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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                    FORM 10-K

   (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, 2001
                                       OR
      [ ]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        Commission File Number: 333-65194

                               KAISER VENTURES LLC
             (Exact name of registrant as specified in its charter)

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

       3633 E. Inland Empire Blvd. Suite 850
                 Ontario, Ca 91764
      ------------------------------------------
       (Address of principal executive offices
                    and zip code)

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

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

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [_]

The aggregate market value of the registrant's Class A Units, held by
non-affiliates of the registrant was approximately $9,726,342 based upon the tax
appraisal conducted on behalf of the Company as of November 30, 2002, which was
assumed to be the same value as of March 22, 2002. 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).

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No __
   ---

At March 22, 2002, 6,904,299 Class A Units were outstanding including 136,919
Class A Units outstanding but reserved for distribution to the general unsecured
creditors of Kaiser Steel Corporation.

Documents Incorporated By Reference: None, except for certain exhibits as
identified in the Exhibit List to the Form 10-K Report.

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                         TABLE OF CONTENTS TO FORM 10-K

PART I                                                                      PAGE

                  FORWARD-LOOKING STATEMENTS........................          1

                  WHO WE ARE........................................          1

   Item 1.        BUSINESS..........................................          1

   Item 2.        PROPERTIES........................................         14

   Item 3.        LEGAL PROCEEDINGS.................................         16

   Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                    HOLDERS.........................................         19

PART II

   Item 5.        MARKET FOR THE COMPANY'S EQUITY AND RELATED
                    OWNER MATTERS...................................         21

   Item 6.        SELECTED FINANCIAL DATA...........................         22

   Item 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS.............         23

   Item 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......         31

   Item 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                    ON ACCOUNTING AND FINANCIAL DISCLOSURE..........         31

PART III

   Item 10.       MANAGERS AND EXECUTIVE OFFICERS OF THE
                    REGISTRANT......................................         32

   Item 11.       EXECUTIVE COMPENSATION............................         36

   Item 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT..................................         41

   Item 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....         42

PART IV

   Item 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                    REPORTS ON FORM 8-K.............................         43

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                                     PART I

FORWARD-LOOKING STATEMENTS

     Except for the historical statements and discussions contained herein,
statements contained in this 10-K 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,
Annual Report, 10-Q Report or 8-K Report of the Company 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-K 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 and pre-bankruptcy activities of Kaiser Steel
Corporation, the predecessor of Kaiser, including, among others, 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; 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 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.  Kaiser Inc.  merged with and
into Kaiser LLC effective November 30, 2001.

ITEM 1.       BUSINESS

BUSINESS STRATEGY

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

      .   An approximate 80% ownership interest in Mine Reclamation, LLC, (which
          we refer to as MRC), which has permitted a 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;

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     .    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

     .    Approximately 5,450 additional acres owned or controlled by Kaiser at
          the Eagle Mountain Site that are not included in the pending sale to
          the District.

     .   Cash and cash equivalents, and receivables of approximately $20.2
         million as of December 31, 2001.

     Strategy  Leading to  Conversion  of Kaiser Inc. to a Limited  Liability
Company.  In September 2000, Kaiser Inc.'s Board of Directors approved a
strategy to maximize the cash distributed to stockholders.  Under this
strategy, Kaiser was seeking:

     .   To complete the sale of the landfill  project at the Eagle
         Mountain Site and to resolve the related outstanding federal land
         exchange litigation.  The sale of the landfill is subject to the
         satisfaction of numerous conditions.  As a result, we cannot be sure
         that this sale will close.  Although the contractual expiration date
         is currently in the second quarter of 2002, the date has already been
         extended a number of times. The conditions to closing are not expected
         to be met by the current expiration date, and the parties will have to
         decide whether to extend the period one or more additional times or
         waive certain of the conditions to closing.  There is no assurance or
         requirement that the parties will continue to extend the closing date,
         and, if it is extended, for how long.  Even if the sale is completed,
         we do not expect to receive any cash from the sale until the litigation
         related to the land exchange is resolved favorably.  If that litigation
         is not favorably resolved, MRC may attempt to cure any defects in the
         land exchange so that the sale to the District could still be
         completed. However, if the litigation is not favorably resolved and MRC
         cannot otherwise cure the defects in a timely fashion, then the
         District's purchase of the landfill project would be unwound and MRC
         would seek another alternative for the sale of the landfill project or
         abandon it. Although a definite time period for curing any defects has
         not yet been negotiated with the District, it could take a substantial
         period of time. For additional information, see "Business - Eagle
         Mountain Landfill Project and Pending Sale."

     .   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 its is appropriate to
         maximize the value for this asset through a sale or other alternative
         transaction;

     .   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 well as sell our remaining assets.

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

     .   MRC entered into an agreement to sell the landfill project at the Eagle
         Mountain Site in August 2000. For additional information, see "BUSINESS
         - Eagle Mountain Landfill Project and Pending Sale - Pending Sale of
         the Landfill Project."

     .   We sold approximately 588 acres of the former Kaiser Steel mill site
         property (which we refer to as the Mill Site Property) in mid-August
         2000 for $16 million in cash plus the assumption of

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         certain environmental liabilities. For additional information, see
         "BUSINESS - Historical Operations and Completed Transactions - Sale
         of Mill Site Property."

     .   We sold approximately 37 additional acres of the Mill Site Property in
         October 2000 for $3.8 million in cash. For additional information, see
         "BUSINESS - Historical Operations and Completed Transactions - Sale of
         Rancho Cucamonga Parcel."

     .   We sold our interest in Fontana Union in March 2001 for $87.5 million
         in cash, plus approximately $2.5 million in additional payments due
         under a related lease. For additional information, see "BUSINESS -
         Historical Operations and Completed Transactions - Water Resources -
         Fontana Union Stock Sale."

     .   We purchased an insurance policy effective June 30, 2001, covering
         substantially all of Kaiser's remaining historical environmental and
         asbestos risks and anticipated litigation for the next 12 years 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.

     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, 2002. Kaiser Inc.'s Board sought the best means of
delivering significant cash to its investors on a tax advantageous basis, to
avoid the double taxation generally imposed on future corporate distributions to
investors and to sell its remaining assets without further investor approval.
After studying and considering various alternatives, Kaiser Inc.'s Board
determined that these goals could be best achieved by converting Kaiser Inc.
into a limited liability company that would be taxed as a partnership. More
specifically, by converting to a limited liability company on or before December
31, 2001, Kaiser ultimately saved approximately $16 million in taxes in 2001
(which was in excess of the original estimated tax savings of between $10.5
-$12.0 million to be achieved upon the conversion to a limited liability
company) by capturing, among other things, the significant 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, a
conversion would allow most of Kaiser Inc.'s stockholders to be able to offset
their tax basis in each share of Kaiser Inc.'s common stock against the merger
consideration, with only the difference taxed at capital gains rates. 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. However, as
a result of the requirements imposed by the Internal Revenue Code, for the unit
holders to enjoy the tax advantages offered by a pass-through entity such as a
limited liability company, the Class A Units received in the merger cannot be
traded on any securities market and contain significant transfer restrictions.

     After the Securities and Exchange Commission reviewed Kaiser Inc.'s
and Kaiser LLC's proposed joint proxy and registration statement, Kaiser
Inc. mailed to its stockholders of record as of October 8, 2001, a notice of
annual meeting, a joint proxy and registration statement for its annual meeting
to be held on November 28, 2001, and the Company's annual report for 2000. At
the annual meeting, Kaiser Inc.'s stockholders overwhelmingly approved the
merger and the subsequent conversion of Kaiser Inc. into a limited liability
company. The merger was effective as of 11:59 p.m. on November 30, 2001, which
was the last day of trading of Kaiser Inc. common stock.

EAGLE MOUNTAIN LANDFILL PROJECT AND PENDING SALE

     Description of the Eagle Mountain Site. Kaiser's 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
approximately 4,654 acres of the idled mine site and the rail line to MRC for
development of a rail-haul solid-waste landfill.

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     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 20 of 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,
which was a subsidiary of Browning Ferris Industries. Before and in connection
with its subsidiary's 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
increasing its 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 approximately 80% of MRC's Class B Units and 100% of its Class A
Units.

PENDING SALE OF THE LANDFILL PROJECT

     In August 2000, MRC entered into an agreement to sell the landfill project
to the District for $41 million. Under the terms of this agreement, upon closing
of the sale, $39 million of the total purchase price would be deposited into an
escrow account. This money would be released on the resolution of certain
litigation contingencies relating to the litigation challenging the completed
federal land exchange. 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, if there
is a successful outcome of the federal litigation at the Federal District Court
level. The decision by the District Court would be subject to appeal. The
remaining $2 million of the purchase price would also be placed into an escrow
account upon closing and would 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. Receipt
of the purchase price, in whole or in part, if at all, is expected to be delayed
for years pending satisfactory resolution of these contingencies.

     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. Although the contractual expiration date is currently in
the second quarter of 2002, the date has already been extended a number of
times. The conditions to closing are not expected to be met by the current
expiration date, and the parties will have to decide 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 to vote its interest in MRC in favor
of the sale of the landfill project to the District on its current terms.

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 re-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 and 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 12 1/2% 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 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

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panel's review is effectively limited to confirming substantial compliance
with all developmental approvals, mitigation measures and permits.

     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 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
have amended their respective complaints to include allegations that the
appraisal used in Kaiser's land exchange with the BLM is similarly defective.
Although we originally anticipated that the federal court would hold a trial or
rule on summary judgment motions in May 2001, this original schedule has been
substantially delayed for, among other reasons, the Court of Appeals' ruling in
Bisson. Kaiser, MRC and the BLM are evaluating their options with regard to the
appraisal used in Kaiser's completed land exchange. 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

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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 is 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, have objected to the ECEC project and have intervened in the matter.

ONGOING CONSIDERATIONS IF THE SALE IS NOT COMPLETED

     Successful resolution of the federal land exchange litigation could take a
number of years. If MRC does not complete the sale of the landfill project to
the District, MRC will likely require a substantial further investment by Kaiser
and other investors in MRC. We anticipate making an additional investment in MRC
of approximately $2 million in 2002. However, we can make no assurance that
sufficient and suitable financing will be available to MRC in order to allow it
to continue to pursue the landfill project and to resolve the federal
litigation. If MRC continues to pursue development of the landfill, it will face
several financial and operational obstacles. Additionally, MRC could decide not
to pursue the continued development of the landfill project, which would likely
materially hinder MRC's ability to sell the landfill project on favorable terms,
if at all.

     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 lose 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:

     .   Waste collection - local agencies require licenses to collection
         vehicles and monitor truck safety, weight limitations and collection
         time and frequency.

     .   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, 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, we may be unable to
meet our stated goals and our operating 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. It is owned by Goldfields Mining Corporation and its
subsidiary, Arid Operations, Inc. The District has also entered into an
agreement to purchase the Mesquite Regional Landfill at a price and on terms
substantially similar to the sale of the landfill project by MRC to the
District. Truck-haul landfills in the Los Angeles Basin are also competitors to
the proposed rail-haul landfills.

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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 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 given separate performance
guaranty agreements guarantying 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
approximately 3,000 tons of municipal solid waste per day.

     As part of our strategy, we intend to evaluate any potential offers to
purchase our interest in the West Valley MRF in light of our primary objective
of optimizing value for our members. The West Valley MRF currently generates
sufficient cash flow to fund its cost of operations and does not require
additional investment by Kaiser to operate. Furthermore, the West Valley MRF
should generate sufficient cash distributions to cover Kaiser LLC's foreseeable
general and administrative costs.

     The operating agreement for the West Valley MRF provides the opportunity
for either party 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, there is an event of default by a party under
the agreement that is not cured within a specified time period, or, in some
circumstances, 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 the option to purchase our interest in the West Valley
MRF.

FINANCING

     Most of the financing for the West Valley MRF was obtained through the
issuance and sale of 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), to finance
the West Valley MRF's construction and development. The interest rate for the
Bonds varies weekly. The rates for 2001 ranged from 1.55% to 4.70%. 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 on a stated schedule.

     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.

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<PAGE>

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

     .   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 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 little 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 currently 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. However, Kaiser believes
that none of them has yet completed the permitting process.

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. Environmental remediation of the Tar Pits Parcel began in January 2002
and is currently expected to be completed by the end of the third quarter of
2002. CCG Ontario, LLC, referred to as CCG, is responsible for remediating 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
"BUSINESS - Historical Operations and Completed Transactions - Mill Site
Environmental Matters."

EAGLE MOUNTAIN TOWNSITE

     Kaiser owns and operates the Eagle Mountain Townsite through a wholly-owned
subsidiary. 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. Kaiser currently leases a portion of the
Eagle Mountain Townsite to a private company that operates a minimum security
prison for the State of California. The lease for the private prison currently
expires on June 30, 2002. Due to budget constraints, the State of California may
not renew its

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<PAGE>

contract with the operator of the private prison at the Eagle
Mountain Site. If this should happen, Kaiser's lease with the prison operator
would not be extended past June 30, 2002.

     When the Eagle Mountain iron ore mine was operational, the Eagle Mountain
Townsite provided housing for mine employees and their families. Asbestos was
and is contained in many of the buildings at the Eagle Mountain Site and related
piping. Other than environmental remediation associated with this asbestos,
Kaiser is not currently aware of any other environmental remediation required at
the Eagle Mountain Townsite that could require Kaiser to expend substantial
funds or that could lead to material liability.

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.

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 Corporation, a wholly owned subsidiary of Kaiser, owns 77
improved lots, including, among other lots, one residential structure and a 240
acre parcel of unimproved land across the highway from the main entrance 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, 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 was effectively in the water business. At
the time of the sale 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.

     Fontana Union owns water rights to produce water from four distinct surface
and subsurface sources of water near Fontana, California. Locally available
water resources such as those owned by Fontana Union continue to be increasingly
important and valuable in Southern California. Kaiser's ownership of Fontana
Union entitled us to receive, annually, a proportionate share of Fontana Union's
water, historically totaling approximately 34,000 acre feet per year (an acre
foot equals approximately 325,000 gallons). In addition, when other shareholders
of Fontana Union did not take their annual proportionate shares of water, the
unclaimed water for each year was divided pro rata among those shareholders that
exercised their water rights. At the time we sold our interest in Fontana Union
in March 2001, our pro

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<PAGE>

rata interest in unclaimed water raised our effective overall
ownership percentage to approximately 57.19%. Over time, we expected
this supplemental source of water to be reduced or eliminated as minority
shareholders, who do not currently utilize all their water, begin to use, sell,
or lease their water interests.

     Lease of Interest in Fontana Union to Cucamonga County Water District. In
1989, Kaiser leased all of its shares of Fontana Union stock to Cucamonga, a
local water district, under the terms of the 102-year take-or-pay lease, 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. Thus, on a quarterly basis,
Cucamonga paid for its proportionate share of the agreed upon annual quantities
regardless of fluctuations in actual water flows and actual receipt and use of
water, except in certain limited situations. In addition, Cucamonga bore
substantially all risks and costs of producing the water under the Cucamonga
Lease. However, if a third party challenged any of Fontana Union's water rights,
Kaiser and Cucamonga were obligated to share the costs of defending such
challenge.

     Under the terms of the Cucamonga Lease, our future lease revenue increases
were primarily dependent 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. The MWD rate increases are often cyclical in
nature depending upon such factors as water availability, consumption, capital
projects and available reserves.

     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, which it is now in the
process of implementing. 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 adoption of the most recent major rate restructuring.

     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. Subsequent to the final oral argument in the
case, the parties ultimately 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.

                                      11

<PAGE>

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 5
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.

     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., referred to as PMI, 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 built 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. We voted for the merger and
elected to take the cash and stock election afforded to PMI shareholders.
Pursuant to this election, 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 the merger, 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 sales price of approximately $1.7 million.
The remaining NAPA Lot of approximately 5.2 acres was sold in December 1999 for
a cash sales 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. In addition, we were party to a consent order with
the California Department of Toxic Substances Control, referred to as the DTSC,
which is essentially an agreement to investigate and remediate property. This
consent order and our financial assurances to the DTSC were terminated as part
of the sale transaction, 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. 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 sales price was
approximately $3.8 million.

                                      12

<PAGE>

     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 an additional
approximately 7 acres after that land's environmental remediation in 2000. We
are also obligated to contribute the Tar Pits Parcel to West Valley at West
Valley's option, upon the environmental remediation of the Tar Pits Parcel in a
manner suitable for use by West Valley. 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. In 1988,
the Company entered into a consent order with the DTSC, which required the
Company to investigate and remediate hazardous materials on the Mill Site
Property. This consent order 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 associated with the property as well as
certain other environmental obligations. As discussed above, in this
transaction, our consent order with the DTSC was terminated, and CCG entered
into a new consent order with the DTSC. As a result, CCG is now responsible for
all future investigation and remediation of the Mill Site Property it purchased,
as well as various other items covered under the 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 know environmental conditions on the property. IT
filed for bankruptcy in January 2002, but to date is continuing to perform its
environmental remediation services contract. 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 CCG's agreement with
IT. IT is currently completing the solidification of the tar within the Tar Pits
parcel and it is currently anticipated that this portion of the remediation of
the Tar Pits parcel will be completed by April 30, 2002.

     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 IT's performance under its environmental
remediation service agreement with CCG; 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

                                      13

<PAGE>

agreement. CCG did not assume any of the Company's future obligations, if any,
with regard to the specified plume.

     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 an insurance policy
effective June 30, 2001. This insurance policy is designed to provide broad
commercial general liability, pollution legal liability, and contractual
indemnity coverage for Kaiser's ongoing and historical operations. With the
purchase of this policy, we were able to reduce our estimated environmental
liabilities to zero. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" in Part II, Item 7. of this Form 10-K
Report and "Part I, Item 3. LEGAL PROCEEDINGS - New Insurance" in this 10-K
Report.

     The Company is involved, from time-to-time, in legal proceedings concerning
environmental matters. For example, in 2001, the City of Ontario re-asserted
that the plume discussed above negatively impacts one of the City's former
production wells. See "Part I, Item 3. LEGAL PROCEEDINGS."

EMPLOYEES

     As of March 22, 2002, Kaiser had 10 full-time and 6 part-time employees. It
is anticipated the number of full-time employees of the Company will be reduced
to 9 and the number of part-time employees will be reduced to 5 as of the end of
May 2002. In addition, as of March 22, 2002, MRC, the Company's subsidiary, had
1 part-time employee.

ITEM 2.       PROPERTIES

OFFICE FACILITIES

     Our principal offices are located at 3633 East Inland Empire Boulevard,
Suite 850, Ontario, California, 91764. The Company currently leases
approximately 5,500 square feet in Ontario, California. However, in May 2002 we
will move to 3633 East Inland Empire Boulevard, Suite 480, reducing our leased
space to approximately 3,100 square feet. The lease for the reduced space
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 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

                                      14

<PAGE>

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 and are currently in use.
Most of the houses in use are leased to Management and Training Corporation for
use in conjunction with a permitted 500-bed community-custody facility operated
under a contract with the California Department of Corrections. However, the
lease with Management Training Corporation may be terminated effective June 30,
2002, because of the reduction in the California State budget, which may
eliminate many, if not all private prisons contracted with the State of
California. Utilization of the remaining houses and related facilities will
require additional renovation activities plus approval by Riverside County of a
Townsite Specific Plan.

     In and around the Eagle Mountain area the Company has various possessory
mining claims of approximately 3,509 acres and holds approximately 5,635 acres
in fee simple (which includes the 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. 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.

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. See "Part I, Item 1. BUSINESS - Municipal Solid Waste - Eagle
Mountain Landfill Project."

FONTANA, CALIFORNIA

     With exception of the approximate 5 acre Tar Pits Parcel, the Company no
longer owns any property at the former KSC mill site. See "Part 1, Item 1.
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 the Company, owns 77
improved lots including one residential structure. Lake Tamarisk, LLC also owns
a 240 acre parcel of unimproved land across the highway from the main entrance
to Lake Tamarisk. This property was under contract and scheduled to be sold in
the first quarter of 2001 for $1.75 million in cash, but the buyer timely
terminated the purchase under the terms of the purchase and sale agreement. We
are currently marketing this property.

                                      15

<PAGE>

OTHER REAL ESTATE PROPERTIES

     We own numerous small parcels of land in Huerfano and Archuleta Counties in
Colorado. In February 2001, we sold our Silver Lake Mine west of Baker,
California, several iron ore deposits, and approximately 190 acres near Afton
Canyon, California for approximately $2 million. Historical Operations and
Completed Transactions - Mill Site Property.")

