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United States

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-KSB



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(Mark One)

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

for the fiscal year ended December 31, 2006

OR



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

Commission File Number: 000-33433



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KAISER VENTURES LLC

(Exact name of
registrant as specified in its charter)



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

3633 E. Inland Empire Blvd. Suite 480

Ontario, Ca 91764

(Address of
principal executive offices and zip code)

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

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

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



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



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Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ̈

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

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-8 is not contained in this form, and will not be contained to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ̈

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.):    Yes ̈No  x

Issuers revenues for its most recent fiscal year: approximately $2,600,000.

The Class A Units are not publicly traded. The aggregate market value of the issuers Class A Units held by non-affiliates of the issuer would be approximately $6,164,031 based upon the tax appraisal conducted on behalf of
the Company as of November 30, 2001 reflecting a $1.50 per unit value. There has not been any public trading of Class A Units since that date. (For purposes of this calculation, Class A Units held by each manager, executive officer,
and by each person known by the registrant as owning 10% or more of the outstanding Class A Units have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes).

At March 15, 2007, 7,044,299 Class A Units were outstanding including 104,267 Class A Units outstanding but reserved for distribution to the general
unsecured creditors in the Kaiser Steel Corporation bankruptcy and 113,690 Class A Units deemed outstanding and reserved for issuance to holders of Kaiser Ventures Inc. stock that have to convert such stock into Kaiser Ventures LLC Class A
Units.

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

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



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TABLE OF CONTENTS TO FORM 10-KSB



|         |  |                                                                                                                 |  |     
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                                 |  | PAGE
|PART I   |  |                                                                                                                 |  |     
|         |  |                                                                                                                
|         |  | FORWARD-LOOKING STATEMENTS                                                                                      |  | 1   
|         |  |                                                                                                                
|         |  | WHO WE ARE                                                                                                      |  | 1   
|         |  |                                                                                                                
|Item 1.  |  | DESCRIPTION OF BUSINESS                                                                                         |  | 1   
|         |  |                                                                                                                
|Item 2.  |  | DESCRIPTION OF PROPERTIES                                                                                       |  | 14  
|         |  |                                                                                                                
|Item 3.  |  | LEGAL PROCEEDINGS                                                                                               |  | 16  
|         |  |                                                                                                                
|Item 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             |  | 18  
|         |  |                                                                                                                
|PART II  |  |                                                                                                                 |  |     
|         |  |                                                                                                                
|Item 5.  |  | MARKET FOR THE COMPANYS EQUITY, RELATED OWNER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES |  | 19  
|         |  |                                                                                                                
|Item 6.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                           |  | 21  
|         |  |                                                                                                                
|Item 7.  |  | FINANCIAL STATEMENTS                                                                                            |  | 30  
|         |  |                                                                                                                
|Item 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            |  | 54  
|         |  |                                                                                                                
|Item 8A  |  | CONTROLS AND PROCEDURES                                                                                         |  | 54  
|         |  |                                                                                                                
|Item 8B  |  | OTHER INFORMATION                                                                                               |  | 55  
|         |  |                                                                                                                
|PART III |  |                                                                                                                 |  |     
|         |  |                                                                                                                
|Item 9.  |  | MANAGERS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT               |  | 56  
|         |  |                                                                                                                
|Item 10. |  | EXECUTIVE COMPENSATION                                                                                          |  | 59  
|         |  |                                                                                                                
|Item 11. |  | SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                |  | 68  
|         |  |                                                                                                                
|Item 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                  |  | 69  
|         |  |                                                                                                                
|PART IV  |  |                                                                                                                 |  |     
|         |  |                                                                                                                
|Item 13. |  | EXHIBITS                                                                                                        |  | 70  
|         |  |                                                                                                                
|Item 14. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                          |  | 75  



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PART I

FORWARD-LOOKING STATEMENTS

Except for the historical statements and discussions contained herein,
statements contained in this 10-KSB Report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Any 10-K Report, 10-KSB Report, 10-Q Report, 10-QSB Report, 8-K Report, website posting or press release of the Company and any amendment thereof may include forward-looking statements. In addition, other written or oral statements, which constitute
forward-looking statements, have been made and may be made in the future by the Company. You should not put undue reliance on forward-looking statements. When used or incorporated by reference in this 10-KSB Report or in other written or oral
statements, the words anticipate, estimate, project and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties, and assumptions. We
believe that our assumptions are reasonable. Nonetheless, it is likely that at least some of these assumptions will not come true. Accordingly, should one or more of these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated, expected, or projected. For example, our actual results could materially differ from those projected as a result of factors such as, but not limited to: Kaisers
inability to complete the anticipated sale of its Eagle Mountain landfill project; litigation, including, among others, the averse decision of the U.S. District Court in September 2005 impacting the Eagle Mountain landfill project and the outcome of
the appeal of this adverse decision, pre-bankruptcy activities of Kaiser Steel Corporation, the predecessor of Kaiser, and asbestos claims; insurance coverage disputes; the impact of federal, state, and local laws and regulations on our permitting
and development activities; competition; the challenge, reduction or loss of any claimed tax benefits; the impact of natural disasters on our assets; and/or general economic conditions in the United States and Southern California. The Company
disclaims any intention to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

WHO WE ARE

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



|Item 1. | DESCRIPTION OF BUSINESS
|------- | -----------------------

Business Strategy

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



| |  |  | An 82.48% ownership interest in Mine Reclamation, LLC, (referred to as MRC), which owns a permitted rail-haul municipal solid waste landfill at a property called
the Eagle Mountain Site located in the California desert. This landfill project 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
plus accrued interest, which sale is subject to a number of conditions,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | several of which remain to be fully satisfied. In September 2005 the Company received an adverse U.S. District Court decision that may materially impact the
viability of the landfill project. We along with the U.S Department of Interior have appealed the decision to the U.S. 9thCircuit Court of Appeals;
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the District. However,
the September 2005 adverse U.S. District Court decision reversing a completed land exchange between Kaiser and the United States Bureau of Land Management (BLM), if upheld on appeal, will change the amount and nature of a material
portion of Kaisers land holdings at the Eagle Mountain Site.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2006, we also had cash and
cash equivalents, receivables and short-term investments of approximately $8,302,000 and long-term investments of approximately $2,000,000.

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



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



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



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



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



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

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



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



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



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



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



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

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

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

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

We continue to undertake activities to implement the cash maximization strategy. However, it is
unlikely that staff and related expenses will be reduced further given our remaining assets and activities. In addition, the September 2005 adverse U.S. District Court decision concerning the landfill project may ultimately alter and will certainly
impact the timing of the continuing implementation of the cash maximization strategy. For additional information on the adverse U.S. District Court decision, please see Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project
Litigation.

Eagle Mountain Landfill Project and Pending Sale

Description of the Eagle Mountain Site. Kaisers Eagle Mountain Site located in the remote California desert approximately 200 miles east of Los Angeles, currently consisting of approximately 10,800 acres
that contains three large open pit mines, the Eagle Mountain Townsite and a 52-mile private rail line that accesses the site. In 1988, Kaiser leased what is now approximately 4,654 acres of the idle mine site and the rail line to MRC for development
of a rail-haul solid-waste landfill. As discussed in



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more detail below, the amount and nature of the acreage owned and controlled at the Eagle Mountain Site would change in the event the September 2005 U.S.
District Court decision reversing a land exchange completed between the Company and the BLM in October 1999 is upheld on appeal.

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 received all the major permits and approvals required for siting, constructing, and operating the landfill project in 1999. We believe that the Eagle Mountain Site has many unique attributes which make it particularly well-suited
for a rail-haul, solid waste landfill, including, among other attributes, its remote location, arid climate, available and suitable materials for the proposed liner system and daily cover, and rail access.

Acquisition of Our Interest in MRC. We initially acquired our interest in MRC in 1995, as a result of the withdrawal of MRCs previous
majority owner, a subsidiary of Browning Ferris Industries. Before and in connection with this withdrawal, Browning Ferris invested approximately $45 million in MRC. In 2000, Kaiser assigned all of the economic benefits of the MRC lease and granted
an option to buy the landfill property to MRC in exchange for an increase in Kaisers ownership interest in MRC. The MRC lease will terminate upon the sale of the landfill project to the District, assuming the sale is completed. We presently
own 82.48% of MRCs Class B Units (like common stock) and 100% of its Class A Units (like preferred stock). See Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale - MRC Financing below.

Pending Sale of the Landfill Project

Background.In August 2000, MRC entered into an agreement to sell the landfill project to the District for $41 million. Under the terms of that agreement, upon closing of the sale, $39 million of the total purchase price is to be
deposited into an escrow account. This money would then be released to MRC on the resolution of certain litigation contingencies. Currently the only existing litigation contingency arises out of the federal litigation challenging the completed
federal land exchange which is discussed below. Even though the closing has not taken place and these funds have not been deposited into an escrow account, interest began accruing on this portion of the purchase price on May 3, 2001. The
remaining $2 million of the purchase price would also be placed into an escrow account upon closing and was originally to be released upon the later of (1) the release of the $39 million as described above or (2) the permitting approvals
of the Districts Puente Hills landfill for its remaining 10 years of capacity. However, the District has received the necessary permits for the expansion of its Puente Hills landfill and thus, the full purchase price will be placed into escrow
when the initial closing has occurred, and will be released upon resolution of the pending federal land exchange litigation. As discussed in more detail in Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Exchange
Litigation, on September 20, 2005, the U.S. District Court for the Central District of California, Eastern Division, issued an adverse decision in the federal land exchange litigation, which would, if fully affirmed on appeal,
jeopardize the viability of the landfill project and its sale to the District. Accordingly, receipt of the purchase price, in whole or in part, if at all, is expected to be delayed for several years pending satisfactory resolution of these
contingencies. At this time, we cannot estimate when or if the sale may be completed.

