

The labor dispute with the USWA involves a number of uncertainties, including
the ultimate cost of a settlement with the USWA and the resolution of the USWA's
appeal of a ruling by the Oakland, California, regional office of the National
Labor Relations Board (the "NLRB") that was favorable to KACC. Although we are
satisfied with the productivity improvements achieved by the temporary work
force at these plants and although turnover rates have declined significantly
since the beginning of the dispute, there can be no assurance about KACC's
ability to retain and motivate such a work force for an indefinite period.

Since the beginning of the dispute, KACC has held periodic but unsuccessful
talks with the USWA to seek a new labor agreement. KACC's proposal to the union
has encompassed wage and benefit increases in exchange for productivity
improvements. We believe such a proposal would result in a significant net
reduction in operating costs for the affected plants compared to pre-strike
levels. However, upon settlement, KACC's and our earnings may reflect a one-time
charge for certain costs associated with the new labor agreement. There can be
no assurance that this proposal will be accepted.

In July 1999, the Oakland, California regional office of the NLRB dismissed the
USWA's allegations of unfair labor practices against KACC. In September 1999,
the union filed an appeal of this ruling with the NLRB general counsel's office
in Washington, D.C. If the original decision were to be reversed, the matter
would be referred to an administrative judge for a hearing whose outcome would
be subject to additional appeal either by the USWA or KACC. This process could
take months or years. There can be no certainty that the original NLRB decision
will be upheld. If these proceedings eventually resulted in a definitive ruling

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ITEM 1.       BUSINESS (CONTINUED)

against KACC, KACC could be obligated to provide back pay to USWA members at the
five plants. The amount of such back pay could be significant. Back pay, if any,
would not cover the period prior to the USWA's January 1999 offer to return to
work.

The USWA has publicly stated that it is conducting a corporate campaign against
KACC. Such campaigns are often conducted by unions during a labor dispute and
are designed to bring public pressure to bear on a company in the belief that
such pressure will expedite the settlement of the dispute. As part of its
corporate campaign against KACC, the USWA has engaged in a number of activities,
including contacting KACC's customers, suppliers, members of the investment
community, clergymen, and various public agencies with whom KACC has ongoing
relationships. Although such efforts on the part of the USWA have generated
publicity in the news media, we believe that they have had little or no material
impact on our operations. We do not know if the corporate campaign will continue
or, if so, how long it might continue, or what specific actions the USWA may
take. We do not know if such efforts may have a material impact on KACC's
operations in the future.

o    The asbestos-related lawsuits against KACC could continue to increase and
     could adversely impact our financial position

KACC is a defendant in numerous lawsuits in which the plaintiffs allege that
they have injuries caused by exposure to asbestos during, and as a result of,
their employment or association with KACC, or exposure to products containing
asbestos produced or sold by KACC. The lawsuits generally relate to products
KACC sold twenty or more years ago. On December 31, 1999, there were 100,000
claims pending, compared with 86,400 claims at December 31, 1998. KACC has
reached agreements under which it expects to settle approximately 31,900 of the
claims pending on December 31, 1999 over an extended period.

Our December 31, 1999, balance sheet includes a liability for estimated
asbestos-related costs of $387.8 million. We cannot assure you that this
liability will not increase in the future. In determining the amount of the
liability, we have only included estimates for the cost of claims for a ten year
period through 2009 because we do not have a reasonable basis for estimating
costs beyond that period. However, we expect that these costs may continue
beyond 2009 and that they could be substantial.

We believe KACC has insurance coverage for a substantial portion of such
asbestos-related costs. Accordingly, our December 31, 1999, balance sheet
includes a long term receivable for estimated insurance recoveries of $315.5
million.

As a result of the net increases in our estimates for such asbestos-related
liabilities and receivables during 1999, we recorded pre-tax charges of $53.2
million during the year ended December 31, 1999.

Prior to insurance recoveries, we estimate that KACC's annual cash payments for
asbestos-related costs will be approximately $75.0 - $85.0 million for each of
the years 2000 through 2002, approximately $35.0 - $55.0 million for each of the
years 2003 and 2004, and a total of $58.0 million beyond 2004. We believe that
KACC will recover a substantial portion of these payments from insurance, but
cannot assure you that KACC will receive substantial insurance payments or that
the timing of such payments will occur in the year KACC is required to make the
payments. However, KACC has reached preliminary agreements with certain
insurance carriers under which it expects to collect a substantial portion of
its anticipated 2000 asbestos-related payments. However, delays in receiving
these or future repayments would have an adverse impact on KACC's liquidity.

We continue to monitor claims activity, the status of lawsuits, legislative
developments and other factors. We cannot assure you that our estimates of
liabilities and recoveries will not change in the future. We also cannot assure
you that the amounts related to future asbestos-related claims will not exceed
KACC's aggregate insurance coverage.

o    We have recently experienced net losses

We reported a net loss of $54.1 million for the year ended December 31, 1999.
There can be no assurance that we will operate profitability in future periods.

o    We operate in a highly competitive industry

The production of alumina, primary and fabricated aluminum products is highly
competitive. There are numerous companies who operate in the aluminum industry.
Certain of our competitors are substantially larger, have greater financial
resources than we do and may have other strategic advantages.

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ITEM 1.       BUSINESS (CONTINUED)

o    The operation of KACC's smelters depends on obtaining reliable and
     affordable electric power

The process of converting alumina into aluminum requires significant amounts of
electric power. The cost of electric power is an important production cost of
KACC's aluminum smelters. KACC has smelters located in Mead and Tacoma,
Washington, Ghana, and Wales, the United Kingdom.

Pacific Northwest

o    KACC purchases electric power for the Mead and Tacoma, Washington, smelters
     from the Bonneville Power Administration ("BPA"), which supplies
     approximately half of the electric power for the two plants, and from other
     suppliers. The power contracts with the BPA expire in September 2001, and
     the power contracts with other suppliers expire at various times though
     September 2001.

     The BPA is engaged in the process of determining the allocation and price
     of electric power to its customers for the period October 2001 to September
     2006. We believe that adequate electric power will be available during that
     period, from the BPA and from other suppliers, for the operation of KACC's
     smelters in Washington. The price of power purchased from the BPA could be
     significantly greater than the current price for such power, which would
     have an adverse effect on the profitability of such facilities.

Ghana

o    Electric power for the 90%-owned Valco smelter is produced by hydroelectric
     generators operated by the Volta River Authority ("VRA"). The delivery of
     electric power to the smelter is subject to interruption periodically
     because of drought and other factors beyond the control of Valco. Electric
     power is supplied under a contract with the VRA which expires in 2017. The
     power contract indexes a portion of the price of power to the market price
     of primary aluminum, and provides for a review and adjustment of the base
     power rate and the price index every five years. In December 1999, Valco
     and the VRA reached an agreement that provides for sufficient power to
     operate four of Valco's five potlines in 2000 and 2001. In addition, the
     agreement provides a framework for resolving longer-term issues. This
     framework, among other things, is anticipated to result in an improvement
     in the reliability of Valco's long-term power supply and an increase in the
     price of power beginning in 2000, which increase will be partially offset
     in 2000 and 2001 by compensation Valco will receive from the VRA with
     respect to the provision of power in 1998 and 1999. However, we cannot
     provide assurance that in the long-term Valco will continue to be
     allocated sufficient power to operate at the desired operating levels past
     2001 or that such power will be available at an affordable price.

Wales

o    Electric power for the 49%-owned Anglesey smelter is supplied under a
     contract which expires in 2001. Anglesey expects to enter into a new power
     agreement during the first quarter of 2000 under which the existing
     contract would terminate early, in April 2000, and the new agreement would
     replace it for the period April 2000 through September 2005. We expect that
     the price of power under the new agreement will be significantly greater
     than the price under the present contract, which would have an adverse
     effect on KACC's financial results associated with the Anglesey smelter.
     However, Anglesey has ongoing initiatives to offset the impact of increased
     energy costs through cost reduction and revenue enhancement initiatives by
     2001. However, we cannot assure you that these initiatives will be
     successful in fully offsetting such increased energy costs.

We cannot provide assurance that electric power at affordable prices will be
available in the future for these smelters.

o    KACC's current or past operations subject it to environmental compliance,
     clean-up and damage claims that may be costly

The operations of KACC's facilities are regulated by a wide variety of
international, federal, state and local environmental laws. These environmental
laws regulate, among other things:

o    air and water emissions and discharges;

o    the generation, storage, treatment, transportation and disposal of solid
     and hazardous waste; and

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ITEM 1.       BUSINESS (CONTINUED)

o    the release of hazardous or toxic substances, pollutants and contaminants
     into the environment.

Compliance with these environmental laws is costly. While legislative,
regulatory and economic uncertainties make it difficult for us to project future
spending for these purposes, we currently anticipate that in the 2000 - 2001
period KACC's environmental capital spending will be approximately $13.0 million
per year and that KACC's operating costs will include pollution control costs
totaling approximately $35.0 million per year. However, subsequent changes in
environmental laws may change the way KACC must operate and may force KACC to
spend more then we currently project.

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

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

In response to environmental concerns, we have established environmental
accruals representing our estimate of the costs we reasonably expect KACC to
incur in connection with these matters. Our estimates are based on presently
enacted laws, existing technology, and our assessment of the likely remediation
to be performed in each case. At December 31, 1999, the balance of our accruals,
which are primarily included in our long-term liabilities, was $48.9 million. We
estimate that the annual costs charged to these environmental accruals will be
approximately $3.0 million to $9.0 million per year for the years 2000 through
2004 and an aggregate of approximately $23.0 million thereafter. However, we
cannot assure you that KACC's actual costs will not exceed our current
estimates. As additional facts develop, definitive clean-up plans are
established, the necessary regulatory approvals are received, or other
technologies are developed, changes in these and other factors may result in
KACC's costs exceeding our current expectations. We believe that it is
reasonably possible that costs associated with these environmental matters may
exceed current accruals by amounts that could range, in the aggregate, up to an
estimated $30.0 million. As the resolution of these matters is subject to
further regulatory review and approval, no assurance can be given as to when the
factors upon which a substantial portion of this estimate is based can be
expected to be resolved. However, we are currently working to resolve certain of
these matters.

o    KACC is subject to political and regulatory risks in a number of countries

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


I
TEM 2.       PROPERTIES

The locations and general character of the principal plants, mines, and other
materially important physical properties relating to KACC's operations are
described in Item 1 "- Business Operations" and those descriptions are
incorporated herein by reference. KACC owns in fee or leases all the real estate
and facilities used in connection with its business. Plants and equipment and
other facilities, other than the Gramercy, Louisiana alumina refinery (see Item
1 "- Incident at Gramercy Facility"), 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

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
--------------------------------------------------------------------------------



the years to incorporate technological advances in order to improve efficiency,
increase capacity, and achieve energy savings. The Company believes that KACC's
plants are cost competitive on an international basis.

KACC's obligations under the Credit Agreement are secured by, among other
things, mortgages on KACC's major domestic plants (other than the Gramercy
alumina refinery). See Note 5 of Notes to Consolidated Financial Statements for
further discussion.


ITEM 3.       LEGAL PROCEEDINGS

This section contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. See

Item 1 of this Report for cautionary information with respect to such
forward-looking statements.

Gramercy Litigation

On July 5, 1999, KACC's Gramercy, Louisiana, alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. The cause of the
accident is under investigation by KACC and various governmental agencies. In
January 2000, MSHA issued 21 citations in connection with its investigation of
the Gramercy incident. The citations allege, among other things, that certain
aspects of the plant's operations were unsafe and that such mode of operation
contributed to the explosion. To date, no monetary penalty has been proposed by
MSHA. Although the Company expects that a fine will be levied, the Company
cannot predict the amount of any such fine(s). It is possible that other civil
or criminal fines or penalties could be levied against KACC. KACC has previously
announced that it disagrees with the substance of the citations and has
challenged them.

Twenty-four employees were injured in the incident, several of them severely.
KACC may be liable for claims relating to the injured employees. The incident
has also resulted in thirty-six lawsuits, most of which were styled as class
action suits, being filed against KACC on behalf of more than 13,000 claimants.
The lawsuits allege, among other things, property damage and personal injury.
Such lawsuits were initially filed, on dates ranging from July 5, 1999, through
December 26, 1999, in the Fortieth Judicial District Court for the Parish of St.
John the Baptist, State of Louisiana, or in the Twenty-Third Judicial District
Court for the Parish of St. James, State of Louisiana, and such lawsuits have
been removed to the United Stated District Court, Eastern District of Louisiana,
and are consolidated under the caption Carl Bell, et al. v. Kaiser Aluminum &
Chemical Corporation, No. 99-2078, et seq. Plaintiffs have filed motions to
remand the actions to state court, and the federal court has taken the matter
under advisement. The cases are currently stayed pending mediation between the
parties. The aggregate amount of damages sought in the lawsuits cannot be
determined at this time. See Note 2 of Notes to Consolidated Financial
Statements.

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 20 years. The portion of Note 10 of Notes
to Consolidated Financial Statements under the heading "Asbestos Contingencies"
is incorporated herein by reference.

Labor Matters

In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of unfair labor practices ("ULPs") were filed by the USWA with the
National Labor Relations Board ("NLRB"). In July 1999, the Oakland, California,
regional office of the NLRB dismissed all material charges filed against KACC.
In September 1999, the union filed an appeal of this ruling with the NLRB
general counsel's office in Washington, D.C. The portion of Note 10 of Notes to
Consolidated Financial Statements under the heading "Labor Matters" is
incorporated herein by reference.

Other Matters

Various other lawsuits and claims are pending against KACC. While uncertainties
are inherent in the final outcome of such matters and it is presently impossible
to determine the actual costs that ultimately may be incurred, management
believes that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity. See Note 10 of Notes to
Consolidated Financial Statements.

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

During the fourth quarter of 1999, written consents of the holders of the
Company's Common Stock were solicited to approve an amendment to the Company's
Restated Certificate of Incorporation to increase the number of shares of Common
Stock which the Company has authority to issue by 25,000,000, from 100,000,000
to 125,000,000, and, consequently, to increase the total number of shares of all
classes of stock which the Company has authority to issue by 25,000,000, from
120,000,000 to 145,000,000. The amendment was approved in January 2000, with
50,383,413 consents submitted for the amendment, 24,007 consents submitted
against the amendment, and 13,702 consents submitted abstaining.


PART II


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

The Company's Common Stock is traded on the New York Stock Exchange under the
symbol "KLU." The number of record holders of the Company's Common Stock at
January 28, 2000, was 317. The information in Note 5 of Notes to Consolidated
Financial Statements under the heading "Debt Covenants and Restrictions" is
incorporated herein by reference. The Company has not paid any dividends on its
Common Stock during the two most recent fiscal years. The high and low sales
prices for the Company's Common Stock for each quarterly period of 1999, 1998
and 1997, as reported on the New York Stock Exchange is set forth in the
Quarterly Financial Data on page 58 in this Report and is incorporated herein by
reference.

The Credit Agreement contains restrictions on the ability of the Company to pay
dividends on or make distributions on account of the Company's Common Stock, and
the Credit Agreement and the indentures governing KACC's public debt contain
restrictions on the ability of the Company's subsidiaries to transfer funds to
the Company in the form of cash dividends, loans or advances. See Note 5 of
Notes to Consolidated Financial Statements and the " Management's Discussion and
Analysis of Financial Condition and Results of Operations - Financing Activities
and Liquidity and Capital Structure" for additional information.


ITEM 6.    SELECTED FINANCIAL DATA

Selected financial data for the Company is incorporated herein by reference to
the table at page 1 of this Report, to the table at pages 18 - 19 of

Management's Discussion and Analysis of Financial Condition and Results of
Operations, to Note 1 of Notes to Consolidated Financial Statements, and to The
Five-Year Financial Data on pages 59 - 60 in this Report.


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

Kaiser Aluminum Corporation ("Kaiser" or the "Company"), through its wholly
owned subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC"), operates in
all principal aspects of the aluminum industry through the following business
segments: Bauxite and alumina, Primary aluminum, Flat-rolled products and
Engineered products. The Company uses a portion of its bauxite, alumina, and
primary aluminum production for additional processing at certain of its
downstream facilities. Intersegment transfers are valued at estimated market
prices. The table below provides selected operational and financial information
on a consolidated basis with respect to the Company for the years ended December
31, 1999, 1998, and 1997. The following data should be read in conjunction with
the Company's consolidated financial statements and the notes thereto, contained
elsewhere herein. See Note 12 of Notes to Consolidated Financial Statements for
further information regarding segments. (All references to tons refer to metric
tons of 2,204.6 pounds.)


<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                          ------------------------------------------------
(In millions of dollars, except shipments and prices)        1999               1998               1997
-----------------------------------------------------     ----------         ----------         ----------


<S>                                                       <C>                <C>                <C>    
Shipments: (000 tons)
   Alumina
      Third Party                                             2,093.9(1)         2,250.0            1,929.8
      Intersegment                                              757.3(1)           750.7              968.0
                                                           ----------         ----------         ----------
        Total Alumina                                         2,851.2            3,000.7            2,897.8
                                                           ----------         ----------         ----------
   Primary Aluminum
      Third Party                                               295.6              263.2              327.9
      Intersegment                                              171.2              162.8              164.2
                                                           ----------         ----------         ----------
        Total Primary Aluminum                                  466.8              426.0              492.1
                                                           ----------         ----------         ----------
   Flat-Rolled Products                                         217.9              235.6              247.9
                                                           ----------         ----------         ----------
   Engineered Products                                          171.1              169.4              152.1
                                                           ----------         ----------         ----------
Average Realized Third Party Sales Price:(2)
   Alumina (per ton)                                       $      177         $      197         $      198
   Primary Aluminum (per pound)                            $      .67         $      .71         $      .75
Net Sales:
   Bauxite and Alumina
      Third Party (includes net sales of bauxite)          $    397.9(1)      $    472.7         $    411.7
      Intersegment                                              129.0(1)           135.8              201.7
                                                           ----------         ----------         ----------
        Total Bauxite & Alumina                                 526.9              608.5              613.4
                                                           ----------         ----------         ----------
   Primary Aluminum
      Third Party                                               439.1              409.8              543.4
      Intersegment                                              240.6              233.5              273.8
                                                           ----------         ----------         ----------
        Total Primary Aluminum                                  679.7              643.3              817.2
                                                           ----------         ----------         ----------
   Flat-Rolled Products                                         576.2              714.6              743.3
   Engineered Products                                          542.6              581.3              581.0
   Minority Interests                                            88.5               78.0               93.8
   Eliminations                                                (369.6)            (369.3)            (475.5)
                                                           ----------         ----------         ----------
        Total Net Sales                                    $  2,044.3         $  2,256.4         $  2,373.2
                                                           ==========         ==========         ==========
Operating Income (Loss):
   Bauxite & Alumina                                       $     (6.0)(3)     $     42.0(7)      $     54.2
   Primary Aluminum                                               8.0(4)            49.9(7)           148.3
   Flat-Rolled Products                                          17.1               70.8(7)            28.2(8)
   Engineered Products                                           38.6               47.5(7)            42.3(8)
   Micromill                                                    (30.7)(5)          (63.4)(5)          (24.5)
   Eliminations                                                   6.9                8.9               (5.9)
   Corporate                                                    (62.8)             (65.1)             (74.6)(8)
                                                           ----------         ----------         ----------
        Total Operating Income (Loss)                      $    (28.9)        $     90.6         $    168.0
                                                           ==========         ==========         ==========
Net Income (Loss)                                          $    (54.1)(6)     $       .6         $     48.0
                                                           ==========         ==========         ==========
Capital Expenditures                                       $     68.4         $     77.6         $    128.5
                                                           ==========         ==========         ==========
</TABLE>





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(1)   Net sales for the year ended December 31, 1999, included approximately 264
      tons of alumina purchased from third parties and resold to certain
      unaffiliated customers and 131 tons of alumina purchased from third
      parties and transferred to the Company's primary aluminum business unit.
(2)   Average realized prices for the Company's Flat-rolled products and
      Engineered products segments are not presented as such prices are subject
      to fluctuations due to changes in product mix. Average realized third
      party sales prices for alumina and primary aluminum include the impact of
      hedging activities.
(3)   Operating income (loss) for the year ended December 31, 1999, included
      charges of $5.0 related to insurance deductibles and self-insurance
      provisions and estimated business interruption insurance recoveries
      totaling $41.0. Additionally, depreciation was suspended for the Gramercy,
      Louisiana alumina refinery for the last six months of 1999, as a result of
      the July 5, 1999, incident. Depreciation expense for the Gramercy refinery
      for the six months ended June 30, 1999, was approximately $6.0.
(4)   Operating income (loss) for the year ended December 31, 1999, included
      potline restart costs of $12.8.
(5)   Operating income (loss) for the years ended December 31, 1999 and 1998
      included non-cash charges of $19.1 and $45.0, respectively, related to the
      impairment of the Company's Micromill assets.
(6)   Net income (loss) for the year ended December 31, 1999, included a pre-tax
      gain of $85.0 on involuntary conversion at Gramercy facility, which amount
      represents the difference between the minimum expected property damage
      reimbursement amount for the Gramercy alumina refinery and the net
      carrying value of the damaged property.
(7)   Operating income (loss) for the year ended December 31, 1998, for the
      Bauxite and alumina, Primary aluminum, Flat-rolled products and Engineered
      products segments included unfavorable strike-related impacts of
      approximately $11.0, $29.0, $16.0, and $4.0, respectively.
(8)   Operating income (loss) for the year ended December 31, 1997, included
      pre-tax charges of $2.6, $12.5 and $4.6 related to restructuring of
      operations for the Flat-rolled products, Engineered products and Corporate
      segments, respectively.

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

OVERVIEW

Market-related Factors

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree on the volume and mix of all products sold and on KACC's
hedging strategies. Primary aluminum prices have historically been subject to
significant cyclical price fluctuations. See Notes 1 and 11 of Notes to
Consolidated Financial Statements for a discussion of KACC's hedging activities.

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

During 1999, the Average Midwest United States transaction price ("AMT price")
per pound of primary aluminum declined to a low of approximately $.57 per pound
in February 1999 and then began a steady increase ending 1999 at $.79 per pound.
During 1998, the AMT price per pound of primary aluminum experienced a steady
decline during the year, beginning the year in the $.70 to $.75 range and ending
the year in the low $.60 range. During 1997, the AMT price remained in the $.75
to $.80 price range for the first eleven months before declining to the low $.70
range in December.

Subsequent to December 31, 1999, the AMT price continued to rise. At January 28,
2000, the AMT price was approximately $.84 per pound.

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Incident at Gramercy Facility

On July 5, 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. Twenty-four
employees were injured in the incident, several of them severely. As a result of
the incident, alumina production at the facility was completely curtailed.
Production at the plant is currently expected to remain completely curtailed
until the third quarter of 2000 when KACC expects to begin partial production.
Based on current estimates, full production is expected to be achieved during
the first quarter of 2001 or shortly thereafter. KACC has received the
regulatory permit required to operate the plant once the facility is ready to
resume production.

The cause of the incident is under investigation by KACC and governmental
agencies. In January 2000, the U.S. Mine Safety and Health Administration
("MSHA") issued 21 citations in connection with its investigation of the
incident. The citations allege, among other things, that certain aspects of the
plant's operations were unsafe and that such mode of operation contributed to
the explosion. To date, no monetary penalty has been proposed by MSHA. Although
the Company expects that a fine will be levied, the Company cannot predict the
amount of any such fine(s). It is possible that other civil or criminal fines or
penalties could be levied against KACC. KACC has previously announced that it
disagrees with the substance of the citations and has challenged them. However,
as more fully explained below, based on what is known to date and discussions
with the Company's advisors, the Company believes that the financial impact of
this incident (in excess of insurance deductibles and self-retention provisions)
will be largely offset by insurance coverage. Deductibles and self-retention
provisions under the insurance coverage for the incident total $5.0 million,
which amounts were charged to Cost of products sold in 1999.

KACC's insurance policies provide that KACC will be reimbursed for the costs of
repairing or rebuilding the damaged portion of the facility using new materials
of like kind and quality with no deduction for depreciation. Based on
discussions with the insurance carriers and their representatives and third
party engineering reports, KACC recorded a pretax gain of $85.0 million,
representing the difference between the minimum expected property damage
reimbursement amount and the net carrying value of the damaged property of $15.0
million. The receivable attributable to the minimum expected property damage
reimbursement has been classified as a long-term item in Other assets, despite
the fact that substantially all such amounts are expected to be spent during
2000, as such proceeds will be invested in property, plant and equipment. The
overall impact of recognizing the gain will be a significant increase in
stockholders' equity and an increase in deprecation expense in future years once
production is restored.

The Gramercy facility has incurred incremental costs for clean-up and other
activities during 1999 and will continue to incur such costs in 2000. These
clean-up and site preparation activities have been offset by accruals of
approximately $14.0 million for estimated insurance recoveries.

KACC's insurance policies provide for the reimbursement of specified continuing
expenses incurred during the interruption period plus lost profits (or less
expected losses) plus other expenses incurred as a result of the incident. KACC
had recorded expected business interruption insurance recoveries totaling $19.0
million and $41.0 million in the quarter and year ended December 31, 1999, as a
reduction of Cost of products sold, which amounts substantially offset actual
expenses incurred during these periods. However, the business interruption
insurance amounts recorded represent estimates of KACC's business interruption
coverage, based on preliminary discussions with the insurance carriers and their
representatives, and are, therefore, subject to change. KACC currently believes
that additional amounts may be recoverable. Any adjustments to the recorded
amounts of expected recovery will be reflected from time to time as such amounts
are agreed to by the insurance carriers. The amounts of such adjustments could
be material.

Since production has been curtailed at the Gramercy facility, KACC has, for the
time being, suspended depreciation of the facility. Depreciation expense for the
first six months of 1999 was approximately $6.0 million. However, KACC believes
that the depreciation expense that would have been incurred may, at least in
part, be recoverable under its business interruption insurance coverage.

The incident has also resulted in thirty-six class action lawsuits being filed
against KACC alleging, among other things, property damage and personal injury.
In addition, a claim for alleged business interruption losses has been made by a
neighboring business. The aggregate amount of damages sought in the lawsuits and
other claims cannot be determined at this time; however, KACC does not currently
believe the damages will exceed the amount of coverage under its liability
policies.

Claims relating to all of the injured employees are expected to be covered under
KACC's workers' compensation or liability policies. However, the aggregate
amount of workers' compensation claims cannot be determined at this time and it
is possible that such claims could exceed KACC's coverage limitations. While it
is presently impossible to determine the aggregate amount

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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of claims that may be incurred, or whether they will exceed KACC's coverage
limitations, KACC currently believes that any amount in excess of the coverage
limitations will not have a material effect on the Company's consolidated
financial position or liquidity. However, it is possible that as additional
facts become available, additional charges may be required and such charges
could be material to the period in which they are recorded.

Labor Matters

Substantially all of KACC's hourly workforce at the Gramercy, Louisiana, alumina
refinery, Mead and Tacoma, Washington, aluminum smelters, Trentwood, Washington,
rolling mill, and Newark, Ohio, extrusion facility were covered by a master
labor agreement with the United Steelworkers of America (the "USWA") which
expired on September 30, 1998. The parties did not reach an agreement prior to
the expiration of the master agreement and the USWA chose to strike. In January
1999, KACC declined an offer by the USWA to have the striking workers return to
work at the five plants without a new agreement. KACC imposed a lock-out to
support its bargaining position and continues to operate the plants with
salaried employees and other workers as it has since the strike began.

As a result of the USWA strike, the Company temporarily curtailed three out of a
total of eleven potlines at its Mead and Tacoma, Washington, aluminum smelters
at September 30, 1998 (representing approximately 70,000 tons per year of
production capacity out of a total combined production capacity of 273,000 tons
per year at the facilities). Restarts of the two Mead potlines were completed
during mid-1999. While a portion of the curtailed potline at Tacoma has been
restarted to meet internal requirements, the timing for a complete restart of
the potline (representing approximately 10,000 tons of idle production capacity)
has yet to be determined and will depend upon market conditions and other
factors.

While the Company initially experienced an adverse strike-related impact on its
profitability in the fourth quarter of 1998, the Company currently believes that
KACC's operations at the affected facilities have been substantially stabilized
and will be able to run at, or near, full capacity, and that the incremental
costs associated with operating the affected plants during the dispute were
virtually eliminated as of January 1999 (excluding the impacts of the restart
costs discussed above and the effect of market factors such as the continued
market-related curtailment at the Tacoma smelter). However, no assurances can be
given that KACC's efforts to run the plants on a sustained basis, without a
significant business interruption or material adverse impact on the Company's
operating results, will be successful.

KACC and the USWA continue to communicate. The objective of KACC has been, and
continues to be, to negotiate a fair labor contract that is consistent with its
business strategy and the commercial realities of the marketplace.

Strategic Initiatives

KACC's strategy is to improve its financial results by: increasing the
competitiveness of its existing plants; continuing its cost reduction
initiatives; adding assets to businesses it expects to grow; pursuing
divestitures of its non-core businesses; and strengthening its financial
position.

In addition to working to improve the performance of the Company's existing
assets, the Company has devoted significant efforts analyzing its existing asset
portfolio with the intent of focusing its efforts and capital in sectors of the
industry that are considered most attractive, and in which the Company believes
it is well positioned to capture value. The initial steps of this process
resulted in the June 1997 acquisition of the Bellwood extrusion facility, the
May 1997 formation of AKW L.P. ("AKW"), the rationalization of certain of the
Company's engineered products operations and the Company's investment to expand
its production capacity for heat treat flat-rolled products at its Trentwood,
Washington, rolling mill.

This process has continued in 1999. In February 1999, KACC completed the
acquisition of the remaining 45% interest in Kaiser LaRoche Hydrate Partners
("KLHP"), an alumina marketing venture, from its joint venture partner for a
cash purchase price of approximately $10.0 million. Additionally, in April 1999,
KACC completed the sale of its 50% interest in AKW, to its partner for $70.4
million. The strategic analysis process also resulted in the Company's decision
in the latter part of 1998 to seek a strategic partner for the further
development and deployment of KACC's Micromill(TM) technology and to KACC's
later agreement in January 2000 to sell the Micromill assets and technology, for
a nominal payment at closing and future payments based on subsequent performance
and profitability of the Micromill technology.

Another area of emphasis has been a continuing focus on managing the Company's
legacy liabilities. The Company believes that KACC has insurance coverage
available to recover certain incurred and future environmental costs and a
substantial portion of its asbestos-related costs and is actively pursing claims
in this regard. During 1998, KACC received recoveries totaling


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approximately $35.0 million from certain of its insurers related to current and
future environmental claims. The timing and amount of future recoveries of
asbestos-related claims from insurance carriers remain a major priority of the
Company, but will depend on the pace of claims review and processing by such
carriers and the resolution of any disputes regarding coverage under the
insurance policies. However, during 1999, KACC reached preliminary agreements
under which it expects to collect a substantial portion of its expected
asbestos-related payments from certain insurance carriers in 2000.

Additional portfolio analysis and initiatives are continuing.

Valco Operating Level

In 1999, the power allocation for KACC's 90%-owned Volta Aluminium Company
Limited ("Valco") smelter in Ghana was sufficient for the smelter to operate
three out of a total of five potlines as of January 1. Each of Valco's potlines
is capable of producing approximately 40,000 tons per year of primary aluminum.
However, production was well below this level in the first half of the year due
to the timing of restarts for the two incremental potlines. Consequently, to
compensate for the low production in the first half of the year, Valco operated
above an equivalent three-potline annual rate during the last six months of
1999. At December 31, 1999, Valco was operating four potlines.