FONTANA UNION WATER COMPANY

     Until March 6, 2001 we owned 8,057.03 shares, or approximately 53.71%, of
the outstanding stock of Fontana Union, a California mutual water company. On
March 6, 2001, we sold our shares in Fontana Union for $87.5 million and, as
part of this sale, received approximately $2.5 million in payments under the
Cucamonga water lease. See "Part I, Item 1. BUSINESS - Water Resources."

ITEM 3.       LEGAL PROCEEDINGS

     Kaiser, in the normal course of its business, is involved in various claims
and legal proceedings. A number of litigation matters previously reported have
settled and such settlements did not have a material adverse impact on our
financial statements. Except for those matters described below, management
believes these matters will not have a material adverse effect on Kaiser's
business or financial condition. Significant legal proceedings, including those
which may have a material adverse effect on our business or financial condition,
are summarized as follows:

LITIGATION

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

     In December 1999, the first case was filed challenging the land exchange -
Donna Charpied; Laurence Charpied; et al. v. United States Department of the
Interior; Bureau of Land Management; et al, (United States District Court for
the Central District of California, Riverside Division, Case No. EDCV 99-0454
RT(MCx)). In January 2000, a second case was filed - National Parks and
Conservation Association v. Bureau of Land Management, et al. (United States
District Court for the Central District of California, Riverside Division, Case
No. EDCV-00-0041 VAX (JWJx)). We expect that both cases will be consolidated
into one hearing. The plaintiffs have argued 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. The plaintiffs have not sought
damages other than the recovery of attorneys' fees. In November 2000, the Ninth
Circuit Court of Appeals announced a decision that may have a material adverse
impact on Kaiser's federal land exchange litigation and the pending sale of the
landfill project 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 highest best use 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 have amended their respective complaints to include
allegations that the appraisal used in Kaiser's land exchange with the BLM is
similarly defective. Although we originally anticipated that the federal court
would hold a trial or rule on summary judgment motions in May 2001, this
original schedule has been substantially delayed for, among other reasons, the
Court of Appeals' ruling in Bisson. At the current time, we do not know when a

                                      16

<PAGE>

trial will be held or a ruling will be made, and Kaiser, MRC and the BLM are
evaluating their options with regard to the appraisal used in Kaiser's completed
land exchange.

     Warrant Dispute. New Kaiser Employees' Voluntary Benefit Association, VEBA,
and Pension Benefit Guaranty Corporation, PBGC, are the beneficial owners of
warrants to purchase, respectively, 460,000 and 285,260 Class A Units in the
Company (the warrants were initially for common stock of Kaiser Inc. and in the
merger of Kaiser Inc. with and into Kaiser LLC, the warrants were converted into
Class A Units of Kaiser LLC). VEBA and PBGC have each claimed that the treatment
of its warrant in the conversion violated the terms of the warrant. We do not
believe this claim has any merit. Prior to the vote on the conversion proposal,
it was agreed by Kaiser, VEBA and PBGC that the rights of each VEBA and PBGC,
under its warrant, would not be changed or waived by (i) any consent to or
approval of the conversion proposal by either VEBA, PBGC or any director
representing either of them, or (ii) any decision by either the VEBA or the PBGC
to delay any potential legal challenge until after the adoption and completion
of the conversion proposal. VEBA and PBGC voted their respective shares in
Kaiser Inc. in favor of the conversion proposal. VEBA recently renewed its claim
that the conversion proposal violated the terms of its warrant.

     Product Liability Litigation. On March 22, 2002, Kaiser received a
complaint in the mail captioned Explorer Pipeline Company, et al v. Kaiser Steel
Corporation, et al., (District Court of Tarrant County, Texas, Case No.
96-191821-02). In summary, the allegations are that Kaiser Steel Corporation or
possibly other steel companies may have manufactured or sold pipe that was used
in a portion of a petroleum pipeline that runs from the Texas Gulf Coast to
Hammond, Indiana. It is further alleged that such portion of the pipeline was
defective and ruptured on March 9, 2000, releasing gasoline causing damage to
the plaintiffs' respective interests in land and that there were business
interruption damages to certain of the plaintiffs. No amount of damages has been
pled. Based upon the complaint, it appears that plaintiffs filed this lawsuit
because of statute of limitations concerns without knowing who may have actually
sold or manufactured the pipe in the ruptured section of the pipeline. Since
Kaiser just received the complaint, Kaiser has not had the opportunity to
discover any of the facts of this case. Kaiser Inc. and Kaiser LLC were also
named as defendants in the law suit. If Kaiser should remain in this case, we
will vigorously defend the lawsuit.

     Slemmer Litigation. On March 28, 2002, we were served with a complaint
captioned 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 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. We believe that the suit against us is totally
without merit and we will vigorously defend the lawsuit.

     Asbestos Suits. Kaiser, along with KSC Recovery (the Kaiser Steel
Corporation bankruptcy estate), are currently named in approximately forty (40)
active asbestos lawsuits. Kaiser and KSC have been previously named in other
asbestos suits but for various reasons those suits are not currently being
pursued. 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 Kaiser and/or KSC were in some manner
associated with one or more shipyards or has successor liability.

     In addition, there are several claims involving other facilities such as
the Mill Site Property. Most of these lawsuits are third party premises claims
that claim injury resulting from exposure to asbestos or asbestos containing
products and involve multiple defendants. Kaiser anticipates that it, often
along with KSC, 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 couple of years,
increasing the likelihood that additional suits will be filed against us. In
addition, the trend has been toward increasing trial damages and settlement
demands. Virtually all of the complaints against Kaiser and KSC are
non-specific, but involve allegations relating to pre-bankruptcy activities. It
is difficult to determine the amount of damages that Kaiser 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. Instead these claims incorporate
by reference a blanket pleading that asserts an amount of damages in excess of
the court's jurisdictional requirement (usually $50,000). Additionally, those
actions which assert a specific amount of damages do not specify the amount by
defendant, and Kaiser is often one of many defendants in these cases, often more
than 50 defendants. Many cases have been dismissed without

                                      17

<PAGE>

Kaiser paying any amount in settlement, and most other cases have been settled
for a payment of less than $10,000. Occasionally, Kaiser has entered into
settlements in excess of $100,000. Since the bankruptcy proceedings,
approximately 176 claims have been resolved, with only 12 of those claims being
resolved for a payment in excess of $100,000. Kaiser has resolved
approximately 70% of these claims for less than $10,000. Most claims that
settled for more than $100,000 were covered entirely, or in part, by insurance.

     To date, several, but not all, of the plaintiffs have agreed that they will
not pursue Kaiser, although they have the right to pursue Kaiser's insurance
coverage to the extent there is coverage. Kaiser currently believes that these
claims are substantially covered by insurance coverage, and we have tendered
these suits to the appropriate insurance carriers. Many, but not all, of the
current asbestos claims are being accepted for defense and indemnity purposes by
insurance carriers, subject to a reservation of rights. However, two insurance
carriers are disputing the amount of insurance coverage with regard to the
various types of asbestos claims and the extent of the participation the
allocation, if any, of defense costs and damages to Kaiser. Kaiser and KSC are
engaged in settlement negotiations with insurance carriers with regard to these
coverage disputes and Kaiser had reserved for asbestos claims and related
matters as a part of its environmental reserves. Depending upon the nature of
the claims and the year of claimed exposure, Kaiser's percentage of exposure in
these cases may range from 0 percent to 100 percent. However, as discussed in
the section entitled "New Insurance Policy", any currently uninsured risks are
now covered by a newly purchased insurance policy up to a maximum of $50
million.

     Kaiser also currently believes that it has various defenses to these
claims, including, among other defenses, the discharge granted to it in
connection with Kaiser Steel's bankruptcy reorganization. However, this is an
evolving area of the law and it is possible that the bankruptcy discharge will
not be recognized in many of the asbestos claims. Because the claims involve
pre-bankruptcy activities, the Kaiser Steel bankruptcy estate, through KSC, has
been incurring defense and settlement costs, which we expect will be reimbursed
in large part by insurance. If KSC is unable to fund these expenses, whether
from cash reserves or from insurance proceeds, we may be obligated to fund these
costs, which was part of the motivation for purchasing the new insurance policy
described below. See "New Insurance Policy."

     Bankruptcy Claims. KSC was formed for the primary purpose of pursuing
certain legal actions on behalf of the former creditors of Kaiser Steel and
handling the remaining administrative duties of the Kaiser Steel bankruptcy
estate, including claims resolution. All litigation and bankruptcy
administration costs are borne by KSC, which maintains a cash reserve from
previous litigation and other recoveries to fund anticipated ongoing litigation
and administration costs. Because of the minimum activities of the Kaiser Steel
bankruptcy estate at this time, the Bankruptcy Court terminated its supervision
over the estate in October 1996. However, the bankruptcy estate is reopened from
time to time to address certain litigation matters as they arise.

     From time to time, various environmental and similar types of claims, such
as the environmental and asbestos litigation mentioned above that relate to
Kaiser Steel pre-bankruptcy activities, are asserted against KSC and Kaiser.
Excluding the asbestos claims, there were approximately four environmental
claims made in 2000 and one in 2001. The claims made in 2000 were all resolved
through KSC. Settlements ranged from zero to about $150,000 (in settlement of a
$1 million late general unsecured creditor claim in the bankruptcy estate). In
connection with the Kaiser Steel plan of reorganization, Kaiser, as the
reorganized successor to Kaiser Steel, 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 Kaiser Steel bankruptcy plan, if
any of these claims or other similar claims are ultimately determined to survive
the Kaiser Steel bankruptcy, it could have a material adverse effect on Kaiser.
In particular, there is some question as to the validity of the discharge with
regard to particular claims, such as asbestos claims.

                                      18

<PAGE>

     California Regional Water Quality Control Board. In the Summer of 2001, the
RWQCB communicated with Kaiser that the City of Ontario is asserting that we are
responsible for the damage caused by a plume of high total dissolved solids
(such as salt) to one of its wells, which plume allegedly emanated from the Mill
Site Property. By way of background, in the Fall of 1993, RWQCB approved a
settlement agreement resolving Kaiser's groundwater remediation obligation. The
settlement agreement provided that Kaiser would: (i) pay $1,500,000 upon
approval of the settlement agreement; and (ii) contribute 1,000 acre feet of
water in storage per year for 25 years for the benefit of a regional groundwater
de-salter program either by direct transfer to the de-salter project or
abandonment to the basin with a Watermaster waiver of the de-salter
replenishment obligation. Kaiser has satisfied all of its obligations under the
settlement agreement. However, the settlement agreement left open the
possibility of certain third party claims. Kaiser has the right to commence its
own investigation and to present its findings to the RWQCB before the RWQCB
makes a decision on the matter. Our preliminary investigation work has been
provided to the RWQCB. Kaiser believes this matter is covered under its new
insurance policy that addresses, among other items, environmental matters. See
"New Insurance Policy." and the section entitled "The Conversion Proposal - RISK
FACTORS - California Regional Water Quality Control Board" of our Registration
Statement on Form S-4, filed October 19, 2002.

NEW INSURANCE POLICY

     Kaiser has purchased an insurance policy that is designed to provide broad
commercial general liability, pollution legal liability, and contractual
indemnity coverage for Kaiser'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 in excess of Kaiser's existing and historic
insurance policies; however, to the extent that these other insurance policies
are not responsive to a loss, the newly purchased 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 are brought against Kaiser.

     This policy will supplement existing insurance through additional policy
limits and provide coverage for uninsured aspects of Kaiser's current insurance
program, including, among others, uninsured gaps arising from insurance company
insolvencies, deductibles, or self-insured retentions. The policy is
specifically intended to provide additional coverage for Kaiser's 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 Kaiser arising from, e.g., prior corporate transactions
and real estate sales. The aggregate cost for this policy was approximately $5.8
million, of which KSC Recovery paid $2 million and we paid the balance of
approximately $3.8 million.

ITEM 4.       SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     On November 28, 2001, Kaiser Inc. held its annual meeting of stockholders.
The vote on each of the proposals was as follows:

     Proposal One -The Election of Directors:

          DIRECTOR             VOTES FOR    VOTES WITHHELD/ABSTAIN

Ronald E. Bitonti              4,892,867           364,205
Todd G. Cole                   4,981,232           275,840
Gerald A. Fawcett              4,896,521           360,551
Reynold C. MacDonald           4,896,773           360,299
Charles E. Packard             4,976,447           280,625
Richard E. Stoddard            4,880,004           377,068
Marshall F. Wallach            4,979,511           377,068

                                      19

<PAGE>

     Proposal Two-Conversion of Kaiser Inc. into a limited liability company by
the merger of Kaiser Inc. with and into Kaiser LLC:

         FOR: 4,276,581              AGAINST: 18,998          ABSTAIN: 2,522

     No shareholder exercised his or her rights to demand an appraisal of his or
her shares.

     Proposal Three-Authorization of the Adjournment of the Annual meeting in
order to solicit additional votes for the conversion proposal.

         FOR: 4,693,721              AGAINST: 557,145         ABSTAIN: 6,206

     We had 6,442,103 shares of common stock issued and outstanding and eligible
to vote on the proposals.

            [THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]

                                      20

<PAGE>

                                    PART II

ITEM 5.       MARKET FOR THE COMPANY'S EQUITY AND RELATED OWNER MATTERS

KAISER INC.

     Kaiser Inc.'s common stock commenced trading on the NASDAQ Stock
Market(SM) in the fourth quarter of 1990 under the symbol "KSRI." In June 1993,
Kaiser changed its name to Kaiser Resources Inc. and symbol to "KRSC." The
Company changed its name, in June 1995, to Kaiser Ventures Inc., but its
trading symbol remained the same. As a result of the merger of Kaiser Inc. with
and into Kaiser LLC as of the close of business on November 30, 2001, Kaiser
Inc.'s common stock ceased being publicly traded. The following table sets
forth the range of the high and low reported bid prices of Kaiser Inc.'s common
stock for the periods indicated, as reported on the NASDAQ Stock Market(SM).

                                           Low           High
                                           ---           ----
2001:
Fourth quarter (through November 30)     $  12.06      $  12.50
Third quarter.......................     $  12.00      $  13.11
Second quarter......................     $  12.31      $  12.94
First quarter.......................     $   8.50      $  12.94

2000:
Fourth quarter......................     $   9.25      $  13.69
Third quarter.......................     $  10.63      $  13.50
Second quarter......................     $  10.50      $  14.25
First quarter.......................     $  13.75      $  16.06

     Kaiser Inc. paid a $2.00 per share cash distribution to stockholders of
record as of December 13, 2000.

     Kaiser Inc. merged with and into Kaiser LLC effective November 30, 2001.
As a result of the merger each Kaiser Inc. stockholder of record as of December
5, 2001, was entitled to receive $10.00 in cash plus one (1) Class A Unit in
Kaiser LLC for each share of stock.

KAISER LLC

     Neither Kaiser LLC's Class A nor Class B Units are publicly traded. In
fact, there are substantial restrictions imposed on the transfer of the Class A
and Class B Units. However, in connection with the merger of Kaiser Inc. with
and into Kaiser LLC, an independent appraisal of the value of the Class A Units
was made. The appraisal determined that the Class A Units had a value of $1.50
as of November 30, 2001.

     As of March 22, 2002, there were approximately 2,876 holders of record of
our Class A Units.

     As of March 22, 2002, KSC Recovery held 136,919 Class A Units that are
outstanding but reserved for distribution to the former general unsecured
creditors of KSC pursuant to the KSC Plan.

                                      21

<PAGE>

ITEM 6.       SELECTED FINANCIAL DATA

     The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements, related notes and other
financial information included herein.

<TABLE>
<CAPTION>
Selected Statement of Income Data
for the years ended December 31:               2001           2000           1999          1998            1997
                                               ----           ----           ----          ----            ----
<S>                                       <C>            <C>            <C>            <C>            <C>

Total revenues..........................  $ 68,051,000   $  7,644,000   $ 49,516,000   $  7,097,000   $  7,082,000

Costs and expenses......................     6,903,000      6,847,000     13,788,000      4,539,000      4,891,000
                                          ------------   ------------   ------------   ------------   ------------

Income from operations..................    61,148,000        797,000     35,728,000      2,558,000      2,191,000

Net interest (income) expense...........    (2,532,000)      (581,000)       498,000      1,083,000        672,000
                                          -------------  ------------   ------------   ------------   ------------

Income before income tax provision......    63,680,000      1,378,000     35,230,000      1,475,000      1,519,000

Taxes currently payable.................     1,795,000         33,000      8,364,000         12,000         43,000
Deferred tax expense (benefit)..........    12,861,000    (11,998,000)    (3,211,000)       126,000         74,000
Deferred tax expense credited to equity.           ---            ---      6,048,000        105,000        554,000
                                          ------------   ------------   ------------   ------------   ------------

Net income..............................  $ 49,024,000   $ 13,343,000   $ 24,029,000   $  1,232,000   $    848,000
                                          ============   ============   ============   ============   ============

Earnings per unit share
   Net Income
     Basic..............................  $       7.45   $       2.09   $       2.35   $        .12   $        .08
     Diluted............................  $       7.38   $       1.99   $       2.31   $        .11   $        .08

Basic Weighted average
number of units/shares outstanding/(3)/.     6,584,000      6,394,000     10,226,000     10,664,000    10,536,000

Diluted Weighted average
number of units/shares outstanding/(3)/.     6,646,000      6,699,000     10,386,000     10,840,000    10,740,000
</TABLE>

<TABLE>
<CAPTION>
Selected Balance Sheet Data
as of December 31:                             2001           2000           1999          1998            1997
                                               ----           ----           ----          ----            ----
<S>                                       <C>            <C>            <C>            <C>            <C>

Cash, cash equivalents and
   short-term investments...............  $ 16,389,000   $ 10,097,000   $ 14,686,000   $  3,409,000   $  4,330,000
Working capital.........................    16,004,000     19,274,000      5,170,000     (2,487,000)    (4,685,000)
Total assets............................    57,210,000     74,788,000    103,445,000    142,942,000    139,265,000
Long-term debt..........................           ---            ---            ---     13,750,000      8,982,000
Long-term environmental
   remediation reserves.................     4,000,000      4,490,000     23,868,000     24,465,000     24,673,000
Members'/Stockholders' equity/(3)/......    44,208,000     59,474,000     60,890,000     87,838,000     86,204,000
Shares outstanding......................     6,901,000      6,523,000      6,317,000     10,685,000     10,591,000
Book value per unit/share/(3)/..........  $       6.41   $       9.12   $       9.64   $       8.22   $       8.14
</TABLE>

/(1)/  The deferred tax expense credited to equity represents taxes that are
       recorded by the Company for financial reporting purposes, but are not
       payable due to the Company's utilization of Net Operating Loss ("NOL")
       benefits from losses arising prior to and through the KSC bankruptcy.
       Although the amount of this benefit is not included in net income,
       stockholders' equity is increased in an amount equal to the NOL tax
       benefit reported. There were no remaining NOL carryforwards at December
       31, 2001.

/(2)/  The earnings per share amounts prior to 1997 have been restated as
       required to comply with Statement of Financial Accounting Standards No.
       128, Earnings Per Share. For further discussion of earnings per share and
       the impact of Statement No. 128, see the notes to the consolidated
       financial statements beginning on page 65.

/(3)/  Equity of the Company was represented by shares of common stock, through
       November 30, 2001, subsequent to November 30, 2001, the effective date of
       the merger of Kaiser Ventures Inc. with and into Kaiser Ventures LLC,
       equity ownership is represented by units.

                                      22

<PAGE>

ITEM 7.       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.
Since the Kaiser Steel bankruptcy, we have been developing certain assets
remaining after the bankruptcy. As of the date of this 10-K Report, our
remaining principal assets include: (i) an approximate 80% 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; (ii) a 50% ownership interest in the West Valley
Materials Recovery Facility and Transfer Station; (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, and receivables of approximately $20.2 million as of December 31,
2001.

     We have been selling the assets received out of bankruptcy at such time as
we believe maximum value for the particular project or asset can be achieved.
We have then distributed a portion of the proceeds received from such sales to
our shareholders and members.

SUMMARY OF SIGNIFICANT DEVELOPMENTS IN 2001

     During 2001, a number of major events occurred which significantly
affected us. Readers are encouraged to read this 10-K Report in its entirety in
order to adequately understand the impact of these events on us and our
business. The following points summarize three significant developments for us
in 2001: (1) the sale our interest in Fontana Union in March 2001 for $87.5
million in cash, plus approximately $2.5 million in additional payments due
under a related lease; (2) the purchase of an insurance policy effective June
30, 2001, covering substantially all of Kaiser's remaining historical
environmental and asbestos risks and anticipated litigation for the next 12
years for an aggregate cost of approximately $5.8 million, of which we paid
$3.8 million and Kaiser Steel's bankruptcy estate paid $2 million; and (3) in
November 2001, we converted into a limited liability company, saving
approximately $16.0 million in taxes in 2001 and enabling us to increase the
cash distributed to Kaiser Inc.'s stockholders by almost $2.00 per share.
However, as a result of the requirements imposed by the Internal Revenue Code,
to enjoy these tax advantages, the Class A Units distributed in the conversion
can not be traded on any securities market and contain significant transfer
restrictions.