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 and resolution of outstanding litigation. We have been working on
resolving various title issues, obtaining necessary consents and otherwise working toward a closing. However, resolution of all remaining issues will probably not occur until and unless there is a positive decision in the land exchange litigation
which is currently on appeal to the U.S. 9thCircuit Court of Appeals. Although the contractual expiration date is
currently June 30, 2007, the date has already been extended numerous times. The conditions to closing are not expected to be met by the



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current expiration date, and the parties will individually determine whether to extend the closing date one or more additional times. In addition, as
discussed in more detail below, the adverse decision in the federal land exchange may impact the sale of the landfill project to the District. There is no assurance or requirement that either party will continue to extend the closing date for the
proposed sale of the landfill project. See Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale - Risks Factors for a more detailed discussion of some of the material risk factors facing the landfill project
and its sale.

Flood Damage to Railroad

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

MRC Financing

Since 1995 MRC has been funded through a series of private placements to its existing equity
holders. As a result of prior MRC private placements and in exchange for releasing the economic benefits of the lease with MRC and granting MRC the option to acquire the landfill project site for $1.00, we have increased our original 70% ownership
interest in MRC acquired in 1995 to 82.48%. We anticipate that in the second quarter of 2007, MRC will commence an approximate $1,200,000 private placement to its existing equity holders to fund MRC through 2008 the estimated duration of the
9thCircuit Appeal process. The anticipated private placement would be payable over two (2) installments with
the second installment payable in 2008. We anticipate purchasing, at a minimum, that number of units offered for sale that would maintain our current percentage of ownership of 82.48% in MRC. Future funding of MRC will be required to cover such
items as the railroad repairs but there is no assurance that such funding will be obtained.

Current Status

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

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.



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



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

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

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

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

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

We anticipate that the Development Agreement will be fully executed and recorded
just prior to the anticipated 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.

In October 2005, following the adverse U.S. District Court decision on the land exchange litigation, one member of the Riverside Board of Supervisors
attempted to terminate the existing Riverside County approvals for the landfill project. Such attempt was defeated with the only supervisor voting in favor of the proposal to terminate the existing approvals being the supervisor that proposed the
termination of the



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countys approvals. This same county supervisor originally opposed and voted against the landfill project in 1997.

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 Litigation And
Other Threatened Litigation. In October 1999, Kaisers wholly owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. In this exchange, Kaiser transferred approximately 2,800
acres of Kaiser-owned property along its railroad right-of-way to the BLM and a nominal cash equalization payment in exchange for approximately 3,500 acres of land within the landfill project area. The land exchanged by Kaiser was identified as
prime desert tortoise habitat and was a prerequisite to completion of the permitting of the landfill project. With the land exchange completed, the Eagle Mountain Site consists of approximately 10,108 acres with 8,636 acres held in fee (which
includes the Eagle Mountain Townsite) and approximately 1,472 acres held as various mining claims. The land exchange also involved the grant of two rights-of-way by the BLM and the termination of a reversionary interest involving approximately 460
acres of the Eagle Mountain Townsite that was contained in the original grant of such property.

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. Nearly three years after the final brief in the case was filed, on September 20, 2005, the U.S. District Court for the Central District of California, Eastern Division, issued its opinion inDonna Charpied,et al., Plaintiffs v.
United States Department of Interior, et al., Defendants (Case No. ED CV 99-0454 RT (Mex)) and in National Parks and Conservation Association, Plaintiff v. Bureau of Land Management, et al., Defendants (ED CV 00-0041 RT (Mex)).
The decision was adverse to the landfill project in that it set aside the land exchange completed between the Company and BLM as well as two BLM rights-of-way. The Company along with the U.S. Department of Interior are appealing the decision. It is
likely that the appeal process will take several years. If the decision is fully affirmed on appeal, the decision would jeopardize the viability of the landfill project. In addition, the decision could adversely impact the agreement to sell the
landfill project to the District, including termination of the agreement. For a more detailed discussion of this litigation and the risks associated with this litigation, see Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Land
Exchange Litigation.

In addition to the federal land exchange litigation, the Company has been threatened from time to time with
additional litigation over the landfill project involving such matters as the federal Endangered Species Act. However, as of the date of the filing of this Annual Report on Form 10-KSB none of the previous threats have resulted in the commencement
of a legal action against the Company.

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. This project has been proposed in one form or another since 1988. The Company has not agreed to sell or lease this property to ECEC. This project was essentially the same project that ECEC previously proposed and was dismissed by the FERC
in July 1999. However, as a result of the October 1999 completed land exchange with the BLM, there is no title reservation on any portion of the property. As discussed below this may change if the land exchange is ultimately reversed. FERC issued a
preliminary permit to ECEC in June 2001. We, along with others, objected to the ECEC project and intervened in the matter. ECECs preliminary permit expired in the second quarter of 2004. However, shortly after the expiration of such
preliminary permit, ECEC filed an application with FERC for a new preliminary permit for the same project and on March 7, 2005, FERC granted a preliminary permit to ECEC. This is the third time ECEC will have been granted a preliminary permit
for this potential project. As in previous years, to managements knowledge, there was no material activity by ECEC in 2006 with regard to substantively processing its permit application. We, along with others, have again intervened in this
matter.

If the completed land exchange is ultimately and permanently reversed in accordance with the September 2005 U.S. District Court
decision, certain lands currently owned in fee by Kaiser will revert back to federal lands, although a substantial amount of such lands will then be controlled by Kaiser because of its federal mining claims. As a result of any final reversal to
federal ownership, a portion of the land may be subject to a title encumbrance associated with the issuance of the preliminary permit to ECEC by FERC.

Risk Factors

As discussed in this Annual Report on Form 10-KSB, there are numerous risks associated with MRC and the
landfill project. The landfill project has been and continues to be the subject of extensive litigation which has and will continue to substantially delay the landfill project and which could ultimately lead to termination of the landfill project.
If the current land exchange litigation is not favorably resolved or resolved in a manner that a cure can be reasonably undertaken, the landfill project will not be viable as currently permitted. Even if the appeal of the adverse U.S. District Court
decision is successful, we may not be able to cure all of the concerns with regard to other title or due diligence matters in a timely fashion to permit the sale to the District to be completed. If the litigation is not favorably resolved and/or the
Company cannot otherwise cure various alleged title and other closing issues in a timely fashion, then the Districts purchase of the landfill project would not be completed and the Company might have to abandon Eagle Mountain and its
investment. If this should occur, the Company will likely seek to pursue any other possible opportunities or to re-solicit bids for the purchase of the landfill project, which may not result in a sale of the landfill project on favorable terms, if
at all.

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

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

The
landfill project also faces competition from other landfills as well as the Mesquite rail-haul landfill project which the District owns and is developing.

We are also dependent upon the continued services of our executive officers given the complex nature of the landfill project, the challenges it faces, and the importance of historical information. The loss of the
services of our executive officers, especially without advance notice, could materially and adversely impact this project and well as our other business.



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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 of Burrtec Waste Industries, Inc. This entity was formed to construct and operate the materials recovery facility referred to as the West Valley MRF. Under the terms of the parties business arrangements, Kaiser Recycling and Kaiser
remain responsible for any pre-existing environmental conditions and West Valley MRF is responsible for environmental issues that may arise related to any future deposit or release of hazardous substances. Kaiser and Burrtec have each separately
guaranteed the prompt performance of their respective subsidiarys obligations.

Phase 1 of the West Valley MRF, which included a
62,000 square foot building, sorting equipment and related facilities for waste transfer and recycling services was built and equipped in 1997 for a total cost of approximately $10.3 million. Phase 2 of the West Valley MRF was completed in 2001 and
increased the processing facility by an additional 80,000 square feet and included the installation of new recycling lines that increased the capacity of the facility to approximately 5,000 tons per day. Phase 2 was completed for a total approximate
cost of $11 million. West Valley MRF is currently processing, on average, approximately 4,200 - 4,400 tons of municipal solid and green waste per operating day. West Valley MRF is currently seeking to expand its permitted waste processing capacity
to 7,500 tons per day to accommodate projected growth. .

The West Valley MRF generates cash flow in excess of that necessary to fund its
cost of operations. Furthermore, the West Valley MRF should distribute sufficient cash to cover a significant portion of Kaiser LLCs foreseeable general and administrative costs. In 2006, the West Valley MRF distributed a total of $2,000,000
in cash to Kaiser.

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

Financing

Most of the financing for the West Valley MRF was obtained through California Pollution
Control Financing Authority tax exempt bonds. Approximately $9,500,000 in bonds were issued in June 1997 (Phase 1), and approximately $8,500,000 in bonds were issued in May 2000 (Phase 2). The interest rate for the Bonds varies weekly. The rates for
2006 ranged from approximately 3.08% to 4.05%. 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, 2013, although West Valley MRF is required, pursuant
to an agreement with Union Bank, to annually redeem a portion of the Bonds.

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



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As of December 31, 2006, the principal amount of bonds outstanding totaled approximately
$8,970,000.

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

Risk Factors

The West
Valley MRF faces risks related to general economic and market conditions, including the impact of rising interest rates, fuel and labor costs. For example, in 2006, the State of California passed legislation increasing the minimum wage as of
January 1, 2007, to $7.50 per hour and to $8.00 per hour as of January 1, 2008. To the extent that these increases cannot be fully passed through to its customers, the increases in the minimum wage may impact, at least in the short-term,
the margins and profitability of the West Valley MRF. As a part of its operation the West Valley MRF processes for sale certain recyclable materials, including aluminum, glass, paper, newsprint, corrugated cardboard and other similar items. These
commodities are subject to material price fluctuations relating to domestic and international economic and market conditions which can materially affect future operating income and cash flows. During 2006, commodity prices were generally lower than
in 2005.

Most of the waste processed at the West Valley MRF is as a result, directly or indirectly, of hauler or municipal contracts or
franchise agreements. Many of these arrangements are for a specified term and are subject to competitive bidding in the future. For example, as a result of competitive bidding, the West Valley MRF is no longer processing certain waste from a small
customer, the City of Claremont, California. In addition, some of the customers of West Valley MRF may terminate their contracts prior to the scheduled contract term.



