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SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-KSB



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(Mark One)

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



For the fiscal year ended December 31, 2004



OR



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



Commission File Number: 000-33433



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KAISER VENTURES LLC

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                       |  | 33-0972983                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



3633 E. Inland
Empire Blvd. Suite 480

Ontario, Ca 91764

(Address of principal executive offices and zip code)



Registrants telephone number, including area code: (909) 483-8500



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Securities registered pursuant to Section 12(g) of the Act: None



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



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on which Registered
|Class A Units       |  | Not Applicable                           



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-8 is not contained in this form, 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-KSB or any amendment to this Form 10-KSB. ̈



Issuers revenues for its most recent fiscal year: $3,135,000



The aggregate market value of the issuers Class A Units, held by non-affiliates of the issue was approximately $9,566,391 based upon the tax appraisal conducted on behalf of the Company as of November 30, 2001, which was assumed to be
the same value as of March 22, 2005. The Class A Units are not publicly traded. (For purposes of this calculation, Class A Units held by each manager, executive officer, and by each person known by the registrant as owning 10% or more of the
outstanding Class A Units have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes).



At March 22, 2005, 6,929,299 Class A Units were outstanding including 104,267 Class A Units outstanding but reserved for distribution to the general unsecured creditors
in the Kaiser Steel Corporation bankruptcy.



Documents Incorporated by
Reference: Certain exhibits as identified in the Exhibit List to this Report on Form 10-KSB are incorporated by reference.



Transitional Small Business Disclosure Format (Check One):    Yes ̈No  x



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TABLE OF CONTENTS TO FORM 10-KSB



|         |  |                                                                                                   |  |     
|-------- |  | ------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                   |  | PAGE
|PART I   |  |                                                                                                   |  |     
|         |  |                                                                                                  
|         |  | FORWARD-LOOKING STATEMENTS                                                                        |  | 1   
|         |  |                                                                                                  
|         |  | WHO WE ARE                                                                                        |  | 1   
|         |  |                                                                                                  
|Item 1.  |  | DESCRIPTION OF BUSINESS                                                                           |  | 1   
|         |  |                                                                                                  
|Item 2.  |  | DESCRIPTION OF PROPERTIES                                                                         |  | 15  
|         |  |                                                                                                  
|Item 3.  |  | LEGAL PROCEEDINGS                                                                                 |  | 16  
|         |  |                                                                                                  
|Item 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                               |  | 20  
|         |  |                                                                                                  
|PART II  |  |                                                                                                   |  |     
|         |  |                                                                                                  
|Item 5.  |  | MARKET FOR THE COMPANYS EQUITY AND RELATED OWNER MATTERS                                         |  | 21  
|         |  |                                                                                                  
|Item 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             |  | 22  
|         |  |                                                                                                  
|Item 7.  |  | FINANCIAL STATEMENTS                                                                              |  | 29  
|         |  |                                                                                                  
|Item 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE              |  | 57  
|         |  |                                                                                                  
|Item 8A  |  | CONTROLS AND PROCEDURES                                                                           |  | 57  
|         |  |                                                                                                  
|Item 8B  |  | OTHER INFORMATION                                                                                 |  | 58  
|         |  |                                                                                                  
|PART III |  |                                                                                                   |  |     
|         |  |                                                                                                  
|Item 9.  |  | MANAGERS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |  | 59  
|         |  |                                                                                                  
|Item 10. |  | EXECUTIVE COMPENSATION                                                                            |  | 62  
|         |  |                                                                                                  
|Item 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                    |  | 68  
|         |  |                                                                                                  
|Item 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                    |  | 70  
|         |  |                                                                                                  
|Item 13. |  | EXHBITS                                                                                           |  | 71  
|         |  |                                                                                                  
|Item 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                            |  | 77  





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PART I



FORWARD-LOOKING STATEMENTS



Except for the historical statements and discussions contained herein, statements contained in this 10-KSB Report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any 10-K Report, 10-KSB Report, 10-Q Report, 10-QSB Report, 8-K Report, web site posting or press release of the Company and any amendment thereof may include
forward-looking statements. In addition, other written or oral statements, which constitute forward-looking statements, have been made and may be made in the future by the Company. You should not put undue reliance on forward-looking statements.
When used or incorporated by reference in this 10-KSB Report or in other written or oral statements, the words anticipate, estimate, project and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties, and assumptions. We believe that our assumptions are reasonable. Nonetheless, it is likely that at least some of these assumptions will not come true. Accordingly, should one
or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, or projected. For example, our actual results could materially
differ from those projected as a result of factors such as, but not limited to: Kaisers inability to complete the anticipated sale of its Eagle Mountain landfill project; litigation, including, among others, claims that relate to Eagle
Mountain, pre-bankruptcy activities of Kaiser Steel Corporation, the predecessor of Kaiser, and asbestos claims; insurance coverage disputes; the impact of federal, state, and local laws and regulations on our permitting and development activities;
competition; the challenge, reduction or loss of any claimed tax benefits; the impact of natural disasters on our assets; and/or general economic conditions in the United States and Southern California. The Company disclaims any intention to update
or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



WHO WE ARE



Unless otherwise
noted: (1) the term Kaiser LLC refers to Kaiser Ventures LLC; (2) the term Kaiser Inc. refers to the former Kaiser Ventures Inc.; (3) the terms Kaiser, the Company, we, us, and
our, refer to past and ongoing business operations conducted in the form of Kaiser Inc. or currently Kaiser LLC, and their respective subsidiaries. Kaiser Inc. merged with and into Kaiser LLC effective November 30, 2001; (4) the terms
Class A Units and members refer to Kaiser LLCs Class A Units and the beneficial owners thereof, respectively; and (5) the term the merger refers to the merger of Kaiser Inc. with and into Kaiser LLC
effective November 30, 2001, in which Kaiser LLC was the surviving company.



Item 1. DESCRIPTION OF BUSINESS



Business
Strategy



General. Kaiser is the reorganized
successor to Kaiser Steel Corporation, referred to as KSC, which was an integrated steel manufacturer that filed for bankruptcy protection in 1987. Since KSCs bankruptcy, we have been developing certain assets remaining after the bankruptcy.
In summary, our principal assets currently include:



| |  |  | An 82.48% ownership interest in Mine Reclamation, LLC, (referred to as MRC), which owns a permitted rail-haul municipal solid waste landfill at a property called the Eagle Mountain
Site located in the California desert. This landfill is currently subject to a contract for its sale to County District No. 2 of Los Angeles County (which we refer to as the District) for approximately $41 million, which sale is subject to a number
of conditions, several of which remain to be fully satisfied;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station, a transfer station and materials recovery facility located on land acquired from
Kaiser, which we refer to as the West Valley MRF; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the District.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2004, we also had cash and cash equivalents, receivables
and short-term investments of approximately $14.3 million.



Cash Maximization Strategy. In September 2000, Kaiser Inc.s Board of Directors approved a strategy to maximize the cash distributed to Kaiser Inc.s stockholders. Under this strategy, Kaiser sought to:



| |  |  | To complete the sale of the landfill project at the Eagle Mountain Site and to resolve the outstanding litigation in connection with the related federal land exchange at that site.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To reduce the risk to Kaiser from outstanding environmental and other similar types of liabilities by purchasing additional insurance coverage and negotiating with purchasers of our
properties to assume liability risks as part of the sale transaction;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To continue to hold our 50% interest in West Valley MRF, which pays cash distributions to Kaiser, until we believe it is appropriate to sell this asset;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To sell miscellaneous assets, such as surplus property and mineral interests in Southern California; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | To further reduce our general and administrative expenses by continuing to reduce our staff as we sell our remaining assets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



Consistent with this strategy, Kaiser Inc. completed or entered into the
following transactions:



| |  |  | In August 2000, MRC entered into an agreement to sell the landfill project at the Eagle Mountain Site to the District. This sale is subject to the satisfaction of numerous
conditions, not all of which have been satisfied. As a result, we cannot be sure that this sale will close on the terms negotiated with the District, if at all. For additional information, see DESCRIPTION OF BUSINESS - Eagle Mountain Landfill
Project and Pending Sale - Pending Sale of the Landfill Project.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Also in August 2000, we sold approximately 588 acres of the former KSC mill site property (referred to as the Mill Site Property) for $16 million in cash plus the assumption of
certain environmental liabilities. For additional information, see DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill Site Property - CCG Ontario, LLC.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In October 2000, we sold approximately 37 additional acres of the Mill Site Property for $3.8 million in cash. For additional information, see DESCRIPTION OF BUSINESS -
Historical Operations and Completed Transactions - Mill Site Property - Rancho Cucamonga Parcel.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In March 2001, in connection with the resolution of certain litigation, we sold our interest in Fontana Union Water Company, a mutual water company, for $87.5 million in cash, plus
approximately $2.5 million in additional payments due under a related lease. For additional information, see DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Water Resources - Fontana Union Stock Sale.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In June 2001, we purchased a twelve-year insurance policy effective June 30, 2001, expected to cover substantially all environmental claims related to the historical operations of
Kaiser for an aggregate cost of approximately $5.8 million, of which KSC Recovery, Inc., Kaiser Steels bankruptcy estate (referred to as KSC), paid $2 million and we paid the balance of approximately $3.8 million. For additional
information, see DESCRIPTION OF BUSINESS - Historical Operations and Complete Transactions - Mill Site Environmental Matters.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Conversion to a Limited Liability Company. As a result of the actions outlined above, Kaiser
Inc. had cash and cash equivalents of approximately $80 million as of September 30, 2001. At that time, Kaiser Inc.s Board sought the best means of delivering this cash to its investors on a tax advantageous basis while also avoiding any
future double taxation generally imposed on future corporate distributions to investors. After considering various alternatives, Kaiser Inc.s Board determined that converting Kaiser Inc. into a limited liability company would best achieve
these goals.



More specifically, by converting to a limited
liability company on or before December 31, 2001, Kaiser ultimately saved approximately $16 million in income taxes in 2001 by capturing the significant accumulated tax losses associated with MRC. These tax savings meant that Kaiser Inc. was able to
increase the cash distributed to its stockholders by almost $2.00 per share. In addition, the conversion enabled most of Kaiser Inc.s stockholders to offset their tax basis in each share of Kaiser Inc.s common stock against the cash
distribution to them in the merger, with only the difference taxed at capital gains rates.



The conversion was approved at Kaiser Inc.s November 28, 2001, annual meeting of its stockholders and consummated on November 30, 2001. The conversion was accomplished through the merger of Kaiser Inc. with and
into Kaiser LLC, with Kaiser LLC as the surviving company of the merger. In order to capture the benefits associated with the income tax flow-through treatment offered by a limited liability structure and as a result of the requirements imposed by
the Internal Revenue Code, the Class A Units received in the merger are not traded on any securities market and are subject to significant transfer restrictions.



We continue to undertake activities to implement the cash maximization strategy.



Eagle Mountain Landfill Project and Pending Sale



Description of the Eagle Mountain Site. Kaisers approximate
10,108 acre Eagle Mountain Site, located in the remote California desert approximately 200 miles east of Los Angeles, consists of three large open pit mines, the Eagle Mountain Townsite and a 52-mile private rail line that accesses the site. In
1988, Kaiser leased what is now approximately 4,654 acres of the idle mine site and the rail line to MRC for development of a rail-haul solid-waste landfill.



In 1988, in anticipation of Southern Californias need for new environmentally safe landfill capacity, MRC began the planning and permitting for a
20,000 ton per day rail-haul, non-hazardous solid waste landfill at Kaisers Eagle Mountain Site. The landfill project has received all the major permits and approvals required for siting, constructing, and operating the landfill project. We
believe that the Eagle Mountain Site has many unique attributes which make it particularly well-suited for a rail-haul, solid waste landfill, including, among other attributes, its remote location, arid climate, available and suitable materials for
the proposed liner system and daily cover, and rail access.



Acquisition of Our Interest in MRC. We initially acquired our interest in MRC in 1995, as a result of the withdrawal of MRCs previous majority owner, a subsidiary of Browning Ferris Industries. Before and in connection with
this withdrawal, Browning Ferris invested approximately $45 million in MRC. In 2000, Kaiser assigned all of the economic benefits of the MRC lease and granted an option to buy the landfill property to MRC in exchange for an increase in Kaisers
ownership interest in MRC. The MRC lease will terminate upon the sale of the landfill project to the District, assuming the sale is completed. We presently own 82.48% of MRCs Class B Units and 100% of its Class A Units.



Pending Sale of the Landfill Project



Background.In August 2000, MRC entered into an agreement to sell the
landfill project to the District for $41 million. Under the terms of that agreement, upon closing of the sale, $39 million of the total purchase price is to be deposited into an escrow account. This money will be released to MRC on the resolution of
certain litigation contingencies relating to the litigation challenging the completed federal land exchange. Even though the closing has not taken place and these funds have not been deposited into an escrow account, interest began



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accruing on this portion of the purchase price on May 3, 2001, and will be paid out to MRC on a quarterly basis once
the initial closing of the sale occurs and once there is a successful outcome of the federal litigation at the Federal District Court level. The remaining $2 million of the purchase price would also be placed into an escrow account upon closing and
was originally to be released upon the later of (1) the release of the $39 million as described above or (2) the permitting approvals of the Districts Puente Hills landfill for its remaining 10 years of capacity. However, in 2003 and early
2004 the District received the necessary permits for the expansion of its Puente Hills landfill and thus, the full purchase price will be placed into escrow when the initial closing has occurred, and will be released upon resolution of the pending
federal land exchange litigation. Receipt of the purchase price, in whole or in part, if at all, is expected to be delayed for several years pending satisfactory resolution of these contingencies. At this time, we cannot estimate when or if the sale
may be completed.



Additionally, the sale of the landfill
project is subject to the results of the Districts due diligence and satisfaction of numerous contingencies. The contingencies include, but are not limited to, obtaining the transfer of the landfill projects permits to the District,
obtaining all necessary consents to the transaction, resolving title matters and negotiating mutually acceptable joint use agreements. We continue to work on resolving various title issues, obtaining necessary consents and otherwise working toward a
closing. Although the contractual expiration date is currently June 30, 2005, the date has already been extended numerous times. The conditions to closing are not expected to be met by the current expiration date, and the parties will individually
determine whether to extend the closing date one or more additional times. There is no assurance or requirement that either party will continue to extend the closing date for the proposed sale of the landfill project. Kaiser has agreed with the
District to vote its interest in MRC in favor of the sale of the landfill project to the District on its current terms prior to the initial closing.



Flood Damage to Railroad



The Company owns an approximate 52-mile private railroad that runs from Ferrum Junction near the Salton Sea to the Eagle Mountain mine. In late August and
early September of 2003, portions of the railroad and related protective structures sustained considerable damage due to heavy rains and flash floods. This damage included having some rail sections being buried under silt while other areas had their
rail bed undermined. Subsequent to the filing of our report on Form 10-Q for the quarter ended September 30, 2003, we conducted a more complete investigation of the damage and of the costs to return the railroad to the condition that it was in prior
to the flood damage. As a result of such investigation, we currently estimate the cost to repair the damage to be a minimum of $4,500,000. During 2004 we undertook the work necessary to help preserve and protect the existing railroad. However, the
major repairs required to return the railroad to its condition prior to the flood damage will be deferred until a later date.



MRC Financing



Since 1995 MRC has been funded through a series of private placements to its existing equity holders. In 2003 MRC completed a $2,100,000 private placement
of its Class B Units to its existing members. The private placement was payable in installments with the last two installments paid in 2004. Our equity contribution under the private placement totaled $1,822,000. As a result of the private placement
our ownership interest in MRC increased to 82.48%. Future funding of MRC will be required to cover such items as the federal land exchange litigation and the railroad repairs but there is no assurance that such funding will be obtained.



Current Status



Approval by Riverside County of the Landfill Project; Development Agreement. Between 1992 and 1995, MRC faced legal
challenges to its application and receipt of regulatory permits and consents required to operate the landfill project. In March 1995, MRC again initiated the necessary permitting process by filing its land use applications with Riverside County and
working with the County and U.S. Bureau of Land Management, referred to as the BLM, in securing the certification and approval of a new environmental impact report, or an EIR. After extensive public comment, the new EIR was released to the public in
January 1997, and received final approval from the Riverside Board of Supervisors in September 1997.



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As a part of the process of considering the landfill project, Kaiser and MRC negotiated a Development
Agreement with Riverside County. The Development Agreement provides the mechanism by which MRC acquires long-term vested land-use rights for a landfill and generally governs the relationship among the parties to the Agreement. The Development
Agreement also addresses such items as the duties and indemnification obligations to Riverside County; the extensive financial assurances to be provided to Riverside County; the reservation and availability of landfill space for waste generated
within Riverside County; and events of default and remedies, as well as a number of other items.



In addition, the financial payments to or for the benefit of Riverside County and others are detailed in the Development Agreement as well as in the
Purchase and Sale Agreement, which forms a part of the Development Agreement. The Purchase and Sale Agreement requires a per ton payment on non-County waste determined from a base rate which is the greater of $2.70 per ton or ten percent (10%) of
the landfill tip fee up to 12,000 tons of non-County waste. The 10% number increases to 121⁄2% for all non-County waste in excess of 12,000 tons per day. The per ton payment to the County also increases as volume increases. The per ton payments
on non-County Waste to Riverside County are summarized as follows:



|                                         |  |                                                                       
|---------------------------------------- |  | ----------------------------------------------------------------------
|Average Tons Per Day of Non-County Waste |  | Payment to Riverside County                                           
|0 - 7,000                                |  | Greater of 10% (12.5% once volume exceeds 12,000 tpd or $2.70 (Base)
|7,000 - 10,000                           |  | Base + $ .80                                                          
|10,000 - 12,000                          |  | Base + $1.30                                                          
|12,000 - 16,000                          |  | Base + $2.30                                                          
|16,000 - 20,000                          |  | Base + $3.30                                                          



Of the payments made
to Riverside County by MRC on non-County municipal solid waste, $.90 of the per ton payment will be deposited into an environmental trust. In addition, MRC directly pays $.90 per ton into the environmental trust for in-County waste deposited into
the landfill. Funds in the environmental trust are to be used within Riverside County for: (a) the protection, acquisition, preservation and restoration of parks, open space, biological habitat, scenic, cultural and scientific resources; (b) the
support of environmental education and research; (c) the mitigation of the landfill projects environmental impacts; and (d) the long term monitoring of the above mentioned items.



Finally, MRC has agreed to pay $.10 per ton of municipal solid waste deposited into the landfill to the National Parks
Foundation for the benefit of the National Park Service.



Other
major payments include: (i) partial funding for up to four rail crossings with $1 million due at the commencement of construction of the landfill and an additional $1 million over the course of landfill operations; (ii) financial assistance of
approximately $2 million for the host community, Lake Tamarisk, comprised of $500,000 due at the commencement of construction of the landfill plus approximately $1.5 million due over the course of landfill operations; and (iii) funding for the
non-California Environmental Quality Act reduction air emission programs of $600,000 over the course of operations.



The initial term of the Development Agreement is fifty years, although it may be extended to November 30, 2088, under certain conditions. The Development
Agreement allows the landfill project to receive up to 20,000 tons per day, 6 days a week, of non-hazardous municipal solid waste. However, during its first ten years of operation, the landfill owner is limited to 10,000 tons per day of non-County
waste plus the waste generated from within the County. After ten years, the owner of the landfill may request an increase in its daily tonnage, and an independent scientific panel will review such request. The panels review is effectively
limited to confirming substantial compliance with all developmental approvals, mitigation measures and permits.



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We anticipate that the Development Agreement will be fully executed and recorded just prior to the
closing of the sale of the landfill project. Riverside County has approved the assumption of the Development Agreement by the District as part of the sale of the landfill by MRC.



Successful Appeal of EIR Litigation. After the September 1997 approval of the new EIR for the landfill project,
litigation with respect to MRCs EIR certification resumed. In February 1998, the San Diego County Superior Court issued a final ruling with respect to this litigation, finding that the EIR certification did not adequately evaluate the landfill
projects impact on the Joshua Tree National Park and the threatened desert tortoise. MRC, Kaiser and Riverside County appealed the Superior Courts decision; opponents did not appeal.



On May 7, 1999, the Court of Appeal announced its decision to completely
reverse the San Diego Superior Courts prior adverse decision. The Court of Appeals decision, in effect, reinstated the EIR certification and reinstated the previous approval of the landfill project by Riverside County. In June 1999,
opponents to the landfill project requested that the California Supreme Court review and overturn the Court of Appeals decision. In July 1999, the California Supreme Court declined to review the Court of Appeals decision.



Federal Land Exchange and Ongoing Litigation. In October 1999,
Kaisers wholly owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. In this exchange, Kaiser transferred approximately 2,800 acres of Kaiser-owned property along its railroad
right-of-way to the BLM and a nominal cash equalization payment in exchange for approximately 3,500 acres of land within the landfill project area. The land exchanged by Kaiser was identified as prime desert tortoise habitat and was a prerequisite
to completion of the permitting of the landfill project. With the land exchange completed, the Eagle Mountain Site consists of approximately 10,108 acres with 8,636 acres held in fee (which includes the Eagle Mountain Townsite) and approximately
1,472 acres held as various mining claims.



Following
completion of the land exchange, two lawsuits were filed challenging it and requesting its reversal. The plaintiffs argue that the land exchange should be reversed because the BLM failed to comply with the National Environmental Policy Act and the
Federal Land Management Policy Act. In November 2000, the Ninth Circuit Court of Appeals announced a decision in an unrelated case that may have a material adverse impact on Kaisers federal land exchange litigation and the pending sale to the
District. In Desert Citizens Against Pollution v. Bisson,(Ninth Circuit Court of Appeals, Case No. 97-55429), the Court of Appeals concluded, among other things, that the BLM did not properly value the land being acquired by the competing
Mesquite rail-haul landfill project and ordered a reversal of the land exchange. The court concluded that the appraisal should have considered the lands being acquired from the BLM as a landfill. The court did not, however, determine the proper
valuation of the exchanged lands. The plaintiffs in Kaisers federal land exchange litigation amended their respective complaints to include allegations that the appraisal used in Kaisers land exchange with the BLM is similarly defective.
In light of the Bisson decision, the BLM has completed an independent review of the highest and best use analysis of the lands involved in the exchange between Kaiser and the BLM. The BLMs independent appraiser concluded
that there would be no change in the determination of the highest and best use in the appraisal used in the land exchange if the property involved was expressly considered as a landfill site. Given all the facts and circumstances, the
independent appraiser concluded that there was no premium to be paid for the property interests exchanged by the BLM even if a portion of such property interests were a part of a planned landfill. The scheduled briefing in this case was completed in
January 2003. No activity took place with regard to this case in 2004 and, as of the date of this Report on Form 10-KSB, we are still awaiting a decision from the court.



In addition to the federal land exchange litigation, the Company, along with the U.S. Department of Interior, the BLM, the
District and Metropolitan Water District of Southern California, received a letter in September 2002 from the Center for Biological Diversity, the Sierra Club, and Citizens for the Chuckwalla Valley (Complaining Groups) declaring their
intent to sue for violations of the Endangered Species Act in regard to actions or inactions related to the railroad that would serve the landfill project. Among other things, it is alleged that there has been a failure to comply with a biological
opinion issued by the U.S. Fish & Wildlife Service and that the BLM has failed to enforce the terms of that biological opinion. In summary, the Complaining Groups are demanding enforcement of the biological opinion or revocation by the BLM of
the right-of-ways granted for the



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existing Eagle Mountain railroad and the Eagle Mountain road. The biological opinion contains, among other items,
mitigation measures for the desert tortoise which could require substantial expenditures.



In reviewing the complaints of the Complaining Groups, the BLM out of an abundance of caution conducted an informal consultation with the U.S. Fish & Wildlife Service with respect to the biological opinion.
Although neither the construction of the landfill project nor the regular use of the railroad have commenced, the BLM requested that the Company develop a maintenance schedule for the railroad that would include addressing, among other things, the
particular concerns of culverts and rail line ballast. The Company submitted a proposed schedule.



On April 8, 2004, the Complaining Groups sent a letter to the BLM and the Company again declaring their intent to sue for violations of the Endangered
Species Act and asking that the same type of actions be taken against the Company as demanded in the September 2002 letter. This new letter was apparently triggered by the activities undertaken to preserve and protect the railroad from further
damage such as the cleaning out of blocked culverts after the flash floods that occurred in the area in 2003 that damaged a limited portion of the rail line. In June 2004, the Company appropriately responded to this notice of intent to sue letter
and further voluntarily agreed to undertake certain measures to alleviate concerns with respect to the desert tortoise. In 2004, the Company completed certain of the voluntary measures and the Complaining Groups have not pursued any further action
with respect to their April 8, 2004 letter. See Legal Proceedings - Eagle Mountain Landfill Project Land Exchange Litigation.



Eagle Crest Energy Company. In November 2000, Eagle Crest Energy Company, referred to as ECEC, a previous opponent to the landfill project, filed
an application for a preliminary permit with the Federal Energy Regulatory Commission, referred to as FERC, for a proposed 1,000 mega-watt hydroelectric pump storage project and ancillary facilities. The proposed ECEC project would utilize two of
the mining pits and other property at the Eagle Mountain Site, portions of which are currently leased to MRC and the subject of the pending sale to the District. The Company has not agreed to sell or lease this property to ECEC. This project was
essentially the same project that ECEC previously proposed and was dismissed by the FERC in July 1999. However, as a result of the land exchange with the BLM, there is no title reservation on any portion of the property. FERC issued a preliminary
permit to ECEC in June 2001. We, along with others, objected to the ECEC project and intervened in the matter. ECECs preliminary permit, expired in the second quarter of 2004. However, shortly after the expiration of such preliminary permit
ECEC filed an application with FERC for a new preliminary permit for the same project and on March 7, 2005, FERC granted a preliminary permit to ECEC. This is the third time ECEC will have been granted a preliminary permit for this potential
project. As in previous years, to managements knowledge, there was no material activity by ECEC in 2004 with regard to substantively processing its permit application. We, along with others, have again intervened in this matter.



Ongoing Considerations if the Sale is not Completed



Successful resolution of the federal land exchange litigation could continue
to take a number of years. Due to delays in closing on the sale to the District, the additional threatened Endangered Species Act litigation, and the need to repair the flood damage to the railroad, we anticipate that additional investment in MRC
will be necessary. We can make no assurance that sufficient and suitable funding will be available to MRC in order to allow it to continue to pursue the landfill project, to undertake the major railroad repairs and to resolve the federal litigation
and any new litigation. Alternatively, MRC could decide not to pursue the continued development of the landfill project, which would likely materially hinder MRCs ability to realize any value from the landfill project.



Governmental Regulation/Permitting. In the development and maintenance
of our assets, we and other entities on which we rely are subject to extensive, expensive and increasingly stringent regulation by federal, state and local authorities. Entities operating in this arena must obtain and maintain numerous local, state
and federal governmental permits and consents. Failure to comply with these regulations could result in the loss of a needed license, permit or consent or could result in significant monetary fines. Examples of the wide ranging regulations which
apply to the development and maintenance of our assets include:



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| |  |  | Waste collection - local agencies require licenses to collection vehicles and monitor truck safety.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Landfill activities (such as the Eagle Mountain landfill project) - local and state authorities require permits and consents.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | Waste transfer, interim processing, resource recovery and disposal - we and the entities on which we rely must comply with zoning and land-use restrictions.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General - Air, noise and water pollution regulations may also affect our business from time to time.
| | - |  | ----------------------------------------------------------------------------------------------------



Competition. The waste management industry is highly competitive, with a few large, integrated waste management firms
and a significant number of smaller, independent operators. The number of competitors has decreased over the past five years, but their size has greatly increased as a result of mergers and acquisitions of waste hauler and management companies. Due
to this increasing competition and industry consolidation, there are fewer independent waste management operating companies than in the past and, as a result, fewer potential buyers of our waste related assets. If this reduction of industry
operators negatively impacts our ability to operate or sell our assets on favorable terms, our results will likely be materially and adversely affected.



Currently, the Mesquite Regional Landfill located in Imperial County, California is the only other competing rail-haul project proposed in California. In
late 2002, the District purchased the Mesquite Regional Landfill at a price and on terms substantially similar to the pending sale of the landfill project by MRC to the District. We understand that the District has contracted and has commenced the
engineering and other work necessary to be in a position to begin construction on the Mesquite project. The impact, if any, of the Districts ownership of the Mesquite landfill project on its purchase of the Eagle Mountain landfill project is
unknown.



Truck-haul landfills in the Los Angeles Basin are
also competitors to the proposed rail-haul landfills.



Risks. As is discussed in this Report on Form 10-KSB, there are numerous risks associated with MRC and the landfill project, including the competition represented by the Mesquite rail-haul landfill project, which the District owns
and is developing. There are also numerous risks and contingencies associated with the pending sale of the landfill project to the District. There can be no assurance that all outstanding matters currently preventing an initial closing with the
District will be resolved to the satisfaction of the parties. Accordingly, there can be no assurance that the sale to the District will occur or that the current terms of the pending transaction may not be significantly modified as a result of
future discussions with the District or as to the timing of the receipt of the purchase price. There can be no assurance that the ownership and development of the Mesquite landfill by the District will not adversely impact the negotiations and the
closing on the sale of the landfill to the District. In addition, there are material litigation risks associated with the current federal land exchange litigation, including reversal of the completed land exchange and the threatened litigation over
the Endangered Species Act, all as discussed above. No assurance can be made that we will successfully and timely resolve these matters so as to avoid a material adverse effect on our current plan to sell the landfill to the District. If we are
unable to manage any of these risks or uncertainties, we may not be able to sell the landfill project and the value of our Class A Units could be materially reduced.