PRIMARY REVENUE SOURCES

ONGOING OPERATIONS

     Kaiser's revenues from ongoing operations are generally derived from the
development of our long-term projects. Revenues from water resources represent
payments received under the lease of our interest in Fontana Union to
Cucamonga, which was sold in 2001. Income from equity method investments
reflect Kaiser's share of income related to those equity investments (i.e.,
PMI) and, starting in 1997, a limited liability company (i.e., West Valley MRF)
which we account for under the equity method.

INTERIM ACTIVITIES (NET)

     Revenues and expenses from interim activities are generated from various
sources. Significant components of interim activities have included water and
waste water treatment revenues, rentals under short-term tenant

                                      23

<PAGE>

lease arrangements, royalty revenues from the sale of slag to outside
contractors, royalty revenues from the sale of recyclable revert materials and
other miscellaneous short-term activities at the Mill Site Property; housing
rental income, aggregate and rock sales and lease payments for the minimum
security prison at the Eagle Mountain Site; and royalty revenues from iron ore
shipments from our iron ore mine in California (the "Silver Lake Mine"). Due to
the interim nature of these activities we are presenting these revenues net of
their related expenses.  Revenues and expenses associated with these activities
at the Mill Site Property and Silver Lake Mine have ceased due to the sales of
these properties.

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 its revenues as
well as the recent developments regarding our long-term ongoing and interim
revenue sources. See "Part I, Item 1. 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, 2001 AND 2000

     An analysis of the significant components of our resource revenues for the
years ended December 31, 2001 and 2000 follows:

<TABLE>
<CAPTION>
                                                     2001         2000         % Inc. (Dec)
                                                     ----         ----         ------------
<S>                                             <C>           <C>                  <C>
Ongoing Operations
   Gain on Sale of FUWC Stock.................  $ 65,171,000  $        ---         100%
   Water resource............................   $    295,000  $  5,640,000         (95%)
   Gain on sale of California Mines...........     1,756,000           ---         100%
   Income from equity method investment in
        West Valley MRF, LLC.................        978,000     1,651,000         (41%)
   Mill Site land sales......................        107,000       532,000         (80%)
                                                ------------  ------------   -----------

     Total ongoing operations................     68,307,000     7,823,000         773%
                                                ------------  ------------   ----------

Interim Activities (net)                            (256,000)     (179,000)        (43%)
                                                ------------- -------------  -----------

     Total resource revenues.................   $ 68,051,000  $  7,644,000         790%
                                                ============  ============   ----------
</TABLE>

     Resource Revenues. Total resource revenues for 2001 were $68,051,000,
compared to $7,644,000 for 2000. Revenues from ongoing operations increased 8
fold for 2001 to $68,307,000 from $7,823,000 in 2000, while the loss from
interim activities (net of related expenses) increased 43% to $256,000 from
$179,000 in 2000.

     Ongoing Operations. During the first quarter of 2001, we completed the
sale of our investment in Fontana Union Water Company ("Fontana Union") to
Cucamonga (to whom the shares were leased under a 102 year lease) for $87.5
million, resulting in a gain of $65.2 million. Included in the net gain of
$65.2 million was the payment of $1.0 million to management pursuant to our
Long-Term Transaction Incentive Program. Water lease revenues under our
102-year take-or-pay lease with Cucamonga were $295,000 during 2001 compared to
$5,640,000 for 2000. The 95% decrease in water lease revenues during 2001
reflects the sale of our Fontana Union stock, which closed March 6, 2001.

     During the first quarter of 2001, we also sold our California Mine
properties for $2.0 million, resulting in a gain of $1,756,000. Finally, we
recognized deferred gain of $107,000 from the sales of certain Mill Site
property parcels that closed in 1997 and 1999 compared to a gain of $532,000
from the sale of the Rancho Cucamonga Parcel in 2000.

                                      24

<PAGE>

     Income from equity method investments decreased by $673,000 to $978,000
due to lower equity income from the West Valley MRF during 2001 compared to
2000.  This decrease in equity income in the West Valley MRF is mainly due to
higher operating and maintenance expenses incurred during and subsequent to the
expansion of the facility ($490,000), an increase in depreciation expense due
to the facility expansion ($620,000), a 31% decrease in net revenues from the
sale of recyclable products ($540,000) due to lower commodity prices and,
finally, higher interest and general and administrative expenses ($370,000).
These increases in expenses and decreases in net revenues are being partially
offset by a 7% increase in processing fee revenues due to a 12% increase in
transfer and recycling volume ($490,000).

     Interim Activities (net). Interim activities net of expenses for 2001 were
a net expense of $256,000 compared to a net expense of $179,000 for 2000. The
43% increase in net interim expense in 2001 is primarily attributable to lower
net operating revenue at the California Mines which were sold in February 2001
($238,000) being partially offset by: (a) lower expenses associated with the
termination of interim activities at the Mill Site Property which was sold in
August 2000 ($139,000); and (b) lower net interim expense at Eagle Mountain
($23,000).

     Resource Operating Costs. Resource operating costs are those costs
directly related to the resource revenue (in this case commission expense on
Cucamonga water lease revenue). Total resource operating costs for 2001
decreased to $42,000 from $509,000 in 2000. This decrease was due to the sale
of our investment in Fontana Union stock in March 2001.

     Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 2001 increased 8% to $6,861,000 from $6,338,000 for
2000. The increase is primarily due to higher legal, accounting and
professional expenses relating to the restructuring from a corporation to a
limited liability company ($1,550,000) and higher compensation and benefits
expenses ($122,000).  These increases were partially offset by reductions in
two non-cash expenses, the expense related to the exercise of nonqualified
stock options ($936,000) and variable stock option accounting expense
($217,000).

     Net Interest Income. Net interest income for 2001 was $2,532,000 compared
to $581,000 in 2000. The change was due primarily to: (a) an increase in
interest income ($1,822,000) relating to our higher cash and investment
balances, most of which relates to proceeds from our sale of our Fontana Union
stock, and a decrease in interest expense ($126,000) associated with our
$30,000,000 revolving-to-term credit facility with Union Bank which was
terminated prior to our sale of our Fontana Union stock.

     Pre-Tax Income and Income Tax Provision. We recorded income before income
tax provision of $63,680,000 for 2001, versus $1,378,000 recorded in 2000. An
income tax provision of $14,656,000 was recorded in 2001 compared to an income
tax benefit of $11,965,000 for 2000.

     Net Income. For 2001, we reported a net income of $49,024,000, or $7.45
per share, versus $13,343,000, or $2.09 per share, reported for 2000.

                                      25

<PAGE>

RESULTS OF OPERATIONS

ANALYSIS OF RESULTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

     An analysis of the significant components of our resource revenues for the
years ended December 31, 2000 and 1999 follows:

<TABLE>
<CAPTION>
                                                   2000          1999         % Inc. (Dec)
                                                   ----          ----         ------------
<S>                                            <C>           <C>                <C>
Ongoing Operations
   Water resource............................  $ 5,640,000   $ 5,228,000           8%
   Gain on merger of PMI into ISC............          ---    35,713,000        (100%)
   Gain on sale of ISC common stock..........          ---     6,575,000        (100%)
   Income (loss) from equity method
     Investments
        Penske Motorsports Inc...............          ---      (329,000)        100%
        West Valley MRF, LLC.................    1,651,000       910,000          81%
   Mill Site land sales......................      532,000     1,622,000         (67%)
                                               -----------   -----------   -----------

     Total ongoing operations................    7,823,000    49,719,000         (84%)
                                               -----------   -----------   -----------

Interim Activities (net)                          (179,000)     (203,000)         12%
                                               ------------  ------------  ----------

     Total resource revenues.................  $ 7,644,000   $49,516,000         (85%)
                                               ===========   ===========   -----------
</TABLE>

     Resource Revenues. Total resource revenues for 2000 were $7,644,000,
compared to $49,516,000 for 1999. Revenues from ongoing operations decreased
84% during the year to $7,823,000 from $49,719,000 in 1999, while the loss from
interim activities (net of related expenses) declined 12% to $179,000 from
$203,000 in 1999. This significant decrease from our record 1999 revenue levels
reflects the unusual non-recurring 1999 revenues relating to the Penske
Motorsports, Inc./International Speedway Corporation merger and the subsequent
sale of International Speedway common stock.

     Ongoing Operations. Water lease revenues under our 102-year take-or-pay
lease with Cucamonga were $5,640,000 during 2000 compared to $5,228,000 for
1999. This increase in water revenues primarily reflects an agreed upon change
in the Chino Basin Ag-Pool billing cycle from 12 months in arrears to current
year.

     Income (loss) from equity method investments increased to $1,651,000 for
2000 from $581,000 for 1999. The increase of $1,070,000 reflects higher equity
income from the West Valley MRF ($741,000) and the discontinuance of recording
equity income (loss) from Penske Motorsports ($329,000), effective April 1,
1999, due to the merger between International Speedway and Penske Motorsports
that was announced in May 1999. The increase in equity income from the West
Valley MRF is primarily due to an 18% increase in transfer tonnage, and a 24%
increase in net recycling commodity sale prices, being partially offset by a
16% increase in operating expenses and a 31% increase in interest expense.

     During the third quarter of 1999, International Speedway consummated its
merger with Penske Motorsports, purchasing the 88% of Penske Motorsports'
Common Stock it did not already own for $50.00 per share. We received, under
the cash and stock election of 30% and 70%, respectively, $24.4 million in cash
and 1,187,407 shares of International Speedway Class A Common Stock. As a
result of the merger we recognized a gain of $35.7 million in 1999.

     Subsequent to the merger of Penske Motorsports into International
Speedway, we commenced an orderly liquidation of our position in the common
stock of International Speedway. By the middle of

                                      26

<PAGE>

November 1999, we had completed the sale of our International Speedway common
stock resulting in a gain of $6.6 million.

     Interim Activities (net). Interim activities net of expenses for 2000 were
a net expense of $179,000 compared to a net expense of $203,000 for 1999. The
12% decrease in net interim expense in 2000 is primarily attributable to the
conclusion of interim activities at the Mill Site Property due to the sale to
CCG in August 2000 ($88,000) being mostly offset by higher net operating costs
at Eagle Mountain and the California Mines ($64,000). The higher operating
costs at Eagle Mountain consisted primarily of increased security costs
($24,000), license and permit costs ($22,000) and depreciation expense
($10,000). The increase in operating costs at the California Mines was due to
increased property taxes ($8,000).

     Resource Operating Costs. Resource operating costs are those costs
directly related to the ongoing resource revenue sources. Total resource
operating costs for 2000 decreased to $509,000 from $8,878,000 in 1999. The
principal reason for this decrease from 1999 was the then pending bulk sale of
virtually all the Mill Site Property to Ontario Ventures I, LLC, which required
us to record a write-down to net realizable value of $8,350,000 during 1999.
Other operating costs for 2000 were $509,000 compared to $528,000 for 1999. The
4% decrease in 2000 operating costs was primarily due to the sale of our
investment in Penske Motorsports/International Speedway during 1999 ($25,000)
being partially offset by lower costs associated with water revenue ($6,000).

     Corporate General and Administrative Expenses. Corporate overhead expenses
for 2000 decreased 29% to $3,469,000 from $4,910,000 for 1999. The decrease was
due to lower compensation and related expenses ($214,000) and lower
professional and outside consulting expenses ($1,227,000). Most of the decrease
in professional and outside consulting expense was related to the VEBA/PBGC
share repurchase that was completed in November 1999, while the decrease in
compensation was related to staff reductions. In 2000, we incurred stock based
compensation expense of $2,224,000 related to the exercise of nonqualified
stock options. Also, the repricing of stock options in December 2000 required
us to change our stock option accounting policy and account for all outstanding
options under "variable plan accounting." This resulted in us incurring an
expense of $645,000 for 2000.

     Net Interest (Income) Expense. Net interest (income) expense for 2000 was
$581,000 of income compared to $498,000 of expense in 1999. The positive
increase ($1,079,000) was due primarily to significantly lower interest expense
on long-term debt ($1,245,000) being partially offset by lower interest income
from lower cash/investment balances ($166,000).

     Income and Income Tax Provision. We recorded income before income tax
provision of $1,378,000 for 2000, a 96% decrease from the $35,230,000 recorded
in 1999. An income tax benefit of $11,965,000 was recorded in 2000 as compared
with an income tax provision of $11,201,000 in 1999. The income tax benefit
recorded in 2000 is a direct result of our pending sale of our investment in
Fontana Union that would create sufficient future taxable income for Kaiser
Inc.  to be able to fully utilize our NOLs. Before 2000, we had historically
recorded an offsetting allowance or reserve with respect to a portion of our
NOL asset to take into account the possibility that we may not generate
sufficient gains to use all of our NOLs. However, the income tax benefit
derived from the sale of our interest in Fontana Union in 2001 enables us to
use all of our NOLs in existence prior to the adoption of the conversion
proposal as an offset against this gain.

     Net Income. For 2000, we reported net income of $13,343,000, or $2.09 per
share, a 44% decrease from the $24,029,000, or $2.35 per share, reported for
1999.

                                      27

<PAGE>

                         SECTION 2: FINANCIAL POSITION

     Cash, Cash Equivalents and Short-Term Investments. We define cash
equivalents as highly liquid debt instruments with original maturities of 90
days or less. Cash and cash equivalents increased $6,292,000 to $16,389,000 at
December 31, 2001 from $10,097,000 at December 31, 2000. Included in cash and
cash equivalents is $1,387,000 and $3,247,000 held solely for the benefit of
MRC at December 31, 2001 and December 31, 2000, respectively. The increase in
cash and cash equivalents is primarily due to: (a) the sale of our Fontana
Union stock ($81,783,000); (b) the sale of the California Mines for $2.0
million, of which $726,000 was cash received at closing; (c) the issuance of
common stock relating to the exercise of stock options of $3,278,000; and (d)
cash distributions from the West Valley MRF ($750,000). These increases were
offset by: (a) the distribution of $10.00 per share to stockholders of Kaiser
in December 2001 ($69,285,000); (b) the purchase of a comprehensive
environmental insurance policy ($3,800,000); (c) capital expenditures
($1,454,000); and (d) environmental remediation expenditures ($126,000).

     Working Capital. During 2001, current assets decreased $4.6 million to
$18.8 million, while current liabilities decreased $1.3 million to $2.8
million.  The decrease in current assets resulted primarily from the $6.3
million increase in cash and cash equivalents offset by a $10.7 million decline
in current deferred tax assets, both of which relate to the sale of our Fontana
Union stock. The decrease in current liabilities resulted from the payment of
prior accruals ($1.3 million). Included in current liabilities as of December
31, 2001 is $164,000 in accounts payable and accrued liabilities relating to
MRC. As a result, working capital decreased during 2001 by $3.3 million to
$16.0 million at December 31, 2001.

     Land and Improvements. Land and improvements decreased $240,000 during
2001 due to the sale of our California Mine properties in February.

     Investments. There was a $228,000 increase in our investment in the West
Valley MRF during 2001 due to the recording of our equity share of income of
$978,000, being mostly offset by the receipt of $750,000 in cash distributions
during the year. The $16,612,000 decrease in our investment in Fontana Union is
due to the sale of that investment during the first quarter of 2001. Our
investment in the Eagle Mountain Landfill increased $1,497,000 during 2001 due
to continuing landfill development activities.

     Other Assets. The increase in other assets ($2,146,000) is primarily
related to our purchase of a environmental insurance policy ($3.8 million) and
an increase in notes receivable due to the sale of the California Mines
($759,000 long-term portion) being partially offset by utilization of our
long-term deferred tax assets ($2.2 million), primarily relating to the
Company's sale of its Fontana Union stock, and an increase in accumulated
depreciation as of December 31, 2001 ($271,000). Due to the nature of the
insurance policy, generally accepted accounting practices require that the cost
of the policy be capitalized separately from the related liability. See
"Environmental Remediation."

     Environmental Remediation. We estimated, as of December 31, 2001, based
upon current information, that our future environmental liability related to
certain matters not assumed by CCG Ontario, LLC, a subsidiary of Catellus
Development Corporation, a New York Stock Exchange company, in its purchase of
the Mill Site Property (August 2000), including groundwater and other possible
third party claims, would be approximately $4.0 million. However, we purchased,
effective June 30, 2001, a 12 year $50 million insurance policy at a cost of
approximately $3.8 million. This policy will cover, among other things,
virtually any and all environmental liabilities and claims, including defense
costs, (up to the $50 million policy limit) relating to the historical
operations and assets of the Company reflected in the above $4.0 million
liability. Due to the nature of the insurance policy, generally accepted
accounting practices require that the cost of the policy be capitalized
separately from the related liability. See "Other Assets."

                                      28

<PAGE>

     Long-term Liabilities. The decrease in other long-term liabilities is
primarily due to decreases in accrued liabilities ($388,000) and environmental
reserves ($490,000) and the recognition of deferred gains on prior real estate
sales ($107,000).

     Minority Interest. As of December 31, 2001, we recorded $5,280,000 of
minority interest relating to the approximately 19% ownership interest in MRC
we do not own.

     Contingent Liabilities. We have contingent liabilities that are more fully
described in the notes to the financial statements.

                           SECTION 3: BUSINESS OUTLOOK

     The statements contained in this Business Outlook, as well as in Part I.
Item 1. BUSINESS, are based upon current operations and expectations. In
addition to the forward-looking statements and information contained elsewhere
in this 10-K Report, these statements are forward-looking and, 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, been generally derived from the development of our major
long-term projects and investments. The development of a number of these
projects and investments, such as our 50% equity ownership of the West Valley
MRF, is essentially complete and we have been recognizing significant revenues
and income from these investments. However, the revenues from ongoing
operations were significantly reduced in 2001 as a result of completing the
sale of our ownership interest in Fontana Union to Cucamonga. In addition, we
distributed a significant portion of the net proceeds from the Fontana Union
stock sale ($69,285,000) to Kaiser Inc.'s stockholders in December 2001, as a
result of the merger between Kaiser Inc. with and into Kaiser LLC. 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 expansion of the
facility's capacity from 2,000 to 5,000 tons per day. The expanded facility is
now operational. 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 on the ability of the West Valley MRF to attract new customers and waste
volumes from the closure of local landfills such as the Spadra Landfill, which
closed in April 2000, and on the future construction of any competing
facilities.

     As part of our strategy, we intend to evaluate any potential offers to
purchase our interest in the West Valley MRF in light of our primary objective
of maximizing value for our stockholders. 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 to operate. Furthermore, the West
Valley MRF should continue to generate sufficient cash distributions to the
Company to help cover future general and administrative costs.

     Pending Sale of Eagle Mountain Landfill Project. In August 2000, MRC
entered into an agreement to sell the landfill project located at the Eagle
Mountain Site to the District. Under that agreement, MRC will receive $41
million for the landfill project if the conditions to closing are satisfied and
the sale transaction closes. The cash will be held in escrow pending the
resolution of certain additional contingencies, which are not expected to occur
for several years. The closing of this sale is subject to, among other things,
the results of the District's due diligence, obtaining the transfer of the
landfill project's permits to the District, obtaining all necessary consents to
the transaction and resolution of various titled and joint use matters. The
parties have agreed numerous times to extend the initial closing date of the
sale transaction pending receipt of land surveys, resolution of title matters,
resolution of joint use agreements, resolution of certain title issues, receipt
of third-party approvals or consents and other

                                      29

<PAGE>

matters. Further extensions during 2002 of the Closing date will be required.
There is no assurance that extensions will be granted by either party.

     If the sale transaction closes, $39 million of the total purchase price
will be deposited, upon closing, into an escrow account and will be released
when the outstanding federal litigation related to MRC's federal land exchange
with BLM is fully and satisfactorily resolved. Although the $39 million has not
yet been deposited into escrow, interest on this $39 million began accruing at
the beginning of May 2001. Accrued interest on this portion of the purchase
price, for up to a four year period, will be paid out to MRC on a quarterly
basis beginning with a successful outcome of the federal litigation. If the
transaction closes, the remaining $2 million of the purchase price will also be
placed into an escrow account, upon closing, and will be released upon the
later of (i) the release of the $39 million as described above, or (2) the
permitting approval of the District's Puente Hills landfill for its remaining
10 years of capacity.