Valco operated only one potline during most of 1998. However, Valco earned
compensation in 1998 (in the form of energy credits to be utilized over the last
half of 1998 and during 1999) from the Volta River Authority ("VRA") in lieu of
the power necessary to run two of the potlines that were curtailed during 1998.
The compensation substantially mitigated the financial impact in 1998 of the
curtailment of such lines. However, Valco did not receive any compensation from
the VRA for one additional potline which was curtailed in January 1998.

Under a December 1999 agreement between Valco and the VRA, Valco's power
allocation for 2000 and 2001 will be sufficient for the smelter to operate four
of its five potlines. Valco and the VRA also reached an agreement in December
1999 that provides a framework for resolving longer-term issues. This framework,
among other things, is anticipated to result in an improvement in the
reliability of Valco's long-term power supply and an increase in the price for
power beginning in 2000. The increase in the price for power will be partially
offset by net payments of approximately $13 million Valco will receive from the
VRA over the period 2000 to 2001 with respect to the provision of power in 1998
and 1999.

Flat-Rolled Products

In December 1999, the Company announced that its flat-rolled products business
unit expects to accelerate its product mix shift toward higher value added
product lines such as heat-treat, beverage can lid and tab stock, automotive and
other niche businesses, and away from beverage can body stock. The initial steps
of this process should be completed by early 2000, at which point the Company
will assess related issues such as employment levels at the Trentwood facility.
Although the shift in product mix is expected to have a favorable impact on the
Company's results and financial position over the long term, it is possible that
such a product mix shift may result in certain non-recurring charges that would
have an adverse impact on the Company's near term results.

RESULTS OF OPERATIONS

1999 AS COMPARED TO 1998

Summary - The Company reported a net loss of $54.1 million, or $.68 of basic
loss per common share, for 1999 compared to net income of $.6 million, or $.01
of basic income per common share, for 1998. Net sales in 1999 totaled $2,044.3
million compared to $2,256.4 million in 1998.

Net loss for 1999 included a non-cash pre-tax charge of $19.1 million, or $.16
per share, to reduce the carrying value of KACC's Micromill assets, pre-tax
charges of $32.8 million, or $.27 per common share, to reflect mark-to-market
adjustments on certain primary aluminum hedging transactions and non-cash
pre-tax charges of $53.2 million, or $.44 per common share, for asbestos-
related claims. The 1999 charges were offset by a pre-tax gain on involuntary
conversion at Gramercy facility of $85.0 million, or $.69 per share, a pre-tax
gain of $50.5 million, or $.42 per common share, on the sale of the Company's
50% interests in AKW and a non-cash tax benefit of $4.0 million, or $.05 per
share, resulting from the resolution of certain tax matters. Net income for 1998
included approximately $60.0 million, $.50 per common share, of pre-tax
incremental expense and the earnings impact of lost volume associated with the
strike by members of the USWA (more fully discussed above), a non-cash pre-tax
charge of $45.0 million, $.38 per common share, to reduce the carrying value of
KACC's Micromill assets, (more fully discussed above) and a non-cash tax benefit
of $8.3 million, $.10 per common share, resulting from the resolution of certain
tax matters.


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Bauxite and Alumina - Third party net sales were down 16% in 1999 as compared to
1998 as a result of a 10% decline in third party average realized prices and a
7% decrease in third party alumina shipments. The decline in the average
realized prices in 1999 as compared to 1998 was primarily attributable to a
decrease in net gains from KACC hedging activities. The decrease in
year-over-year shipments was primarily the net effect of the Gramercy incident
after considering the 264,000 tons of alumina purchased by KACC from third
parties to fulfill third party sales contract.

Intersegment net sales for 1999 declined 5% as compared to 1998. The decline was
primarily due to a 6% decline in the intersegment average realized price, offset
in part by a 1% increase in intersegment shipments, resulting from potline
restarts at Valco and at the Company's Washington smelters. Intersegment net
sales include approximately 131,000 tons of alumina purchased from third-parties
and transferred to the primary aluminum business unit.

Segment operating income was down in 1999 as compared to 1998 primarily as a
result of the price and volume factors discussed above. Segment operating income
for 1999 was also adversely affected by the $5.0 million cost of insurance
deductibles and self-retention provisions related to the Gramercy incident and
was favorably impacted by the fact that depreciation on the Gramercy facility
was suspended in July 1999. Segment operating income for 1998 included the
adverse impact of approximately $11.0 million of incremental strike-related
costs.

Primary Aluminum - Third party net sales of primary aluminum were up 7% as
compared to 1998 as a result of a 12% increase in third party shipments offset
by a 6% decrease in the average realized third party sales prices. The increase
in shipments was primarily due to the favorable impact of Valco operating three
potlines in 1999 as compared to one potline in 1998. While average primary
aluminum market prices for 1999 were approximately the same as 1998, the Company
experienced a reduction in third party average realized prices as a result of a
decrease in net gains from KACC hedging activities.

Intersegment net sales for 1999 were up 3% as compared to 1998. Intersegment
shipments increased 5% due to the timing of shipments to the Company's
fabricated business units while intersegment average realized prices were down
2%.

Segment operating income for 1999 was down compared to 1998. The most
significant component of this decline was the reduction in the average realized
prices discussed above. Results for 1999 were also adversely impacted by costs
of approximately $1.3 million and $12.8 million for the fourth quarter and the
year, respectively, associated with preparing and restarting potlines at Valco
and the Washington smelters. The favorable impact of Valco operating at a higher
rate in 1999 (as compared to 1998) was substantially offset by the fact that
Valco earned mitigating compensation of approximately $29.0 million in 1998 for
two of its curtailed potlines. Segment operating income for 1998 included the
adverse impact of approximately $29.0 million of incremental strike-related
costs and the favorable impact of the previously mentioned compensation earned
by Valco as a result of the curtailment of two of its potlines.

Flat-Rolled Products - Net sales of flat-rolled products for 1999 declined by
19% compared to 1998 as a result of a 13% decline in average realized prices and
an 8% decline in product shipments. The decline in average realized prices
resulted primarily from a shift in product mix (from aerospace products, which
have a higher price and operating margin, to other products) and a reduction in
prices resulting from reduced demand for heat treat products. The reduction in
shipments was primarily due to reduced demand in 1999 for aerospace heat treat
products offset, in small part, by increased shipments of general engineered
products.

The decline in 1999 prices and shipments as compared to 1998 was responsible for
the decline in segment operating income for 1999. Segment operating income for
1998 included the adverse impact of approximately $16.0 million of incremental
strike-related costs.

Engineered Products - Net sales of engineered products for 1999 decreased 7%
compared to 1998 primarily due to an 8% decline in average realized prices.
Product shipments were essentially flat. The decline in the average sales
realized prices in 1999 was attributable to a change in product mix (higher
ground transportation products offset by lower aerospace shipments). While there
was a strong increase in 1999 in the demand for ground transportation products
it was offset by a reduced demand for aerospace products.

Segment operating income for 1999 decreased compared to 1998 as a result of the
factors discussed above as well as the reduced equity in earnings from AKW
(which partnership interests were sold in April 1999). Segment operating income
for 1998 included the adverse impact of approximately $4.0 million of
incremental strike-related costs.


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Eliminations - Eliminations of intersegment profits vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales.

Corporate and Other - Corporate operating expenses represent corporate general
and administrative expenses which are not allocated to the Company's business
segments. Corporate operating expenses for 1999 were lower than 1998 primarily
due to reduced incentive compensation expense resulting from the decline in
operating results.

1998 AS COMPARED TO 1997

Summary - The Company reported net income of $.6 million, or $.01 basic income
per common share, for 1998 compared to net income of $48.0 million, or $.57 of
basic income per common share, for 1997. Net sales in 1998 totaled $2,256.4
million compared to $2,373.2 million in 1997.

Net income for 1998 included the effect of certain non-recurring items,
including approximately $60.0 million, $.50 per common share, of pre-tax
incremental expense and the earnings impact of lost volume associated with a
strike by members of the USWA (more fully discussed above), a pre-tax non-cash
charge of $45.0 million, $.38 per common share, to reduce the carrying value of
the Company's Micromill assets and a non-cash tax benefit of $8.3 million, $.10
per common share, resulting from the resolution of certain tax matters. Net
income for 1997 included the effect of two essentially offsetting non-recurring
items: a $19.7 million pre-tax restructuring charge and a non-cash tax benefit
of approximately $12.5 million related to the settlement of certain tax matters.

Bauxite and Alumina - Third party net sales of alumina were up 16% in 1998 as
compared to 1997 primarily due to a 17% increase in third party shipments. The
increase in 1998 third party shipments (and offsetting decrease in 1998
intersegment shipments) resulted from reduced shipments to Valco, due to the
production curtailment more fully discussed above and to a lesser extent, the
fourth quarter strike-related curtailment of three potlines at the Company's
Washington smelters. The average realized price for third party alumina sales
was down only slightly as the allocated net gains from the Company's hedging
activities substantially offset the decline in market prices related to the
Company's primary aluminum-linked customer sales contracts. In addition to being
impacted by the reduced shipments to Valco and the Washington smelters as
discussed above, intersegment sales were adversely affected by a substantial
market-related decline in intersegment average sales prices.

Segment operating income was essentially unchanged, excluding the impact of the
approximate $11.0 million of incremental strike-related costs. The adverse
impact of reduced intersegment realized prices was essentially offset by
improved operating performance resulting from higher production as well as lower
energy costs.

Primary Aluminum - 1998 third party net sales of primary aluminum were down 25%
as compared to 1997 primarily as a result of a 20% reduction in shipments,
caused by the 1998 potline curtailments at Valco and the Washington smelters. A
5% reduction in average realized third party sales prices between 1998 and 1997
(reflecting lower market prices offset, in part, by allocated net gains from
KACC's hedging activities), also adversely impacted third party net sales.
Intersegment net sales were down approximately 15% between 1998 and 1997. While
intersegment shipments were essentially unchanged from the prior year, average
realized prices dropped by 14% reflecting lower market prices for primary
aluminum.

Segment operating income in 1998 was down significantly from 1997. The operating
income impact of the Valco potline curtailments was partially mitigated by the
compensation from the VRA for two of the three curtailed potlines. In addition
to the impact of the one uncompensated potline curtailment at Valco, 1998
results were also negatively affected by the impact of the potline curtailments
at the Company's Washington smelters, reduced average realized prices (primarily
on intersegment sales), and an adverse strike-related impact of approximately
$29.0 million.

Flat-Rolled Products - Net sales of flat-rolled products decreased by 4% during
1998 as compared to 1997 as a 5% reduction in product shipments was modestly
offset by the price impact of changes in product mix. The mix of product
shipments in 1998 reflects a higher demand for heat treat products, primarily in
the first half of the year, offset by reduced can sheet shipments and an
increased level of tolling, all as compared to 1997.

Segment operating income increased significantly in 1998 primarily as a result
of the increased demand for heat treat products in the first half of 1998 and
improved operating efficiencies. Segment results for 1998 were particularly
strong in light of the unfavorable strike-related impact of approximately $16.0
million. Segment results for 1997 included a non-cash charge recorded in the
second quarter of 1997 in connection with restructuring activities.


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Engineered Products - Net sales of engineered products were relatively flat year
to year. An 11% increase in product shipments was effectively offset by
market-related reductions in product prices as well as by the price impact of
changes in product mix. The increase in year-over-year shipments is in part due
to the impact of the Company's ownership of the Bellwood extrusion facility in
Richmond, Virginia, for all of 1998 versus only half of 1997. This was, in part,
offset by a decline in year-over-year sales, attributable to the AKW wheels
joint venture formation in May 1997 and reduced shipments caused by labor
difficulties at two major customers.

Segment operating income declined by approximately 6% in 1998 as compared to
1997, excluding the 1997 pre-tax net charge related to restructuring of
operations and approximately $4.0 million of adverse incremental strike-related
impact in 1998, as a result of the market impact of the previously mentioned
labor difficulties at two major customers and due to an overall softening in
demand, particularly in the second half of the year.

Eliminations - Eliminations of intersegment profit vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales.

Corporate and Other - Corporate operating expenses represent corporate general
and administrative expenses which are not allocated to the Company's business
segments. Excluding the 1997 pre-tax charge associated with the Company's
restructuring of operations, corporate expenses were lower in 1998 than in 1997
primarily as a result of lower consulting and other costs associated with the
Company's ongoing profit improvement program and portfolio review initiatives.

LIQUIDITY AND CAPITAL RESOURCES

See Note 5 of Notes to Consolidated Financial Statements for a listing of the
Company's indebtedness and information concerning certain restrictive debt
covenants.

Operating Activities

In 1999, operating activities used $90.6 of cash. This amount compares with 1998
and 1997 when operating activities provided cash of $170.7 and $45.0 million,
respectively. The decrease in cash flows from operating activities between 1999
and 1998 was due primarily to the impact of 1999 results, excluding non-cash
charges, and an increased investment in working capital (excluding cash). The
increase in cash flows from operating activities between 1998 and 1997 was due
primarily to a reduced investment in working capital (excluding cash), the
receipt of $35.0 million of environmental insurance recoveries and the impact of
1998 results (excluding non-cash charges).

Investing Activities

Total consolidated capital expenditures were $68.4, $77.6, and $128.5 million in
1999, 1998, and 1997, respectively (of which $4.8, $7.2, and $6.6 million were
funded by the minority partners in certain foreign joint ventures). Except for
the purchase in 1999 of the remaining 45% interest in KLHP for approximately
$10.0 million, capital expenditures were made primarily to improve production
efficiency, reduce operating costs and expand capacity at existing facilities.
Total consolidated capital expenditures, excluding the expenditures to rebuild
the Gramercy, Louisiana facility which will be partially funded with insurance
proceeds (see " - Overview - Incident at Gramercy Facility" above,) are
currently expected to be between $80.0 and $115.0 million per year in each of
2000 through 2002 (of which approximately 10% is expected to be funded by the
Company's minority partners in certain foreign joint ventures). See " -
Financing Activities and Liquidity" below for a discussion of Gramercy related
capital spending. Management continues to evaluate numerous projects, all of
which would require substantial capital, both in the United States and overseas.
The level of capital expenditures may be adjusted from time to time depending on
the Company's price outlook for primary aluminum and other products, KACC's
ability to assure future cash flows through hedging or other means, the
Company's financial position and other factors.

Financing Activities and Liquidity

As of December 31, 1999, the Company's total consolidated indebtedness was
$972.8 million, including $10.4 million outstanding under KACC's credit
agreement, as amended, (the "Credit Agreement"). At February 29, 2000, KACC had
$212.6 million of unused availability remaining under the Credit Agreement after
allowing for $30.0 million of outstanding borrowings and $82.4 million for
outstanding letters of credit.

Under the Credit Agreement, KACC is able to borrow by means of revolving credit
advances and letters of credit (up to $125.0 million) an aggregate amount equal
to the lesser of $325.0 million or a borrowing base relating to eligible
accounts receivable


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and eligible inventory. The Credit Agreement, which matures in August 2001, is
guaranteed by the Company and by certain significant subsidiaries of KACC. The
Credit Agreement requires KACC to comply with certain financial covenants,
places significant restrictions on the Company and KACC, and is secured by a
substantial majority of the Company's and KACC's assets. The Credit Agreement
does not permit the Company, and significantly restricts KACC's ability, to pay
any dividends on their common stock. The indentures governing KACC's public debt
includes various restrictions on KACC and its subsidiaries and repurchase
obligations upon a Change of Control (as defined).

KACC's and the Company's near-term liquidity will be, as more fully discussed
below, affected by three significant items: the Gramercy incident, aluminum
hedging margin requirements and the amount of net payments for asbestos
liabilities.

As of December 31, 1999, the Company had recorded estimated recoveries for
clean-up, site preparation and business interruption costs incurred relating to
the Gramercy incident of approximately $55.0 million. As of December 31, 1999,
approximately $50.0 million of insurance recoveries had been received.
Additionally, through February 29, 2000, KACC had received approximately $25.0
million of additional insurance recoveries. During 2000, capital spending
related to rebuilding the Gramercy facility is expected to be approximately
$200.0 million. KACC believes that between 50% and 80% of such expenditures will
ultimately be funded by proceeds from KACC's insurance contracts. The remainder
of the Gramercy-related capital expenditures will be funded by KACC using
existing cash resources, funds from operations and/or borrowings under KACC's
Credit Agreement. The amount of capital expenditures to be funded by KACC will
depend on, among other things, the ultimate cost and timing of the rebuild and
negotiations with the insurance carriers. In addition, KACC will incur
continuing expenses and experience lost profits subsequent to 1999 as a result
of the Gramercy incident which amounts (based on current primary aluminum prices
and available facts and circumstances) are expected to total another $100.0
million, which amount is expected to be largely offset by insurance recoveries.

KACC continues to work with the insurance carriers to maximize the amount of
recoveries and to minimize, to the extent possible, the period of time between
when KACC expends funds and when it is reimbursed. KACC will likely have to fund
an average of 30 - 60 days of property damage and business interruption
activity, unless some other arrangement is agreed with the insurance carriers,
and such amounts will be significant. The Company believes it has sufficient
financial resources to fund the construction and business interruption costs on
an interim basis. However, no assurances can be given in this regard. If
insurance recoveries were to be delayed or if there were other significant uses
of KACC's existing Credit Agreement capacity, delays in the rebuilding of the
Gramercy refinery could occur and could have a material adverse impact on the
Company's and KACC's liquidity and operating results.

Hedging activities could also have an adverse impact on KACC's near-term
liquidity. At December 31, 1999, KACC had made margin advances of $38.0 million
and had posted letters of credit totaling $40.0 million in lieu of making margin
advances. Increases in primary aluminum prices subsequent to December 31, 1999,
could result in KACC having to make additional margin advances or post
additional letters of credit and such amounts could be significant. KACC's
exposure to margin advances is expected to improve throughout 2000 as its year
2000 positions, which have a lower average maximum contract price than KACC's
2001 positions, expire. KACC is considering various financing and hedging
strategies to limit its exposure to further margin advances in the event of
aluminum price increases. However, no assurance can be given that KACC will be
successful in this regard.

KACC's estimated annual cash payments, prior to insurance recoveries, for
asbestos-related costs will be approximately $75.0 million to $85.0 million for
each of the years 2000 through 2002. The Company believes that KACC will recover
a substantial portion of these payments from insurance. Preliminary agreements
have been reached with certain insurance carriers under which it expects to
collect a substantial portion of its 2000 asbestos-related payments. However,
delays in receiving these or future insurance repayments would have an adverse
impact on KACC's liquidity.

While no assurance can be given that existing cash sources will be sufficient to
meet the Company's short-term liquidity requirements, management believes that
the Company's existing cash resources, together with cash flows from operations
and borrowings under the Credit Agreement, will be sufficient to satisfy its
working capital and capital expenditure requirements for the next year.

KACC's ability to make payments on and to refinance its debt on a long-term
basis depends on its ability to generate cash in the future. This, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors beyond KACC's control. KACC will need to refinance
all or a substantial portion of its debt on or before its maturity. No assurance
can be given that KACC will be able to refinance its debt on acceptable terms.
However, with respect to long-term


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liquidity, management believes that operating cash flow, together with the
ability to obtain both short and long-term financing, should provide sufficient
funds to meet KACC's and the Company's working capital and capital expenditure
requirements.

Capital Structure

MAXXAM Inc. ("MAXXAM") and one of its wholly owned subsidiaries collectively own
approximately 63% of the Company's Common Stock, with the remaining
approximately 37% of the Company's Common Stock being publicly held. Certain of
the shares of the Company's Common Stock beneficially owned by MAXXAM are
subject to certain pledge agreements. See Note 8 of Notes to Consolidated
Financial Statements for a further description of the pledge agreements.

The Company has an effective "shelf" registration statement covering the
offering from time to time of up to $150.0 million of equity securities. Any
such offering will only be made by means of a prospectus. The Company also has
an effective "shelf" registration statement covering the offering of up to
10,000,000 shares of the Company's Common Stock that are owned by MAXXAM. The
Company will not receive any of the net proceeds from any transaction initiated
by MAXXAM pursuant to this registration statement.

In January 2000, the Company increased the number of its authorized shares of
Common Stock to 125,000,000 from 100,000,000 to improve the Company's
flexibility to issue Common Stock under its employee benefit plans, under an
existing shelf registration statement, and in connection with other
transactions.

Commitments and Contingencies

The Company and KACC are subject to a number of environmental laws, to fines or
penalties assessed for alleged breaches of the environmental laws, and to claims
and litigation based upon such laws. KACC currently is subject to a number of
claims under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments Act of 1986
("CERCLA") and, along with certain other entities, has been named as a
potentially responsible party for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA. Based on the Company's
evaluation of these and other environmental matters, the Company has established
environmental accruals of $48.9 million at December 31, 1999. However, the
Company believes that it is reasonably possible that changes in various factors
could cause costs associated with these environmental matters to exceed current
accruals by amounts that could range, in the aggregate, up to an estimated $30.0
million.

KACC is also 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 sold for at least 20 years. Based on past experience and
reasonably anticipated future activity, the Company has established a $387.8
million accrual at December 31, 1999, for estimated asbestos-related costs for
claims filed and estimated to be filed through 2009, before consideration of
insurance recoveries. However, the Company believes that substantial recoveries
from insurance carriers are probable. The Company reached this conclusion based
on prior insurance-related recoveries in respect of asbestos-related claims,
existing insurance policies and the advice of outside counsel with respect to
applicable insurance coverage law relating to the terms and conditions of these
policies. Accordingly, the Company has recorded an estimated aggregate insurance
recovery of $315.5 million (determined on the same basis as the asbestos-related
cost accrual) at December 31, 1999. Although the Company has settled
asbestos-related coverage matters with certain of its insurance carriers, other
carriers have not yet agreed to settlements. The timing and amount of future
recoveries from these carriers will depend on the pace of claims review and
processing by such carriers and on the resolution of any disputes regarding
coverage under such policies that may arise.

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 and insurance recoveries that ultimately may be received, management
currently believes that the resolution of these uncertainties and the incurrence
of related costs, net of any related insurance recoveries, should not have a
material adverse effect on the Company's consolidated financial position,
results of operations, or liquidity.

In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of unfair labor practices ("ULPs") have been filed with the National
Labor Relations Board ("NLRB")by the USWA. KACC responded to all such
allegations and believes that they are without merit. In July 1999, the Oakland,
California, regional office of the NLRB dismissed all material charges filed
against KACC. In September 1999, the union filed an appeal of this ruling with
the NLRB general counsel's office


                                       27


<PAGE>   31



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
--------------------------------------------------------------------------------



in Washington, D.C. If the original decision were to be reversed, the matter
would be referred to an administrative law judge for a hearing whose outcome
would be subject to an additional appeal either by the USWA or KACC. This
process could take months or years. There can be no certainty that the original
NLRB decision will be upheld. If these proceedings eventually resulted in a
definitive ruling against KACC, it could be obligated to provide back pay to
USWA members at the five plants and such amount could be significant. However,
while uncertainties are inherent in the final outcome of such matters, the
Company believes that the resolution of the alleged ULPs should not result in a
material adverse effect on the Company's consolidated financial position,
results of operations, or liquidity.

See Note 10 of Notes to Consolidated Financial Statements for a more detailed
discussion of these contingencies and the factors affecting management's
beliefs. See also "Overview."

OTHER MATTERS

Year 2000 Readiness Disclosure

Although the Company did experience some minor inconveniences in connection with
the year 2000 date change, such inconveniences did not have any material adverse
impacts on the Company's results of operations or financial condition.

The Company had a company-wide program which coordinated the year 2000 efforts
of its individual business units and tracked their progress. Each of the
Company's business units developed year 2000 plans specifically tailored to its
individual situation. A wide range of solutions were implemented, including
modifying existing systems and, in limited cases where it was cost effective,
purchasing new systems. Total spending related to these projects, which began in
1997 and continued through 1999, was $8.3 million. System modification costs
were expensed as incurred. Costs associated with new systems were capitalized
and will be amortized over the life of the system.

Income Tax Matters

The Company's net deferred income tax assets as of December 31, 1999, were
$437.4 million, net of valuation allowances of $125.6 million. The Company
believes a long-term view of profitability is appropriate and has concluded that
these net deferred income tax assets will more likely than not be realized. See
Note 6 of Notes to Consolidated Financial Statements for a discussion of these
and other income tax matters.


I
TEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This section contains forward-looking statements that involve risk and
uncertainties. Actual results could differ materially from those projected in
these forward-looking statements.

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. As discussed
more fully in Notes 1 and 11 of Notes to Consolidated Financial Statements, KACC
utilizes hedging transactions to lock-in a specified price or range of prices
for certain products which it sells or consumes and to mitigate KACC's exposure
to changes in foreign currency exchange rates. The following sets forth the
impact on future earnings of adverse market changes related to KACC's hedging
positions with respect to commodity and foreign exchange contracts described
more fully in Note 11 of Notes to Consolidated Financial Statements. The impact
of market changes on energy derivative activities is generally not significant.

Alumina and Primary Aluminum

Alumina and primary aluminum production in excess of internal requirements is
sold in domestic and international markets, exposing the Company to commodity
price opportunities and risks. KACC's hedging transactions are intended to
provide price risk management in respect of the net exposure of earnings
resulting from (i) anticipated sales of alumina, primary aluminum and fabricated
aluminum products, less (ii) expected purchases of certain items, such as
aluminum scrap, rolling ingot, and bauxite, whose prices fluctuate with the
price of primary aluminum. On average, before consideration of hedging
activities, any fixed price contracts with fabricated aluminum products
customers, variations in production and shipment levels, and timing issues
related to price changes the Company estimates that each $.01 increase
(decrease) in the market price per price-equivalent pound of primary aluminum
increases (decreases) the Company's annual pre-tax earnings by approximately
$15.0 million.



                                       28


<PAGE>   32



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
--------------------------------------------------------------------------------



As of December 31, 1999, approximately 65% and 45% of KACC's net hedgeable
volume with respect to 2000 and 2001, respectively, is subject to a minimum and
maximum contract price. Based on the average December 1999 London Metal Exchange
("LME") cash price for primary aluminum of approximately $.71 per pound, the
Company estimates that it would realize a net aggregate pre-tax reduction of
operating income of approximately $70.0 million from its hedging positions and
fixed price customer contracts during 2000 and 2001. The Company estimates that
a hypothetical $.10 increase from the above stated December 1999 price would
result in an additional net aggregate pre-tax reduction of operating income of
approximately $130.0 million being realized during 2000 and 2001 related to
KACC's hedging positions and fixed price customer contracts. Approximately 40%
of the total reductions in operating income would occur in the first half of
2000. Both amounts are versus what the Company's results would have been without
the derivative commodity contracts and fixed price customer contracts discussed
above. Conversely, the Company estimates that a hypothetical $.10 decrease from
the above stated December 1999 price level would result in an aggregate pre-tax
increase in operating income of approximately $30.0 million being realized
during 2000 and 2001 related to KACC's hedging positions and fixed price
customer contracts. It should be noted, however, that, since the hedging
positions and fixed price customer contracts lock-in a specified price or range
of prices, any increase or decrease in earnings attributable to KACC's hedging
positions or fixed price customer contracts would be significantly offset by a
decrease or increase in the value of the hedged transactions.

As stated in Note 11 of Notes to the Consolidated Financial Statements, KACC has
certain hedging positions which do not qualify for treatment as a "hedge" under
current accounting guidelines and thus must be marked-to-market each period.
Fluctuations in forward market prices for primary aluminum would likely result
in additional earnings volatility as a result of these positions. The Company
estimates that a hypothetical $.10 increase in spot market prices from the
December 31, 1999, LME cash price of $.74 per pound would, if the forward market
were in a "contango" position (i.e., where future prices exceed spot prices),
result in additional aggregate mark-to-market charges of between $20.0 - $30.0
million during 2000 and 2001. Conversely, the Company estimates that a
hypothetical $.10 decrease in year-end 1999 spot market prices would result in
aggregate mark-to-market income of between $20.0 - $30.0 million during 2000
and 2001. For purposes of this computation, the Company assumed that the forward
market would be essentially "flat" (i.e., future prices would approximate the
current forward market price).

The foregoing estimated earnings impact on 2001 excludes the possible effect on
pre-tax income of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which must be
adopted by the Company as of January 1, 2001.

In addition to having an impact on the Company's earnings, a hypothetical
$.10-per-pound change in primary aluminum prices would also impact the Company's
cash flows and liquidity through changes in possible margin advance
requirements. At December 31, 1999, KACC had made margin advances of $38.0
million and had posted letters of credit totaling $40.0 million in lieu of
paying margin advances. Increases in primary aluminum prices subsequent to
December 31, 1999, could result in KACC having to make additional margin
advances or post additional letters of credit and such amounts could be
significant. If primary aluminum prices increased by $.10 per pound (from the
year-end 1999 price) by March 31, 2000 and the forward curve were as described
above, it is estimated that KACC could be required to make additional margin
advances in the range of $75 to $100 million. On the other hand, a hypothetical
$.10 decrease in primary aluminum prices by March 31, 2000, using the same
forward curve assumptions stated above, would be expected to result in KACC
receiving a substantial majority of its previous margin advances. KACC's
exposure to margin advances is expected to improve throughout 2000 as its year
2000 positions, which have a lower average maximum contract price than KACC's
2001 positions, expire. KACC is considering various financing and hedging
strategies to limit its exposure to further margin advances in the event of
aluminum price increases. However, no assurance can be given that KACC will be
successful in this regard.

Foreign Currency

KACC enters into forward exchange contracts to hedge material cash commitments
for foreign currencies. KACC's primary foreign exchange exposure is related to
KACC's Australian Dollar (A$) commitments in respect of activities associated
with its 28.3%-owned affiliate, Queensland Alumina Limited. The Company
estimates that, before consideration of any hedging activities, a US $0.01
increase (decrease) in the value of the A$ results in an approximate $1- $2
million (decrease) increase in the Company's annual pre-tax earnings.

At December 31, 1999, the Company held derivative foreign currency contracts
hedging approximately 82% and 27% of its A$ currency commitments for 2000 and
2001, respectively. The Company estimates that a hypothetical 10% reduction in
the A$ exchange rate would result in the Company recognizing a net aggregate
pre-tax cost of approximately $3 - $10 million during 2000


                                       29


<PAGE>   33



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
--------------------------------------------------------------------------------



and 2001 related to KACC's foreign currency hedging positions. This cost is
versus what the Company's results would have been without the Company's
derivative foreign currency contracts. It should be noted, however, that, since
the hedging positions lock- in specified rates, any increase or decrease in
earnings attributable to currency hedging instruments would be offset by a
corresponding decrease or increase in the value of the hedged commitments.


ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


<TABLE>
<CAPTION>
                                                                                                                   PAGE
                                                                                                                   ----

<S>                                                                                                                <C>
   Report of Independent Public Accountants..........................................................................31

   Consolidated Balance Sheets.......................................................................................32

   Statements of Consolidated Income (Loss)..........................................................................33

   Statements of Consolidated Cash Flows.............................................................................34

   Notes to Consolidated Financial Statements........................................................................35

   Quarterly Financial Data (Unaudited)..............................................................................58

   Five-Year Financial Data..........................................................................................59
</TABLE>




                                       30


<PAGE>   34
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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


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

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1999
and 1998, and the related statements of consolidated income (loss) and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kaiser Aluminum Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.