In addition, there are risks that the landfill project will be impacted by natural disasters like the floods that caused
significant damage to the rail line in 2003. Certain risks may be uninsurable or are not insurable on terms which we believe are economical.



As stated above, MRC will need additional funding to complete the landfill project, including funds to repair the flood damage sustained by the Eagle
Mountain rail line. There is no assurance that MRC can obtain additional funds through debt or equity financing on acceptable terms.



We are also dependent upon the continued services of our executive officers given the complex nature of the landfill project, the challenges it faces, and
the importance of historical information. The loss of the services of



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our executive officers, especially without advance notice, could materially and adversely impact this project and
well as our other business.



WEST VALLEY MATERIALS RECOVERY FACILITY AND
TRANSFER STATION



Background



West Valley MRF, LLC, referred to as West Valley, was formed in
June 1997 by Kaiser Recycling Corporation (now Kaiser Recycling, LLC (formerly Kaiser Recycling, Inc.)), a wholly-owned subsidiary of Kaiser, and West Valley Recycling & Transfer, Inc., a wholly-owned subsidiary of Burrtec Waste Industries, Inc.
This entity was formed to construct and operate the materials recovery facility referred to as the West Valley MRF. Under the terms of the parties business arrangements, Kaiser Recycling and Kaiser remain responsible for any pre-existing
environmental conditions and West Valley MRF is responsible for environmental issues that may arise related to any future deposit or release of hazardous substances. Kaiser and Burrtec have each separately guaranteed the prompt performance of their
respective subsidiarys obligations.



Phase 1 of the West
Valley MRF, which included a 62,000 square foot building, sorting equipment and related facilities for waste transfer and recycling services was built and equipped in 1997 for a total cost of approximately $10.3 million. Phase 2 of the West Valley
MRF was completed in 2001 and increased the processing facility by an additional 80,000 square feet and included the installation of new recycling lines that increased the capacity of the facility to approximately 5,000 tons per day. Phase 2 was
completed for a total approximate cost of $11 million. West Valley MRF is currently processing, on average, approximately 4,200 - 4,400 tons of municipal solid and green waste per operating day.



The West Valley MRF generates cash flow in excess of that necessary to fund
its cost of operations. Furthermore, the West Valley MRF should distribute sufficient cash to cover a significant portion of Kaiser LLCs foreseeable general and administrative costs. In 2004, the West Valley MRF distributed a total of
$2,250,000 in cash to Kaiser.



The Operating Agreement for the
West Valley MRF provides the opportunity for either Burrtec or Kaiser to buy the other partys interest in the West Valley MRF at fair market value in the event a party desires to accept an offer to buy its interest in the West Valley MRF, in
the event of default by a party under the Agreement that is not cured within a specified time period or, in some circumstances, in the event there is a proposed transfer or deemed transfer. For example, a change in the control of Kaiser to a company
that is in the waste management business could trigger Burrtecs option to purchase our interest in the West Valley MRF. In the event a party exercises its right to purchase upon the occurrence of an uncured default, a discount to fair market
value may be applicable.



Financing



Most of the financing for the West Valley MRF was obtained through
California Pollution Control Financing Authority tax exempt bonds. Approximately $9,500,000 in bonds were issued in June 1997 (Phase 1), and approximately $8,500,000 in bonds were issued in May 2000 (Phase 2). The interest rate for the Bonds varies
weekly. The rates for 2004 ranged from 1.32 to 2.2%. Bonds issued for Phase 1 have a stated maturity date of June 1, 2012, and bonds issued for Phase 2 have a stated maturity date of June 1, 2030, although West Valley MRF is required, pursuant to an
agreement with Union Bank, to annually redeem a portion of the Bonds.



The bonds are secured by a pledge and lien on the loan payments made by West Valley MRF and funds that may be drawn on an irrevocable direct pay letter of credit issued by Union Bank of California, N.A. The bonds are backed by a letter of
credit issued by Union Bank. Kaiser and Burrtec have each severally guaranteed fifty percent (50%) of the principal and interest on the bonds to Union Bank in the event of a default by West Valley MRF.



West Valley MRF and Union Bank have executed a Reimbursement Agreement that,
among other things, sets the terms and conditions whereby West Valley MRF:



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| |  |  | is required to repay Union Bank in the event of a draw under the letter of credit;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | grants Union Bank certain security interests in the income and property of West Valley MRF;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | agrees to a schedule for the redemption of the Bonds; and
| | - |  | ---------------------------------------------------------



| |  |  | agrees to comply with certain financial and other covenants.
| | - |  | ------------------------------------------------------------



Kaiser and Kaiser Recycling have also provided environmental guaranty agreements to Union Bank. Under these agreements, Kaiser and Kaiser Recycling are
jointly and severally liable for any liability that may be imposed on Union Bank for pre-existing environmental conditions on the West Valley MRFs property acquired from Kaiser Recycling that the West Valley MRF fails to timely address.



Competition



Burrtec owns and operates a transfer and limited materials recovery facility
in Agua Mansa, California. This facility is located approximately 15 miles from the West Valley MRF and could compete, in very limited areas, for waste that might otherwise go to the West Valley MRF. To date, the materials recovery facility in Agua
Mansa has had minimal impact on the West Valley MRFs market for customers. Burrtec also owns or controls materials recovery facilities in Victorville, California and in the Coachella Valley of California, which are not considered to be
competitors of the West Valley MRF. Other entities have from time to time proposed to develop materials recovery facilities that would serve the same broad geographic area as that served by West Valley. Except for a relatively small materials
recovery facility located in Colton, California owned by Republic Industries, we believe that none of them has yet completed the permitting process. However, the materials recovery facility in Colton is a competitor and one municipality formerly
using the West Valley MRF has contracted for its recycling services with the Colton facility.



Tar Pits Parcel



Currently, the only remaining property we own at the Mill Site Property is an approximate 5 acre parcel known as the Tar Pits Parcel. Under our agreement with the West Valley MRF, we are obligated to contribute the Tar Pits Parcel to the
West Valley MRF, at its option, upon the environmental remediation of the property. Except for ongoing inspection and monitoring activities, remediation of the Tar Pits Parcel was completed in 2002 at CCG Ontario, LLCs, (referred to as CCG),
expense. CCG is responsible for this propertys environmental remediation pursuant to the terms of the purchase agreement entered into between CCG and Kaiser in August 2000 relating to Kaisers sale of approximately 588 acres of the Mill
Site Property. See DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill Site Environmental Matters.



EAGLE MOUNTAIN TOWNSITE



We own and operate the Eagle Mountain Townsite through a wholly-owned subsidiary, Kaiser Eagle Mountain, LLC. The Eagle Mountain Townsite covers
approximately 1,300 acres, consists of more than 300 houses (of which approximately 100 have been renovated for current occupancy), a water supply and sewage treatment system, an office building, machine shops, school facilities and other
structures. As part of the Districts purchase of the landfill project from MRC, the District will acquire or control a substantial portion of this infrastructure, including utility and water distribution facilities, which serves the landfill
property as well as the Eagle Mountain Townsite. However, the District will not be acquiring any houses as a part of the landfill property.



Until December 31, 2003, a portion of the Eagle Mountain Townsite was leased on a month-to-month basis to Management Training Corporation
(MTC), a company that operated a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from Californias 2003 - 2004 state budget as of December 31, 2003, including the
private prison located at Eagle Mountain. Accordingly,



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effective December 31, 2003, the private prison at Eagle Mountain was closed. MTC surrendered most of the property it
leased as of December 31, 2003, with the exception of several houses that it continued to lease through during the first quarter of 2004. As of the date of this Report on Form 10-KSB, we have not had any success in finding a replacement tenant
although efforts are ongoing. With the prisons closure, during 2004 we developed and implemented a plan to mothball the Eagle Mountain Townsite with Eagle Mountains ongoing operations and staffing being reduced.



Other than possible environmental remediation associated with asbestos
containing products in certain structures, we are not aware of any material environmental remediation required at the Eagle Mountain Townsite that could require us to expend substantial funds or that could lead to material liability. However, under
the terms of a reclamation plan for a portion of the former mine site there are ongoing reclamation activities for which the Company has recorded a reserve for the estimated cost of such activities.



OTHER KAISER ASSETS



Land adjacent to the Eagle Mountain Site



In and around the Eagle Mountain Townsite area, Kaiser has various possessory mining claims aggregating approximately 1,472 acres and holds approximately
7,344 acres in fee simple. This property is in addition to the approximate 1,300 acre Eagle Mountain Townsite. Approximately 4,654 acres of this property will be sold as a part of the sale of the landfill project.



Kaiser owns four deep water wells, two of which are currently being used, and
two booster pump stations that serve the Eagle Mountain site and the Eagle Mountain Townsite.



Rock/Aggregate



As a
result of previous mining at Eagle Mountain, millions of tons of rock of various sizes have been stock piled on portions of the property around the Eagle Mountain Townsite. At the present time there are no active buyers for the rock.



Lake Tamarisk, California



Lake Tamarisk is an unincorporated community located two miles northwest of
Desert Center, California and approximately 8 miles from the Eagle Mountain mine. This community has 150 improved lots situated around two recreational lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home park, the community
has an average year-round population in excess of 150. Lake Tamarisk Development, LLC, a wholly owned subsidiary of Kaiser, owns: (i) 74 single family improved lots, including, one residential structure; (ii) a 3.47 acre multi-family lot; (iii) 3
commercial lots totaling approximately 12.26 acres; (iv) an approximate 170 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk; (v) an approximate 200 acre unimproved parcel adjoining the nine-hole Lake
Tamarisk golf course; and (vi) an approximate 39 acre unimproved parcel adjacent to Lake Tamarisk.



HISTORICAL OPERATIONS AND COMPLETED TRANSACTIONS



Water Resources



Background. Until the sale of its ownership interest in Fontana Union Water Company, or Fontana Union, to Cucamonga County Water District, referred to as Cucamonga, in March 2001 for $87.5 million or approximately $10,860
per share of Fontana Union stock, the Companys results of operations depended, in large part, on water rights and successfully leasing such rights. Concurrently with the sale of its Fontana Union stock, the Company also received approximately
$2.5 million in payments under its water lease with Cucamonga. Thus, the following information concerning Fontana Union and Cucamonga is provided for historical purposes and to assist the reader as to the context of the Fontana Union stock sale.



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Fontana Union owns water rights to produce water from four distinct surface and subsurface sources of
water near Fontana, California. Kaisers ownership of Fontana Union entitled it to receive, annually, a proportionate share of Fontana Unions water.



Lease of Interest in Fontana Union to Cucamonga County Water District. In 1989, Kaiser leased all of its then owned shares of Fontana Union
stock to Cucamonga, a local water district, under the terms of the 102-year take-or-pay lease, referred to as the Cucamonga Lease. Under this lease, Cucamonga was entitled to receive all of our proportionate share of water from Fontana
Union (including shares acquired after 1989) with lease payments based upon fixed quantities of water at a rate of 68.13% of rate charged by the Metropolitan Water District of Southern California, the MWD, for untreated,
non-interruptible water as available through Chino Basin Municipal Water District.



Under the terms of the Cucamonga Lease, our future lease revenue increases depended primarily upon any adjustments in the MWD water rates and other fees upon which the lease rate was calculated. The MWD rate
established for untreated, non-interruptible water is based on a number of factors, including the MWD need for funds to finance capital improvements and to cover its fixed operational and overhead costs.



On July 1, 1995, MWD implemented changed rates and a new rate structure which
was the subject of a dispute between Kaiser and Cucamonga. In December 2000, MWD approved another major rate restructuring. Without the Fontana Union stock sale, we anticipated that we would be engaged in an additional dispute with Cucamonga as a
result of MWDs continued adoption of major rate restructuring programs every few years.



The Cucamonga Lease Dispute.As a result of these July 1995 changes in the MWD rates, we asserted that all the changed rates and items implemented by MWD, which must be paid in order to receive untreated,
non-interruptible water from MWD, were to be included in the calculation of the MWD rate payable under the terms of the Cucamonga Lease. Cucamonga disputed our interpretation and asserted that our interpretation of the Cucamonga lease in relation to
the changes effected in 1995 by the MWD would result in a rate increase to Cucamonga in excess of the 1995 MWD rate of increase Cucamonga asserted was the appropriate rate increase (the Dispute). This Dispute, impacted all payments made
by Cucamonga subsequent to July 1995. Because Kaiser and Cucamonga were unable to resolve this Dispute out of court, in 1996 Kaiser instituted litigation against Cucamonga in San Bernardino County Superior Court.



After a trial on the matter in March 1998, the Court concluded that the MWD
rate, as defined in the Cucamonga lease, was discontinued effective July 1, 1995, as a result of the rate restructuring implemented by MWD.



Fontana Union Stock Sale.Prior to the determination of the outcome of an arbitration over the new MWD rate that would be used under the terms of
the Cucamonga Lease, the parties negotiated a resolution to the Dispute with the sale of the Companys Fontana Union Stock to Cucamonga for a purchase price of $87.5 million. In addition, Cucamonga agreed to pay $2.5 million in payments under
the Cucamonga Lease. Kaiser Inc.s stockholders approved the Fontana Union stock sale in February 2001, and the Fontana Union stock sale was completed on March 6, 2001.



Mill Site Property



Background. From 1942 through 1983, KSC operated a steel mill in Southern California near the junction of the Interstate 10 and Interstate 15
freeways and approximately three miles to the northeast of Ontario International Airport. The original Mill Site Property owned by Kaiser after it emerged from the KSC bankruptcy consisted of approximately 1,200 acres and portions of the property
required substantial environmental remediation. Except for the approximate five acre Tar Pits Parcel, we no longer own any portion of the Mill Site Property. The disposition of the Mill Site Property by us over the past several years is described
below.



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The California Speedway Property. In November 1995, the Company contributed approximately 480
acres of the Mill Site Property in exchange for common stock in the company that became Penske Motorsports, Inc., a leading promoter of motor sports activities and an owner and operator of automobile racetracks. In December 1996, the Company sold to
PMI approximately 54 additional acres of the Mill Site Property, for cash and additional stock in PMI. The California Speedway, a world class motor sports speedway, was constructed on this approximate 534 acres of the Mill Site Property.



In July 1999, International Speedway Corporation, referred to as ISC,
through a wholly owned subsidiary, acquired PMI. Kaiser Inc., as a stockholder in PMI, voted for the merger and elected to receive a portion of the merger consideration in cash and a portion in ISC stock. In the transaction Kaiser received
approximately $24 million in cash and 1,187,407 shares of ISC Class A common stock, resulting in a gain of $35.7 million. Subsequent to PMIs acquisition, we sold all of the shares we owned in ISC at an average price of approximately $53.52 per
share, realizing an additional gain of approximately $6.6 million. The gross cash proceeds we received in 1999 from the merger and the subsequent sale of ISC stock totaled approximately $88 million.



The NAPA Lots. In conjunction with the permitting and development of
the California Speedway, we permitted and developed three parcels known as the NAPA Lots for sale. In September 1997, the largest NAPA Lot, consisting of approximately 15.5 acres, was sold for a gross sale price of approximately $2.9
million. In November 1999, another of the NAPA Lots, consisting of approximately 7.8 acres, was sold for a gross cash sale price of approximately $1.7 million. The remaining NAPA Lot of approximately 5.2 acres was sold in December 1999 for a cash
sale price of approximately $1.1 million.



CCG Ontario, LLC
(CCG).In August 2000, we sold approximately 588 acres of our remaining Mill Site Property to CCG for $16 million in cash plus the assumption of virtually all known and unknown environmental obligations and risks associated with the property as
well as certain other environmental obligations. Included in the land sold to CCG were ancillary items such as the sewer treatment plant and the water rights associated with the property. As part of the transaction, CCG obtained environmental
insurance coverage and other financial assurance mechanisms related to the known and unknown environmental obligations and risks associated with the transferred property as well as other environmental obligations subject to limited exceptions. In
addition, before this sale transaction, we were party to a consent order with the California Department of Toxic Substances Control, referred to as the DTSC, which was essentially an agreement to investigate and remediate property. As part of
the sale transaction, this consent order and our financial assurances to the DTSC were terminated, and CCG entered into a new consent order with the DTSC and provided the necessary financial assurances. For additional information, see Part I,
Item 1. DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill Site Environmental Matters below.



Rancho Cucamonga Parcel. In October 2000, the Company completed the sale of approximately 37 acres of the Mill Site Property, known as the Rancho
Cucamonga parcel, to The California Speedway Corporation. The gross cash sale price was approximately $3.8 million.



West Valley MRF Property. At the time of the formation of West Valley in 1997, Kaiser Inc. contributed 23 acres of the former Mill Site Property,
on which a 62,000 square foot building, sorting equipment and related facilities were constructed during Phase 1 of the West Valley MRF development. Under the terms of our agreements with West Valley, we contributed additional land approximating 7
acres after that lands environmental remediation in 2000. We are also obligated to contribute the Tar Pits Parcel to West Valley MRF at its option, upon the environmental remediation of the Tar Pits Parcel in a manner suitable for use by West
Valley MRF. The Tar Pits Parcel is the only acreage that we continue to own at the former Mill Site Property.



Mill Site Environmental Matters



The operation of a steel mill by the Companys predecessor, KSC, resulted in known contamination of limited portions of the Mill Site Property. As discussed above, the Companys consent order with the DTSC was terminated in
connection with the sale of approximately 588 acres of the remaining Mill Site Property to CCG for $16 million in cash plus the assumption of virtually all known and unknown environmental obligations and risks



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associated with the property as well as certain other environmental obligations. Concurrently with that termination,
CCG entered into a new consent order with the DTSC, in which CCG assumed responsibility for all future investigation and remediation of the Mill Site Property it purchased, as well as various other items covered under its CCG consent order. In
addition, CCG assumed and agreed to indemnify the Company against various contractual environmental indemnification and operations and maintenance (O&M) obligations the Company has with purchasers of other portions of the Mill Site
Property. In connection with this land sale, CCG entered into a fixed price environmental remediation services agreement with IT Corporation (IT), an environmental contractor, to remediate the known environmental conditions on the
property. IT filed for bankruptcy in January 2002, but certain of the assets of IT were eventually acquired by The Shaw Group, including the fixed price environmental contract. Accordingly, the fixed price environmental remediation services contract
continues to be performed. In addition, CCG is obligated to remediate the Tar Pits Parcel pursuant to a solidification and capping strategy. The remediation of the Tar Pits parcel is also covered by the fixed price environmental remediation
contract. Except for continuing inspection and maintenance obligations, the remediation of the Tar Pits Parcel has been completed.



Many of the environmental obligations assumed by CCG are backed, in whole or in part, by various financial assurance mechanisms or products. Examples of
the financial assurances or products provided, include, but are not limited to: a performance bond issued to assure performance under the environmental remediation service agreement; a real estate environmental liability insurance policy with a
policy limit of $50 million; a remediation stop loss policy covering $15 million in cost overruns for known remediation, which known remediation was estimated to be approximately $15 million; and a limited corporate guaranty by CCGs parent
company. All financial assurance mechanisms or products are subject to their terms. In addition, there are certain exceptions to CCGs assumption of the Companys prior environmental obligations such as any certain environmentally related
litigation outstanding as of the date of the closing of the land sale to CCG.



With regard to groundwater, we previously settled certain obligations of groundwater contamination with the California Regional Water Quality Control Board, or the RWQCB, concerning a plume (containing total dissolved
solids, sulfate, and organic carbon) to which the historic steel operations contributed. The settlement required us to make a $1.5 million cash payment, which was made in February 1994, and the contribution of 1,000 acre feet of water annually for
25 years to a water quality improvement project. In 1999, approximately 20 years ahead of schedule, we contributed the full 25,000 acre feet required under the terms of the settlement agreement with the RWQCB. This contribution of water satisfied
all of the Companys obligations to the RWQCB under the terms of the settlement agreement. CCG did not assume any of the Companys future obligations, if any, with regard to the specified plume, and we retained potential liability from
certain third party claims alleging damages from the identified groundwater plume. One such claim was asserted against the Company and was settled in 2004.



As a result of the transaction with CCG and the Companys previous remediation activities in 2000, the Companys estimated environmental
liabilities were reduced by approximately $21.9 to $4.5 million. These potential environmental liabilities included, among other things, environmental obligations at the Mill Site Property that were not assumed by CCG, such as any potential third
party damages from the identified groundwater plume discussed above, environmental remediation work at the Eagle Mountain Site, and third-party bodily injury and property damage claims, including asbestos claims not covered by insurance and/or paid
by the KSC bankruptcy estate.



In keeping with our goal to
minimize our potential liabilities, including the potential liabilities outlined above, we purchased effective June 30, 2001, a 12-year $50 million insurance policy, which is expected to cover substantially any and all environmental claims (up to
the $50 million policy limit) relating to the historical operations of the Company. See MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in Part II, Item 6., of this Report on Form 10-KSB.



The Company is involved, from time-to-time, in legal
proceedings concerning environmental matters. See Part I, Item 3. LEGAL PROCEEDINGS.



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Employees



As of March 22, 2005, Kaiser LLC had no employees. However, Kaiser LLC leases employees through Business Staffing, Inc., a subsidiary of Kaiser LLC, and
reimburses Business Staffing for the costs associated with 5 full-time (4 at Ontario, California and 1 at Eagle Mountain, California) and 4 part-time employees (3 in Ontario, California and 1 at Eagle Mountain, California). All of the full-time and
part time employees were previously employed by Kaiser Inc.



Item 2. DESCRIPTION OF PROPERTIES



Office
Facilities



Our principal offices are located at 3633 East
Inland Empire Boulevard, Suite 480, Ontario, California, 91764. The Company currently leases approximately 2,950 square feet in Ontario, California at a current cost of approximately $6,700 per month. The lease expires on August 31, 2007, with the
right to terminate the lease upon prior written notice effective as of February 28, 2006. Our subsidiary, Kaiser Eagle Mountain, LLC, also currently maintains an office at the Eagle Mountain Site. We own the building used as an office at the Eagle
Mountain Site.



Eagle Mountain, California



The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle
Mountain Townsite are located in Riverside County, approximately ten miles northwest of Desert Center, California. Desert Center is located on Interstate 10 between Indio and Blythe. The heavy duty maintenance shops and electrical power distribution
system have been kept substantially intact since the 1982 shutdown. The Company also owns several buildings, a water distribution system, a sewage treatment facility, and related infrastructure. The District, upon its purchase of the landfill
project, will own a substantial portion of this infrastructure. Accordingly, the District and the Company are negotiating a number of agreements addressing access and joint use of infrastructure facilities. The Eagle Mountain Townsite includes more
than 300 single family homes, approximately 100 of which have been renovated. However, due to the closure of the private prison at the Eagle Mountain Townsite effective December 31, 2003, we developed and implemented a plan to mothball the Townsite
in 2004.



During 2003 a portion of the Eagle Mountain Townsite
was leased on a month-to-month basis to MTC that operated a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from Californias 20032004 state budget as of December 31,
2003, including the private prison located at Eagle Mountain. Accordingly, effective December 31, 2003, the private prison at Eagle Mountain was closed with most of the leased property returned to us as of that date, with the exception of several
houses that it continued to lease during the first quarter of 2004. During 2004 we did not have any success in finding a replacement tenant but our efforts to find a replacement tenant are continuing. However, since we were not successful in 2004 in
finding a replacement tenant we developed and implemented a plan to mothball the Eagle Mountain Townsite which was completed in the fourth quarter of 2004. With the closure of the private prison, Eagle Mountains ongoing operations and staffing
were reduced.



In and around the Eagle Mountain area the
Company has various possessory mining claims of approximately 1,472 acres and holds approximately 8,644 acres in fee simple (which includes the approximate 1,300 acre Eagle Mountain Townsite). Approximately 4,654 acres of this property will be sold
as a part of sale of the landfill project, assuming such sale is completed. See Part I, Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project.



The Company owns four deep water wells, of which two are currently being used, and two booster pump stations that serve the
Eagle Mountain Site. See also Part I, Item 1. DESCRIPTION OF BUSINESS  Other Kaiser Assets.





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Railroad



To transport ore from the Eagle Mountain mine to the mill site (see below), Kaiser Steel Corporation constructed a 52-mile heavy duty rail line connecting
the mine to the main Southern Pacific rail line at Ferrum, California. We own in fee approximately 10% of the 52-mile railroad right-of-way. The major remaining portion of the railroad right-of-way consists of various private easements and an
operating right-of-way from the BLM. The railroad is included in the lease to MRC and, to the extent reasonably possible, will be transferred to the District upon the consummation of the sale of the landfill project if the sale is completed.
Portions of the railroad suffered significant flood damage in 2003. For additional information, see Part I, Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale  Flood Damage to Railroad.



Fontana, California



With exception of the approximate 5 acre Tar Pits Parcel, the Company no longer owns any property at the former Mill Site
Property. With the exception of ongoing maintenance and inspection obligations, the environmental remediation of this parcel has been completed. See Part 1, Item 1. DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions -
Mill Site Property.



Lake Tamarisk, California



Lake Tamarisk is an unincorporated community located two miles northwest of
Desert Center, California and approximately 8 miles from the Eagle Mountain mine. This community has 150 improved lots situated around two recreational lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home park, the community
has an average year-round population in excess of 150. Lake Tamarisk Development, LLC, a wholly owned subsidiary of Kaiser, owns: (i) 74 single family improved lots, including, one residential structure; (ii) a 3.47 acre multi-family lot; (iii) 3
commercial lots totaling approximately 12.26 acres; (iv) an approximate 170 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk; (v) an approximate 200 acre unimproved parcel adjoining the nine-hole Lake
Tamarisk golf course; and (vi) an approximate 39 acre unimproved parcel adjacent to Lake Tamarisk.



Item 3. LEGAL PROCEEDINGS



In the
normal course of our business we are involved in various claims and legal proceedings. A number of litigation matters previously reported, such as the City of Ontario claim and the Explorer Pipeline litigation, were settled or dismissed in 2004.
Significant legal proceedings, including those which may have a material adverse effect on our business or financial condition, are summarized below. However, the following discussion does not, and is not intended to, discuss all of the litigation
matters to which we may be or become a party. Should we be unable to resolve any legal proceeding in the manner we anticipate and for a total cost within close proximity to any potential damage liability we have estimated, our business and results
of operations may be materially and adversely affected.



Litigation



Eagle Mountain Landfill Project Land Exchange
Litigation. In October 1999, Kaisers wholly-owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. This completed land exchange has been challenged in two separate federal
lawsuits.



Federal Land Exchange Litigation. There are
two separate, but related, litigation matters in federal district court involving the completed land exchange between Kaiser Eagle Mountain, Inc, and the BLM. The details of each case are as follows:



A. Donna Charpied; Laurence Charpied; The Desert Protection Society
(Plaintiffs) v. United States Department of the Interior; Bureau of Land Management; Bruce Babbitt, in his official capacity as Secretary of the Interior; Tom Fry, in his official capacity as Acting Director of the Bureau of Land Management; Al
Wright,



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in his official capacity as Acting California State Director of the Bureau of Land Management; Tim Salt, in his
official capacity as Bureau of Land Management California Desert District Manager; Robert Stanton, in his official capacity as Director of the National Park Service, Kaiser Eagle Mountain, Inc., and Mine Reclamation Corporation (Defendants), (United
States District Court for the Central District of California, Riverside Division, Case No. EDCV 99-0454 RT(MCx)).



In December 1999, opponents of Eagle Mountain landfill project filed a lawsuit in the federal district court located in Riverside, California seeking to
stop the Eagle Mountain landfill project. In summary, the lawsuit challenges the BLMs approval of a land exchange between the Company and the BLM. The challenges are based upon, among other things, the Companys and the BLMs alleged
failure to comply with the National Environmental Policy Act and the Federal Land Policy Managements Act. The relief sought is an unwinding of the land exchange that was completed on October 13, 1999, and the award of attorneys fees. The
National Park Service has been dismissed out of the lawsuit. In Desert Citizens Against Pollution v. Bisson,(Ninth Circuit Court of Appeals, Case No. 97-55429), the Court of Appeals concluded, among other things, that the BLM did not
properly value the land being acquired by the competing Mesquite rail-haul landfill project and ordered a reversal of the land exchange. The court concluded that the appraisal should have considered the highest best use of the lands being acquired
from the BLM as a landfill. The court did not, however, determine the proper valuation of the exchanged lands. The plaintiffs in Kaisers federal land exchange litigation amended their respective complaints to include allegations that the
appraisal used in Kaisers land exchange with the BLM is similarly defective.



In light of the Bisson ruling, the BLM has completed an independent review of the highest and best use analysis consistent with that discussed in the Bisson decision.The BLMs
independent appraiser concluded that there would be no change in the determination of the highest and best use analysis in the appraisal used in the land exchange if the property involved was expressly considered as a land fill site.
Given all the facts and circumstances, the independent appraisal concluded that there was no premium to be paid for the property interests exchanged by the BLM even if a portion of such property interests were a part of a planned landfill.



All scheduled briefing for the case was completed in January
2003. As of the date of this Report on Form 10-KSB we are still awaiting a decision from the court. Kaiser is vigorously defending the litigation.



B. National Parks and Conservation Association (Plaintiff) v. Bureau of Land Management; United States Department of the Interior; Kaiser Eagle
Mountain, Inc.; and Mine Reclamation Corporation (Defendants), (United States District Court for the Central District of California, Riverside Division, Case No. EDCV 000041 VAP(JWJx)).