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The largest sources of waste for the West Valley MRF are derived through Burrtec affiliated
companies, the City of Ontario and Waste Management, Inc. affiliated companies. The loss of waste currently hauled or directed by these companies or the City of Ontario to the West Valley MRF could materially impact West Valley.

Governmental action may also affect waste flow to the West Valley MRF. Municipalities may annex unincorporated areas within San Bernardino County and
Riverside County where the West Valley MRF currently derives waste; as a result customers in annexed areas may be required to obtain services from competitors. In addition, the franchise agreements of counties may impose restrictions on the flow of
waste to the West Valley MRF. For example, in 2005 San Bernardino County imposed conditions on the hauling of waste generated in the unincorporated areas of the county that prevents or discourages such waste from being processed at the West Valley
MRF. The imposition of these restrictions resulted in the loss of approximately 200 to 250 tons per week of waste being processed at the facility.

In addition, there is an extensive regulation of the waste industry. The regulatory process requires firms in the waste hauling, waste recycling and/or landfill business to obtain and retain numerous governmental permits to conduct various
aspects of their operations, any of which may be subject to revocation, modification or denial. Changes in such governmental policies and attitudes relating to the industry could impair the landfill projects or the West Valley MRFs ability to
obtain applicable permits from governmental authorities on a timely basis and to retain such permits. The Company is not in a position at the present time to assess the extent of the impact of such potential changes in governmental policies and
attitudes on the permitting processes, but they could be significant.

The West Valley MRF is also facing increasing competition for waste
as discussed in more detail under the Competition discussion immediately above.

Miscellaneous Business

The Company is able to generate miscellaneous income from time to time from such activities as leasing its fee owned land at Eagle Mountain for
commercials and military and law enforcement training.

OTHER KAISER ASSETS

For a discussion of our other assets such as the Eagle Mountain Townsite, the property adjoining the Eagle Mountain Townsite and the Lake Tamarisk
property, please see Item 2. DESCRIPTION OF PROPERTIES.

HISTORICAL OPERATIONS AND COMPLETED TRANSACTIONS

The following information is provided as historical background and to put into context our current activities including our current cash maximization
strategy.

Water Resources

Until the
sale of its ownership interest in Fontana Union Water Company, or Fontana Union, to Cucamonga County Water District, referred to as Cucamonga, in March 2001 for $87.5 million or approximately $10,860 per share of Fontana Union stock, the
Companys results of operations depended, in large part, on water rights and successfully leasing such rights. Concurrently with the sale of its Fontana Union stock, the Company also received approximately $2.5 million in payments under its
water lease with Cucamonga. The sale was completed in the context of settling outstanding litigation between Cucamonga and the Company. Prior to that time Kaiser leased all of its shares in Fontana Union to Cucamonga under the terms of 102-year
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Fontana Union owns water rights to produce water from various sources of water near Fontana,
California. Kaisers ownership of Fontana Union entitled it to receive, annually, a proportionate share of Fontana Unions water, which water was historically used in connection with Kaisers steel making activities.

Mill Site Property

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

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

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

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

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



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

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

Environmental Matters

The operation of a steel mill by the Companys predecessor, KSC, resulted in known contamination of limited portions of the Mill Site Property. As
discussed above, the Companys consent order with the DTSC was terminated in connection with the sale of approximately 588 acres of the remaining Mill Site Property to CCG for $16 million in cash plus the assumption of virtually all known and
unknown environmental obligations and risks associated with the property as well as certain other environmental obligations. Concurrently with that termination, CCG entered into a new consent order with the DTSC, in which CCG assumed responsibility
for all future investigation and remediation of the Mill Site Property it purchased, as well as various other items covered under its CCG consent order. In addition, CCG assumed and agreed to indemnify the Company against various contractual
environmental indemnification and operations and maintenance (O&M) obligations the Company has with purchasers of other portions of the Mill Site Property. In connection with this land sale, CCG entered into a fixed price
environmental remediation services agreement with IT Corporation (IT), an environmental contractor, to remediate the known environmental conditions on the property. IT filed for bankruptcy in January 2002, but certain of the assets of IT
were eventually acquired by The Shaw Group, including the fixed price environmental contract. Accordingly, the fixed price environmental remediation services contract continues to be performed. In addition, CCG is obligated to remediate the Tar Pits
Parcel pursuant to a solidification and capping strategy. The remediation of the Tar Pits parcel is also covered by the fixed price environmental remediation contract. Except for continuing inspection and maintenance obligations, the remediation of
the Tar Pits Parcel has been completed although the Company may review additional remediation possibilities as a means of making such parcel useable property.

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

With regard to groundwater, we previously settled certain allegations of groundwater contamination concerning a plume (containing
total dissolved solids, sulfate, and organic carbon) to which the historic steel operations allegedly contributed. 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



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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 2004, this reserve was again reduced to approximately $2.4 million to reflect settlement of a third party claim related to the groundwater plume discussed above. This reserve was further reduced in 2005
as a result of reclassifying $500,000 to the Eagle Mountain Townsite Cleanup Reserve. This environmental reserve was increased by $1.2 million as of December 31, 2005, for Eagle Mountain Townsite environmental related matters, as discussed in
more detail in Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Section 2: New Accounting Pronouncements. As a result of some remediation actives that took place at Eagle Mountain in 2006 the
environmental reserve was further reduced by $197,000.

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

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

Tar Pits Parcel

Currently, the only remaining property we own at the Mill Site Property is an approximate 5 acre parcel known as the Tar Pits Parcel. Under our agreement with the West Valley MRF, we are obligated to contribute the Tar Pits Parcel to the
West Valley MRF, at its option, upon the environmental remediation of the property. Except for ongoing inspection and monitoring activities, remediation of the Tar Pits Parcel was completed in 2002 at CCG Ontario, LLCs, (referred to as CCG),
expense. CCG is responsible for this propertys environmental remediation pursuant to the terms of the purchase agreement entered into between CCG and Kaiser in August 2000 relating to Kaisers sale of approximately 588 acres of the Mill
Site Property. However, the Company may explore additional remediation alternatives as a means of making the Tar Pits Parcel useable. See Part I, Item 1. DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill
Site Environmental Matter

Employees

As of March 15, 2007, Kaiser LLC had no employees. However, Kaiser LLC leases employees through Business Staffing, Inc., a subsidiary of Kaiser LLC, and reimburses Business Staffing for the costs associated with 5 full-time (4 at
Ontario, California and 1 at Eagle Mountain, California) and 5 permanent part-time employees (3 in Ontario, California and 2 at Eagle Mountain, California). All except one of the full-time and all of the part-time employees were previously employed
by Kaiser Inc.

Item 2.
DESCRIPTION OF PROPERTIES

Office Facilities

Our principal offices are located at 3633 East Inland Empire Boulevard, Suite 480, Ontario, California, 91764. The Company currently leases approximately
2,950 square feet in Ontario, California at a current cost of approximately $6,800 per month. The office lease was extended in 2006 and it now expires on August 31, 2009 with the Company having the option to extend the lease until
August 31, 2011. Our subsidiary, Kaiser Eagle Mountain, LLC, also currently maintains an office at the Eagle Mountain Site. We own the building used as an office at the Eagle Mountain Site.



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Eagle Mountain, California

The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle Mountain Townsite are located in Riverside County, approximately ten miles northwest of Desert Center, California. Desert Center is located on
Interstate 10 between Indio and Blythe. The heavy duty maintenance shops and electrical power distribution system have been kept substantially intact since the 1982 shutdown. The Company also owns several buildings, a water distribution system, a
sewage treatment facility, and related infrastructure. The District, upon its purchase of the landfill project, will own a substantial portion of this infrastructure. Accordingly, the District and the Company are negotiating a number of agreements
addressing access and joint use of infrastructure facilities. The Eagle Mountain Townsite includes more than 300 single family homes, approximately 100 of which have been renovated. Due to the passage of time and the impacts of weather, a number of
the buildings and houses at the Eagle Mountain Townsite are deteriorating at a faster rate than anticipated and may not be salvageable. Accordingly, we may need to demolish or rehabilitate a number of structures over the next several years and we
have established a $2.5 million reserve for such purposes. In 2006, 27 homes were remediated and demolished. See also Part II, Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Section 2:
Liquidity and Capital Resources - New Accounting Pronouncements.

Until December 31, 2003, a private prison was operated at the
Eagle Mountain Townsite. With the closure of the private prison and implementation of a mothball plan in 2004, Eagle Mountains ongoing operations and staffing were reduced. We are continuing to seek appropriate tenants for a lease of all or
portions of the Eagle Mountain Townsite. However, the September 2005 adverse U.S. District Court decision involving a completed land exchange between Kaiser and the BLM may hinder these efforts.

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

In and around the Eagle Mountain site the Company currently has various possessory mining claims of approximately 1,472 acres and holds approximately
8,644 acres in fee simple (which includes the approximate 1,300 acre Eagle Mountain Townsite). Approximately 4,654 acres of this property will be sold as a part of sale of the landfill project, assuming such sale is completed. See Part I,
Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project. However, if the adverse U.S. District Court decision is up held on appeal it will impact the amount and nature of our land holdings. If the land exchange is finally
reversed, and we are placed back to the same position as prior to the land exchange, we would own or control in and around Eagle Mountain approximately 1,800 acres in fee and 9,550 acres in various possessory mining claims. In addition, the reversal
of the land exchange would reinstate a reversionary interest contained in the original grant of approximately 460 acres of the Eagle Mountain Townsite.

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.

Rock/Aggregate

As a result of previous mining at Eagle Mountain, millions of tons of rock of various
sizes has been stock piled on portions of the property around the Eagle Mountain Townsite. At the present time, there are no active bulk buyers for the rock although interest has been expressed for the purchase of small quantities.