     The District has been undertaking significant due diligence on the
landfill project and has the right to terminate the sale agreement if it is not
satisfied with the results of its due diligence. Additionally, the parties are
negotiating various ancillary agreements and a decision in an unrelated case
related to a federal land exchange to which BLM was a party could potentially
have a material adverse impact on the landfill project and its pending sale.
For additional information see "Part I, Item 1. BUSINESS - Eagle Mountain
Landfill Project and Pending Site."

     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 is obligated to remediate the environmental contamination of this parcel
pursuant to the terms of CCG's purchase of approximately 588 acres of the Mill
Site Property from us in August 2000. As described elsewhere in this Report,
CCG assumed substantially all of our environmental liabilities associated with
the purchased property as well as certain other environmental liabilities and
risks associated with the Mill Site Property, including the remediation of the
Tar Pits Parcel.

     Sale of Miscellaneous Properties. In February 2001, we completed the sale
of our Silver Lake Mine property, several other mining claims and properties
and a 190 acre parcel near Afton Canyon, California. The gross sales price was
$2 million with $726,000 received as a down payment and the balance represented
by buyer's secured promissory note. The note is payable over five years and
accrues interest at the rate of 8% per annum.

     Corporate Overhead. As we divest our remaining assets, we intend to
further reduce our corporate staffing and overhead to reflect the reduced
requirements of its remaining operations and projects.

     Capital Resources. After taking into account the cash distributed in
connection with the merger of Kaiser Inc. into Kaiser LLC, Kaiser LLC expects
that its current cash balances and short-term investments together with cash
provided from operating activities and reserves set aside from Kaiser Inc.'s
sale of its investment in Fontana Union will be sufficient to satisfy our
projected operating cash requirements for the next 3-4 years.

     Use of Net Operating Loss Tax Carryforwards. We utilized all of our
remaining NOLs during 2001. As a result of the merger of Kaiser Inc. into
Kaiser LLC in 2001, we have no NOLs as of December 31, 2001.

CASH MAXIMIZATION STRATEGY

     We have been developing the assets we received out of the Kaiser Steel
bankruptcy and then selling them at such time as we believe we can optimize
value for a particular project or asset. During 2000 and 2001, we: (i) sold the
balance of our real estate at the former Kaiser Steel Corporation mill site
near Fontana, California, except for an approximate five acre parcel; (ii)
entered into an agreement to sell the

                                      30

<PAGE>

landfill project to the District, 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 is currently scheduled to occur during 2002,
         this sale is subject to the satisfaction of numerous conditions, and,
         as a result, we cannot be sure when or if this sale will ultimately
         close. Also, due to the status of the Districts' due diligence and
         negotiations regarding joint use matters, we currently anticipate that
         the closing date may be delayed further. 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. - Items 1. Eagle Mountain Landfill Project
         and Pending Sale ";

     .   To continue to hold our interest in West Valley MRF, which pays cash
         distributions to us, until we believe we can maximize stockholder
         value through a sale or other alternative transaction;

     .   To sell our remaining miscellaneous assets such as surplus property in
         Southern California; and

     .   To further reduce our general and administrative expenses.

     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.

     Insurance. In furtherance of one of the goals of the Cash Maximization
Strategy, we 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 our 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 in excess of our existing
and historic insurance policies; however, to the extent that these other
insurance policies are not responsive to a loss, the newly-purchased 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 are brought
against us. The policy is specifically intended to supplement our previously
existing coverage for our 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 Kaiser
arising from, e.g., prior corporate transactions and real estate sales. The
aggregate cost for this policy was approximately $5.8 million, of which KSC
Recovery paid $2.0 million and we paid the balance of approximately $3.8
million.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Please see Item 14 of this Form 10-K Report for financial statements and
supplementary data.

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

     Not Applicable.

                                      31

<PAGE>

                                    PART III

ITEM 10.      MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT

MANAGERS

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

             NAME                 AGE               POSITION WITH THE COMPANY
             ====                 ===               =========================

Richard E. Stoddard                51        Chief Executive Officer, President
                                              and Chairman of the Board

Ronald E. Bitonti                  69        Director

Todd G. Cole                       81        Director

Gerald A. Fawcett                  69        Vice Chairman

Marshall F. Wallach                59        Director

     Richard E. Stoddard was appointed Chief Executive Officer of the Company
in June 1988, and has held such position and/or the position of Chairman of the
Board since such date. Prior to joining the Company 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 PMI. International Speedway Corporation acquired PMI in July
1999.

     Ronald E. Bitonti is Chairman of the Benefits Committee for the VEBA and
was Chairman of the Reorganized Creditors' Committee formed during the Kaiser
Steel Corporation 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 since November 1991.

     Todd G. 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,
and serves on the Board of Directors of Avborne, Inc. (aircraft and component
overhaul), Hawaiian Airlines, Inc. (certificated air carrier), IB Net, Ltd.
(business-to-business internet services), Ionosphere, Inc. (automated resources
management), and 1Hemispher.com (bringing the benefits of the internet to small
business enterprises). Mr. Cole has been a director since November 1989.

     Gerald A. Fawcett was President and Chief Operating Officer of the Company
from January 1996, until his retirement from full time duties on January 15,
1998. He was appointed to the Company's Board on January 15, 1998, and
currently serves as Vice Chairman of the Board. Mr. Fawcett started his
employment with the former Kaiser Steel Corporation in 1951 holding various
positions in the steel company, ultimately becoming Division Superintendent of
the Cold Rolled and Coated Products Division. After a five year consulting
business working with domestic and overseas steel industry clients, Mr. Fawcett
joined the Company 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 served as President of The Wallach Company, a
Denver, Colorado based investment banking firm, since 1984. The Wallach Company
was sold to Keycorp on January 1, 2001. 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 for Tomkins, PLC. He has been a director since November
1991.

                                      32

<PAGE>

     Prior to the merger of Kaiser Inc. with and into Kaiser LLC, Kaiser Inc.'s
Board of Directors consisted of the above individuals together with Reynold C.
MacDonald and Charles E. Packard.

BOARD AND COMMITTEE MEETINGS

Kaiser Inc.

     Through November 31, 2001, the effective date of the merger of Kaiser Inc.
with and into Kaiser LLC, Kaiser Inc.'s Board had an Audit Committee, a Human
Relations Committee, and a Finance Committee. Ad hoc committees were also
established from time-to-time by Kaiser Inc.'s Board. The Chief Executive
Officer served as an ex-officio member of all committees.

     Kaiser Inc.'s Audit Committee was composed of Messrs. Packard (Chairman),
MacDonald, and Bitonti. The Audit Committee generally reviewed the activities
of Kaiser's independent accountants and the results of the examination made by
these professionals in connection with Kaiser's financial statements and a
review of internal accounting controls. The Audit Committee held one meeting in
2001. In addition, Kaiser Inc.'s Board of Directors determined that all of the
members of the Audit Committee were "independent," as defined by the rules of
the Nasdaq Stock Market.

     Kaiser Inc.'s Human Relations Committee was composed of Messrs. Cole
(Chairman), Bitonti, Fawcett, and Packard. This committee had general
responsibility for all employee compensation and benefit matters, including,
among things, recommendations to the full Board on compensation arrangements of
officers and directors, benefit plans, stock options and other stock related
grants. The Human Relations Committee held four meetings in 2001.

     Kaiser Inc.'s Finance Committee, was composed of Messrs. Wallach
(Chairman), Cole and MacDonald. The Finance Committee had general
responsibility for Kaiser's annual operating budget and capital plan, changes
in Kaiser's capital structure, and Kaiser's credit facilities such as lines of
credit, loans, and other forms of indebtedness. The Finance Committee held
three meetings in 2001.

     Kaiser Inc.'s Board of Directors did not have a standing committee to
nominate candidates to the Board. For purposes of establishing a slate of
nominees for its 2001 Annual Meeting, Kaiser Inc.'s Board of Directors
established an ad hoc nominating committee composed of Messrs. Cole (Chairman),
MacDonald and Wallach. The ad hoc nominating committee met once in 2001 in
preparation for Kaiser Inc.'s 2001 Annual Meeting held on November 28, 2001.

     Kaiser Inc.'s Board of Directors held five meetings in 2001. All directors
of Kaiser Inc. attended at least 75% of the meetings of the Board and 75% of
the meetings of the committees on which they served during 2001.

Kaiser LLC

     Kaiser LLC's Board of Manages consists of five managers: Messrs. Stoddard,
Bitonti, Cole, Fawcett and Wallach. Kaiser LLC's Board has an Audit Committee
and a Human Relations Committee. Kaiser LLC's Board of Managers held two
meetings in 2001 and one meeting by consent.

     Kaiser LLC's Audit Committee, currently consists of Messrs. Wallach
(Chairman) and Mr. Bitonti. The Audit Committee has the same responsibilities
as it did at Kaiser Inc. in that is generally reviews the activities of
Kaiser's independent accountants and the results of the examination made by
these professionals in connection with Kaiser's financial statements and a
review of internal accounting controls.

                                      33

<PAGE>

     Kaiser LLC also has a Human Relations Committee. Although, Kaiser Ventures
LLC leases its employees from Business Staffing, Inc., this committee, along
with Business Staffing, Inc., reviews compensation and benefit programs for the
employees leased to Kaiser by Business Staffing.

DIRECTOR COMPENSATION

Kaiser Inc.

     Kaiser Inc.'s Board established director compensation periodically by
resolution. Directors who were also employees of Kaiser Inc. received no fees
for serving as directors. During 2001, all non-employee directors of Kaiser
Inc. received a fee of $1,000 for each Board or committee meeting attended in
person and a $750 fee for telephonic meetings. A non-employee director serving
as a committee chairman received an additional $2,000 per year retainer. Kaiser
Inc. also paid a $15,000 per year retainer to each non-employee director.
Kaiser Inc. also paid attendance fees and chairman fees for all temporary
committees.

     In addition, the Board had a stock incentive compensation program for
non-management members of the Board of Directors. The Board Stock Plan was for
no more than a total of 25,000 shares of Kaiser Inc.'s common stock, with no
one member of the Board entitled to be issued more than 7,500 shares.

     Pursuant to the Board Stock Plan, non-management members of the Kaiser
Inc. Board were each originally issued 1,500 shares of restricted common stock,
subject to vesting, which vesting may be subject to acceleration. Out of the
original 1,500 shares granted to each non-management member of the Board, 750
shares vested on May 10, 2001, and 750 shares were scheduled to vest on May 10,
2002. Under the Board Stock Plan, the Company granted an additional 750 shares
of restricted common stock annually to each non-employee member of the Board.
Accordingly, 750 shares of restricted common stock were issued to each
non-employee Board Members effective November 21, 2001. All unvested shares of
restricted stock vested in connection with the merger of Kaiser Inc. into
Kaiser LLC on November 30, 2001.

Kaiser LLC

     Subsequent to the effective date of the merger of Kaiser Inc. with and
into Kaiser LLC, Kaiser LLC's Board of Managers adopted the same cash
compensation policy for non-employee Board members discussed above as was in
effect for the Board of Directors of Kaiser Inc.

     However, Kaiser LLC's Board of Managers terminated the existing Board
Stock Plan and adopted a new Board equity plan, in recognition of the reduced
financial structure of Kaiser and as a result of the conversion to a limited
liability company.

     The new Board equity plan provides that each non-management manager shall
be granted 2,500 unvested Class A Units as of May 31 of each year, commencing
May 31, 2002. Each annual grant will vests on January 31 of the year following
the grant, subject to acceleration upon the occurrence of certain events.

                                      34

<PAGE>

EXECUTIVE OFFICERS

    The current executive officers of the Company are:

        Name               Age               Position with the Company
        ====               ===               =========================

Richard E. Stoddard        51     President, Chairman of the Board and Chief
                                  Executive Officer

James F. Verhey            54     Executive Vice President - Finance and Chief
                                  Financial Officer

Terry L. Cook              46     Executive Vice President - Administration,
                                  General Counsel and Corporate Secretary

Paul E. Shampay            40     Vice President - Finance

     Richard E. Stoddard biographical information is set forth above under
"Managers."

     James F. Verhey joined the Company 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
the Company in January 1998. In addition to his duties with the Company, Mr.
Verhey was appointed Vice President of Finance and Chief Financial Officer of
Mine Reclamation Corporation in February 1995. From July 1992 to joining the
Company, Mr. Verhey was the Chief Financial Officer of OESI Power Corp., a
Portland, Oregon based geothermal company. From June 1991 to July 1992, Mr.
Verhey served as President of Mithryn Energy, Inc. Mr. Verhey is a certified
public accountant and spent several years with Price Waterhouse in Los Angeles,
California. As of October 1, 1999, Mr. Verhey began working less than full time
for the Company.

     Terry L. Cook joined the Company 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 the Company, Mr.
Cook was a partner in the Denver office of the national law firm McKenna &
Cuneo 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. Shampay was appointed Vice President, Finance in January 2000. Mr.
Shampay joined the Company 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.

     Due to the substantial reduction of our need for environmental and related
services with the sale of many of our assets, the completion by the District of
its environmental review of the Eagle Mountain Site, and the completion of the
conversion of Kaiser Inc., into a limited liability company, we terminated,
without cause, the employment of Anthony Silva, Kaiser's Vice President
Resource Development and Environmental Services, effective February 28, 2002.
However, since he was an executive officer of Kaiser through February 28, 2002,
he is included in the compensation information in this Form 10-K Report.

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
directors and executive officers, and persons who own more than 10% of our
Class A Units, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Kaiser.

                                      35

<PAGE>

     To our knowledge, based solely on a review of copies of reports provided
by such individuals to Kaiser and written representations of certain
individuals that no other reports were required, during the fiscal year ended
December 31, 2001, all Section 16(a) filing requirements applicable to our
directors, officers, and greater that 10% beneficial owners were timely filed.

ITEM 11.      EXECUTIVE COMPENSATION

                         SUMMARY COMPENSATION TABLE/1/

<TABLE>
<CAPTION>
                                                                                  Long Term Compensation
                                                                           -----------------------------------
                                        Annual Compensation                          Awards            Payouts
                             --------------------------------------------- ------------------------ ------------ --------------
                                                                           ------------------------ ------------ --------------
                                                                Other
                                                                Annual       Restricted  Securities               All Other
         Name and                                              Compen-         Stock     Underlying    LTIP       Compen-
    Principal Position        Year     Salary     Bonus/(2)/  sation/(3)/     Awards     Options    Payouts/(4)/  sation/(5)/
    ------------------        ----     ------     ----------  ------          ------     -------    ------------  -----------
<S>                           <C>    <C>         <C>            <C>             <C>         <C>     <C>          <C>

Richard E. Stoddard           2001   $ 361,740   $ 100,000      $0              $0          $0      $365,079     $  111,404
Chairman of the Board,        2000   $ 348,446   $ 315,000      $0              $0          $0      $ 21,569     $   72,050
President and CEO             1999   $ 312,694   $ 312,694      $0              $0           0          $0       $   38,657

James F. Verhey               2001   $ 118,669      $0          $0              $0          $0      $146,032     $   33,538
Exec. Vice President -        2000   $ 105,000   $  68,250      $0              $0          $0      $  8,628     $   29,008
Finance & CFO                 1999   $ 177,620   $ 177,620      $0              $0           0         $0        $   21,058

Terry L. Cook                 2001   $ 201,541   $ 100,000      $0              $0          $0      $219,048     $   59,928
Executive Vice President,     2000   $ 194,087   $ 173,250      $0              $0          $0      $ 12,941     $   39,558
General Counsel and           1999   $ 173,099   $ 173,099      $0              $0           0         $0        $   20,895
Secretary

Anthony Silva/(6)/            2001   $ 121,787      $0          $0              $0          $0      $109,524     $   30,149
Vice President Resource       2000   $ 117,669   $  64,809      $0              $0          $0      $  6,471     $   19,540
Development & Envir. Svcs.    1999   $ 113,850   $  74,003      $0              $0        25,000       $0        $   12,831

Paul E. Shampay/(7)/          2001   $ 94,052       $0          $0              $0          $0      $ 73,016     $   21,211
Vice President - Finance      2000   $ 91,221    $  45,500      $0              $0          $0      $  4,131     $    9,997
</TABLE>

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

/(2)/  Bonuses are paid in January for the preceding calendar year.

/(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.

/(4)/  In September 2000, the Company adopted a long term transaction incentive
       plan which is discussed in more detail in Item 11. Executive Compensation
       - Long-Term Incentive Plans - Awards in Last Fiscal Year. 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. This table reflects payments
       made in the calendar year.

/(5)/  Officers of the Company are eligible to participate in the Company's
       401(k) Savings Plan, Money Purchase Plan and Supplemental Executive
       Retirement Plan (collectively "Plans"). During, 2001, the Company made
       contributions of a $111,404 to the Plans on the account of Mr.
       Stoddard, $33,538 for the account of Mr. Verhey, $59,928 for the
       account of Mr. Cook, $30,149 for the account of Mr. Silva, and $21,211
       for the account of Mr. Shampay. During 2000, the Company made
       contributions of $72,050 to the Plans on account of Mr. Stoddard,
       $29,008 for the account of Mr. Verhey, $39,558 for the account of Mr.
       Cook, $19,540 for the account of Mr. Silva and $9,997 for the account
       of Mr. Shampay. During 1999, the Company made contributions of $38,657
       to the plans for the account of Mr. Stoddard, $21,058 for the account
       of Mr. Verhey, $20,895 for the account of Mr. Cook, and $12,831 for the
       account of Mr. Silva.

/(6)/  Mr. Silva's employment with the Company was terminated, without cause, as
       of February 28, 2002, due to the reduced need for his services.

/(7)/  Mr. Shampay became an executive officer of the Company in January 2000.

                                      36

<PAGE>

                             OPTION GRANTS IN 2001

     There were no option grants made to a Named Executive Officer in 2001.

                      AGGREGATED OPTION EXERCISES IN 2001
                    AND OPTION VALUES AT DECEMBER 31, 2001

     Pursuant to the terms of the Plan and Agreement of Merger between Kaiser
Inc. and Kaiser LLC, all in the money stock options, i.e., those with a cash
exercise price of $10.00 or less, were deemed exercised on the effective date
of the merger. Out of the money options were converted to options to acquire
Class A Units in Kaiser LLC. The following table summarizes options exercised
during the fiscal year ended December 31, 2001, by the executive officers named
in the Summary Compensation Table, and the value of their unexercised options
as of December 31, 2001:

<TABLE>
<CAPTION>
                                                                       VALUE OF
                                                 NUMBER OF            UNEXERCISED
                                             UNEXERCISED OPTIONS     IN-THE-MONEY
                        SHARES                   AT 12/31/01       OPTIONS 12/31/01
                      ACQUIRED ON   VALUE        EXERCISABLE/        EXERCISABLE/
        NAME           EXERCISE    REALIZED     UNEXERCISABLE      UNEXERCISABLE/(1)/
        ====           ========    ========     =============      ==================
<S>                     <C>        <C>            <C>                <C>
Richard E. Stoddard     23,750     $34,000        62,350/0           $8,000/$0

James F. Verhey         25,000     $36,000        45,000/0             $0/$0

Terry L. Cook           50,000     $110,000       45,000/0             $0/$0

Anthony Silva           37,000     $132,000          0/0                N/A

Paul E. Shampay         22,500     $85,000           0/0                N/A
</TABLE>

/(1)/  Price used was $11.50 per Class A Unit 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

         In September 2000, Kaiser Board approved a long-term transaction
incentive plan, referred to as the TIP, to provide an incentive for the
executive officers of Kaiser to maximize proceeds from asset sales. Following
its conversion to a limited liability company, as of January 1, 2002, Kaiser
terminated the TIP and in its place issued Class C and Class D Units in Kaiser
LLC (the "Incentive Units") to the five officers of Kaiser (the "Participating
Officers") as set forth below. The cash flow to the Participating Officers from
their Incentive Units is designed to mirror the cash flow under the TIP. Under
both the TIP and the Incentive Units, the Participating Officers receive cash
distributions an amount dependant upon the amount of cash available for
distribution to Kaiser owners based on both the price (net of expenses and
taxes) achieved in selling Kaiser's major assets and on its operating expenses.

     Based on the predetermined individual thresholds and targets, Kaiser made
payments 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 as follows:

                              Total Payments
             Name             Made Under TIP
==============================================

Richard E. Stoddard             $ 633,256
James F. Verhey                 $ 253,303
Terry L. Cook                   $ 379,954
Anthony Silva                   $ 190,247
Paul E. Shampay                 $ 126,652

                                      37

<PAGE>

     No more payments will be made under the TIP. However, the compensation
philosophy and payments to be made, if any, under the TIP are effectively
continued after the conversion to a limited liability company through the use of
the Class C and D units.

     When all of the major assets have been realized, the Participating Officers
will receive a portion of the net proceeds in accordance with a formula that
will result in payments, if any, equal to those that would have been paid under
the TIP if it had been continued.