This lawsuit was brought by the National Parks Association and alleges
causes of action that are virtually identical to the causes of action asserted in the Charpied litigation. All scheduled briefing has been completed for this litigation. Kaiser is also vigorously defending this matter.



Threatened Endangered Species Act Litigation. The Company along with
the U.S. Department of Interior, the BLM, the Los Angeles County Sanitation District and Metropolitan Water District of Southern California, received a letter dated September 26, 2002, from the Center for Biological Diversity, the Sierra Club, and
Citizens for the Chuckwalla Valley (Complaining Groups) declaring their intent to sue for violations of the Endangered Species Act in regard to actions or inactions related to the railroad that would serve the Eagle Mountain landfill
project. Among other things, it is alleged that there has been a failure to comply with a biological opinion issued by the U.S. Fish & Wildlife Service and that the BLM has failed to enforce the terms of that biological opinion. In summary, the
Complaining Groups are demanding enforcement of the biological opinion or revocation by the BLM of the right-of-ways granted for the existing Eagle Mountain railroad and the Eagle Mountain road. The biological opinion contains, among other items,
mitigation measures for the desert tortoise which could require substantial expenditures.



In reviewing the complaints of the Complaining Groups, the BLM, out of an abundance of caution, conducted an informal consultation with the U.S. Fish & Wildlife Service with respect to the biological opinion.



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Although neither the construction of the landfill project nor the regular use of the railroad has commenced, the BLM
requested the Company to develop a maintenance schedule for the railroad that would address, among other things, the particular concerns of culverts and rail line ballast. The Company submitted a proposed schedule for such activities.



On April 8, 2004, the Complaining Groups sent a letter to the BLM and the
Company again declaring their intent to sue for violations of the Endangered Species Act and asking that the same type of actions be taken against the Company as demanded in the September 2002 letter. This new letter was apparently triggered by the
activities undertaken to preserve and protect the railroad from further damage such as the cleaning out of blocked culverts after the flash floods that occurred in the area in 2003 that damaged a limited portion of the rail line. In June 2004, the
Company appropriately responded to this notice of intent to sue letter and further voluntarily agreed to undertake certain measures to alleviate concerns with respect to the desert tortoise. In 2004, the Company completed certain of the voluntary
measures and the Complaining Groups have not pursued any further action with respect to their April 8, 2004 letter.



Tex Tin Claim. In February 2004 we received correspondence identifying the Company as a potentially responsible party for remediation and related
costs at a property in Texas known as the Tex Tin site. It appears that the basis for such identification is that the Company is considered the reorganized successor to KSC. However, the factual basis and the monetary extent of the alleged liability
are currently unknown. No legal action has been commenced against the Company. We have informed those giving the notice that we believe such liability, if any, was discharged in the bankruptcy of KSC. We also believe that there is coverage under our
existing insurance for this claim. There has been no material activity with regard to this claim other than the initial correspondence.



BKK Landfill Claim. On November 29, 2004, the Company received a letter from the California Department of Toxic Substances Control
(DTSC) notifying the Company that it was identified as a potentially responsible party, along with a number of other entities, with respect to the BKK Landfill Facility located in West Covina, California (the Facility). The
letter stated that the BKK Corporation announced that it would not be able to continue to operate the Facility after November 17, 2004. In December 2004, the Company, along with a number of other potentially responsible parties, was included in an
imminent and substantial endangerment order and remedial action order (the Order) issued by the DTSC. Based upon the information contained in the letter and made available in subsequently provided information, any activity which could
give rise to any possible liability occurred prior to the bankruptcy of Kaiser Steel Corporation and thus, such claim should be discharged by the bankruptcy. The Companys position was communicated to the DTSC. In January 2005, the DTSC in
effect concurred with the Companys position and informed the Company that it would remove the Company from the Order. Accordingly, with the removal of the Company from the Order, this matter is resolved with respect to the DTSC.



Asbestos Litigation. There are pending asbestos litigation claims,
primarily bodily injury, against Kaiser LLC and Kaiser Steel Corporation (the bankruptcy estate of Kaiser Steel Corporation is embodied in KSC Recovery, Inc.). There currently are approximately 17 active suits. Most of the plaintiffs allege that
they were aboard Kaiser ships or worked in shipyards in the Oakland/San Francisco, California area or Vancouver, Washington area in the 1940s and that the Company and/or KSC Recovery were in some manner associated with one or more shipyards or
has successor liability. However, we are beginning to see the focus of the claims shifting from ships and shipyards to other facilities such as the former Kaiser Steel Mill Site Property. Plaintiffs attorneys are increasingly requesting mill
site and Eagle Mountain related documents in an effort to build a war chest of documents for future litigation.



Most of these lawsuits are third party premises claims alleging injury resulting from exposure to asbestos or asbestos containing products and involve
multiple defendants. The Company anticipates that it, often along with KSC Recovery, will be named as a defendant in additional asbestos lawsuits. A number of large manufacturers and/or installers of asbestos and asbestos containing products have
filed for bankruptcy over the past several years, increasing the likelihood that additional suits will be filed against the Company. In addition, the trend has been toward increasing trial damages and settlement demands. Virtually all of the
complaints against us and KSC



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Recovery are non-specific, but involve allegations relating to pre-bankruptcy activities. It is difficult to
determine the amount of damages that we could be liable for in any particular case until near the time of trial; indeed, many of these cases do not include pleadings with specific damages. The Company vigorously defends all asbestos claims as is
appropriate for a particular case.



Of the claims resolved to
date, approximately 76% have been resolved without payment to the plaintiffs, and of the 45 cases that have been settled to date involving a payment made to plaintiffs, the settlement amount was $37,500 or less for 38 of such cases. The Company
believes that it currently has substantial insurance coverage for the asbestos claims and has tendered these suits to appropriate insurance carriers.



Slemmer Litigation. Thomas M. Slemmer, et al v. Fontana Union Water Company, et al., (San Bernardino County District Court, California, Case No. SCVSS
086856). The defendants in the lawsuit are Kaiser, Fontana Union Water Company, Cucamonga County Water Company, San Gabriel Valley Water and individuals serving on the Board of Directors of Fontana Union Water Company. In summary, plaintiffs
allege that they are the owners of 175 shares of the stock of Fontana Union Water Company, a mutual water company, and that the defendants conspired and committed acts that constitute an unlawful restraint of trade, a breach of fiduciary duty by the
controlling shareholders of Fontana Union and fraudulent business practices in violation of California law. Among other things, plaintiffs have requested $25,000,000 in damages and the trebling of such damages under California law. The lawsuit is
proceeding as a class action lawsuit. Discovery in the case is currently ongoing and a trial on the matter is currently scheduled to occur in 2005. We believe that the allegations against us are without merit and we will vigorously defend this suit.



Port of Oakland. The Port of Oakland has asserted, but
taken no action, with respect to a potential claim arising out of alleged contamination of soil from underground storage tanks. The Port of Oakland alleged that KSC used these tanks at property owned by the Port of Oakland and leased by Kaiser Steel
Corporation pursuant to a lease agreement that terminated in 1986. Based upon the communication received, the Port of Oakland claims damages of approximately $150,000 plus unknown potential remediation costs. We believe, based upon the information
provided to date, that the allegations are without merit and that any potential claim would be barred under the statute of limitations.



Port of Los Angeles. On March 21, 2003, KSC received a Third Party Complaint captioned Santa Monica Baykeeper, et al (Plaintiffs) v. Kaiser
International Corporation, et al (Defendants) / American Bulk Loading Enterprises, Inc. et al (Third-Party Plaintiffs) v. AMICOR, et al (Third Party Defendants) United States District Court Central District of California; Case Number CV-97-7761
DDP (RCx). The underlying litigation involves a citizens enforcement action commenced against the Port of Los Angeles, Kaiser International Company, and others by the Santa Monica Baykeepers for alleged contamination to the San Pedro Inner Harbor in
the Port of Los Angeles arising from the operation of a bulk loading facility. The Third Party Plaintiffs subsequently commenced litigation against KSC and thirty-nine other Third Party Defendants seeking recovery for any amount paid by the Third
Party Defendants under theories of equitable indemnity, negligence and contribution. While we understand the case is still open, the litigation is not being actively pursued against KSC.



London Market Claim. In 2002, litigation was commenced by Truck Insurance Exchange (Truck) against
Lloyds of London, and certain London Market Insurance Companies (collectively London Carriers), captionedTruck Insurance Exchange v. Fremont Indemnity, et al, Los Angeles Superior Court Case No. BC 260738. In essence Truck
was claiming that the London Carriers were obligated to participate in the payment of a litigation settlement that Truck had made. The London Carriers tendered the claim to the Company for indemnification pursuant to a 1995 settlement agreement
between the London Carriers and the Company. The Company in turn submitted the London Carriers claim to IMACC, which is a third party that we believe is ultimately responsible for the payment of any amount that it determined to be owed in
litigation. During the second quarter of 2003, the Truck litigation was dismissed because of Trucks failure to commence its law suit within the applicable statute of limitations. As of the date of this 10-KSB Report, IMACC has been reimbursing
the London Carriers for the reasonable attorneys fees and costs of this litigation. Truck appealed the trial courts decision to dismiss the case but such appeal was denied in an unpublished opinion. We understand that Truck is seeking to
appeal this matter to the California Supreme Court.



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Bankruptcy Claims. The bankruptcy estate of KSC was officially closed by order of U.S.
Bankruptcy Court for the District of Colorado on October 2, 1996. However, the bankruptcy case was reopened in 1999 in connection with certain litigation matters. Since that time, the bankruptcy case was again closed, however, the administration of
KSCs bankrupt estate will continue for several more years.



From time to time various environmental and similar types of claims that relate to Kaiser Steel pre-bankruptcy activities, are asserted against KSC and Kaiser LLC. Excluding the asbestos claims, there has been an average of two to four such
claims a year for the past several years. The Port of Oakland and the BKK Landfill claims are examples of the types of claims that are occasionally alleged to have arisen out of pre-bankruptcy activities. In connection with the KSC
plan of reorganization, Kaiser, as the reorganized successor to KSC, was discharged from all liabilities that may have arisen prior to confirmation of the plan, except as otherwise provided by the plan and by law. Although Kaiser believes that in
general all pre-petition claims were discharged under the KSC bankruptcy plan, there have been some challenges as to the validity of the discharge of certain specified claims, such as asbestos claims. If any of these or other similar claims are
ultimately determined to survive the KSC bankruptcy, it could have a materially adverse effect on Kaisers business and value.



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



None.



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PART II



Item 5. MARKET FOR THE COMPANYS EQUITY AND RELATED OWNER MATTERS



Kaiser Inc.s common stock commenced trading on the NASDAQ Stock Marketsmin the fourth quarter of 1990 under the symbol KSRI. In the merger, each Kaiser Inc. stockholder of record as of December 5, 2001, received $10.00
in cash plus one (1) Class A Unit in Kaiser LLC for each share of stock. The Class A Units are subject to significant trading restrictions and are not listed for trading on any securities exchange. As a result, Kaiser Inc.s common stock ceased
being publicly traded on November 30, 2001. Kaiser Inc. paid a $2.00 per share cash distribution to stockholders of record as of December 13, 2000.



The Class A Units are subject to substantial transfer restrictions and, therefore, the Class A Units are not traded on an established securities market
and are not readily tradable on a secondary market or the substantial equivalent thereof. However, we are aware that there have been a very limited number of private purchase and sale transactions since November 30, 2001, and, with one exception, no
single purchase and sale transaction has involved more than 15,000 Class A Units. In connection with the merger, the Class A Units were independently appraised and determined to have a value of $1.50 as of November 30, 2001.



As of March 22, 2005, there were approximately 3,108 holders of record of our
Class A Units which includes holders of Kaiser Inc. stock that have yet to convert their shares to Class A Units as a result of the merger.



As of March 22, 2005, KSC Recovery held 104,267 Class A Units that are outstanding but reserved for distribution to the former general unsecured creditors
of KSC pursuant to the KSC Plan.



We currently have no
immediate plans to make distributions but anticipate making distributions subsequent to receiving our share of the proceeds from the sale of the Eagle Mountain landfill project if such sale is completed or if other funds become available for
distribution in accordance with our cash maximum strategy.



Equity
Compensation Plan Information



As required by Item 201(d)
of Regulation S-K, the following table provides certain information as of December 31, 2004, with respect to our equity compensation plans under which equity securities of the Company are authorized for issuance.



|                                                           |  |                                                                                           |  |                                                                         |      |                                                                                                                                          |               |  
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------- | -
|Plan Category                                              |  | Number of securities to be issued uponexercise of outstanding options, warrantsand rights |  | Weighted-averageexercise price ofoutstandingoptions, warrantsand rights |      | Number of securitiesremaining available forfuture issuance underequity
compensationplans (excludingsecurities reflected in first column) |              
|Equity compensation plans approved by security holders     |  | 298,100                                                                                   |  | $                                                                       | 3.11 |                                                                                                                                          | 0             |  
|Equity compensation plans not approved by security holders |  | N/A                                                                                       |  |                                                                         | N/A  |                                                                                                                                          | 10,000 annual | 1

---

|1 | Each non-management member of the Board of Managers receives an annual grant of 2,500 Class A Units. In addition, beginning in
2004, 2,500 Class A Units are being granted to Mr. Fawcett. Accordingly, 10,000 Class A Units are currently being issued each year. For additional information, see Item 10. Executive Compensation  Manager Compensation.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Section 1: Operating Results



Summary Background



Kaiser, including its wholly-owned subsidiaries unless otherwise provided herein, is the reorganized successor to Kaiser Steel Corporation which was an
integrated steel manufacturer that filed for bankruptcy protection in 1987 (KSC). Since the KSC bankruptcy, we have been developing certain assets remaining after the bankruptcy. As of the date of this Report on Form 10-K/A, our
remaining principal assets include: (i) an 82.48% ownership interest in Mine Reclamation, LLC, which owns a permitted rail-haul municipal solid waste landfill located at the Eagle Mountain Site; (ii) a 50% ownership interest in the West Valley
Materials Recovery Facility and Transfer Station; and (iii) approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the County District No. 2 of Los Angeles County
(which we refer to as the District). As of December 31, 2004, we also had cash and cash equivalents, receivables and long-term investments in securities of approximately $14.3 million. As previously discussed, the permitted rail-haul municipal solid
waste landfill project at Eagle Mountain is currently under contract to be sold to the District for approximately $41 million.



We have sought to sell our assets at such times and on such terms as we believe will generate maximum value from those assets. In September 2000, Kaiser
Inc.s Board of Directors approved a strategy to maximize cash distributions to Kaiser Inc.s stockholders. We continue to pursue this strategy and seek to liquidate our remaining assets in order to maximize cash distributions to our
members.



Restatement of Certain Prior Financial Statements



In 2004 we filed amended reports on Form 10-Q/A and Form 10-K/A with the
Securities and Exchange Commission beginning with our report on Form 10-Q for the period ended June 30, 2001, through and including our Annual Report on Form 10-K for the period ended December 31, 2003 (collectively the Amended Reports).
The Amended Reports reflect that effective July 1, 2001, the Company changed its method of accounting for premium costs and claims under a twelve-year insurance policy purchased June 30, 2001, to amortize the premium costs over the term of the
underlying prospective insurance policy and record insurance recoveries on known claims liabilities when recoveries are estimable and claims liabilities are accepted by the insurance carrier. Previously, the Company had capitalized the cost of the
policy as prepaid insurance in other assets and reduced the prepaid insurance as claims were paid and insurance recoveries were collected.



Annual Report on Form 10-KSB



Kaiser qualifies as a small business filer under SEC rules and under such rules Kaiser is only required to include and discuss in this Annual Report on
Form 10-KSB its balance sheet for 2004 and its consolidated statements of operations, cash flows and changes in members equity for the years ended December 31 2004, and 2003. The reader of this Annual Report on Form 10-KSB is encouraged to
read our prior reports filed with the SEC for our financial statements for other previous years.



Primary Revenue Sources



Ongoing
Operations



Kaisers revenues from ongoing
operations are generally derived from the development of our long-term projects. Income from equity method investments reflects Kaisers share of income related to those equity investments (i.e., West Valley MRF) which we account for under the
equity method



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Interim Activities (net)



Revenues and expenses from interim activities are generated from various sources. Significant components of interim
activities have included housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain Site. Due to the interim nature of these activities, we are presenting these revenues net of their
related expenses. Due to the termination of the minimum security prison lease at the Eagle Mountain Townsite as of December 31, 2003, interim revenues have declined significantly in 2004. Expenses during 2004 at the Eagle Mountain Townsite remained
at historical levels while the Townsite operations were being closed down and its facilities were being mothballed.



Summary of Revenue Sources



Due to the developmental nature of certain of our projects and our recognition of revenues from bankruptcy-related and other non-recurring items,
historical period-to-period comparisons of total revenues may not be meaningful for developing an overall understanding of the Company. Therefore, we believe it is important to evaluate the trends in the components of our revenues as well as the
recent developments regarding our long-term ongoing and interim revenue sources. See Part I, Item 1. DESCRIPTION OF BUSINESS for a discussion of recent material events affecting the Companys revenue sources.



Results of Operations



Analysis of Results for the Years Ended December 31, 2004 and 2003



An analysis of the significant components of our resource revenues for the
years ended December 31, 2004 and 2003 follows:



|                                                        |  |      |           |   |      |   |           |              |  |      |   
|------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ------------ |  | ---- | --
|                                                        |  | 2004 |           |   | 2003 |   |           | % Inc. (Dec) | 
|Ongoing Operations                                      |  |      |           |   |      |   |           |              |  |      |   
|Income from equity method investment in West Valley MRF |  | $    | 2,310,000 |   |      | $ | 2,281,000 |              |  | 1    | % 
|Gain on Mill Site land sales                            |  |      | 375,000   |   |      |   | 107,000   |              |  | 251  | % 
|                                                        |  |      |           |   |      |   |           |              |  |      |   
|Total ongoing operations                                |  |      | 2,685,000 |   |      |   | 2,388,000 |              |  | 12   | % 
|                                                        |  |      |           |   |      |   |           |              |  |      |   
|Interim Activities (net)                                |  |      | (751,000  | ) |      |   | (114,000  | )            |  | (559 | )%
|                                                        |  |      |           |   |      |   |           |              |  |      |   
|Total resource revenues                                 |  | $    | 1,934,000 |   |      | $ | 2,274,000 |              |  | (15  | )%
|                                                        |  |      |           |   |      |   |           |              |  |      |   



Resource
Revenues. Total resource revenues for 2004 were $1,934,000 compared to $2,274,000 for 2003. Revenues from ongoing operations increased 12% for 2004 to $2,685,000 from $2,388,000 in 2003 while the loss from interim activities (net of related
expenses) increased 559% to $751,000 from $114,000 in 2003.



Ongoing Operations. Income from equity method investments increased by $29,000 to $2,310,000 due to increased equity income from the West Valley MRF during 2004 as compared to 2003. This increase in equity income in the West Valley
MRF is mainly due to: (a) a 12% increase in volume of waste processed at the West Valley MRF ($381,000); (b) an increase in net recycling sales mainly due to higher commodity prices ($270,000); and (c) a decrease in interest expense ($31,000). These
increases in revenues and reduction in interest expense were mostly offset by an increase in payroll and related operating expenses ($573,000) and an increase in partnership expenses ($80,000).



Gain on Mill Site land sales. The Company recognized gains of $375,000
and $107,000 during 2004 and 2003 from the sales of certain Mill Site property parcels that closed in 1997 and 1999. The $268,000 increase during 2004 was due to the collection of the balance of the notes receivables (including balloon payments) in
the fourth quarter of the year.



Interim Activities
(net). Interim activities, net of expenses, for 2004 were a loss of $751,000 compared to a loss of $114,000 for 2003. This increase in the loss from interim activities was expected due to the termination of



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the minimum security prison lease at the Eagle Mountain Townsite as of December 31, 2003, (see the following
paragraph for details). During 2004 revenues decreased by $862,000 while expenses at the Eagle Mountain Townsite remained close to historical levels while the Townsite operations were being closed down and its facilities were being mothballed.



During 2003, a portion of the Eagle Mountain Townsite was
leased on a month-to-month basis to Management Training Corporation (MTC), a company that operates a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from
Californias 2003 - 2004 state budget as of December 31, 2003, including the private prison located at Eagle Mountain. Accordingly, effective December 31, 2003, the private prison at Eagle Mountain was closed. MTC surrendered most of the
property it leased as of December 31, 2003, with the exception of several houses that it continued to lease through February 2004. As a result, the Eagle Mountain Townsite was mothballed in 2004 and appropriate cost accruals were recorded. As of the
date of this Report on Form 10-KSB, we have not had any success in finding a replacement tenant.



Resource Operating Costs. Resource operating costs are those costs directly related to the resource revenue (in this case environmental insurance
costs relating to the Companys historical operations and the MRC Casualty Loss). Total resource operating costs for 2004 and 2003 were $320,000 and $4,820,000, respectively. During the third quarter of 2003, portions of the 52-mile Eagle
Mountain railroad and related protective structures sustained considerable damage due to heavy rains and flash floods. The damage included some rail sections being buried under silt while other areas had their rail bed undermined. We currently
estimate the cost of repairing this damage to be $4,500,000. As a result, the Company recorded a reserve and a charge to earnings in the amount of $4,500,000 during 2003 to cover the cost of these repairs. The remaining $320,000 of expense in both
2004 and 2003 is due to the amortization expense associated with the Companys environmental insurance policy.



Corporate General and Administrative Expenses.Total corporate general and administrative expenses for 2004 decreased 13% to $2,421,000 from
$2,777,000 for 2003. The decrease is primarily due to one time retention payments ($1,031,000) made as of June 30, 2003, to senior management under the terms of their respective employment agreements negotiated in 2000. This decrease was
substantially offset by: (a) higher legal and professional expenses ($125,000); (b) higher non-recurring severance costs ($338,000); (c) a net reduction in the decrease of previously established reserves during 2004 ($113,000); and (d) increased
staffing and related expenses ($99,000). The reserves eliminated in 2004 and 2003 had been established in previous years for certain possible liabilities that were resolved during 2004 and 2003, and thus the reserve was determined to be unnecessary
and was reversed against general and administrative expenses.



Net Interest and Investment Income. Net interest and investment income for 2004 was $450,000 compared to $627,000 in 2003. The change was due to decreased gains on investments ($147,000) and lower interest income ($155,000) being
partially offset by increased dividend income ($124,000).



Loss before Minority Interest and Income Tax Provision. The Company recorded a loss before minority interest and income tax provision of $357,000 for 2004 versus $4,696,000 for 2003.



Minority Interest. During 2003 the minority unitholders in MRC were
allocated $789,000, or 17.52%, of the $4,500,000 recorded casualty loss that was incurred due the heavy rains and flash flood damage on the 52-mile Eagle Mountain railroad.



Pre-Tax Income (Loss) and Income Tax Provision. The Company recorded a loss before income tax provision (benefit) of
$357,000 for 2004, versus a loss of $3,907,000 recorded in 2003. Subsequent to the Companys conversion into an LLC, the Company is taxed as a partnership and, thus, the Companys results of operations (on an income tax basis) are
allocated to the unit holders for inclusion in their respective income tax returns. Therefore, the only taxes imposed on the Company are a gross revenue tax imposed by the State of California, and income taxes imposed on Business Staffing Inc., a
subsidiary of the Company. These taxes amounted to $14,000 for 2004, versus $16,000 for 2003. Additionally, during 2003, the Company recorded a



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$46,000 tax expense related to activity prior to its conversion to a limited liability company. The additional income
tax expense for 2003 was the result of a finalization of a State of California income tax audit for 1999.



Net Income (Loss).For 2004, the Company reported a net loss of $371,000 or $0.05 per unit, versus a net loss of $3,969,000 or $0.57 per unit,
reported for 2003.



Liquidity and Capital Resources



Cash, Cash Equivalents and Investments. We define cash equivalents as
highly liquid debt investment instruments with original maturities of 90 days or less. Cash and cash equivalents increased $573,000 to $4,135,000 at December 31, 2004. Included in cash and cash equivalents is $2,286,000 held solely for the benefit
of MRC at December 31, 2004. The increase in cash and cash equivalents is primarily due to: (a) the receipt of cash distributions from the West Valley MRF of $2.25 million; (b) collections on notes and accounts receivable totaling $611,000; (c) net
cashflow from investments totaling $425,000; and private placement contributions by MRC minority unitholders totaling $141,000. These cash uses were mostly offset by $2,100,000 million of cash used for operations and capitalized MRC landfill
expenditures of $768,000.



Working Capital. During 2004,
current assets decreased $2,100,000 to $15,500,000, while current liabilities decreased $1,800,000 to $2,500,000. The decrease in current assets resulted primarily from the collection of the $1,800,000 insurance receivable and the reduction of
$352,000 in current notes receivable. The decrease in current liabilities resulted primarily from the $1,500,000 decrease in the litigation accrual and the recognition of the remaining deferred real estate gain of $375,000. The decreases in
insurance receivable and litigation accrual are due to the settlement, collection and subsequent payment of the City of Ontario claim. Included in current liabilities as of December 31, 2004 is $198,000 in accounts payable and accrued liabilities
relating to MRC. As a result, working capital decreased during 2004 by $300,000 to $13,000,000 at December 31, 2004.



Critical Accounting Policies



The Companys accounting policies are more fully described in the Notes to the Financial Statements. As disclosed in the Notes to the Financial
Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States



The Company believes the following critical accounting policies are important to the portrayal of the Companys financial condition and results.



Investments. The Company accounts for investments under
the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. The investments are classified as available-for-sale and are recorded at the purchase
price of the security plus or minus the amortization of the discount or premium paid. Changes in the market value of the investments are recorded as a change to the investment with a corresponding change to comprehensive income, which is a component
of members equity. In addition, realized gains or losses, and interest income or dividends are reflected in the statement of operations.



Investment in West Valley MRF, LLC. The Company accounts for its investment in West Valley MRF, LLC, the owner of West Valley MRF, under the equity
method of accounting because of the Companys 50% ownership interest.



Landfill Permitting and Development. Through its 82.48% interest in Mine Reclamation, LLC, the Company has been developing, for sale to a municipal entity or operating company, its property known as the Eagle
Mountain Site in the California desert for use as a rail-haul municipal solid waste landfill. Pursuant to SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, capitalizable landfill site development costs
are recorded at cost and expensed when management determines that the capitalized costs provide no future benefit.



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Long-Lived Assets. In accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets, long-lived assets are evaluated for potential impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.



Environmental Insurance and Environmental Remediation Liabilities. The
Companys $3,800,000 premium for the prospective insurance policy is capitalized as a long-term asset and is being amortized on a straight-line basis over the twelve (12) year term of the policy. To the extent a pre-existing liability has not
been recorded, claims made for environmental matters are recorded as litigation accruals in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss
can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably
estimated.



Revenue Recognition. Revenues are recognized
when the Company has completed the earnings process and an exchange transaction has taken place.



Use of Estimates.The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Future events and their effects cannot be determined with absolute certainty and therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates and such
differences may be material to the financial statements.



New Accounting
Pronouncements



In 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest Entities (Interpretation 46), an interpretation of ARB No. 51. Interpretation 46 addresses consolidation by business enterprises of variable interest entities. Interpretation 46
applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. For interests in special-purpose entities, it applies in the first year
or interim period ending after December 15, 2003, and for all other types of variable interest entities, it applies for periods ending after March 15, 2004, to variable interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. Based upon its review of this interpretation, as amended, the Company does not believe it has any variable interest entities to which Interpretation 46 would apply.



In December 2004, the Financial Accounting Standards Board issued a revision
of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123R). SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related
implementation guidance and eliminates the alternative to use Opinion 25s intrinsic value method of accounting that was provided in Statement 123 as originally issued. Under Opinion 25, issuing stock options to employees at market value
generally resulted in recognition of no compensation cost. SFAS No. 123R requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with
limited exceptions). SFAS No. 123R is effective for the first interim or annual reporting period that begins after June 15, 2005. The Company has not quantified the potential effect of adoption of SFAS No. 123R. However, the Company believes
adoption of SFAS No. 123R will not result in a decrease to reported earnings.



Section 3: Business Outlook



The statements contained in this Business Outlook, as well as in Part I. Item 1. DESCRIPTION OF BUSINESS, are based upon current operations and expectations. In addition to the forward-looking statements and information
contained elsewhere in this Report on Form 10-KSB, these statements are forward-looking and,



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therefore, actual results may differ materially. See the Companys disclosure regarding forward-looking
statements in the section entitled Forward-Looking Statements above.



Ongoing Operations. As noted above, our revenues from ongoing operations have, in the past, generally been derived from the performance of our major long-term development projects and investments. Certain of
these projects and investments, such as our 50% equity ownership of the West Valley MRF, are essentially complete and we have been recognizing significant revenues and income from them. We also continue to evaluate our remaining assets and
investments in light of how to best provide maximum value to our members.



In regard to the West Valley MRF, the most significant factor affecting our future equity income from the West Valley MRF is the profitability of the expansion of the facilitys capacity from 2,000 to 5,000 tons
per day completed in 2001. The expansion enlarged the processing facility by an additional 80,000 square feet and provides for additional materials recovery sorting capacity. The ultimate success of this expansion will continue to depend: (a) on the
ability of the West Valley MRF to attract new customers and waste volumes at attractive processing rates; (b) on recyclable commodity prices; and (c) on future competition from competing facilities.