                                                       ARTHUR ANDERSEN LLP




Houston, Texas
March 7, 2000







                                       31

<PAGE>   35




KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                                                   December 31,
                                                                                            -------------------------
(In millions of dollars, except share amounts)                                                     1999          1998
---------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>           <C>       
ASSETS
Current assets:
   Cash and cash equivalents                                                                $     21.2    $     98.3
   Receivables:
     Trade, less allowance for doubtful receivables of $5.9 in 1999 and $6.2 in 1998             154.1         170.1
     Other                                                                                       106.9         112.6
   Inventories                                                                                   546.1         543.5
   Prepaid expenses and other current assets                                                     145.6         105.5
                                                                                            ----------    ----------
     Total current assets                                                                        973.9       1,030.0

Investments in and advances to unconsolidated affiliates                                          96.9         128.3
Property, plant, and equipment - net                                                           1,053.7       1,108.7
Deferred income taxes                                                                            440.0         377.9
Other assets                                                                                     634.3         346.0
                                                                                            ----------    ----------
     Total                                                                                  $  3,198.8    $  2,990.9
                                                                                            ==========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                         $    231.7    $    173.3
   Accrued interest                                                                               37.7          37.3
   Accrued salaries, wages, and related expenses                                                  62.1          73.8
   Accrued postretirement medical benefit obligation - current portion                            51.5          48.2
   Other accrued liabilities                                                                     168.8         148.3
   Payable to affiliates                                                                          85.8          77.1
   Long-term debt - current portion                                                                 .3            .4
                                                                                            ----------    ----------
     Total current liabilities                                                                   637.9         558.4

Long-term liabilities                                                                            727.1         532.9
Accrued postretirement medical benefit obligation                                                678.3         694.3
Long-term debt                                                                                   972.5         962.6
Minority interests                                                                               117.7         123.5
Commitments and contingencies
Stockholders' equity:
   Common stock, par value $.01, authorized 125,000,000 shares; issued and
     outstanding, 79,405,333 and 79,153,543 in 1999 and 1998                                        .8            .8
   Additional capital                                                                            536.8         535.4
   Accumulated deficit                                                                          (471.1)       (417.0)
   Accumulated other comprehensive income - additional minimum pension liability                  (1.2)         -
                                                                                            ----------    ----------
     Total stockholders' equity                                                                   65.3         119.2
                                                                                            ----------    ----------
     Total                                                                                  $  3,198.8    $  2,990.9
                                                                                            ==========    ==========
</TABLE>



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


                                       32

<PAGE>   36





KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                              Year Ended December 31,
                                                                                    ---------------------------------------
(In millions of dollars, except share amounts)                                             1999          1998          1997
---------------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>           <C>           <C>       
Net sales                                                                           $  2,044.3    $  2,256.4    $  2,373.2
                                                                                    ----------    ----------    ----------
Costs and expenses:
   Cost of products sold                                                               1,859.2       1,906.2       1,951.2
   Depreciation and amortization                                                          89.5          99.1         102.5
   Selling, administrative, research and development, and general                        105.4         115.5         131.8
   Non-cash impairment of Micromill assets/restructuring of operations                    19.1          45.0          19.7
                                                                                    ----------    ----------    ----------
     Total costs and expenses                                                          2,073.2       2,165.8       2,205.2
                                                                                    ----------    ----------    ----------
Operating income (loss)                                                                  (28.9)         90.6         168.0

Other income (expense):
   Interest expense                                                                     (110.1)       (110.0)       (110.7)
   Gain on involuntary conversion at Gramercy facility                                    85.0           -             -
   Other - net                                                                           (35.9)          3.5           3.0
                                                                                    ----------    ----------    ----------
Income (loss) before income taxes and minority interests                                 (89.9)        (15.9)         60.3

Benefit (provision) for income taxes                                                      32.7          16.4          (8.8)

Minority interests                                                                         3.1            .1          (3.5)
                                                                                    ----------    ----------    ----------
Net income (loss)                                                                        (54.1)           .6          48.0

Dividends on preferred stock                                                               -             -            (5.5)
                                                                                    ----------    ----------    ----------

Net income (loss) available to common shareholders                                  $    (54.1)   $       .6    $     42.5
                                                                                    ==========    ==========    ==========
Earnings (loss) per share:
   Basic                                                                            $     (.68)   $      .01    $      .57
                                                                                    ==========    ==========    ==========

   Diluted                                                                          $     (.68)   $      .01    $      .57
                                                                                    ==========    ==========    ==========
Weighted average shares outstanding (000):
   Basic                                                                                79,336        79,115        74,221
                                                                                    ==========    ==========    ==========

   Diluted                                                                              79,336        79,156        74,382
                                                                                    ==========    ==========    ==========
</TABLE>


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


                                       33

<PAGE>   37


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------  
                                                                                                    Year Ended December 31,      
                                                                                               --------------------------------- 
(In millions of dollars)                                                                           1999        1998         1997 
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                 
<S>                                                                                          <C>          <C>         <C>        
Cash flows from operating activities:                                                                                            
   Net income (loss)                                                                         $   (54.1)   $     .6    $    48.0  
   Adjustments to reconcile net income to net cash (used) provided by operating activities:
       Depreciation and amortization (including deferred financing costs of $4.3, $3.9,
         and $6.1)                                                                                93.8       103.0        108.6  
       Non-cash impairment of Micromill assets/restructuring of operations                        19.1        45.0         19.7  
       Gain on involuntary conversion at Gramercy facility                                       (85.0)         --           --    
       Gain on sale of interest in AKW joint venture                                             (50.5)         --           --    
       Non-cash benefit for income taxes                                                            --        (8.3)       (12.5) 
       Equity in (income) loss of unconsolidated affiliates, net of distributions                 (4.9)         .1          7.8  
       Minority interests                                                                         (3.1)        (.1)         3.5  
       Decrease (increase) decrease in receivables                                                21.7        61.5        (92.1) 
       (Increase) decrease in inventories                                                         (2.6)       24.8         (9.3) 
       (Increase) decrease in prepaid expenses and other current assets                          (66.9)       30.1        (10.1) 
       Increase (decrease) in accounts payable and accrued interest                               58.8        (3.2)       (11.5) 
       Increase (decrease) in payable to affiliates and other accrued liabilities                 19.6       (45.3)       (23.9) 
       Decrease in accrued and deferred income taxes                                             (55.2)      (26.2)       (17.4) 
       Increase (decrease) in net long-term assets and liabilities                                15.7       (23.9)        28.6  
       Other                                                                                       3.0        12.6          5.6  
                                                                                             ---------    --------    ---------  
         Net cash (used) provided by operating activities                                        (90.6)      170.7         45.0  
                                                                                             ---------    --------    ---------  
Cash flows from investing activities:                                                                                            
   Proceeds from sale of interest in AKW joint venture                                            70.4          --           --    
   Additions to property, plant, and equipment                                                   (68.4)      (77.6)      (128.5) 
   Other                                                                                           1.1         3.2         19.9  
                                                                                             ---------    --------    ---------  
         Net cash provided (used) by investing activities                                          3.1       (74.4)      (108.6) 
                                                                                             ---------    --------    ---------  
Cash flows from financing activities:                                                                                            
   Borrowings under credit agreement, net                                                         10.4          --           --   
   Borrowings of long-term debt                                                                     --          --         19.0  
   Repayments of long-term debt                                                                    (.6)       (8.9)        (8.8) 
   Capital stock issued                                                                            1.4          .1           .4  
   Decrease (increase) in restricted cash, net                                                      .8         4.3         (5.3) 
   Incurrence of financing costs                                                                    --         (.6)         (.9) 
   Preferred stock dividends paid                                                                   --          --         (4.2) 
   Redemption of minority interests' preference stock                                             (1.6)       (8.7)        (2.1) 
                                                                                             ---------    --------    ---------  
         Net cash provided (used) by financing activities                                         10.4       (13.8)        (1.9) 
                                                                                             ---------    --------    ---------  
Net (decrease) increase in Cash and cash equivalents during the year                             (77.1)       82.5        (65.5) 
Cash and cash equivalents at beginning of year                                                    98.3        15.8         81.3  
                                                                                             ---------    --------    ---------  
Cash and cash equivalents at end of year                                                     $    21.2    $   98.3    $    15.8  
                                                                                             =========    ========    =========  
Supplemental disclosure of cash flow information:                                                                                
   Interest paid, net of capitalized interest                                                $   105.4    $  106.3    $   102.7  
   Income taxes paid                                                                              24.1        16.8         24.4  
   Tax allocation payments to MAXXAM Inc.                                                           --          --         11.8  
</TABLE>



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


                                       34

<PAGE>   38
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


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

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the statements of Kaiser Aluminum
Corporation ("Kaiser" or the "Company") and its majority owned subsidiaries. The
Company is a subsidiary of MAXXAM Inc. ("MAXXAM") and conducts its operations
through its wholly-owned subsidiary, Kaiser Aluminum & Chemical Corporation
("KACC"). KACC operates in all principal aspects of the aluminum industry-the
mining of bauxite (the major aluminum bearing ore), the refining of bauxite into
alumina (the intermediate material), the production of primary aluminum, and the
manufacture of fabricated and semi-fabricated aluminum products. Kaiser's
production levels of alumina, before consideration of the Gramercy incident (see
Note 2), and primary aluminum exceed its internal processing needs, which allows
it to be a major seller of alumina and primary aluminum to domestic and
international third parties (see Note 12).

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

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

Certain reclassifications of prior-year information were made to conform to the
current presentation.

CASH AND CASH EQUIVALENTS

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

INVENTORIES

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


<TABLE>
<CAPTION>

                                                                  December 31,
                                                           ---------------------------
                                                                  1999           1998
--------------------------------------------------------------------------------------
<S>                                                        <C>             <C>       
Finished fabricated products                               $     118.5     $    112.4
Primary aluminum and work in process                             189.4          205.6
Bauxite and alumina                                              124.1          109.5
Operating supplies and repair and maintenance parts              114.1          116.0
                                                           -----------     ----------
                                                           $     546.1     $    543.5
                                                           ===========     ==========
</TABLE>


DEPRECIATION

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

STOCK-BASED COMPENSATION

The Company applies the intrinsic value method to account for a stock-based
compensation plan whereby compensation cost is recognized only to the extent
that the quoted market price of the stock at the measurement date exceeds the
amount an employee


                                       35

<PAGE>   39


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


must pay to acquire the stock. No compensation cost has been recognized for this
plan as the exercise price of the stock options granted in 1999, 1998 and 1997
were at or above the market price (see Note 7).

OTHER INCOME (EXPENSE)

Other expense in 1999, 1998, and 1997, includes $53.2, $12.7, and $8.8, of
pre-tax charges related principally to establishing additional litigation
reserves for asbestos claims net of estimated aggregate insurance recoveries
pertaining to operations which were discontinued prior to the acquisition of the
Company by MAXXAM in 1988. Other expense in 1999 also includes $32.8 of pre-tax
charges to reflect mark-to-market adjustments on certain primary aluminum
hedging transactions and a net pre-tax gain of $50.5 on the sale of the
Company's 50% interest in AKW L.P. (see Note 3). Other income in 1998 includes
$12.0 attributable to insurance recoveries related to certain incurred
environmental costs (see Note 10).

DEFERRED FINANCING COSTS

Costs incurred to obtain debt financing are deferred and amortized over the
estimated term of the related borrowing.

FOREIGN CURRENCY

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

DERIVATIVE FINANCIAL INSTRUMENTS

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

Most of KACC's hedging activities involve the use of option contracts (which
establish a maximum and/or minimum amount to be paid or received) and forward
sales contracts (which effectively fix or lock-in the amount KACC will pay or
receive). Option contracts typically require the payment of an up-front premium
in return for the right to receive the amount (if any) by which the price at the
settlement date exceeds the strike price. Any interim fluctuations in prices
prior to the settlement date are deferred until the settlement date of the
underlying hedged transaction, at which point they are reflected in net sales or
cost of sales (as applicable) together with the related premium cost. Forward
sales contracts do not require an up-front payment and are settled by the
receipt or payment of the amount by which the price at the settlement date
varies from the contract price. No accounting recognition is accorded to interim
fluctuations in prices of forward sales contracts.

KACC has established margin accounts and credit limits with certain
counterparties related to open forward sales and option contracts. When
unrealized gains or losses are in excess of such credit limits, KACC is entitled
to receive advances from the counterparties on open positions or is required to
make margin advances to counterparties, as the case may be. At December 31,
1999, KACC had made margin advances of $38.0 and had posted letters of credit
totaling $40.0 in lieu of paying margin advances. At December 31, 1998, KACC had
received $9.9 of margin advances. Increases in primary aluminum prices
subsequent to December 31, 1999, could result in KACC having to make additional
margin advances or post additional letters of credit and such amounts could be
significant. Management considers credit risk related to possible failure of the
counterparties to perform their obligations pursuant to the derivative contracts
to be minimal.

Deferred gains or losses as of December 31, 1999, are included in Prepaid
expenses and other current assets and Other accrued liabilities (see Note 11).

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company estimates the fair value of its outstanding indebtedness to be
$970.5 and $950.0 at December 31, 1999 and 1998, respectively, based on quoted
market prices for KACC's 9-7/8% Senior Notes due 2002 (the "9-7/8% Notes"),
12-3/4% Senior Subordinated Notes due 2003 (the "12-3/4% Notes"), and 10-7/8%
Senior Notes due 2006 (the "10-7/8% Notes"), and the discounted


                                       36

<PAGE>   40


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


future cash flows for all other indebtedness, using the current rate for debt of
similar maturities and terms. The Company believes that the carrying amount of
other financial instruments is a reasonable estimate of their fair value, unless
otherwise noted.

EARNINGS PER SHARE

Basic - Earnings per share is computed by deducting preferred stock dividends
from net income (loss) in order to determine net income (loss) available to
common shareholders. This amount is then divided by the weighted average number
of common shares outstanding during the period, including the weighted average
impact of the shares of common stock issued during the year from the date(s) of
issuance.

Diluted - The impact of outstanding stock options was excluded from the
computation of Diluted loss per share for the year ended December 31, 1999, as
its effect would have been antidilutive. Diluted earnings per share for the
years ended December 31, 1998 and 1997, include the dilutive effect of
outstanding stock options (41,000 and 161,000 shares, respectively).

LABOR RELATED COSTS

The Company is currently operating five of its U.S. facilities with salaried
employees and other workers as a result of the September 30, 1998, strike by the
United Steelworkers of America ("USWA") and the subsequent "lock-out" by the
Company in January 1999. However, the Company has continued to accrue certain
benefits (such as pension and other postretirement benefit costs/liabilities),
for the USWA members during the period of the strike and subsequent lock-out.
For purposes of computing the benefit-related costs and liabilities to be
reflected in the accompanying consolidated financial statements for the year
ended December 31, 1999, the Company has based its accruals on the terms of the
previously existing (expired) USWA contract. Any differences between the amounts
accrued and the amounts ultimately agreed to during the collective bargaining
process will be reflected in future results during the term of any new contract.

All incremental operating costs incurred as a result of the USWA strike and
subsequent lockout are being expensed as incurred. During 1998, such costs were
substantial, totaling approximately $50.0. The Company's 1998 results also
reflect reduced profitability of approximately $10.0 resulting from the
strike-related curtailment of three potlines (representing approximately 70,000
tons* of annual capacity) at the Company's Mead and Tacoma, Washington, smelters
and certain other shipment delays experienced at the other affected facilities
at the outset of the USWA strike. During 1999, strike related costs were
virtually eliminated except for the restart costs of approximately $12.8
associated with restarting potlines at the Company's smelters and the impact of
reduced volume.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize
all derivative instruments as assets or liabilities in the balance sheet and to
measure those instruments at fair value. Under SFAS No. 133, the Company will be
required to "mark-to-market" its hedging positions at each period-end in advance
of recording the physical transactions to which the hedges relate. Changes in
the fair value of the Company's open hedging positions will be reflected as an
increase or reduction in stockholders' equity through comprehensive income. The
impact of the changes in fair value of the Company's hedging positions will
reverse out of comprehensive income (net of any fluctuations in other "open"
positions) and will be reflected in traditional net income when the subsequent
physical transactions occur. Currently, the dollar amount of the Company's
comprehensive income adjustments is not significant so there is not a
significant difference between "traditional" net income and comprehensive
income. However, differences between comprehensive income and traditional net
income may become significant in future periods as SFAS No. 133 will result in
fluctuations in comprehensive income and stockholders' equity in periods of
price volatility, despite the fact that the Company's cash flow and earnings
will be "fixed" to the extent hedged. This result is contrary to the intent of
the Company's hedging program, which is to "lock-in" a price (or range of
prices) for products sold/used so that earnings and cash flows are subject to
reduced risk of volatility.

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


                                       37

<PAGE>   41



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


Adoption of SFAS No. 133 was initially required on or before January 1, 2000.
However, in June 1999, the FASB issued SFAS No. 137 which delayed the required
implementation date of SFAS No. 133 to no later than January 1, 2001. The
Company is currently evaluating how and when to implement SFAS No. 133.

2.   INCIDENT AT GRAMERCY FACILITY

On July 5, 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. Twenty-four
employees were injured in the incident, several of them severely. As a result of
the incident, alumina production at the facility was completely curtailed.
Production at the plant is currently expected to remain completely curtailed
until the third quarter of 2000 when KACC expects to begin partial production.
Based on current estimates, full production is expected to be achieved during
the first quarter of 2001 or shortly thereafter. KACC has received the
regulatory permit required to operate the plant once the facility is ready to
resume production.

The cause of the incident is under investigation by KACC and governmental
agencies. In January 2000, the U.S. Mine Safety and Health Administration
("MSHA") issued 21 citations in connection with its investigation of the
incident. The citations allege, among other things, that certain aspects of the
plant's operations were unsafe and that such mode of operation contributed to
the explosion. To date, no monetary penalty has been proposed by MSHA. Although
the Company expects that a fine will be levied, the Company cannot predict the
amount of any such fine(s). It is possible that other civil or criminal fines or
penalties could be levied against KACC. KACC has previously announced that it
disagrees with the substance of the citations and has challenged them. However,
as more fully explained below, based on what is known to date and discussions
with the Company's advisors, the Company believes that the financial
impact of this incident (in excess of insurance deductibles and self-retention
provisions) will be largely offset by insurance coverage. Deductibles and
self-retention provisions under the insurance coverage for the incident total
$5.0, which amounts have been charged to Cost of products sold in 1999.

KACC has significant amounts of insurance coverage related to the Gramercy
incident. KACC's insurance coverage has five separate components: property
damage, clean-up and site preparation, business interruption, liability and
workers' compensation. The insurance coverage components are discussed below.

Property Damage. KACC's insurance policies provide that KACC will be reimbursed
for the costs of repairing or rebuilding the damaged portion of the facility
using new materials of like kind and quality with no deduction for depreciation.
Based on discussions with the insurance carriers and their representatives and
third party engineering reports, KACC recorded a pretax gain of $85.0,
representing the difference between the minimum expected property damage
reimbursement amount and the net carrying value of the damaged property of
$15.0. The receivable attributable to the minimum expected property damage
reimbursement has been classified as a long-term item in Other assets, despite
the fact that substantially all such amounts are expected to be spent during
2000, as such proceeds will be invested in property, plant and equipment. The
overall impact of recognizing the gain will be a significant increase in
stockholders' equity and an increase in depreciation expense in future years
once production is restored.

Clean-up and Site Preparation. The Gramercy facility has incurred incremental
costs for clean up and other activities during 1999 and will continue to incur
such costs in 2000. These clean-up and site preparation activities have been
offset by accruals of approximately $14.0 for estimated insurance recoveries.

Business Interruption. KACC's insurance policies provide for the reimbursement
of specified continuing expenses incurred during the interruption period plus
lost profits (or less expected losses) plus other expenses incurred as a result
of the incident. Operations at the Gramercy facility and a sister facility in
Jamaica, which supplies bauxite to Gramercy, will continue to incur operating
expenses until production at the Gramercy facility is restored. KACC will also
incur increased costs as a result of agreements to supply certain of Gramercy's
major customers with alumina, despite the fact that KACC had declared force
majeure with respect to the contracts shortly after the incident. KACC is
purchasing alumina from third parties, in excess of the amounts of alumina
available from other KACC-owned facilities, to supply these customers' needs as
well as to meet intersegment requirements. In consideration of the foregoing
items, KACC recorded expected business interruption insurance recoveries
totaling $19.0 and $41.0 in the quarter and year ended December 31, 1999, as a
reduction of Cost of products sold, which amounts substantially offset actual
expenses incurred during these periods. Such business interruption insurance
amounts represent


                                       38

<PAGE>   42


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


estimates of KACC's business interruption coverage based on discussions with the
insurance carriers and their representatives and are therefore subject to
change.

Since production has been completely curtailed at the Gramercy facility, KACC
has, for the time being, suspended depreciation of the facility. Depreciation
expense for the first six months of 1999 was approximately $6.0.

Liability. The incident has also resulted in thirty-six class action lawsuits
being filed against KACC alleging, among other things, property damage and
personal injury. In addition, a claim for alleged business interruption losses
has been made by a neighboring business. The aggregate amount of damages sought
in the lawsuits and other claims cannot be determined at this time; however,
KACC does not currently believe the damages will exceed the amount of coverage
under its liability policies.

Workers' Compensation. Claims relating to all of the injured employees are
expected to be covered under KACC's workers' compensation or liability policies.
However, the aggregate amount of workers' compensation claims cannot be
determined at this time and it is possible that such claims could exceed KACC's
coverage limitations. While it is presently impossible to determine the
aggregate amount of claims that may be incurred, or whether they will exceed
KACC's coverage limitations, KACC currently believes that any amount in excess
of the coverage limitations will not have a material effect on the Company's
consolidated financial position or liquidity. However, it is possible that as
additional facts become available, additional charges may be required and such
charges could be material to the period in which they are recorded.

Timing of Insurance Recoveries. As of December 31, 1999, the Company had
recorded estimated recoveries for clean-up, site preparation and business
interruption costs incurred of approximately $55.0. As of December 31, 1999,
approximately $50.0 of insurance recoveries had been received. Additionally
through February 29, 2000, KACC had received approximately $25.0 of additional
insurance recoveries. KACC continues to work with the insurance carriers to
maximize the amount of recoveries and to minimize, to the extent possible, the
period of time between when KACC expends funds and when it is reimbursed.
However, KACC will likely have to fund an average of 30 - 60 days of property
damage and business interruption activity, unless some other arrangement is
agreed with the insurance carriers, and such amounts will be significant. The
Company believes it has sufficient financial resources to fund the construction
and business interruption costs on an interim basis. However, no assurances can
be given in this regard. If insurance recoveries were to be delayed or if there
were to be other significant uses of KACC's existing Credit Agreement capacity,
delays in the rebuilding of the Gramercy refinery could occur and could have a
material adverse impact on the Company's and KACC's liquidity and operating
results.

3.   INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Summary of combined financial information is provided below for unconsolidated
aluminum investments, most of which supply and process raw materials. The
investees are Queensland Alumina Limited ("QAL") (28.3% owned), Anglesey
Aluminium Limited ("Anglesey") (49.0% owned), Kaiser Jamaica Bauxite Company
(49.0% owned), and AKW L.P ("AKW") (50% owned). The equity in income (loss)
before income taxes of such operations is treated as a reduction (increase) in
cost of products sold. At December 31, 1999 and 1998, KACC's net receivables
from these affiliates were not material. On April 1, 1999, KACC sold its 50%
interest in AKW to its partner for $70.4, which resulted in the Company
recognizing a net pre-tax gain of $50.5 (included in Other income/expense). The
Company's equity in income of AKW was $2.5, $7.8, and $4.8 for the years ended
December 31, 1999, 1998, and 1997, respectively.


                                       39

<PAGE>   43


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


SUMMARY OF COMBINED FINANCIAL POSITION


<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                  --------------------------
                                                                                        1999            1998
------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>             <C>       
Current assets                                                                    $    370.4      $    356.0
Long-term assets (primarily property, plant, and equipment, net)                       344.1           393.9
                                                                                  ----------      ----------
   Total assets                                                                   $    714.5      $    749.9
                                                                                  ==========      ==========
Current liabilities                                                               $    120.4      $     92.2
Long-term liabilities (primarily long-term debt)                                       368.3           396.6
Stockholders' equity                                                                   225.8           261.1
                                                                                  ----------      ----------
   Total liabilities and stockholders' equity                                     $    714.5      $    749.9
                                                                                  ==========      ==========
</TABLE>


SUMMARY OF COMBINED OPERATIONS


<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                         -----------------------------------
                                                                             1999          1998         1997
------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>          <C>    
Net sales                                                                 $ 594.9       $ 659.2      $ 644.1
Costs and expenses                                                         (582.9)       (651.7)      (637.8)
Benefit (provision) for income taxes                                           .8          (2.7)        (8.2)
                                                                          -------       -------      ------- 
Net income (loss)                                                         $  12.8       $   4.8      $  (1.9)
                                                                          =======       =======      ======= 
Company's equity in income                                                $   4.9       $   5.4      $   2.9
                                                                          =======       =======      =======
Dividends received                                                        $    -        $   5.5      $  10.7
                                                                          =======       =======      =======
</TABLE>


The Company's equity in income differs from the summary net income (loss) due to
varying percentage ownerships in the entities and equity method accounting
adjustments. At December 31, 1999, KACC's investment in its unconsolidated
affiliates exceeded its equity in their net assets by approximately $9.2.
Amortization of the excess investment totaling $9.9, $10.0, and $11.4 is
included in Depreciation and amortization for the years ended December 31, 1999,
1998, and 1997, respectively.

The Company and its affiliates have interrelated operations. KACC provides some
of its affiliates with services such as financing, management, and engineering.
Significant activities with affiliates include the acquisition and processing of
bauxite, alumina, and primary aluminum. Purchases from these affiliates were
$152.9, $235.1, and $245.2, in the years ended December 31, 1999, 1998, and
1997, respectively.


                                       40

<PAGE>   44


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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

4.   PROPERTY, PLANT, AND EQUIPMENT

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


<TABLE>
<CAPTION>
                                                              December 31,
                                                       --------------------------
                                                             1999            1998
---------------------------------------------------------------------------------
<S>                                                    <C>             <C>      
Land and improvements                                   $   166.1       $   164.1
Buildings                                                   230.0           229.5
Machinery and equipment                                   1,519.7         1,549.5
Construction in progress                                     67.7            43.8
                                                        ---------       ---------
                                                          1,983.5         1,986.9
Accumulated depreciation                                   (929.8)         (878.2)
                                                        ---------       ---------
     Property, plant, and equipment, net                $ 1,053.7       $ 1,108.7
                                                        =========       =========
</TABLE>




In the latter part of 1998, the Company decided to seek a strategic partner for
the further development and deployment of KACC's Micromill(TM) technology. This
change in strategic course was based on management's conclusion that additional
time and investment would be required to achieve a commercial success. Given the
Company's other strategic priorities, the Company believed that introducing
added commercial and financial resources was the appropriate course of action
for capturing the maximum long-term value. A number of third parties were
contacted regarding joint ventures or other arrangements. In September 1999,
based on negotiations with these third parties, KACC concluded that a sale of
the Micromill assets and technology was more likely than a partnership. KACC
ultimately signed an agreement to sell the Micromill assets and technology in
January 2000 for a nominal payment at closing and future payments based on
subsequent performance and profitability of the Micromill technology. As a
result of the changes in strategic course in 1999 and 1998, the carrying value
of the Micromill assets was reduced by recording impairment charges of $19.1 and
$45.0, respectively.

5.   LONG-TERM DEBT

Long-term debt and its maturity schedule are as follows:


<TABLE>
<CAPTION>
                                                                                                    2005     December 31,
                                                                                                           -----------------
                                                                                                     and      1999     1998
                                                        2000      2001    2002     2003     2004    After     Total    Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>      <C>     <C>      <C>      <C>      <C>         <C>      <C>  
Credit Agreement                                               $  10.4                                      $  10.4       -
9-7/8% Senior Notes due 2002, net                                      $ 224.6                                224.6  $ 224.4
10-7/8% Senior Notes due 2006, net                                                                $ 225.6     225.6    225.7
12-3/4% Senior Subordinated Notes due 2003                                      $ 400.0                       400.0    400.0
Alpart CARIFA Loans - (fixed and variable rates) 
     due 2007, 2008                                                                                  60.0      60.0     60.0
Other borrowings (fixed and variable rates)           $   .3        .3      .3       .3  $    .2     50.8      52.2     52.9
                                                      ------   ------- -------  -------  -------  -------   -------  -------
Total                                                 $   .3   $  10.7 $ 224.9  $ 400.3  $    .2  $ 336.4     972.8    963.0
                                                      ======   ======= =======  =======  =======  =======    
Less current portion                                                                                             .3       .4
                                                                                                            -------  -------
     Long-term debt                                                                                         $ 972.5  $ 962.6
                                                                                                            =======  =======
</TABLE>




                                       41

<PAGE>   45


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


CREDIT AGREEMENT

In February 1994, the Company and KACC entered into a credit agreement, as
amended, (the "Credit Agreement") which provides a $325.0 secured, revolving
line of credit through August 2001. KACC is able to borrow under the facility by
means of revolving credit advances and letters of credit (up to $125.0) in an
aggregate amount equal to the lesser of $325.0 or a borrowing base relating to
eligible accounts receivable and eligible inventory. As of February 29, 2000,
$212.6 (of which $42.6 could have been used for letters of credit) was available
to KACC under the Credit Agreement. The Credit Agreement is unconditionally
guaranteed by the Company and by certain significant subsidiaries of KACC.
Interest on any outstanding balances will bear a premium (which varies based on
the results of a financial test) over either a base rate or LIBOR, at KACC's
option.

DEBT COVENANTS AND RESTRICTIONS

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

The obligations of KACC with respect to its 9-7/8% Notes, its 10-7/8% Notes and
its 12-3/4% Notes are guaranteed, jointly and severally, by certain subsidiaries
of KACC. The indentures governing the 9-7/8% Notes, the 10-7/8% Notes and the
12-3/4% Notes (collectively, the "Indentures") restrict, among other things,
KACC's ability to incur debt, undertake transactions with affiliates, and pay
dividends. Further, the Indentures provide that KACC must offer to purchase the
9-7/8% Notes, the 10-7/8% Notes and the 12-3/4% Notes, respectively, upon the
occurrence of a Change of Control (as defined therein), and the Credit Agreement
provides that the occurrence of a Change in Control (as defined therein) shall
constitute an Event of Default thereunder.

The Credit Agreement does not permit the Company, and significantly restricts
KACC's ability, to pay dividends on their common stock.

In December 1991, Alumina Partners of Jamaica ("Alpart") entered into a loan
agreement with the Caribbean Basin Projects Financing Authority ("CARIFA").
Alpart's obligations under the loan agreement are secured by two letters of
credit aggregating $64.2. KACC is a party to one of the two letters of credit in
the amount of $41.7 in respect of its ownership interest in Alpart. Alpart has
also agreed to indemnify bondholders of CARIFA for certain tax payments that
could result from events, as defined, that adversely affect the tax treatment of
the interest income on the bonds.

RESTRICTED NET ASSETS OF SUBSIDIARIES

Certain debt instruments restrict the ability of KACC to transfer assets, make
loans and advances, and pay dividends to the Company. The restricted net assets
of KACC totaled $15.7 and $124.4 at December 31, 1999 and 1998, respectively.

CAPITALIZED INTEREST

Interest capitalized in 1999, 1998, and 1997, was $3.4, $3.0, and $6.6,
respectively.