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Railroad

To transport ore from the Eagle Mountain mine to the mill site (see below), Kaiser Steel Corporation constructed a 52-mile heavy duty rail line connecting the mine to the main Southern Pacific rail line at Ferrum, California. We own in fee
approximately 10% of the 52-mile railroad right-of-way. The major remaining portion of the railroad right-of-way consists of various private easements and an operating right-of-way from the BLM. The railroad is included in the lease to MRC and, to
the extent reasonably possible, will be transferred to the District upon the consummation of the sale of the landfill project if the sale is completed. Portions of the railroad suffered significant flood damage in 2003. The adverse U.S. District
Court decision reversing a completed land exchange would also reverse a BLM right-of-way granted under the Federal Land Policy and Management Act for the railroad but the original federal right-of-way granted under the Private Law 790 would remain
in place. In addition, if the land exchange is fully reversed, Kaiser would reacquire approximately 2,800 acres along or near the railroad that had been conveyed to the BLM as a part of the October 1999 land exchange. For additional information, see
Part I, Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale - Flood Damage to Railroad.

Fontana,
California

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

Lake
Tamarisk, California

Lake Tamarisk is an unincorporated community located two miles northwest of Desert Center, California and
approximately 8 miles from the Eagle Mountain mine. This community has 150 improved lots situated around two recreational lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home park, the community has an average year-round
population in excess of 150. Lake Tamarisk Development, LLC, a wholly owned subsidiary of Kaiser, owns: (i) 74 single family improved lots, including, one residential structure; (ii) 3 multi-family lots totaling 12.42 acres; (iii) 1
commercial lot totaling approximately 3.31 acres; (iv) an approximate 170 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk; (v) an approximate 200 acre unimproved parcel adjoining the nine-hole Lake
Tamarisk golf course; and (vi) an approximate 39 acre unimproved parcel adjacent to Lake Tamarisk. We are seeking to sell our Lake Tamarisk properties but are also looking at other development opportunities that may enhance the ultimate value
and sale of such properties.



|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------

In the normal course of our business we are involved in various claims and
legal proceedings. A number of litigation matters previously reported, were settled, dismissed or were inactive in 2006. For example, the Slemmer litigation (Thomas M. Slemmer, et al. v. Fontana Union Water Company, et al., (San
Bernardino County Superior Court, California, Case No. SCVSS 086856)).and associated insurance coverage dispute were fully resolved in 2006. Significant legal proceedings, including those which may have a material adverse effect on our business or
financial condition, are summarized below. However, the following discussion does not, and is not intended to, discuss all of the litigation matters to which we may be or become a party. Should we be unable to resolve any legal proceeding in the
manner we anticipate and for a total cost within close proximity to any potential damage liability we have estimated, our business and results of operations may be materially and adversely affected.



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Eagle Mountain Landfill Project Land Exchange Litigation. In October 1999, Kaisers
wholly-owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. This completed land exchange has been challenged in two separate federal lawsuits. On September 20, 2005, the U. S.
District Court for the Central District of California, Eastern Division, issued its opinion inDonna Charpied,et al., Plaintiffs v. United States Department of Interior, et al., Defendants (Case No. ED CV 99-0454 RT (Mex)) and in
National Parks and Conservation Association, Plaintiff v. Bureau of Land Management, et al., Defendants (ED CV 00-0041 RT (Mex)). The decision is adverse to the landfill project in that it sets aside a land exchange completed between
the Company and U.S. Bureau of Land Management (BLM) in October 1999 as well as two BLM rights-of-way. It also effectively reinstates a reverter title issue involving the Eagle Mountain Townsite.

In the exchange, the Companys wholly owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC) transferred approximately 2,800
acres of Kaiser-owned property along its railroad right-of-way to the BLM and a cash equalization payment in exchange for approximately 3,500 acres of land within the Eagle Mountain landfill project area. The land exchanged by the Company was
identified as prime desert tortoise habitat and was a prerequisite to completion of the permitting of the Eagle Mountain landfill project. Following completion of the land exchange, two lawsuits were filed challenging it and requesting its reversal.
The plaintiffs argued that the land exchange should have been reversed, because, among other reasons, the BLM failed to comply with the National Environmental Policy Act and the Federal Land Policy and Management Act. The U.S. District Court
concluded that the environmental impact statement was deficient in its explanation and/or environment analysis with regard to: (i) the issue of eutrophication which deals with the introduction of nutrients, in this case primarily nitrogen, as a
result of the existence of the landfill project; (ii) Big Horn Sheep, which is not an endangered species; (iii) the statement of purpose and need for the landfill project; and (iv) the reasonable range of alternatives to the proposed
project. The court did rule in favor of the landfill project with regard to the environmental analysis and explanation for: (i) noise; (ii) night lighting; (iii) visual impacts; (iv) the desert tortoise; (v) groundwater; and
(vi) air. The court also ruled that the environmental impact statement was deficient under the Federal Land Policy and Management Act with regard to: (i) the appraisal undertaken by the BLM in the land exchange; and (ii) a full
discussion of the BLMs conclusions on the public need for the landfill project. A copy of the decision can be found as Exhibit 99.1 to the Companys Report on Form 8-K dated September 20, 2005.

We and the U.S. Department of Interior have appealed the decision to the U. S. 9thCircuit Court of Appeals. There can be no assurance that we will be successful in any appeal. If the decision is fully
affirmed on appeal, the decision would jeopardize the viability of the landfill project. The U.S. Department of Interiors first brief and our separate first brief were filed in January 2007. The opponents first set of briefs are currently due
in April 2007. The current briefing schedule, which may be modified, has the last brief as being filed in July 2007. It is likely that the complete appeal process will take several years. In addition, the decision could adversely impact the
agreement to sell the landfill project to the District, including termination of the agreement.

Asbestos Litigation. There are
pending asbestos litigation claims, primarily bodily injury, against Kaiser LLC and Kaiser Steel Corporation (the bankruptcy estate of Kaiser Steel Corporation is embodied in KSC Recovery, Inc.). There currently are approximately nine active suits.
Many of the plaintiffs allege that they or their family members were aboard Kaiser ships or worked in shipyards in the Oakland/San Francisco, California area or Vancouver, Washington area in the 1940s and that the Company and/or KSC Recovery
were in some manner associated with one or more shipyards or has successor liability. However, there is an increasing number of claims related to other facilities such as the former Kaiser Steel Mill Site Property.

Most of these lawsuits are third party premises claims alleging injury resulting from exposure to asbestos or asbestos containing products and involve
multiple defendants. The Company anticipates that it, often along with KSC Recovery, will be named as a defendant in additional asbestos lawsuits. A number of large manufacturers and/or installers of asbestos and asbestos containing products have
filed



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for bankruptcy over the past several years, increasing the likelihood that additional suits will be filed against the Company. In addition, the trend has
been toward increasing trial damages and settlement demands. Virtually all of the complaints against us and KSC Recovery are non-specific, but involve allegations relating to pre-bankruptcy activities. It is difficult to determine the amount of
damages that we could be liable for in any particular case until near the time of trial; indeed, many of these cases do not include pleadings with specific damages. The Company vigorously defends all asbestos claims as is appropriate for a
particular case.

Of the claims resolved to date, approximately 78% have been resolved without payment to the plaintiffs, and of the 46
cases that have been settled to date involving a payment made to plaintiffs, the settlement amount was $37,500 or less for 38 of such cases. The Company believes that it currently has substantial insurance coverage for the asbestos claims and has
tendered these suits to appropriate insurance carriers.

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

From time to time various environmental and similar
types of claims that relate to Kaiser Steel pre-bankruptcy activities, are asserted against KSC and Kaiser LLC. Excluding the asbestos claims, there has been an average of two to four such claims a year for the past several years. There were no such
claims in 2005 but in 2006 a claim that was settled in 2000 was reopened under the terms of the 2000 settlement agreement. It is currently not considered to be a material claim in that the first settlement was for a claim in the bankruptcy estate of
less than $25,000. In connection with the KSC plan of reorganization, Kaiser, as the reorganized successor to KSC, was discharged from all liabilities that may have arisen prior to confirmation of the plan, except as otherwise provided by the plan
and by law. Although Kaiser believes that in general all pre-petition claims were discharged under the KSC bankruptcy plan, there have been some challenges as to the validity of the discharge of certain specified claims, such as asbestos claims. If
any of these or other similar claims are ultimately determined to survive the KSC bankruptcy, it could have a materially adverse effect on Kaisers business and value.



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

None.



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PART II



|Item 5. | MARKET FOR THE COMPANYS EQUITY, RELATED OWNER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ---------------------------------------------------------------------------------------------------------------

Kaiser Inc.s common stock commenced trading on the NASDAQ Stock Marketsmin the fourth quarter of 1990 under the symbol KSRI. In the merger, each Kaiser Inc. stockholder of record as of
December 5, 2001, received $10.00 in cash plus one (1) Class A Unit in Kaiser LLC for each share of stock. The Class A Units are subject to significant trading restrictions and are not listed for trading on any securities
exchange. As a result, Kaiser Inc.s common stock ceased being publicly traded on November 30, 2001. Kaiser Inc. paid a $2.00 per share cash distribution to stockholders of record as of December 13, 2000. In connection with the
merger, the Class A Units were independently appraised and determined to have a value of $1.50 as of November 30, 2001.

The
Class A Units are subject to substantial transfer restrictions and, therefore, the Class A Units are not traded on an established securities market and are not readily tradable on a secondary market or the substantial equivalent thereof.
However, we are aware that there have been a very limited number of private purchase and sale transactions since November 30, 2001. To our knowledge, in 2006 less than 2,000 Class A Units were sold to third parties at a price averaging
$.50 per unit. Since the Class A Units are not publicly traded and there is no secondary market for the units, there is no performance graph.

As of March 10, 2007, there were approximately 3,404 holders of record of our Class A Units which includes holders of Kaiser Inc. stock that have yet to convert their shares to Class A Units as a result of the merger.

As of March 10, 2007, KSC Recovery held 104,267 Class A Units that are outstanding but reserved for distribution to the former
general unsecured creditors of KSC pursuant to the KSC Plan. In addition there are 113,690 Class A Units deemed outstanding that are reserved for those investors that have yet to convert their Kaiser Inc. stock to Kaiser LLC Class A Units
as a result of the merger.

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

We did not repurchase any Class A Units in 2006.