As part of our strategy, we intend to evaluate any potential offers to
purchase our interest in the West Valley MRF or other alternatives in light of our primary objective of maximizing value. The West Valley MRF currently generates more than sufficient cash flow to fund its cost of operations and does not require
additional investment by us. Furthermore, the West Valley MRF should continue to generate sufficient cash distributions to cover a significant portion of Kaiser LLCs foreseeable general and administrative costs.



Pending Sale of Eagle Mountain Landfill Project. As discussed in more
detailed in Part I, Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale. In August 2000, MRC entered into that certain Agreement For Purchase and Sale of Real Property and Related Personal Property In
Regard To The Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions (Landfill Project Sale Agreement) with the District. In summary, the landfill project (which includes our royalty payments under the MRC Lease) is under
contract to be sold to the District for $41 million. The exact future timing of any initial closing is currently unknown and there are a number of risks associated with the project and certain conditions that must be satisfied before the sale of the
District.



Upon closing of the sale of the landfill project,
$39 million of the total purchase price will be deposited into an escrow account and will be released when any litigation contingencies are fully resolved. As of the date of this Report, the only litigation contingency is the federal litigation
challenging the completed federal land exchange. Although closing has not occurred, interest began to accrue on this portion of the purchase price in May 2001, and will be paid out to MRC after the initial closing on a quarterly basis beginning with
a successful outcome of the federal litigation regarding the land exchange with the BLM at the Federal District Court level for a period of up to four years. Also upon closing, the remaining $2 million of the purchase price will also be placed into
an escrow account as a result of the Districts Puente Hills landfill receiving in 2003 and early 2004 the necessary permit approvals for its remaining 10 years of capacity.



Mill Site Property. The only remaining Mill Site Property owned by the Company is an approximate five acre parcel
referred to as the Tar Pits Parcel. CCG substantially completed the environmental remediation of this parcel pursuant to the terms of its agreement during 2002. The West Valley MRF has the right to purchase the Tar Pits Parcel for $1.00.



Sale of Miscellaneous Properties and other Possible Opportunities.
We are continuing to seek buyers for our miscellaneous properties, most of which are located at or near our Eagle Mountain facilities and we are continuing to seek tenants for the private prison facility in the Eagle Mountain Townsite. In addition,
we are exploring possible opportunities for the sale of rock from the Eagle Mountain Site. As a result of past mining activities, millions of tons of rock of various sizes was stock piled near the Eagle Mountain Townsite. Any sale of rock would be
from property that is not a part of the landfill project.



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Corporate Overhead. As we divest our remaining assets, we intend to further reduce corporate
staffing and overhead to reflect the reduced requirements of our remaining operations and projects. The costs of such reductions shall be recorded at the time the decision to make such reductions is made by the Company.



Capital Resources. Kaiser LLC expects that its current cash balances
and short-term investments together with cash generated from the West Valley MRF, note receivables and any future asset sales will be sufficient to satisfy the Companys ongoing projected operating cash requirements.



Cash Maximization Strategy



We have been developing our remaining assets and then selling them at such
times and on such terms as we believe optimizes the realizable value for a particular project or asset. During 2000 and 2001, we: (i) sold the balance of our real estate at the former KSC mill site near Fontana, California, except for an approximate
five acre parcel, the Tar Pits Parcel; (ii) entered into an agreement to sell the landfill project to the District for an aggregate of $41 million, with MRC and the District working toward a closing on such transaction; (iii) sold our interest in
Fontana Union to Cucamonga; and (iv) paid a total of $12.00 per share in cash distributions to Kaiser Inc.s stockholders. In continuing this strategy, our current plans include:



| |  |  | To complete the sale of the landfill project and to resolve favorably the related outstanding federal land exchange litigation. Although the closing with the District was scheduled
to occur during 2002, this sale is subject to the satisfaction of numerous conditions and, as a result, this date has been extended numerous times, and we cannot be sure when or if this sale will ultimately close. If the sale transaction is
completed, we do not expect to receive any substantial cash from the sale until the related litigation matters are resolved, which may be several years. See Part I. - Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and
Pending Sale;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To continue to hold our interest in West Valley MRF, which pays significant cash distributions to us, until we believe we can negotiate a sale of our interest that maximizes value
to our members;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To sell our remaining miscellaneous assets, such as our surplus property in Riverside County, California;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | To further reduce our general and administrative expenses; and
| | - |  | --------------------------------------------------------------



| |  |  | The Company expects to terminate operations and distribute all available cash to its members once the cash maximization strategy is completed. The Company currently does not expect
completion of this strategy until 2007 at the earliest.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Conversion. In November 2001, the stockholders of Kaiser Inc. overwhelmingly approved the conversion of Kaiser Inc. into a newly-formed limited liability company pursuant to a merger between the Kaiser Inc. and Kaiser LLC. In this
conversion, Kaiser Inc.s stockholders received $10.00 in cash plus one Class A Unit for each share of common stock in Kaiser Inc. The conversion to a limited liability company and the resulting cash payment to stockholders was an important
step in the implementation of the cash maximization strategy.



Insurance. In furtherance of the cash maximization strategy, we purchased an insurance policy in 2001 that is designed to provide broad commercial general liability, pollution legal liability, and contractual indemnity coverage for
our ongoing and historical operations. The aggregate cost for this policy was approximately $5.8 million, of which KSC Recovery paid $2.0 million and the Company paid $3.8 million.





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Item 7. FINANCIAL STATEMENTS



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                     |  | PAGE
|                                                                                                     | 
|Reports of Independent Registered Public Accounting Firms                                            |  | 30  
|                                                                                                     | 
|Consolidated Balance Sheet as of December 31, 2004                                                   |  | 32  
|                                                                                                     | 
|Consolidated Statements of Operations for the years ended December 31, 2004 and 2003                 |  | 34  
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003                 |  | 35  
|                                                                                                     | 
|Consolidated Statements of Changes in Members Equity for the years ended December 31, 2004 and 2003 |  | 36  
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | 37  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Members and Board of Managers of Kaiser Ventures LLC:



We have audited
the accompanying consolidated balance sheet of Kaiser Ventures LLC (the Company) as of December 31, 2004 and the related consolidated statement of operations, members equity and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 audit provides a reasonable basis for our opinion.



In our opinion, the
consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kaiser Ventures, LLC as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of America.



Moss Adams LLP

Irvine, California

March 11, 2005





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Managers and Members of Kaiser Ventures LLC and Subsidiaries



We have audited the accompanying consolidated statements of operations, cash flows, and
changes in members equity for the year ended December 31, 2003 of Kaiser Ventures LLC and Subsidiaries (the Company). 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 audit.



We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations, cash flows, and changes in members equity for the year ended December 31, 2003, in conformity
with U.S. generally accepted accounting principles.



/s/ Ernst & Young LLP




Orange County, California

February 12, 2004,

except for Note 2  Environmental
Insurance and

Environmental Remediation Liabilities,

Notes 9 and 12, and Note 18  Environmental Contingencies,

as to which the date is November 12, 2004





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CONSOLIDATED BALANCE SHEET

as of December 31



|                                                                                 |  |      |           
|-------------------------------------------------------------------------------- |  | ---- | ----------
|                                                                                 |  | 2004
|ASSETS                                                                           |  |      |           
|Current Assets                                                                   |  |      |           
|Cash and cash equivalents                                                        |  | $    | 4,135,000 
|Accounts receivable and other, net of allowance for doubtful accounts of $34,000 |  |      | 207,000   
|Short-term investments                                                           |  |      | 9,634,000 
|Note receivable                                                                  |  |      | 292,000   
|Restricted cash held for conversion distribution                                 |  |      | 1,265,000 
|                                                                                 |  |      |           
|                                                                                 |  |      | 15,533,000
|                                                                                 |  |      |           
|Eagle Mountain Landfill Investment                                               |  |      | 29,685,000
|                                                                                 |  |      |           
|Investment in West Valley MRF                                                    |  |      | 4,231,000 
|                                                                                 |  |      |           
|Land                                                                             |  |      | 2,503,000 
|                                                                                 |  |      |           
|Other Assets                                                                     |  |      |           
|Note receivable                                                                  |  |      | 57,000    
|Unamortized environmental insurance premium                                      |  |      | 2,680,000 
|Buildings and equipment (net)                                                    |  |      | 547,000   
|                                                                                 |  |      |           
|                                                                                 |  |      | 3,284,000 
|                                                                                 |  |      |           
|Total Assets                                                                     |  | $    | 55,236,000
|                                                                                 |  |      |           



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





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KAISER VENTURES LLC AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEET

as of December 31



|                                                 |  |      |            |  
|------------------------------------------------ |  | ---- | ---------- | -
|                                                 |  | 2004 |           
|LIABILITIES AND MEMBERS EQUITY                  |  |      |            |  
|Current Liabilities                              |  |      |            |  
|Accounts payable                                 |  | $    | 157,000    |  
|Conversion distribution payable                  |  |      | 1,265,000  |  
|Accrued liabilities                              |  |      | 952,000    |  
|Current portion of MRC accrual for casualty loss |  |      | 169,000    |  
|                                                 |  |      |            |  
|                                                 |  |      | 2,543,000  |  
|                                                 |  |      |            |  
|Long-term Liabilities                            |  |      |            |  
|Accrued liabilities                              |  |      | 250,000    |  
|Accrual for MRC casualty loss                    |  |      | 4,195,000  |  
|Environmental remediation                        |  |      | 2,423,000  |  
|                                                 |  |      |            |  
|                                                 |  |      | 6,868,000  |  
|                                                 |  |      |            |  
|Total Liabilities                                |  |      | 9,411,000  |  
|                                                 |  |      |            |  
|Minority Interest                                |  |      | 5,179,000  |  
|                                                 |  |      |            |  
|Commitments and Contingencies                    |  |      |            |  
|Members Equity                                  |  |      |            |  
|Class A units; issued and outstanding 6,929,299  |  |      | 40,859,000 |  
|Class B units; issued and outstanding 751,956    |  |      |           |  
|Class C units; issued and outstanding 952        |  |      |           |  
|Class D units; issued and outstanding 48         |  |      |           |  
|Accumulated other comprehensive loss             |  |      | (213,000   | )
|                                                 |  |      |            |  
|Total Members Equity                            |  |      | 40,646,000 |  
|                                                 |  |      |            |  
|Total Liabilities and Members Equity            |  | $    | 55,236,000 |  
|                                                 |  |      |            |  



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





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CONSOLIDATED STATEMENTS OF OPERATIONS

for the Years Ended December 31



|                                                                                                                        |  |      |           |   |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                                                                                        |  | 2004 |           |   | 2003 |  
|Resource Revenues                                                                                                       |  |      |           |   |      |   |            |  
|Ongoing Operations                                                                                                      |  |      |           |   |      |   |            |  
|Income from equity method investment in the West Valley MRF                                                             |  | $    | 2,310,000 |   |      | $ | 2,281,000  |  
|Realized deferred gain on Mill Site land sales                                                                          |  |      | 375,000   |   |      |   | 107,000    |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Total ongoing operations                                                                                                |  |      | 2,685,000 |   |      |   | 2,388,000  |  
|Interim Activities, net loss                                                                                            |  |      | (751,000  | ) |      |   | (114,000   | )
|                                                                                                                        |  |      |           |   |      |   |            |  
|Total resource revenues                                                                                                 |  |      | 1,934,000 |   |      |   | 2,274,000  |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Resource Operating Costs                                                                                                |  |      |           |   |      |   |            |  
|Environmental insurance premium amortization                                                                            |  |      | 320,000   |   |      |   | 320,000    |  
|MRC casualty loss                                                                                                       |  |      |          |   |      |   | 4,500,000  |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Total resource operating costs                                                                                          |  |      | 320,000   |   |      |   | 4,820,000  |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Income (Loss) from Resources                                                                                            |  |      | 1,614,000 |   |      |   | (2,546,000 | )
|Corporate General and Administrative Expenses                                                                           |  |      |           |   |      |   |            |  
|Corporate overhead expenses, excluding employee retention, stock-based compensation and stock option repricing expenses |  |      | 2,068,000 |   |      |   | 1,735,000  |  
|Employee retention expense                                                                                              |  |      |          |   |      |   | 1,031,000  |  
|Unit-based compensation expense                                                                                         |  |      | 15,000    |   |      |   | 11,000     |  
|Severance expense                                                                                                       |  |      | 338,000   |   |      |   |           |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|                                                                                                                        |  |      | 2,421,000 |   |      |   | 2,777,000  |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Loss from Operations                                                                                                    |  |      | (807,000  | ) |      |   | (5,323,000 | )
|Net interest and investment income                                                                                      |  |      | 450,000   |   |      |   | 627,000    |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Loss before Minority Interest and Income Tax Provision                                                                  |  |      | (357,000  | ) |      |   | (4,696,000 | )
|Minority Interest in Loss                                                                                               |  |      |          |   |      |   | 789,000    |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Loss before Income Tax Provision                                                                                        |  |      | (357,000  | ) |      |   | (3,907,000 | )
|Income tax provision                                                                                                    |  |      |           |   |      |   |            |  
|Current                                                                                                                 |  |      | 14,000    |   |      |   | 16,000     |  
|Income tax expense attributed to activities prior to conversion to LLC                                                  |  |      |          |   |      |   | 46,000     |  
|                                                                                                                        |  |      |           |   |      |   |            |  
|Net Loss                                                                                                                |  | $    | (371,000  | ) |      | $ | (3,969,000 | )
|                                                                                                                        |  |      |           |   |      |   |            |  
|Basic Loss Per Unit                                                                                                     |  | $    | (0.05     | ) |      | $ | (0.57      | )
|                                                                                                                        |  |      |           |   |      |   |            |  
|Diluted Loss Per Unit                                                                                                   |  | $    | (0.05     | ) |      | $ | (0.57      | )
|                                                                                                                        |  |      |           |   |      |   |            |  
|Basic Weighted Average Number of Units Outstanding                                                                      |  |      | 6,924,000 |   |      |   | 6,916,000  |  
|Diluted Weighted Average Number of Units Outstanding                                                                    |  |      | 6,924,000 |   |      |   | 6,916,000  |  



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





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##### Index to Financial Statements

KAISER VENTURES LLC AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS

for the Years Ended December 31



|                                                                           |  |      |            |   |      |   |            |  
|-------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                           |  | 2004 |            |   | 2003 |  
|Cash Flows from Operating Activities                                       |  |      |            |   |      |   |            |  
|Net loss                                                                   |  | $    | (371,000   | ) |      | $ | (3,969,000 | )
|Income from equity method investment in West Valley MRF                    |  |      | (2,310,000 | ) |      |   | (2,281,000 | )
|Income tax expense attributed to activities prior to the conversion to LLC |  |      |           |   |      |   | 46,000     |  
|MRC casualty loss, net of minority interest                                |  |      |           |   |      |   | 3,711,000  |  
|Depreciation and amortization                                              |  |      | 490,000    |   |      |   | 547,000    |  
|Unrealized gain on investments                                             |  |      |           |   |      |   | (87,000    | )
|Class A Units / Stock-based compensation expense                           |  |      | 15,000     |   |      |   | 11,000     |  
|Mill Site land sale deferred gain realized                                 |  |      | (375,000   | ) |      |   | (107,000   | )
|Changes in assets:                                                         |  |      |            |   |      |   |            |  
|Receivable and other                                                       |  |      | (33,000    | ) |      |   | 308,000    |  
|Insurance receivable                                                       |  |      | 1,531,000  |   |      |   |           |  
|Purchase of investments  trading                                          |  |      |           |   |      |   | (7,045,000 | )
|Changes in liabilities:                                                    |  |      |            |   |      |   |            |  
|Accounts payable and accrued liabilities                                   |  |      | 226,000    |   |      |   | (232,000   | )
|Litigation accrual                                                         |  |      | (1,250,000 | ) |      |   |           |  
|Income taxes payable                                                       |  |      | (28,000    | ) |      |   | (40,000    | )
|Long-term accrued liabilities                                              |  |      |           |   |      |   | (4,000     | )
|                                                                           |  |      |            |   |      |   |            |  
|Net cash flows used in operating activities                                |  |      | (2,105,000 | ) |      |   | (9,142,000 | )
|                                                                           |  |      |            |   |      |   |            |  
|Cash Flows from Investing Activities                                       |  |      |            |   |      |   |            |  
|Minority interest                                                          |  |      | 141,000    |   |      |   | 241,000    |  
|Purchase of investments                                                    |  |      | (324,000   | ) |      |   | (7,369,000 | )
|Maturities of investments                                                  |  |      | 750,000    |   |      |   | 7,980,000  |  
|Collection of notes receivable                                             |  |      | 644,000    |   |      |   | 356,000    |  
|Capitalized landfill expenditures                                          |  |      | (768,000   | ) |      |   | (1,083,000 | )
|Environmental remediation expenditures                                     |  |      | (15,000    | ) |      |   | (18,000    | )
|Distribution from West Valley MRF                                          |  |      | 2,250,000  |   |      |   | 2,250,000  |  
|                                                                           |  |      |            |   |      |   |            |  
|Net cash flows from (used in) investing activities                         |  |      | 2,678,000  |   |      |   | 2,357,000  |  
|                                                                           |  |      |            |   |      |   |            |  
|Cash Flows from Financing Activities                                       |  |      |            |   |      |   |            |  
|Receipt (payment) of conversion distribution from (to) transfer agent, net |  |      | (75,000    | ) |      |   | 1,340,000  |  
|Decrease (increase) in restricted cash for conversion distribution, net    |  |      | 75,000     |   |      |   | (1,340,000 | )
|                                                                           |  |      |            |   |      |   |            |  
|Net cash flows from financing activities                                   |  |      |           |   |      |   |           |  
|                                                                           |  |      |            |   |      |   |            |  
|Net Changes in Cash and Cash Equivalents                                   |  |      | 573,000    |   |      |   | (6,785,000 | )
|Cash and Cash Equivalents at Beginning of Year                             |  |      | 3,562,000  |   |      |   | 10,347,000 |  
|                                                                           |  |      |            |   |      |   |            |  
|Cash and Cash Equivalents at End of Year                                   |  | $    | 4,135,000  |   |      | $ | 3,562,000  |  
|                                                                           |  |      |            |   |      |   |            |  



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





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KAISER VENTURES LLC AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY

for the Years Ended December 31, 2004 and 2003



|                                                                 |  |                      |  |                |            |   |                                            |   |          |       |  |   |            |  
|---------------------------------------------------------------- |  | -------------------- |  | -------------- | ---------- | - | ------------------------------------------ | - | -------- | ----- |  | - | ---------- | -
|                                                                 |  | Member Class A Units |  | MembersEquity |            |   | AccumulatedOtherComprehensiveIncome (Loss) |   |          | Total | 
|Balance at December 31, 2002                                     |  | 6,911,799            |  | $              | 45,173,000 |   |                                            | $ |         |       |  | $ | 45,173,000 |  
|Net loss                                                         |  |                     |  |                | (3,969,000 | ) |                                            |   |         |       |  |   | (3,969,000 | )
|Comprehensive loss, change in net unrealized gain on investments |  |                     |  |                |           |   |                                            |   | (165,000 | )     |  |   | (165,000   | )
|Comprehensive loss                                               |  |                      |  |                |            |   |                                            |   |          |       |  |   | (4,134,000 | )
|Issuance of Class A Units                                        |  | 7,500                |  |                | 11,000     |   |                                            |   |         |       |  |   | 11,000     |  
|                                                                 |  |                      |  |                |            |   |                                            |   |          |       |  |   |            |  
|Balance at December 31, 2003                                     |  | 6,919,299            |  |                | 41,215,000 |   |                                            |   | (165,000 | )     |  |   | 41,050,000 |  
|Net loss                                                         |  |                     |  |                | (371,000   | ) |                                            |   |         |       |  |   | (371,000   | )
|Comprehensive loss, change in net unrealized gain on investments |  |                     |  |                |           |   |                                            |   | (48,000  | )     |  |   | (48,000    | )
|                                                                 |  |                      |  |                |            |   |                                            |   |          |       |  |   |            |  
|Comprehensive loss                                               |  |                      |  |                |            |   |                                            |   |          |       |  |   | (418,000   | )
|Issuance of Class A Units                                        |  | 10,000               |  |                | 15,000     |   |                                            |   |         |       |  |   | 15,000     |  
|                                                                 |  |                      |  |                |            |   |                                            |   |          |       |  |   |            |  
|Balance at December 31, 2004                                     |  | 6,929,299            |  | $              | 40,859,000 |   |                                            | $ | (213,000 | )     |  | $ | 40,646,000 |  
|                                                                 |  |                      |  |                |            |   |                                            |   |          |       |  |   |            |  



At December 31, 2004, 2003 and 2002,
Kaiser Ventures LLC had 751,956 Class B Units outstanding. At December 31, 2004, 2003 and 2002, Kaiser Ventures LLC had 952 and 48, Class C and D Units outstanding, respectively.



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







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KAISER VENTURES LLC AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1. NATURE
OF BUSINESS



Unless otherwise noted: (1) the term
Kaiser Inc. refers to the former Kaiser Ventures Inc., (2) the term Kaiser LLC refers to Kaiser Ventures LLC, and (3) the terms Kaiser, the Company, we, us, and our,
refer to past and ongoing business operations conducted in the form of Kaiser Inc. or Kaiser LLC, and their respective subsidiaries.



On November 16, 1988, the Company began operations as Kaiser Steel Resources, Inc. upon the successful completion of the reorganization of Kaiser Steel
Corporation (KSC) under Chapter 11 of the Bankruptcy Code. The Company has changed its name twice since reorganization in June 1993 and 1995, to Kaiser Resources Inc. and to Kaiser Ventures Inc. (Kaiser Inc.), respectively.
In November 2001, the stockholders of Kaiser Inc. approved the conversion of Kaiser Inc. into a newly-formed limited liability company pursuant to a merger of Kaiser Inc. with and into Kaiser Ventures LLC. Under the terms of the agreement and plan
of merger, Kaiser Inc.s stockholders received $10.00 in cash plus one Class A Unit for each share of common stock in Kaiser Inc. Kaiser Inc. assets and liabilities were carried over at their historical cost basis.



At December 31, 2004, the Companys principal assets include: (i) an
82.48% ownership interest in Mine Reclamation, LLC, which owns a permitted rail-haul municipal solid waste landfill located at the Eagle Mountain Site, this landfill is currently under contract to be sold to County District No. 2 of Los Angeles
County for approximately $41 million, which sale is subject to a number of conditions, several of which remain to be fully satisfied; (ii) a 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station (West
Valley MRF); (iii) approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the District; and (iv) cash and cash equivalents, receivables and short-term
investments of approximately $14.3 million.



The Companys
consolidated financial statements include the following significant entities: Lake Tamarisk Development, LLC; Kaiser Eagle Mountain, LLC; Kaiser Recycling LLC; Business Staffing, Inc.; and Mine Reclamation, LLC. See Note 2 below for additional
information concerning the Companys subsidiaries.



Ongoing
Operations



The Companys revenues from
ongoing operations are generally derived from the development of the Companys long-term projects. Income from equity method investments reflects Kaisers share of income related to its equity investment in the West Valley MRF which the
Company accounts for under the equity method.



Interim
Activities



Revenues and expenses from interim
activities are generated from various sources. Significant components of interim activities include housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain Townsite. Due to the interim
nature of these activities, the Company is presenting these revenues net of their related expenses. Total interim revenues for 2004, and 2003, were $200,000, and $1.1 million, respectively. Due to the termination of the minimum security prison lease
at the Eagle Mountain Townsite as of December 2003, operations at the Townsite were significantly curtailed during 2004 and its facilities mothballed.



Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation



The consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries and majority-owned investments, except as
specified below. Intercompany accounts and transactions have been eliminated.



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KSC Recovery, Inc. (KSC Recovery).The Companys wholly-owned subsidiary, KSC
Recovery, Inc., which is governed and controlled by a Bankruptcy Court approved Plan of Reorganization, acts solely as an agent for KSCs former creditors in pursuing bankruptcy related adversary litigation and administration of the KSC
bankruptcy estate. Kaiser exercises no significant control or influence over nor does Kaiser have any interest in the operations, assets or liabilities of KSC Recovery except as provided by the terms of the approved Plan of Reorganization. In
addition, KSC Recoverys cash on hand and potential future recoveries fund all costs and expenses of KSC Recovery. Consequently, activity of KSC Recovery is not included in Kaisers financial statements; however, KSC Recovery is a member
of the Kaiser consolidated group for tax purposes and is therefore included in the consolidated tax return.



Cash and Cash Equivalents



The Company considers all highly liquid debt instruments purchased with original maturities of 90 days or less to be cash equivalents. The Company maintains its cash balances with two financial institutions that have
Standard & Poors ratings of AA- or higher, have at least $30 billion in assets and are insured by the Federal Deposit Insurance Corporation up to $100,000 at each institution.



Investments



The Company accounts for investments under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The Company has an Investment Policy which provides for the investment of excess cash balances primarily in mutual funds, commercial paper, certificates of deposit, debt instruments, and government debt
securities. The Company considers instruments with maturities of 365 days or more from the balance sheet date to be long-term investments. The classification of investment securities is reviewed by the Company at each reporting period.



During 2003, the Company invested in bond mutual funds which were
originally classified as trading when purchased and were accounted for as such through June 30, 2003. As a trading security, the investment was marked to market with any unrealized gain or loss reflected in the statement of
operations. However, as of June 30, 2003, the bond funds were reclassified to available-for-sale. Additionally as a result of certain investment transactions during the first six-months of 2003, the Company reclassified all of its
investments previously classified as held-to-maturity to available-for-sale as of June 30, 2003. As an available-for-sale security realized gains or losses, and interest income or dividends are reflected in the
statement of operations while unrealized gains and losses are included in comprehensive income (loss) which is a component of members equity.



Real Estate



In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which the Company adopted effective January 1,
2002, the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the
carrying amounts of those assets.



Interest and property taxes
related to real estate under development are capitalized during periods of development.



Investment in West Valley MRF, LLC



The Company accounts for its investment in West Valley MRF, LLC, the owner of West Valley MRF, under the equity method of accounting because of the Companys 50% ownership interest.



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KAISER VENTURES LLC AND SUBSIDIARIES



Landfill Permitting and Development



Through its 82.48% interest in Mine Reclamation, LLC, the Company has been
developing, for sale to a municipal entity or operating company, its property known as the Eagle Mountain Site in the California desert for use as a rail-haul municipal solid waste landfill. Pursuant to SFAS No. 67, Accounting for Costs and
Initial Rental Operations of Real Estate Projects, capitalizable landfill site development costs are recorded at cost and consist of engineering and environmental studies, legal and consulting expenses, and other costs directly related to the
permitting and development process. These costs are expensed when management determines that the capitalized costs provide no future benefit. Additionally, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived
Assets, long-lived assets are evaluated for potential impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company is still litigating challenges to a land exchange completed
with the Bureau of Land Management of the U. S. Department of the Interior in October 1999 (See Note 19), and no sale of the Eagle Mountain is expected until this matter is ultimately resolved. Further, the perception of the public and private
financial markets of the value of solid waste sites and the waste management industry can fluctuate significantly over time. Accordingly, there can be no assurance that the Company will successfully sell the Eagle Mountain assets on favorable terms
or at all.



Buildings and Equipment



Buildings and equipment are stated on the cost basis. Depreciation is
provided on the straight-line method over the estimated useful lives of the respective assets.



Environmental Insurance and Environmental Remediation Liabilities



The Companys $3.8 million premium for the prospective insurance policy is capitalized as a long-term asset and is being amortized on a straight-line
basis over the twelve (12) year term of the policy. To the extent a pre-existing liability has not been recorded, claims made for environmental matters are recorded as litigation accruals in the Companys consolidated financial statements
pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance
receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated.



Revenue Recognition



Revenues are recognized when the Company has completed the earnings process and an exchange transaction has taken place.



Income Taxes



The Company is taxed as a partnership and thus, the Companys results
of operations (on an income tax basis) are allocated to the members for inclusion in their respective income tax returns. The only income taxes imposed on the Company are a minor gross revenue tax imposed by the State of California and income taxes
imposed on Business Staffing Inc., the Companys only corporate subsidiary.



Earnings Per Share



The
Company follows SFAS No. 128, Earnings per Sharein calculating basic and diluted earnings per unit. Basic earnings per unit excludes the dilutive effects of options, warrants and convertible securities, while diluted earnings per unit
includes the dilutive effects of claims on the earnings of the Company.