                                       42

<PAGE>   46


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


6.   INCOME TAXES

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


<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                     -------------------------------------------
                                           1999             1998            1997
--------------------------------------------------------------------------------

<S>                                  <C>             <C>              <C>       
Domestic                             $   (81.8)      $    (93.6)      $  (112.6)
Foreign                                   (8.1)            77.7           172.9
                                     ---------       ----------       --------- 

     Total                           $   (89.9)      $    (15.9)      $    60.3
                                     =========       ==========       =========
</TABLE>




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

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



<TABLE>
<CAPTION>
                                      Federal           Foreign           State          Total
----------------------------------------------------------------------------------------------
<S>                              <C>               <C>              <C>             <C>       
1999     Current                 $       (.5)      $     (23.1)     $      (.3)     $   (23.9)
         Deferred                       43.8               7.1             5.7           56.6
                                 -----------       -----------      ----------      --------- 
              Total              $      43.3       $     (16.0)     $      5.4      $    32.7
                                 ===========       ===========      ==========      =========

1998     Current                 $      (1.8)      $     (16.5)     $      (.2)     $   (18.5)
         Deferred                       44.4             (12.5)            3.0           34.9
                                 -----------       -----------      ----------      --------- 

              Total              $      42.6       $     (29.0)     $      2.8      $    16.4
                                 ===========       ===========      ==========      =========

1997     Current                 $      (2.0)      $     (28.7)     $      (.2)     $   (30.9)
         Deferred                       30.5              (7.0)           (1.4)          22.1
                                 -----------       -----------      ----------      --------- 

              Total              $      28.5       $     (35.7)     $     (1.6)     $    (8.8)
                                 ===========       ===========      ==========      ========= 
</TABLE>





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


<TABLE>
<CAPTION>
                                                                                              Year Ended December 31,
                                                                                        -----------------------------------
                                                                                            1999          1998         1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>          <C>     
Amount of federal income tax benefit (provision) based on the statutory rate            $  31.2       $   5.6      $ (21.1)
Revision of prior years' tax estimates and other changes in valuation allowances            1.1           8.3         12.5
Percentage depletion                                                                        2.8           3.2          4.2
Foreign taxes, net of federal tax benefit                                                  (3.2)         (1.9)        (3.1)
Other                                                                                        .8           1.2         (1.3)
                                                                                        -------       -------      ------- 
Benefit (provision) for income taxes                                                    $  32.7       $  16.4      $  (8.8)
                                                                                        =======       =======      ======= 
</TABLE>



                                       43

<PAGE>   47


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


<TABLE>
<CAPTION>
The components of the Company's net deferred income tax assets are as follows:

                                                                   December 31,
                                                           -----------------------------
                                                                   1999             1998
----------------------------------------------------------------------------------------
<S>                                                        <C>               <C>       
Deferred income tax assets:
   Postretirement benefits other than pensions             $     274.7       $    279.4
   Loss and credit carryforwards                                 119.3             92.0
   Other liabilities                                             146.3            146.4
   Other                                                         193.9            132.8
   Valuation allowances                                         (125.6)          (107.7)
                                                           -----------       ----------
     Total deferred income tax assets-net                        608.6            542.9
                                                           -----------       ----------
Deferred income tax liabilities:
   Property, plant, and equipment                               (101.6)          (109.9)
   Other                                                         (69.6)           (54.8)
                                                           -----------       ----------
     Total deferred income tax liabilities                      (171.2)          (164.7)
                                                           -----------       ----------
Net deferred income tax assets                             $     437.4       $    378.2
                                                           ===========       ==========
</TABLE>





The principal component of the Company's net deferred income tax assets is the
tax benefit, net of certain valuation allowances, associated with the accrued
liability for postretirement benefits other than pensions. The future tax
deductions with respect to the turnaround of this accrual will occur over a
30-to-40-year period. If such deductions create or increase a net operating
loss, the Company has the ability to carry forward such loss for 20 taxable
years. For these reasons, the Company believes that a long-term view of
profitability is appropriate and has concluded that this net deferred income tax
asset will more likely than not be realized.

A substantial portion of the valuation allowances provided by the Company
relates to loss and credit carryforwards. To determine the proper amount of
valuation allowances with respect to these carryforwards, the Company evaluated
all appropriate factors, including any limitations concerning their use and the
year the carryforwards expire, as well as the levels of taxable income necessary
for utilization. With regard to future levels of income, the Company believes,
based on the cyclical nature of its business, its history of operating earnings,
and its expectations for future years, that it will more likely than not
generate sufficient taxable income to realize the benefit attributable to the
loss and credit carryforwards for which valuation allowances were not provided.

As of December 31, 1999 and 1998, $39.1 and $46.2, respectively, of the net
deferred income tax assets listed above are included in the Consolidated Balance
Sheets in the caption entitled Prepaid expenses and other current assets.
Certain other portions of the deferred income tax liabilities listed above are
included in the Consolidated Balance Sheets in the captions entitled Other
accrued liabilities and Long-term liabilities.

The Company and its domestic subsidiaries file consolidated federal income tax
returns. During the period from October 28, 1988, through June 30, 1993, the
Company and its domestic subsidiaries were included in the consolidated federal
income tax returns of MAXXAM. The tax allocation agreements of the Company and
KACC with MAXXAM terminated pursuant to their terms, effective for taxable
periods beginning after June 30, 1993. During 1997, MAXXAM reached a settlement
with the Internal Revenue Service regarding all remaining years where the
Company and its subsidiaries were included in the MAXXAM consolidated federal
income tax returns. As a result of this settlement, KACC paid $11.8 to MAXXAM
during 1997, in respect of its liabilities pursuant to its tax allocation
agreement with MAXXAM. Payments or refunds for periods prior to July 1, 1993
related to other jurisdictions could still be required pursuant to the Company's
and KACC's respective tax allocation agreements with MAXXAM. In accordance with
the Credit Agreement, any such payments to MAXXAM by KACC would require lender
approval, except in certain specific circumstances.


                                       44

<PAGE>   48


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


At December 31, 1999, the Company had certain tax attributes available to offset
regular federal income tax requirements, subject to certain limitations,
including net operating loss and general business credit carryforwards of $146.1
and $2.5, respectively, which expire periodically through 2019 and 2011,
respectively, foreign tax credit ("FTC") carryforwards of $33.7, which expire
periodically through 2004, and alternative minimum tax ("AMT") credit
carryforwards of $24.0, which have an indefinite life. The Company also has AMT
net operating loss and FTC carryforwards of $106.7 and $66.9, respectively,
available, subject to certain limitations, to offset future alternative minimum
taxable income, which expire periodically through 2019 and 2004, respectively.

7.   EMPLOYEE BENEFIT AND INCENTIVE PLANS

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

Retirement plans are non-contributory for salaried and hourly employees and
generally provide for benefits based on a formula which considers length of
service and earnings during years of service. The Company's funding policies
meet or exceed all regulatory requirements.

The Company and its subsidiaries provide postretirement health care and life
insurance benefits to eligible retired employees and their dependents.
Substantially all employees may become eligible for those benefits if they reach
retirement age while still working for the Company or its subsidiaries. The
Company has not funded the liability for these benefits which are expected to be
paid out of cash generated by operations. The Company reserves the right,
subject to applicable collective bargaining agreements, to amend or terminate
these benefits.

Assumptions used to value obligations at year-end and to determine the net
periodic benefit cost in the subsequent year are:



<TABLE>
<CAPTION>
                                                               Pension Benefits                  Medical/Life Benefits
                                                        --------------------------------    -------------------------------
                                                             1999        1998       1997         1999       1998       1997
                                                        --------------------------------    -------------------------------
<S>                                                         <C>         <C>        <C>          <C>        <C>        <C>  
Weighted-average assumptions as of December 31,
Discount rate                                               7.75%       7.00%      7.25%        7.75%      7.00%      7.25%
Expected return on plan assets                              9.50%       9.50%      9.50%          -          -          -
Rate of compensation increase                               4.00%       5.00%      5.00%        4.00%      4.00%      5.00%
</TABLE>


In 1999, annual assumed rates of increase in the per capita cost of covered
benefits (i.e., health care cost trend rate) for non-HMO participants are 6.5%
and 7.5% for HMO at all ages. The assumed rates of increase are assumed to
decline gradually to 5.0% in 2002 for non-HMO participants and in 2004 for HMO
participants and remain at that level thereafter.


                                       45

<PAGE>   49


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


The following table presents the funded status of the Company's pension and
other postretirement benefit plans as of December 31, 1999 and 1998, and the
corresponding amounts that are included in the Company's Consolidated Balance
Sheets:


<TABLE>
<CAPTION>
                                                                     Pension Benefits                  Medical/Life Benefits     
                                                             -------------------------------     ------------------------------- 
                                                                  1999              1998              1999              1998     
                                                             -------------     -------------     -------------      ------------ 
<S>                                                          <C>               <C>               <C>                <C>          
Change in Benefit Obligation:                                                                                                    
   Benefit obligation at beginning of year                   $       872.5     $       873.0     $       616.8      $      544.5 
   Service cost                                                       14.6              14.2               5.2               4.2 
   Interest cost                                                      59.7              59.7              41.5              37.5 
   Currency exchange rate change                                      (5.7)              (.4)               -                 -  
   Curtailments, settlements and amendments                             .4              (4.6)               -                4.0 
   Actuarial (gain) loss                                             (44.5)             15.2                .1              72.0 
   Benefits paid                                                     (91.0)            (84.6)            (48.2)            (45.4)
                                                             -------------     -------------     -------------      ------------ 
     Benefit obligation at end of year                               806.0             872.5             615.4             616.8 
                                                             -------------     -------------     -------------      ------------ 
Change in Plan Assets:                                                                                                           
   FMV of plan assets at beginning of year                           801.8             756.9                -                 -  
   Actual return on assets                                           133.0             106.8                -                 -  
   Settlements                                                          -               (5.5)               -                 -  
   Employer contributions                                             14.0              28.2              48.2              45.4 
   Benefits paid                                                     (91.0)            (84.6)            (48.2)            (45.4)
                                                             -------------     -------------     -------------      ------------ 
   FMV of plan assets at end of year                                 857.8             801.8               -                  -  
                                                             -------------     -------------     -------------      ------------ 
   Benefit obligations in excess of (less than) plan assets          (51.8)             70.7             615.4             616.8 
   Unrecognized net actuarial gain                                   131.9              23.8              56.7              55.9 
   Unrecognized prior service costs                                  (15.2)            (18.5)             57.7              69.8 
   Adjustment required to recognize minimum liability                  1.2                -                 -                 -  
   Intangible asset and other                                          2.6               4.3                -                 -  
     Accrued benefit liability                               -------------     -------------     -------------      ------------ 
                                                             $        68.7     $        80.3     $       729.8      $      742.5
                                                             =============     =============     =============      ============
</TABLE>


The aggregate fair value of plan assets and accumulated benefit obligation for
pension plans with plan assets in excess of accumulated benefit obligations were
$778.1 and $679.0, respectively, as of December 31, 1999, and $293.0 and $280.7,
respectively, as of December 31, 1998.



<TABLE>
<CAPTION>
                                                               Pension Benefits                  Medical/Life Benefits
                                                       -------------------------------------------------------------------
                                                          1999       1998        1997         1999       1998       1997
                                                       ---------  ----------  ---------    ---------  ---------  ---------
<S>                                                    <C>        <C>         <C>          <C>        <C>        <C>      
Components of Net Periodic Benefit Costs:
   Service cost                                        $    14.6  $     14.2  $    13.4    $     5.2  $     4.2  $     6.1
   Interest cost                                            59.7        59.7       61.6         41.5       37.5       44.8
   Expected return on assets                               (72.9)      (69.4)     (61.8)            -         -          -
   Amortization of prior service cost                        3.3         3.2        3.4        (12.1)     (12.4)     (12.4)
   Recognized net actuarial (gain) loss                       .7         1.4        2.6            -       (7.1)       (.9)
                                                       ---------  ----------  ---------    ---------  ---------  ---------
   Net periodic benefit cost                                 5.4         9.1       19.2         34.6       22.2       37.6
   Curtailments, settlements, etc.                            .4         3.2        3.7            -          -          -
                                                       ---------  ----------  ---------    ---------  ---------  ---------
     Adjusted net periodic benefit costs               $     5.8  $     12.3  $    22.9    $    34.6  $    22.2  $    37.6
                                                       =========  ==========  =========    =========  =========  =========
</TABLE>



                                       46

<PAGE>   50


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


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



<TABLE>
<CAPTION>
                                                                     1% Increase           1% Decrease
                                                                   -------------         -------------
<S>                                                                <C>                   <C>          
Increase (decrease) to total of service and interest cost          $        6.3          $       (4.6)
Increase (decrease) to the postretirement benefit obligation       $       62.9          $      (44.0)
</TABLE>



POSTEMPLOYMENT BENEFITS

The Company provides certain benefits to former or inactive employees after
employment but before retirement.

INCENTIVE PLANS

The Company has an unfunded incentive compensation program, which provides
incentive compensation based on performance against annual plans and over
rolling three-year periods. In addition, the Company has a "nonqualified" stock
option plan and KACC has a defined contribution plan for salaried employees. The
Company's expense for all of these plans was $6.0, $7.5, and $8.3 for the years
ended December 31, 1999, 1998, and 1997, respectively.

Up to 8,000,000 shares of the Company's Common Stock were reserved for issuance
under its stock incentive compensation plans. At December 31, 1999, 2,192,713
shares of Common Stock remained available for issuance under those plans. Stock
options granted pursuant to the Company's nonqualified stock option program are
granted at or above the prevailing market price, generally vest at a rate of
20-33% per year, and have a five or ten year term. Information concerning
nonqualified stock option plan activity is shown below. The weighted average
price per share for each year is shown parenthetically.



<TABLE>
<CAPTION>
                                                                       1999          1998         1997
-------------------------------------------------------------------------------------------------------

<S>                                                               <C>             <C>          <C>    
Outstanding at beginning of year ($9.98, $10.45, and $10.33)      3,049,122       819,752      890,395
Granted ($11.15, $9.79 and $10.06)                                1,218,068     2,263,170       15,092
Exercised ($7.25, $7.25, and $8.33)                                  (7,920)      (10,640)     (48,410)
Expired or forfeited ($11.02, $9.60, and $10.12)                    (20,060)      (23,160)     (37,325)
                                                                  ---------     ---------      -------
Outstanding at end of year ($10.24, $9.98, and $10.45)            4,239,210     3,049,122      819,752
                                                                  =========     =========      =======
Exercisable at end of year ($10.17, $10.09, and $10.53)           1,763,852     1,261,262      601,115
                                                                  =========     =========      =======
</TABLE>



In accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation ("SFAS No. 123"), the Company is
required to calculate pro forma compensation cost for all stock options granted
subsequent to December 31, 1994. For SFAS No. 123 purposes, the fair value of
the 1999, 1998, and 1997 stock option grants were estimated using a
Black-Scholes option pricing model. The pro forma after-tax effect of the
estimated fair value of the grants would be to increase the net loss in 1999 by
$1.8 and reduce net income in 1998 and 1997 by $1.5 and $.1, respectively.


                                       47

<PAGE>   51


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


8.   STOCKHOLDERS' EQUITY, COMPREHENSIVE INCOME AND MINORITY INTERESTS

Changes in stockholders' equity and comprehensive income were:



<TABLE>
<CAPTION>
                                                                                                         Accumulated             
                                                                                              Accu-            Other             
                                              Preferred         Common     Additional       mulated    Comprehensive             
                                                  Stock          Stock        Capital       Deficit           Income       Total 
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                 
                                                                                                                                 
<S>                                          <C>            <C>           <C>            <C>          <C>             <C>        
BALANCE, DECEMBER 31, 1996                   $      .4      $      .7     $    531.1     $  (460.1)   $        (2.8)  $    69.3  
   Net income                                                                                 48.0                         48.0  
     Minimum pension liability adjustment,                                                                                       
         net of tax                                                                                             2.8         2.8  
                                                                                                                      ---------  
   Comprehensive income                                                                                                    50.8  
   Common stock issued upon redemption                                                                                           
     and conversion of preferred stock             (.4)            .1            1.7                                        1.4  
   Stock options exercised                                                        .4                                         .4  
   Dividends on preferred stock                                                               (5.5)                        (5.5) 
   Incentive plan accretion                                                       .6                                         .6  
                                             ---------      ---------     ----------     ---------    -------------   ---------  
BALANCE, DECEMBER 31, 1997                          -              .8          533.8        (417.6)            -          117.0  
   Net income/Comprehensive income                                                              .6                           .6  
   Stock options exercised                                                        .1                                         .1  
   Incentive plan accretion                                                      1.5                                        1.5  
                                                                                                                                 
                                                                                                                                 
                                             ---------      ---------     ----------     ---------    -------------   ---------  
BALANCE, DECEMBER 31, 1998                          -              .8          535.4        (417.0)            -          119.2  
                                                                                                                                 
   Net income (loss)/Comprehensive income                                                    (54.1)                       (54.1) 
     Minimum pension liability adjustment,
         net of tax                                                                                            (1.2)       (1.2) 
                                                                                                                      ---------  
   Comprehensive income                                                                                                   (55.3) 
   Stock options exercised                                                        .1                                         .1  
   Incentive plan accretion                                                      1.3                                        1.3  
                                             ---------      ---------     ----------     ---------    -------------   ---------  
BALANCE, DECEMBER 31, 1999                   $      -       $      .8     $    536.8     $  (471.1)   $        (1.2)  $    65.3  
                                             =========      =========     ==========     =========    =============   =========  
</TABLE>


Changes in minority interest were:           



<TABLE>
<CAPTION>
                                            1999                            1998                           1997
                                 --------------------------      --------------------------     --------------------------
                                     Redeemable                      Redeemable                     Redeemable
                                     Preference                      Preference                     Preference
                                          Stock        Other              Stock        Other             Stock        Other
---------------------------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>            <C>             <C>            <C>              <C>      
Beginning of period balance      $        20.1    $   103.4      $        27.7   $    100.0     $        27.5    $    94.2
Redeemable preference stock
   Accretion                               1.0                             1.1                            2.3
   Stock redemption                       (1.6)                           (8.7)                          (2.1)
Minority interests                                     (5.2)                            3.4                            5.8
                                 -------------    ---------      -------------   ----------     -------------    ---------
End of period balance            $        19.5    $    98.2      $        20.1   $    103.4     $        27.7    $   100.0
                                 =============    =========      =============   ==========     =============    =========
</TABLE>



COMMON STOCK

In January 2000, the Company increased the number of authorized shares of Common
Stock to 125,000,000 from 100,000,000.

                                       48


<PAGE>   52
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


REDEEMABLE PREFERENCE STOCK

In 1985, KACC issued its Cumulative (1985 Series A) Preference Stock and its
Cumulative (1985 Series B) Preference Stock (together, the "Redeemable
Preference Stock") each of which has a par value of $1 per share and a
liquidation and redemption value of $50 per share plus accrued dividends, if
any. No additional Redeemable Preference Stock is expected to be issued. Holders
of the Redeemable Preference Stock are entitled to an annual cash dividend of $5
per share, or an amount based on a formula tied to KACC's pre-tax income from
aluminum operations, when and as declared by the Board of Directors.

The carrying values of the Redeemable Preference Stock are increased each year
to recognize accretion between the fair value (at which the Redeemable
Preference Stock was originally issued) and the redemption value. Changes in
Redeemable Preference Stock are shown below.



<TABLE>
<CAPTION>
                                                 1999            1998           1997
------------------------------------------------------------------------------------
<S>                                          <C>             <C>            <C>    
Shares:
   Beginning of year                         421,575         595,053        634,684
   Redeemed                                  (31,322)       (173,478)       (39,631)
                                             -------         -------        -------

   End of year                               390,253         421,575        595,053
                                             =======         =======        =======
</TABLE>



Redemption fund agreements require KACC to make annual payments by March 31 of
the subsequent year based on a formula tied to consolidated net income until the
redemption funds are sufficient to redeem all of the Redeemable Preference
Stock. On an annual basis, the minimum payment is $4.3 and the maximum payment
is $7.3. At December 31, 1999, the balance in the redemption fund was $12.5
(included in Other Assets). KACC also has certain additional repurchase
requirements which are, among other things, based upon profitability tests.

The Redeemable Preference Stock is entitled to the same voting rights as KACC
common stock and to certain additional voting rights under certain
circumstances, including the right to elect, along with other KACC preference
stockholders, two directors whenever accrued dividends have not been paid on two
annual dividend payment dates or when accrued dividends in an amount equivalent
to six full quarterly dividends are in arrears. The Redeemable Preference Stock
restricts the ability of KACC to redeem or pay dividends on its common stock if
KACC is in default on any dividends payable on Redeemable Preference Stock.

PREFERENCE STOCK

KACC has four series of $100 par value Cumulative Convertible Preference Stock
("$100 Preference Stock") with annual dividend requirements of between 41/8% and
4 3/4%. KACC has the option to redeem the $100 Preference Stock at par value
plus accrued dividends. KACC does not intend to issue any additional shares of
the $100 Preference Stock.

The $100 Preference Stock can be exchanged for per share cash amounts between
$69 - $80. KACC records the $100 Preference Stock at their exchange amounts for
financial statement presentation and the Company includes such amounts in
minority interests. At December 31, 1999 and 1998, outstanding shares of $100
Preference Stock were 19,538 and 19,963, respectively.

PREFERRED STOCK

PRIDES Convertible - During August 1997, the remaining 8,673,850 outstanding
shares of PRIDES were converted into 7,227,848 shares of Common Stock pursuant
to the terms of the PRIDES Certificate of Designations. Further in accordance
with the PRIDES Certificate of Designations, no dividends were paid or payable
for the period June 30, 1997, to, but not including, the date of conversion.
However, in accordance with generally accepted accounting principles, the $1.3
of accrued dividends attributable to the period June 30, 1997, to, but not
including, the conversion date were treated as an increase in Additional capital
at the date of conversion and were reflected as a reduction of Net income
available to common shareholders.

PLEDGED SHARES

From time to time MAXXAM or certain of its subsidiaries which own the Company's
Common Stock may use such stock as collateral under various financing
arrangements. At December 31, 1999, 27,938,250 shares of the Company's Common
Stock beneficially owned by MAXXAM Group Holdings Inc. ("MGHI"), a wholly owned
subsidiary of MAXXAM, were pledged as


                                       49

<PAGE>   53


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


security for $130.0 principal amount of 12% Senior Secured Notes due 2003 issued
in December 1996 by MGHI. An additional 8,915,000 shares of the Company's Common
Stock were pledged by MAXXAM under a separate agreement under which $18.5 had
been borrowed by MAXXAM at December 31, 1999. In addition to the foregoing,
MAXXAM has agreed to secure each $1.0 of borrowings with 400,000 shares of the
Company's Common Stock under the terms of another $25.0 credit facility ($2.5
outstanding at December 31, 1999).

9.   RESTRUCTURING OF OPERATIONS

During the second quarter of 1997, the Company recorded a $19.7 restructuring
charge to reflect actions taken and plans initiated to achieve reduced
production costs, decreased corporate selling, general and administrative
expenses, and enhanced product mix. The significant components of the
restructuring charge were: (i) a net loss of approximately $1.4 as a result of
the contribution of certain net assets of KACC's Erie, Pennsylvania, fabrication
plant in connection with the formation of AKW and the subsequent decision to
close the remainder of the Erie plant in order to consolidate its forging
operations into two other facilities; (ii) a charge of $15.6 associated with
asset dispositions regarding product rationalization and geographical
optimization; and (iii) a charge of approximately $2.7 for benefit and other
costs associated with the consolidation or elimination of certain corporate and
other staff functions.

10.  COMMITMENTS AND CONTINGENCIES

COMMITMENTS

KACC has a variety of financial commitments, including purchase agreements,
tolling arrangements, forward foreign exchange and forward sales contracts (see
Note 11), letters of credit, and guarantees. Such purchase agreements and
tolling arrangements include long-term agreements for the purchase and tolling
of bauxite into alumina in Australia by QAL. These obligations expire in 2008.
Under the agreements, KACC is unconditionally obligated to pay its proportional
share of debt, operating costs, and certain other costs of QAL. KACC's share of
the aggregate minimum amount of required future principal payments at December
31, 1999, is $103.6 which matures as follows: $11.3 in 2000, $14.1 in 2001,
$43.0 in 2002, and $35.2 in 2003. KACC's share of payments, including operating
costs and certain other expenses under the agreements, has ranged between $92.0
- $100.0 over the past three years. KACC also has agreements to supply alumina
to and to purchase aluminum from Anglesey.

Minimum rental commitments under operating leases at December 31, 1999, are as
follows: years ending December 31, 2000 - $36.0; 2001 - $33.6; 2002 - $29.3;
2003 - $26.2; 2004 - $24.7; thereafter - $88.7. The future minimum rentals
receivable under noncancelable subleases was $82.3 at December 31, 1999.

Rental expenses were $41.1, $34.5, and $30.4, for the years ended December 31,
1999, 1998, and 1997, respectively.

ENVIRONMENTAL CONTINGENCIES

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

Based on the Company's evaluation of these and other environmental matters, the
Company has established environmental accruals, primarily related to potential
solid waste disposal and soil and groundwater remediation matters. The following
table presents the changes in such accruals, which are primarily included in
Long-term liabilities, for the years ended December 31, 1999, 1998, and 1997:


                                       50

<PAGE>   54


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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



<TABLE>
<CAPTION>
                                                              1999        1998       1997
-----------------------------------------------------------------------------------------
<S>                                                        <C>         <C>        <C>   
Balance at beginning of period                             $ 50.7      $ 29.7     $ 33.3
Additional accruals                                           1.6        24.5        2.0
Less expenditures                                            (3.4)       (3.5)      (5.6)
                                                           ------      ------     ------
Balance at end of period                                   $ 48.9      $ 50.7     $ 29.7
                                                           ======      ======     ======
</TABLE>




These environmental accruals represent the Company's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology, and the Company's
assessment of the likely remediation action to be taken. The Company expects
that these remediation actions will be taken over the next several years and
estimates that annual expenditures to be charged to these environmental accruals
will be approximately $3.0 to $9.0 for the years 2000 through 2004 and an
aggregate of approximately $23.0 thereafter.

As additional facts are developed and definitive remediation plans and necessary
regulatory approvals for implementation of remediation are established or
alternative technologies are developed, changes in these and other factors may
result in actual costs exceeding the current environmental accruals. The Company
believes that it is reasonably possible that costs associated with these
environmental matters may exceed current accruals by amounts that could range,
in the aggregate, up to an estimated $30.0. As the resolution of these matters
is subject to further regulatory review and approval, no specific assurance can
be given as to when the factors upon which a substantial portion of this
estimate is based can be expected to be resolved. However, the Company is
currently working to resolve certain of these matters.

The Company believes that KACC has insurance coverage available to recover
certain incurred and future environmental costs and is pursuing claims in this
regard. During December 1998, KACC received recoveries totaling approximately
$35.0 from certain of its insurers related to current and future claims. Based
on the Company's analysis, a total of $12.0 of such recoveries was allocable to
previously accrued (expensed) items and, therefore, was reflected in earnings
during 1998. The remaining recoveries were offset against increases in the total
amount of environmental reserves. No assurances can be given that the Company
will be successful in other attempts to recover incurred or future costs from
other insurers or that the amount of recoveries received will ultimately be
adequate to cover costs incurred.

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

ASBESTOS CONTINGENCIES

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 sold for at least 20 years.

The following table presents the changes in number of such claims pending for
the years ended December 31, 1999, 1998, and 1997.



<TABLE>
<CAPTION>
                                                             1999         1998         1997
-------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>          <C>   
Number of claims at beginning of period                   86,400       77,400       71,100
Claims received                                           29,300       22,900       15,600
Claims settled or dismissed                              (15,700)     (13,900)      (9,300)
                                                          ------       ------       ------
Number of claims at end of period                        100,000       86,400       77,400
                                                         =======       ======       ======
</TABLE>



                                       51

<PAGE>   55
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


The foregoing claims and settlement figures as of December 31, 1999, do not
reflect the fact that KACC has reached agreements under which it expects to
settle approximately 31,900 of the pending asbestos-related claims over an
extended period.

The Company maintains a liability for estimated asbestos-related costs for
claims filed to date and an estimate of claims to be filed over a 10 year period
(i.e., through 2009). The Company's estimate is based on the Company's view, at
each balance sheet date, of the current and anticipated number of
asbestos-related claims, the timing and amounts of asbestos-related payments,
the status of ongoing litigation and settlement initiatives, and the advice of
Wharton Levin Ehrmantraut Klein & Nash, P.A., with respect to the current state
of the law related to asbestos claims. However, there are inherent uncertainties
involved in estimating asbestos- related costs and the Company's actual costs
could exceed the Company's estimates due to changes in facts and circumstances
after the date of each estimate. Further, while the Company does not presently
believe there is a reasonable basis for estimating asbestos-related costs beyond
2009 and, accordingly, no accrual has been recorded for any costs which may be
incurred beyond 2009, the Company expects that such costs may continue beyond
2009, and that such costs could be substantial. As of December 31, 1999, an
estimated asbestos-related cost accrual of $387.8, before consideration of
insurance recoveries, has been reflected in the accompanying financial
statements primarily in Long-term liabilities. The Company estimates that annual
future cash payments for asbestos-related costs will range from approximately
$75.0 to $85.0 in the years 2000 to 2002, approximately $35.0 to $55.0 for each
of the years 2003 and 2004, and an aggregate of approximately $58.0 thereafter.

The Company believes that KACC has insurance coverage available to recover a
substantial portion of its asbestos-related costs. Although the Company has
settled asbestos-related coverage matters with certain of its insurance
carriers, other carriers have not yet agreed to settlements. KACC has reached
preliminary agreements with certain insurance carriers under which it expects to
collect a substantial portion of its 2000 asbestos-related payments. The timing
and amount of future recoveries from these and other insurance carriers will
depend on the pace of claims review and processing by such carriers and on the
resolution of any disputes regarding coverage under such policies. The Company
believes that substantial recoveries from the insurance carriers are probable.
The Company reached this conclusion after considering its prior
insurance-related recoveries in respect of asbestos- related claims, existing
insurance policies, and the advice of Heller Ehrman White & McAuliffe LLP with
respect to applicable insurance coverage law relating to the terms and
conditions of those policies. Accordingly, an estimated aggregate insurance
recovery of $315.5, determined on the same basis as the asbestos-related cost
accrual, is recorded primarily in Other assets at December 31, 1999. However, no
assurances can be given that KACC will be able to project similar recovery
percentages for future asbestos-related claims or that the amounts related to
future asbestos-related claims will not exceed KACC's aggregate insurance
coverage.

Management continues to monitor claims activity, the status of lawsuits
(including settlement initiatives), legislative developments, and costs incurred
in order to ascertain whether an adjustment to the existing accruals should be
made to the extent that historical experience may differ significantly from the
Company's underlying assumptions. This process resulted in the Company
reflecting charges of $53.2, $12.7, and $8.8 (included in Other income(expense))
in the years ended December 31, 1999, 1998, and 1997, respectively, for
asbestos-related claims, net of expected insurance recoveries, based on recent
cost and other trends experienced by KACC and other companies. While
uncertainties are inherent in the final outcome of these asbestos matters and it
is presently impossible to determine the actual costs that ultimately may be
incurred and insurance recoveries that will be received, management currently
believes that, based on the factors discussed in the preceding paragraphs, the
resolution of asbestos-related uncertainties and the incurrence of
asbestos-related costs net of related insurance recoveries should not have a
material adverse effect on the Company's consolidated financial position or
liquidity. However, as the Company's estimates are periodically re- evaluated,
additional charges may be necessary and such charges could be material to the
results of the period in which they are recorded.

LABOR MATTERS

In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of unfair labor practices ("ULPs") were filed with the National
Labor Relations Board ("NLRB") by the USWA. As previously disclosed, KACC
responded to all such allegations and believed that they were without merit. In
July 1999, the Oakland, California, regional office of the NLRB dismissed all
material charges filed against KACC. In September 1999, the union filed an
appeal of this ruling with the NLRB general counsel's office in Washington, D.C.
If the original decision were to be reversed, the matter would be referred to an
administrative law judge for a hearing whose outcome would be subject to an
additional appeal either by the USWA or KACC.