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Equity Compensation Plan Information

As required by Item 201(d) of Regulation S-K, the following table provides certain information as of December 31, 2006, with respect to our
equity compensation plans under which equity securities of the Company are authorized for issuance.



|                                                           |  |                                                                                       |  |                                                                         |      |                                                                                                                                          |               |  
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------------- | -
|Plan Category                                              |  | Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand
rights |  | Weighted-averageexercise price ofoutstandingoptions, warrantsand rights |      | Number of securitiesremaining availablefor future
issuanceunder equitycompensation plans (excludingsecurities reflected in first column) |              
|Equity compensation plans approved by security holders     |  | 298,100                                                                               |  | $                                                                       | 3.11 |                                                                                                                                          | 0             |  
|Equity compensation plans not approved by security holders |  | N/A                                                                                   |  |                                                                         | N/A  |                                                                                                                                          | 20,000 annual | 1

---

|1 | Beginning in 2005, each non-management member of the Board of Managers receives an annual grant of 5,000 Class A Units. Prior to 2005, annual grants of 2,500 Class A Units were made. In addition, beginning in 2004
Mr. Fawcett was included in the annual unit grants. Accordingly, a total of 20,000 Class A Units are currently being issued each year collectively to the members of the Board of Managers. Not reflected in the forging table for 2006 is that
each executive officer under the terms of his employment agreement is to be issued 25,000 Class A Units as of January 15 of each year beginning as of January 15, 2007, provided he is still employed by the Company as of the preceding
December 31. For additional information, see Item 10. Executive Compensation  Executive Compensation.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Section 1: Operating Results

Summary Background

Kaiser, including its wholly-owned subsidiaries unless otherwise provided herein, is the reorganized successor to Kaiser Steel Corporation which was an integrated steel manufacturer that filed for bankruptcy
protection in 1987 (KSC). Since the KSC bankruptcy, we have been developing certain assets remaining after the bankruptcy. As of the date of this Report on Form 10-K, our remaining principal assets include: (i) an 82.48% ownership
interest in Mine Reclamation, LLC, which owns a permitted rail-haul municipal solid waste landfill located at the Eagle Mountain Site; (ii) a 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station; and
(iii) approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the County District No. 2 of Los Angeles County (which we refer to as the District). However,
if the September 2005 U.S. District Court decision providing that a land exchange completed in October 1999 is to be unwound is upheld on appeal, the reversal of the land exchange will impact the amount and nature of the land we own and control. As
of December 31, 2006, we also had cash and cash equivalents, receivables and short-term investments in securities of approximately $8.3 million. As previously discussed, the permitted rail-haul municipal solid waste landfill project at Eagle
Mountain is currently under contract to be sold to the District for approximately $41 million.

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

Annual Report on Form 10-KSB

Kaiser qualifies as a small business filer under SEC rules and under such rules Kaiser is only required to include and discuss in this
Annual Report on Form 10-KSB its balance sheet as of December 31, 2006 and its consolidated statements of operations, cash flows and changes in members equity for the years ended December 31, 2006, and 2005. The reader of this Annual
Report on Form 10-KSB is encouraged to read our prior reports filed with the SEC for our financial statements for other previous years.

Primary Revenue
Sources

Ongoing Operations

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

Interim Activities (net)

Revenues and expenses from interim activities are generated from various sources. Historically, significant components of interim revenue activities have
included housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain facility. Due to the interim nature of these activities, the Company is presenting these revenues net of their related
expenses. During 2006, the Company generated miscellaneous income at Eagle Mountain from activities such as leasing its fee owned land for media-related activities and military and law enforcement training. In addition, we have recently remediated
and demolished certain buildings at Eagle Mountain, the costs for which have already been accrued.



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Summary of Revenue Sources

Due to the nature of the Companys projects and the Companys 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, the Company believes it is important to evaluate the trends in the components of its revenues as well as the recent developments regarding its long-term ongoing and
interim revenue sources. See Part I, Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - BUSINESS UPDATE 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, 2006 and 2005

Resource Revenues. Total net resource revenues for 2006 were
$1,233,000, compared to $1,309,000 for 2005. The reasons for this decrease are discussed below in Ongoing Operations and Interim Activities (net).

Ongoing Operations. Income from the Companys equity method investment decreased by $44,000 to $2,149,000 for 2006 as compared to 2005. This decrease in equity income in the West Valley MRF is mainly due
to lower MRF volumes and commodity prices as compared to the same period in 2005 plus higher operating expenses primarily in the areas of staffing ($118,000) and repair and maintenance ($38,000). Additionally, due to a dispute with one customer over
transportation rate increases, an increase in the accounts receivable reserve of $125,000 was recorded. These increases in expenses were partially offset by lower depreciation and amortization expense ($88,000) and consumables expense ($48,000), as
well as the reversal of accrued liabilities for which it was determined that the liability no longer existed. Increases in transfer and green waste processing fees during 2006 also helped offset a portion of the above cost increases.

Interim Activities (net). Interim activities net of expenses for 2006 was a net loss of $916,000 compared to a net loss of $884,000 for 2005. The
increase in the loss was due primarily to higher Townsite maintenance expenses, the cost of consultants to investigate possible profitable uses of the remaining Eagle Mountain property and the amortization of the capitalized Townsite abatement
reserve. For additional information, see Conditional Asset Retirement Obligations under Critical Accounting Policies.

Resource Operating Costs. Resource operating costs are those costs directly related to the resource revenues (in this case environmental insurance costs relating to the Companys historical operations). Total resource operating
costs for 2006 and 2005 were $300,000 and $2,324,000, respectively. The decrease in 2006 from the same period in 2005 is due to the establishment, during 2005, of a $2,000,000 reserve for the demolition and clean-up of certain structures at the
Eagle Mountain Townsite.

Corporate General and Administrative Expenses.Corporate general and administrative expenses for 2006
decreased 35% to $1,533,000 from $2,369,000 for 2005. The decrease is mainly due to an approximate $100,000 reduction in legal expense costs associated with the Slemmer litigation, which has been settled. In addition, since 2004 the Company had been
seeking reimbursement of the Slemmer legal costs from its insurance company. During October 2006, the Company reached agreement with the insurance company regarding the reimbursement claim and in December recorded a $455,000 credit/gain
against these litigation costs.

Net Interest and Investment Income. Net interest and investment income (loss) for 2006 was ($7,000)
compared to $310,000 for 2005. This change was the result of the sale of all of the Companys investments in two PIMCO bond funds which resulted in the realization of a loss of $367,000 which was previously reflected in accumulated other
comprehensive loss, a component of members equity. The



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proceeds from the sale of the PIMCO bonds were reinvested in short and long-term high grade commercial paper and U.S. government bonds.

Pre-Tax Loss and Income Tax Provision. The Company recorded a pre-tax loss of $607,000 for 2006 versus a pre-tax loss of $3,074,000 for 2005. The
Company is taxed as a partnership and, thus, the Companys results of operations (on an income tax basis) are allocated to the unit holders for inclusion in their respective income tax returns. There are, however, minor income taxes imposed on
the Company, a gross revenue tax imposed by the State of California, and income taxes on Business Staffing Inc., the Companys only corporate subsidiary. These taxes amounted to $18,000 for 2006, versus $11,000 for 2005.

Net Income (Loss).For 2006, the Company reported a net loss of $625,000 or $0.09 per unit, versus a net loss of $3,085,000 or $0.44 per unit,
reported for 2005.

Section 2: Liquidity and Capital Resources

Cash, Cash Equivalents and Investments. We define cash equivalents as highly liquid debt investment instruments with original maturities of 90
days or less. Cash and cash equivalents decreased $2,948,000 to $1,153,000 at December 31, 2006. Included in cash and cash equivalents is $796,000 held solely for the benefit of MRC at December 31, 2006.

Below is a table showing the major changes in cash:



|                                       |  |   |            |  
|-------------------------------------- |  | - | ---------- | -
|Increase of Short Term Investments     |  | $ | 1,169,000  |  
|Distributions from the West Valley MRF |  |   | 2,000,000  |  
|Insurance Claim receipt                |  |   | 625,000    |  
|                                       | 
|Cash used in Operations                |  |   | (3,927,000 | )
|Capitalized Landfill Expenditures      |  |   | (817,000   | )
|Cash Transfer to Long Term Investment  |  |   | (2,000,000 | )
|Other                                  |  |   | 2,000      |  
|                                       |  |   |            |  
|Net Decrease in Cash and Equivalents   |  | $ | (2,948,000 | )
|                                       |  |   |            |  

Working Capital. During 2006, current assets decreased $2,980,000 to $10,400,000, while
current liabilities decreased $43,000 to $2,100,000. This caused working capital to decrease during 2006 by $3,006,000 to $8.2 million at December 31, 2006.

Below is a table showing the major changes in working capital.



|                                              |  |            |  
|--------------------------------------------- |  | ---------- | -
|Changes in Current Asset                      |  |            |  
|Decrease in Consolidated Cash                 |  | (2,948,000 | )
|Increase in Restricted Cash                   |  | 921,000    |  
|Decrease in Short Term Investments            |  | (820,000   | )
|Decrease in Accounts Receivable and Other Net |  | (76,000    | )
|Decrease in notes receivable                  |  | (57,000    | )
|                                              | 
|Changes in Current Liabilities                |  |            |  
|Decrease in Payables                          |  | 60,000     |  
|Increase in Accrued Liabilities               |  | (86,000    | )
|                                              |  |            |  
|Net Decrease in Working Capital               |  | (3,006,000 | )
|                                              |  |            |  

Accounts Receivable and Other (net). During 2006, accounts receivable and other (net)
increased by $76,000 primarily as a result of the pre-payment of 2007 insurance premiums, which was partially offset by the collection of accounts receivable. During 2006 payments totaling of $625,000 relating to a



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recorded insurance claim receivable were received. Since all costs related to the insurance claim receivable had been fully reserved, the payment received
served to reduce the receivable and reserve and therefore had no effect on the net balance of accounts receivable and other.

Notes
Receivable.During 2006 a note receivable with a balance of $57,000, was collected in full.