LLC Unit/Stock Options



At December 31, 2004, the Company has three stock-based employee compensation plans, which are described more fully in Note 13. The Company accounts for those plans under the recognition and measurement



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KAISER VENTURES LLC AND SUBSIDIARIES



principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. The following table illustrates the
effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock Based Compensation, to the above plans.



|                                   |  |      |          |   |      |   |            |  
|---------------------------------- |  | ---- | -------- | - | ---- | - | ---------- | -
|                                   |  | 2004 |          |   | 2003 |  
|Net Earnings (loss)                |  |      |          |   |      |   |            |  
|As reported                        |  | $    | (371,000 | ) |      | $ | (3,969,000 | )
|Pro forma                          |  | $    | (371,000 | ) |      | $ | (3,969,000 | )
|Earnings (loss) per unit (Basic)   |  |      |          |   |      |   |            |  
|As reported                        |  | $    | (0.05    | ) |      | $ | (0.57      | )
|Pro forma                          |  | $    | (0.05    | ) |      | $ | (0.57      | )
|Earnings (loss) per unit (Diluted) |  |      |          |   |      |   |            |  
|As reported                        |  | $    | (0.05    | ) |      | $ | (0.57      | )
|Pro forma                          |  | $    | (0.05    | ) |      | $ | (0.57      | )



The Company employed
the Black-Scholes option-pricing model in order to calculate the above adjustment in net income (loss) and earnings (loss) per unit/share. The effect on net earnings for 2004, and 2003 is not necessarily representative of the effect in future years.
The following table describes the assumptions utilized by the Black-Scholes option-pricing model for options granted during 1999, the last year stock options were granted by the Company.



|                        |  |       |  
|----------------------- |  | ----- | -
|                        |  | 1999  |  
|Volatility              |  | 0.415 |  
|Risk-free interest rate |  | 6.00  | %
|Expected life in years  |  | 2.28  |  
|Forfeiture rate         |  | 0.00  | %
|Dividend yield          |  | 0.00  | %



Use of
Estimates



The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Fair Value of Financial Instruments



The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value:



Cash and Cash
Equivalents. The carrying amount approximates fair value because of the short-term maturity of these instruments.



Receivables. The carrying amount approximates fair value because of the short-term maturity of these instruments.



Investments. The carrying amount approximates fair value of these
investments.



New Accounting Pronouncements



In 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities (Interpretation 46), an interpretation of ARB No. 51. Interpretation 46 addresses consolidation by business enterprises of variable interest entities. Interpretation 46 applies
immediately to variable interest entities created



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KAISER VENTURES LLC AND SUBSIDIARIES



after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.
For interests in special-purpose entities, it applies in the first year or interim period ending after December 15, 2003, and for all other types of variable interest entities, it applies for periods ending after March 15, 2004 to variable interest
entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. Based upon its review of this interpretation, as amended, the Company does not believe it has any variable interest entities to which Interpretation
46 would apply.



In December 2004, the Financial Accounting
Standards Board issued a revision of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123R). SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance and eliminates the alternative to use Opinion 25s intrinsic value method of accounting that was provided in Statement 123 as originally issued. Under Opinion 25, issuing stock options to
employees at market value generally resulted in recognition of no compensation cost. SFAS No. 123R requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value
of those awards (with limited exceptions). SFAS No. 123R is effective for the first interim or annual reporting period that begins after June 15, 2005. The Company has not quantified the potential effect of adoption of SFAS No. 123R. However, the
Company believes adoption of SFAS No. 123R will not result in a decrease to reported earnings.



Note 3. ACCOUNTS RECEIVABLE AND OTHER



Accounts receivable and other as of December 31 consisted of the following:



|                                |  |      |         |  
|------------------------------- |  | ---- | ------- | -
|                                |  | 2004 |        
|West Valley MRF, LLC            |  | $    | 33,000  |  
|DreamWorks                      |  |      | 22,000  |  
|Interest receivable             |  |      |        |  
|KSC Recovery                    |  |      | 24,000  |  
|Other                           |  |      | 162,000 |  
|                                |  |      |         |  
|                                |  |      | 241,000 |  
|Allowance for doubtful accounts |  |      | (34,000 | )
|                                |  |      |         |  
|Total                           |  | $    | 207,000 |  
|                                |  |      |         |  



Note 4. INVESTMENT IN WEST VALLEY
MRF, LLC



Effective June 19, 1997, Kaiser Recycling
Corporation (KRC) and West Valley Recycling & Transfer, Inc. (WVRT), a subsidiary of Burrtec Waste Industries, Inc. (Burrtec), which are equal members of West Valley MRF, LLC, (a California limited liability
company) entered into a Members Operating Agreement (MOA) which is substantially the equivalent of a joint venture agreement but for a limited liability company. The construction and start up of the West Valley MRF was completed during
December 1997.



Pursuant to the terms of the MOA, KRC
contributed approximately 23 acres of Mill Site property on which the West Valley MRF was constructed while WVRT contributed all of Burrtecs recycling business that was operated within Riverside County, thereby entitling West Valley MRF to
receive all revenues generated from this business after the closing date.



Most of the financing for the construction of the West Valley MRF of approximately $22,000,000, including reimbursement of previously incurred development costs of Burrtec and the Company, was obtained through the
issuance and sale of two California Pollution Control Financing Authority (the Authority) Variable Rate Demand Solid Waste Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A and Series 2000A (the Bonds). The
Bonds are secured by an irrevocable letter of credit issued by Union Bank of California, N.A. (Union Bank). The Bonds have stated maturity dates of June 1, 2012 for Series 1997A ($9,500,000) and June 1,



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KAISER VENTURES LLC AND SUBSIDIARIES



2030 Series 2000A ($8,500,000), although West Valley MRF, LLC is required, pursuant to its agreement with Union Bank,
to annually redeem a portion of the Bonds on a stated schedule. Pursuant to a Guaranty Agreement with Union Bank, the Company and Burrtec each are liable for fifty percent (50%) of the principal and interest on the Bonds in the event of a default by
the West Valley MRF, LLC. West Valley MRF, LLC also has established a $2,000,000 equipment line of credit with Union Bank in order to refinance and purchase additional equipment.



The Company also remains responsible for any pre-existing environmental conditions on the land, which is generally covered
by insurance.



The Company is accounting for its investment in
West Valley MRF, LLC under the equity method.



The condensed
summarized financial information of West Valley MRF, LLC as of November 30, is as follows:



|                                        |  |      |           
|--------------------------------------- |  | ---- | ----------
|                                        |  | 2004
|Balance Sheet Information               |  |      |           
|Current Assets                          |  | $    | 8,712,000 
|Property and Equipment (net)            |  |      | 15,352,000
|Other Assets                            |  |      | 318,000   
|                                        |  |      |           
|Total Assets                            |  | $    | 24,382,000
|                                        |  |      |           
|Current Liabilities                     |  | $    | 5,311,000 
|Other Liabilities                       |  |      |          
|CPCFA Bonds Payable (long-term portion) |  |      | 10,870,000
|Members Equity                         |  |      | 8,201,000 
|                                        |  |      |           
|Total Liabilities and Members Equity   |  | $    | 24,382,000
|                                        |  |      |           
|Income Statement Information            |  |      |           
|Net Revenues                            |  | $    | 14,052,000
|Gross Profit                            |  | $    | 5,799,000 
|Net Income                              |  | $    | 4,619,000 



The Company has
recognized equity income from the West Valley MRF of $2,310,000, and $2,281,000, in 2004 and 2003, respectively. The Company received cash distributions of $2,250,000 during both 2004, and 2003 from its investment in the West Valley MRF.



Note 5. MINE RECLAMATION, LLC



The Company, in January 1995, acquired a 70% interest in Mine Reclamation,
the developer of the landfill project. As a result of subsequent equity fundings and purchases, the Companys ownership interest in Mine Reclamation as of December 31, 2004, is 82.48%. On August 9, 2000, MRC, entered into that certain Agreement
For Purchase and Sale of Real Property and Related Personal Property In Regard To The Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions (Landfill Project Sale Agreement) with the District. In summary, the landfill
project (which includes the Companys royalty payments under the MRC Lease) is being sold for $41 million, with an initial closing currently scheduled to occur on June 30, 2005, but the initial closing date has been extended numerous times.
However, payment of the purchase price will be delayed as described in more detail below. The sale of the landfill project is subject to the results of the Districts due diligence and satisfaction of numerous contingencies. The contingencies
include, but are not limited to, obtaining the transfer of the landfill projects permits to the District and obtaining all necessary consents to the transaction.



Upon closing, $39 million of the total purchase price is to be deposited into an escrow account and will be released when
litigation contingencies are fully resolved. The litigation contingencies are the federal litigation challenging the completed federal land exchange. Even though the closing has not taken place and these funds have not been deposited into an escrow
account, interest began accruing on this portion of the purchase price on May 3, 2001, and will be paid out to MRC on a quarterly basis, once the initial closing of the sale occurs and once there is a successful outcome of the federal litigation at
the Federal District Court level. The remaining $2 million



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of the purchase price would also be placed into an escrow account upon closing and was originally to be released upon
the later of (1) the release of the $39 million as described above or (2) the permitting approvals of the Districts Puente Hills landfill for its remaining 10 years of capacity. However, in 2003 and early 2004, the District received the
necessary permits for the expansion of its Puente Hills landfill and thus, the full purchase price will be placed into escrow when the initial closing has occurred, and will be released upon resolution of the pending federal land exchange
litigation. Receipt of the purchase price, in whole or in part, if at all, could be delayed for a substantial period of time pending satisfactory resolution of these contingencies. At this time the Company cannot estimate when or if the sale may be
completed.



The District has been undertaking extensive due
diligence on the landfill project and has the right to terminate the Landfill Project Sale Agreement if it is not satisfied with the results of its due diligence and other matters. Due diligence, joint use negotiations and other items are expected
to continue during 2005. In addition, the parties will individually determine whether each chooses to continue to extend the closing date for the transaction.



There are numerous risks associated with MRC and the landfill project, including the competition represented by the Mesquite rail-haul landfill
project, which the District purchased. There are also numerous risks and contingencies associated with the pending sale of the landfill project to the District. There can be no assurance that all outstanding matters currently preventing an initial
closing with the District will be resolved to the satisfaction of the parties. Accordingly, there can be no assurance that the sale to the District will occur or that the current terms of the pending transaction may not be significantly modified as
a result of future discussions with the District or as to the timing of the receipt of the purchase price. There can be no assurance that the completed purchase of the Mesquite landfill by the District will not adversely impact the negotiations and
the closing on the sale of the landfill to the District. In addition, there are material litigation risks associated with the current federal land exchange litigation, including reversal of the completed land exchange and the recently threatened
litigation over the Endangered Species Act, all as discussed in Note 19.  LEGAL PROCEEDINGS. No assurance can be made that the Company will successfully and timely resolve these matters so as to avoid a material adverse effect on
the Companys current plan to sell the landfill to the District. In addition, there are risks that the landfill project will be impacted by natural disasters like the floods that caused significant damage to the rail line in 2003. Certain risks
may be uninsurable or are not insurable on terms which the Company believes are economical.



As discussed below, MRC will need additional funding to complete the landfill project, including funds to repair the flood damage sustained by the Eagle Mountain rail line. There is no assurance that MRC can obtain
additional funds through debt or equity financing on acceptable terms.



If the Company is unable to manage any of these risks or uncertainties, the Company may not be able to sell the landfill at a favorable price, if at all, and the value of the Companys Class A Units could be materially reduced.



Flood Damage to Railroad. The Company owns an
approximate 52-mile private railroad that runs from Ferrum Junction near the Salton Sea to the Eagle Mountain mine. In late August and early September of 2003, portions of the railroad and related protective structures sustained considerable damage
due to heavy rains and flash floods. This damage included having some rail sections being buried under silt while other areas had their rail bed undermined. Subsequent to the filing of the Companys report on Form 10-Q/A for the quarter ended
September 30, 2003, the Company conducted a more complete investigation of the damage and of the costs to return the railroad to the condition that it was in prior to the flood damage. As a result of such investigation, the Company currently
estimates the cost to repair the damage to be a minimum of $4,500,000, an accrual for which was recorded in 2003. The Companys current plans has undertaken, the work necessary to help preserve and protect the existing railroad. However, the
major repairs to return the railroad to its condition prior to the flood damage will be deferred until a later date.





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KAISER VENTURES LLC AND SUBSIDIARIES



Note 6. INVESTMENTS



The Company has an Investment Policy which provides for the investment of excess cash balances primarily in bond funds, commercial paper, and debt
instruments. At December 31, 2004, the Company had investments in bond mutual funds which were classified as available for sale. At December 31, 2003, the Company had investments in bond mutual funds and U.S. corporate commercial paper
which were all classified as available for sale. The classification of investment securities is reviewed by the Company at each reporting period.



In April 2003, the Company sold certain of its held to maturity investments prior to their stated maturity date. The Company had determined
that its investments were too concentrated in one industry, and thus sold certain investments in order to minimize that risk. As a result of these transactions, the remaining held to maturity investments with an amortized cost of
$4,773,000 were reclassified as available-for-sale investments. The unrealized gain of $52,000 associated with investments classified as available-for-sale was recorded as an increase to the investment with a corresponding
increase to comprehensive income, which is a component of members equity. In addition, realized gains or losses, and interest income or dividends are reflected in the statement of operations.



The Companys investments in bond mutual funds were originally
classified as trading when purchased and were accounted for as such through June 30, 2003. As a trading security, the investment was marked to market with any unrealized gain or loss reflected in the statement of operations.
However, as of June 30, 2003, the bond funds were reclassified to available-for-sale.



During 2003 the Company sold investments, classified as held to maturity, with a basis of $1,025,000 for $1,017,000, resulting in a loss of
$8,000. Also during 2003 the Company sold investments, classified as available-for-sale, with a basis of $2,942,000 for $3,010,000, resulting in a realized gain of $68,000. The basis for all investments sold was determined using
specific identification.



The following is a
summary of the fair value of investment securities, all with maturities of less than 12 months which are classified as available-for-sale as of December 31, 2004:



|                              |  |           |          
|----------------------------- |  | --------- | ---------
|AVAILABLE-FOR-SALE SECURITIES |  | FAIRVALUE
|Bond funds                    |  | $         | 9,634,000
|                              |  |           |          



As of December 31,
2004, the Companys available for sale securities had an unrealized net loss of $213,000 that is included in other comprehensive loss, a component of Members Equity, due to unrealized net losses on two bond funds.
The unrealized losses initially arose on the two bond funds arose during July 2003. Due to the diverse nature and return history of these bond funds, the Company believes that these losses are only temporary.



Note 7. CONVERSION DISTRIBUTION



At December 31, 2004, the Company holds $1,265,000 in cash it had previously
sent to its transfer agent in December 2001 for the payment of the $10.00 per share merger consideration to shareholders. This cash, classified as restricted cash, will ultimately be distributed to shareholders once the correct paperwork is
submitted by such shareholders, thereby reducing the related conversion distribution payable. During the first seven months of 2003, the transfer agent returned to the Company, $1,470,000 of its December 2001 merger consideration. During the second
quarter of 2004 and the fourth quarter of 2003, the Company returned $75,000 and $130,000, respectively, of these funds to the transfer agent for distribution to shareholders.





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Note 8. NOTE RECEIVABLE



As of December 31, 2004, the Company has one note receivable from Levand Steel. The outstanding balance of the Levand Steel
note at December 31, 2004 is $349,000, of which $292,000 has been included in current assets and the balance of $57,000, is classified as a long-term asset. The note bears interest at 8% per annum with monthly payments of $25,700 including interest,
with the remaining balance due February 2006.



Note 9. ENVIRONMENTAL
INSURANCE



One of the goals in the cash maximization
strategy approved by Kaiser Ventures LLCs Board of Directors in September 2000 was to reduce the liabilities associated with existing and potential future environmental and other similar types of claims. In furtherance of such goal, the
Company purchased an insurance policy effective June 30, 2001, that is designed to provide broad prospective commercial general liability, pollution legal liability, and contractual indemnity coverage for the Companys ongoing and historical
operations. The policy has a twelve (12) year term and limits of $50,000,000 in the aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is designed to provide coverage for future claims in excess of the
Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the policy will provide first dollar coverage for a claim resulting from property damage, personal
injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically intended to provide additional coverage for
potential liabilities arising from pollution conditions or known and/or potential asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g., prior corporate
transactions and real estate sales. The aggregate cost for this policy was approximately $5,800,000, of which, based upon discussions among the respective members of the Boards of Directors, KSC Recovery paid $2,000,000 and the Company paid the
balance of approximately $3,800,000. The portion of the policy paid by KSC Recovery was expected to cover known and/or potential asbestos claims; while the portion of the policy paid by the Company was expected to cover future potential claims
arising from the Companys historical operations. The Company expects this policy will cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company.



The Companys $3,800,000 premium for the prospective
insurance policy is capitalized as a long-term asset and is being amortized on a straight-line basis over the twelve (12) year term of the policy; approximately $80,000 per quarter or $320,000 per year. To the extent a pre-existing liability has not
been recorded, claims made for environmental matters are recorded as litigation accruals in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss
can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably
estimated.



Note 10. BUILDINGS AND EQUIPMENT (Net)



Buildings and equipment (net) as of December 31 consisted of the following:



|                         |  |      |            |  
|------------------------ |  | ---- | ---------- | -
|                         |  | 2004 |           
|Buildings and structures |  | $    | 2,085,000  |  
|Machinery and equipment  |  |      | 1,830,000  |  
|                         |  |      |            |  
|                         |  |      | 3,915,000  |  
|Accumulated depreciation |  |      | (3,368,000 | )
|                         |  |      |            |  
|Total                    |  | $    | 547,000    |  
|                         |  |      |            |  



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Note 11. ACCRUED LIABILITIES - CURRENT



The current portion of accrued liabilities as of December 31 consisted of the following:



|                                                   |  |      |        
|-------------------------------------------------- |  | ---- | -------
|                                                   |  | 2004
|Compensation, severance and related employee costs |  | $    | 477,000
|Accrued professional                               |  |      | 457,000
|Other                                              |  |      | 18,000 
|                                                   |  |      |        
|Total                                              |  | $    | 952,000
|                                                   |  |      |        



Note 12. ENVIRONMENTAL REMEDIATION
RESERVE



With the sale of approximately 588 acres of the
Companys Mill Site Property to CCG in August 2000, substantially all of the environmental liabilities associated with that property were eliminated; thus, as a result of the sale and the remediation work undertaken prior to the sale, the
Company was able to reduce its environmental remediation reserves by $21,252,000.



The Company purchased an insurance policy effective June 30, 2001 that is designed to provide broad commercial general liability, pollution legal liability, and contractual indemnity coverage for the Companys
ongoing and historical operations. The policy has a twelve (12) year term and limits of $50,000,000 in the aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is designed to provide coverage for future
claims in excess of the Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the policy will provide first dollar coverage for a loss resulting from
property damage, personal injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically intended to provide
additional coverage for known and/or potential liabilities arising from pollution conditions or asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g.,
prior corporate transactions and real estate sales.



In August
2001, the California Regional Water Quality Control Board, on behalf of the City of Ontario, asserted an environmental claim against the Company relating to the historical operations conducted at the Mill Site. The Company tendered the claim to its
insurance carrier and the insurance carrier accepted the claim. As a result, at September 30, 2001, the Company recorded an insurance receivable in an amount equal to its pre-existing estimated environmental liability of $1,500,000 and reclassified
the obligation as a litigation accrual separate from its environmental remediation liabilities. The City of Ontarios claims were fully settled in March 2004 with the settlement paid by the insurance carrier. The final settlement between our
insurance carrier and the City of Ontario resulted in a payment to the City that was $250,000 less than the Company had accrued. Therefore the Company reduced both its litigation accrual and insurance receivable by $250,000 as of the date of the
settlement.



As of December 31, 2004, the Company estimates,
based upon current information, that its future environmental liability related to certain matters not assumed by CCG in its purchase of the Mill Site Property, such as the groundwater plume discussed below and other environmental related items,
including, but not linked to remediation at the Eagle Mountain Site, potential third party property damage and bodily injury claims, would be approximately $2,400,000. In the event a future claim for damages is filed against the Company that relates
to the remaining $2,400,000 environmental reserve, management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.



See Note 9 Environmental Insurance, and Note 18 Commitments and Contingencies - Environmental
Contingencies.





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KAISER VENTURES LLC AND SUBSIDIARIES



Note 13. EQUITY



Conversion into LLC



In November 2001, the stockholders of Kaiser Inc. approved the conversion of Kaiser Inc. into a newly-formed limited liability company pursuant to a
merger between Kaiser Inc. and Kaiser LLC, the surviving company. Under the terms of the merger converting Kaiser Inc., to a limited liability company, Kaiser Inc.s stockholders received $10.00 in cash plus one Class A Unit for each share of
common stock in Kaiser Inc. The new Class A Units are not listed on any stock exchange, additionally the transferability of the units is subject to the approval of an executive of the Company. Subsequent to the conversion, Kaiser LLC is taxed as a
partnership and thus, Kaiser LLC results of operations (on an income tax basis) are distributed to the unitholders for inclusion in their respective income tax returns.



Class A Units Outstanding



At December 31, 2004 Kaiser LLC had 6,929,299 Class A Units outstanding.



At December 31, 2004, there are 298,000 Class A Units available for issuance
relating to outstanding options.



As of December 31,
2000, 136,919 shares of the outstanding common stock of the Company were being held for the benefit of the former general unsecured creditors of the predecessor company pending the resolution of disputed bankruptcy claims. The final resolution of
these claims will result in the final allocation of the held shares among the unsecured creditor group, which presents no liability to the Company. For financial reporting purposes these shares have been considered issued and outstanding. Just prior
to the Companys conversion into an LLC in November 2001, these 136,919 shares were issued to the bankruptcy estate, and subsequently converted into Class A units. During 2003, 11,321 of these 136,919 Class A units were tendered by the
bankruptcy estate to a bankruptcy claimant as partial settlement of their claim. Therefore, as of December 31, 2003 there are 125,598 Class A units being held by the bankruptcy estate. During 2004, 21,331 of these Class A units were distributed to
bankruptcy claimants. Therefore, as of December 31, 2004 there are 104,267 Class A units being held by the bankruptcy estate.



Class B Units



Prior to the merger, Kaiser LLC issued 751,956 Class B Units to current and former MRC executives. These MRC executives had previously been granted the
right to receive certain contingent incentive payments in order to incentivize each of them to assist Kaiser and MRC in closing the sale of the landfill project as well as meeting all conditions necessary for the release of funds from escrow. These
Class B Units, issued to the MRC executives, replaced those incentive payments rights.



These Class B Units are entitled to receive approximately 2% of any cash actually received by MRC, up to approximately $752,000 or $1.00 per unit, if MRC receives the currently agreed upon price of $41,000,000. The
Class B Units are not entitled to any distributions or profits, have no voting rights except as required by law and are not transferable.



At December 31, 2004, Kaiser LLC had 751,956 Class B Units outstanding.



Class C and D Units



During 2002, the Company issued Class C and D Units to certain officers and terminated the Long-Term Incentive Plan (TIP) as to future
unearned payments that could have been payable to the Companys executive officers. Payments to holders of the Class C and D Units will only be paid upon the monetization of the Companys major assets. Payments, if any, will be made under
a formula that replicates the amount that would



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have been paid under the TIP if it had been continued. Class C and D Units are not entitled to any other
distributions or profits, have no voting rights except as required by law and are not transferable.



At December 31, 2004, Kaiser LLC had 952 and 48 Class C and D Units outstanding.



Warrants



In November 1999, Kaiser Inc. purchased 2,730,950 and 1,693,551 shares of its common stock from the New Kaiser Voluntary Employees Benefit
Association (the VEBA) and from the Pension Benefit Guaranty Corporation (the PBGC), respectively, who were then the Companys two largest stockholders. As consideration for these shares Kaiser Inc.: paid $13.00 per
share in cash; issued stock purchase warrants that have an exercise price of $17 per share and a term until September 30, 2004, to the VEBA (460,000 shares) and the PBGC (285,000 shares), which provided the VEBA and the PBGC with additional
consideration approximating $0.60 per share; and gave the VEBA and the PBGC certain limited participation rights in the future success of the Company. The Company initially recorded this transaction at a net value of $13 per share because the
warrant value conveyed to the sellers of approximately $0.60 per share is offset by a corresponding equity credit for the warrants issuance value. Subsequently, in 2000, as a result of the two sales of the Companys remaining Mill Site
Property, the Company made contingent payments equaling approximately $1.11 per share. These warrants expired in 2004 without being exercised.



Unit/Stock Option and Unit/Stock Grant Programs



In October 1990, the Companys stockholders approved the Amended, Restated and Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan (the
1989 Stock Plan). The 1989 Stock Plan provided for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock or deferred stock awards. Certain options granted under the 1989 Stock Plan
are still outstanding. The Company incurred no compensation expense during 2003 related to these options.



In July 1992, the Companys stockholders approved the 1992 Stock Plan. The 1992 Stock Plan provides for the grant of incentive stock options and
non-qualified stock options. The 1992 Stock Option Plan is administered by the Board of Directors. The 1992 Plan is a three-year Plan with years running from July 1 to June 30. Each July 1, an amount equal to 2% of the Companys shares
outstanding became available to support grants of stock options to employees during that year. At the end of each plan year, reserved plan shares not made subject to stock options revert to normal unissued share status. Grants are generally
established at fair market value of the Companys common stock on the date of the grant and the exercise thereof may extend for up to 10 years with various vesting schedules.



In addition, under the 1992 Stock Plan each director when first elected to the Board shall automatically be granted options
for 5,000 common stock shares. Each non-employee director who is re-elected or serving an unexpired term as a member of the Board at an annual meeting of holders of stock of the Company will be automatically granted an additional 1,500 stock
options. These options have an exercise price equal to the fair market value of the Companys Common Stock on the date of the grant.



In June 1995, the Companys stockholders approved the 1995 Stock Plan. The 1995 Stock Plan provides for the grant of incentive stock options,
non-qualified stock options, restricted stock and other stock related incentives. However, there are no outstanding options under this plan, as of December 31, 2004.



In addition, under the 1995 Stock Plan, each director when first elected to the Board shall automatically be granted options
for 5,000 common stock shares. Each non-employee director who is re-elected or serving an unexpired term as a member of the Board at an annual meeting of holders of stock of the Company will be automatically granted an additional 1,500 stock
options. These options have an exercise price equal to the fair market value of the Companys common stock on the date of the grant.



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In May 2000, the Companys proposed 2000 Stock Plan was not approved by the shareholders of the
Company thus no options were granted in 2000. The Company in May 2000 granted to each non-employee director who was re-elected or serving an unexpired term as a member of the Board a restricted stock award of 1,500 shares. The restrictions on these
shares lapse equally on the first and second anniversaries of the grants.



In December 2000, the Company declared and paid a cash distribution of $2.00 per share from the proceeds of the two Mill Site Property sales in 2000. As a result of this cash distribution, the Company reduced the
exercise price on all outstanding options by the $2.00 in order to mirror the $2.00 dividend per share. This repricing required the Company to change to variable plan accounting for its outstanding options, which resulted in the Company incurring an
expense of $428,000 for 2001.



Effective with the date of the
merger, all options with an exercise price of $10.00 and below, 326,750 options, were deemed exercised which entitled the optionees to participate in the $10.00 cash distribution and conversion into Class A Units. As a result of this cash
distribution, the Company reduced the exercise price on all remaining outstanding options, 301,100 Class A Unit options, by the $10.00 in order to mirror the $10.00 dividend per share. Additionally, the term on the remaining unit options was
extended, due to their reduced liquidity, to December 31, 2008.



In 2004, and 2003, the Company did not incur any unit based compensation expense related to the exercise of nonqualified unit options.



A summary of the status of grants under the Companys unit/stock plans as of December 31, 2004 and 2003, and activities during the years ended on
those dates is presented below:



|                                                               |  |         |         |                                |   |         |  |                                |         |  |   |     
|-------------------------------------------------------------- |  | ------- | ------- | ------------------------------ | - | ------- |  | ------------------------------ | ------- |  | - | ----
|                                                               |  | 2004    |         | 2003                          
|                                                               |  | Options |         | Weighted-AverageExercise Price |   | Options |  | Weighted-AverageExercise Price
|Outstanding at beginning of Year                               |  |         | 298,100 |                                | $ | 3.11    |  |                                | 298,100 |  | $ | 3.11
|Granted                                                        |  |         |        |                                |   |        |  |                                |        |  |   |    
|Exercised                                                      |  |         |        |                                |   |        |  |                                |        |  |   |    
|Forfeited                                                      |  |         |        |                                |   |        |  |                                |        |  |   |    
|                                                               |  |         |         |                                |   |         |  |                                |         |  |   |     
|Outstanding at end of year                                     |  |         | 298,100 |                                | $ | 3.11    |  |                                | 298,100 |  | $ | 3.11
|                                                               |  |         |         |                                |   |         |  |                                |         |  |   |     
|Options exercisable at year End                                |  |         | 298,100 |                                | $ | 3.11    |  |                                | 298,100 |  | $ | 3.11
|                                                               |  |         |         |                                |   |         |  |                                |         |  |   |     
|Weighted-average fair value of options granted during the year |  | $       | N/A     |                                |   |         |  | $                              | N/A     |  |   |     



The following table
summarizes information about variable unit options outstanding as of December 31, 2004:



|                         |  |                                        |  |                                     |  |                                |     
|------------------------ |  | -------------------------------------- |  | ----------------------------------- |  | ------------------------------ | ----
|                         |  |                                        |  | Options Exercisable and Outstanding
|Range of Exercise Prices |  | Weighted-AverageRemaining Life (years) |  | Options                             |  | Weighted-AverageExercise Price
|$0.55 to $1.625          |  | 4.0                                    |  | 161,600                             |  | $                              | 1.36
|$4.85 to $5.58           |  | 4.0                                    |  | 136,500                             |  | $                              | 5.18





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Note 14. EARNINGS (LOSS) PER UNIT/SHARE



The following table sets forth the computation of basic and diluted earnings (loss) per unit/share:



|                                                                                                     |  |      |           |   |      |   |            |  
|---------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                                                                     |  | 2004 |           |   | 2003 |  
|Numerator:                                                                                           |  |      |           |   |      |   |            |  
|Net (loss)                                                                                           |  | $    | (371,000  | ) |      | $ | (3,969,000 | )
|Numerator for basic earnings (loss) per unit (Loss) available to Class A members                     |  | $    | (371,000  | ) |      | $ | (3,969,000 | )
|Numerator for diluted earnings (loss) per unit (Loss) available to Class A members                   |  | $    | (371,000  | ) |      | $ | (3,969,000 | )
|Denominator:                                                                                         |  |      |           |   |      |   |            |  
|Denominator for basic earnings per unit - weighted-average shares                                    |  |      | 6,924,000 |   |      |   | 6,916,000  |  
|Effect of dilutive options                                                                           |  |      |          |   |      |   |           |  
|                                                                                                     |  |      |           |   |      |   |            |  
|Denominator for diluted earnings per unit - adjusted weighted-average shares and assumed conversions |  |      | 6,924,000 |   |      |   | 6,916,000  |  
|                                                                                                     |  |      |           |   |      |   |            |  
|Basic (loss) per unit                                                                                |  | $    | (0.05     | ) |      | $ | (0.57      | )
|                                                                                                     |  |      |           |   |      |   |            |  
|Diluted (loss) per unit                                                                              |  | $    | (0.05     | ) |      | $ | (0.57      | )
|                                                                                                     |  |      |           |   |      |   |            |  



For additional
disclosures regarding the outstanding employee unit/stock options see Note 13.