                                       52

<PAGE>   56


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


This process could take months or years. If these proceedings eventually
resulted in a definitive ruling against KACC, it could be obligated to provide
back pay to USWA members at the five plants and such amount could be
significant. However, while uncertainties are inherent in the final outcome of
such matters, the Company believes that the resolution of the alleged ULPs
should not result in a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.

OTHER CONTINGENCIES

The Company or KACC 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 currently
believes that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.

11.  DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

At December 31, 1999, the net unrealized loss on KACC's position in aluminum
forward sales and option contracts (excluding the impact of those contracts
discussed below which have been marked to market), energy forward purchase and
option contracts, and forward foreign exchange contracts, was approximately
$73.9 (based on comparisons to applicable year-end published market prices). As
KACC's hedging activities are generally designed to lock-in a specified price or
range of prices, gains or losses on the derivative contracts utilized in these
hedging activities will be offset by losses or gains, respectively, on the
transactions being hedged.

ALUMINA AND ALUMINUM

The Company's earnings 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. Primary
aluminum prices have historically been subject to significant cyclical price
fluctuations. Alumina prices as well as fabricated aluminum product prices
(which vary considerably among products) are significantly influenced by changes
in the price of primary aluminum but generally lag behind primary aluminum price
changes by up to three months. Since 1993, the Average Midwest United States
transaction price for primary aluminum has ranged from approximately $.50 to
$1.00 per pound.

From time to time in the ordinary course of business, KACC enters into hedging
transactions to provide price risk management in respect of the net exposure of
earnings and cash flows resulting from (i) anticipated sales of alumina, primary
aluminum and fabricated aluminum products, less (ii) expected purchases of
certain items, such as aluminum scrap, rolling ingot, and bauxite, whose prices
fluctuate with the price of primary aluminum. Forward sales contracts are used
by KACC to effectively fix the price that KACC will receive for its shipments.
KACC also uses option contracts (i) to establish a minimum price for its product
shipments, (ii) to establish a "collar" or range of prices for KACC's
anticipated sales, and/or (iii) to permit KACC to realize possible upside price
movements. As of December 31, 1999, KACC had entered into option contracts that
established a price range for 341,000 and 317,000 tons of primary aluminum with
respect to 2000 and 2001, respectively.

Additionally, through December 31, 1999, KACC had also entered a series of
transactions with a counterparty that will provide KACC with a premium over the
forward market prices at the date of the transaction for 2,000 tons of primary
aluminum per month during the period January 2000 through June 2001. KACC also
contracted with the counterparty to receive certain fixed prices (also above the
forward market prices at the date of the transaction) on 4,000 tons of primary
aluminum per month over a three year period commencing October 2001, unless
market prices during certain periods decline below a stipulated "floor" price,
in which case the fixed price sales portion of the transactions terminate. The
price at which the October 2001 and after transactions terminate is well below
current market prices. While the Company believes that the October 2001 and
after transactions are consistent with its stated hedging objectives, these
positions do not qualify for treatment as a "hedge" under current accounting
guidelines. Accordingly, these positions will be "marked-to-market" each period.
For the year ended December 31, 1999, the Company recorded mark-to-market
pre-tax charges of $32.8 in Other income (expense) associated with the
transactions described in this paragraph.

As of December 31, 1999, KACC had sold forward virtually all of the alumina
available to it in excess of its projected internal smelting requirements for
2000 and 2001 at prices indexed to future prices of primary aluminum.


                                       53

<PAGE>   57


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


ENERGY

KACC is exposed to energy price risk from fluctuating prices for fuel oil and
diesel oil consumed in the production process. KACC from time to time in the
ordinary course of business enters into hedging transactions with major
suppliers of energy and energy related financial instruments. As of December 31,
1999, KACC held a combination of fixed price purchase and option contracts for
an average of 232,000 barrels per month of fuel oil for 2000.

FOREIGN CURRENCY

KACC enters into forward exchange contracts to hedge material cash commitments
to foreign subsidiaries or affiliates. At December 31, 1999, KACC had net
forward foreign exchange contracts totaling approximately $88.5 for the purchase
of 133.0 Australian dollars from January 2000 through May 2001, in respect of
its Australian dollar denominated commitments from January 2000 through May
2001. In addition, KACC has entered into an option contract to purchase 42.0
Australian dollars for the period from January 2000 through June 2001.

12.  SEGMENT AND GEOGRAPHICAL AREA INFORMATION

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

The Company's operations are organized and managed by product type. The Company
operates in four segments of the aluminum industry: Alumina and bauxite, Primary
aluminum, Flat-rolled products and Engineered products. The Alumina and bauxite
business unit's principal products are smelter grade alumina and chemical grade
alumina hydrate, a value-added product, for which the Company receives a premium
over smelter grade market prices. The Primary aluminum business unit produces
commodity grade products as well as value-added products such as rod and billet,
for which the Company receives a premium over normal commodity market prices.
The Flat-rolled products group sells to the beverage container and specialty
coil markets as well as value-added products such as heat treat aluminum sheet
and plate which are used in the aerospace and general engineering markets. The
Engineered products business unit serves a wide range of industrial segments
including the automotive, distribution, aerospace and general engineering
markets.

The Company uses a portion of its bauxite, alumina and primary aluminum
production for additional processing at its downstream facilities. Transfers
between business units are made at estimated market prices. The accounting
policies of the segments are the same as those described in Note 1. Business
unit results are evaluated internally by management before any allocation of
corporate overhead and without any charge for income taxes or interest expense.


                                       54

<PAGE>   58


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


Financial information by operating segment at December 31, 1999, 1998, and 1997
is as follows:



<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                          ----------------------------------------
                                                                1999           1998           1997
--------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>            <C>       
Net Sales:
   Bauxite and Alumina:
     Net sales to unaffiliated customers                  $   397.9 (1) $    472.7     $    411.7
     Intersegment sales                                       129.0 (1)      135.8          201.7
                                                          ---------     ----------     ----------
                                                              526.9          608.5          613.4
                                                          ---------     ----------     ----------
   Primary Aluminum:
     Net sales to unaffiliated customers                      439.1          409.8          543.4
     Intersegment sales                                       240.6          233.5          273.8
                                                          ---------     ----------     ----------
                                                              679.7          643.3          817.2
                                                          ---------     ----------     ----------
   Flat-Rolled Products                                       576.2          714.6          743.3
   Engineered Products                                        542.6          581.3          581.0
   Minority interests                                          88.5           78.0           93.8
   Eliminations                                              (369.6)        (369.3)        (475.5)
                                                          ---------     ----------     ----------
                                                          $ 2,044.3     $  2,256.4     $  2,373.2
                                                          =========     ==========     ==========


Equity in income (loss) of unconsolidated affiliates:
   Bauxite and Alumina                                    $     3.4     $     (3.2)    $     (7.0)
   Primary Aluminum                                            (1.0)           1.2            5.1
   Engineered Products                                          2.5            7.8            4.8
   Corporate and Other                                            -            (.4)             -
                                                          ---------     ----------     ----------
                                                          $     4.9     $      5.4     $      2.9
                                                          =========     ==========     ==========

Operating income (loss):
   Bauxite and Alumina                                    $    (6.0)(2) $     42.0 (6) $     54.2
   Primary Aluminum                                             8.0 (3)       49.9 (6)      148.3
   Flat-Rolled Products                                        17.1           70.8 (6)       28.2 (7)
   Engineered Products                                         38.6           47.5 (6)       42.3 (7)
   Micromill                                                  (30.7)(4)      (63.4)(4)      (24.5)
   Eliminations                                                 6.9            8.9           (5.9)
   Corporate and Other                                        (62.8)         (65.1)         (74.6)(7)
                                                          ---------     ----------     ----------
                                                          $   (28.9)    $     90.6     $    168.0
                                                          =========     ==========     ==========
Depreciation and amortization:
   Bauxite and Alumina                                    $    29.7 (5) $     36.4     $     39.4
   Primary Aluminum                                            27.8           29.9           30.4
   Flat-Rolled Products                                        16.2           16.1           16.0
   Engineered Products                                         10.7           10.8           11.2
   Micromill                                                    2.3            3.6            3.2
   Corporate and Other                                          2.8            2.3            2.3
                                                          ---------     ----------     ----------
                                                          $    89.5     $     99.1     $    102.5
                                                          =========     ==========     ==========
Capital expenditures:
   Bauxite and Alumina                                    $    30.4     $     26.9     $     27.8
   Primary Aluminum                                            12.8           20.7           42.6
   Flat-Rolled Products                                        16.6           20.4           16.8
   Engineered Products                                          7.8            8.4           31.2
   Micromill                                                      -             .2            8.3
   Corporate and Other                                           .8            1.0            1.8
                                                          ---------     ----------     ----------
                                                          $    68.4     $     77.6     $    128.5
                                                          =========     ==========     ==========
</TABLE>




(1)  Net sales for 1999 include approximately 264 tons of alumina purchased from
     third parties and resold to certain unaffiliated customers of the Gramercy
     facility and 131 tons of alumina purchased from third parties and resold to
     the Company's primary business unit.


                                       55

<PAGE>   59
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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


(2)  Operating income (loss) for 1999 included estimated business interruption
     insurance recoveries of $41.0.

(3)  Operating income (loss) for 1999 included potline preparation and restart
     costs of $12.8. 

(4)  Operating income (loss) for 1999 and 1998 included impairment charges of
     $19.1 and $45.0, respectively.

(5)  Depreciation was suspended for the Gramercy facility for the last six
     months of 1999 as a result of the July 5, 1999, incident. Depreciation
     expense for the Gramercy facility for the six months ended June 30, 1999,
     was approximately $6.0.

(6)  Operating income (loss) for 1998 for the Bauxite and alumina, Primary
     aluminum, Flat-rolled products and Engineered products segments included
     unfavorable strike-related impacts of approximately $11.0, $29.0, $16.0,
     and $4.0, respectively.

(7)  Operating income (loss) for 1997 included pre-tax charge of $2.6, $12.5 and
     $4.6 related to the restructuring of operations for the Flat-rolled
     products, Engineered products and Corporate segments, respectively.



<TABLE>
<CAPTION>
                                                                              December 31,
                                                                    -------------------------------
                                                                         1999              1998
---------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>          
Investments in and advances to unconsolidated affiliates:
   Bauxite and Alumina                                              $        71.6     $        76.8
   Primary Aluminum                                                          25.3              27.6
   Engineered Products                                                         -               23.9
                                                                    -------------     -------------
                                                                    $        96.9     $       128.3
                                                                    =============     =============
Segment assets:
   Bauxite and Alumina                                              $       777.7     $       669.0
   Primary Aluminum                                                         560.8             580.8
   Flat-Rolled Products                                                     423.2             431.2
   Engineered Products                                                      253.1             294.5
   Micromill                                                                  3.0              25.3
   Corporate and Other                                                    1,181.0             990.1
                                                                    -------------     -------------
                                                                    $     3,198.8     $     2,990.9
                                                                    =============     =============
</TABLE>



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



<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                 ---------------------------------------------
                                                     1999            1998             1997
----------------------------------------------------------------------------------------------
<S>                                              <C>             <C>              <C>         
Net sales to unaffiliated customers:
     United  States                              $    1,401.8    $     1,698.0    $    1,720.3
     Jamaica                                            233.1            237.0           204.6
     Ghana                                              153.2             89.8           234.2
     Other Foreign                                      256.2            231.6           214.1
                                                 ------------    -------------    ------------
                                                 $    2,044.3    $     2,256.4    $    2,373.2
                                                 ============    =============    ============
</TABLE>




<TABLE>
<CAPTION>
                                                  December 31,
                                          -----------------------------
                                              1999             1998
-----------------------------------------------------------------------
<S>                                       <C>              <C>         
Long-lived assets: (1)
     United States                        $       688.1    $      757.9
     Jamaica                                      288.2           289.2
     Ghana                                         84.1            90.2
     Other Foreign                                 90.2            99.7
                                          -------------    ------------
                                          $     1,150.6    $    1,237.0
                                          =============    ============
</TABLE>



(1) Long-lived assets include Property, plant, and equipment, net, and
Investments in and advances to unconsolidated affiliates.



                                       56


<PAGE>   60


KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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


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


The aggregate foreign currency gain included in determining net income was
immaterial for the years ended December 31, 1999, 1998, and 1997.

No single customer accounted for sales in excess of 10% of total revenue in
1999, 1998, and 1997.

Export sales were less than 10% of total revenue during the years ended December
31, 1999, 1998, and 1997.

                                       57

<PAGE>   61





KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
QUARTERLY FINANCIAL DATA (UNAUDITED)
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>


                                                                         Quarter Ended
                                                    -------------------------------------------------------
(In millions of dollars, except share amounts)      March 31,   June 30,     September 30,   December 31,
-----------------------------------------------------------------------------------------------------------

1999
<S>                                                 <C>       <C>          <C>              <C>     
         Net sales                                $ 479.4     $ 525.0      $   520.3       $  519.6
         Operating income (loss)                    (33.0)         .7          (12.1)          15.5
         Net income (loss)                          (38.2)      (15.7)(1)      (39.2)(2)       39.0(3)
         Earnings (loss) per share:
                  Basic/Diluted                      (.48)       (.20)          (.49)(2)        .49
         Common stock market price:
                  High                              6 7/8      10 1/8          9 3/4          8 1/4
                  Low                               4 3/4           5          6 5/8              6

1998
         Net sales                                $ 597.0     $ 614.8       $  541.6       $  503.0
         Operating income (loss)                     44.8        55.3           30.8          (40.3)
         Net income (loss)                           12.0        16.7           10.8(4)       (38.9)(5)
         Earnings per share:
                  Basic/Diluted                       .15         .21            .14           (.49)(5)
         Common stock market price:
                  High                                 11      11 5/8          9 5/8          7 3/4
                  Low                               8 1/8       8 7/8          5 5/8          4 5/8

1997
         Net sales                                $ 547.4     $ 597.1       $  634.1       $  594.6
         Operating income                            31.3        35.3           54.5           46.9
         Net income                                   2.6        13.7(6)        17.5(3)        14.2
         Earnings per share:
                  Basic/Diluted                       .01         .16            .22            .18
         Common stock market price:
                  High                             13 5/8      12 1/4             16         14 7/8
                  Low                              10 7/8      10 1/8         11 5/8          8 3/8
</TABLE>



(1)  Includes three essentially offsetting items, a pre-tax gain of $50.5 on the
     sale of the Company's interests in AKW, a non-cash pre-tax charge of $38.0
     for asbestos-related claims and a pre-tax charge of $13.5 to reflect a
     mark-to-market adjustment on certain primary aluminum hedging transactions.
    
(2)  Includes a non-cash pre-tax charge of $19.1 to reduce the carrying
     value of the Company's Micromill assets, a non-cash pre-tax charge of $15.2
     for asbestos-related claims and a pre-tax charge of $5.9 to reflect a
     mark-to-market adjustment on certain primary aluminum hedging transactions.
     Excluding these items, basic loss per share would have been approximately
     $.16. 

(3)  Includes a pre-tax gain of $85.0 on involuntary conversion at Gramercy
     facility, which amount represents the difference between the minimum
     expected property damage reimbursement amount for the Gramercy alumina
     refinery and the net carrying value of the damaged property.

(4)  Includes two essentially offsetting non-recurring items, a favorable $8.3
     non-cash tax provision benefit resulting from the resolution of certain
     matters and an approximate $10.0 unfavorable gross profit impact of
     preparing for a strike by employees represented by the USWA at five
     locations.

(5)  Includes an unfavorable pre-tax strike-related gross profit impact of
     approximately $50.0, and a non-cash pre-tax charge of $45.0 related to
     impairment of the Company's Micromill assets. Excluding these items, basic
     earnings per share would have been approximately $.29.

(6)  Includes a $19.7 pre-tax charge for restructuring of operations, an
     offsetting after-tax benefit of $12.5 related to the settlement of certain
     tax matters and a $5.8 pre-tax charge for litigation matters.


                                       58

<PAGE>   62



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
FIVE-YEAR FINANCIAL DATA
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------



                                                                                    December 31,
                                                               --------------------------------------------------  
(In millions of dollars)                                         1999       1998       1997       1996       1995
-----------------------------------------------------------------------------------------------------------------

ASSETS
<S>                                                            <C>        <C>        <C>        <C>        <C>
Current assets:
         Cash and cash equivalents                             $  21.2    $  98.3    $  15.8    $  81.3    $  21.9
         Receivables                                             261.0      282.7      340.2      252.4      308.6
         Inventories                                             546.1      543.5      568.3      562.2      525.7
         Prepaid expenses and other current assets               145.6      105.5      121.3      127.8       76.6
                                                              --------   --------   --------   --------   --------
                  Total current assets                           973.9    1,030.0    1,045.6    1,023.7      932.8

Investments in and advances to unconsolidated affiliates          96.9      128.3      148.6      168.4      178.2
Property, plant, and equipment - net                           1,053.7    1,108.7    1,171.8    1,168.7    1,109.6
Deferred income taxes                                            440.0      377.9      330.6      264.5      269.1
Other assets                                                     634.3      346.0      317.3      308.7      323.5
                                                              --------   --------   --------   --------   --------
                  Total                                       $3,198.8   $2,990.9   $3,013.9   $2,934.0   $2,813.2
                                                              ========   ========   ========   ========   ========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
         Accounts payable and accruals                        $  500.3   $  432.7   $  457.3   $  453.4   $  451.2
                                                                                      
         Accrued postretirement medical benefit obligation -
                  current portion                                 51.5       48.2       45.3       50.1       46.8
         Payable to affiliates                                    85.8       77.1       82.7       97.0       94.2
         Long-term debt - current portion                           .3         .4        8.8        8.9        8.9
                                                              --------   --------   --------   --------   --------
                  Total current liabilities                      637.9      558.4      594.1      609.4      601.1

Long-term liabilities                                            727.1      532.9      491.9      458.1      548.5
Accrued postretirement medical benefit obligation                678.3      694.3      720.3      722.5      734.0
Long-term debt                                                   972.5      962.6      962.9      953.0      749.2
Minority interests                                               117.7      123.5      127.7      121.7      122.7

Stockholders' equity:
         Preferred stock                                             -          -          -         .4         .4
         Common stock                                               .8         .8         .8         .7         .7
         Additional capital                                      536.8      535.4      533.8      531.1      530.3
         Retained earnings (accumulated deficit)                (471.1)    (417.0)    (417.6)    (460.1)    (459.9)
         Accumulated other comprehensive income - 
                  additional minimum pension
                  liability                                       (1.2)         -          -       (2.8)     (13.8)
                                                              --------   --------   --------   --------   --------
                  Total stockholders' equity                      65.3      119.2      117.0       69.3       57.7
                                                              --------   --------   --------   --------   --------
                  Total                                       $3,198.8   $2,990.9   $3,013.9   $2,934.0   $2,813.2
                                                              ========   ========   ========   ========   ========
Debt-to-capital ratio(1)                                          81.2       76.9       77.8       81.2       78.1
</TABLE>




(1)  Total of long-term debt - current portion and long-term debt (collectively
     "total debt") as a ratio of total debt, deferred income tax liabilities,
     minority interests, and stockholders' equity.


                                       59

<PAGE>   63



KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
FIVE-YEAR FINANCIAL DATA
STATEMENTS OF CONSOLIDATED INCOME (LOSS)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------




                                                                               Year Ended December 31,
                                                                 -------------------------------------------------

(In millions of dollars, except share amounts)                      1999     1998      1997      1996      1995
------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>       <C>       <C>       <C>       <C>     
Net sales                                                        $2,044.3   $2,256.4  $2,373.2  $2,190.5  $2,237.8
                                                                 --------   --------  --------  --------  --------
Costs and expenses:
         Cost of products sold                                    1,859.2    1,906.2   1,951.2   1,857.5   1,787.0
         Depreciation and amortization                               89.5       99.1     102.5     107.6     105.7
         Selling, administrative, research and development, and
                  general                                           105.4      115.5     131.8     127.6     134.5
         Impairment of Micromill(TM) assets/restructuring of
                  operations                                         19.1       45.0      19.7        --        --
                                                                 --------   --------  --------  --------  --------
                 Total costs and expenses                         2,073.2    2,165.8   2,205.2   2,092.7   2,027.2
                                                                 --------   --------  --------  --------  --------
Operating income (loss) (2)                                         (28.9)      90.6     168.0      97.8     210.6

Other income (expense):
         Interest expense                                          (110.1)    (110.0)   (110.7)    (93.4)    (93.9)
         Gain on involuntary conversion at Gramercy facility         85.0         --        --        --        --
         Other - net (1)                                            (35.9)       3.5       3.0      (2.7)    (14.1)
                                                                 --------   --------  --------  --------  --------
Income (loss) before income taxes, minority interests               (89.9)     (15.9)     60.3       1.7     102.6

Benefit (provision) for income taxes                                 32.7       16.4      (8.8)      9.3     (37.2)

Minority interests                                                    3.1         .1      (3.5)     (2.8)     (5.1)
                                                                 --------   --------  --------  --------  --------
Net income (loss)                                                   (54.1)        .6      48.0       8.2      60.3

Preferred stock dividends                                              --         --      (5.5)     (8.4)    (17.6)
                                                                 --------   --------  --------  --------  --------
Net income (loss) available to common shareholders                  (54.1)  $     .6  $   42.5  $    (.2) $   42.7
                                                                 ========   ========  ========  ========  ========
Earnings (loss) per share:
         Basic/Diluted                                           $   (.68)  $    .01   $   .57  $    .00  $    .69
Weighted average shares outstanding (000):
         Basic                                                     79,336     79,115    74,221    71,644    62,000
         Diluted                                                   79,336     79,156    74,382    71,644    62,264
</TABLE>






(1)  1999 includes a gain of $50.5 on the sale of the Company's interests in
     AKW, non-cash charges of $53.2 for asbestos-related claims and charges of
     $32.8 to reflect mark-to-market adjustments on certain primary aluminum
     hedging transactions.

(2)  1998 includes an adverse strike-related impact of approximately $60.0.


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ITEM 9. CHANGES 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, and such information is incorporated by reference from
such definitive proxy statement.


PART IV


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

(a)      Index to Financial Statements and Schedules


<TABLE>
<CAPTION>
         1.   Financial Statements....................................................................Page
<S>                                                                                                    <C>
         Report of Independent Public Accountants.......................................................31

         Consolidated Balance Sheets....................................................................32

         Statements of Consolidated Income (Loss).......................................................33

         Statements of Consolidated Cash Flows..........................................................34

         Notes to Consolidated Financial Statements.....................................................35

         Quarterly Financial Data (Unaudited)...........................................................58

         Five-Year Financial Data.......................................................................59

         2.   Financial Statement Schedules...........................................................Page

              Report of Independent Public Accountants..................................................63

              Schedule I     -  Condensed Balance Sheets - Parent Company,
                                Condensed Statements of Income - Parent Company,
                                Condensed Statements of Cash Flows - Parent Company, and
                                Notes to Condensed Financial Statements - Parent Company.............64-67

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

         3.   Exhibits

              Reference is made to the Index of Exhibits immediately preceding
              the exhibits hereto (beginning on page 69), which index is
              incorporated herein by reference.
</TABLE>



(b)      REPORTS ON FORM 8-K

         No Report on Form 8-K was filed by the Company during the last quarter
of the period covered by this Report.



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(c)      EXHIBITS

         Reference is made to the Index of Exhibits immediately preceding the
exhibits hereto (beginning on page 69), which index is incorporated herein by
reference.




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                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have audited in accordance with auditing standards generally accepted in the
United States, the financial statements included in Kaiser Aluminum Corporation
and Subsidiary Companies' annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated March 7,
2000. Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule I listed in the index at Item
14(a)2. above 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 a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audit of the basic
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
financial statements taken as a whole.






                                                             ARTHUR ANDERSEN LLP



Houston, Texas
March 7, 2000




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                                   SCHEDULE I
                    CONDENSED BALANCE SHEETS - PARENT COMPANY

                 (In millions of dollars, except share amounts)



<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                           --------------------------
                                                                                                 1999            1998
                                                                                           ----------      ----------
<S>                                                                                        <C>             <C>       
ASSETS
Investment in KACC                                                                         $  1,978.2      $  1,913.3
                                                                                           ----------      ----------

                           Total                                                           $  1,978.2      $  1,913.3
                                                                                           ==========      ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                                                                         $      --      $       --

Intercompany note payable to KACC, including accrued interest                                 1,912.9         1,794.1

Stockholders' equity:
         Common stock, par value $.01, authorized 125,000,000 shares; issued and
                  outstanding 79,405,333 and 79,153,543 in 1999 and 1998                           .8              .8
         Additional capital                                                                     536.8           535.4
         Accumulated deficit                                                                   (471.1)         (417.0)
         Accumulated other comprehensive income - additional minimum pension liability           (1.2)             --
                                                                                           ----------      ----------

                           Total stockholders' equity                                            65.3           119.2
                                                                                           ----------      ----------

                           Total                                                           $  1,978.2      $  1,913.3
                                                                                           ==========      ==========
</TABLE>







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



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                                   SCHEDULE I
             CONDENSED STATEMENTS OF INCOME (LOSS) - PARENT COMPANY

                            (In millions of dollars)



<TABLE>
<CAPTION>
                                                    December 31,
                                       ------------------------------------------
                                          1999            1998            1997
                                       ----------      ----------      ----------
<S>                                    <C>             <C>             <C>       
Equity in income of KACC               $     65.1      $    112.5      $    154.2

Administrative and general expense            (.3)            (.4)           (1.7)

Interest expense                           (118.9)         (111.5)         (104.5)
                                       ----------      ----------      ----------


Net income (loss)                      $    (54.1)     $       .6      $     48.0
                                       ==========      ==========      ==========
</TABLE>



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



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                                   SCHEDULE I
               CONDENSED STATEMENTS OF CASH FLOWS - PARENT COMPANY

                            (In millions of dollars)


<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                       ------------------------------------------  
                                                                                          1999            1998            1997
                                                                                       ----------      ----------      ----------  
<S>                                                                                    <C>             <C>             <C>         
Cash flows from operating activities:                                                                                              
     Net income (loss)                                                                 $    (54.1)     $       .6      $     48.0  
     Adjustments to reconcile net income to net cash used for operating activities:                                                
                       Equity in income of KACC                                             (65.1)         (112.5)         (154.2) 
                       Accrued interest on intercompany note payable to KACC                118.9           111.5           104.5  
                       Accrued taxes paid                                                      --            (3.3)           (1.8) 
                                                                                       ----------      ----------      ----------  
                                                                                                                                   
                                Net cash used by operating activities                         (.3)           (3.7)           (3.5) 
                                                                                       ----------      ----------      ----------  
                                                                                                                                   
Cash flows from investing activities:                                                                                              
     Investment in KACC                                                                       (.1)            (.1)            (.3) 
                                                                                       ----------      ----------      ----------  
                                                                                                                                   
                                Net cash used by investing activities                         (.1)            (.1)            (.3) 
                                                                                       ----------      ----------      ----------  
Cash flows from financing activities:                                                                                              
    Dividends paid                                                                             --              --            (4.2)
    Capital stock issued                                                                       .1              .1              .4 
    Payments from KACC on intercompany note receivable                                         --              --             4.2 
    Tax allocation payments from KACC                                                          --             3.3             1.8 
    Operating cost advances from KACC                                                          .3               4             1.6 
                                                                                       ----------      ----------      ---------- 
                               Net cash provided by financing activities                       .4             3.8             3.8 
                                                                                       ----------      ----------      ---------- 
                                                                                    
Net (decrease) increase in cash and cash equivalents during the year                           --              --              --
Cash and cash equivalents at beginning of year                                                 --              --              --
                                                                                       ----------      ----------      ----------
Cash and cash equivalents at end of year                                               $       --      $       --      $       --
                                                                                       ==========      ==========      ==========
                                                                                                                                 
Supplemental disclosure of non-cash investing activities:                                                                        
         Non-cash (decrease) increase in investment in KACC                            $      (.1)     $     (1.7)     $      4.4
</TABLE>
                                                       







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



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                                   SCHEDULE I
            NOTES TO CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY


1.  BASIS OF PRESENTATION

Kaiser Aluminum Corporation (the " Company") is a holding company and conducts
its operations through its wholly owned subsidiary, Kaiser Aluminum & Chemical
Corporation ("KACC"), which is reported herein using the equity method of
accounting. The accompanying parent company condensed financial statements of
the Company should be read in conjunction with the 1999 consolidated financial
statements of Kaiser Aluminum Corporation and Subsidiary Companies ("Kaiser").

Certain reclassifications of prior-year information were made to conform to the
current presentation.


2.  INTERCOMPANY NOTE PAYABLE

The Intercompany Note to KACC, as amended, provides for a fixed interest rate of
65/8%. Interest and principal payments are payable over a 15-year term pursuant
to a predetermined schedule starting December 31, 2000. However, as the Company
has both the ability and intent to amend the payment terms so that no amounts
come due during 2000, a portion of the Intercompany Note has not been reflected
as a current maturity.


3.  RESTRICTED NET ASSETS

The investment in KACC is substantially unavailable to the Company pursuant to
the terms of certain debt instruments. The obligations of KACC in respect of the
credit facilities under the Credit Agreement are guaranteed by the Company and
by certain significant subsidiaries of KACC. See Note 5 of Notes to Kaiser's
Consolidated Financial Statements.




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   SIGNATURES

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


                             
                                           KAISER ALUMINUM CORPORATION



        Date:  March 10, 2000          By       Raymond J. Milchovich
                                       ----------------------------------------
                                                Raymond J. Milchovich
                                          President, Chief Executive Officer,
                                         Chief Operating Officer and Director

         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 10, 2000
                                                 Raymond J. Milchovich
                                       ----------------------------------------
                                                 Raymond J. Milchovich.
                                          President, Chief Executive Officer,
                                       Chief Operating Officer and Director
                                          (Principal Executive Officer)

        Date:  March 10, 2000
                                                 John T. La Duc
                                       ----------------------------------------
                                                   John T. La Duc
                                             Executive Vice President and 
                                              Chief Financial Officer
                                            (Principal Financial Officer)


        Date:  March 10, 2000
                                                 Daniel D. Maddox
                                       ----------------------------------------
                                                 Daniel D. Maddox
                                            Vice President and Controller
                                           (Principal Accounting Officer)


        Date:  March 10, 2000                  George T. Haymaker, Jr.
                                       ----------------------------------------
                                              George T. Haymaker, Jr.
                                               Chairman of the Board

        Date:  March 10, 2000
                                                 Robert J. Cruikshank
                                       ----------------------------------------
                                                 Robert J. Cruikshank
                                                      Director

        Date:  March 10, 2000
                                                  Charles E. Hurwitz
                                       ----------------------------------------
                                                  Charles E. Hurwitz
                                                       Director

        Date:  March 10, 2000
                                                    Ezra G. Levin
                                       ----------------------------------------
                                                    Ezra G. Levin
                                                      Director

        Date:  March 10, 2000
                                                     James D. Woods
                                       ----------------------------------------
                                                     James D. Woods
                                                       Director





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                                INDEX OF EXHIBITS


<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
   *3.1    Restated Certificate of Incorporation of Kaiser Aluminum Corporation
           (the "Company" or "KAC"), dated February 18, 2000.

   3.2     Certificate of Retirement of KAC, dated October 24, 1995
           (incorporated by reference to Exhibit 3.2 to the Report on Form 10-K
           for the period ended December 31, 1995, filed by KAC, File No.
           1-9447).

   3.3     Certificate of Retirement of Kaiser Aluminum Corporation, dated
           February 12, 1998 (incorporated by reference to Exhibit 3.3 to the
           Report on From 10-K for the period ended December 31, 1997, filed by
           KAC, File No. 1-9447).

   3.4     Certificate of Elimination of KAC, dated July 1, 1998 (incorporated
           by reference to Exhibit 3.4 to the Report on Form 10-Q for the
           quarterly period ended June 30, 1999, filed by KAC, File No. 1-9447).