Short-Term Investments. During
2006, short-term investments decreased by $820,000. This is the result of the sale of the Companys investments in two PIMCO bond funds and the reinvestment a portion of the proceeds in short-term high grade commercial paper and U.S. government
bonds. At December 31, 2006, the Company had $6.9 million of its excess cash reserves invested in such investments.

Long-Term
Investments. During 2006, a portion of the proceeds from the Company sale of two short term PIMCO bond funds were reinvested in long-term commercial paper. At December 31, 2006, the Company had $2.0 million of its excess cash reserves
invested in long-term high grade commercial paper and U.S. governmental bonds.

Investments. The Companys recording of
$2,149,000 in equity of income from its investment in the West Valley MRF was partially offset by the receipt of cash distributions from the West Valley MRF totaling $2,000,000. This resulted in a $149,000 increase in the Companys investment.
In addition, our investment in the Eagle Mountain Landfill increased $817,000 during 2006 due to continuing landfill development activities which were capitalized.

Other Assets. There was a decrease in other assets of $652,000 which is primarily the result of the amortization of the environmental insurance policy of $300,000, and an increase in accumulated depreciation as
of December 31, 2006 of $352,000.

Environmental Remediation. The Company purchased, effective June 30, 2001, a 12-year
$50 million insurance policy, which is expected to cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company. As of December 31, 2006, based upon current
information, we estimate that our future environmental liability related to certain matters and risks 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) (Catellus Development Corporation merged with and into Palmtree Acquisition Corporation, a subsidiary of ProLogis on September 15, 2005), including a certain groundwater matter as well as potential matters at Eagle
Mountain and at other historical locations and other possible third party claims, would be approximately $2.4 million for which a reserve has been established. In the event a claim for damages is filed against the Company that relates to this
reserve, management believes that the claim may be covered by such insurance depending upon the nature and timing of the claim.

Minority Interest. As of December 31, 2006, the Company has recorded $5,179,000 of minority interest relating to the approximately 17.5% ownership interest in MRC the Company does not own.

Contingent Liabilities. The Company has contingent liabilities more fully described above and in the notes to the financial statements.

Critical Accounting Policies

The
Companys accounting policies are more fully described in the Notes to the Financial Statements.

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

Investments. The Company accounts for investments under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity



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Securities. The investments are classified as available-for-sale and are recorded at the purchase price of the security plus or minus the
amortization of the discount or premium paid. Changes in the market value of the investments are recorded as a change to the investment with a corresponding change to comprehensive income, which is a component of members equity. In addition,
realized gains or losses, and interest income or dividends are reflected in the statement of operations.

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

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

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

Environmental Insurance and Environmental Remediation Liabilities. The Companys
$3,800,000 premium for the prospective insurance policy is capitalized as a long-term asset and is being amortized on a straight-line basis over the twelve (12) year term of the policy. To the extent a pre-existing liability has not been
recorded, claims made for environmental matters are recorded as litigation accruals in the Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss
can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably
estimated. In 2004, this reserve was again reduced to approximately $2.4 million to reflect settlement of a third party claim related to the groundwater plume discussed above. This reserve was further reduced in 2005 as a result of reclassifying
$500,000 to the Eagle Mountain Townsite Cleanup Reserve.

In addition, during 2005, as discussed in more detail below under New
Accounting Pronouncements, the Company increased its environmental reserve by $1,200,000 to account for its conditional asset retirement obligations related to future abatement obligations for asbestos-containing products in certain of the
viable structures at the Eagle Mountain Townsite.

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

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

New Accounting
Pronouncements

In December 2004, the Financial Accounting Standards Board issued a revision of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123R). SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,



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and its related implementation guidance and eliminates the alternative to use Opinion 25s intrinsic value method of accounting that was provided in
Statement 123 as originally issued. Under Opinion 25, issuing stock options to employees at market value generally resulted in recognition of no compensation cost. SFAS No. 123R requires entities to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions). SFAS No. 123R is effective for the first interim or annual reporting period that begins after June 15,
2005. Since the Company did not issue any unit options during 2006 and there was no unvested stock (unit) option based compensation, the adoption of SFAS No. 123R has not resulted in any decrease in reported earnings.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Financial Statements  Considering
the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements (SAB 108). This new guidance addresses how a registrant should quantify the effect of errors on the financial statements
based on their impact to both the balance sheet and the income statement in order to determine materiality. The guidance provides for a one-time cumulative effect adjustment to correct for misstatements and errors that were not deemed material under
a prior approach but are material under the SAB 108 approach. The application of SAB 108 did not have an effect on the Companys consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). This new standard provides guidance for
using fair value to measure assets and liabilities and information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings.
This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial
statement disclosure requirements about a companys use of fair value measurements, including the effect of such measures on earnings. The provisions of SFAS 157 are effective for financial statements issued for fiscal years beginning after
November 15, 2007. While the Company is currently evaluating the provisions of SFAS 157, the adoption is not expected to have a material impact on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48) which
clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This pronouncement prescribes a recognition threshold and
measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in the Companys tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting
in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN 48 are effective for the Company beginning January 1, 2007. The cumulative effect of initially adopting FIN 48 will be recorded as an
adjustment to opening retained earnings in the year of adoption and will be presented separately. The Company is in the process of evaluating the effect, if any, the adoption of FIN 48 will have on its financial statements.

Section 3: Business Outlook

The
statements contained in this Business Outlook, as well as in Part I, Item 1. DESCRIPTION OF BUSINESS, are based upon current operations and expectations. In addition to the forward-looking statements and information contained
elsewhere in this Annual Report on Form 10-KSB, 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, generally been derived from the performance of our major long-term development projects and



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investments. We have previously sold most of our projects and investments. Our principal remaining assets and projects, other than cash and securities, are:
(i) the landfill project; (ii) our 50% equity ownership of the West Valley MRF; and (iii) miscellaneous property at or near the Eagle Mountain Townsite. We have no material ongoing operations except in connection with such assets and
projects. Our principal sources of ongoing income is derived from the West Valley MRF and our investments although we are generating miscellaneous income from the lease of our Eagle Mountain property for military and law enforcement training and
from location payments when the site is used as a location for a movie, commercial or other media-related purposes. We will 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 factors affecting our future equity income will continue to depend upon:
(i) the ability of the West Valley MRF to attract new customers and waste volumes at attractive processing rates; (ii) recyclable commodity prices; (iv) the ability to increase prices to reflect increases in such items as fuel and
personnel costs; and (iv) future competition from competing facilities. To begin addressing anticipated future needs, the West Valley MRF is in the process of seeking to increase its permitted capacity to 7,500 tons per days of waste processing
capacity. It is estimated that this increase in permitted capacity will be approved in 2007.

The West Valley MRF currently generates more
than sufficient cash flow to fund its cost of operations and does not require additional investment by us. Furthermore, the West Valley MRF should continue to generate sufficient cash distributions to cover a significant portion of Kaiser LLCs
foreseeable general and administrative costs.

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

Assuming there is a sale of the
landfill project, $41 million of the total purchase price will be deposited into an escrow account and will be released when any litigation contingencies are fully resolved. As of the date of this Report, the only litigation contingency is the
federal litigation challenging the completed federal land exchange. In September 2005 the Company received an adverse U.S. District Court decision in the land exchange litigation that may materially impact the validity of the landfill project. The
decision was adverse to the landfill project in that it set aside the land exchange completed between the Company and BLM as well as two BLM rights-of-way. The Company and the U.S. Department of Interior are appealing the decision. It is likely that
the appeal process will take several years. If the decision is fully affirmed on appeal, the decision would jeopardize the viability of the landfill project. In addition, the decision could adversely impact the agreement to sell the landfill project
to the District, including termination of the agreement. For a more detailed discussion of this litigation and the risks associated with this litigation, see Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Land Exchange
Litigation. Although closing has not occurred, interest began to accrue on this portion of the purchase price in May 2001.

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



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Sale of Miscellaneous Properties, Eagle Mountain Townsite, and other Possible Opportunities.
We are continuing to seek buyers for our miscellaneous properties, most of which are located at or near our Eagle Mountain facilities and we are continuing to seek tenants for the private prison facility in the Eagle Mountain Townsite. However, the
September 2005 adverse U.S. District Court decision involving a completed land exchange between Kaiser and the BLM may hinder these efforts. In addition, due to the passage of time and the impacts of weather, a number of the buildings and houses at
the Eagle Mountain Townsite are deteriorating at a faster rate than anticipated and may not be salvageable. Accordingly, we will need to demolish or rehabilitate a number of structures over the next several years and we have established a reserve
for such purposes. In 2006 we remediated and demolished 27 houses.

In addition, we are exploring possible opportunities for the sale of
rock from the Eagle Mountain Site. As a result of past mining activities, millions of tons of rock of various sizes was stockpiled near the Eagle Mountain Townsite. Any sale of rock would be from property that is not a part of the landfill project.

We are also pursing the rental of appropriate areas of our Eagle Mountain property for military and law enforcement training, as well as
for movies, commercials and other media-related purposes.

Corporate Overhead. Given our current assets and projects, it is unlikely
that we will be able to further reduce personnel and corporate overhead in the near future. However, as we divest our remaining assets, we intend to further reduce corporate staffing and overhead to reflect the reduced requirements of our remaining
operations and projects. The costs of such reductions shall be recorded at the time the decision to make such reductions is made by the Company.

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

Cash Maximization Strategy

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



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



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



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



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| |  |  | To terminate operations and distribute all available cash to its members once the cash maximization strategy is completed. The Company currently does not expect
completion of this strategy until the end of 2008 at the earliest.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We continue to undertake activities to implement the
cash maximization strategy. However, the September 2005 adverse U.S. District Court decision concerning the landfill project may ultimately alter and will certainly impact the timing of the continuing implementation of the cash maximization
strategy.