The following discussion discloses the number of vested and outstanding options during 2004 and 2003 that were not included in the computation of diluted earnings per unit/share. The Company incurred a net loss during
2004 and 2003 and therefore all options are considered antidilutive for that year.



Note 15. SUPPLEMENTAL CASH FLOW INFORMATION



No interest was paid in 2004 or 2003.



No interest
expense was incurred in 2004 or 2003.



Income taxes paid in
2004 and 2003 were $27,000 and $56,000, respectively. During 2003, the Company was audited by the State of California for years prior to its conversion to a limited liability company. As a result of that audit the Company paid the State of
California $46,000 during 2003.



The Company has not
capitalized interest or property taxes during 2004 or 2003.



Note 16. INCOME
TAXES



Subsequent to the Companys conversion into an
LLC, the Company is taxed as a partnership and thus, the Companys results of operations (on an income tax basis) are allocated to the unitholders for inclusion in their respective income tax returns. Therefore, the only taxes imposed on the
Company are a gross revenue tax imposed by the State of California, and income taxes imposed on Business Staffing Inc. These taxes amounted to $14,000 for 2004 and $16,000 for 2003. Also, during 2003 the Company recorded an additional $46,000 income
tax expense as a result of the finalization of a State of California income tax audit for 1999.



Note 17. SIGNIFICANT CUSTOMERS



Significant Customers



Management and Training Corporation (MTC) operated a minimum security prison facility on a portion of the Eagle Mountain Site through December 31, 2003.



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The Company received substantial portions of its revenue from the following customers:



|                       |  |          |        
|---------------------- |  | -------- | -------
|Year Ended December 31 |  | MTCLease
|2004                   |  | $        | 87,000 
|2003                   |  | $        | 873,000



Note 18. COMMITMENTS AND
CONTINGENCIES



Environmental Contingencies



As discussed in Note 19, effective June 30, 2001, the Company purchased, a
12-year $50,000,000 insurance policy, which is expected to cover substantially any and all environmental claims (up to the $50,000,000 policy limit) relating to the historical operations of the Company. To the extent a pre-existing liability has not
been recorded, claims made for environmental matters are recorded as litigation accruals in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss
can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably
estimated.



At the inception of the insurance contract, the
Company estimated, based upon current information and discussions with environmental consultants, that its future environmental liabilities related to certain matters not assumed by CCG Ontario, LLC in its purchase of the Mill Site Property,
including a certain groundwater matter as well as potential matters at Eagle Mountain and at other historical locations, would be approximately $4.0 million. These liabilities reflected managements estimate of potential future environmental
claims, remediation and related costs but did not represent known claims at the inception of the policy. In August 2001, the California Regional Water Quality Control Board, on behalf of the City of Ontario, asserted an environmental claim against
the Company relating to the historical operations conducted at the Mill Site. The Company tendered the claim to its insurance carrier and the insurance carrier accepted the claim. As a result, at September 30, 2001, the Company recorded an insurance
receivable in an amount equal to its pre-existing estimated environmental liability of $1,500,000 and reclassified the obligation as a litigation accrual. In the event a future claim for damages is filed against the Company that relates to the
remaining $2,400,000 environmental reserve, management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.



Pension Plans



The Company currently sponsors a voluntary qualified 401(k) savings plan and a nonqualified pension plan, available to all full-time employees.
Participants may make contributions of up to 15% of their compensation with the Company matching one-half of each participants contribution up to 6% of compensation. The non-qualified plan mirrors the qualified 401(k) plan.



Total expense relative to these plans for the years ended December 31, 2004
and 2003 was $129,200 and $176,000, respectively.



Letters of Credit



At December 31, 2004, the Company had guaranteed a
letter of credit outstanding on its behalf to third parties totaling $103,000. This letter of credit was issued for reclamation activities performed at an idled coal property, on behalf of and at the expense of the KSC bankruptcy estate.



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MRC Financing



Since 1995 MRC has been funded through a series of private placements to its existing equity holders. In 2003 MRC completed a $2,100,000 private
placement of its Class B Units to its existing members. The private placement was payable in installments with the last two installments paid in 2004. Kaisers equity contribution totaled $1,822,000, bringing its ownership interest in MRC to
82.48%. Future funding of MRC will be required to cover such items as the federal land exchange litigation and the railroad repairs but there is no assurance that such funding will be obtained.



Note 19. LEGAL PROCEEDINGS



The Company, in the normal course of its business, is involved in various
claims and legal proceedings. A number of litigation matters previously reported have settled. Significant legal proceedings, including those which may have a material adverse effect on the Companys business or financial condition, are
summarized below. However, the following discussion does not, and is not intended to, discuss all of the litigation matters to which the Company may be or become a party. Should the Company be unable to resolve any legal proceeding in the manner the
Company anticipates and for a total cost within close proximity to any potential damage liability the Company has estimated, the Companys business and results of operations may be materially and adversely affected.



Eagle Mountain Landfill Project Land Exchange Litigation. In October
1999, Kaisers wholly-owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the United States Bureau Land Management (BLM). This completed land exchange has been challenged in
two separate federal lawsuits.



Federal Land Exchange
Litigation. There are two separate, but related, litigation matters in federal district court involving the completed land exchange between Kaiser Eagle Mountain, Inc, and the BLM. The details of each case are as follows:



A. Donna Charpied; Laurence Charpied; The Desert Protection Society
(Plaintiffs) v. United States Department of the Interior; Bureau of Land Management; Bruce Babbitt, in his official capacity as Secretary of the Interior; Tom Fry, in his official capacity as Acting Director of the Bureau of Land Management; Al
Wright, in his official capacity as Acting California State Director of the Bureau of Land Management; Tim Salt, in his official capacity as Bureau of Land Management California Desert District Manager; Robert Stanton, in his official capacity as
Director of the National Park Service, Kaiser Eagle Mountain, Inc., and Mine Reclamation Corporation (Defendants), (United States District Court for the Central District of California, Riverside Division, Case No. EDCV 99-0454 RT(MCx)).



In December 1999, opponents of Eagle Mountain landfill
project filed a lawsuit in the federal district court located in Riverside, California seeking to stop the Eagle Mountain landfill project. In summary, the lawsuit challenges the BLMs approval of a land exchange between the Company and the
BLM. The challenges are based upon, among other things, the Companys and the BLMs alleged failure to comply with the National Environmental Policy Act and the Federal Land Policy Managements Act. The relief sought is an unwinding
of the land exchange that was completed on October 13, 1999, and the award of attorneys fees. The National Park Service has been dismissed out of the lawsuit. In Desert Citizens Against Pollution v. Bisson,(Ninth Circuit Court of
Appeals, Case No. 97-55429), the Court of Appeals concluded, among other things, that the BLM did not properly value the land being acquired by the competing Mesquite rail-haul landfill project and ordered a reversal of the land exchange. The court
concluded that the appraisal should have considered the highest best use of the lands being acquired from the BLM as a landfill. The court did not, however, determine the proper valuation of the exchanged lands. The plaintiffs in Kaisers
federal land exchange litigation amended their respective complaints to include allegations that the appraisal used in Kaisers land exchange with the BLM is similarly defective.



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In light of the Bisson ruling, the BLM has completed an independent review of the
highest and best use analysis consistent with that discussed in the Bisson decision.The BLMs independent appraiser concluded that there would be no change in the determination of the highest and best use
analysis in the appraisal used in the land exchange if the property involved was expressly considered as a land fill site. Given all the facts and circumstances, the independent appraisal concluded that there was no premium to be paid for the
property interests exchanged by the BLM even if a portion of such property interests were a part of a planned landfill.



All scheduled briefing for the case was completed in January 2003. As of the date of this Report on Form 10-KSB we are still awaiting a decision from the
court. Kaiser is vigorously defending the litigation.



B.
National Parks and Conservation Association (Plaintiff) v. Bureau of Land Management; United States Department of the Interior; Kaiser Eagle Mountain, Inc.; and Mine Reclamation Corporation (Defendants), (United States District Court for the
Central District of California, Riverside Division, Case No. EDCV 000041 VAP(JWJx)).



This lawsuit was brought by the National Parks Association and alleges causes of action that are virtually identical to the causes of action asserted in the Charpied litigation. All scheduled briefing has been
completed for this litigation. Kaiser is also vigorously defending this matter.



Threatened Endangered Species Act Litigation. The Company along with the U.S. Department of Interior, the BLM, the Los Angeles County Sanitation District and Metropolitan Water District of Southern California,
received a letter dated September 26, 2002, from the Center for Biological Diversity, the Sierra Club, and Citizens for the Chuckwalla Valley (Complaining Groups) declaring their intent to sue for violations of the Endangered Species Act
in regard to actions or inactions related to the railroad that would serve the Eagle Mountain landfill project. Among other things, it is alleged that there has been a failure to comply with a biological opinion issued by the U.S. Fish &
Wildlife Service and that the BLM has failed to enforce the terms of that biological opinion. In summary, the Complaining Groups are demanding enforcement of the biological opinion or revocation by the BLM of the right-of-ways granted for the
existing Eagle Mountain railroad and the Eagle Mountain road. The biological opinion contains, among other items, mitigation measures for the desert tortoise which could require substantial expenditures.



In reviewing the complaints of the Complaining Groups, the BLM, out of an
abundance of caution, conducted an informal consultation with the U.S. Fish & Wildlife Service with respect to the biological opinion. Although neither the construction of the landfill project nor the regular use of the railroad has commenced,
the BLM requested the Company to develop a maintenance schedule for the railroad that would address, among other things, the particular concerns of culverts and rail line ballast. The Company submitted a proposed schedule for such activities.



On April 8, 2004, the Complaining Groups sent a letter to the
BLM and the Company again declaring their intent to sue for violations of the Endangered Species Act and asking that the same type of actions be taken against the Company as demanded in the September 2002 letter. This new letter was apparently
triggered by the activities undertaken to preserve and protect the railroad from further damage such as the cleaning out of blocked culverts after the flash floods that occurred in the area in 2003 that damaged a limited portion of the rail line. In
June 2004, the Company appropriately responded to this notice of intent to sue letter and further voluntarily agreed to undertake certain measures to alleviate concerns with respect to the desert tortoise. In 2004, the Company completed certain of
the voluntary measures and the Complaining Groups have not currently pursued any further action with respect to their April 8, 2004 letter.



Tex Tin Claim. In February 2004 we received correspondence identifying the Company as a potentially responsible party for remediation and related
costs at a property in Texas known as the Tex Tin site. It appears that the basis for such identification is that the Company is considered the reorganized successor to KSC. However, the factual basis and the monetary extent of the alleged liability
are currently unknown. No legal action has been commenced against the Company. We have informed those giving the notice that we believe such liability, if any, was discharged in the bankruptcy of KSC. We also believe that there is coverage under our



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existing insurance for this claim. There has been no material activity with regard to this claim other than the
initial correspondence.



Asbestos Litigation. There are
pending asbestos litigation claims, primarily bodily injury, against Kaiser LLC and Kaiser Steel Corporation (the bankruptcy estate of Kaiser Steel Corporation is embodied in KSC Recovery, Inc.). There currently are approximately 17 active suits.
Most of the plaintiffs allege that they were aboard Kaiser ships or worked in shipyards in the Oakland/San Francisco, California area or Vancouver, Washington area in the 1940s and that the Company and/or KSC Recovery were in some manner
associated with one or more shipyards or has successor liability. However, we are beginning to see the focus of the claims shifting from ships and shipyards to other facilities such as the former Kaiser Steel Mill Site Property. Plaintiffs
attorneys are increasingly requesting mill site and Eagle Mountain related documents in an effort to build a war chest of documents for future litigation.



Most of these lawsuits are third party premises claims alleging injury resulting from exposure to asbestos or asbestos
containing products and involve multiple defendants. The Company anticipates that it, often along with KSC Recovery, will be named as a defendant in additional asbestos lawsuits. A number of large manufacturers and/or installers of asbestos and
asbestos containing products have filed for bankruptcy over the past several years, increasing the likelihood that additional suits will be filed against the Company. In addition, the trend has been toward increasing trial damages and settlement
demands. Virtually all of the complaints against us and KSC Recovery are non-specific, but involve allegations relating to pre-bankruptcy activities. It is difficult to determine the amount of damages that we could be liable for in any particular
case until near the time of trial; indeed, many of these cases do not include pleadings with specific damages. The Company vigorously defends all asbestos claims as is appropriate for a particular case.



Of the claims resolved to date, approximately 76% have been resolved without
payment to the plaintiffs, and of the 45 cases that have been settled to date involving a payment made to plaintiffs, the settlement amount was $37,500 or less for 38 of such cases. The Company believes that it currently has substantial insurance
coverage for the asbestos claims and has tendered these suits to appropriate insurance carriers.



Slemmer Litigation. Thomas M. Slemmer, et al v. Fontana Union Water Company, et al., (San Bernardino County District Court, California, Case No. SCVSS
086856). The defendants in the lawsuit are Kaiser, Fontana Union Water Company, Cucamonga County Water Company, San Gabriel Valley Water and individuals serving on the Board of Directors of Fontana Union Water Company. In summary, plaintiffs
allege that they are the owners of 175 shares of the stock of Fontana Union Water Company, a mutual water company, and that the defendants conspired and committed acts that constitute an unlawful restraint of trade, a breach of fiduciary duty by the
controlling shareholders of Fontana Union and fraudulent business practices in violation of California law. Among other things, plaintiffs have requested $25,000,000 in damages and the trebling of such damages under California law. The lawsuit is
proceeding as a class action lawsuit. Discovery in the case is currently ongoing and a trial on the matter is currently scheduled to occur in 2005. We believe that the allegations against us are without merit and we will vigorously defend this suit.



Port of Oakland. The Port of Oakland has asserted, but
taken no action, with respect to a potential claim arising out of alleged contamination of soil from underground storage tanks. The Port of Oakland alleged that KSC used these tanks at property owned by the Port of Oakland and leased by Kaiser Steel
Corporation pursuant to a lease agreement that terminated in 1986. Based upon the communication received, the Port of Oakland claims damages of approximately $150,000 plus unknown potential remediation costs. We believe, based upon the information
provided to date, that the allegations are without merit and that any potential claim would be barred under the statute of limitations.



Port of Los Angeles. On March 21, 2003, KSC received a Third Party Complaint captioned Santa Monica Baykeeper, et al (Plaintiffs) v. Kaiser
International Corporation, et al (Defendants) / American Bulk Loading Enterprises, Inc. et al (Third-Party Plaintiffs) v. AMICOR, et al (Third Party Defendants) United States District Court Central District of California; Case Number CV-97-7761
DDP (RCx). The underlying litigation involves a citizens enforcement action commenced against the Port of Los Angeles, Kaiser International Company, and



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others by the Santa Monica Baykeepers for alleged contamination to the San Pedro Inner Harbor in the Port of Los
Angeles arising from the operation of a bulk loading facility. The Third Party Plaintiffs subsequently commenced litigation against KSC and thirty-nine other Third Party Defendants seeking recovery for any amount paid by the Third Party Defendants
under theories of equitable indemnity, negligence and contribution. While we understand the case is still open, the litigation is not being actively pursued against KSC.



London Market Claim. In 2002, litigation was commenced by Truck Insurance Exchange (Truck) against
Lloyds of London, and certain London Market Insurance Companies (collectively London Carriers), captionedTruck Insurance Exchange v. Fremont Indemnity, et al, Los Angeles Superior Court Case No. BC 260738. In essence Truck
was claiming that the London Carriers were obligated to participate in the payment of a litigation settlement that Truck had made. The London Carriers tendered the claim to the Company for indemnification pursuant to a 1995 settlement agreement
between the London Carriers and the Company. The Company in turn submitted the London Carriers claim to IMACC, which is a third party that we believe is ultimately responsible for the payment of any amount that it determined to be owed in
litigation. During the second quarter of 2003, the Truck litigation was dismissed because of Trucks failure to commence its law suit within the applicable statute of limitations. As of the date of this 10-KSB Report, IMACC has been reimbursing
the London Carriers for the reasonable attorneys fees and costs of this litigation. Truck appealed the trial courts decision to dismiss the case but such appeal was denied in an unpublished opinion. We understand that Truck is seeking to
appeal this matter to the California Supreme Court.



Bankruptcy Claims. The bankruptcy estate of KSC was officially closed by order of U.S. Bankruptcy Court for the District of Colorado on October 2, 1996. However, the bankruptcy case was reopened in 1999 in connection with certain
litigation matters. Since that time, the bankruptcy case was again closed, however, the administration of KSCs bankrupt estate will continue for several more years.



From time to time various environmental and similar types of claims that relate to Kaiser Steel pre-bankruptcy activities,
are asserted against KSC and Kaiser LLC. Excluding the asbestos claims, there has been an average of two to four such claims a year for the past several years. The Port of Oakland and the BKK Landfill claims are examples of the types
of claims that are occasionally alleged to have arisen out of pre-bankruptcy activities. In connection with the KSC plan of reorganization, Kaiser, as the reorganized successor to KSC, was discharged from all liabilities that may have arisen prior
to confirmation of the plan, except as otherwise provided by the plan and by law. Although Kaiser believes that in general all pre-petition claims were discharged under the KSC bankruptcy plan, there have been some challenges as to the validity of
the discharge of certain specified claims, such as asbestos claims. If any of these or other similar claims are ultimately determined to survive the KSC bankruptcy, it could have a materially adverse effect on Kaisers business and value.



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Note 20. QUARTERLY FINANCIAL DATA (Unaudited)



|                                                                |  |              |          |   |               |   |            |              |  |   |               |   |  |   |            |  
|--------------------------------------------------------------- |  | ------------ | -------- | - | ------------- | - | ---------- | ------------ |  | - | ------------- | - |  | - | ---------- | -
|                                                                |  | FirstQuarter |          |   | SecondQuarter |   |            | ThirdQuarter |  |   | FourthQuarter |  
|2004                                                            |  |              |          |   |               |   |            |              |  |   |               |   |  |   |            |  
|Resource revenues                                               |  | $            | 320,000  |   |               | $ | 479,000    |              |  | $ | 382,000       |   |  | $ | 753,000    |  
|Income (loss) from operations (1)                               |  | $            | (400,000 | ) |               | $ | (227,000   | )            |  | $ | (277,000      | ) |  | $ | (97,000    | )
|Income (loss) before income tax provision                       |  | $            | (322,000 | ) |               | $ | (151,000   | )            |  | $ | (206,000      | ) |  | $ | 322,000    |  
|Net (loss) income                                               |  | $            | (324,000 | ) |               | $ | (153,000   | )            |  | $ | (208,000      | ) |  | $ | 314,000    |  
|Earnings (loss) per unit (2)                                    |  |              |          |   |               |   |            |              |  |   |               |   |  |   |            |  
|Basic                                                           |  | $            | (0.05    | ) |               | $ | (0.02      | )            |  | $ | (0.03         | ) |  | $ | 0.05       |  
|Diluted                                                         |  | $            | (0.05    | ) |               | $ | (0.02      | )            |  | $ | (0.03         | ) |  | $ | 0.05       |  
|                                                                |  |              |          |  
|2003                                                            |  |              |          |   |               |   |            |              |  |   |               |   |  |   |            |  
|Resource revenues                                               |  | $            | 835,000  |   |               | $ | 343,000    |              |  | $ | 509,000       |   |  | $ | 587,000    |  
|Income (loss) from operations (1)                               |  | $            | 329,000  |   |               | $ | (1,314,000 | )            |  | $ | (1,609,000    | ) |  | $ | (2,729,000 | )
|Income (loss) before minority interest and income tax provision |  | $            | 442,000  |   |               | $ | (1,094,000 | )            |  | $ | (1,495,000    | ) |  | $ | (2,549,000 | )
|Income (loss) before income tax provision                       |  | $            | 442,000  |   |               | $ | (1,094,000 | )            |  | $ | (1,232,000    | ) |  | $ | (2,023,000 | )
|Net (loss) income                                               |  | $            | 438,000  |   |               | $ | (1,098,000 | )            |  | $ | (1,280,000    | ) |  | $ | (2,029,000 | )
|Earnings (loss) per unit (2)                                    |  |              |          |   |               |   |            |              |  |   |               |   |  |   |            |  
|Basic                                                           |  | $            | 0.06     |   |               | $ | (0.16      | )            |  | $ | (0.19         | ) |  | $ | (0.29      | )
|Diluted                                                         |  | $            | 0.06     |   |               | $ | (0.16      | )            |  | $ | (0.19         | ) |  | $ | (0.29      | )

---

|(1) | See Note 5  Mine Reclamation, LLC regarding loss in fourth quarter related to flood damage to railroad.
|--- | --------------------------------------------------------------------------------------------------------

|(2) | Annual per unit/share amounts may not agree to the sum of the quarterly per unit/share amounts due to rounding.
|--- | ---------------------------------------------------------------------------------------------------------------



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Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



On January 26, 2005, our Audit Committee dismissed Ernst & Young LLP as our independent registered public accountant firm with the termination to be
effective immediately. Ernst & Young LLP had served in such capacity since 1993.



On January 26, 2005, the Audit Committee engaged Moss Adams LLP as our independent registered public accountant firm for the fiscal year 2004 and to review our financial statements to be filed in connection with our
Form 10-QSB Reports for the quarters ended June 30, 2004 and September 30, 2004. Prior to engaging Moss Adams LLP, we did not consult with them regarding the application of accounting principles to a specific or completed transaction or the type of
audit opinion that might be rendered on our financial statements.



During our two most recent completed fiscal years and the subsequent interim periods preceding the Audit Committees determination to change our independent registered public accountant firm there were no disagreements with Ernst &
Young LLP on any matters of accounting principles or practices, financial statement or disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of Ernst & Young LLP would have caused it to make reference to the
subject matter of the disagreement in connection with its reports on the financial statements for such years. We restated our financial statements and applicable reports on Form 10-Q and Form 10-K beginning with the June 30, 2001, 10-Q/A Report
through the Report on Form 10-K/A for the year ended December 31, 2003. Ernst & Young LLPs reports on our financial statements for the past two years did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles.



Item 8A. CONTROLS AND PROCEDURES



Disclosure
Controls and Procedure



The Company maintains controls and
procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the
SEC. Based on an evaluation of the Companys disclosure controls and procedures as of the end of the period covered by this report conducted by the Companys management, with the participation of the Chief Executive and Chief Financial
Officer, the Chief Executive and Chief Financial Officer believe that these controls and procedures are effective at the reasonable assurance level to ensure that the Company is able to collect, process and disclose the information it is
required to disclose in the reports it files with the SEC within the required time periods.



Internal Control Over Financial Reporting



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



Limitations on
the Effectiveness of Controls



We do not expect that the
disclosure controls or our internal controls will prevent all errors and they cannot possibly prevent all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management



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override of the control. The design of any system of controls also is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



Item 8B. OTHER INFORMATION



Not
applicable.



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PART III



Item 9. MANAGERS AND EXECUTIVE OFFICERS OF THE COMPANY



BOARD OF MANAGERS



The current members of the
Board of Managers are as follows:



|                    |  |     |  |                                                             
|------------------- |  | --- |  | ------------------------------------------------------------
|NAME                |  | AGE |  | POSITION WITH THE COMPANY                                   
|Richard E. Stoddard |  | 54  |  | Chief Executive Officer, President and Chairman of the Board
|Ronald E. Bitonti   |  | 72  |  | Manager                                                     
|Todd G. Cole        |  | 84  |  | Manager                                                     
|Gerald A. Fawcett   |  | 72  |  | Vice Chairman                                               
|Marshall F. Wallach |  | 62  |  | Manager                                                     



Richard E. Stoddardwas appointed Chief Executive Officer of Kaiser in June 1988, and has held such position and/or the position of Chairman of the Board since such date. Prior to joining Kaiser in 1988, he was an attorney in private practice in Denver, Colorado.
Mr. Stoddard is Chairman of the Board of Managers of Mine Reclamation, LLC and until July 1999 he served on the Board of Directors of Penske Motorsports, Inc. (PMI) when International Speedway Corporation acquired PMI. As of January 1,
2003, Mr. Stoddard began working less than full time for Kaiser. In addition to working on behalf of Kaiser, Mr. Stoddard works as a general business consultant with an emphasis on distressed businesses and water development opportunities. In this
capacity, Mr. Stoddard is working primarily on behalf of Cadiz, Inc., a public company currently traded on the over-the-counter market.



Ronald E. Bitonti is Chairman of the Benefits Committee for the VEBA and was Chairman of the Reorganized Creditors Committee formed during
the KSC bankruptcy until dissolution of this committee in 1991. From 1985 to 1991, Mr. Bitonti served as International Representative for the United Steelworkers of America. Mr. Bitonti retired from KSC in 1981 and has been a director or manager of
Kaiser since November 1991.



Todd G. Cole has been a
director or manager of Kaiser since November 1989. Mr. Cole was Chief Executive Officer of CIT Financial Corporation before starting his present career as a consultant and corporate director. He currently is President of Cole & Wilds Associates,
Inc., a consulting company. Mr. Cole served on the Board of Directors of Hawaiian Airlines, Inc. until his resignation in May 2003. (Hawaiian Airlines, Inc. is a certificated air carrier, which filed for Chapter 11 bankruptcy reorganization on March
21, 2003). He is a founding director of Coral Gable Trust Company, a Florida State chartered institution, which began operations in April 2004. Mr. Cole is an active member of the Georgia Bar Association and is an accredited certified public
accountant (inactive status).



Gerald A. Fawcett was
President and Chief Operating Officer of Kaiser Inc. from January 1996 until his retirement from full time duties on January 15, 1998. He was appointed to Kaisers Board on January 15, 1998, and currently serves as Vice Chairman of the Board
and undertakes special projects on behalf of the Company from time-to-time. Mr. Fawcett began his employment with KSC in 1951, holding various positions in the steel company and ultimately becoming Division Superintendent of the Cold Rolled and
Coated Products Division. After working five years consulting with domestic and overseas steel industry clients, Mr. Fawcett joined Kaiser in 1988 as Senior Vice President and became Executive Vice President in October 1989. He is also Vice Chairman
of the Board of MRC.



Marshall F. Wallach has been a
director or manager of Kaiser since November 1991. Since 1984, Mr. Wallach has served as President of The Wallach Company, a Denver, Colorado based investment banking firm. The Wallach Company was sold to Keycorp on January 1, 2001. Mr. Wallach
retired from The Wallach



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Company on Dec. 31, 2003. Prior to forming The Wallach Company, Mr. Wallach managed the corporate finance department
and established the mergers and acquisitions department of Boettcher & Company, a regional investment bank in Denver, Colorado. Mr. Wallach serves on the boards of several non-profit organizations and privately-owned corporations. He also serves
on the Board of Tomkins, PLC and is currently President of Wallach Capital Advisors, Inc. which was incorporated in early 2004.



MANAGER EMERITUS



Reynold C. MacDonald serves as a Manager Emeritus on our Board of Managers. This is an honorary, nonvoting and unpaid position. In this position, Mr.
MacDonald is available to the Board and to the Chief Executive Officer to provide guidance on Company matters. Mr. MacDonald served on the Board of Directors of Kaiser Inc. from November 1988 until completion of the merger in 2001, and he also was
an employee of Kaiser Steel from 1946 to 1963, with his last position being assistant general superintendent of all the mills. Mr. MacDonald served as Chairman of the Board for Acme Metals Company from 1986 until 1992 and continues as a director
with that company. He has also served as a director with Interlake, Inc., a metals fabrication and materials handling company and of ARAMARK Group, Inc.



AUDIT COMMITTEE MATTERS



The duties and responsibilities of the Audit Committee are set forth in our Audit Committee Charter. The Audit Committees primary function is to
review the financial information to be provided to our members, the financial reporting process, the system of internal controls, the audit process and the Companys process for monitoring compliance with laws and regulations.