   *3.5    Certificate of Amendment of the Restated Certificate of Incorporation
           of Kaiser Aluminum Corporation, dated January 10, 2000.

   3.6     Amended and Restated By-Laws of Kaiser Aluminum Corporation, dated
           October 1, 1997 (incorporated by reference to Exhibit 3.3 to the
           Report on Form 10-Q for the quarterly period ended September 30,
           1997, filed by KAC, File No. 1-9447).

   4.1     Indenture, dated as of February 1, 1993, among Kaiser Aluminum &
           Chemical Corporation ("KACC"), as Issuer, Kaiser Alumina Australia
           Corporation, Alpart Jamaica Inc., and Kaiser Jamaica Corporation, as
           Subsidiary Guarantors, and The First National Bank of Boston, as
           Trustee, regarding KACC's 12 3/4% Senior Subordinated Notes Due 2003
           (incorporated by reference to Exhibit 4.1 to Form 10-K for the period
           ended December 31, 1992, filed by KACC, File No. 1-3605).

   4.2     First Supplemental Indenture, dated as of May 1, 1993, to the
           Indenture, dated as of February 1, 1993 (incorporated by reference to

           Exhibit 4.2 to the Report on Form 10-Q for the quarterly period ended
           June 30, 1993, filed by KACC, File No. 1-3605).

   4.3     Second Supplemental Indenture, dated as of February 1, 1996, to the
           Indenture, dated as of February 1, 1993 (incorporated by reference to

           Exhibit 4.3 to the Report on Form 10-K for the period ended December
           31, 1995, filed by KAC, File No. 1-9447).

   4.4     Third Supplemental Indenture, dated as of July 15, 1997, to the
           Indenture, dated as of February 1, 1993 (incorporated by reference to

           Exhibit 4.1 to the Report on Form 10-Q for the quarterly period ended
           June 30, 1997, filed by KAC, File No. 1-9447).

   4.5     Fourth Supplemental Indenture, dated as of March 31, 1999, to the
           Indenture, dated as of February 1, 1993, (incorporated by reference
           to Exhibit 4.1 to the Report on Form 10-Q for the quarterly period
           ended March 31, 1999, filed by KAC, File No. 1-9447).

   4.6     Indenture, dated as of February 17, 1994, among KACC, as Issuer,
           Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
           Jamaica Corporation, and Kaiser Finance Corporation, as Subsidiary
           Guarantors, and First Trust National Association, as Trustee,
           regarding KACC's 97/8% Senior Notes Due 2002 (incorporated by
           reference to Exhibit 4.3 to the Report on Form 10-K for the period
           ended December 31, 1993, filed by KAC, File No. 1-9447).
</TABLE>




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<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
   4.7     First Supplemental Indenture, dated as of February 1, 1996, to the
           Indenture, dated as of February 17, 1994 (incorporated by reference
           to Exhibit 4.5 to the Report on Form 10-K for the period ended
           December 31, 1995, filed by KAC, File No. 1-9447).

   4.8     Second Supplemental Indenture, dated as of July 15, 1997, to the
           Indenture, dated as of February 17, 1994 (incorporated by reference
           to Exhibit 4.2 to the Report on Form 10-Q for the quarterly period
           ended June 30, 1997, filed by KAC, File No. 1-9447).

   4.9     Third Supplemental Indenture, dated as of March 31, 1999, to the
           Indenture, dated as of February 17, 1994 (incorporated by reference
           to Exhibit 4.2 to the Report on Form 10-Q for the quarterly period
           ended March 31, 1999, filed by KAC, File No. 1-9447).

   4.10    Indenture, dated as of October 23, 1996, among KACC, as Issuer,
           Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
           Jamaica Corporation, Kaiser Finance Corporation, Kaiser Micromill
           Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser Texas Micromill
           Holdings, LLC and Kaiser Texas Sierra Micromills, LLC, as Subsidiary
           Guarantors, and First Trust National Association, as Trustee,
           regarding KACC's 107/8% Series B Senior Notes Due 2006 (incorporated
           by reference to Exhibit 4.2 to the Report on Form 10-Q for the
           quarterly period ended September 30, 1996, filed by KAC, File No.
           1-9447).

   4.11    First Supplemental Indenture, dated as of July 15, 1997, to the
           Indenture, dated as of October 23, 1996 (incorporated by reference to

           Exhibit 4.3 to the Report on Form 10-Q for the quarterly period ended
           June 30, 1997, filed by KAC, File No. 1-9447).

   4.12    Second Supplemental Indenture, dated as of March 31, 1999, to the
           Indenture, dated as of October 23, 1996 (incorporated by reference to
           Exhibit 4.3 to the Report on Form 10-Q for the quarterly period ended
           March 31, 1999, filed by KAC, File No. 1-9447).

   4.13    Indenture, dated as of December 23, 1996, among KACC, as Issuer,
           Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
           Jamaica Corporation, Kaiser Finance Corporation, Kaiser Micromill
           Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser Texas Micromill
           Holdings, LLC, and Kaiser Texas Sierra Micromills, LLC, as Subsidiary
           Guarantors, and First Trust National Association, as Trustee,
           regarding KACC's 10 7/8% Series D Senior Notes due 2006 (incorporated
           by reference to Exhibit 4.4 to the Registration Statement on Form
           S-4, dated January 2, 1997, filed by KACC, Registration No.
           333-19143).

   4.14    First Supplemental Indenture, dated as of July 15, 1997, to the
           Indenture, dated as of December 23, 1996 (incorporated by reference
           to Exhibit 4.4 to the Report on Form 10-Q for the quarterly period
           ended June 30, 1997, filed by KAC, File No. 1-9447).

   4.15    Second Supplemental Indenture, dated as of March 31, 1999, to the
           Indenture, dated as of December 23, 1996 (incorporated by reference
           to Exhibit 4.4 to the Report on Form 10-Q for the quarterly period
           ended March 31, 1999, filed by KAC, File No. 1-9447).

   4.16    Credit Agreement, dated as of February 15, 1994, among KAC, KACC, the
           financial institutions a party thereto, and BankAmerica Business
           Credit, Inc., as Agent (incorporated by reference to Exhibit 4.4 to
           the Report on Form 10-K for the period ended December 31, 1993, filed
           by KAC, File No. 1-9447).

   4.17    First Amendment to Credit Agreement, dated as of July 21, 1994,
           amending the Credit Agreement, dated as of February 15, 1994, among
           KAC, KACC, the financial institutions party thereto, and BankAmerica
           Business Credit, Inc., as Agent (incorporated by reference to Exhibit
           4.1 to the Report on Form 10-Q for the quarterly period ended June
           30, 1994, filed by KAC, File No. 1-9447).
</TABLE>




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<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
   4.18    Second Amendment to Credit Agreement, dated as of March 10, 1995,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.6 to the Report on Form 10-K for the period
           ended December 31, 1994, filed by KAC, File No. 1-9447).

   4.19    Third Amendment to Credit Agreement, dated as of July 20, 1995,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.1 to the Report on Form 10-Q for the quarterly
           period ended June 30, 1995, filed by KAC, File No. 1-9447).

   4.20    Fourth Amendment to Credit Agreement, dated as of October 17, 1995,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.1 to the Report on Form 10-Q for the quarterly
           period ended September 30, 1995, filed by KAC, File No. 1-9447).

   4.21    Fifth Amendment to Credit Agreement, dated as of December 11, 1995,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.11 to the Report on Form 10-K for the period
           ended December 31, 1995, filed by KAC, File No. 1-9447).

   4.22    Sixth Amendment to Credit Agreement, dated as of October 1, 1996,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.1 to the Report on Form 10-Q for the quarterly
           period ended September 30, 1996, filed by KAC, File No. 1-9447).

   4.23    Seventh Amendment to Credit Agreement, dated as of December 17, 1996,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KAC, KACC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.18 to the Registration Statement on Form S-4,
           dated January 2, 1997, filed by KACC, Registration No. 333-19143).

   4.24    Eighth Amendment to Credit Agreement, dated as of February 24, 1997,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, Kaiser, the financial institutions a party
           thereto, and BankAmerica Business Credit, Inc., as Agent
           (incorporated by reference to Exhibit 4.16 to the Report on Form 10-K
           for the period ended December 31, 1996, filed by KAC, File No.
           1-9447).

   4.25    Ninth Amendment to Credit Agreement, dated as of April 21, 1997,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.5 to the Report on From 10-Q for the quarterly
           period ended June 30, 1997, filed by KAC, File No. 1-9447).

   4.26    Tenth amendment to Credit Agreement, dated as of June 25, 1997,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.6 to the Report on Form 10-Q for the quarterly
           period ended June 30, 1997, filed by KAC, File No. 1-9447).

   4.27    Eleventh Amendment to Credit Agreement, dated as of October 20, 1997,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.7 to the Report on Form 10-Q for the quarterly
           period ended September 30, 1997, filed by KAC, File No. 1-9447).
</TABLE>





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<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
   4.28    Twelfth Amendment to Credit Agreement, dated as of January 13, 1998,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions a party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.24 to the Report on Form 10-K for the period
           ended December 31, 1997, filed by KAC, File No. 1-9447).

   4.29    Thirteenth Amendment to Credit Agreement, dated as of July 20, 1998,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4 to the Report on Form 10-Q for the quarterly
           period ended June 30, 1998, filed by KAC, File No. 1-9447).

   4.30    Fourteenth Amendment to Credit Agreement, dated as of December 11,
           1998, amending the Credit Agreement, dated as of February 15, 1994,
           as amended, among KACC, KAC, the financial institutions party
           thereto, and BankAmerica Business Credit, Inc., as Agent
           (incorporated by reference to Exhibit 4.26 to the Report on Form 10-K
           for the period ended December 31, 1998, filed by KAC, File No.
           1-9447).

   4.31    Fifteenth Amendment to Credit Agreement, dated as of February 23,
           1999, amending the Credit Agreement, dated as of February 15, 1994,
           as amended, among KACC, KAC, the financial institutions party
           thereto, and BankAmerica Business Credit, Inc., as Agent
           (incorporated by reference to Exhibit 4.27 to the Report on Form 10-K
           for the period ended December 31, 1998, filed by KAC, File No.,
           1-9447.)

   4.32    Sixteenth Amendment to Credit Agreement, dated as of March 26, 1999,
           amending the Credit Agreement, dated as of February 15, 1994, as
           amended, among KACC, KAC, the financial institutions party thereto,
           and BankAmerica Business Credit, Inc., as Agent (incorporated by
           reference to Exhibit 4.28 to the Report on Form 10-K for the period
           ended December 31, 1998, filed by KAC, File No. 1-9447).

   4.33    Seventeenth Amendment to Credit Agreement, dated as of September 24,
           1999, amending the Credit Agreement, dated as of February 15, 1994,
           as amended, among KACC, KAC, the financial institutions party
           thereto, and Bank of America, N.A. (successor to BankAmerica Business
           Credit, Inc.), as Agent (incorporated by reference to Exhibit 4.1 to
           the Report on Form 10-Q for the quarterly period ended September 30,
           1999, filed by KAC, File No. 1-9447).

   *4.34   Eighteenth Amendment to Credit Agreement, dated as of February 11,
           2000, amending the Credit Agreement, dated as of February 15, 1994,
           as amended, among KACC, KAC, the financial institutions party
           thereto, and Bank of America, N.A. (successor to BankAmerica Business
           Credit, Inc.), as Agent.

   *4.35   Limited Waiver Regarding Repayment of CARIFA Bonds, dated February
           17, 2000, among KAC, KACC, the financial institutions party thereto
           and Bank of America, N.A., as Agent.

   4.36    Intercompany Note between KAC and KACC (incorporated by reference to

           Exhibit 10.11 to the Report on Form 10-K for the period ended
           December 31, 1996, filed by MAXXAM Inc. ("MAXXAM"), File No. 1-3924).

   4.37    Confirmation of Amendment of Non-Negotiable Intercompany Note, dated
           as of October 6, 1993, between KAC and KACC (incorporated by
           reference to Exhibit 10.12 to the Report on Form 10-K for the period
           ended December 31, 1996, filed by MAXXAM, File No. 1-3924).

   4.38    Senior Subordinated Intercompany Note between KAC and KACC dated
           February 15, 1994 (incorporated by reference to Exhibit 4.22 to the
           Report on Form 10-K for the period ended December 31, 1993, filed by
           KAC, File No. 1-9447).

   4.39    Senior Subordinated Intercompany Note between KAC and KACC dated
           March 17, 1994 (incorporated by reference to Exhibit 4.23 to the
           Report on Form 10-K for the period ended December 31, 1993, filed by
           KAC, File No. 1-9447).
</TABLE>







                                       72

<PAGE>   76
KAISER ALUMINUM CORPORATION AND SUBISIARY COMPANIES
-------------------------------------------------------------------------------




<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
           KAC has not filed certain long-term debt instruments not being
           registered with the Securities and Exchange Commission where the
           total amount of indebtedness authorized under any such instrument
           does not exceed 10% of the total assets of KAC and its subsidiaries
           on a consolidated basis. KAC agrees and undertakes to furnish a copy
           of any such instrument to the Securities and Exchange Commission upon
           its request.

   10.1    Form of indemnification agreement with officers and directors
           (incorporated by reference to Exhibit (10)(b) to the Registration
           Statement of KAC on Form S-4, File No. 33-12836).

   10.2    Tax Allocation Agreement, dated as of December 21, 1989, between
           MAXXAM and KACC (incorporated by reference to Exhibit 10.21 to
           Amendment No. 6 to the Registration Statement on Form S-1, dated
           December 14, 1989, filed by KACC, Registration No. 33-30645).

   10.3    Tax Allocation Agreement, dated as of February 26, 1991, between KAC
           and MAXXAM (incorporated by reference to Exhibit 10.23 to Amendment
           No. 2 to the Registration Statement on Form S-1, dated June 11, 1991,
           filed by KAC, Registration No. 33-37895).

   10.4    Tax Allocation Agreement, dated as of June 30, 1993, between KACC and
           KAC (incorporated by reference to Exhibit 10.3 to the Report on Form
           10-Q for the quarterly period ended June 30, 1993, filed by KACC,
           File No. 1-3605).

                  Executive Compensation Plans and Arrangements
                       [Exhibits 10.5 - 10.30, inclusive]

   10.5    KACC's Bonus Plan (incorporated by reference to Exhibit 10.25 to
           Amendment No. 6 to the Registration Statement on Form S-1, dated
           December 14, 1989, filed by KACC, Registration No. 33-30645).

   10.6    Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by reference
           to Exhibit 10.1 to the Report on Form 10-Q for the quarterly period
           ended June 30, 1993, filed by KACC, File No. 1-3605).

   10.7    Kaiser 1995 Employee Incentive Compensation Program (incorporated by
           reference to Exhibit 10.1 to the Report on Form 10-Q for the
           quarterly period ended March 31, 1995, filed by KAC, File No.
           1-9447).

   10.8    Kaiser 1995 Executive Incentive Compensation Program (incorporated by
           reference to Exhibit 99 to the Proxy Statement, dated April 26, 1995,
           filed by KAC, File No. 1-9447).

   10.9    Kaiser 1997 Omnibus Stock Incentive Plan (incorporated by reference
           to Appendix A to the Proxy Statement, dated April 29, 1997, filed by
           KAC, File No. 1-9447).

   10.10   Employment Agreement, dated April 1, 1993, among KAC, KACC, and
           George T. Haymaker, Jr. (incorporated by reference to Exhibit 10.2 to
           the Report on Form 10-Q for the quarterly period ended March 31,
           1993, filed by KAC, File No. 1-9447).

   10.11   First Amendment to Employment Agreement by and between KACC, KAC and
           George T. Haymaker, Jr. (incorporated by reference to Exhibit 10 to
           the Report on Form 10-Q for the quarterly period ended June 30, 1996,
           filed by KAC, File No. 1-9447).

   10.12   Second Amendment to Employment Agreement, dated as of December 10,
           1997, by and between KAC, KACC, and George T. Haymaker, Jr.
           (incorporated by reference to Exhibit 10.12 to the Report on Form
           10-K for the period ended December 31, 1997, filed by KAC, File No.
           1-9447).
</TABLE>







                                       73

<PAGE>   77
KAISER ALUMINUM CORPORATION AND SUBISIARY COMPANIES
-------------------------------------------------------------------------------




<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 

   *10.13  Director and Non-Executive Chairman Agreement, dated January 1, 2000,
           among KAC, KACC and George T. Haymaker, Jr.

   10.14   Letter Agreement, dated January 1995, between KAC and Charles E.
           Hurwitz, granting Mr. Hurwitz stock options under the Kaiser 1993
           Omnibus Stock Incentive Plan (incorporated by reference to Exhibit
           10.17 to the Report on Form 10-K for the period ended December 31,
           1994, filed by KAC, File No. 1-9447).

   10.15   Employment Agreement between KACC and Raymond J. Milchovich made
           effective for the period from January 1, 1998, to December 31, 2002
           (incorporated by reference to Exhibit 10.3 to the Report on Form 10-Q
           for the quarterly period ended September 30, 1998, filed by KAC, File
           No. 1-9447).

   10.16   Employment Agreement, dated as of June 1, 1999, between KACC and
           Raymond J. Milchovich (incorporated by reference to Exhibit 10.1 to
           the Report on Form 10-Q for the quarterly period ended June 30, 1999,
           filed by KAC, File No. 1-9447).

   10.17   Time-Based Stock Option Grant Pursuant to the Kaiser 1997 Omnibus
           Stock Incentive Plan to Raymond J. Milchovich, effective July 2, 1998
           (incorporated by reference to Exhibit 10.4 to the Report on Form 10-Q
           for the quarterly period ended September 30, 1998, filed by KAC, File
           No. 1-9447).

   10.18   Restated Promissory Note, dated June 14, 1999, from Raymond J.
           Milchovich to KACC (incorporated by reference to Exhibit 10.2 to the
           Report on Form 10-Q for the quarterly period ended June 30, 1999,
           filed by KAC, File No. 1-9447).

   10-19   Employment Agreement between KACC and John T. La Duc made effective
           for the period from January 1, 1998, to December 31, 2002
           (incorporated by reference to Exhibit 10.5 to the Report on From 10-Q
           for the quarterly period ended September 30, 1998, filed by KAC, File
           No. 1-9447).

   10.20   Time-Based Stock Option Grant Pursuant to the Kaiser 1997 Omnibus
           Stock Incentive Plan to John T. La Duc, effective July 10, 1998
           (incorporated by reference to Exhibit 10.6 to the Report on Form 10-Q
           for the quarterly period ended September 30, 1998, filed by KAC, File
           No. 1-9447).

   10.21   Time-Based Stock Option Grant Pursuant to the Kaiser 1997 Omnibus
           Stock Incentive Plan to George T. Haymaker, Jr., effective January 1,
           1998 (incorporated by reference to Exhibit 10.18 to the Report on
           Form 10-K for the period ended December 31, 1998, filed by KAC, File
           No. 1-9447).

   10.22   Performance-Accelerated Stock Option Grant Pursuant to the Kaiser
           1997 Omnibus Stock Incentive Plan to George T. Haymaker, Jr.,
           effective January 1, 1998 (incorporated by reference to Exhibit 10.19
           to the Report on Form 10-K for the period ended December 31, 1998,
           filed by KAC, File No. 1-9447).

   10.23   Letter Agreement, dated July 27, 1998, between KACC and John H.
           Walker (incorporated by reference to Exhibit 10.20 to the Report on
           Form 10-K for the period ended December 31, 1998, filed by KAC, File
           No. 1-9447).

   10.24   Executive Employment Agreement, effective December 1, 1999, between
           MAXXAM and J. Kent Friedman (incorporated by reference to Exhibit
           10.52 to the Report on Form 10-K for the period ended December 31,
           1999, filed by MAXXAM, File No. 1-3924).

   10.25   Employment Agreement made and entered into as of September 1, 1996,
           by and between KACC and Jack A. Hockema (incorporated by reference to
           Exhibit 10 to the Report on Form 10-Q for the quarterly period ended
           September 30, 1996, filed by KAC, File No. 1-9447).
</TABLE>






                                       74

<PAGE>   78
KAISER ALUMINUM CORPORATION AND SUBISIARY COMPANIES
-------------------------------------------------------------------------------




<TABLE>
<CAPTION>
  Exhibit
  Number                       Description
  ------                       -----------
<S>        <C> 
   *10.26  Letter Agreement, dated April 15, 1999, amending the Employment
           Agreement made and entered into as of September 1, 1996, by and
           between KACC and Jack A. Hockema.

   *10.27  Description of compensation arrangements among KACC, KAC, and Jack A.
           Hockema.

   10.28   Description of Kaiser Severance Protection and Change of Control
           Benefits Program (incorporated by reference to Exhibit 10.21 to the
           Report on Form 10-K for the period ended December 31, 1998, filed by
           KAC, File No. 1-9447).

   10.29   Form of letter agreement with persons granted stock options under the
           Kaiser 1993 Omnibus Stock Incentive Plan to acquire shares of KAC
           Common Stock (incorporated by reference to Exhibit 10.18 to the
           Report on Form 10-K for the period ended December 31, 1994, filed by
           KAC, File No. 1-9447).

   10.30   Form of Deferred Fee Agreement between KAC, KACC, and directors of
           KAC and KACC (incorporated by reference to Exhibit 10 to the Report
           on Form 10-Q for the quarterly period ended March 31, 1998, filed by
           KAC, File No. 1-9447).

   *21     Significant Subsidiaries of KAC.

   *23.1   Consent of Independent Public Accountants.

   *23.2   Consent of Wharton Levin Ehrmantraut Klein & Nash, P.A.

   *23.3   Consent of Heller Ehrman White & McAuliffe LLP.

   *27     Financial Data Schedule.
</TABLE>



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


*          Filed herewith


                                       75





<PAGE>   1



                                                                     EXHIBIT 3.1


                                    RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                           KAISER ALUMINUM CORPORATION

                         (Pursuant to Section 245 of the
                General Corporation Law of the State of Delaware)


         The undersigned, for the purpose of restating the Restated Certificate
of Incorporation of Kaiser Aluminum Corporation, a corporation organized under
the laws of the State of Delaware (the "Corporation"), does hereby certify that:

         (1) The present name of the Corporation is Kaiser Aluminum Corporation.

         (2) The Corporation was originally incorporated under the name
"KaiserTech Limited". The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
February 20, 1987.

         (3) This Restated Certificate of Incorporation has been duly adopted by
the Corporation's Board of Directors in accordance with Section 245 of the
General Corporation Law of the State of Delaware. This Restated Certificate of
Incorporation only restates and integrates and does not further amend the
provisions of the certificate of incorporation of the Corporation as theretofore
amended or supplemented, and there is no discrepancy between those provisions
and the provisions of this restated certificate.


         (4) The Restated Certificate of Incorporation of the Corporation is
hereby restated in its entirety as follows:

         FIRST: The name of the corporation is Kaiser Aluminum Corporation.

         SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle.

The name of the registered agent of the corporation is The Corporation Trust
Company.

         THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

         FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is ONE HUNDRED FORTY-FIVE MILLION
(145,000,000) shares consisting of:

         (a) ONE HUNDRED TWENTY-FIVE MILLION (125,000,000) shares of the par
         value of One Cent ($.01) per share, which shall be designated Common
         Stock; and

         (b) TWENTY MILLION (20,000,000) shares of the par value of Five Cents
         ($.05) per share, which shall be designated Preferred Stock.

         A. Statement of Preferences, Limitations and Relative Rights in Respect
of Shares of Preferred Stock and Authority of Board of Directors to Fix
Designations, Powers, Preferences, Rights, Qualifications, Limitations and
Restrictions Thereof Not Fixed Hereby.

         Shares of Preferred Stock may be issued from time to time in one or
more classes or one or more series within any class thereof, as may be
determined from time to time by the Board of Directors, each of said classes and
series to be distinctly designated. All shares of any one series of Preferred
Stock shall be alike in every particular. The voting rights, if any, of each
such class and series and the preferences and relative, participating, optional
and other special rights of each such class and series and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other classes and series at any time outstanding; and, subject to the
provisions of Section C of this Article FOURTH, the Board of Directors of the
corporation is hereby expressly granted authority to fix, by resolutions duly
adopted prior to the issuance of any shares of a particular class or series of
Preferred Stock, the voting powers, if any, of stock of such class or series and
the designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions of such
class or series within such class, including, but without limiting the
generality of the foregoing, the following:

         (a) The rate and times at which, and the terms and conditions on which,
     dividends on Preferred Stock of such class or series shall be paid;

         (b) The right, if any, of the holders of Preferred Stock




<PAGE>   2


     of such class or series to convert the same into, or exchange the same for,
     shares of other classes or series of stock of the corporation and the terms
     and conditions of such conversion or exchange;

         (c) The redemption price or prices and the time or times at which, and
     the terms and conditions on which, Preferred Stock of such class or series
     may be redeemed;

         (d) The rights of the holders of Preferred Stock of such class or
     series upon the voluntary or involuntary liquidation, merger,
     consolidation, distribution or sale of assets, dissolution or winding up,
     of the corporation;

         (e) The terms of the sinking fund or redemption or purchase account, if
     any, to be provided for the Preferred Stock of such class or series;

         (f) The distinctive designation of, and the number of shares of
     Preferred Stock which shall constitute such class or series, which number
     may be increased (except where otherwise provided by the Board of
     Directors) or decreased (but not below the number of shares thereof then
     outstanding) from time to time by like action of the Board of Directors;
     and

         (g) The voting powers, if any, of the holders of such class or series
     of Preferred Stock which may, without limiting the generality of the
     foregoing, include (i) the right to more or less than one vote per share on
     any or all matters voted upon by the stockholders, and (ii) the right,
     voting as a class or series by itself or together with other classes or
     series of Preferred Stock or all classes and series of Preferred Stock as a
     class, to elect one or more directors of the corporation if there shall
     have been a default in the payment of dividends on any one or more classes
     or series of Preferred Stock or under such other circumstances and on such
     conditions as the Board of Directors may determine.

         B. Statement of Limitations, Relative Rights and Powers in Respect of
Shares of Common Stock.

         1. After the requirements with respect to preferential dividends on the
Preferred Stock (fixed in accordance with the provisions of Section A of this
Article FOURTH) shall have been met and after the corporation shall have
complied with all of the requirements, if any, with respect to the setting aside
of sums as sinking funds or redemption or purchase accounts (fixed in accordance
with the provisions of Section A of this Article FOURTH), then and not otherwise
the holders of Common Stock shall be entitled to receive such dividends as may
be declared from time to time by the Board of Directors.

         2. After distribution in full of the preferential amount to be
distributed to the holders of Preferred Stock in the event of the voluntary or
involuntary liquidation, distribution or sale of assets, dissolution or winding
up of the corporation, the holders of the Common Stock shall, subject to the
rights, if any, of the holders of Preferred Stock to participate therein (fixed
in accordance with the provisions of Section A of this Article FOURTH), be
entitled to receive all the remaining assets of the corporation, tangible and
intangible, of whatever kind available for distribution to stockholders ratably
in proportion to the number of shares of Common Stock held by them respectively.

         3. Except as may otherwise be required by law or by the provisions of
such resolution or resolutions as may be adopted by the Board of Directors
pursuant to the provisions of Section A of this Article FOURTH, each holder of
Common Stock shall have one vote in respect of each share of stock held by him
on all matters voted upon by stockholders.

         C. Other Provisions.

         1. No holder of shares of any class or series of stock of the
corporation shall be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of any stock of any class,
series or kind whatsoever, or to subscribe for or purchase securities
convertible into stock of, any class, series or kind whatsoever, whether now or
hereafter authorized, and whether issued for cash, property or services or by
way of dividends or otherwise.

         2. The powers and rights of the holders of Common Stock shall be
subordinated to the powers, preferences and rights of the holders of Preferred
Stock. The relative powers, preferences and rights of each class or series of
Preferred Stock in relation to the powers, preferences and rights of each other
class or series of Preferred Stock shall, in each case, be as fixed from time to
time by the provisions of such resolution or resolutions as may be adopted by
the Board of Directors pursuant to the provisions of Section A of this Article
FOURTH, and the consent, by class or series vote or otherwise, of the holders of
such of the classes or series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the Board of Directors of
any other classes or series of Preferred Stock whether or not the powers,
preferences and rights of such other classes or series shall be fixed by the
Board of Directors as senior to, or on a parity with, the powers, preferences
and rights of such outstanding classes or series, or any of them; provided,
however, that the Board of Directors may provide in the resolution or
resolutions as to any classes or series of Preferred Stock adopted pursuant to
the provisions of Section A of this Article FOURTH that the consent of the




<PAGE>   3


holders of a majority (or such greater proportion as shall be therein fixed) of
the outstanding shares of such classes or series voting thereon shall be
required for the issuance of any or all other classes or series of Preferred
Stock.

         3. Subject to the provisions of Paragraph 2 of Section C of this
Article FOURTH, shares of any class or series of Preferred Stock may be
authorized or issued, in aggregate amounts not exceeding the total number of
shares of Preferred Stock authorized by this Restated Certificate of
Incorporation, from time to time as the Board of Directors of the corporation
shall determine and for such consideration as shall be fixed by the Board of
Directors.

         4. Shares of Common Stock, in an aggregate amount not exceeding the
total number of shares of Common Stock authorized in this Restated Certificate
of Incorporation, may be issued from time to time as the Board of Directors of
the corporation shall determine and for such consideration as shall be fixed by
the Board of Directors.

         5. The authorized number of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from time
to time by the affirmative vote of the holders of a majority of the stock of the
corporation entitled to vote thereon.

         FIFTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholder of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.

         SIXTH: The Board of Directors of the corporation reserves the right to
amend, alter, change or repeal the By-laws of the corporation, in the manner now
or hereafter prescribed by statute.

         SEVENTH:

         (a) This corporation shall to the fullest extent permitted by Delaware
law, as in effect from time to time (but, in the case of any amendment of the
General Corporation Law of the State of Delaware, only to the extent that such
amendment permits this corporation to provide broader indemnification rights
than said law permitted this corporation to provide prior to such amendment),
indemnify each person who is or was a director or officer of this corporation or
of any of its wholly-owned subsidiaries at any time on or after October 28, 1988
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, or was or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director, officer, employee or agent of this corporation or of any
of its subsidiaries, or is or was at any time serving, at the request of this
corporation, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity against all expense, liability
and loss (including, but not limited to, attorneys' fees, judgments, fines,
excise taxes or penalties (with respect to any employee benefit plan or
otherwise), and amounts paid or to be paid in settlement) incurred or suffered
by such director or officer in connection with such proceeding; provided,
however, that, except as provided in Paragraph (e) of this Article SEVENTH, this
corporation shall not be obligated to indemnify any person under this Article
SEVENTH in connection with a proceeding (or part thereof) if such proceeding (or
part thereof) was not authorized by the Board of Directors of this corporation
and was initiated by such person against (i) this corporation or any of its
subsidiaries, (ii) any person who is or was a director, officer, employee or
agent of this corporation or any of its subsidiaries and/or (iii) any person or
entity which is or was controlled, controlled by, or under common control with,
this corporation or has or had business relations with this corporation or any
of its subsidiaries.

         (b) The right to indemnification conferred in this Article SEVENTH
shall be a contract right, shall continue as to a person who has ceased to be a
director or officer of this corporation or of any of its wholly-owned
subsidiaries and shall inure to the benefit of his or her heirs, executors and
administrators, and shall include the right to be paid by this corporation the
expenses incurred in connection with the defense or investigation of any such
proceeding in advance of its final disposition; provided, however, that, if and
to the extent that Delaware law so requires, the payment of such expense in
advance of the final disposition of a proceeding shall be made only upon
delivery to this corporation of an undertaking, by or on




<PAGE>   4


behalf of such director or officer or former director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer or former director or officer is not entitled to be indemnified by this
corporation.