     The Class C Units will be held by Participating Officers still working for
Kaiser; upon departure of a holder, any Class C Units held by him will be
converted into Class D Units (if the departure is for cause, all the Units may
be repurchase at nominal value). 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 initial (and current) Units are as follows:

 PARTICIPATING OFFICER      CLASS C UNITS       CLASS D UNITS
==================================================================

     Rick Stoddard               400
     Terry Cook                  240
     James Verhey                160
     Anthony Silva                72                 48
     Paul Shampay                 80

     The Incentive Units will not have the right to vote on any matter except as
required by law, and the Units and any rights to distributions with respect to
those Units may not be transferred. 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 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. Unlike the TIP, the Incentive Units do not have a
termination date.

     The amount that will be distributable to the Incentive Units cannot be
determined until the assets are realized and the general obligations and
liabilities of Kaiser are satisfied. The following table sets forth the total
amount that would be earned by the Participating Officers, assuming that (i)
each Participating Officers continues to work for Kaiser throughout the period;
and (ii) the cash available for distribution to the Kaiser LLC's members is
equal to the specified target for each major asset:

<TABLE>
<CAPTION>
                                       -----------------------------------------
                                              Estimated Aggregate Payouts
                                           Under Non-Stock Price-Based Plans
                            Period     -----------------------------------------
                            Until         Threshold     Target       Maximum
          Name              Payout           ($)         ($)           ($)
--------------------------------------------------------------------------------
<S>                         <C>              <C>       <C>            <C>
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)/
Anthony Silva /(1)/          N/A/(2)/        0/(3)/    $132,600       N/A/(4)/
Paul E. Shampay /(1)/        N/A/(2)/        0/(3)/     $88,400       N/A/(4)/
</TABLE>

/(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 major assets
      in an amount that exceeds the threshold levels established for such asset.
/(3)/ If the amount realized is less than or equal to the applicable threshold
      for each asset or the overall Company, no distribution would be made on
      the realization. The distribution would equal 5% of any amount over the
      applicable threshold until the applicable target is reached.
/(4)/ There is no maximum distributable to the Incentive Units. The
      distributions would be increased by 10% of the amount realized in excess
      of the target.

                                      38

<PAGE>

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

     Kaiser entered into employment agreements with its executive officers to
insure the availability of their services during the critical period of asset
sales and in connection with Kaiser Inc.'s evaluation of various strategic and
cash maximization alternatives. Effective, January 1, 2002, Business Staffing,
Inc., a subsidiary of Kaiser LLC, became the employer of Kaiser's employees and
Business Staffing assumed the employment agreements discussed below. Business
Staffing leases employees to Kaiser.

     Mr. Stoddard is employed pursuant to a seconded amended and restated
employment agreement dated as of September 19, 2000, which was subsequently
amended as of April 14, 2001. Subject to the payment of severance compensation,
the agreement provides that Mr. Stoddard's employment may be terminated at any
time. Mr. Stoddard may be awarded annual bonus as determined in the discretion
of Business Staffing and Kaiser. See "Incentive Compensation Plans." In
addition, under Mr. Stoddard's employment agreement, he is to be paid a
retention bonus in June 2003, equal to approximately 159% of the greater of his
annual base salary in June 2003, or his base annual salary in effect as of
September 19, 2000. While Mr. Stoddard's annual base salary in 2003 cannot be
determined, based on his annual base salary as of March 1, 2002, Mr. Stoddard
would receive a retention bonus equal to approximately $596,137.

     Messrs. Cook, Silva and Shampay also each entered into an amended and
restated employment agreement with Kaiser effective September 19, 2000, which
was subsequently amended as of April 14, 2001. Subject to the payment of
severance compensation, Kaiser may terminate any executive officer at anytime.
The Board has formally terminated Kaiser's historical annual bonus program,
although it reserves the right to grant bonuses in its sole discretion that are
in addition to bonuses granted under Kaiser's former long term transaction
incentive plan. See "Incentive Compensation Plans." Mr. Stoddard and Mr. Cook
were each awarded special bonuses for 2001. Like Mr. Stoddard, Mr. Cook is
entitled to be paid a retention bonus in June 2003. Mr. Cook's retention bonus
is equal to approximately 76% of the greater of his annual base salary in June
2003, or his annual base salary in effect as of September 19, 2000. While Mr.
Cook's annual base salary in 2003 cannot be determined, based on his annual
base salary as of March 1, 2001, Mr. Cook would receive a retention bonus equal
to approximately $158,756.

     Mr. Verhey entered into an amended and restated employment agreement
effective September 19, 2000, which was subsequently amended and restated as of
April 11, 2001. Among other things, the amendment provides for a reduced time
commitment to approximately six (6) days a month upon the conversion of Kaiser
Inc. into Kaiser LLC. The Board reserves the right to grant Mr. Verhey bonuses
in its sole discretion, and Mr. Verhey is entitled to be paid and was paid a
retention bonus of $155,000 in January 2002. Additionally, Mr. Verhey is
entitled to be paid severance of approximately $155,000 as required under his
employment agreement. After November 30, 2001, if Mr. Verhey voluntarily
terminates his employment, then Mr. Verhey will be entitled to continue to
receive employee benefits at levels and amounts consistent with the benefits
offered at the time of his termination for six months after the effective date
of his termination. Each party is required to give the other party 90 days'
advance notice of any employment termination.

     The September 19, 2000, amended and restated employment agreement of each
executive officer eliminated any "change or control" provisions contained in
the previous employment agreements. The current employment agreements of the
executive officers provide that upon an officer's termination of employment for
any reason other than for cause, including, among other reasons, constructive
termination, there is an obligation to pay such officer severance. Except as
noted below, an executive officer's severance is an amount equal to six months
then-current base salary, a pro rata portion of his bonus for the current year,
if any, plus one half of the individual's average annual bonus determined by
the average percentage of base salary of the bonus over the previous five years
prior to and including 2000 (or such lesser period for which the executive
participates in the annual bonus program) plus the acceleration of the payment
of any retention bonus not already paid to the officer. Severance is payable

                                      39

<PAGE>

in one lump sum or, at the executive's option, over such period as he may
determine. In addition, Business Staffing will continue to pay his benefits for
one year. Should an executive officer voluntarily terminate his employment,
Business Staffing will not be obligated to pay him any additional compensation,
other than the compensation due and owing up to the date of termination. Mr.
Stoddard is entitled to one year of base-salary and bonus as part of his
severance compensation plus the acceleration of the payment of his retention
bonus, if not already paid at the time of termination. Mr. Shampay's employment
agreement does not provide for a retention bonus, thus, he receives as
severance one-year's then current base salary, a pro rata portion of current
bonus, if any, and one-year's average bonus that is determined as described
above. In addition, for purpose of severance pay, Mr. Verhey's annual base
salary is deemed not to be less than his base salary as of September 30, 1999.

     As noted above, Business Staffing assumed all the employment agreement
obligations of Kaiser.

     In 2000, Kaiser adopted a long term transaction incentive plan that
provides bonuses to Kaiser's executive officer if certain goals are achieved.
This bonus program in effect during 2001, is described in more detail above
under "Incentive Compensation Plans."

     Set forth below is the annual base salary of Kaiser's Chief Executive
Officer and each of its other four most highly compensated executive officers
as of March 1, 2002:

           NAME            ANNUAL BASE SALARY
           ----            ------------------

Richard E. Stoddard         $   374,929
Terry L. Cook               $   208,889
James F. Verhey             $   127,305
Paul E. Shampay             $    97,480

     As a result of the reduced need for environmental services and the
completion of the environmental due diligence by the District on the Eagle
Mountain Site, Mr. Silva's employment with Kaiser and Business Staffing was
terminated effective February 28, 2002. Mr. Silva was paid a total of $192,376
plus accrued and used vacation time as severance compensation in accordance with
the terms of his employment agreement and a separation agreement implementing
his employment agreement.

                                      40

<PAGE>

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENFICIAL OWNERS AND MANAGERS

     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 list (generally reporting ownership as of March 22, 2002), the number of
Class A Units of Kaiser LLC's membership units owned by each person known by
Kaiser to own of record or beneficially five percent (5%) or more of such units.
The table does not include the 136,919 Class A Units reserved but not yet
distributed to the Class 4A unsecured creditors of Kaiser Steel Corporation as
of March 22, 2002, since such Class A Units outstanding are not eligible to
vote.

<TABLE>
<CAPTION>
                                               Number of
                                             Class A Units                                                   Percent of Issued
                                                 Shares            Warrants                                   and Outstanding
                                              Beneficially        Exercisable                                  Class A Based
                                             Owned Without     Within 60-Days/(1)/         Total Class           on Total
Name and Address of Beneficial Owner           Warrants        of March 22, 2002         A Interest/(1)/   Class A Interest/(2)/
==================================================================================================================================

<S>                                             <C>                 <C>                      <C>                 <C>
Ascend Capital Holdings Corporation
One Montgomery St., Suite 3300                  656,000                 ---                    656,000              9.5%
San Francisco, CA  94104

Beat & Co.
P.O. Box 5756                                   403,788                 ---                    402,788              5.9%
Boston, MA 02114

First Eagle SOOFN Global Fund.
1345 Avenue of the Americas, 44th Floor         365,000                 ---                    365,000              5.3%
New York, New York  10105

Kaiser's Voluntary Employees' Beneficiary
Association Trust (VEBA) /(3)/                  656,987             460,000                  1,116,987             16.2%
9786 Sierra Avenue
Fontana, CA  92335

Pension Benefit Guaranty Corporation/(4)/
Pacholder Associates, Inc.                      407,415             285,260                    692,675             10.0%
8044 Montgomery Road, Suite 382
Cincinnati, OH  45236
</TABLE>

/(1)/  This column includes warrants exercisable within 60 days of March 22,
       2002, at $16.11 per share in the following amounts: VEBA - 460,000
       shares; and PBGC - 285,260. The warrants expire September 30, 2004. The
       VEBA and PBGC warrants were effectively exchanged in the merger for new
       warrants to purchase 460,000 Class A Units and 285,260 Class A Units,
       respectively, each with an exercise price of $6.11 per unit ($16.11
       minus $10). The new warrants will expire on September 30, 2004. (These
       warrants were initially issued with a strike price of $17.00 per share.
       The initial strike price of these warrants was reduced by $.89 as a
       result of a distribution to Kaiser stockholders in 2000).
/(2)/  The percentage for each member was determined as if all the warrants
       specified in Note (1) above held by the member, if any, had been
       exercised by that particular member.
/(3)/  VEBA received its shares in Kaiser as a creditor of the Kaiser Steel
       Corporation bankruptcy. VEBA acquired warrants in connection with the
       purchase by Kaiser of Company stock owned by VEBA. See "Certain
       Relationships and Related Transactions." VEBA's shares in Kaiser are held
       in trust by Wells Fargo & Company.
/(4)/  PBGC received its shares in Kaiser as a creditor of the Kaiser Steel
       Corporation bankruptcy. PBGC acquired warrants in connection with the
       purchase by Kaiser of Company stock owned by PBGC. See "Certain
       Relationships and Related Transactions." Pacholder Associates, Inc. has
       a contract with the PBGC pursuant to which it has full and complete
       investment discretion with respect to the stock owned by PBGC, including
       the power to vote such shares.

                                      41

<PAGE>

SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS

     This table below reflects the number of Class A Units beneficially owned by
the principal Executive Officers of Kaiser LLC, its managers and all of its
managers and other officers as a group as of March 22, 2002, as well as the
number of options exercisable within 60 days of March 22, 2002.

<TABLE>
<CAPTION>
                                                                                                         Percent of Issued
                                                   Class A                                                and Outstanding
                                                 Beneficially     Class A Underlying                       Class A Units
                                                    Owned,        Options Exercisable      Total           Based on Total
                                                   Without         Within 60-Days of    Class A Unit           Class A
       Officers and Directors                      Options        March 22, 2002/(1)/   Interest/(1)/        Interest/(1)/
===========================================================================================================================

<S>                                                 <C>                <C>                 <C>                      <C>
Richard E. Stoddard, CEO, President &                99,873             62,350             162,223                   2.3%
Chairman

Gerald A. Fawcett, Vice Chairman/(2)/                98,078             62,000             162,078                   2.3%

James F. Verhey, Executive Vice                      42,035             45,000              87,035                   1.3%
President - Finance & CFO

Terry L. Cook, Executive Vice President
- Administration, General Counsel &                  67,966             45,000             112,966                   1.6%
Corporate Secretary

Anthony Silva, Vice President Resource
Development & Environmental Services                 41,785                  0              41,785                  *

Paul E. Shampay, Vice President -                    22,500                  0              22,500                  *
Finance

Ronald E. Bitonti, Manager/(3)/                      10,896              1,500              12,396                  *

Todd G. Cole, Manager                                17,688                  0              17,688                  *

Marshall F. Wallach, Manager                         20,750              1,500              22,250                  *

All officers and directors as a group               420,071            218,850             638,921                   9.0%
(9 persons) /(1)/
</TABLE>

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

/(1)/  Percentage was determined as if all the options listed in the column
       "Class A Underlying Options Exercisable Within 60-Days of March 22,
       2002," were exercised by the applicable 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 shares beneficially owned by VEBA.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     New Kaiser Employees' Voluntary Benefit Association, VEBA, and Pension
Benefit Guaranty Corporation, PBGC, are the beneficial owners of warrants to
purchase 460,000 and 285,260 Class A Units in the Company. Both PBGC and VEBA
have asserted that the merger of Kaiser Inc. with and into Kaiser LLC violated
the terms of that warrant. For additional information on this matter please see
"Part I. Item 3. - LEGAL PROCEEDINGS - Warrant Dispute."

                                      42

<PAGE>

                                    PART IV

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

(a)  The following financial statements and financial schedules are filed as a
part of this report:

<TABLE>
<S>     <C>                                                                                            <C>
1.      Financial Statements                                                                           Page
        --------------------                                                                           ----

        Report of Independent Auditors.................................................................  56

        Consolidated Balance Sheets ...................................................................  57

        Consolidated Statements of Income..............................................................  59

        Consolidated Statements of Cash Flows..........................................................  60

        Consolidated Statements of Changes in Equity...................................................  61

        Notes to Consolidated Financial Statements.....................................................  62

2.      Financial Statement Schedules
        -----------------------------

        II    Valuation and Qualifying Accounts and Reserves...........................................  82
</TABLE>

     All other schedules are omitted because they are not required, are
inapplicable, or the information is included in the Consolidated Financial
Statements or Notes thereto.

(b)  Reports on Form 8-K.

     The following reports on Form 8-K have been filed during the last quarter
of the period covered by this Form 10-K Report to the date of this report.

     1.    On October 23, 2001, Kaiser Inc. filed a 8-K Report with the
Securities and Exchange Commission regarding the filing of a definitive joint
proxy statement with the Securities and Exchange Commission to be mailed to
stockholders of record as of October 8, 2001.

     2.    On November 29, 2001, Kaiser LLC filed an 8-K Report with the
Securities and Exchange Commission regarding stockholder approval of the
conversion of Kaiser Inc. into a limited liability company and that the shares
of stock in Kaiser Inc. would cease trading as of the close of business
November 30, 2001.

     3.    On December 5, 2001, Kaiser LLC filed an 8-K Report with the
Securities and Exchange Commission regarding the completion of the merger of
Kaiser Inc. with and into Kaiser LLC effective November 30, 2001, and
containing the instructions as to how to receive the merger consideration.

(c)  Exhibits.  The following exhibits are filed as part of this Form 10-K:

                                      43

<PAGE>

                                  EXHIBIT INDEX

(*   Indicates compensation plan, contract or arrangement)

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------
<S>               <C>
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               Stock Purchase Agreement between Kaiser Ventures Inc. and the New Kaiser Voluntary Employees'
                  Beneficiary Association dated November 22, 1999, incorporated by reference from Exhibit 2.1 of
                  the Company's Form 8-K dated November 22, 1999.

2.5               Stock Purchase Agreement between Kaiser Ventures Inc. and Pension Benefit Guaranty Corporation
                  dated November 22, 1999, incorporated by reference from Exhibit 2.2 of the Company's Form 8-K
                  dated November 22, 1999.

2.6               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.

2.7               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 Registration Statement Form
                  S-4 filed on October 16, 2001.
</TABLE>

                                      44

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
3.4               First Amendment to Amended and Restated Kaiser  Ventures LLC Operating  Agreement,  effective as
                  of January 15, 2002, filed with this report.

4.1.              Stock Purchase  Warrant  between Kaiser  Ventures Inc. and the New Kaiser  Voluntary  Employees'
                  Beneficiary  Association dated November 22, 1999,  incorporated by reference from Exhibit 4.1 of
                  Kaiser Ventures Inc. Form 8-K dated November 22, 1999.

4.2               Stock Purchase  Warrant between Kaiser Ventures Inc. and Pension  Benefit  Guaranty  Corporation
                  dated  November 22, 1999,  incorporated  by reference  from Exhibit 4.2 of Kaiser  Ventures Inc.
                  Form 8-K dated November 22, 1999.

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  Company'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.

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.
</TABLE>

                                      45

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
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              Eagle Mountain Lease between  Management and Training  Corporation and Kaiser Steel Corporation,
                  dated November 16, 1987,  incorporated  by reference from Exhibit 10.4 of Kaiser Ventures Inc.'s
                  Form 10-K Report for the year ended December 31, 1988.

10.3.1            First Amendment dated July 1, 1990, to Lease between Management and Training Corporation and
                  Kaiser Steel Resources, Inc., incorporated by reference from Exhibit 10.3.1 of Kaiser Ventures
                  Inc.'s Form 10-K Report for the year ended December 31, 1990.

10.3.2            Second  Amendment  dated November 16, 1992, to Lease dated November 16, 1987 between  Management
                  and Training  Corporation  and Kaiser Steel  Resources,  Inc.,  incorporated  by reference  from
                  Exhibit 10.3.2 of Kaiser Ventures Inc.'s Form S-2 Registration No. 33-56234).

10.3.3            Third Amendment to Eagle Mountain Lease between Management and Training Corporation and Kaiser
                  Steel Resources, Inc. dated November 16, 1997, incorporated by reference from Exhibit 10.3.3 of
                  Kaiser Ventures Inc.'s Form 10-K Report for the year ended December 31, 1998.

10.3.4            Fourth Amendment to Eagle Mountain Lease between Management and Training Corporation and Kaiser
                  Ventures Inc. dated February 1, 1999, incorporated by reference from Exhibit 10.3.4 of Kaiser
                  Ventures Inc.'s Form 10-K Report for the year ended December 31, 1998.

10.3.5            Fifth Amendment to Eagle Mountain Lease between Management and Training Corporation and Kaiser
                  Ventures Inc., dated July 12, 2001, filed with this Report.

10.4*             Second Amended and Restated  Employment  Agreement  between Kaiser  Ventures Inc. and Richard E.
                  Stoddard dated as of September 19, 2000,  incorporated  by reference from Exhibit 10.4 of Kaiser
                  Ventures Inc.'s Form 10-Q Report for the quarter ended September 30, 2000.

10. 5*            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 10-K Report for the
                  year ended December 31, 1998.

10.6*             Amended and Restated Employment  Agreement between Kaiser Ventures Inc. and Terry L. Cook dated
                  as of  September  19, 2000,  incorporated  by  reference  from Exhibit 10.4 of Kaiser  Ventures
                  Inc.'s Form 10-Q Report for the quarter ended September 30, 2000.
</TABLE>

                                      46

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
10.7*             Transition  Employment  Agreement  between Kaiser Ventures Inc., and Lee R. Redmond dated as of
                  January 6, 2000,  incorporated  by reference from Exhibit 10.6 of Kaiser  Ventures  Inc.'s 10-K
                  Report for the year ended December 31, 1999.

10.8*             Amended and Restated  Employment  Agreement  between  Kaiser  Ventures Inc. and Paul E. Shampay
                  dated as of September 19, 2000,  incorporated by reference from Exhibit 10.6 of Kaiser Ventures
                  Inc.'s 10-Q Report for the quarter ended September 30, 2000.

10.9*             Amended and Restated Employment  Agreement between Kaiser Ventures Inc. and Anthony Silva dated
                  as of  September  19, 2000,  incorporated  by  reference  from Exhibit 10.5 of Kaiser  Ventures
                  Inc.'s Form 10-Q Report for the quarter ended September 30, 2000.

10.9.1*           Separation Agreement  between  Business  Staffing,  Inc. and Anthony Silva dated as of
                  February 28, 2002, filed with this report.

10.10*            First  Amendment to the Second Amended and Restated  Employment  Agreement  between  Richard E.
                  Stoddard  and Kaiser  Ventures  Inc.  dated as of April 11,  2001,  incorporated  by  reference
                  Exhibit 10.1 of Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended June 30, 2001.