Under our Audit Committee Charter, the Audit Committee is solely responsible
for:



| |  |  | Hiring and firing the independent registered public accounting firm auditors for Kaiser LLC;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Resolving any disagreement between the independent registered public accounting firm and management; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Approving all non-audit services performed by Kaiser LLCs independent registered public accounting firm, subject to a de minimis exception.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



Mr. Wallach and Mr. Cole serve as members of our Audit Committee. Our Board
has determined that both Mr. Wallach and Mr. Cole are independent of Kaisers management and that they have accounting or financial management experience sufficient to qualify each of them as a financial expert under the rules
issued by NASDAQ. In addition, our Board has determined that Mr. Wallach and Mr. Cole each qualify as an audit committee financial expert under current SEC rules and regulations. However, even if none of the current members of our Audit
Committee would qualify as an audit committee financial expert under SEC rules and regulations, we would retain Mr. Wallach and Mr. Cole on the Audit Committee because of their expertise and experience in financial matters, including
reviewing and analyzing financial statements, and their familiarity with the Company and its operations. In addition:



| |  |  | Neither Mr. Wallach nor Mr. Cole sits on audit committees for more than two other public companies.
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Each member of the Audit Committee has one vote.
| | - |  | ------------------------------------------------



| |  |  | Neither Mr. Wallach nor Mr. Cole receives any compensation from us, other than as a manager and/or as a member of any committee appointed by the Board of Managers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



In performing its duties, the Audit Committee
seeks to maintain free and open communication between the managers, the independent registered public accounting firm and our internal financial management. The Audit



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KAISER VENTURES LLC AND SUBSIDIARIES



Committee is intended to provide an independent and, as appropriate, confidential forum in which interested parties
can freely discuss information and concerns.



In addition to
its usual oversight activities, during 2004 the Audit Committee was involved in the decision and the process of restating our financial statements and amending our reports with the SEC beginning with the Report on Form 10-Q for the quarter ended
June 30, 2001, and ending with the annual report for Form 10-K for the year ended December 31, 2003. In addition, on January 26, 2005, the Audit Committee terminated Ernst & Young LLP as our independent registered public accounting firm and
retained Moss Adams LLP as our independent registered public accounting firm for fiscal 2004.



In connection with our annual audit:



| |  |  | The Audit Committee reviewed and discussed with Moss Adams LLP, our independent registered public accounting firm, their overall plans for the audit and the audits scope.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee reviewed the fees for the restatement of our financial statements and amended reports filed with the SEC in 2004 and the fees charged for other services rendered
to Kaiser by Ernst & Young LLP our former independent registered public accounting firm.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee reviewed and discussed the audited financial statements with our management.
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee discussed with our independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards 61.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1,
and has discussed with the independent registered public accounting firm independence.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Audit Committee met in executive session with management and separately with representatives of Moss Adams LLP.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Based upon the foregoing, the Audit Committee recommended to the Board of Managers that the audited financial statements be included in our Annual Report on Form 10-KSB for the year
ended December 31, 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



EXECUTIVE OFFICERS



The current executive officers of the Company are:



|                    |  |     |  |                                                                                   
|------------------- |  | --- |  | ----------------------------------------------------------------------------------
|NAME                |  | AGE |  | POSITION WITH THE COMPANY                                                         
|Richard E. Stoddard |  | 54  |  | Chief Executive Officer, President and Chairman of the Board                      
|James F. Verhey     |  | 57  |  | Executive Vice President - Finance and Chief Financial Officer                    
|Terry L. Cook       |  | 49  |  | Executive Vice President - Administration, General Counsel and Corporate Secretary
|Paul E. Shampay     |  | 43  |  | Vice President - Finance                                                          



Richard E.
Stoddards biographical information is set forth above under Board of Managers.



James F. Verhey joined Kaiser and was appointed Vice President - Finance and Chief Financial Officer in August 1993, appointed Senior Vice
President - Finance in January 1996, and appointed Executive Vice President of Kaiser in January 1998. In addition to his duties with Kaiser, Mr. Verhey was appointed Vice President of Finance and Chief Financial Officer of Mine Reclamation
Corporation in February 1995. Mr. Verhey is a



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KAISER VENTURES LLC AND SUBSIDIARIES



certified public accountant and spent several years with PricewaterhouseCoopers LLP in Los Angeles, California. As of
October 1, 1999, Mr. Verhey began working less than full time for Kaiser. In addition to working for Kaiser, Mr. Verhey is the President of UCC Vineyard Group, which is headquartered in Napa, California, and which owns and manages wine grape
vineyards.



Terry L. Cook joined Kaiser and was
appointed General Counsel and Corporate Secretary in August 1993, became a Senior Vice President in January 1996, and was appointed Executive Vice President - Administration in January 2000. Mr. Cook was appointed General Counsel and Corporation
Secretary of Mine Reclamation Corporation in February 1995. Prior to joining Kaiser, Mr. Cook was a partner in the Denver office of the national law firm McKenna & Cuneo (now called McKenna Long & Aldridge) specializing in business,
corporate, and securities matters. Prior to his joining McKenna & Cuneo in July 1988, Mr. Cook was an attorney in private practice as a partner in a Denver, Colorado, law firm.



Paul E. Shampaywas appointed Vice President, Finance in January 2000. Mr. Shampay joined Kaiser in 1995, as
Corporate Controller. Prior to joining Kaiser, Mr. Shampay spent 11 years in various senior financial positions at Rancon Financial Corporation, a syndicator of SEC registered limited partnerships and regional commercial and residential real estate
developer. Mr. Shampay is a certified public accountant, certified management accountant, and is certified in financial management. As a result of moving to Northern California, Mr. Shampay will no longer be an officer and work full time on behalf
of the Company beginning approximately May 2005.



COMPLIANCE WITH SECTION
16(A) OF THE SECURITIES EXCHANGE ACT OF 1934



Section
16(a) of the Securities Act of 1934, as amended, requires our managers and executive officers, and persons who own more than 10% of our Class A Units, to file with the SEC initial reports of ownership and reports of changes in ownership of Kaiser
LLC.



To our knowledge, based solely on a review of copies of
reports provided by such individuals to us and written representations of certain individuals that no other reports were required, during the fiscal year ended December 31, 2004, all Section 16(a) filing requirements applicable to our managers,
officers, and greater that 10% beneficial owners were timely filed.



CODE OF
BUSINESS CONDUCT AND ETHICS



The Company has adopted an
employee policy called the Code of Business Conduct and Ethics. This policy states the Companys policies on, among other things, complying with laws, fair dealing, confidentiality and insider trading. The Code of Business Conduct
and Ethics applies to all employees including the Companys executive officers. This policy also creates an enforcement procedure in which employees are able to submit reports or inquiries to the Audit Committee, on a strictly confidential
basis, for the committees independent investigation. The Companys Code of Business Conduct and Ethics is available on the Companys website www.kaiserventures.com. A copy may also be obtained free of charge by writing to the
Company.



Item 10. EXECUTIVE COMPENSATION



The following table sets forth the compensation information for our Chief Executive Officer and our three most highly compensated executive officers. (There are only four executive officers of the Company.) Over the past several years we
have reduced our staffing needs due primarily to the sale of substantial assets and consummation of the merger that created the present structure.



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SUMMARY COMPENSATION TABLE(1)



|                                                                |  |              |  |                     |                       |                        |     |               |                             |         |                          |     |                             |                 |                |     |                           |    |           |  |     |                      |       
|--------------------------------------------------------------- |  | ------------ |  | ------------------- | --------------------- | ---------------------- | --- | ------------- | --------------------------- | ------- | ------------------------ | --- | --------------------------- | --------------- | -------------- | --- | ------------------------- | -- | --------- |  | --- | -------------------- | ------
|                                                                |  |              |  |                     |                       | Long Term Compensation |     |               |                            
|                                                                |  |              |  | Annual Compensation |                       | Awards                 |     |               |                             | Payouts |                          |     |                            
|Name and Principal
Position                                     |  | Year         |  | Salary              |                       | Bonus(2)               |     |               | OtherAnnualCompen-sation(3) |         | RestrictedUnit Awards(4) |     | SecuritiesUnderlyingOptions |                 | LTIPPayouts(5) |     | All OtherCompen-sation(6) |   
|Richard E. StoddardChairman of the Board,President and CEO      |  | 200420032002 |  | $$$                 | 294,580286,000374,929 |                        | $$$ | 50,00050,0000 |                             |         | $$$                      | 000 |                             |   400 Class C |                | 000 |                           | $$ | 246,039 |  | $$$ | 33,897694,35475,973  | (7)   
|                                                                |  |              |  |                     |                       |                        |     |              
|James F. VerheyExec. Vice President-Finance & CFO               |  | 200420032002 |  | $$$                 | 135,059131,125127,305 |                        | $$$ | 32,78100      |                             |         | $$                       | 00  |                             | 160 Class C   |                | 000 |                           | $$ | 98,643  |  | $$$ | 15,125183,220193,531 | (7)(7)
|                                                                |  |              |  |                     |                       |                        |     |              
|Terry L. CookExec. Vice President,General Counsel and Secretary |  | 200420032002 |  | $$$                 | 221,605215,150208,889 |                        | $$$ | 25,00050,0000 | (8)                         |         | $$$                      | 000 |                             | 240 Class C   |                | 000 |                           | $$ | 147,965 |  | $$$ | 28,737211,72547,649  | (7)   
|                                                                |  |              |  |                     |                       |                        |     |              
|Paul E. ShampayVice President-Finance                           |  | 200420032002 |  | $$$                 | 118,450110,15097,480  |                        | $$$ | 000           | (8)                         |         | $$$                      | 000 |                             | 80 Class C    |                | 000 |                           | $$ | 49,322  |  | $$$ | 10,7588,63712,544    |       

---

|(1) | Effective January 1, 2002, the officers of the Company became employees of Business Staffing, Inc., a subsidiary of the Company. Pursuant to an agreement between the Company and
Business Staffing, Inc., all employees are leased by Business Staffing, Inc. to Kaiser.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | All bonuses are listed in the year paid.
|--- | ----------------------------------------

|(3) | Does not include the dollar value of perquisites and other personal benefits. The aggregate amount of perquisites and other personal benefits received by each executive officer did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for such executive officer. The named executive officers are provided with certain life, health and other non-cash benefits generally available to all salaried
employees.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Class C and/or Class D Units were issued to the executive officers in January 2002, as a part of a performance based long term incentive compensation program. These units had no
value at the time of issuance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | In September 2000, the Company adopted a long-term transaction incentive plan dependent in large part on the net proceeds from the sale of the Companys assets. However, this
particular program was terminated as to future unearned payments effective January 1, 2002, and Class C and Class D Units in the Company were issued, as applicable, in lieu thereof. No payments have been made under the Class C and D Units and this
table reflects payments earned and made in the calendar year pursuant to the long-term transaction incentive plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The named executive officers are provided with certain life, health and other non-cash benefits generally available to all salaried employees and not included under applicable SEC
rules. Effective January 1, 2002, Business Staffing, Inc. became the sponsor of Kaisers 401(k) Savings Plan, Money Purchase Plan (the 401(k) Savings Plan and Money Purchase Plan Combined into one plan in 2002) and Supplemental Executive
Retirement Plan (collectively Plans). The amounts contributed by Business Staffing, Inc. to these plans is reimbursed by the Company. Accordingly, the contributions are reflected in the Summary Compensation Table. During 2004, the
Company made contributions of $33,897 to the Plans on account of Mr. Stoddard, $15,125 for the account of Mr. Verhey, $28,737 for the account of Mr. Cook, and $10,758 for the account of Mr. Shampay. During 2003, the Company made contributions of
$98,972 to the Plans on account of Mr. Stoddard, $28,016 for the account of Mr. Verhey, $44,123 for the account of Mr. Cook, and $8,637 for the account of Mr. Shampay. During, 2002, the Company made contributions of $75,973 to the Plans on account
of Mr. Stoddard, $38,531 for the account of Mr. Verhey, $47,649 for the account of Mr. Cook, $12,544 for the account of Mr. Shampay.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | The All Other Compensation includes payment of the following retention bonuses: Richard E. Stoddard - $595,382 (2003); James F. Verhey - $155,204 (2002 and 2003); and
Terry L. Cook - $167,602 (2003), as well as the contributions made to the Plans on the executives behalf as described in Note 6 above.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Mr. Cook also received a bonus in 2004 of $40,000 from KSC Recovery, Inc., the bankruptcy estate of Kaiser Steel Corporation and Mr. Shampay received a $5,000 bonus from KSC
Recovery, Inc. KSC Recovery, Inc.s financial statements are not consolidated with the financial statements of the Company.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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KAISER VENTURES LLC AND SUBSIDIARIES



OPTION GRANTS IN 2004



There were no option grants made to a named executive officer in 2004.



AGGREGATED OPTION EXERCISES IN 2004 AND OPTION VALUES AT DECEMBER 31, 2004



No options were exercised during the fiscal year ended
December 31, 2004, by the executive officers named in the Summary Compensation Table. The following table summarizes the value of their unexercised options as of December 31, 2004:



|                    |  |                          |  |               |   |                                                                    |          |                                                                                  |   |         
|------------------- |  | ------------------------ |  | ------------- | - | ------------------------------------------------------------------ | -------- | -------------------------------------------------------------------------------- | - | --------
|NAME                |  | UNITSACQUIRED ONEXERCISE |  | VALUEREALIZED |   | NUMBER OFUNEXERCISEDOPTIONS AT 12/31/04 EXERCISABLE/ UNEXERCISABLE |          | VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS 12/31/04 EXERCISABLE/ UNEXERCISABLE(1)
|Richard E. Stoddard |  | 0                        |  | $             | 0 |                                                                    | 62,350/0 |                                                                                  | $ | 8,000/$0
|James F. Verhey     |  | 0                        |  | $             | 0 |                                                                    | 45,000/0 |                                                                                  | $ | 0/$0    
|Terry L. Cook       |  | 0                        |  | $             | 0 |                                                                    | 45,000/0 |                                                                                  | $ | 0/$0    
|Paul E. Shampay     |  | 0                        |  | $             | 0 |                                                                    | 0/0      |                                                                                  |   | N/A     

---

|(1) | Value determined from an assumed value of $1.50 per Class A Unit, which is based on an independent appraisal conducted by Duff & Phelps, an independent financial
advisor, as of November 30, 2001. The Class A Units are not publicly traded.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



LONG-TERM INCENTIVE COMPENSATION PLANS



Kaiser Inc. provided an incentive to its executive officers through a long-term transaction incentive plan, referred to as the TIP. The TIP was designed to compensate Kaiser Inc.s executive officers for
maximizing proceeds from asset sales and resulting distributions to Kaiser Inc.s stockholders. The TIP was terminated shortly after the merger. In place of the TIP, Kaiser LLC issued Class C and Class D Units in Kaiser LLC (collectively
referred to as the Incentive Units) to the five previous participants in the TIP (the Participating Officers). The terms of the Incentive Units mirror the previous cash flow incentives provided to the
Participating Officers under the TIP.



Under both the TIP and
the terms of the Incentive Units, the Participating Officers receive cash distributions based on the cash available for distribution to our members from the proceeds realized in the sale of our remaining major assets (net of expenses and taxes) and
on our operating expenses.



The terms of the Incentive Units
set threshold and target sale prices for our remaining assets. The Participating Officers, as a group, receive 5% of the aggregate net proceeds from an asset sale in excess of the threshold. If the net proceeds exceeds the
higher target sale value, the Participating Officers, as a group, receive 10% of the aggregate net proceeds from such sale in excess of the target. The Incentive Units do not contain a maximum cap as to the amount distributable to such units.



Based on the predetermined thresholds and targets, Kaiser made
the following payments to the named executive officers under the TIP from sale of the Mill Site Property, the sale of Kaisers Fontana Union stock to Cucamonga, and the tax benefits generated by the conversion to a limited liability company:



|                    |  |                                 |        
|------------------- |  | ------------------------------- | -------
|NAME                |  | TOTAL PAYMENTSMADE UNDER TIP(1)
|Richard E. Stoddard |  | $                               | 633,256
|James F. Verhey     |  | $                               | 253,303
|Terry L. Cook       |  | $                               | 379,954
|Paul E. Shampay     |  | $                               | 126,652

---

|1 | There will be no more payments under the TIP.
|- | ---------------------------------------------

|
|



The Class C
Units are held by Participating Officers still employed by Kaiser LLC, and, upon a Participating Officers departure, all Class C Units are automatically converted into Class D Units. One former officer of



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Kaiser LLC holds 72 Class C Units and 48 Class D Units. In the event a Participating Officer is terminated for
cause, Kaiser LLC may repurchase, for a nominal value, all of that officers Incentive Units. Any payment to the Participating Officers will be split with a full share to each Class C Unit and a smaller share for each Class D Unit
which will depend on the length of the period since its issuance. The following table sets forth the number of Incentive Units held by the Participating Officers that are also named executive officers.



|                      |  |               |  
|--------------------- |  | ------------- | -
|PARTICIPATING OFFICER |  | CLASS C UNITS |  
|Rick Stoddard         |  | 400           |  
|Terry Cook            |  | 240           |  
|James Verhey          |  | 160           |  
|Paul Shampay          |  | 80            | 1

---

|1 | Mr. Shampays Class C units will convert to Class D Units at such time that he is no longer works full time for the Company.
|- | ----------------------------------------------------------------------------------------------------------------------------



The Incentive Units do not have the right to vote on any matter, except as
required by law. Neither the Incentive Units nor any rights to distributions with respect to such units may be transferred by any Participating Officer. The Incentive Units do not have a termination date.



Each Incentive Unit will be allocated an amount of the profits of the Company
equal to the amount of any distribution with respect to such Incentive Unit, with the character (capital gain, ordinary income, etc.) of the profits to reflect the portion of each type of income recognized by the Company with respect to that
asset(s) after January 1, 2002, as determined by the Board in good faith. Therefore, the total amount that Participating Officers will receive pursuant to the terms of the Incentive Units can only be determined upon sale of all of our assets and
satisfaction of our general obligations and liabilities. The following table sets forth the total amount that would be earned by the Participating Officers, assuming that (i) each Participating Officer continues to work for Kaiser throughout the
period; and (ii) the proceeds generated from the sale of each major asset and the related cash available for distribution to members equals the specified target for such asset:



|                       |  |                   |              |  |                                                                        |           |  |            |         |  |     |    
|---------------------- |  | ----------------- | ------------ |  | ---------------------------------------------------------------------- | --------- |  | ---------- | ------- |  | --- | ---
|                       |  | PERIODUNTILPAYOUT |              |  | ESTIMATED AGGREGATE FUTURE PAYOUTS UNDER NON-STOCK PRICE - BASED PLANS |          
|NAME                   |  |                   | THRESHOLD($) |  |                                                                        | TARGET($) |  | MAXIMUM($) |        
|Richard E. Stoddard(1) |  | N/A               | (2)          |  | 0                                                                      | (3)       |  | $          | 442,000 |  | N/A | (4)
|James F. Verhey(1)     |  | N/A               | (2)          |  | 0                                                                      | (3)       |  | $          | 176,800 |  | N/A | (4)
|Terry L. Cook(1)       |  | N/A               | (2)          |  | 0                                                                      | (3)       |  | $          | 265,200 |  | N/A | (4)
|Paul E. Shampay(1)     |  | N/A               | (2)          |  | 0                                                                      | (3)       |  | $          | 88,400  |  | N/A | (4)

---

|(1) | The actual participation percentage of each Participating Officer in any distributions to the Incentive Units will depend on whether the Participating Officer holds
Class C or Class D Units. Adjustment of the individual percentages will not change the size of the total distributions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The right to distributions primarily depends upon the sale of Kaiser LLCs major assets for aggregate net proceeds in excess of the previously established
threshold levels.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Participating Officers are only entitled to receive distributions on their Incentive Units if and when Kaiser LLC sells a remaining major asset for aggregate net
proceeds in excess of the previously established sale price threshold for such asset, or, in the event of the sale of the Company, in excess of the previously set sale price (net of expenses and taxes) for the overall Company. If net proceeds
generated from the sale exceeds the applicable thresholds, then the Participating Officers, as a group, would receive as a distribution on their Incentive Units cash equal to 5% of any amount over the applicable threshold up to the applicable
target.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | There is no maximum cap as to distribution to the holders of Incentive Units. In the event proceeds in excess of the target are generated, the Participating
Officers, as a group, would receive distributions equal to 10% of the aggregate net proceeds realized in excess of the target.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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KAISER VENTURES LLC AND SUBSIDIARIES



EMPLOYMENT AGREEMENTS



As part of our cash maximization strategy and in connection with the merger, effective, January 1, 2002, Business Staffing,
Inc., our subsidiary, became the employer of all of Kaisers employees and the contracting employer with respect to the several employment agreements discussed below. Business Staffing leases employees to Kaiser LLC and Kaiser LLC reimburses
Business Staffing for all employee and related expenses.



Mr.
Stoddard is employed pursuant to an employment agreement dated as of January 1, 2003, which reflects a reduced time commitment by Mr. Stoddard to Kaiser and a base salary reduction of $100,000 from Mr. Stoddards previous employment agreement
with Kaiser. Mr. Stoddards employment agreement has a three-year term and continues thereafter on a month-to-month basis until we have disposed of all of our material assets. Voluntary termination of employment by Mr. Stoddard results in the
forfeiture of all severance benefits to Mr. Stoddard.



Mr.
Verhey is employed pursuant to an employment agreement dated as of January 1, 2002, which reduced his time commitment to the Company. As a part of his new employment arrangement, in January 2002 Mr. Verhey received a transition payment of $155,000
representing the acceleration of his final severance payment. If Mr. Verhey voluntarily terminates his employment, his employment agreement entitles him to continue to receive employee benefits for six months following his termination at levels and
at amounts consistent with the benefits offered to him at the time of his termination. Under Mr. Verheys employment agreement, 90 days advance notice of any employment termination is required by the terminating party.



Effective January 1, 2002, Mr. Cook, entered into an employment agreement
with Business Staffing. As of December 15, 2004, Mr. Cooks employment agreement was amended to essentially provide that Mr. Cook would be employed, subject to termination for cause, through at least December 31, 2007. However, the Company, at
its option, has the right to request Mr. Cook to work less than full time at a salary of no less than eighty percent (80%) of his annual full time salary at the time the Company exercises such option. During any reduced time work period, the
Companys actual payments to Mr. Cook can be further reduced in certain circumstances depending upon the compensation Mr. Cook may receive from other work. Voluntary termination of employment results in the forfeiture of all severance benefits
for Mr. Cook.



The agreement regarding Mr. Shampays
employment agreement was modified as a result of Mr. Shampay moving his residence in late 2004. Mr. Shampay is currently employed pursuant to a Transition Employment Agreement dated March 15, 2005. Such agreement provides that Mr. Shampay will
continue to work full time for the Company at his current salary through approximately April 30, 2005. He will then continue to provide services based upon a reduced time commitment for six months at his current salary. At the end of such six months
period, Mr. Shampay will serve as a consultant to the Company for six month on an as needed basis in exchange for the Companys payment of the premiums on his current health, dental, insurance, disability and life insurance benefits for such
period.



Although Kaisers Board formally terminated our
historical annual bonus program, Business Staffing reserves the right, in its Boards sole and absolute discretion, to grant bonuses to its executives officers.



Under the terms of prior employment agreements, each executive officer was to receive severance in an amount equal to one
years base salary and average bonus, with Mr. Stoddard to receive two years annual base salary and average bonus. Beginning in 2000, the severance obligation was split equally between a retention fee and a final severance payment, with
the total compensation remaining the same. During 2003, Mr. Stoddard, Mr. Cook and Mr. Verhey were paid retention fees of $595,387, $164,267 and $155,000, respectively, since each remained an employee. Mr. Shampays employment agreement did not
provide for a retention fee.



If any of the following officers
is terminated without cause, including, among other reasons, constructive termination, such officer is entitled to receive cash severance pay as follows:



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| |  |  | Mr. Stoddard would receive severance in an amount equal to: (i) one year of his base-salary in effect as of December 31, 2003; (ii) a pro rata portion of his bonus for the current
year, if any; (iii) one year of his average annual bonus, determined as described below; and (iv) his base salary for the balance of the initial three-year term of his employment agreement, if any.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mr. Cook would receive severance in an amount equal to: (i) six months of his highest base salary; (ii) a pro rata portion of his bonus for the current year, if any; (iii) one half
of his average annual bonus, determined as described below; and (iv) up to 80% of his base salary through December 31, 2007.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mr. Verhey would receive severance in an amount equal to a pro rata portion of his bonus for the current year, if any. Due to the accelerated payment of Mr. Verheys final
severance payment and the receipt of his retention bonus, once Mr. Verheys pro rata share of his bonus, if any, has been paid, he is entitled to no further cash severance compensation.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Under the terms of Mr. Shampays Transition Employment Agreement, he
will not receive any severance compensation.



The average
annual bonus for any officer, would equal the product of (X) the average percentage of base salary of the bonuses granted to such officer over the five years immediately preceding and including 2000 (or such lesser period for which he has
participated in the annual bonus program) and (Y) the officers highest base salary.



Severance is payable in one lump sum or, at the executives option, over a period of time. In addition, Business Staffing will continue to pay benefits, such as health and dental insurance, for one year except
that Mr. Stoddard shall receive a continuation of such benefits for two years. In the event an executive officer voluntarily terminates his employment, Business Staffing will not be obligated to pay him any severance or other additional
compensation, other than the compensation due and owing up to the date of termination.



None of the employment agreements contain change of control provisions.



In the event any payments to an executive officer would be subject to the excise tax for Internal Revenue Code determined excess parachute
payments, he has the election to receive either the full amount of the payments or such lesser amount as would result in the greatest after tax payment to him.



Each executive officer can be terminated for cause. Cause is generally defined as:



a. Willful breach by an officer of any provision of his employment
agreement, provided, however, if the breach is not a material breach, Business Staffing is required to give written notice of such breach and the officer shall have thirty (30) days in which to cure such breach. No written notice or cure period
shall be required in the event of a willful and material breach of his agreement;



b. Gross negligence or dishonesty in the performance of the officers duties or possibilities under his employment agreement;



c. Engaging in conduct or activities or holding any position that materially conflicts with the interest of, or materially
interferes with the officers duties and responsibilities to Business Staffing, Kaiser LLC or their respective affiliates; or



d. Engaging in conduct which is materially detrimental to the business of Business Staffing, Kaiser LLC or their respective affiliates.



Set forth below is the annual base salary of Kaisers Chief Executive
Officer and each of its other named executive officers as of March 1, 2005:



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|                    |  |                    |        
|------------------- |  | ------------------ | -------
|NAME                |  | ANNUAL BASE SALARY
|Richard E. Stoddard |  | $                  | 303,417
|Terry L. Cook       |  | $                  | 228,253
|James F. Verhey     |  | $                  | 139,111
|Paul E. Shampay     |  | $                  | 122,004



Over the past several
years we have had reduced our staffing needs due primarily to the sale of substantial assets and the consummation of the merger creating the present structure as well as the December 31, 2003, termination of the lease for the private prison located
at Eagle Mountain.



HUMAN RELATIONS COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATIONS



During the year ending December 31, 2004,
the Human Relations Committee consisted of Messrs. Cole (Chairman), Bitonti, and Fawcett. Mr. Fawcett was President and Chief Operating Officer of Kaiser from January 1996, until his retirement from full time duties on January 15, 1998. Mr. Fawcett
continues to perform work for us from time-to-time. During 2004, Mr. Fawcett received $60,000 as a base salary. He was not separately compensated for his service on the Board of Managers except that in 2004 he was awarded 2,500 restricted Class A
Units along with all other members of the Board of Managers except for Mr. Stoddard. Mr. Fawcett also continues to serve on the Board of Managers of Mine Reclamation, LLC.



MANAGER COMPENSATION



Non-employee managers are paid an annual retainer fee of $15,000 and a meeting fee of $1,000 for each in person meeting and a meeting fee of $750 per
telephonic meeting. The chairman of any committee receives an additional annual retainer fee of $2,000 and an additional meeting fee of $500 per committee meeting.



The current Board equity plan provides that each non-management manager shall be granted 2,500 unvested Class A Units of
each year, commencing May 31, 2002. In 2004 the Board added Mr. Fawcett to its equity compensation plan. Accordingly, a grant of 2,500 restricted Class A Units was made to Messrs. Bitonti, Cole, Fawcett and Wallach effective July 27, 2004. Each
annual grant vests on January 31stof the year following the grant, subject to acceleration upon the occurrence of
certain events. Accordingly, the restricted 2,500 Class A Units granted to Messrs. Bitonti, Cole, Fawcett and Wallach on July 31, 2004, fully vested on January 31, 2005.



We do not provide retirement benefits for managers.



Item 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



PRINCIPAL UNIT MEMBERS



The following table sets forth, based upon the latest available filings with the Securities and Exchange Commission and from the Companys Class A Unit member ownership list (generally reporting ownership as of December 31, 2004), the
number of Class A Units owned by each person known by us to own of record or beneficially five percent (5%) or more of such units. The table includes the 104,267 Class A Units issued but reserved and not yet distributed to the Class 4A unsecured
creditors of KSC because those reserved units are not eligible to vote.