         (c) The corporation's obligation to indemnify and to pay expenses in
advance of the final disposition of a proceeding under this Article SEVENTH
shall arise, and all rights and protections granted to directors and officers
under this Article SEVENTH shall vest, at the time of the occurrence of the
transaction or event to which any proceeding relates, or at the time that the
action or conduct to which any proceeding relates was first taken or engaged in
(or omitted to be taken or engaged in), regardless of when any proceeding is
first threatened, commenced or completed.

         (d) Notwithstanding any other provision of this Restated Certificate of
Incorporation or the By-Laws of this corporation, no action by this corporation,
either by amendment to or repeal of this Article SEVENTH or the By-Laws of this
corporation or otherwise shall diminish or adversely affect any right or
protection granted under this Article SEVENTH to any director or right or
protection granted under this Article SEVENTH to any director or officer or
former director or officer of this corporation or of any of its wholly-owned
subsidiaries which shall have become vested as aforesaid prior to the date that
any such amendment, repeal or other corporate action is taken.

         (e) If a claim for indemnification and/or for payment of expenses in
advance of the final disposition of a proceeding arising under this Article
SEVENTH is not paid in full by this corporation within thirty days after a
written claim has been received by this corporation, the claimant may at any
time thereafter bring suit against this corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim.

         (f) The right to indemnification and the payment of expenses incurred
in connection with the defense or investigation of a proceeding in advance of
its final disposition conferred in this Article SEVENTH shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provision of this Restated Certificate of Incorporation, By-laws,
agreement, vote of stockholders or disinterested directors or otherwise. This
corporation may also indemnify all other persons to the fullest extent permitted
by Delaware law.

         EIGHTH:

         A. The business and affairs of the corporation shall be managed by or
under the direction of the Board of Directors. The number of directors of the
corporation shall be fixed by or pursuant to the By-laws of the corporation.
Election of directors need not be by written ballot unless the By-laws so
provide.

         B. The term of office of any director shall expire at the next
succeeding annual meeting of stockholders.

         NINTH: A director of this corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (i) for any breach of the director's duty of loyalty
to the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware
or (iv) for any transaction from which the director derived any improper
personal benefit. If the General Corporation Law of the State of Delaware is
amended after approval by the stockholders of this Article NINTH to further
eliminate or limit the personal liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. No amendment to or repeal of this Article NINTH shall adversely affect
any right or protection of a director of the corporation existing at the time of
such amendment or repeal.

         IN WITNESS WHEREOF, I have signed this Restated Certificate of
Incorporation on behalf of Kaiser Aluminum Corporation this 18th day of
February, 2000.


KAISER ALUMINUM CORPORATION



By: /s/ J. Kent Friedman
    J. Kent Friedman
    Senior Vice President
    and General Counsel

ATTEST

By: /s/ John Wm. Niemand II
    John Wm. Niemand II
    Secretary



<PAGE>   1
                                                                     EXHIBIT 3.5

                            CERTIFICATE OF AMENDMENT

                                     OF THE


                      RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                           KAISER ALUMINUM CORPORATION
                    (Pursuant to Sections 228 and 242 of the
                General Corporation Law of the State of Delaware)

         Kaiser Aluminum Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify:

         FIRST: That the Restated Certificate of Incorporation of Kaiser
Aluminum Corporation is amended by deleting the first paragraph of Article
FOURTH of the Restated Certificate of Incorporation, which read as follows prior
to the amendment:

                  "FOURTH: The total number of shares of all classes of stock
         which the corporation shall have authority to issue is ONE HUNDRED
         TWENTY MILLION (120,000,000) shares consisting of:

                  (a)      ONE HUNDRED MILLION (100,000,000) shares of the par
                           value of One Cent ($.01) per share, which shall be
                           designated Common Stock; and

                  (b)      TWENTY MILLION (20,000,000) shares of the par value
                           of Five Cents ($.05) per share, which shall be
                           designated Preferred Stock."

and by replacing such deleted first paragraph of Article FOURTH with the
following:

                  "FOURTH:  The total number of shares of all classes of stock
         which the corporation shall have authority
 to issue is ONE HUNDRED
         FORTY-FIVE MILLION (145,000,000) shares consisting of:

                  (a)      ONE HUNDRED TWENTY-FIVE MILLION (125,000,000) shares
                           of the par value of One Cent ($.01) per share, which
                           shall be designated Common Stock; and

                  (b)      TWENTY MILLION (20,000,000) shares of the par value
                           of Five Cents ($.05) per share, which shall be
                           designated Preferred Stock."

         SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware and that the written consent thereto of the stockholders
of Kaiser Aluminum Corporation in accordance with Section 228 of the General
Corporation Law of the State of Delaware has been given.

         IN WITNESS WHEREOF, Kaiser Aluminum Corporation has caused its
corporate seal to be hereunto affixed and this Certificate of Amendment to be
signed by J. Kent Friedman, its Senior Vice President and General Counsel, and
John Wm. Niemand II, its Secretary, respectively, this 10th day of January,
2000.


                                                 /S/ J. Kent Friedman
                                                 J. Kent Friedman
                                                 Senior Vice President
                                                 and General Counsel


(Corporate Seal)



ATTEST:



         /S/ John Wm. Niemand II
         John Wm. Niemand II
         Secretary



<PAGE>   1
                                                                  EXHIBIT 4.34



                    EIGHTEENTH AMENDMENT TO CREDIT AGREEMENT


                  THIS EIGHTEENTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment"), dated as of February 11, 2000, is by and between KAISER ALUMINUM &
CHEMICAL CORPORATION, a Delaware corporation (the "Company"), KAISER ALUMINUM
CORPORATION, a Delaware corporation (the "Parent Guarantor"), the various
financial institutions that are or may from time to time become parties to the
Credit Agreement referred to below (collectively, the "Lenders" and,
individually, a "Lender"), and Bank of America, N.A. (successor to BankAmerica
Business Credit, Inc., a Delaware corporation), as agent (in such capacity,
together with its successors and assigns in such capacity, the "Agent") for the
Lenders. Capitalized terms used, but not defined, herein shall have the meanings
given to such terms in the Credit Agreement, as amended hereby.

                              W I T N E S S E T H:

                  WHEREAS, the Company, the Parent Guarantor, the Lenders and
the Agent are parties to the Credit Agreement, dated as of February 15, 1994, as
amended by the First Amendment to Credit Agreement, dated as of July 21, 1994,
the Second Amendment to Credit Agreement, dated as of March 10, 1995, the Third
Amendment to Credit Agreement and Acknowledgement, dated as of July 20, 1995,

the Fourth Amendment to Credit Agreement, dated as of October 17, 1995, the
Fifth Amendment to Credit Agreement, dated as of December 11, 1995, the Sixth
Amendment to Credit Agreement, dated as of October 1, 1996, the Seventh
Amendment to Credit Agreement, dated as of December 17, 1996, the Eighth
Amendment to Credit Agreement, dated as of February 24, 1997, the Ninth
Amendment to Credit Agreement and Acknowledgment, dated as of April 21, 1997,
the Tenth Amendment to Credit Agreement and Assignment, dated as of June 25,
1997, the Eleventh Amendment to Credit Agreement and Limited Waivers, dated as
of October 20, 1997, the Twelfth Amendment to Credit Agreement, dated as of
January 13, 1998, the Thirteenth Amendment to Credit Agreement, dated as of July
20, 1998, the Fourteenth Amendment to Credit Agreement, dated as of December 11,
1998, the Fifteenth Amendment to Credit Agreement, dated as of February 23,
1999, the Sixteenth Amendment to Credit Agreement, dated as of March 26, 1999;
and the Seventeenth Amendment to Credit Agreement, dated as of September 24,
1999 (the "Credit Agreement"); and

                  WHEREAS, the parties hereto have agreed to amend the Credit
Agreement as herein provided;

                  NOW, THEREFORE, the parties hereto agree as follows:

                  Section 1.        Amendments to Credit Agreement.

         1.1      Amendments to Article I:  Definitions and Accounting Terms.


                  A.       Subsection 1.1 of the Credit Agreement is hereby
amended by amending subsection (a) of the definition of "Change of Control"
contained therein to read in its entirety as follows:

                  "(a) MAXXAM not owning (other than by reason of the existence
of a Lien or other encumbrance but including by reason of the foreclosure of or
other realization upon a Lien or other encumbrance) direct or indirect sole
beneficial ownership (as defined under Regulation 13d-3 of the Securities
Exchange Act of 1934 as in effect on the date of this Agreement) of at least 40%
of the total common equity, on a fully diluted basis, of the Parent Guarantor or
the Company; or"

                  B.       Subsection 1.1 of the Credit Agreement is hereby
amended by amending the definition of "Minimum Net Worth" contained therein to
read in its entirety as follows:

                  "'Minimum Net Worth' means (a) for each Fiscal Quarter of the
Company ending on or prior to December 31, 1998 (commencing with the Fiscal
Quarter ending September 30, 1996), $500,000,000 plus 50% of Net Income (but not
loss) for each such Fiscal Quarter, (b) for the two Fiscal Quarters of the
Company ending on March 31, 1999 and June 30, 1999, $600,000,000 plus 50% of Net
Income (but not loss) for each such Fiscal Quarter, and (c) for each Fiscal
Quarter of the Company ending thereafter, $550,000,000 plus 50% of Net Income
(but not loss) for each such Fiscal Quarter; provided that the calculation of
Minimum Net Worth shall exclude (i) the effect of any non-cash charges, up to an
aggregate amount of $70,000,000, in respect of the Micromill project, including
(without limitation) any write-down of Micromill project assets located at the
Center for Technology in Pleasanton, California, and at the Micromill facility
near Reno, Nevada, (ii) the net cumulative effect of any mark-to-market gains or
losses incurred after December 31, 1998, up to an aggregate net amount of
$50,000,000 of losses, on aluminum hedging agreements of the Company and its
Subsidiaries that do not qualify for hedging treatment under GAAP, (iii) the
effect of any non-cash charges, up to an aggregate amount of $30,000,000, in
respect of the settlement of the Company's labor dispute with the United
Steelworkers of America, and (iv) the net cumulative effect of any gains or
losses, up to an aggregate net amount of $50,000,000 of losses, in respect of
adjustments to the net cost basis of the assets of the Gramercy, Louisiana
facility as a result of the explosion at such facility, all of the above
adjustments to be reflected on the relevant Compliance Certificate."



<PAGE>   2


                  Section 2.        Conditions to Effectiveness.

                  This Amendment shall become effective as of the date hereof
only when the following conditions shall have been satisfied and notice thereof
shall have been given by the Agent to the Parent Guarantor, the Company and each
Lender (the date of satisfaction of such conditions and the giving of such
notice being referred to herein as the "Eighteenth Amendment Effective Date"):

                  A. The Agent shall have received for each Lender counterparts
hereof duly executed on behalf of the Parent Guarantor, the Company, the Agent
and the Required Lenders (or notice of the approval of this Amendment by the
Required Lenders satisfactory to the Agent shall have been received by the
Agent).

                  B.       The Agent shall have received:

                           (1) Resolutions of the Board of Directors or of the
Executive Committee of the Board of Directors of the Company and the Parent
Guarantor approving and authorizing the execution, delivery and performance of
this Amendment, certified by their respective corporate secretaries or
assistant secretaries as being in full force and effect without modification or
amendment as of the date of execution hereof by the Company or the Parent
Guarantor, as the case may be;

                           (2) A signature and incumbency certificate of the
officers of the Company and the Parent Guarantor executing this Amendment;

                           (3) For each Lender, an opinion, addressed to the
Agent and each Lender, from Kramer Levin Naftalis & Frankel LLP, in form and
substance satisfactory to the Agent; and

                           (4) Such other information, approvals, opinions,
documents or instruments as the Agent may reasonably request.

                  Section 3.        Company's Representations and Warranties.

                  In order to induce the Lenders and the Agent to enter into
this Amendment and to amend the Credit Agreement in the manner provided herein,
the Parent Guarantor and the Company represent and warrant to each Lender and
the Agent that, as of the Eighteenth Amendment Effective Date, after giving
effect to the effectiveness of this Amendment, the following statements are true
and correct in all material respects:

                  A.      Authorization of Agreements. The execution and 
delivery of this Amendment by the Company and the Parent Guarantor and the
performance of the Credit Agreement as amended by this Amendment (the "Amended
Agreement") by the Company and the Parent Guarantor are within such Obligor's
corporate powers and have been duly authorized by all necessary corporate
action on the part of the Company and the Parent Guarantor, as the case may be.

                  B.      No Conflict.  The execution and delivery by the
Company and the Parent Guarantor of this Amendment and the performance by
the Company and the Parent Guarantor of the Amended Agreement do not:

                          (1)      contravene such Obligor's Organic Documents;

                          (2)      contravene the Senior Indenture, the New
Senior Indenture, the Additional New Senior Indentures, or the Subordinated
Indenture or contravene any other contractual restriction where such a
contravention has a reasonable possibility of having a Materially Adverse Effect
or contravene any law or governmental regulation or court decree or order
binding on or affecting such Obligor or any of its Subsidiaries; or

                          (3)      result in, or require the creation or
imposition of, any Lien on any of such Obligor's properties or any of the
properties of any Subsidiary of such Obligor, other than pursuant to the Loan
Documents.

                  C.       Binding Obligation.  This Amendment has been duly
executed and delivered by the Company and the Parent Guarantor and this
Amendment and the Amended Agreement constitute the legal, valid and binding
obligations of the Company and the Parent Guarantor, enforceable against the
Company and the Parent Guarantor in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally and by
general principles of equity.

                  D.       Governmental Approval, Regulation, etc.  No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body or any other Person is required
for the due execution, delivery or performance of this Amendment by the Company
or the Parent Guarantor.

                  E.       Incorporation of Representations and Warranties from
Credit Agreement.  Each of the statements set forth in Section 7.2.1 of
the Credit Agreement is true and correct.

                  Section 4.        Acknowledgement and Consent.

                  The Company is a party to the Company Collateral Documents, in
each case as amended through the date hereof, pursuant to which the Company has
created Liens in favor of the Agent on certain Collateral to secure the



<PAGE>   3


Obligations. The Parent Guarantor is a party to the Parent Collateral Documents,
in each case as amended through the date hereof, pursuant to which the Parent
Guarantor has created Liens in favor of the Agent on certain Collateral and
pledged certain Collateral to the Agent to secure the Obligations of the Parent
Guarantor. Certain Subsidiaries of the Company are parties to the Subsidiary
Guaranty and/or one or more of the Subsidiary Collateral Documents, in each case
as amended through the date hereof, pursuant to which such Subsidiaries have (i)
guarantied the Obligations and/or (ii) created Liens in favor of the Agent on
certain Collateral. The Company, the Parent Guarantor and such Subsidiaries are
collectively referred to herein as the "Credit Support Parties", and the Company
Collateral Documents, the Parent Collateral Documents, the Subsidiary Guaranty
and the Subsidiary Collateral Documents are collectively referred to herein as
the "Credit Support Documents".

                  Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement as amended by this
Amendment and consents to the amendment of the Credit Agreement effected as of
the date hereof pursuant to this Amendment.

                  Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect. Each Credit Support Party hereby confirms
that each Credit Support Document to which it is a party or otherwise bound and
all Collateral encumbered thereby will continue to guaranty or secure, as the
case may be, the payment and performance of all obligations guaranteed or
secured thereby, as the case may be.

                  Each Credit Support Party (other than the Company and the
Parent Guarantor) acknowledges and agrees that (i) notwithstanding the
conditions to effectiveness set forth in this Amendment, such Credit Support
Party is not required by the terms of the Credit Agreement or any other Loan
Document to consent to the amendments to the Credit Agreement effected pursuant
to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or
any other Loan Document shall be deemed to require the consent of such Credit
Support Party to any future amendments to the Credit Agreement.

                  Section 5.        Miscellaneous.

                  A.       Reference to and Effect on the Credit Agreement and
the Other Loan Documents.

                           (1)      On and after the Eighteenth Amendment
Effective Date, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Amended Agreement.

                           (2)      Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.

                  B.       Applicable Law.  THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.

                  C.       Headings.  The various headings of this Amendment
are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provision hereof.

                  D.       Counterparts.  This Amendment may be executed by the
parties hereto in several counterparts and by the different parties on separate
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

                  E.       Severability.  Any provision of this Amendment which
is prohibited or unenforceable in any jurisdiction shall, as to such provision
and such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment or affecting the validity or enforceability of such provisions in any
other jurisdiction.

                  IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered as of the day and year first above written.


KAISER ALUMINUM CORPORATION              KAISER ALUMINUM & CHEMICAL CORPORATION


By: /S/ Karen A. Twitchell               By: /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

BANK OF AMERICA, N.A. (successor to      BANK OF AMERICA, N.A. (successor to
BankAmerica Business Credit, Inc.),      BankAmerica Business Credit, Inc.)
as Agent

By: /S/ Michael J. Jasaitis              By:  /S/ Michael J. Jasaitis
Name: Michael J. Jasaitis                Name: Michael J. Jasaitis
Its: Vice President                      Its: Vice President



<PAGE>   4


BANK OF AMERICA, N.A. (formerly known    THE CIT GROUP/BUSINESS
as Bank of America National Trust and    CREDIT, INC.
Savings Association)

By:  /S/ Michael Balok                   By:  /S/ Grant Weiss
Name Printed: Michael Balok              Name Printed:  Grant Weiss
Its: Managing Director                   Its:  Assistant Vice President


CONGRESS FINANCIAL CORPORATION           HELLER FINANCIAL, INC.
(WESTERN)

By: /S/ Kristine Metchikian              By:  /S/ Richard J. Holston
Name Printed:  Kristine Metchikian       Name Printed:  Richard J. Holston
Its: Vice President                      Its:  Assistant Vice President


LA SALLE BANK NATIONAL                   TRANSAMERICA BUSINESS CREDIT
ASSOCIATION (formerly known as           CORPORATION
La Salle National Bank)

By:  /S/ Douglas C. Colletti             By:  /S/ Robert Heinz
Name Printed: Douglas C. Colletti        Name Printed:  Robert Heinz
Its:  First Vice President               Its:  Senior Vice President

ABN AMRO BANK N.V.


By: /S/ Jeffrey A. French
Name Printed:  Jeffrey A. French
Its:  Senior Vice President


By:  /S/ Robert S. Sheppard
Name Printed:  Robert S. Sheppard
Its:  Vice President

ACKNOWLEDGED AND AGREED TO:

AKRON HOLDING CORPORATION                KAISER ALUMINUM & CHEMICAL
                                         INVESTMENT, INC.

By: /S/ Karen A. Twitchell               By: /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

KAISER ALUMINUM PROPERTIES,              KAISER ALUMINUM TECHNICAL
INC.                                     SERVICES, INC.

By: /S/ Karen A. Twitchell               By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

OXNARD FORGE DIE COMPANY, INC.           KAISER ALUMINIUM
                                         INTERNATIONAL, INC.

By: /S/ Karen A. Twitchell               By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

KAISER ALUMINA AUSTRALIA                 KAISER FINANCE CORPORATION
CORPORATION

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

ALPART JAMAICA INC.                      KAISER JAMAICA CORPORATION

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

KAISER BAUXITE COMPANY                   KAISER EXPORT COMPANY

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

KAISER MICROMILL HOLDINGS, LLC           KAISER SIERRA MICROMILLS, LLC

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed: Karen A. Twitchell
Its:  Treasurer                          Its: Treasurer

KAISER TEXAS SIERRA MICROMILLS,          KAISER TEXAS MICROMILL
LLC                                      HOLDINGS, LLC

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell



<PAGE>   5


Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer

KAISER BELLWOOD CORPORATION              KAISER TRANSACTION CORP.

By:  /S/ Karen A. Twitchell              By:  /S/ Karen A. Twitchell
Name Printed:  Karen A. Twitchell        Name Printed:  Karen A. Twitchell
Its:  Treasurer                          Its:  Treasurer




<PAGE>   1
                                                                    Exhibit 4.35

               LIMITED WAIVER REGARDING REPAYMENT OF CARIFA BONDS

                                February 17, 2000





Kaiser Aluminum & Chemical Corporation
Kaiser Aluminum Corporation
5847 Sa Felipe, Suite 2600
Houston, TX 77057


Attention:        John T. LaDuc
                  Karen A. Twitchell

Ladies and Gentlemen:

                  Reference is made to that certain Credit Agreement dated as of
February 15, 1994, as amended by First Amendment to Credit Agreement dated as of
July 21, 1994; Second Amendment to Credit Agreement dated as of March 10, 1995;
Third Amendment to Credit Agreement and Acknowledgment dated as of July 20,
1995; Fourth Amendment to Credit Agreement dated as of October 17, 1995; Fifth
Amendment to Credit Agreement dated as of December 11, 1995; Sixth Amendment to
Credit Agreement dated as of October 1, 1996; Seventh Amendment to Credit
Agreement dated as of December 17, 1996; Eighth Amendment to Credit Agreement
dated as of February 24, 1997; Ninth Amendment to Credit Agreement and
Acknowledgment dated as of April 21, 1997; Tenth Amendment to Credit Agreement
and Assignment dated as of June 25, 1997; Eleventh Amendment to Credit Agreement
and Limited Waivers dated as of October 20, 1997; Twelfth Amendment to Credit
Agreement dated as of January 13, 1998; Thirteenth
 Amendment to Credit Agreement
dated as of July 20, 1998; Fourteenth Amendment to Credit Agreement dated as of
December 11, 1998; Fifteenth Amendment to Credit Agreement dated as of February
23, 1999; Sixteenth Amendment to Credit Agreement dated as of March 26, 1999;
Seventeenth Amendment to Credit Agreement dated as of September 24, 1999; and
Eighteenth Amendment to Credit Agreement dated as of February 11, 2000 (said
Credit Agreement, as amended, being the "CREDIT AGREEMENT", the terms defined
therein being used herein as therein defined), among Kaiser Aluminum & Chemical
Corporation, a Delaware corporation ("COMPANY"), Kaiser Aluminum Corporation, a
Delaware corporation ("PARENT GUARANTOR"), the financial institutions listed on
the signature pages hereof ("LENDERS") and Bank of America, N.A., as Agent
("AGENT").

                  Company has informed Agent that Alumina Partners of Jamaica, a
Subsidiary of Company, intends to elect to purchase and cancel a portion of its
Caribbean Basin Projects Financing Authority Bonds in the aggregate principal
amount of $4,000,000 and to pay accrued interest thereon. At the request of
Company the undersigned Lenders, constituting Required Lenders under the Credit
Agreement, hereby waive compliance with the provisions of Section 9.2.6(b)(ii)
of the Credit Agreement to the extent, and only to the extent, necessary to
permit the transaction described above.

                  Without limiting the generality of the provisions of Section
12.1 of the Credit Agreement, the waiver set forth herein shall be limited
precisely as written and relates solely to the noncompliance by Company with the
provisions of Section 9.2.6(b)(ii) of the Credit Agreement in the manner and to
the extent described above, and nothing in this Limited Waiver shall be deemed
to (a) constitute a waiver of compliance by Company with respect to Section
9.2.6(b)(ii) of the Credit Agreement in any other instance or (ii) any other
term, provision or condition of the Credit Agreement or any other instrument or
agreement referred to therein or (b) prejudice any right or remedy that Agent or
any Lender may now have or may have in the future under or in connection with
the Credit Agreement or any other instrument or agreement referred to therein.
Except as expressly set forth herein, the terms, provisions and conditions of
the Credit Agreement and the other Loan Documents shall remain in full force and
effect and in all other respects are hereby ratified and confirmed.

                  This Limited Waiver may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.

                  THIS LIMITED WAIVER SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO SUCH LAWS RELATING TO CONFLICTS OF LAWS.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Limited Waiver to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

KAISER ALUMINUM                            KAISER ALUMINUM & CHEMICAL
CORPORATION                                CORPORATION

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

BANK OF AMERICA, N.A. (successor           BANK OF AMERICA, N.A. (successor
to BankAmerica Business Credit, Inc.),     to BankAmerica Business Credit, Inc.)
as Agent
                                           By:  /S/ MICHAEL J. JASAITIS



<PAGE>   2


By:  /S/ MICHAEL J. JASAITIS               Name:  Michael J. Jasaitis
Name: Michael J. Jasaitis                  Its:  Vice President
Its:      Vice President

BANK OF AMERICA, N.A. (formerly            THE CIT GROUP/BUSINESS
known as Bank of America National          CREDIT, INC.
Trust and Savings Association)

By:  /S/ MICHAEL BALOK                     By:  /S/ GRANT WEISS
Name: Michael Balok                        Name:  Grant Weiss
Its:  Managing Director                    Its:  Assistant Vice President

CONGRESS FINANCIAL                         HELLER FINANCIAL, INC.
CORPORATION (WESTERN)

By: /S/ KRISTINE METCHIKIAN                By:  /S/ RICHARD J. HOLSTON
Name: Kristine Metchikian                  Name:  Richard J. Holston
Its:  Vice President                       Its:  Assistant Vice President

LA SALLE BANK NATIONAL                     TRANSAMERICA BUSINESS
ASSOCIATION (formerly La Salle             CREDIT CORPORATION
National Bank)
                                           By:  /S/ ANN KAPLAN
By:  /S/ DOUGLAS C. COLLETTI               Name:  Ann Kaplan
Name: Douglas C. Colletti                  Its:  Vice President
Its:  First Vice President

ABN AMRO BANK N.V.

By:  /S/ AMANDA COX
Name:  Amanda Cox
Its:  Vice President

By:  /S/ TAMIRA TREFFERS-HERRERA
Name:  Tamira Treffers-Herrera
Its:  Group Vice President


ACKNOWLEDGED AND AGREED TO:

AKRON HOLDING CORPORATION                  KAISER ALUMINUM & CHEMICAL
                                           INVESTMENT, INC.

By: /S/ KAREN A. TWITCHELL                 By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

KAISER ALUMINUM PROPERTIES,                KAISER ALUMINUM TECHNICAL
INC.                                       SERVICES, INC.

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

OXNARD FORGE DIE COMPANY, INC.             KAISER ALUMINIUM INTERNATIONAL, INC.

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

KAISER ALUMINA AUSTRALIA CORPORATION       KAISER FINANCE CORPORATION

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

ALPART JAMAICA INC. INC.                   KAISER JAMAICA CORPORATION

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

KAISER BAUXITE COMPANY                     KAISER EXPORT COMPANY

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer

KAISER MICROMILL                           KAISER SIERRA
HOLDINGS, LLC                              MICROMILLS, LLC

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL
Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Treasurer of Kaiser Aluminum &             Its:  Treasurer
Chemical Corporation

KAISER TEXAS SIERRA                        KAISER TEXAS MICROMILL
MICROMILLS, LLC                            HOLDINGS, LLC

By:  /S/ KAREN A. TWITCHELL                By:  /S/ KAREN A. TWITCHELL



<PAGE>   3


Name:  Karen A. Twitchell                  Name:  Karen A. Twitchell
Its:  Treasurer                            Its:  Treasurer
 



<PAGE>   1
                                                                   Exhibit 10.13

                                                               January 1, 2000





Mr. George T. Haymaker, Jr.
President and Chief Executive Officer
Kaiser Aluminum Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057

         RE:      DIRECTOR AND NON-EXECUTIVE CHAIRMAN AGREEMENT

Dear George:

         Reference is hereby made to the oral agreement that in October, 1999
was entered into by and between the Boards of Directors (the "Boards") of Kaiser
Aluminum Corporation ("KAC"), Kaiser Aluminum & Chemical Corporation ("KACC")
and you regarding the terms and conditions upon which you are to serve as a
Director and non-executive Chairman of the Boards for the period commencing
immediately after your retirement from employment by KACC in December, 1999, and
ending on the date of the annual meeting of shareholders of KAC in May, 2001.
The purpose of this letter agreement is to set forth and memorialize the terms
and conditions of our oral agreement. The terms and conditions of our agreement
are set forth below.

         1.       The Boards hereby engage you and you hereby agree to perform
                  services as a Director and non-executive Chairman of the
                  Boards of KAC and KACC.

         2.       In addition to your duties as a Director of the Boards, you
                  shall devote up to forty (40) hours each calendar month to the
                  affairs of KAC and
 KACC as directed by the Chief Executive
                  Officer (or acting Chief Executive Officer) of KAC and KACC,
                  with particular focus on assisting with implementation of
                  strategic plans that have been developed (or will be
                  developed) for KAC and KACC.

         3.       The term of this letter agreement shall commence on the date
                  immediately after the date of your retirement from employment
                  by KACC in December, 1999, and will expire on the date of the
                  annual meeting of shareholders of KAC in May, 2001, unless
                  earlier terminated by (i) your death or disability (as defined
                  in KAC's Long Term Disability Plan that covers executives and
                  directors of KAC), (ii) for cause (as defined below) or (iii)
                  the mutual agreement of the parties hereto. For purposes of
                  this letter agreement, the term "cause" shall mean:

                  (i)      Your conviction for, or plea of nolo contendere to,
                           a felony; or

                  (ii)     Your commission of an act involving fraud or
                           intentional dishonesty, which act is intended to
                           result in substantial personal enrichment at the
                           expense of KAC or any of its subsidiaries; or

                  (iii)    Your material breach of any material provision of
                           this letter agreement which remains uncorrected for
                           30 days after written notice from the Boards or the
                           Chief Executive Officer and an opportunity to
                           correct; or

                  (iv)     Your knowing and willful misconduct in the
                           performance of your duties, which continues for 30
                           days after written notice from the Board or the Chief
                           Executive Officer and which results in material
                           injury to the reputation, business or operation of
                           KAC or any of its subsidiaries.

         The existence of "cause" shall be determined by an affirmative vote of
         not less than two-thirds of the members of each of the Boards. If the
         requisite affirmative vote by two-thirds of the members of each of the
         Boards is not obtained, this letter agreement may not be terminated for
         cause.

         4.       Your base compensation for services as a Director and
                  non-executive Chairman of both Boards shall be at a rate of
                  $250,000 for a full twelve consecutive month year, which
                  shall include an amount of $40,000 per year representing base
                  Director's fees, which may be deferred as described in
                  paragraph 5, and any amounts due for performance on any
                  Committees of the Boards, including the Executive Committee.
                  Absent any deferrals as described in paragraph 5, base
                  compensation shall be paid in cash in quarterly increments of
                  $62,500 during the first month following the completion of
                  the quarter in which fees were earned.  Notwithstanding the
                  immediately preceding sentence, but subject to the following
                  provisions of paragraph 5, with respect to the final quarter
                  of the term of this letter agreement in which this letter



<PAGE>   2


                  agreement shall expire or terminate, the parties hereby
                  expressly agree that you shall be entitled to a pro rata
                  portion of the $62,500 quarterly increment determined by
                  multiplying such amount by a fraction, the numerator of which
                  shall be the number of hours in which you performed services
                  hereunder and the denominator shall be 120 hours.  You shall
                  be solely liable and responsible for complying with all laws,
                  rules and regulations regarding timely payment of applicable
                  taxes including, without limitation, federal and state
                  income, self-employment and/or disability taxes that may
                  apply to such compensation.

         5.       Some or all of the following amounts attributable to your fees
                  as a Director may be deferred at your option into a "phantom
                  stock" and/or interest-bearing account to the same extent as
                  other Directors of KAC and KACC are permitted an election to
                  do so. Your deferral rights hereunder pertain to the $10,000
                  in quarterly payments of Director's fees as shall be due in
                  cash following the relevant calendar quarter for required
                  services rendered for an entire calendar quarter.
                  Notwithstanding the immediately preceding sentence, with
                  respect to the final quarter of the term of this
                  letter agreement in which this letter agreement shall expire
                  or terminate, the parties agree that you shall be entitled to
                  a pro rata portion of the $10,000 quarterly Director's fees
                  determined by the portion of the quarter in which you serve as
                  a Director.