10.11*            First Amendment to the Amended and Restated  Employment  Agreement  between James F. Verhey and
                  Kaiser  Ventures Inc.  dated as of April 11, 2001,  incorporated  by reference  Exhibit 10.2 of
                  Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended June 30, 2001.

10.12*            First  Amendment to the Amended and Restated  Employment  Agreement  between  Terry L. Cook and
                  Kaiser  Ventures Inc.  dated as of April 11, 2001,  incorporated  by reference  Exhibit 10.2 of
                  Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended June 30, 2001.

10.13*            First  Amendment to the Amended and Restated  Employment  Agreement  between  Anthony Silva and
                  Kaiser  Ventures Inc.  dated as of April 11, 2001,  incorporated  by reference  Exhibit 10.3 of
                  Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended June 30, 2001.

10.14*            First Amendment to the Amended and Restated  Employment  Agreement  between Paul E. Shampay and
                  Kaiser  Ventures Inc.  dated as of April 11, 2001,  incorporated  by reference  Exhibit 10.4 of
                  Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended June 30, 2001.

10.15*            Second Amended and Restated  Employment  Agreement  between James F. Verhey and
</TABLE>

                                      47

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
                  Kaiser  Ventures Inc. dated as of April 11, 2001,  incorporated  by reference  Exhibit 10.5 of
                  the Company's Form 10-Q Report for the quarter ended June 30, 2001.

10.16             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.

10.16.1           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.

10.16.2           Third Amendment to Lease Agreement between Lord Baltimore Properties and Kaiser Ventures LLC
                  dated February 19, 2002, filed with this report.

10.17             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.

10.18             Lease of Corporate shares of Fontana Union Water Company coupled with Irrevocable Proxy between
                  Kaiser Resources Inc. and Cucamonga County Water District dated July 1, 1993, incorporated by
                  reference from Exhibit 1 to Form 10-Q dated June 30, 1993.

10.18.1           Stock Purchase Agreement and Joint Escrow Instructions between Kaiser Ventures Inc. and
                  Cucamonga County Water District dated as of November 14, 2000, incorporated by reference from
                  Exhibit 10.7 of Kaiser Ventures Inc.'s Form 10-Q Report for the quarter ended September 30,
                  2000.

10.19             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.

10.20             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.

10.21*            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).

10.22*            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.

10.22.1*          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).
</TABLE>

                                      48

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------
<S>               <C>

10.23*            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 quarter ended September 30, 2000.

10.24*            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.

10.24.1*          Form of Restricted Stock Agreement for Directors Stock Plan, incorporated by reference from
                  Exhibit 10.19.1 of Kaiser Ventures Inc.'s Form 10-K Report for the year ended December 31, 2000.

10.25             Form of  Indemnification  Agreement  for  individuals  serving on the Board of Managers of Kaiser
                  Ventures LLC filed with this Report.

10.26             Form of Indemnification Agreement for officers of Kaiser Ventures LLC filed with this Report.

10.27             Settlement Agreement among Kaiser Resources Inc., KSC Recovery, Inc., Kaiser Coal Corporation,
                  the UMWA Combined Benefit Fund and the UMWA 1992 Benefit Plan dated December 1, 1994,
                  incorporated by reference from Exhibit 10.22 of Kaiser Ventures Inc.'s 10-K Report for the year
                  ended December 31, 1994.

10.28             Promissory  Note of McLeod  Properties,  Fontana LLC,  dated  September  30, 1997 payable to the
                  order of Kaiser  Ventures Inc.,  incorporated  by reference from Exhibit 10.3 of Kaiser  Ventures
                  Inc.'s 10-Q Report for the period ended September 30, 1997.

10.28.1           Guaranty  Agreement  of Budway  Enterprises,  Inc.  and V.M.  McLeod  dated  September  30, 1997,
                  incorporated  by reference  from  Exhibit  10.3.1 of Kaiser  Ventures  Inc.'s 10-Q Report for the
                  period ended September 30, 1997.

10.28.2           Subordinated Deed of Trust, Assignment of Leases and Rents and Security Agreement dated
                  September 30, 1997 given by McLeod Properties, Fontana LLC for the benefit of the Kaiser
                  Ventures Inc., incorporated by reference from Exhibit 10.3.2 of Kaiser Ventures Inc.'s Form 10-Q
                  Report for the period ended September 30, 1997.

10.29             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.

10.29.1           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.

10.30             Loan  Agreement  dated as of June 1, 1997 between West Valley MRF, LLC and
</TABLE>

                                      49

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
                  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.

10.30.1           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.

10.30.2           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.

10.31             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.

10.31.1           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.

10.31.2           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.

10.31.3           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.

10.32             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.

10.32.1           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.

10.32.2           First Amendment and Restated Environmental Compliance Agreement between West Valley MRF, LLC and
                  Union Bank of California, N.A. dated May 1, 2000, incorporated
</TABLE>

                                      50

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
                  by reference from Exhibit 10.4.2 of Kaiser Ventures Inc.'s Form 10-Q Report for the period ended
                  June 30, 2000.

10.32.2           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.

10.32.3           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.

10.32.4           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.

10.32.5           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.

10.33             Registration  Rights Agreement among Kaiser Venture Inc. and the New Kaiser Voluntary  Employees'
                  Beneficiary  Association  and Pension  Benefit  Guaranty  Corporation  dated  November  22, 1999,
                  incorporated  by reference  from Exhibit 10.1 of Kaiser  Ventures  Inc.'s Form 8-K dated November
                  22, 1999.

10.34             Contingent Payment Agreement between Kaiser Ventures Inc and the New Kaiser Voluntary Employees'
                  Beneficiary Association dated November 22, 1999, incorporated by reference from Exhibit 10.2 of
                  Kaiser Ventures Inc.'s Form 8-K dated November 22, 1999.

10.35             Contingent Payment Agreement between Kaiser Ventures Inc and Pension Benefit Guaranty
                  Corporation dated November 22, 1999, incorporated by reference from Exhibit 10.3 of Kaiser
                  Ventures Inc.'s Form 8-K dated November 22, 1999.

10.36             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.

10.36.1           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.

10.36.2           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
</TABLE>

                                      51

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                               DOCUMENT DESCRIPTION
-------           ---------------------------------------------------------------------------------------------------

<S>               <C>
                  Ventures  Inc.'s Form 10-Q Report for the period ended June 30, 2000.

10.34.3           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.

10.34.4           Purchase Agreement and Escrow Instructions between Kaiser Steel Land Development, Inc. and The
                  California Speedway Corporation dated August 10, 2000, incorporated by reference from Exhibit
                  10.1.6 of Kaiser Ventures Inc.'s Form 10-Q Report for the period ended September 30, 2000.

21                Active  subsidiaries  of  Kaiser  Ventures  LLC  are:  Kaiser  Services,   Inc.;  Lake  Tamarisk
                  Development,  LLC; Kaiser Eagle Mountain, LLC; Kaiser Recycling,  LLC; Business Staffing,  Inc.;
                  and Mine Reclamation, LLC.

23                Consent of Ernst & Young LLP, independent auditors.

24                Power of Attorney (included in the signature page).

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.
</TABLE>

                                      52

<PAGE>

                                   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:  March 29, 2002       KAISER VENTURES INC.

                                  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.

                               (Power of Attorney)

                                      53

<PAGE>

     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-K 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.

<TABLE>
<CAPTION>
             Signature                                  Title                               Date
             ---------                                  -----                               ----

<S>                                         <C>                                         <C>
1.   Principal Executive Officer

     /s/ Richard E. Stoddard                President, Chief Executive                  March 29, 2002
     -----------------------------
     Richard E. Stoddard                    Officer and Chairman of the
                                            Board of Managers
                                            (Principal Executive Officer)

2.   Principal Financial and
     Accounting Officer

     /s/James F. Verhey                     Executive Vice President, and               March 29, 2002
     -----------------------------
     James F. Verhey                        Chief Financial Officer (Principal
                                            Financial and Accounting Officer)
</TABLE>

                                      54

<PAGE>

<TABLE>
<CAPTION>
               Signature                                   Title                          Date
               ---------                                   -----                          ----

<S>                                                    <C>                            <C>
4.    Managers

      /s/ Ronald E. Bitonti                               Manager                     March 27, 2002
      ----------------------------
      Ronald E. Bitonti

      /s/ Todd G. Cole                                    Manager                     March 27, 2002
      ----------------------------
      Todd G. Cole

      /s/ Gerald A. Fawcett                            Vice Chairman                  March 27, 2002
      ----------------------------
      Gerald A. Fawcett

      /s/ Marshall F. Wallach                             Manager                     March 27, 2002
      ----------------------------
      Marshall F. Wallach
</TABLE>

                                      55

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES

                         REPORT OF INDEPENDENT AUDITORS

Board of Managers
Kaiser Ventures LLC and Subsidiaries

         We have audited the accompanying consolidated balance sheets of Kaiser
Ventures LLC and subsidiaries (the "Company") as of December 31, 2001 and 2000,
and the related consolidated statements of income, cash flows, and equity for
each of the three years in the period ended December 31, 2001. Our audits also
included the financial statement schedules listed in the Index at Item 14(a).
These financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kaiser Ventures LLC and Subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

                                            ERNST & YOUNG LLP

Orange County, California
January 22, 2002

                                      56

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                AS OF DECEMBER 31

<TABLE>
<CAPTION>
                                                                               2001                     2000
                                                                               ----                     ----
ASSETS

<S>                                                                       <C>                     <C>
Current Assets
     Cash and cash equivalents...................................         $    16,389,000         $    10,097,000
     Accounts receivable and other, net of allowance for
       doubtful accounts of $34,000 and $83,000,
       respectively..............................................                 173,000               2,497,000
     Income tax receivable.......................................               1,904,000                      --
     Deferred tax assets.........................................                      --              10,699,000
     Notes receivable............................................                 337,000                 107,000
                                                                          ---------------         ---------------

                                                                               18,803,000              23,400,000
                                                                          ---------------         ---------------

Eagle Mountain Landfill Investment...............................              25,651,000              24,154,000
                                                                          ---------------         ---------------

Investment in West Valley MRF....................................               3,888,000               3,660,000
                                                                          ---------------         ---------------

Land and improvements............................................               2,503,000               2,743,000
                                                                          ---------------         ---------------

Investment in Fontana Union Water Company........................                      --              16,612,000
                                                                          ---------------         ---------------

Other Assets
     Notes receivable............................................               1,348,000                 589,000
     Deferred tax assets.........................................                      --               2,161,000
     Unamortized environmental insurance premium.................               3,800,000                      --
     Buildings and equipment (net)...............................               1,217,000               1,463,000
     Other assets................................................                      --                   6,000
                                                                          ---------------         ---------------

                                                                                6,365,000               4,219,000
                                                                          ---------------         ---------------

Total Assets.....................................................         $    57,210,000         $    74,788,000
                                                                          ===============         ===============
</TABLE>

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

                                      57

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                AS OF DECEMBER 31

<TABLE>
<CAPTION>
                                                                               2001                       2000
                                                                               ----                       ----
LIABILITIES AND EQUITY

<S>                                                                      <C>                       <C>
Current Liabilities
      Accounts payable..........................................         $       278,000           $       302,000
      Accrued liabilities.......................................               2,521,000                 3,824,000
                                                                         ---------------           ---------------

                                                                               2,799,000                 4,126,000
                                                                         ---------------           ---------------

Long-term Liabilities
      Deferred gain on sale of real estate......................                 589,000                   696,000
      Accrued liabilities.......................................                 334,000                   722,000
      Environmental remediation.................................               4,000,000                 4,490,000
                                                                         ---------------           ---------------

                                                                               4,923,000                 5,908,000
                                                                         ---------------           ---------------

Total Liabilities...............................................               7,722,000                10,034,000
                                                                         ---------------           ---------------

Minority Interest...............................................               5,280,000                 5,280,000
                                                                         ---------------           ---------------

Commitments and Contingencies

Stockholders' Equity
     Common stock, par value $.03 per share, authorized
         13,333,333 shares; issued and outstanding
         0 and 6,522,700, respectively..........................                      --                   195,000
     Capital in excess of par value.............................                      --                51,676,000
     Retained earnings..........................................                      --                 7,603,000
                                                                         ---------------           ---------------

Total Stockholders' Equity......................................                      --                59,474,000
                                                                         ---------------           ---------------

Members' Equity
     Class A units; issued and outstanding 6,901,299 and 0,
         respectively...........................................              44,208,000                        --
     Class B units; issued and outstanding 751,956 and 0,
         respectively...........................................                      --                        --
                                                                         ---------------           ---------------
Total Members' Equity...........................................              44,208,000                        --
                                                                         ---------------           ---------------

Total Liabilities and Equity....................................         $    57,210,000           $    74,788,000
                                                                         ===============           ===============
</TABLE>

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

                                      58

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                        FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
                                                                     2001             2000             1999
                                                                     ----             ----             ----
<S>                                                             <C>               <C>             <C>
Resource Revenues
  Ongoing Operations
     Gain on sale of FUWC.................................      $  65,171,000     $          --   $          --
     Water resource.......................................            295,000         5,640,000       5,228,000
     Gain on sale of California mines.....................          1,756,000                --              --
     Gain on merger of PMI into ISC.......................                 --                --      35,713,000
     Gain on sale of ISC common stock.....................                 --                --       6,575,000
     Income (loss) from equity method investments
         Penske Motorsports Inc...........................                 --                --        (329,000)
         West Valley MRF, LLC.............................            978,000         1,651,000         910,000
     Gain on Mill Site land sales.........................            107,000           532,000       1,622,000
                                                                -------------     -------------   -------------

         Total ongoing operations.........................         68,307,000         7,823,000      49,719,000
                                                                -------------     -------------   -------------

     Interim Activities Net (Loss)........................           (256,000)         (179,000)       (203,000)
                                                                --------------    --------------  --------------

         Total resource revenues..........................         68,051,000         7,644,000      49,516,000
                                                                -------------     -------------   -------------

Resource Operating Costs
  Operating costs.........................................             42,000           509,000         528,000
  Write-down to net realizable value......................                 --                --       8,350,000
                                                                -------------     -------------   -------------

         Total resource operating costs...................             42,000           509,000       8,878,000
                                                                -------------     -------------   -------------

Income from Resources.....................................         68,009,000         7,135,000      40,638,000

Corporate General and Administrative Expenses
  Corporate overhead expenses, excluding stock based
    compensation and stock option repricing expenses......          5,145,000         3,469,000       4,910,000
  Stock based compensation expense........................          1,288,000         2,224,000              --
  Stock option repricing expense..........................            428,000           645,000              --
                                                                -------------     -------------   -------------

                                                                    6,861,000         6,338,000       4,910,000
                                                                -------------     -------------   -------------

Income from Operations....................................         61,148,000           797,000      35,728,000

  Net interest (income) expense...........................         (2,532,000)         (581,000)        498,000
                                                                --------------    --------------  -------------

Income before Income Tax Provision........................         63,680,000         1,378,000      35,230,000

  Income tax provision
     Currently payable....................................          1,795,000            33,000       8,364,000
     Deferred tax expense (benefit).......................         12,861,000       (11,998,000)     (3,211,000)
     Deferred tax expense credited to equity..............                 --                --       6,048,000
                                                                -------------     -------------   -------------

Net Income................................................      $  49,024,000     $  13,343,000   $  24,029,000
                                                                =============     =============   =============

Basic Earnings Per Unit/Share.............................      $        7.45     $        2.09   $        2.35
                                                                =============     =============   =============

Diluted Earnings Per Unit/Share...........................      $        7.38     $        1.99   $        2.31
                                                                =============     =============   =============

Basic Weighted Average Number of Units/Shares Outstanding.          6,584,000         6,394,000      10,226,000

Diluted Weighted Average Number of Units/Shares Outstanding...      6,646,000         6,699,000      10,386,000
</TABLE>

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

                                      59

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
                                                                       2001             2000              1999
                                                                       ----             ----              ----
<S>                                                              <C>               <C>              <C>
Cash Flows from Operating Activities
    Net income...............................................    $   49,024,000    $   13,343,000   $   24,029,000
    Provision for income tax which is credited to equity.....                --                --        6,048,000
    Income from equity method investments....................          (978,000)       (1,651,000)        (581,000)
    Deferred tax (benefit) expense...........................        12,861,000       (11,998,000)      (3,211,000)
    Depreciation and amortization............................           275,000           370,000          511,000
    Stock based compensation expense.........................         1,288,000         1,247,000               --
    Stock option repricing...................................           428,000           645,000               --
    Gain on merger of PMI into ISC...........................       (65,171,000)               --               --
    Gain on merger of PMI into ISC...........................                --                --     (35,713,000)
    Gain on sale of ISC common stock.........................                --                --       (6,575,000)
    Write-down to net realizable value.......................                --                --        8,350,000
    Accelerated vesting of stock options.....................                --            20,000           54,000
    Mill Site deferred gain realized.........................          (107,000)          (28,000)              --
    Gain on sale of Ca Mine & Mill Site Properties...........        (1,756,000)         (504,000)      (1,622,000)
    Allowance for doubtful accounts..........................                --            (7,000)        (213,000)
    Changes in assets:
      Receivable and other...................................         2,273,000          (512,000)         574,000
      Income tax receivable..................................        (1,904,000)               --               --
    Changes in liabilities:
      Current liabilities....................................        (1,757,000)         (902,000)         294,000
      Income taxes payable...................................                --        (3,501,000)       3,501,000
      Long-term accrued liabilities..........................          (337,000)         (429,000)         (56,000)
                                                                 ---------------   ---------------  ---------------

    Net cash flows used in operating activities..............        (5,861,000)       (3,907,000)      (4,610,000)
                                                                 ---------------   ---------------  ---------------

Cash Flows from Investing Activities
    Minority interest........................................                --           508,000          997,000
    Proceeds from the sale of FUWC Stock.....................        81,783,000                --               --
    Proceeds from the sale of Ca Mine & Mill Site Properties.           726,000        19,880,000        2,662,000
    Collection of note receivable............................           281,000           111,000           75,000
    Capital expenditures.....................................       (1,454,000)       (4,076,000)      (3,570,000)
    Environmental remediation expenditures...................          (126,000)         (626,000)      (1,808,000)
    Environmental insurance..................................        (3,800,000)               --               --
    Proceeds from the sale of ISC common stock...............                --                --       63,552,000
    Proceeds of the merger of PMI into ISC...................                --                --       24,419,000
    Distribution from West Valley MRF........................           750,000         1,000,000          450,000
    Investment in Fontana Union Water Co.....................                --          (654,000)              --
                                                                 --------------    ---------------  --------------

    Net cash flows from investing activities.................        78,160,000        16,143,000       86,777,000
                                                                 --------------    --------------   --------------

Cash Flows from Financing Activities
    Issuance of common stock.................................         3,278,000           871,000          379,000
    Distribution to Shareholders.............................       (69,285,000)      (12,772,000)              --
    Shareholder payment contingent upon Mill Site real estate                --        (4,924,000)              --
      sale...................................................
    Repurchase of common stock...............................                --                --      (57,519,000)
    Borrowings under revolver-to-term credit facility........                --                --        3,000,000
    Principal payments on revolver-to-term credit facility and
      note payable...........................................                --                --      (16,750,000)
                                                                 --------------    --------------   ---------------

    Net cash flows used in financing activities..............       (66,007,000)      (16,825,000)     (70,890,000)
                                                                 ---------------   ---------------  ---------------

Net Changes in Cash and Cash Equivalents.....................         6,292,000        (4,589,000)      11,277,000

Cash and Cash Equivalents at Beginning of Year...............        10,097,000        14,686,000        3,409,000
                                                                 --------------    --------------   --------------

Cash and Cash Equivalents at End of Year.....................    $   16,389,000    $   10,097,000   $   14,686,000
                                                                 ==============    ==============   ==============

The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>

                                      60

<PAGE>

                     KAISER VENTURES LLC AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
             for the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                        Member Units /
                                         Common Stock
                                    Class A                     Capital In
                                    Units /                     Excess of     Retained     Members'
                                    Shares          Amount      Par Value     Earnings      Equity           Total
                                  ------------------------------------------------------------------------------------
<S>                                 <C>         <C>           <C>           <C>           <C>       <C>  <C>
Balance at December 31, 1998        10,685,257  $    321,000  $ 74,741,000  $ 12,776,000  $         --   $ 87,838,000

   Repurchase of common stock       (4,424,501)     (133,000)  (32,537,000)  (24,849,000)                 (57,519,000)

   Issuance of shares of
     common stock............           56,097         1,000       439,000            --                      440,000

   Accelerated vesting of stock
     options ................               --            --        54,000            --                       54,000

   Provision for income tax,
     credited to equity......               --            --     6,048,000            --                    6,048,000

   Net Income................               --            --            --    24,029,000                   24,029,000
                                  ------------   -----------  ------------  ------------  ------------   ------------

Balance at December 31, 1999         6,316,853       189,000    48,745,000    11,956,000            --     60,890,000

   Issuance of shares of
     common stock............          205,847         6,000     2,266,000            --                    2,272,000

   Accelerated vesting of stock
     options ................               --            --        20,000            --                       20,000

   Repricing of stock options               --            --       645,000            --                      645,000

   Shareholder payment
     contingent upon Mill Site
     real estate sale........               --            --            --    (4,924,000)                  (4,924,000)

   Dividend..................               --            --            --   (12,772,000)                 (12,772,000)

   Net Income................               --            --            --    13,343,000                   13,343,000
                                  ------------   -----------   ------------  ------------  ------------   ------------

Balance at December 31, 2000         6,522,700       195,000    51,676,000     7,603,000            --     59,474,000

   Issuance of shares of
     common stock............          378,599        12,000     4,555,000            --                    4,567,000

   Repricing of stock options               --            --       428,000            --                      428,000

   Conversion to LLC ........                       (207,000)  (56,659,000)   (7,603,000)   64,469,000             --

   Dividend..................               --            --            --            --   (69,285,000)   (69,285,000)

   Net Income................               --            --            --            --    49,024,000     49,024,000
                                  ------------   -----------   ------------  ------------  ------------   ------------

Balance at December 31, 2001         6,901,299  $         --  $         --  $         --  $ 44,208,000   $ 44,208,000
                                  ============  ============  ============  ============  ============   ============
</TABLE>

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

                                      61

<PAGE>

                      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, 2001, the Company's principal assets include: (i) an
approximate 80% 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; (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, and
receivables of approximately $20.2 million.