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|                                                                                                                        |  |                                         |  |                                            |  
|----------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------------------------------------ | -
|Name and Address of Beneficial Owner                                                                                    |  | Number ofClass A UnitsBeneficiallyOwned |  | % of Issuedand OutstandingClass A Units(1) |  
|Ascend Capital Holdings Corporation One Montgomery St., Suite 3300 San Francisco, CA 94104                              |  | 656,000                                 |  | 9.5                                        | %
|                                                                                                                        |  |                                        
|First Eagle SOOFN Global Fund. 1345 Avenue of the Americas, 44thFloor New York, New York 10105                          |  | 365,000                                 |  | 5.3                                        | %
|                                                                                                                        |  |                                        
|Kaisers Voluntary Employees Beneficiary Association Trust (VEBA)(2) 9786 Sierra Avenue Fontana, CA 92335              |  | 656,987                                 |  | 9.5                                        | %
|                                                                                                                        |  |                                        
|Pension Benefit Guaranty Corporation(3) Pacholder Associates,
Inc. 8044 Montgomery Road, Suite 382 Cincinnati, OH 45236 |  | 407,415                                 |  | 5.9                                        | %
|                                                                                                                        |  |                                        
|Willow Creek Capital Partners(4) Willow Creek Offshore
Fund 17 E. Sir Francis Drake Blvd., Suite 100 Lakespur, CA 94939 |  | 654,900                                 |  | 9.5                                        | %

---

|(1) | The percentage for each member is based on the total number if issued and outstanding Class A Units (excluding the 104,267 Class A Units reserved but not yet distributed to the
Class 4A unsecured creditors of KSC).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | VEBA received its shares in Kaiser as a creditor of the KSC bankruptcy. VEBA also had acquired warrants in connection with the purchase by Kaiser of its stock owned by VEBA but such
warrants expired in 2004 without being exercised. VEBAs shares in Kaiser are held in trust by AST Trust Company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | PBGC received its shares in Kaiser as a creditor of the KSC bankruptcy. PBGC also acquired warrants in connection with the purchase by Kaiser of its stock owned by PBGC but such
warrants expired in 2004 without being exercised. Pacholder Associates, Inc. has a contract with PBGC pursuant to which it has full and complete investment discretion with respect to the shares owned by PBGC, including the power to vote such
securities. Substantially all of the PBGCs units are held through a nominee Beat & Co.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | For purposes of reporting ownership in this table, the units held by Willow Creek Capital Partners and held by Willow Creek Offshore Fund have been combined.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



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KAISER VENTURES LLC AND SUBSIDIARIES



SECURITY OWNERSHIP OF MANAGEMENT



This table below reflects the number of Class A Units beneficially owned by the Companys (1) managers and manager
nominees, (2) named executive officers, and (3) all of its managers and named executive officers as a group, as of March 22, 2005, as well as the number of options exercisable within 60 days of that date.



|                                                                                                |  |                                                 |  |                                                                          |  |                                 |  |                                           |  
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------------- |  | ------------------------------------------------------------------------ |  | ------------------------------- |  | ----------------------------------------- | -
|                                                                                                |  | Column 1                                        |  | Column 2                                                                 |  | Column 3                        |  | Column 4                                  |  
|Name                                                                                            |  | Class A UnitsBeneficiallyOwned,ExcludingOptions |  | Class A UnitsUnderlyingOptionsExercisableWithin 60-Daysof March 22,
2005 |  | Total # ofClass A UnitsOwned(1) |  | % of IssuedandOutstandingClass A Units(1) |  
|Richard E. Stoddard, CEO, President & Chairman                                                  |  | 120,194                                         |  | 62,350                                                                   |  | 182,544                         |  | 2.6                                       | %
|Gerald A. Fawcett, Vice Chairman(2)                                                             |  | 100,578                                         |  | 62,000                                                                   |  | 162,578                         |  | 2.3                                       | %
|James F. Verhey, Executive Vice President  Finance & CFO                                       |  | 42,035                                          |  | 45,000                                                                   |  | 87,035                          |  | 1.2                                       | %
|Terry L. Cook, Executive Vice President - Administration, General Counsel & Corporate Secretary |  | 67,966                                          |  | 45,000                                                                   |  | 112,966                         |  | 1.6                                       | %
|Paul E. Shampay, Vice President - Finance                                                       |  | 22,500                                          |  | 0                                                                        |  | 22,500                          |  |                                           | *
|Ronald E. Bitonti, Manager(3)                                                                   |  | 18,396                                          |  | 1,500                                                                    |  | 19,896                          |  |                                           | *
|Todd G. Cole, Manager                                                                           |  | 25,188                                          |  | 0                                                                        |  | 25,188                          |  |                                           | *
|Marshall F. Wallach, Manager                                                                    |  | 28,250                                          |  | 1,500                                                                    |  | 29,750                          |  |                                           | *
|All officers and managers as a group (8 persons)(1)                                             |  | 425,107                                         |  | 217,350                                                                  |  | 642,457                         |  | 9.0                                       | %

---

|* | Less than one percent.
|- | ----------------------

|(1) | The percentage for each individual is based on the total number if issued and outstanding Class A Units (including the 104,267 Class A Units which have been issued but are reserved
and not yet distributed to the Class 4A unsecured creditors of KSC) and was determined as if all the options listed in Column 2 had been exercised by that particular individual. All options are vested.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Fawcett retired as President and Chief Operating Officer of Kaiser effective January 15, 1998.
|--- | --------------------------------------------------------------------------------------------------

|(3) | Mr. Bitonti is Chairman of the VEBA Board of Trustees. He disclaims any beneficial ownership interest in the units beneficially owned by VEBA.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Not applicable.



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PART IV



Item 13. EXHIBITS



(a) Exhibits.



The following exhibits are filed as part of this Form 10-KSB.



EXHIBIT INDEX



(* Indicates compensation plan, contract or arrangement)



|               |  |                                                                                                                                                                                                                                                                                        
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                   
|2.1            |  | Second Amended Joint Plan of Organization as Modified, as filed with the United States Bankruptcy Court for the District of Colorado on September 19, 1988, incorporated by reference from
Exhibit 2.1 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31, 1988.
|               | 
|2.2            |  | Second Amended Joint Plan of Reorganization Modification, as filed with the United States Bankruptcy Court on September 26, 1988, incorporated by reference from Exhibit 2.2 of Kaiser Ventures
Inc.s Form 10-K Report for the year ended December 31, 1988.                          
|               | 
|2.3            |  | United States Bankruptcy Court Order dated October 4, 1988, confirming the Second Amended Joint Plan of Reorganization as Modified, incorporated by reference from Exhibit 2.3 of Kaiser
Ventures Inc.s Form 10-K Report for the year ended December 31, 1988.                        
|               | 
|2.4            |  | Agreement and Plan of Merger between Kaiser Ventures Inc. and Kaiser Ventures LLC, incorporated by reference from Exhibit 2.6 to Kaiser Ventures LLC Registration Statement on Form S-4, filed
on October 19, 2001.                                                                    
|               | 
|2.5            |  | Certificate of Merger to be filed with the Secretary of State of Delaware, incorporated by reference from Exhibit 2.7 to Kaiser Ventures LLC Registration Statement on Form S-4, filed on
October 19, 2001.                                                                            
|               | 
|3.1            |  | Certificate of Formation of Kaiser Ventures LLC, filed with the Delaware Secretary of State on July 10, 2001, incorporated by reference from Exhibit 3.3 to Kaiser Ventures LLC Registration
Statement on Form S-4, filed on July 16, 2001.                                            
|               | 
|3.2            |  | Kaiser Ventures LLC Operating Agreement, effective as of July 10, 2001, incorporated by reference from Exhibit 3.4 to Kaiser Ventures LLC Registration Statement Form S-4 filed on July 16,
2001.                                                                                      
|               | 
|3.3            |  | Amended and Restated Kaiser Ventures LLC Operating Agreement, effective as of October 1, 2001, incorporated by reference from Exhibit 3.5 to Kaiser Ventures LLCs Registration Statement
Form S-4 filed on October 16, 2001.                                                          
|               | 
|3.4            |  | First Amendment to Amended and Restated Kaiser Ventures LLC Operating Agreement, effective as of January 15, 2002, incorporated by reference from Exhibit 3.4 to Kaiser Ventures LLC Form 10-K
Report for the year ended December 31, 2001.                                            
|               | 
|10.1           |  | Lease Entered into between Kaiser Eagle Mountain, Inc., and Mine Reclamation Corporation, dated November 30, 1988, incorporated by reference from Exhibit 10.1 of the Kaiser Ventures
Inc.s Form 10-K Report for the year ended December 31, 1988.                                    
|               | 
|10.1.1         |  | First Amendment dated December 18, 1990, to Lease dated November 30, 1990 between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation, incorporated by reference from the Kaiser
Ventures Inc.s Form 8-K Report dated December 18, 1990.                                     



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.1.2         |  | Second Amendment dated July 29, 1994, to Lease dated November 30, 1990, between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation, incorporated by reference from Exhibit 4 of
Kaiser Ventures Inc.s Form 10-Q Report for the period ending June 30, 1994.                                                                                                                                                                                                                                         
|               | 
|10.1.3         |  | Third Amendment dated January 29, 1995, but effective as of January 1, 1995, to Lease dated November 30, 1990, between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation,
incorporated by reference from Exhibit 10.1.3 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31, 1994.                                                                                                                                                                                            
|               | 
|10.1.4         |  | Fourth Amendment dated effective January 1, 1996, between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation, incorporated by reference from Exhibit 10.1.4 of Kaiser Ventures
Inc.s Form 10-K Report for the year ended December 31, 1995.                                                                                                                                                                                                                                                         
|               | 
|10.1.5         |  | Indemnification Agreement dated September 9, 1997 among Riverside County, Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle Mountain Reclamation, Inc. and Kaiser Ventures Inc,
incorporated by reference from Exhibit 10.1 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended September 30, 1997.                                                                                                                                                                                  
|               | 
|10.1.6         |  | Development Agreement to be executed upon consummation of federal land exchange among Riverside County, Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle Mountain Reclamation,
Inc. and Kaiser Ventures Inc., incorporated by reference from Exhibit 10.2 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended September 30, 1997.                                                                                                                                                    
|               | 
|10.1.7         |  | Operating Agreement for Mine Reclamation, LLC dated June 1, 2000, incorporated by reference from Exhibit 10.1.7 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31,
2000.                                                                                                                                                                                                                                                                                                               
|               | 
|10.2           |  | Agreement for Purchase and Sale of Real Property and Related Personal Property in Regard to the Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions between County
Sanitation District No. 2 of Los Angeles County and Mine Reclamation, LLC incorporated by reference from Exhibit 10.3 of the Companys Form 10-Q Report for the quarter ended June 30, 2000, incorporated by reference from Exhibit 10.2 of Kaiser
Ventures Inc.s Form 10-K Report for the year ended December 31, 2000.
|               | 
|10.3*          |  | Employment Agreement between Business Staffing, Inc. and Richard E. Stoddard dated as of January 1, 2003, incorporated by reference from Exhibit 10.4 of Kaiser Ventures LLCs Form 10-K
for the year ended December 31, 2002.                                                                                                                                                                                                                                                                                 
|               | 
|10.4*          |  | Employment Agreement between Kaiser Ventures Inc. and Gerald A. Fawcett dated as of January 18, 1999, incorporated by reference from Exhibit 10.5 of Kaiser Ventures Inc.s Form 10-K
Report for the year ended December 31, 1998.                                                                                                                                                                                                                                                                             
|               | 
|10.5*          |  | Employment Agreement between Business Staffing, Inc. and Terry L. Cook dated as of January 1, 2002, incorporated by reference from Exhibit 10.1 of Kaiser Ventures LLCs Form 10-Q Report
for the quarter ended June 30 2002.                                                                                                                                                                                                                                                                                  
|               | 
|10.5.1*        |  | Amendment to Employment Agreement between Business Staffing, Inc. and Terry L. Cook dated December 15, 2004, incorporated by reference from Exhibit 10.1, of Kaiser Ventures LLCs Form
8-K Report dated December 15, 2004.                                                                                                                                                                                                                                                                                    
|               | 
|10.6*          |  | Transition Employment Agreement between Business Staffing, Inc. and Paul E. Shampay dated as of March 9, 2005, incorporated by reference from Exhibit 10.1 of Kaiser Ventures LLCs 8-K
Report dated March 9, 2005.                                                                                                                                                                                                                                                                                            
|               | 
|10.7*          |  | Employment Agreement between Business Staffing, Inc. and James F. Verhey dated as of January 1, 2002, incorporated by reference from Exhibit 10.4 of Kaiser Ventures LLCs 10-Q Report for
the quarter ended June 30, 2002.                                                                                                                                                                                                                                                                                    



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|               |  |                                                                                                                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|               |  |                                                                                                                                                                                                                                                                                                  
|EXHIBIT NUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                             
|10.8           |  | Lease Agreement between American Trading Estate Properties (now known as Lord Baltimore Properties), Landlord and Kaiser Resources Inc., Tenant, dated June 6, 1994, incorporated by reference
from Exhibit 10.8 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31, 1994.
|               | 
|10.8.1         |  | Second Amendment to Lease Agreement between Lord Baltimore Properties and Kaiser Ventures Inc. dated September 27, 1999, incorporated by reference from Exhibit 10.10.1 of Kaiser Ventures
Inc.s 10-K for the year ended December 31, 1999.                                                     
|               | 
|10.8.2         |  | Third Amendment to Lease Agreement between Lord Baltimore Properties and Kaiser Ventures LLC dated February 19, 2002, incorporated by reference from Exhibit 10.16.2 of Kaiser Ventures LLC
Report for the year ended December 31, 2001.                                                         
|               | 
|10.9           |  | Settlement Agreement between Kaiser Resources Inc. and California Regional Water Quality Control Board, Santa Ana Region, dated October 21, 1993, incorporated by reference from Exhibit
10.11.2 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31, 1993.                
|               | 
|10.10          |  | Assignment from Kaiser Steel Resources, Inc. to KSC Recovery, Inc., dated December 29, 1989, incorporated by reference from Exhibit 10.20 of Kaiser Ventures Inc.s Form 10-K Report for
the year ended December 31, 1989.                                                                       
|               | 
|10.11*         |  | Amended, Restated and Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan, incorporated by reference from Kaiser Ventures Inc.s Proxy Statement for the Special Meeting of
Stockholders held on October 2, 1990.                                                                           
|               | 
|10.12*         |  | Kaiser Steel Resources, Inc. 1992 Stock Option Plan, as amended, incorporated by reference from Exhibit 10.16 of Kaiser Ventures Inc.s Form S-2 (Registration No.
33-56234).                                                                                                                    
|               | 
|10.13*         |  | Kaiser Ventures Inc. 1995 Stock Plan incorporated by reference from Exhibit 10.15 of Kaiser Ventures Inc.s 10-K Report for the year ended December 31, 1995.                                                                                                                                    
|               | 
|10.13.1*       |  | First Amendment to Kaiser Ventures Inc. 1995 Stock Option Plan, incorporated by reference from Exhibit 4.1.1 of Kaiser Ventures Inc.s Form S-8 Registration Statement (Registration No.
333-17843).                                                                                             
|               | 
|10.14*         |  | Long Term Transaction Incentive Plan adopted by the Company effective September 19, 2000, incorporated by the reference from Exhibit 10.1 of Kaiser Ventures Inc.s Form 10-Q Report for
the period ended September 30, 2000.                                                                    
|               | 
|10.15*         |  | Board of Directors Stock Plan adopted May 10, 2000, incorporated by reference from Exhibit 10.19 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31,
2000.                                                                                                                
|               | 
|10.16          |  | Form of Indemnification Agreement for individuals serving on the Board of Managers of Kaiser Ventures LLC, incorporated by reference from Exhibit 10.25 of Kaiser Ventures LLCs 10-K
Report for the year ended December 31, 2001.                                                               
|               | 
|10.17          |  | Form of Indemnification Agreement for officers of Kaiser Ventures LLC, incorporated by reference from Exhibit 10.26 of Kaiser Ventures LLCs 10-K Report for the year ended December 31,
2001.                                                                                                   
|               | 
|10.18          |  | Members Operating Agreement dated June 19, 1997 between Kaiser Recycling Corporation and West Valley Recycling & Transfer, Inc., incorporated by reference from Exhibit 10.1 of Kaiser
Ventures Inc.s 10-Q Report for the period ended June 30, 1997.                                           
|               | 
|10.18.1        |  | Second Amendment to Members Operating Agreement dated December 1, 2001, filed herewith.                                                                                                                                                                                                          



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|EXHIBIT NUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.18.2        |  | Performance Guaranty and Indemnification Agreement (KRC Obligations) dated June 19, 1997 given by Kaiser Ventures Inc. for the benefit of West Valley MRF, LLC and West Valley Recycling &
Transfer, Inc., incorporated by reference from Exhibit 10.1.1 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30, 1997.                                                                                                             
|               | 
|10.19          |  | Loan Agreement dated as of June 1, 1997 between West Valley MRF, LLC and California Pollution Control Financing Authority, incorporated by reference from Exhibit 10.2 of the Companys
10-Q Report for the period ended June 30, 1997.                                                                                                                                                                                                        
|               | 
|10.19.1        |  | Indenture Agreement dated as of June 1, 1997 between California Pollution Control Financing Authority and BNY Western Trust Company for the benefit of $9,500,000 California Pollution Control
Financing Authority Variable Rate Demand Solid Waste Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A, incorporated by reference from Exhibit 10.2.1 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30,
1997.
|               | 
|10.19.2        |  | Remarketing Agreement dated as of June 1, 1997, and among West Valley MRF, LLC and Westhoff, Cone & Holmstedt and Smith Barney, Inc. with regard to $9,500,000 California Pollution Control
Financing Authority Variable Rate Demand Stock Waste Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A, incorporated by reference from Exhibit 10.3 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30,
1997.     
|               | 
|10.20          |  | Reimbursement Agreement dated as of June 1, 1997 between West Valley MRF, LLC and Union Bank of California, N.A., incorporated by reference from Exhibit 10.4 of Kaiser Ventures Inc.s
10-Q Report for the period ended June 30, 1997.                                                                                                                                                                                                        
|               | 
|10.21          |  | Guaranty and Mandatory DSR Agreement dated as of June 1, 1997 given by Kaiser Ventures Inc. and Kaiser Recycling Corporation for the benefit of Union Bank of California, N.A., incorporated by
reference from Exhibit 10.4.1 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30, 1997.                                                                                                                                        
|               | 
|10.22          |  | Environmental Compliance Agreement dated as of June 19, 1997 between West Valley MRF, LLC and Union Bank of California, N.A., incorporated by reference from Exhibit 10.5 of Kaiser Ventures
Inc.s 10-Q Report for the period ended June 30, 1997.                                                                                                                                                                                            
|               | 
|10.23          |  | Environmental Guaranty Agreement dated as of June 19, 1997 given by Kaiser Ventures Inc. and Kaiser Recycling Corporation for the benefit of Union Bank of California, N.A., incorporated by
reference from Exhibit 10.5.1 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30, 1997.                                                                                                                                           
|               | 
|10.23.1        |  | First Amendment and Restated Environmental Guaranty Agreement between West Valley MRF, LLC and Union Bank of California dated May 1, 2000, incorporated by reference from Exhibit 10.4 of
Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.                                                                                                                                                                          
|               | 
|10.24          |  | Guaranty and Mandatory Deposit Agreement between West Valley MRF, LLC and Union Bank of California, N.A. dated May 1, 2000, incorporated by reference from Exhibit 10.4.1 of Kaiser Ventures
Inc.s Form 10-Q Report for the period ended June 30, 2000.                                                                                                                                                                                       
|               | 
|10.25          |  | First Amendment and Restated Environmental Compliance Agreement between West Valley MRF, LLC and Union Bank of California, N.A. dated May 1, 2000, incorporated by reference from Exhibit
10.4.2 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.                                                                                                                                                                
|               | 
|10.26          |  | Reimbursement Agreement between West Valley MRF, LLC and Union Bank of California, N.A. dated May 1, 2000, incorporated by reference from Exhibit 10.4.3 of Kaiser Ventures Inc.s Form
10-Q Report for the period ended June 30, 2000.                                                                                                                                                                                                        



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|               |  |                                                                                                                                                                                                                                                                                                                      
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                 
|10.27          |  | Loan Agreement between West Valley MRF, LLC and Union Bank of California, N.A. dated May 1, 2000, incorporated by reference from Exhibit 10.4.4 of Kaiser Ventures Inc.s Form 10-Q Report
for the period ended June 30, 2000.                                                                                       
|               | 
|10.28          |  | Loan Guaranty between West Valley MRF, LLC and Union Bank of California, N.A. dated May 1, 2000, incorporated by reference from Exhibit 10.4.5 of Kaiser Ventures Inc.s Form 10-Q Report
for the period ended June 30, 2000.                                                                                        
|               | 
|10.29          |  | Purchase and Sale Agreement and Joint Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel Land Development, Inc. and CCG Ontario, LLC dated July 13, 2000, incorporated by reference
from Exhibit 10.1 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.                       
|               | 
|10.29.1        |  | First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel Land Development, Inc. and CCG Ontario, LLC dated July 20, 2000,
incorporated by reference from Exhibit 10.1.1 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.  
|               | 
|10.29.2        |  | Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel Land Development, Inc. and CCG Ontario, LLC dated July 27, 2000,
incorporated by reference from Exhibit 10.1.2 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000. 
|               | 
|10.29.3        |  | Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel Land Development, Inc. and CCG Ontario, LLC dated August 15, 2000,
incorporated by reference from Exhibit 10.1.3 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.
|               | 
|14             |  | Code of Business Conduct and Ethics of Kaiser Ventures LLC incorporated by reference from Exhibit 14.1 of Kaiser Ventures LLCs Form 10-K Report for the year ended December 31,
2002.                                                                                                                               
|               | 
|21             |  | Active subsidiaries of Kaiser Ventures LLC are: Lake Tamarisk Development, LLC; Kaiser Eagle Mountain, LLC; Kaiser Recycling, LLC; Business Staffing, Inc.; and Mine Reclamation,
LLC.                                                                                                                               
|               | 
|23             |  | Consent of Moss Adams LLP Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                             
|               | 
|23.1           |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                         
|               | 
|24             |  | Power of Attorney (included in the signature page).                                                                                                                                                                                                                                                                  
|               | 
|31.1           |  | Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.                                                                                                                                                                                            
|               | 
|31.2           |  | Certificate of James F. Verhey, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.                                                                                                                                                                                                
|               | 
|32             |  | Certificates of Richard E. Stoddard, Chief Executive Officer, and James F. Verhey, Chief Financial Officer, pursuant to Section 1350, filed with this Report.                                                                                                                                                        
|               | 
|99             |  | Preliminary Opinion and related analysis of Duff & Phelps, LLC, relating to its independent valuation of the Class A Units as of November 30, 2001, incorporated by reference from Exhibit
99.3 of Amendment No. 2 to Kaiser Ventures LLCs Registration Statement on Form S-4, filed on September 30, 2001.         
|               | 
|99.1           |  | Audit Committee Charter of Kaiser Ventures LLC adopted March 18, 2003 incorporated by reference from Exhibit 99.3 of Kaiser Ventures LLCs Report on Form 10-K for the year ended December
31, 2002.                                                                                                                 



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(b) Reports on Form 8-K.



The following Reports on Form 8-K were filed during the fourth quarter of 2004 through the date of this Annual Report on Form 10-KSB.



| | 1. | 8-K/A Report dated August 23, 2004, amending 8-K Report filed on August 23, 2004, to include a letter of Ernst & Young LLP dated December 1, 2004, as an exhibit to the original
filing.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | 8-K Report dated December 15, 2004, regarding an amendment to the Employment Agreement of Terry L. Cook.
| | -- | --------------------------------------------------------------------------------------------------------



| | 3. | 8-K Report dated January 26, 2005, regarding the termination of Ernst & Young LLP as the Companys independent registered public accounting firm and the retention of Moss
Adams LLP as the Companys independent registered public accounting firm.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | 8-K Report dated March 15, 2005 regarding entering into a Transition Employment Agreement with Paul Shampay.
| | -- | ------------------------------------------------------------------------------------------------------------



[REMAINDER OF THIS
PAGE INTENTIONALLY LEFT BLANK]



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KAISER VENTURES LLC AND SUBSIDIARIES



Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Independent Auditor and Fees



The Audit
Committee terminated Ernst & Young LLP as our independent registered public accounting firm as of January 16, 2005, and appointed Moss Adams LLP as our independent registered public accounting firm.



Moss Adams LLP was appointed as our independent registered public accounting
firm for fiscal year 2004 except for the review of the Report on Form 10-QSB for the period ended March 31, 2004, which was reviewed by Ernst & Young LLP.



The Audit Committee has appointed Moss Adams as the Companys independent registered public accounting firm for the current fiscal year.



Fees (including reimbursements for out-of-pocket expenses)
paid to Ernst & Young LLP and Moss Adams LLP for services in fiscal 2004 and 2003 were as follows:



|                     |  |                   |   |                      |   |         |                  |  |   |        
|-------------------- |  | ----------------- | - | -------------------- | - | ------- | ---------------- |  | - | -------
|                     |  | Moss Adams LLP(1) |   | Ernst & Young LLP(1)
|Fee Category         |  | Fiscal 2004 Fees  |   | Fiscal 2004 Fees     |   |         | Fiscal 2003 Fees
|Audit  Fees         |  | $                 |  |                      | $ | 15,000  |                  |  | $ | 89,000 
|Audit  Related Fees |  | $                 |  |                      | $ | 75,000  | (2)              |  | $ |       
|Tax Fees             |  | $                 |  |                      | $ | 26,000  |                  |  | $ | 54,000 
|All Other Fees       |  | $                 |  |                      | $ |        |                  |  | $ |       
|                     |  |                   |   |                      |   |         |                  |  |   |        
|Total Fees           |  | $                 |  |                      | $ | 116,000 |                  |  | $ | 143,000
|                     |  |                   |   |                      |   |         |                  |  |   |        

---

|(1) | Audit Committee appointed Moss Adams LLP as our independent registered public accounting firm
on January 26, 2005, and on the same date terminated Ernst & Young as our independent registered public accounting firm. Moss Adams LLP reviewed the financial statements for our Report on Form 10-QSB for the second and third quarters of 2004 and
conducted the 2004 annual audit. Ernst & Young LLP reviewed the financial statements in our Report on Form 10-QSB for the first quarter of 2004 audit. Moss Adams LLP did not bill us any amount in 2004 since they were appointed as our independent
registered public accounting firm on January 26, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Fees in connection with the Companys restating certain financial statements and filing
amended reports with the SEC in 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------



The above
Audit Fees are for the respective years audit, quarterly reviews and SEC filings, regardless of when the fees were billed. Tax Fees include tax compliance (tax return preparation) and tax advice services. The above Audit-Related Fees, Tax Fees
and All Other Fees shown are based upon billings dates, and may relate to the preceding fiscal year. The Audit Committee considered the compatibility of non-audit services by Ernst & Young LLP and Moss Adams LLP, as applicable with the
maintenance of that firms independence.



The Audit
Committee generally approves all engagements of the independent registered accounting firm in advance including approval of the related fees. The Audit Committee approves an annual budget (and may from time to time approve amendments), which
specifies projects and the approved levels of fees for each. To the extent that items are not covered in the annual budget or fees exceed the budget, management must have them approved by the Audit Committee or, if necessary between Committee
meetings, by the Audit Committee chairman on behalf of the Committee.





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KAISER VENTURES LLC AND SUBSIDIARIES



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.



|                     |  |                     |  |                                                                         
|-------------------- |  | ------------------- |  | ------------------------------------------------------------------------
|Date: April 14, 2005 |  | KAISER VENTURES LLC
|                     |  |                    
|                     |  | By:                 |  | /s/ Richard E. Stoddard                                                 
|                     |  | Name:               |  | Richard E. Stoddard                                                     
|                     |  | Title:              |  | President, Chief Executive Officer and Chairman of the
Board of Managers



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.





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KAISER VENTURES LLC AND SUBSIDIARIES



(Power of Attorney)



Each person whose signature appears below constitutes and appoints RICHARD E. STODDARD and JAMES F. VERHEY as his true and
lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Form 10-KSB and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue thereof.



|   |  |                                            |  |                                                                                                        |  |               
|-- |  | ------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | --------------
|   |  | Signature                                  |  | Title                                                                                                  |  | Date          
|1. |  | Principal Executive Officer                |  |                                                                                                        |  |               
|   |  |                                            | 
|   |  | /s/ Richard E. StoddardRichard E. Stoddard |  | President, Chief Executive Officer and
Chairman of the Board of Managers (Principal Executive
Officer) |  | April 14, 2005
|   |  |                                            |  |                                                                                                       
|   |  |                                            | 
|2. |  | Principal Financial and Accounting Officer |  |                                                                                                        |  |               
|   |  |                                            | 
|   |  | /s/ James F. Verhey                        |  | Executive Vice President, and Chief
Financial Officer (Principal Financial and Accounting Officer)     |  | April 14, 2005
|   |  | James F. Verhey                            |  |                                                                                                        | 



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|   |  |                         |  |               |  |               
|-- |  | ----------------------- |  | ------------- |  | --------------
|   |  | Signature               |  | Title         |  | Date          
|4. |  | Managers                |  |               |  |               
|   |  |                         | 
|   |  | /s/ Ronald E. Bitonti   |  | Manager       |  | April 14, 2005
|   |  | Ronald E. Bitonti       |  |               |  |               
|   |  |                         | 
|   |  | /s/ Todd G. Cole        |  | Manager       |  | April 14, 2005
|   |  | Todd G. Cole            |  |               |  |               
|   |  |                         | 
|   |  | /s/ Gerald A. Fawcett   |  | Vice Chairman |  | April 14, 2005
|   |  | Gerald A. Fawcett       |  |               |  |               
|   |  |                         | 
|   |  | /s/ Marshall F. Wallach |  | Manager       |  | April 14, 2005
|   |  | Marshall F. Wallach     |  |               |  |               



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