         6.       You will be paid incentive compensation with a target amount
                  of $50,000 upon KAC's achievement of such benchmark or
                  benchmarks as shall be determined in the discretion of the
                  Board.  Any such incentive compensation for the year 2000
                  shall be paid in cash in the first calendar quarter of 2001.
                  Any such incentive compensation for 2001 shall be paid in
                  cash in the third quarter of 2001.  Notwithstanding the
                  immediately preceding sentence, the parties agree that any
                  such incentive compensation for a year in which this letter
                  agreement shall expire or terminate shall be determined by
                  multiplying the full amount of incentive compensation for the
                  year by a fraction, the numerator of which is the number of
                  hours in which you performed services hereunder and the
                  denominator of which shall be 480 hours.  You shall be solely
                  liable and responsible for complying with all laws, rules and
                  regulations regarding timely payment of applicable taxes
                  including, without limitation, federal and state income,
                  self-employment and/or disability taxes that may apply to any
                  such incentive compensation payment or payments.

         7.       In order to further assure that your interests are aligned
                  with those of KAC's and KACC's stockholders, and in order to
                  ensure that your right to exercise the options described below
                  is not adversely affected by your agreement to serve as
                  non-executive Chairman of the Board, the following stock
                  option agreements are hereby amended as set forth below.

                  a.       Each of the agreement evidencing an option grant
                           made as of May 18, 1993 and dated August 1993
                           pursuant to which you were granted an option to
                           purchase 100,000 shares of common stock of KAC under
                           the Kaiser 1993 Omnibus Stock Incentive Plan (the
                           "1993 Plan") and the agreement evidencing an option
                           grant made as of December 21, 1994 and dated April
                           1995 pursuant to which you were granted an option to
                           purchase 26,700 shares of common stock of KAC under
                           the 1993 Plan, is amended by providing at the end of
                           the fifth paragraph thereof the following sentence:

                                    Solely for purposes of this letter
                                    agreement, your employment shall not be
                                    deemed to have terminated during any period
                                    of time you serve as the salaried Chairman
                                    of the Board of Directors of the Company,
                                    whether or not you serve as an officer of
                                    the Company or hold any other position with
                                    the Company.

                  b.       Each of the agreement effective as of January 1, 1998
                           pursuant to which you were granted an option to
                           purchase 283,000 shares of KAC common stock under the
                           Kaiser 1997 Omnibus Stock Incentive Plan (the "1997
                           Plan") and the agreement effective as of January 1,
                           1998 pursuant to which you were granted an option to
                           purchase 386,000 shares of KAC common stock under the
                           1997 Plan, is amended by amending the introductory
                           sentence of Paragraph 6 thereof to read in its
                           entirety as follows:

                                            6. Termination of Optionee's
                                    Employment. Termination of Optionee's
                                    employment with KAC or any Subsidiary (as
                                    defined in Attachment A), and any branch,
                                    unit or division of KAC or any Subsidiary



<PAGE>   3


                                    (the "KAC Group") ("Employment") prior to
                                    March 1, 2001 shall affect Optionee's rights
                                    under the Stock Option as provided in this
                                    Section 6. Solely for purposes of this Stock
                                    Option Grant (including Section 4 hereof),
                                    Optionee's Employment shall be deemed to
                                    have been terminated on the later of the
                                    date: (i) Optionee no longer serves as a
                                    regular full-time salaried employee of any
                                    member of the KAC Group; and (ii) Optionee
                                    no longer serves as the salaried Chairman of
                                    the Board of Directors of the Company.

         8.       The relationship between the parties shall be that of
                  independent contracting parties and shall not constitute or be
                  deemed for any purpose to be that of employer and employee.
                  The Boards and KAC and KACC expressly acknowledge and agree
                  that neither shall have the right to direct you with respect
                  to the means or manner in which you fulfill your obligations
                  and responsibilities under this letter agreement. The Boards
                  and KAC and KACC are solely interested in the results obtained
                  by you in connection with your performance of services
                  required hereunder.

         9.       The parties hereby agree that the following provisions shall
                  generally govern this letter agreement.

                  a.       The compensation to which you may be entitled
                           hereunder shall not be subject to your debts or other
                           obligations and shall not be subject in any manner to
                           anticipation, alienation, sale, transfer, assignment,
                           pledge, encumbrance, attachment, garnishment, or
                           other legal or equitable process.

                  b.       This letter agreement shall not be construed to
                           confer upon you any right to receive any, or any
                           particular rate of, base or incentive compensation
                           for services rendered hereunder (other than the base
                           and incentive compensation payable under this letter
                           agreement).

                  c.       This letter agreement contains the entire
                           understanding and agreement between the parties with
                           respect to the subject matter hereof. Accordingly,
                           this letter agreement supersedes any and all other
                           agreements, contracts, plans or other arrangements
                           by, between, among or involving you and KAC and KACC
                           whereunder you are to serve as a Director and
                           non-executive Chairman of KAC and KACC.

                  d.       This letter agreement may not be amended, modified
                           or supplemented in any respect except by a
                           subsequent written agreement entered into by both
                           parties.

                  e.       This letter agreement may not be terminated prior
                           to expiration of the specified term except as
                           otherwise provided in Paragraph 3 hereof.

                  f.       This letter agreement shall be binding upon, and
                           shall inure to the benefit of, KAC and its successors
                           and assigns, KACC and its successors and assigns, and
                           you and your heirs, executors, administrators and
                           personal representatives.

                  g.       No term or condition of this letter agreement shall
                           be deemed to have been waived, nor shall there be an
                           estoppel against the enforcement of any provision of
                           this letter agreement, except by written instrument
                           of the party charged with such waiver or estoppel.
                           Any waiver by either party hereto of a breach of any
                           provision of this letter agreement by the other party
                           shall not operate or be construed as a waiver by such
                           party of any subsequent breach thereof.

                  h.       In the event that any provision of this letter
                           agreement is declared invalid and not binding on the
                           parties hereto in a final decree or order issued by a
                           court of competent jurisdiction, such declaration
                           shall not affect the validity of the other provisions
                           of this letter agreement to which such declaration of
                           invalidity does not relate and such other provisions
                           shall remain in full force and effect.

                  i.       Any notice required or permitted to be given under
                           this letter agreement shall be sufficient if in
                           writing and hand-delivered with appropriate proof of
                           same, or sent by registered or certified mail, return
                           receipt requested, to the affected party or other
                           person or entity at the address last furnished by
                           such party, person or entity. Such notice shall be
                           deemed given as of the date of delivery or, if



<PAGE>   4


                           delivery is made by mail, as of the date shown on the
                           postmark on the receipt for registration or
                           certification.

                  j.       This letter agreement shall be governed and
                           construed in accordance with the laws of the state
                           of Texas, without regard to principles of choice
                           of law.

         If the foregoing accurately sets forth your understanding of our
agreement on the matters set forth herein, please indicate acceptance of this
letter agreement by signing this letter agreement in the space indicated below.


                                          Very truly yours,

                                          KAISER ALUMINUM CORPORATION



                                          By:  /S/ RAYMOND J. MILCHOVICH
                                          Printed Name:  Raymond J. Milchovich
                                          Title:  President, CEO and COO


                                          KAISER ALUMINUM & CHEMICAL
                                          CORPORATION



                                          By:  /S/ RAYMOND J. MILCHOVICH
                                          Printed Name:  Raymond J. Milchovich
                                          Title:  President, CEO and COO


         Accepted and Agreed to as of the 22nd day of January, 2000.


                                               /S/ GEORGE T. HAYMAKER, JR.
                                          Printed Name:  George T. Haymaker, Jr.
                                          Title:  Chairman of the Board



<PAGE>   1
                                                                   Exhibit 10.26

April 15, 1999

Mr. Jack Hockema
30041 Saddleridge Drive
San Juan Capistrano, CA 92675

Dear Jack:

This letter will extend your current Employment Agreement for two years beyond
the current expiration date of December 31, 1998 to December 31, 2000. Also,
your Employment Agreement will be modified as outlined below:

-        Your annual base salary will be raised to two hundred sixty-five
         thousand dollars ($265,000) effective January 1, 1999.

-        You will participate in the Engineered Products Business Unit 1999 and
         2000 annual incentive plans with an annual target incentive opportunity
         of one hundred thirty-five thousand dollars ($135,000) and will not
         participate in the EVA incentive compensation arrangement set forth in
         your Employment Agreement.

-        You will participate in the Engineered Products 1997-1999 and 1998-2000
         Long-Term incentive plans, with an incentive target opportunity of two
         hundred thousand dollars ($200,000) and will not participate in the EVA
         incentive compensation arrangement set forth in your Employment
         Agreement.

-        For both the annual and long-term incentive plans the Engineered
         Products plan multiplier will be used to calculate your award, however
         your target will not affect
 the award pool as it applies to other
         participants.

-        Your automobile allowance will be increased to nine hundred dollars
         ($900) per month, effective January 1, 1999.

-        The "Growing the Business Bonus" will be modified per Attachment I to
         provide a method for calculating a lump sum payment in the event of a
         transfer or sale of all or substantially all of the assets of the
         Engineered Products to a party not controlled by MAXXAM, Kaiser
         Aluminum Corporation or Kaiser Aluminum & Chemical Corporation. In
         cases other than a sale or transfer, the "Growing the Business Bonus"
         will be applied as set forth in your Employment Agreement.

-        For clarification purposes in calculating the "Growing the Business
         Bonus" as it pertains to Attachment I and your Employment Agreement,
         Engineered Products Ebit and net assets will be the reported Ebit and
         net assets adjusted as follows:

                  (a)      Certain 1997 AKW and restructuring adjustments
                  (b)      Amortization of Newark strike costs from 8/15/98
                           through 8/15/2001

-        You will participate in the "Enhanced Severance Protection and Change
         of Control Benefits Program" as described in the letter set forth in
         Attachment II.

Except for the above modifications, all other conditions of your Employment
Agreement remain unchanged.

Sincerely,                               Agreed To and Accepted By:


/S/ Raymond J. Milchovich                /S/ Jack A. Hockema
Raymond J. Milchovich                    Printed Name  Jack A. Hockema
President and Chief Operating Officer    Title Vice President, President EP
                                         Date 4-18-99

                                  ATTACHMENT I

If during the period January 1, 1999 through December 31, 2000 all or
substantially all of the assets of the Engineered Products Business Unit are
sold to a party not controlled by MAXXAM, Kaiser Aluminum Corporation or Kaiser
Aluminum & Chemical Corporation, the "Growing the Business Bonus" will be
calculated as follows:

-        The performance through the date of the sale or transfer shall be
         determined as follows. Note that the "plan" amounts are the specific
         threshold, target and maximum amounts or percentages, for both
         Engineered Products and KAC, as agreed to in the original 1996
         agreement. Refer to Example I.

-        If the sale or transfer is in the year 1999, performance will be
         determined based on the ratio of actual year to date 1999 performance
         to plan for Engineered Products (EP) EBIT, EP EBIT RONA and KAC EBIT
         RONA, and applied to the remainder of the 1999 and 2000 year periods.
         The average multiple is determined after applying such ratio to the
         plan for each of the components, for each of the years.

-        If the sale or transfer is in the year 2000, performance will be
         determined as: (a) for the year 1999, the actual performance against



<PAGE>   2


         plan for EP EBIT, EP EBIT RONA and KAC EBIT RONA; (b) for the year 2000
         the ratio of actual year to date EP EBIT, EP EBIT RONA and KAC EBIT
         RONA, is applied to the remainder of the 2000 year. The average
         multiple is determined based on the actual performance against the plan
         for the year 1999 and the applied performance against the plan for the
         year 2000.

                                    EXAMPLE I
J. Hockema - 1999 Agreement - "Growing the Business Bonus" Example For
Illustration Only


<TABLE>
<CAPTION>

                                       EP         EP EBIT       KAC EBIT
                                      EBIT         RONA           RONA        Totals
<S>                               <C>           <C>           <C>           <C>
Plan - 1999                       $    65.0          20.0%           8.0%
Plan - 2000                       $    85.0          20.0%          11.0%
Net Assets                                      $   240.0     $  1,600.0

SCENARIO 1 - SELL 6/30/99
Estimated Actual to 6/30/99       $    25.0          10.4%           3.0%
Plan at 6/30/99                   $    32.5          10.0%           4.0%
Ratio Actual to Plan                   76.9%        104.0%          75.0%

"Applied" Performance 1999        $    50.0          20.8%           6.0%     ratio x plan
"Applied" Performance 2000        $    65.4          20.8%           8.3%     ratio x plan
Award multiple 1999                   0.750         1.080          0.461         (1)
Award multiple 2000                   0.778         1.080          0.666         (1)

Average multiple 1999 - 2000          0.764          1.08          0.564
Weighting                                25%           25%            50%
Total weighted multiple               0.191          0.27          0.282            0.743
Target                                                                      $       600.0
Total Award                                                                 $       445.8

SCENARIO 2 - SELL 6/30/00
Estimated Actual 1999             $    50.0          20.8%           6.0%    assume same as above
Award multiple 1999                   0.833         1.080          0.461         (1)

Estimated Actual to 6/30/00       $    34.0          14.2%           4.0%
Plan at 6/30/00                   $    42.5          10.0%           5.5%
Ratio Actual to Plan                   80.0%        142.0%          72.7%
"Applied" Performance 2000        $    68.0          28.4%           8.0%     ratio x plan
Award multiple 2000                   0.811         1.925          0.666         (1)

Average multiple 1999 - 2000          0.822         1.503          0.564
Weighting                                25%           25%            50%
Total weighted multiple               0.206         0.376          0.282            0.864
Target                                                                      $       600.0
Total Award                                                                 $       518.4
</TABLE>


(1)      As per original agreement - plan EP EBIT RONA 1999 is $65 million, and
         2000 is $85 million. EP EBIT RONA plan target is 20%. KAC EBIT RONA
         scale based on award matrix C from original Corporate Lti programs
         (with 15% as plan target), and multiple based on actual performance
         against that year's plan performance.

                                  ATTACHMENT II

                                  April 15,1999

Mr. Jack Hockema
30041 Saddleridge Drive
San Juan Capistrano, CA 92675

Dear Jack:

I am pleased to inform you that you have been selected for coverage under the
Enhanced Severance Protection and Change of Control Benefits Program ("Plan")
for selected corporate officers.

As you know, Kaiser Aluminum is pursuing a strategy that could lead to various
forms of corporate restructuring. In that connection, the Plan was developed and
is being made available to selected key officers. The purposes of the Plan
include all of the following:

        -         Retention of top-performers and those with critical skills
                  both pre and post restructuring;

        -         Provision of appropriate protection to business unit
                  management in the event of job loss and/or a change of
                  control,1 and

        -         Maintenance of focus by management on key goals and
                  maintenance of overall energy level through a potentially
                  distracting period.



<PAGE>   3


This letter sets forth the basic provisions of the Plan which, subject to the
limits explained below, is being offered to you in conjunction with other
benefits that otherwise may be payable to you under the Kaiser Aluminum
Termination Payment and Benefits Plan Continuation Policy ("Policy"). For
example, if you become eligible for 6 months under the enhanced severance part
of the Plan and you already have earned 3 months severance under the Policy, you
would receive 3 months severance from the Policy and 3 months severance from the
Plan.

The Plan will be in effect through the end of the 2000 calendar year, unless
earlier amended or terminated by the Compensation Committees or Boards of
Directors of Kaiser Aluminum Corporation and Kaiser Aluminum & Chemical
Corporation. No amendment or termination of the

Plan will adversely affect your right to receive benefits provided under the
Plan without your written consent. After the year 2000, management will
determine the need for any other protection or enhanced severance programs.

--------
(1)  See page 3 for definition of "change of control".

ENHANCED SEVERANCE PROTECTION
Under the enhanced severance protection features of the Plan, you will qualify
for such severance benefits if you are terminated for any reason except for the
following exclusions:

         1.       You voluntarily resign or retire.

         2.       You are discharged for serious cause or other reason
                  prejudicial to Kaiser Aluminum.

         3.       You are eligible for sick leave, LTD or KRP full early
                  disability benefits. Or, you were eligible for sick leave or
                  LTD benefits and (i) you did not report back to work
                  immediately after your eligibility for such benefits ceased,
                  or (ii) you were not medically released to work at the time
                  such benefits ceased.

         4.       You refuse to accept another suitable position with Kaiser
                  Aluminum. Suitability is determined in accordance with
                  guidelines established from time to time by the personnel
                  policy committee.

         5.       You terminate employment on account of death.

In the event that your employment terminates and you qualify for enhanced
severance protection under the Plan, such benefits will be as follows:

         -        12 months base salary,

         -        Prorated incentive awards (prorated incentive target for all
                  short and long term incentive programs in progress at
                  termination).

         -        Continuation of your coverage under medical, dental, life and
                  AD&D coverage by Kaiser Aluminum(2) as if your employment had
                  continued uninterrupted for up to 12 months. You must continue
                  to pay your monthly medical and life insurance contributions
                  (if any) for this coverage to remain in effect.

         -        Payment of your automobile allowance for the number of the
                  severance months.

CHANGE OF CONTROL

In the event that your employment terminates or constructively terminates
(described below), due to a change of control or significant restructuring,
during a period which commences ninety (90) days prior to a change of control or
significant restructuring and ends on the first anniversary of such change of
control or significant restructuring, in lieu of the enhanced severance
protection benefits described above, you will qualify for change of control
benefits.

--------
(2) As you will not actually be an active employee, your coverage under the
cafeteria plan, spending accounts for medical and dependent care expense
reimbursement and the LTD Plan will cease. Your eligibility for COBRA coverage
will commence after the medical continuation benefits cease, and the medical
continuation period is subtracted from your COBRA eligibility period.

Change of control or significant restructuring is defined as: The transfer of
all or part of the assets of, or the merger, consolidation or reorganization of,
Kaiser Aluminum to or with another organization or the transfer of all or part
of the stock of Kaiser Aluminum to another organization.

These benefits are payable as described below, if you are terminated or
constructively terminated due to a change of control or significant
restructuring, except for the following exclusions:



<PAGE>   4


         1.       The purchaser or new controlling entity or Kaiser Aluminum
                  offers you suitable employment in substantially the same
                  capacity and at your current level of compensation. This
                  exception will apply regardless of whether you accept or
                  reject the suitable position.

         2.       You voluntarily resign or retire.

         3.       You are discharged for serious cause or other reason
                  prejudicial to Kaiser Aluminum.

         4.       You are eligible, within the 90 days prior to a change of
                  control, for sick leave, LTD or KRP full early disability
                  benefits. Or, you were eligible for sick leave or LTD benefits
                  and (i) you did not report back to work immediately after your
                  eligibility for such benefits ceased, or (ii) you were not
                  medically released to work at the time such benefits ceased.

         5.       You terminate employment on account of death.

The change of control benefits under the Plan will be as follows:

         -        24 months base salary,

         -        Prorated incentive awards (prorated incentive target for all
                  short and long term incentive programs in progress at
                  termination).

         -        Continuation of your coverage under medical, dental, life and
                  AD&D coverage by Kaiser Aluminum(3) as if your employment had
                  continued uninterrupted for up to 24 months. You must
                  continue to pay your monthly medical and life insurance
                  contributions (if any) for this coverage to remain in effect.

         -        Payment of your automobile allowance for the number of the
                  severance months.

--------
(3) As you will not actually be an active employee, your coverage under the
cafeteria plan, spending accounts for medical and dependent care expense
reimbursement and the LTD Plan will cease. Your eligibility for COBRA coverage
will commence after the medical continuation benefits cease, and the medical
continuation period is subtracted from your COBRA eligibility period.

For purposes of the Plan, you will be deemed to be constructively terminated if:

         -        You are demoted, suffer a substantial reduction of position
                  responsibilities or a substantial change in reporting
                  responsibilities or reporting level;

         -        You are relocated more than fifty (50) miles from your present
                  office location, except for a promotion and / or mutually
                  agreed transfer; or

         -        You suffer a reduction of your base salary and / or total
                  incentive opportunity.

Payments of base salary and prorated incentive awards under the Plan shall be
made (net of withholding for federal, state and local taxes) in a single sum in
cash within thirty (30) days following your termination or constructive
termination of employment. You will be responsible for timely payment of any
additional taxes that may be due on the benefits received under the Plan. Should
you feel that you have reason to contest any settlement under the Plan, you may
do so by following the same procedures as apply to the Company's other severance
pay plans, as such claims procedures are incorporated in the Plan by this
reference.

Kaiser Aluminum shall have the sole discretion to determine which employees
shall participate in the Plan and their level of participation. Kaiser Aluminum
also has the authority to construe, interpret and implement the Plan (including
the right to make factual determinations) and to make rules and otherwise
administer the Plan, and its determination on any matter relating to the Plan
shall be conclusive and binding on all interested persons. To the extent not
preempted by federal law, the Plan shall be construed in accordance with and
governed by the laws of the State of Texas.

As part of your enhanced severance and benefit eligibility under the Plan for
the one year period following the termination of your employment, you shall not,
without prior written consent of Kaiser Aluminum, directly or indirectly engage
in the business of developing products competitive with Kaiser Aluminum within
the United States of America or any other geographical area served by Kaiser
Aluminum. Nor will you engage, within this geographical area, in the design,
development, distribution, manufacture, assembly or sale of a product or service
in competition with any product or service currently marketed or planned by
Kaiser Aluminum to the extent such activity would reveal the plans, designs or
specifications disclosed to you by Kaiser Aluminum. This paragraph does not
restrict your ownership of securities in any enterprise or participation in the
management of any non-Kaiser competitive aspect of any enterprise. By signing



<PAGE>   5


this letter in the space provided, you acknowledge that these prohibitions are
both reasonable as to time, geographical area and scope of activity and do not
impose a restriction greater than is necessary to protect Kaiser Aluminum's good
will, proprietary information and business interests. Additionally, your
signature below acknowledges your continued commitment to abide by the terms of
paragraphs 2, 3, 4, 5, 6 and 7 of your Employment Agreement as well as the
Corporate Code of Business conduct and Accompanying Compliance Manuals. If you
have any questions concerning your obligations under either of these documents,
please let me know.

Participation in the Plan will not give rise to any right to continued
employment, shall not in any way prohibit changes in the terms of your
employment and shall not in any way limit the right of Kaiser Aluminum to
terminate your employment at any time for any reason with or without stating
a reason.

Kaiser Aluminum may assign its rights and obligations hereunder. In such event,
such rights and obligations shall inure to the benefit of and shall be binding
upon the successors and assigns of Kaiser Aluminum. Your rights and obligations
hereunder are personal, and such rights and obligations shall not be subject to
voluntary or involuntary assignment or other transfer by you and any attempted
alienation, assignment or other transfer of your rights or obligations hereunder
shall be void and without effect.

I congratulate you on your selection to participate in the Plan. It indicates
your importance to the performance of Kaiser Aluminum. I would also like to
thank you for your dedicated service and contribution to the past success of
Kaiser Aluminum, and look forward to your continued contribution.

If you have any questions regarding the Plan, please feel free to discuss them
with me, or call Bill Edgley, Director, Corporate Human Resources. If the
foregoing is acceptable, please indicate your acceptance by signing the
duplicate copy of this letter and returning the signed copy to the attention of
Bill Edgley at Kaiser Aluminum, 6177 Sunol Blvd., Pleasanton, CA 94566.

Sincerely,


/S/ Raymond J. Milchovich
Raymond J. Milchovich
President and Chief Operating Officer


AGREED TO AND ACCEPTED BY:

/S/ Jack A. Hockema
Printed Name:  Jack A. Hockema
Title:  Vice President, President EP
Dated:  4-18-99




<PAGE>   1
                                                                  Exhibit 10.27





               Description of Compensation Arrangements

                            Jack A. Hockema


         Effective as of January 24, 2000, Jack A. Hockema was elected Executive
Vice President, and President of Kaiser Fabricated Products, of Kaiser Aluminum
& Chemical Corporation ("KACC"). In connection with such election, new
compensation arrangements for 2000 and 2001 were approved for Mr. Hockema. The
compensation arrangements have three components: base pay, short-term incentive
("STI"), and long-term incentive ("LTI").

         Mr. Hockema's base pay for 2000 was set at $315,000. Mr. Hockema's STI
for 2000 has two components. The first component has a target amount of
$135,000, and any award under this first component will be made based on that
target amount and on the performance of the engineered products business unit
under the provisions of the Engineered Products Business Unit Short-Term
Incentive Plan. The second component has a target amount of $30,000, and any
award will be made based on that target amount and on the performance of the
flat-rolled products business unit as determined by the Chief Executive Officer
of KACC.

         Mr. Hockema's LTI for 2000 has two components. The first component has
a target amount of $200,000, and any award under this first component
 will be
made based on that target amount and on the performance of the engineered
products business unit under the provisions of the Engineered Products Business
Unit Long-Term Incentive Plan. The second component has a value of $135,000,
which award has been made in the form of a grant of a stock option to purchase
shares of the Common Stock of Kaiser Aluminum Corporation.

         Mr. Hockema will qualify for a cash bonus of $500,000 in the event of
the sale of a specified portion of the business units under his management on or
before July 1, 2002. Payment of such a bonus would be made in three equal annual
installments, with the first payment occurring within 30 days of the closing of
such sale.

         Mr. Hockema's base pay for 2001 was set at $375,000. The target amounts
of Mr. Hockema's STI and LTI for 2001 were established at $200,000 and $475,000,
respectively; however, the other terms and conditions of such STI and LTI awards
have not been determined.



<PAGE>   1

                                                                      Exhibit 21



                                  SUBSIDIARIES


Listed below are the principal subsidiaries of Kaiser Aluminum Corporation, the
jurisdiction of their incorporation or organization, and the names under which
such subsidiaries do business. Certain subsidiaries are omitted which,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.


<TABLE>
<CAPTION>
                                                                  Place of
                                                                  Incorporation
     Name                                                         or Organization
     ----                                                         ---------------
<S>                                                             <C>
     Alpart Jamaica Inc. ......................................   Delaware
     Alumina Partners of Jamaica (partnership).................   Delaware
     Anglesey Aluminium Limited................................   United Kingdom
     Kaiser Alumina Australia Corporation......................   Delaware
     Kaiser Aluminium International, Inc.......................   Delaware
     Kaiser Aluminum & Chemical Corporation....................   Delaware
     Kaiser Aluminum & Chemical of Canada Limited..............   Ontario
     Kaiser Bauxite Company....................................   Nevada
     Kaiser Bellwood Corporation...............................   Delaware
     Kaiser Finance Corporation ...............................   Delaware
     Kaiser Jamaica Bauxite Company (partnership)..............   Jamaica
     Kaiser Jamaica Corporation................................   Delaware
     Queensland Alumina Limited................................   Queensland
     Volta Aluminium Company Limited...........................   Ghana
</TABLE>






<PAGE>   2



<TABLE>

<S>            <C>                                                    <C>
Principal       California                                              South Carolina                               
Domestic          Laguna Niguel                                           Greenwood                                  
Operations          Administrative Offices                                  Engineered Products                      
and               Los Angeles
 (City of Commerce)                          Greenwood                                  
Administrative      Engineered Products                                     Engineered Products Machine Shop         
Offices           Oxnard                                                Tennessee                                    
(Partial List)      Engineered Products                                   Jackson                                    
                  Pleasanton                                                Engineered Products                      
                    R&D at the Center for Technology,                   Texas                                        
                    Administrative Offices                                Houston                                    
                Louisiana                                                   Kaiser Aluminum Corporation Headquarters 
                  Baton Rouge                                             Sherman                                    
                    Alumina Business Unit Offices                           Engineered Products                      
                  Gramercy                                              Virginia                                     
                    Alumina                                               Richmond                                   
                Michigan                                                    Engineered Products                      
                  Detroit (Southfield)                                  Washington                                   
                    Automotive Product Development and Sales              Mead                                       
                Ohio                                                        Primary Aluminum,                        
                  Newark                                                    Northwest Engineering Center             
                    Engineered Products                                   Richland                                   
                Oklahoma                                                    Engineered Products                      
                  Tulsa                                                   Tacoma                                     
                    Engineered Products                                     Primary Aluminum                         
                                                                          Trentwood                                  
                                                                            Flat-Rolled Products                     
</TABLE>




<TABLE>

<S>            <C>                                                     <C>
Principal       Australia                                               Jamaica                                 
Worldwide         Queensland Alumina Limited (28.3%)                      Alumina Partners of Jamaica (65%)     
Operations          Alumina                                                 Bauxite, Alumina                    
(Partial List)  Canada                                                    Kaiser Jamaica Bauxite Company (49%)  
                  Kaiser Aluminum & Chemical of                             Bauxite                             
                  Canada Limited (100%)                                 Wales, United Kingdom                   
                    Engineered Products                                   Anglesey Aluminium Limited (49%)
                Ghana                                                       Primary Aluminum                    
                  Volta Aluminium Company Limited (90%)                         
                    Primary Aluminum                                                                            
                                                                      
</TABLE>












<PAGE>   1


                                                                    EXHIBIT 23.1


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


     As independent public accountants, we hereby consent to the incorporation
of our reports included and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements File No.'s 333-71,
333-16239 and 33-49889.



                                        ARTHUR ANDERSEN LLP


Houston, Texas
March 9, 2000





<PAGE>   1


                                                                    EXHIBIT 23.2


     We hereby consent to (i) any references to our firm, or (ii) any references
to advice rendered by our firm contained in Kaiser Aluminum Corporation's Annual
Report on Form 10-K for the year ended December 31, 1999, which is incorporated
into the Company's previously filed Registration Statements on Form S-3 No.'s
333-16239 and 333-71 and Registration Statement on Form S-8 No. 33-49889.



                                        WHARTON LEVIN EHRMANTRAUT
                                            KLEIN & NASH, P.A.




March 6, 2000





<PAGE>   1


                                                                    EXHIBIT 23.3




     With respect to the Registration Statements on Form S-3 No.'s 33-16239 and
333-71 and Registration Statement on Form S-8 No. 33-49889 filed by Kaiser
Aluminum Corporation, a Delaware corporation (the "Registration Statements"), we
hereby consent to the use of our name, and to references to advice rendered by
our firm, incorporated by reference into the Registration Statements from Kaiser
Aluminum Corporation's Annual Report on Form 10-K for the year ended December
31, 1999, under the headings (i) Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources -
Commitments and Contingencies, and (ii) Note 10 of Notes to the Consolidated
Financial Statements.



                                   HELLER EHRMAN WHITE & McAULIFFE




March 6, 2000





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of the Company for the twelve months ended
December 31, 1999, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000811596
<NAME> KAISER ALUMINUM CORPORATION
<MULTIPLIER> 1,000,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                              21
<SECURITIES>                                         0
<RECEIVABLES>                                      267
<ALLOWANCES>                                         6
<INVENTORY>                                        546
<CURRENT-ASSETS>                                   974
<PP&E>                                           1,984
<DEPRECIATION>                                     930
<TOTAL-ASSETS>                                   3,199
<CURRENT-LIABILITIES>                              638
<BONDS>                                            973
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                             1
<OTHER-SE>                                          64
<TOTAL-LIABILITY-AND-EQUITY>                     3,199
<SALES>                                          2,044
<TOTAL-REVENUES>                                 2,044
<CGS>                                            1,859
<TOTAL-COSTS>                                    1,859
<OTHER-EXPENSES>                                   109
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                 110
<INCOME-PRETAX>                                   (90)
<INCOME-TAX>                                      (33)
<INCOME-CONTINUING>                               (54)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                      (54)
<EPS-BASIC>                                      (.68)
<EPS-DILUTED>                                    (.68)
        

</TABLE>