     The Company's consolidated financial statements include the following
significant entities: Kaiser Services, Inc.; 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. Revenues from water
resources represent payments under the lease of the Company's interest in
Fontana Union to Cucamonga County Water District ("Cucamonga"). However, the
lease with Cucamonga terminated effective March 6, 2001, with the sale of the
Company's interest in Fontana Union Water Company ("Fontana Union") to
Cucamonga. Income from equity method investments reflect Kaiser's share of
income related to those equity investments (i.e., Penske Motorsports Inc.
("PMI") from April 1, 1996 through March 31, 1999) and, starting in 1998, a
limited liability company (i.e., the West Valley MRF) which the Company accounts
for under the equity method.

INTERIM ACTIVITIES

     Revenues from interim activities are generated from various sources.
Significant components of interim activities include water and waste water
treatment revenues, rentals under short-term tenant lease arrangements, royalty
revenues from the sale of slag to outside contractors, royalty revenues from the
sale of recyclable revert materials and other miscellaneous short-term
activities at the Mill Site; housing rental income, aggregate and rock sales and
lease payments for the minimum security prison at the Eagle Mountain Townsite;
royalty revenues from iron ore shipments from the Silver Lake Mine. Due to the

                                      62

<PAGE>

interim nature of these activities the Company is presenting these revenues net
of their related expenses. Revenues and expenses associated with these
activities at the former KSC mill site near Fontana, California (the "Mill Site
Property"), and Silver Lake Mine have ceased due to the sales of these
properties. Total interim revenues for 2001, 2000, and 1999, were $1.0 million,
$1.7 million, and $1.9 million, respectively.

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.

     Fontana Union Water Company. Prior to its sale in March 2001, the Company
owned 53.71% of Fontana Union, a mutual water company, which entitled the
Company to its proportionate share of Fontana Union water. The Company
effectively transferred its control in Fontana Union to Cucamonga pursuant to a
102-year lease of its Fontana Union shares ("Cucamonga Lease") which the Company
entered into in March 1989, and which was amended in 1989, 1992 and 1993.
Therefore, Kaiser received no direct benefit from nor had any direct exposure to
the operations or financial performance of Fontana Union. Consequently, Kaiser's
investment in Fontana Union was recorded on the cost method with revenues from
the Cucamonga Lease being recorded on a current basis pursuant to the terms and
conditions of the Lease. (See Note 4.) On March 6, 2001, the Company closed on
the sale of its Fontana Union investment to Cucamonga.

     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 funds 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.

RECLASSIFICATION

     Certain amounts in the prior years have been reclassified to conform to the
current year financial statement presentation.

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 high quality financial institutions and are
insured by the Federal Deposit Insurance Corporation up to $100,000 at each
institution.

                                      63

<PAGE>

REAL ESTATE

     In accordance with Financial Accounting Standards Board ("FASB") Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (FASB 121), 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.

     During 2000, the Company sold the bulk of its remaining Fontana Mill Site
Property for $16 million in cash plus the assumption of virtually all known and
unknown environmental obligations and liabilities associated with the Mill Site
Property to CCG Ontario, LLC ("CCG") and its Rancho Cucamonga parcel to The
California Speedway Corporation for $3.8 million. During 2001, the Company sold
its California iron ore mines for $2.0 million.

     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.

LANDFILL PERMITTING AND DEVELOPMENT

     Through its 80% 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 Statement of Financial Accounting
Standards 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
Statement of Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long-lived Assets and Long-lived Assets to be Disposed of,"
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 6), 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.

REVENUE RECOGNITION

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

INCOME TAXES

     The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary timing differences between the financial
statement and tax bases of assets and liabilities at the applicable enacted tax
rates through November 30, 2001. Subsequent to the conversion into a limited

                                      64

<PAGE>

liability company, the Company is taxed as a partnership and thus, the Company's
results of operations (on an income tax basis) are distributed to the
unitholders for inclusion in their respective income tax returns.

EARNINGS PER SHARE

     The Company follows Statement No. 128, Earnings per Share (FASB 128) in
calculating basic and diluted earnings per share. Basic earnings per share
excludes the dilutive effects of options, warrants and convertible securities,
while diluted earnings per share includes the dilutive effects of claims on the
earnings of the Company.

LLC UNIT/STOCK OPTIONS

     The Company uses the intrinsic value method to account for its LLC
unit/stock compensation arrangements pursuant to the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

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.

NOTE 3.       ACCOUNTS RECEIVABLE AND OTHER

     Accounts receivable as of December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                           2001                    2000
                                                                           ----                    ----
<S>                                                                      <C>                     <C>
Cucamonga County Water District...............................      $             --        $      2,155,000
Other.........................................................               207,000                 425,000
                                                                    ----------------        ----------------
                                                                             207,000               2,580,000

Allowance for doubtful accounts                                              (34,000)                (83,000)
                                                                    ----------------        ----------------
         Total................................................      $        173,000        $      2,497,000
                                                                    ================        ================
</TABLE>

NOTE 4.       SALE OF FONTANA UNION WATER COMPANY STOCK

     Effective March 6, 2001, the Company completed the sale of its
approximately 53.71% ownership interest in the capital stock of Fontana Union a
mutual water company, to Cucamonga for $87.5 million. Stockholder approval for
the sale was obtained. Included in the net gain of $65.2 million was the payment
of $1.0 million to management pursuant to the Company's Long-Term Transaction
Incentive Program. In addition, the Company received approximately $2.5 million
in payments under the lease of Fontana Union shares to Cucamonga. With the sale
of the Fontana Union interest, the lease

                                      65

<PAGE>

with Cucamonga was effectively terminated and the rate dispute litigation
between the Company and Cucamonga was settled.

NOTE 5.       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 most of the 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 ($9.5 million) and June 1, 2030 Series 2000A ($8.5
million), 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 are
each 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 $2.0 million equipment line of credit with Union Bank in order
to refinance and purchase additional equipment.

     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 December 31, is as follows:

<TABLE>
<CAPTION>
                                                                          2001                   2000
                                                                          ----                   ----
<S>                                                               <C>                    <C>
Balance Sheet Information

Current Assets............................................        $     6,021,000        $     4,919,000
Property and Equipment (net)..............................             19,805,000             16,380,000
Other Assets..............................................                510,000              6,640,000
                                                                  ---------------        ---------------
         Total Assets.....................................        $    26,336,000        $    27,939,000
                                                                  ===============        ===============

Current Liabilities.......................................        $     3,476,000        $     4,437,000
Other Liabilities.........................................                997,000              1,184,000
CPCFA Bonds Payable.......................................             15,700,000             16,635,000
Stockholders' Equity......................................              6,163,000              5,683,000
                                                                  ---------------        ---------------
         Total Liabilities and Stockholders' Equity.......        $    26,336,000        $    27,939,000
                                                                  ===============        ===============

Income Statement Information
Net Revenues                                                      $     9,484,000        $     9,218,000
Gross Profit                                                      $     3,205,000        $     4,336,000
Net Income                                                        $     1,980,000        $     3,369,000
</TABLE>

     The Company has received distributions of $750,000 and $1.0 million during
2001 and 2000, respectively, from its investment in the West Valley MRF.

                                      66

<PAGE>

NOTE 6.       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, 2000, is approximately 80%. 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 anticipated to occur, if closing does occur, in the second quarter of
2002. 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. The Company agreed to vote its interest in MRC in favor of
the sale of the landfill project to the District on its current terms.

     Upon closing, $39 million of the total purchase price will 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. Interest will accrue on this
portion of the purchase price commencing with the closing and will be paid out
to Mine Reclamation, LLC on a quarterly basis beginning with a successful
outcome of the federal litigation at the Federal District Court level. The
remaining $2 million of the purchase price will also be placed into an escrow
account upon closing and will 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. 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.

     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. Due diligence, joint use
negotiations and other items are expected to continue into 2002. In addition,
the parties will determine where each need to continue to extend the closing
date for the transaction.

NOTE 7.       NOTES RECEIVABLE

     As of December 31, 2001, the Company has two notes receivable from McLeod
Properties, Fontana LLC (Budway Trucking, Inc.) and one note receivable from
Levand Steel.

     The outstanding balances of the Budway notes total $589,000, of which
$107,000 has been included in current assets and the balance of $482,000 is
classified as a long term asset. The outstanding balance of the notes bears
interest at 10% per annum with quarterly payments of $26,700 plus accrued
interest, with the remaining balance due October 2004. The Company has agreed to
subordinate its notes receivable to a construction/permanent loan in order to
facilitate the construction of a building on the property.

     The outstanding balance of the Levand Steel note is $1,096,000, of which
$230,000 has been included in current assets and the balance of $866,000, is
classified as a long-term asset. The outstanding balance of the notes bears
interest at 8% per annum with monthly payments of $25,700 including accrued
interest, with the remaining balance due February 2006.

NOTE 8.       ENVIRONMENTAL INSURANCE

     One of the goals in the cash maximization strategy approved by the
Company'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

                                      67

<PAGE>

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 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 loss, the newly-purchased 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 are brought against the Company. The
policy is specifically intended to provide additional coverage for the Company's
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. The aggregate cost for this policy
was approximately $5.8 million, of which KSC Recovery paid $2 million and the
Company paid the balance of approximately $3.8 million.

     This policy covers virtually any and all environmental liabhlities and
claims (up to the $50 million policy limit) relating to the historical
operations and assets of the company and reflected on the balance sheet under
the caption Environmental Remediation. At December 31, 2001, the recorded
environmental remediation liability was $4.0 million. Due to the nature of the
insurance policy, generally accepted accounting principles require that the cost
of the policy be capitalized as an Other Asset separately from the related
liability and amortized as the related liabilities are resolved.

NOTE 9.       BUILDINGS AND EQUIPMENT (NET)

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

<TABLE>
<CAPTION>
                                                                            2001                  2000
                                                                            ----                  ----
<S>                                                                  <C>                   <C>
Buildings and structures .....................................       $   2,085,000         $   2,085,000
Machinery and equipment.......................................           1,954,000             1,929,000
                                                                      ------------          ------------
                                                                         4,039,000             4,014,000
Accumulated depreciation......................................          (2,822,000)           (2,551,000)
                                                                     -------------         -------------
         Total................................................       $   1,217,000         $   1,463,000
                                                                     =============         =============
</TABLE>

NOTE 10.      ACCRUED LIABILITIES - CURRENT

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

<TABLE>
<CAPTION>
                                                                           2001                  2000
                                                                           ----                  ----
<S>                                                                  <C>                   <C>
Environmental insurance settlement liability....................     $          --         $   1,313,000
Compensation, severance and related employee costs..............         1,446,000               974,000
Accrued professional and closing costs..........................           727,000               580,000
Other  .........................................................           348,000               957,000
                                                                     -------------         -------------
       Total....................................................     $   2,521,000         $   3,824,000
                                                                     =============         =============
</TABLE>

NOTE 11.      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.

     As of December 31, 2001, 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,

                                      68

<PAGE>

including, but not linked to remediation at the Eagle Mountain Site, potential
third party property damage and bodily injury claims, would be approximately
$4.0 million. For example, the Company remains contingently liable for any
impacts the elevated total dissolved solid groundwater plume may have on
previously existing water wells owned by third parties.

     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 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 loss, the
newly-purchased 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 are brought against the Company. The policy is specifically
intended to provide additional coverage for the Company's 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.

     This policy covers virtually any and all environmental liabilities and
claims (up to the $50 million policy limit) relating to the historical
operations and assets of the Company and reflected on the balance sheet under
the caption Environmental Remediation. Due to the nature of the insurance
policy, generally accepted accounting principles require that the cost of the
policy be capitalized as an Other Assets separately from the related liability
and amortized as the related liabilities are resolved.

     See Note 19, "Commitments and Contingencies" for further information.

NOTE 12.      LONG-TERM DEBT

     Previously the Company had a $30 million credit facility with Union Bank
which was secured by the Company's investment in the stock of Fontana Union. The
facility was cancelled prior to the closing of the sale of the Company's Fontana
Union stock to Cucamonga in March 2001.

     Total interest expense incurred in 2001, 2000, and 1999 was $25,000,
$151,000, $1,272,000, respectively.

NOTE 13.      EQUITY

CONVERSION INTO LLC

     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 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.

EQUITY TRANSACTIONS

     During 2001, 2000 and 1999 the Company recorded transactions directly to
equity other than changes resulting from net income or equity transactions with
members/shareholders. These transactions include deferred tax expense credited
to equity due to the utilization of the Company's reorganization NOL
carryforwards repricing of unit/stock options, and the accelerated vesting of
stock options. These amounts for the years ended December 31, 2001, 2000 and
1999 are as follows:

                                      69

<PAGE>

<TABLE>
<CAPTION>
                                                         2001               2000               1999
                                                         ----               ----               ----
<S>                                               <C>                <C>                 <C>
Deferred tax expense credited to equity.....      $          --      $          --       $   6,048,000
Repricing of unit/stock options.............            428,000            645,000                  --
Accelerated vesting of stock options........                 --             20,000              54,000
                                                  -------------      -------------       -------------

                                                  $     428,000      $     665,000       $   6,102,000
                                                  =============      =============       =============
</TABLE>

CLASS A UNITS/COMMON STOCK OUTSTANDING

     At December 31, 2001 Kaiser LLC had 6,901,299 Class A Units outstanding. At
December 31, 2000, Kaiser Inc. common stock had a par value of $0.03 and
13,333,333 authorized shares, of which 6,522,700 were outstanding.

     In November 1988, 10,000,000 shares of common stock (after giving effect
for a 3 for 1 reverse stock split that took place in 1990) were issued pursuant
to the KSC Plan of Reorganization. As of December 31, 2000 and 1999, 136,919 of
these shares are 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.

CLASS B UNITS

     Prior to the merger Kaiser LLC issued Class B Units to current and former
MRC executives as follows:

                              MRC Executive                       Class B Units
                              -------------                       -------------
                 Richard A. Daniels..................                296,044
                 Gary W. Johnson.....................                244,452
                 Kay Hazen...........................                211,460
                                                                     -------
                                                    TOTAL            751,956

     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 close 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 million. 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, 2001 Kaiser LLC had 751,956 Class B 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 of five years 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

                                      70

<PAGE>

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.

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. During 2000 and 1999 the Company incurred $20,000 and
$54,000, respectively, of compensation expense associated with the accelerated
vesting of certain stock options. The Company incurred no such compensation
expense during 2001.

     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, 2001.

     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.

     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 real estate 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 and $645,000 for 2001 and 2000, respectively.

     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 2001 and 2000 the Company incurred unit/stock based compensation expense
of $1,288,000 and $2,224,000, respectively, related to the exercise of
nonqualified unit/stock options.

     A summary of the status of grants under the Company's unit/stock plans as
of December 31, 2001, 2000, and 1999 and activities during the years ending on
those dates is presented below:

                                      71

<PAGE>

<TABLE>
<CAPTION>
                                           2001                           2000                          1999
                                ---------------------------    ---------------------------    -------------------------
                                                 Weighted-                    Weighted-                      Weighted-
                                                  Average                      Average                        Average
                                                 Exercise                     Exercise                       Exercise
                                    Options       Price           Options      Price             Options      Price
                                    -------       -----           -------      -----             -------      -----
<S>                               <C>          <C>              <C>         <C>                <C>         <C>
Outstanding at beginning of
   Year....................         712,650    $    10.51       1,330,961   $    11.17         1,502,961   $    11.33
Granted....................              --            --              --           --            46,000         9.00
Exercised..................        (411,550)         8.62        (608,301)        8.97           (60,000)        6.33
Forfeited..................              --            --         (10,010)        3.00          (158,000)       13.96
                                 ----------                    ----------                    -----------

Outstanding at end of year          301,100    $     3.08         712,650   $    10.51         1,330,961   $    11.17
                                 ==========                    ==========                     ==========

Options exercisable at year
   End.....................         301,100    $     3.08         712,650   $    10.51         1,289,461   $    11.22
                                 ==========                    ==========                     ==========

Weighted-average fair value
   of options granted during
   the year................      $    N/A                      $     N/A                      $     2.54
</TABLE>

     The following table summarizes information about variable unit options
outstanding as of December 31, 2001:

                                           Options Exercisable and
                                                 Outstanding
                                      --------------------------------
                       Weighted-
                        Average                       Weighted-
 Range of              Remaining                       Average
Exercise Prices       Life (years)         Options  Exercise Price
---------------       ------------         -------  --------------

$0.55  to   5.58           7.0               301,100   $      3.08

     The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for the
Company's unit/stock-based compensation plans other than for compensation and
performance-based stock awards. Had compensation cost for the Company's
unit/stock option plan been determined based upon the fair value at the grant
date for the awards under the plan consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, ("FAS 123"), the effect on the Company's net income
and earnings per unit/share would have been adjusted to the pro forma amounts as
indicated below:

<TABLE>
<CAPTION>
                                           2001                2000               1999
                                           ----                ----               ----
<S>                                 <C>                  <C>                <C>
Net Earnings
  As reported                       $    49,024,000      $    13,343,000    $    24,029,000
  Pro forma                         $    49,024,000      $    12,975,000    $    23,650,000

Earnings per unit/share (Basic)
  As reported                       $        7.45        $        2.09      $        2.35
  Pro forma                         $        7.45        $        2.03      $        2.31

Earnings per unit/share
  (Diluted)
  As reported                       $        7.38        $        1.99      $        2.31
  Pro forma                         $        7.38        $        1.94      $        2.28
</TABLE>

     The Company employed the Black-Scholes option-pricing model in order to
calculate the above reduction in net income and earnings per unit/share. The
effect on net earnings for 2001, 2000, and 1999

                                      72

<PAGE>

is not necessarily representative of the effect in future years. The following
table describes the assumptions utilized by the Black-Scholes option-pricing
model and the resulting fair value of the options granted for 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%

     In 1988, the Company granted stock options totaling 533,333 shares with a
nominal exercise price to certain of its officers as part of the emergence from
bankruptcy reorganization. These options became 50% vested at the date of grant
with the remaining options ratably vesting through June 1, 1991. As of December
31, 2001, all of these options had been exercised, with the last options being
exercised in January 2001.

NOTE 14.      EARNINGS PER UNIT/SHARE

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

<TABLE>
<CAPTION>
                                                      2001                2000               1999
                                                      ----                ----               ----
<S>                                                <C>                 <C>                <C>
Numerator:

  Net Income.................................      $49,024,000         $13,343,000        $24,029,000

  Numerator for basic earnings per unit / share
     -income available to common stockholders.     $49,024,000         $13,343,000        $24,029,000

  Numerator for diluted earnings per unit / share
     -income available to common stockholders.     $49,024,000         $13,343,000        $24,029,000

Denominator:

  Denominator for basic earnings per unit / share
     -weighted-average shares................        6,584,000           6,394,000         10,226,000

  Effect of dilutive options.................           62,000             305,000            160,000
                                                   -----------         -----------        -----------

  Denominator for diluted earnings per unit/share
     -adjusted weighted-average shares and           6,646,000           6,699,000         10,386,000
     assumed conversions.....................      ===========         ===========         ==========

  Basic earnings per unit / share.............     $      7.45         $      2.09        $      2.35
                                                   ===========         ===========        ===========

  Diluted earnings per unit / share...........     $      7.38         $      1.99        $      2.31
                                                   ===========         ===========        ===========
</TABLE>

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

     The following table discloses the number of vested and outstanding options
during 2001, 2000, and 1999 that were not included in the computation of diluted
earnings per unit/share because the options' exercise price was greater than
the average market price of the common shares and, therefore, the effect would
be antidilutive.