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

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



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KAISER VENTURES LLC AND SUBSIDIARIES



|Item 7. | FINANCIAL STATEMENTS
|------- | --------------------



|                                                                                                     |  |     
|---------------------------------------------------------------------------------------------------- |  | ----
|INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS                                                           |  | PAGE
|Report of Independent Registered Public Accounting Firm                                              |  | 31  
|                                                                                                     | 
|Consolidated Balance Sheet as of December 31, 2006                                                   |  | 32  
|                                                                                                     | 
|Consolidated Statements of Operations for the years ended December 31, 2006 and 2005                 |  | 34  
|                                                                                                     | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2006 and 2005                 |  | 35  
|                                                                                                     | 
|Consolidated Statements of Changes in Members Equity for the years ended December 31, 2006 and 2005 |  | 36  
|                                                                                                     | 
|Notes to Consolidated Financial Statements                                                           |  | 37  



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members and Board of Managers of Kaiser Ventures LLC

We have audited the accompanying consolidated balance sheet of Kaiser Ventures, LLC and subsidiaries as of December 31, 2006 and
the related consolidated statements of operations, members equity and cash flows for each of the years in the two-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our 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 as of December 31, 2006, and the consolidated results of its
operations and its cash flows for each of the years in the two-year period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

Irvine, California

March 21, 2007



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CONSOLIDATED BALANCE SHEET

as of December 31



|                                                                                  |  |      |           
|--------------------------------------------------------------------------------- |  | ---- | ----------
|                                                                                  |  | 2006
|ASSETS                                                                            |  |      |           
|Current Assets                                                                    |  |      |           
|Cash and cash equivalents                                                         |  | $    | 1,153,000 
|Accounts receivable and other, net of allowance for doubtful accounts of $34,000. |  |      | 202,000   
|Short-term investments                                                            |  |      | 6,947,000 
|Restricted cash held for                                                          |  |      |           
|Conversion distribution                                                           |  |      | 1,190,000 
|Contribution to Company SERP                                                      |  |      | 921,000   
|                                                                                  |  |      |           
|                                                                                  |  |      | 10,413,000
|                                                                                  | 
|Long Term Investments                                                             |  |      | 2,000,000 
|Eagle Mountain Landfill Investment                                                |  |      | 31,114,000
|Investment in West Valley MRF                                                     |  |      | 4,822,000 
|Land                                                                              |  |      | 2,523,000 
|                                                                                  | 
|Other Assets                                                                      |  |      |           
|Deferred income tax asset                                                         |  |      | 149,000   
|Unamortized environmental insurance premium                                       |  |      | 1,950,000 
|Buildings and equipment (net)                                                     |  |      | 1,333,000 
|                                                                                  |  |      |           
|                                                                                  |  |      | 3,432,000 
|                                                                                  |  |      |           
|Total Assets                                                                      |  | $    | 54,304,000
|                                                                                  |  |      |           

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



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CONSOLIDATED BALANCE SHEET

as of December 31



|                                                          |  |      |           
|--------------------------------------------------------- |  | ---- | ----------
|                                                          |  | 2006
|LIABILITIES AND MEMBERS EQUITY                           |  |      |           
|Current Liabilities                                       |  |      |           
|Accounts payable                                          |  | $    | 121,000   
|Conversion distribution payable                           |  |      | 1,190,000 
|Current portion of MRC accrual for railroad casualty loss |  |      | 143,000   
|Accrued liabilities                                       |  |      | 741,000   
|                                                          |  |      |           
|                                                          |  |      | 2,195,000 
|                                                          |  |      |           
|Long-term Liabilities                                     |  |      |           
|Accrual for MRC railroad casualty loss                    |  |      | 4,195,000 
|Accrual for Eagle Mountain Townsite cleanup               |  |      | 2,340,000 
|Environmental remediation                                 |  |      | 2,915,000 
|Other accrued liabilities                                 |  |      | 250,000   
|                                                          |  |      |           
|                                                          |  |      | 9,700,000 
|                                                          |  |      |           
|Total Liabilities                                         |  |      | 11,895,000
|                                                          |  |      |           
|Minority Interest                                         |  |      | 5,179,000 
|                                                          |  |      |           
|Commitments and Contingencies                             |  |      |          
|                                                          | 
|Members Equity                                           |  |      |           
|Class A units; issued and outstanding 6,969,299           |  |      | 37,188,000
|Class B units; issued and outstanding 751,956             |  |      |          
|Class C units; issued and outstanding 872                 |  |      |          
|Class D units; issued and outstanding 128                 |  |      |          
|Accumulated other comprehensive income (loss)             |  |      | 42,000    
|                                                          | 
|Total Members Equity                                     |  |      | 37,230,000
|                                                          |  |      |           
|Total Liabilities and Members Equity                     |  | $    | 54,304,000
|                                                          |  |      |           

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



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CONSOLIDATED STATEMENTS OF OPERATIONS

for the Years Ended December 31



|                                                            |  |      |           |   |      |   |            |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                            |  | 2006 |           |   | 2005 |  
|Resource Revenues                                           |  |      |           |   |      |   |            |  
|Ongoing Operations                                          |  |      |           |   |      |   |            |  
|Income from equity method investment in the West Valley MRF |  | $    | 2,149,000 |   |      | $ | 2,193,000  |  
|Interim Activities, net loss                                |  |      | (916,000  | ) |      |   | (884,000   | )
|                                                            |  |      |           |   |      |   |            |  
|Total resource revenues                                     |  |      | 1,233,000 |   |      |   | 1,309,000  |  
|Resource Operating Costs                                    |  |      |           |   |      |   |            |  
|Eagle Mountain Townsite clean-up reserve                    |  |      |          |   |      |   | 2,000,000  |  
|Environmental insurance premium amortization                |  |      | 300,000   |   |      |   | 324,000    |  
|                                                            |  |      |           |   |      |   |            |  
|Total resource operating costs                              |  |      | 300,000   |   |      |   | 2,324,000  |  
|                                                            |  |      |           |   |      |   |            |  
|Income (Loss) from Resources                                |  |      | 933,000   |   |      |   | (1,015,000 | )
|Corporate General and Administrative Expenses               |  |      |           |   |      |   |            |  
|Corporate overhead expenses, excluding Slemmer litigation   |  |      | 1,894,000 |   |      |   | 1,916,000  |  
|Slemmer litigation                                          |  |      | (341,000  | ) |      |   | 453,000    |  
|                                                            |  |      |           |   |      |   |            |  
|                                                            |  |      | 1,553,000 |   |      |   | 2,369,000  |  
|                                                            |  |      |           |   |      |   |            |  
|Loss from Operations                                        |  |      | (600,000  | ) |      |   | (3,384,000 | )
|Net interest and investment (loss) income                   |  |      | (7,000    | ) |      |   | 310,000    |  
|                                                            |  |      |           |   |      |   |            |  
|Loss before Income Tax Provision                            |  |      | (607,000  | ) |      |   | (3,074,000 | )
|Income tax provision                                        |  |      | 18,000    |   |      |   | 11,000     |  
|                                                            |  |      |           |   |      |   |            |  
|Net Loss                                                    |  | $    | (625,000  | ) |      | $ | (3,085,000 | )
|                                                            |  |      |           |   |      |   |            |  
|Basic Loss Per Unit                                         |  | $    | (0.09     | ) |      | $ | (0.44      | )
|                                                            |  |      |           |   |      |   |            |  
|Diluted Loss Per Unit                                       |  | $    | (0.09     | ) |      | $ | (0.44      | )
|                                                            |  |      |           |   |      |   |            |  
|Basic Weighted Average Number of Units Outstanding          |  |      | 6,960,000 |   |      |   | 6,938,000  |  
|Diluted Weighted Average Number of Units Outstanding        |  |      | 6,960,000 |   |      |   | 6,938,000  |  

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



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CONSOLIDATED STATEMENTS OF CASH FLOWS

for the Years Ended December 31



|                                                                                   |  |      |            |   |      |   |            |  
|---------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                   |  | 2006 |            |   | 2005 |  
|Cash Flows from Operating Activities                                               |  |      |            |   |      |   |            |  
|Net loss                                                                           |  | $    | (625,000   | ) |      | $ | (3,085,000 | )
|                                                                                   |  |     
|Adjustments to reconcile net loss to net cash used by operating activities:        |  |      |            |   |      |   |            |  
|Income from equity method investment in West Valley MRF, LLC, net of distributions |  |      | (149,000   | ) |      |   | (443,000   | )
|Depreciation and amortization                                                      |  |      | 653,000    |   |      |   | 386,000    |  
|Realized loss on sale of investments                                               |  |      | 367,000    |   |      |   | 52,000     |  
|Class A Units / stock-based compensation expense                                   |  |      | 10,000     |   |      |   | 29,000     |  
|Changes in assets:                                                                 |  |      |            |   |      |   |            |  
|Accounts Receivable- and other                                                     |  |      | 76,000     |   |      |   | 35,000     |  
|Deferred income tax asset                                                          |  |      |           |   |      |   | (80,000    | )
|Changes in liabilities:                                                            |  |      |            |   |      |   |            |  
|Eagle Mountain Townsite cleanup reserve                                            |  |      | (160,000   | ) |      |   | 2,000,000  |  
|Accounts payable and accrued liabilities                                           |  |      | (69,000    | ) |      |   | (269,000   | )
|Income taxes payable                                                               |  |      | 26,000     |   |      |   | (29,000    | )
|                                                                                   |  |      |            |   |      |   |            |  
|Net cash flows provided by (used in) operating activities                          |  |      | 129,000    |   |      |   | (1,404,000 | )
|                                                                                   |  |      |            |   |      |   |            |  
|Cash Flows from Investing Activities                                               |  |      |            |   |      |   |            |  
|Purchase of investments                                                            |  |      | (9,640,000 | ) |      |   | (300,000   | )
|Sale of investments                                                                |  |      | 8,441,000  |   |      |   | 2,021,000  |  
|Collection of notes receivable                                                     |  |      | 57,000     |   |      |   | 292,000    |  
|Capitalized landfill expenditures                                                  |  |      | (817,000   | ) |      |   | (632,000   | )
|Environmental remediation expenditures                                             |  |      | (197,000   | ) |      |   | (11,000    | )
|                                                                                   |  |      |            |   |      |   |            |  
|Net cash flows provided by (used in) investing activities                          |  |      | (2,156,000 | ) |      |   | 1,370,000  |  
|                                                                                   |  |      |            |   |      |   |            |  
|Cash Flows from Financing Activities                                               |  |      |            |   |      |   |            |  
|Payments of conversion distribution to transfer agent                              |  |      |           |   |      |   | (75,000    | )
|Increase in restricted cash for conversion distribution                            |  |      |           |   |      |   | 75,000     |  
|Increase in restricted cash for contributions to SERP                              |  |      | (921,000   | ) |      |   |           |  
|                                                                                   |  |      |            |   |      |   |            |  
|Net cash flows from financing activities                                           |  |      | (921,000   | ) |      |   |           |  
|                                                                                   |  |      |            |   |      |   |            |  
|Net Decrease in Cash and Cash Equivalents                                          |  |      | (2,948,000 | ) |      |   | (34,000    | )
|Cash and Cash Equivalents at Beginning of Year                                     |  |      | 4,101,000  |   |      |   | 4,135,000  |  
|                                                                                   |  |      |            |   |      |   |            |  
|Cash and Cash Equivalents at End of Year                                           |  | $    | 1,153,000  |   |      | $ | 4,101,000  |  
|                                                                                   |  |      |            |   |      |   |            |  
|Supplemental Disclosure of Cash Flow Information                                   |  |      |            |   |      |   |            |  
|                                                                                   |  | 2006 |            |   | 2005 |  
|Cash paid during the year for income taxes                                         |  | $    | 10,830     |   |      | $ | 29,000     |  
|                                                                                   |  |     
|Supplemental disclosure of non-cash investing and financing activities             |  |      |            |   |      |   |            |  
|                                                                                   |  | 2006 |            |   | 2005 |  
|Contingent asset retirement obligation                                             |  |      |           |   |      |   | 1,200,000  |  