<TABLE>
<CAPTION>
                                              2001                   2000                   1999
                                              ----                   ----                   ----
<S>                                     <C>                    <C>                    <C>
Number of antidilutive options.......      194,000                136,500                325,000

Range of option prices
   for the antidilutive options......   $1.63 - 5.58           $14.85 - 15.58         $12.55 - 17.58
</TABLE>

                                      73

<PAGE>

NOTE 15.      SALES OF ASSETS

     During 2001 the Company completed the sale of its approximately 53.71%
ownership interest in the capital stock of Fontana Union Water Company, a mutual
water company, to Cucamonga for $87.5 million. Also during 2001 the sold its
California Mine properties for $2.0 million.

     During 2000, the Company sold the bulk of its remaining Fontana Mill Site
Property for $16 million in cash plus the assumption of virtually all known and
unknown environmental obligations and liabilities associated with the Mill Site
Property to CCG. Also during 2000, the Company sold its Rancho Cucamonga Parcel
to The California Speedway Corporation for $3.8 million.

     During 1999, the Company sold approximately 13 acres of its Napa Lots, a
portion of the Mill Site Property, in two all cash transactions; 7.8 acres to
Maas-Hansen Steel for $1,699,000, or $5.00 per square foot, and 5.2 acres to
D.T. Sari for $1,110,000, or $4.90 per square foot.

NOTE 16.      SUPPLEMENTAL CASH FLOW INFORMATION

     In the first quarter of 2001, the Company sold its California Mine Property
for $2 million, $726,000 cash at closing and $1.3 million on a note receivable
secured by the real estate.

     During 2001 and 2000 the Company had 54,333 and 552,800 stock options
exercised on a net basis. These transactions resulted in the Company receiving
back 36,704 shares during 2001 and 458,621 shares during 2000 of its own common
stock as payment for the purchase price of the options and for the payment of
income taxes.

     The Company paid interest during 2001, 2000, and 1999 of $39,000, $273,000,
and $1,314,000, respectively.

     Income taxes paid in 2001, 2000 and 1999 were $3,477,000, $3,755,000, and
$4,863,000, respectively.

     As a result of the sale, in August 2000, of the bulk of the Company's
remaining Fontana Mill Site Property to CCG, the Company eliminated $21.3
million in environmental remediation liabilities.

     As a result of the merger between PMI and International Speed Corporation
("ISC") in July 1999, the Company's investment in PMI was converted into $24.4
million of cash and $57.0 million of ISC Class A common stock.

     During 1999, the Company issued $62,000 of common stock for payment of 1997
bonuses.

     During 1999, the Company carried back a note receivable for $68,000 from
McLeod Properties, Fontana LLC (Budway Trucking, Inc.) from the sale of
approximately one-third of an acre of Mill Site Property.

     The Company has not capitalized interest or property taxes during 2001,
2000, and 1999.

                                      74

<PAGE>

NOTE 17.      INCOME TAXES

     The income tax provisions for the years ended December 31, 2001, 2000 and
1999 are composed of the following:

<TABLE>
<CAPTION>
                                                              2001                   2000             1999
                                                              ----                   ----             ----
<S>                                                    <C>                    <C>                 <C>
Current tax expense:
  Federal.........................................       $   300,000          $                   $ 1,582,000
                                                                                        --
  State...........................................         1,495,000                33,000          6,782,000
                                                         -----------          ------------        -----------
                                                           1,795,000                33,000          8,364,000
                                                         -----------          ------------        -----------
Deferred tax expense credited to equity:
  Federal.........................................                --                    --          6,048,000
  State...........................................                --                    --                 --
                                                         -----------          ------------         ----------
                                                                  --                    --          6,048,000
                                                         -----------          ------------         ----------
Deferred tax expense (credit):
  Federal.........................................        13,144,000           (12,144,000)        (1,000,000)
  State...........................................          (283,000)              146,000         (2,211,000)
                                                         -----------          ------------        -----------
                                                          12,861,000           (11,998,000)        (3,211,000)
                                                         -----------          ------------        -----------

                                                         $14,656,000          $(11,965,000)       $11,201,000
                                                         ===========          ============        ===========
</TABLE>

     There are no deferred tax amounts recorded as a component of equity
subsequent to December 31, 1999, as all pre-reorganization NOLs have been
utilized. In accordance with FASB 109, the tax benefits of all deductible
temporary differences and loss carryforwards that existed at the date of a
reorganization must be credited directly to additional paid-in capital when the
initial recognition of these benefits occurs subsequent to the reorganization.

     The Company has no deferred tax liabilities as of December 31, 2001, as a
result of its conversion into a limited liability company. Deferred tax
liabilities (assets) were comprised of the following as of December 31, 2000:

                                                                  2000
                                                                  ----
Land held for development.........................        $     1,911,000
Investment in Fontana Union.......................              6,392,000
Depreciation......................................                114,000
                                                          ---------------
                                                                8,417,000
                                                          ---------------
Environmental remediation.........................             (1,788,000)
Investment in MRC.................................             (1,822,000)
Accounts receivable reserve.......................                (33,000)
Other.............................................             (2,200,000)
Loss carryforwards................................            (15,672,000)
                                                          ----------------
                                                              (21,515,000)
                                                          ----------------
Less:  Deferred tax asset valuation allowance.....                238,000
                                                          ---------------
                                                          $   (12,860,000)
                                                          ================

     The net change in the valuation allowance during 2001, 2000, and 1999 was a
reduction of $238,000, $14,126,000, and $10,635,000, respectively. The decrease
in the valuation allowance for 2001 was due to the utilization of net operating
loss carry forwards that occurred during 2001 as a result of the sale of the
Fontana Union stock, in March 2001.

     A reconciliation of the effective income tax rate to the federal statutory
rate, for financial reporting purposes, is as follows:

<TABLE>
<CAPTION>
                                                                        2001         2000         1999
                                                                        ----         ----         ----
<S>                                                                     <C>          <C>          <C>

</TABLE>

                                      75

<PAGE>
<TABLE>
<CAPTION>

<S>                                                                     <C>       <C>             <C>
Federal statutory rate..........................................         35.0%        34.0%        34.0%
Increase resulting from state tax, net of federal benefit.......          1.9%        12.9         12.7
Federal Alternative Minimum Tax.................................           .5%         --           4.5
Change in tax status............................................        (14.4%)        --          --
Additional recognition of pre-reorganization benefits...........          --           --          17.2
Decrease in post-reorganization valuation allowance.............          --        (915.2)       (40.5)
Non taxable equity earnings.....................................          --           --           3.9
                                                                          --           --      --------
                                                                         23%       (868.3%)        31.8%
                                                                     =======      ========     =========
</TABLE>

     There are no consolidated NOL carryforwards available for Federal income
tax or California income tax purposes as of December 31, 2001. As a result of
the conversion into a limited liability company, the remaining deferred tax
assets and liabilities have been eliminated through the provision.

     Subsequent to the conversion, the Company is taxed as a partnership and
thus, the Company's results of operations (on an income tax basis) are
distributed to the unitholders for inclusion in their respective income tax
returns.

NOTE 18.      SIGNIFICANT CUSTOMERS

SIGNIFICANT CUSTOMERS

     Management and Training Corporation ("MTC") operates a minimum security
prison facility on a portion of the Eagle Mountain Site under a lease that
expires in June 2002. Minimum lease payments in 2002 are $415,000.

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

Year Ended            Cucamonga
December 31             Lease              MTC Lease
-----------             -----              ---------
   2001                 $295,000           $ 815,000
   2000               $5,640,000           $ 780,000
   1999               $5,228,000           $ 764,000

NOTE 19.      COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL CONTINGENCIES

     The Company estimates, based upon current information, that its future
environmental liability related to certain matters not assumed by CCG Ontario,
LLC in its purchase of the mill site property, including groundwater and other
possible third party claims, would be approximately $4.0 million. However, the
Company purchased, effective June 30, 2001, a 12 year $50 million insurance
policy at a cost of approximately $3.8 million. This policy will cover, among
other things, virtually any and all environmental liabilities and claims,
including defense costs, (up to the $50 million policy limit) relating to the
historical operations and assets of the Company and reflected in the above $4.0
million liability.

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,
2001, 2000, and 1999, was $262,000, $158,000, and $156,000, respectively.

                                      76

<PAGE>

LETTERS OF CREDIT

     At December 31, 2001, the Company had guaranteed a letter of credit
outstanding on its behalf to third parties totaling $120,000. 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.

NOTE 20.      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 and such settlements did not have a material adverse impact on the
Company's financial statements. Except for those matters described below,
management believes these matters will not have a material adverse effect on
Kaiser's business or financial condition. Significant legal proceedings,
including those which may have a material adverse effect on the Company's
business or financial condition, are summarized as follows:

LITIGATION

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

     In December 1999, the first case was filed challenging the land exchange -
Donna Charpied; Laurence Charpied; et al. v. United States Department of the
Interior; Bureau of Land Management; et al, (United States District Court for
the Central District of California, Riverside Division, Case No. EDCV 99-0454
RT(MCx)). In January 2000, a second case was filed - National Parks and
Conservation Association v. Bureau of Land Management, et al. (United States
District Court for the Central District of California, Riverside Division, Case
No. EDCV-00-0041 VAX (JWJx)). We expect that both cases will be consolidated
into one hearing. The plaintiffs have argued 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. The plaintiffs have not sought
damages other than the recovery of attorneys' fees. In November 2000, the Ninth
Circuit Court of Appeals announced a decision that may have a material adverse
impact on Kaiser's federal land exchange litigation and the pending sale of the
landfill project 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 have amended their
respective complaints to include allegations that the appraisal used in Kaiser's
land exchange with the BLM is similarly defective. Although we originally
anticipated that the federal court would hold a trial or rule on summary
judgment motions in May 2001, this original schedule has been substantially
delayed in light of the Court of Appeals' ruling in Bisson. At the current time,
we do not know when a trial will be held or a ruling will be made, and Kaiser,
MRC and the BLM are evaluating their options with regard to the appraisal used
in Kaiser's completed land exchange.

     Warrant Dispute. New Kaiser Employees' Voluntary Benefit Association, VEBA,
and Pension Benefit Guaranty Corporation, PBGC, are the beneficial owners of
warrants to purchase, respectively, 460,000 and 285,260 Class A Units in the
Company (the warrants were initially for common stock of Kaiser Inc. and in the
merger of Kaiser Inc. with and into Kaiser LLC, the warrants were converted into
Class A Units of Kaiser LLC). VEBA and PBGC have each claimed that the treatment
of its warrant in the conversion violated the terms of the warrant. We do not
believe this claim has any merit. Prior to the vote on the conversion proposal,
it was agreed by Kaiser, VEBA and PBGC that the rights of each VEBA

                                      77

<PAGE>

and PBGC under its warrant would not be changed or waived by (i) any consent to
or approval of the conversion proposal by either VEBA, PBGC or any director
representing either of them, or (ii) any decision by either the VEBA or the
PBGC to delay any potential legal challenge until after the adoption and
completion of the conversion proposal. VEBA and PBGC voted their respective
shares in Kaiser Inc. in favor of the conversion proposal. VEBA recently
renewed its claim that the conversion proposal violated the terms of its
warrant.

     Asbestos Suits. Kaiser, along with KSC Recovery (the Kaiser Steel
Corporation bankruptcy estate), are currently named in approximately forty (40)
active asbestos lawsuits. Kaiser and KSC have been previously named in other
asbestos suits but for various reasons those suits are not currently being
pursued. 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 Kaiser and/or KSC were in some manner
associated with one or more shipyards or has successor liability.

     In addition, there are several claims involving other facilities such as
the Mill Site Property. Most of these lawsuits are third party premises claims
that claim injury resulting from exposure to asbestos or asbestos containing
products and involve multiple defendants. Kaiser anticipates that it, often
along with KSC, 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 couple of years,
increasing the likelihood that additional suits will be filed against us. In
addition, the trend has been toward increasing trial damages and settlement
demands. Virtually all of the complaints against Kaiser and KSC are
non-specific, but involve allegations relating to pre-bankruptcy activities. It
is difficult to determine the amount of damages that Kaiser 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. Instead these claims incorporate
by reference a blanket pleading that asserts an amount of damages in excess of
the court's jurisdictional requirement (usually $50,000). Additionally, those
actions which assert a specific amount of damages do not specify the amount by
defendant, and Kaiser is often one of many defendants in these cases, often more
than 50 defendants. Many cases have been dismissed without Kaiser paying any
amount in settlement, and most other cases have been settled for a payment of
less than $10,000. Occasionally, Kaiser has entered into settlements in excess
of $100,000. Since the bankruptcy proceedings, approximately 176 claims have
been resolved, with only 12 of those claims being resolved for a payment in
excess of $100,000. Kaiser has resolved approximately 70% of these claims for
less than $10,000. Most claims that settled for more than $100,000 were covered
entirely, or in part, by insurance.

     To date, several, but not all, of the plaintiffs have agreed that they will
not pursue Kaiser, although they have the right to pursue Kaiser's insurance
coverage to the extent there is coverage. Kaiser currently believes that these
claims are substantially covered by insurance coverage, and we have tendered
these suits to the appropriate insurance carriers. Many, but not all, of the
current asbestos claims are being accepted for defense and indemnity purposes by
insurance carriers, subject to a reservation of rights. However, two insurance
carriers are disputing the amount of insurance coverage with regard to the
various types of asbestos claims and the extent of the participation the
allocation, if any, of defense costs and damages to Kaiser. Kaiser and KSC are
engaged in settlement negotiations with insurance carriers with regard to these
coverage disputes and Kaiser has reserved for asbestos claims and related
matters as a part of its environmental reserves. Depending upon the nature of
the claims and the year of claimed exposure, Kaiser's percentage of exposure in
these cases may range from 0 percent to 100 percent. However, as discussed in
the section entitled "New Insurance Policy", any currently uninsured risks are
now covered by a newly purchased insurance policy up to a maximum of $50
million.

     Kaiser also currently believes that it has various defenses to these
claims, including, among other defenses, the discharge granted to it in
connection with Kaiser Steel's bankruptcy reorganization. However, this is an
evolving area of the law and it is possible that the bankruptcy discharge will
not be recognized in many of the asbestos claims. Because the claims involve
pre-bankruptcy activities, the

                                      78

<PAGE>

Kaiser Steel bankruptcy estate, through KSC, has been incurring defense and
settlement costs, which we expect will be reimbursed in large part by
insurance. If KSC is unable to fund these expenses, whether from cash reserves
or from insurance proceeds, we may be obligated to fund these costs, which was
part of the motivation for purchasing the new insurance policy described below.
See "New Insurance Policy."

BANKRUPTCY CLAIMS

      KSC was formed for the primary purpose of pursuing certain legal actions
on behalf of the former creditors of Kaiser Steel and handling the remaining
administrative duties of the Kaiser Steel bankruptcy estate, including claims
resolution. All litigation and bankruptcy administration costs are borne by KSC,
which maintains a cash reserve from previous litigation and other recoveries to
fund anticipated ongoing litigation and administration costs. Because of the
minimum activities of the Kaiser Steel bankruptcy estate at this time, the
Bankruptcy Court terminated its supervision over the estate in October 1996.
However, the bankruptcy estate is reopened from time to time to address certain
litigation matters as they arise.

     From time to time, various environmental and similar types of claims, such
as the environmental and asbestos litigation mentioned above that relate to
Kaiser Steel pre-bankruptcy activities, are asserted against KSC and Kaiser.
Excluding the asbestos claims, there were approximately four environmental
claims made in 2000, all of which were resolved through KSC. Settlements ranged
from zero to about $150,000 (in settlement of a $1 million late general
unsecured creditor claim in the bankruptcy estate). In connection with the
Kaiser Steel plan of reorganization, Kaiser, as the reorganized successor to
Kaiser Steel, 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 Kaiser Steel bankruptcy plan, if any of these claims or other similar
claims are ultimately determined to survive the Kaiser Steel bankruptcy, it
could have a material adverse effect on Kaiser. In particular, there is some
question as to the validity of the discharge with regard to particular claims,
such as asbestos claims.

     California Regional Water Quality Control Board. In the Summer of 2001, the
RWQCB communicated with Kaiser that the City of Ontario is asserting that we are
responsible for the damage caused by a plume of high total dissolved solids
(such as salt) to one of its wells, which plume allegedly emanated from the Mill
Site Property. By way of background, in the Fall of 1993, RWQCB approved a
settlement agreement resolving Kaiser's groundwater remediation obligation. The
settlement agreement provided that Kaiser would: (i) pay $1,500,000 upon
approval of the settlement agreement; and (ii) contribute 1,000 acre feet of
water in storage per year for 25 years for the benefit of a regional groundwater
de-salter program either by direct transfer to the de-salter project or
abandonment to the basin with a Watermaster waiver of the de-salter
replenishment obligation. Kaiser has satisfied all of its obligations under the
settlement agreement. However, the settlement agreement left open the
possibility of certain third party claims. Kaiser has the right to commence its
own investigation and to present its findings to the RWQCB before the RWQCB
makes a decision on the matter. Our preliminary investigation work has been
provided to the RWQCB. Kaiser believes this matter is covered under its new
insurance policy that addresses, among other items, environmental matters. See
"New Insurance Policy." and the section entitled "THE CONVERSION PROPOSAL - RISK
FACTORS - California Regional Water Quality Control Board" of our Registration
Statement on Form S-4, filed October 19, 2002.

                                      79

<PAGE>

NOTE 22.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                        First        Second            Third               Fourth
                                                       Quarter       Quarter           Quarter             Quarter
                                                       -------       -------           -------             -------
<S>                                                 <C>            <C>              <C>                <C>
2001

Resource revenues............................       $67,475,000    $     168,000    $      177,000     $    231,000

Income (loss) from operations................       $65,084,000    $    (917,000)   $     (728,000)    $ (2,291,000)

Income (loss) before income tax provision....       $65,470,000    $      95,000    $      236,000     $ (2,121,000)

Net income...................................       $48,009,000    $      70,000    $      749,000     $    196,000

Earnings per unit/share......................
   Basic                                            $      7.35    $         .01    $         0.11     $      (0.02)
   Diluted...................................       $      7.26    $         .01    $         0.11     $       0.00

2000

Resource revenues............................       $ 1,408,000    $   1,593,000    $    1,526,000     $  3,117,000

Income (loss) from operations................       $   393,000    $     745,000    $      283,000     $   (624,000)

Income (loss) before income tax provision....       $   501,000    $     793,000    $      449,000     $   (365,000)

Net income...................................       $   300,000    $     476,000    $      269,000     $ 12,298,000

Earnings per share...........................
   Basic                                            $      0.05    $        . 07    $         0.04     $       1.93
   Diluted...................................       $      0.04    $        . 07    $         0.04     $       1.84
</TABLE>

                                      80

<PAGE>

                      KAISER VENTURES LLC AND SUBSIDIARIES

            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                                                                    Deductions
                                                                                         /
                                             Balance at         Charged to          Adjustments
            Classification                   Beginning           Costs and              from             Balance at
                                             of Period          Expenses (A)          Reserves          End of Period
---------------------------------------    ---------------    -----------------    ---------------     ----------------
<S>                                        <C>                <C>                  <C>                 <C>
Year Ended December 31, 2001
----------------------------

Allowance for losses in collection
of current accounts receivable......       $       83,000     $            --      $       49,000      $       34,000
                                           ==============     ===============      ==============      ==============

Year Ended December 31, 2000
----------------------------

Allowance for losses in collection
of current accounts receivable......       $       90,000     $            --      $        7,000      $       83,000
                                           ==============     ===============      ==============      ==============

Year Ended December 31, 1999
----------------------------

Allowance for losses in collection
of current accounts receivable......       $      303,000     $            --      $      213,000      $       90,000
                                           ==============     ===============      ==============      ==============
</TABLE>

(A) Although the Company is continuing to bill Cucamonga at what it believes is
the correct Metropolitan Water District of Southern California ("MWD") rate
under the lease with Cucamonga, the Company has elected to report revenues on
the basis of amounts Cucamonga is currently paying. The lease dispute was
settled as a result of the sale of the Company's investment in Fontana Union to
Cucamonga in March 2001.

                                      81