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



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CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS EQUITY

for the Years Ended December 31, 2006 and
2005



|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|---------------------------------------------------------------- |  | ------------------- |  | -------------- | ---------- | - | ------------------------------------------ | - | -------- | ----- |  | - | ---------- | -
|                                                                 |  | Member Class AUnits |  | MembersEquity |            |   | AccumulatedOtherComprehensiveIncome (Loss) |   |          | Total | 
|Balance at December 31, 2004                                     |  | 6,929,299           |  |                | 40,859,000 |   |                                            |   | (213,000 | )     |  |   | 40,646,000 |  
|Net loss                                                         |  |                    |  |                | (3,085,000 | ) |                                            |   |         |       |  |   | (3,085,000 | )
|Comprehensive loss, change in net unrealized gain on investments |  |                    |  |                |           |   |                                            |   | (94,000  | )     |  |   | (94,000    | )
|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|Comprehensive loss                                               |  |                     |  |                |            |   |                                            |   |          |       |  |   | (3,179,000 | )
|Issuance of Class A Units                                        |  | 20,000              |  |                | 29,000     |   |                                            |   |         |       |  |   | 29,000     |  
|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|Balance at December 31, 2005                                     |  | 6,949,299           |  |                | 37,803,000 |   |                                            |   | (307,000 | )     |  |   | 37,496,000 |  
|Net loss                                                         |  |                    |  |                | (625,000   | ) |                                            |   |         |       |  |   | (625,000   | )
|Comprehensive Gain                                               |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|Reclassification of realized loss                                |  |                     |  |                |            |   |                                            |   | 307,000  |       |  |   | 307,000    |  
|Unrealized gain on investments                                   |  |                    |  |                |           |   |                                            |   | 42,000   |       |  |   | 42,000     |  
|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|Total Comprehensive Gain                                         |  |                     |  |                |            |   |                                            |   |          |       |  |   | (349,000   | )
|Issuance of Class A Units                                        |  | 20,000              |  |                | 10,000     |   |                                            |   |         |       |  |   | 10,000     |  
|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  
|Balance at December 31, 2006                                     |  | 6,969,299           |  | $              | 37,188,000 |   |                                            | $ | 42,000   |       |  | $ | 37,230,000 |  
|                                                                 |  |                     |  |                |            |   |                                            |   |          |       |  |   |            |  

At December 31, 2006 and 2005, Kaiser Ventures LLC had 751,956 Class B Units outstanding. At
December 31, 2006 and 2005, Kaiser Ventures LLC had outstanding 872 and 128 units outstanding, Class C and D, respectively.

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



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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, 2006, the Companys principal assets include: (i) an 82.48%
ownership interest in Mine Reclamation, LLC, which owns a permitted rail-haul municipal solid waste landfill located at the Eagle Mountain Site, this landfill is currently under contract to be sold to County District No. 2 of Los Angeles County
for approximately $41 million, which sale is subject to a number of conditions, several of which remain to be fully satisfied; (ii) a 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station (West Valley
MRF); (iii) approximately 5,400 additional acres currently owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the District; and (iv) cash and cash equivalents, receivables and
short-term investments of approximately $8.3 million.

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

Ongoing Operations

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

Interim Activities

Revenues and expenses from interim activities are generated from various sources. Significant components of interim activities have included housing
rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain Site. Due to the interim nature of these activities, we are presenting these revenues net of their related expenses.



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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.

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

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with original maturities of 90 days or less to be cash equivalents. The Company
maintains its cash balances with two financial institutions that have Standard & Poors ratings of AA- or higher, have at least $30 billion in assets and are insured by the Federal Deposit Insurance Corporation up to $100,000 at each
institution. At December 31, 2006, and at various times throughout the year, the Company had cash in excess of federally insured limits.

Investments

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

The Company classifies all of its investments as available-for-sale. As an
available-for-sale security, realized gains or losses, and interest income or dividends are reflected in the statement of operations while unrealized gains and losses are included in comprehensive income (loss) which is a component of
members equity.

Real Estate

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

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



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Investment in West Valley MRF, LLC

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

Landfill Permitting and Development

Through its 82.48% interest in Mine Reclamation, LLC, the Company has been developing, for sale to a municipal entity or operating company, its property
known as the Eagle Mountain Site in the California desert for use as a rail-haul municipal solid waste landfill. Pursuant to SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, capitalizable landfill
site development costs are recorded at cost and consist of engineering and environmental studies, legal and consulting expenses, and other costs directly related to the permitting and development process. These costs are expensed when management
determines that the capitalized costs provide no future benefit. Additionally, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, long-lived assets are evaluated for potential impairment
whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company is still litigating challenges to a land exchange completed with the Bureau of Land Management of the U. S. Department of the
Interior in October 1999 (See Note 17), 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 which range from 3 to 10 years. Due to the passage of time and the impacts of weather, a number of
the buildings and houses at the Eagle Mountain Townsite are deteriorating faster than anticipated and may not be salvageable. Accordingly, the Company may need to demolish or rehabilitate a number of structures over the next several years and
accordingly a reserve of $2,500,000 was established in 2005 for such purposes. $2,000,000 of the reserve was expensed in 2005 and $500,000 was reclassified from the unused existing environmental remediation reserve in 2005. The Company utilized
$160,000 of this reserve during 2006.

In addition, in March 2005, the Financial Accounting Standards Board issued, Interpretation
No. 47. Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143 (FIN 47) clarifying and interpreting the legal obligation to perform an asset retirement activity in which
the timing and/or settlement are conditional on a future event that may or may not be within the control of the Company. The Company has adopted FIN 47 effective as of the year ended December 31, 2005. Based upon currently available
information, the Company has estimated that the conditional asset retirement obligations related to possible future abatement for asbestos-containing products in certain of the viable structures at Eagle Mountain would approximate $1,200,000. These
estimates were produced by third party consultants. Pursuant to the requirements of FIN 47, the Company increased its environmental reserve by $1,200,000 to account for these obligations and increased the carrying amount of the associated structures
at Eagle Mountain by a comparable amount. This increased carrying amount is being depreciated over the remaining estimated time that such assets will be owned by the Company, which was estimated to be approximately 4 years.

In addition, the Company has reviewed and analyzed the increased carrying amount associated with structures discussed above pursuant to SFAS
No. 144, Accounting for the Impairment or Disposal of Long-lived Assets and has concluded that the $1,200,000 increase in carrying amount for these structures will be recoverable and that no impairment of these structures exists as of
December 31, 2006.



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Environmental Insurance

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

Revenue Recognition

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

Income Taxes

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

Earnings Per
Share

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

LLC Unit/Stock Options

At December 31,
2006, the Company has three stock-based employee compensation plans, which are described more fully in Note 13. Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123R
(SFAS 123R), Share-Based Payment, which requires the measurement and recognition of compensation expense for all share-based payment (or in our case units) awards to employees and managers based on estimated fair values. SFAS
123R supersedes the Companys previous accounting methodology which used the intrinsic value method under Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees. Under the
intrinsic value method no share-based compensation expense related to any option awards granted to employees or managers had been recognized in the Companys Consolidated Statements of Operations, as all unit option awards granted under the
plans had an exercise price equal to the Companys closing stock price on the date of grant.

The Company adopted SFAS 123R using the
modified prospective transition method. Under this transition method, periods prior to December 31, 2005, are not restated and unvested compensation expense for all share-based awards outstanding as of the adoption date is based on the grant
date fair value estimated in accordance with the original provisions of SFAS 123. The valuation provisions of SFAS 123R apply to new share-based awards granted subsequent to December 31, 2005. The following table illustrates the effect on net
loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock Based Compensation, to the above plans prior to fiscal year 2006.



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|                                   |  |      |            |  
|---------------------------------- |  | ---- | ---------- | -
|                                   |  | 2005 |           
|Net Earnings (loss)                |  |      |            |  
|As reported                        |  | $    | (3,085,000 | )
|Pro forma                          |  | $    | (3,085,000 | )
|Earnings (loss) per unit (Basic)   |  |      |            |  
|As reported                        |  | $    | (0.44      | )
|Pro forma                          |  | $    | (0.44      | )
|Earnings (loss) per unit (Diluted) |  |      |            |  
|As reported                        |  | $    | (0.44      | )
|Pro forma                          |  | $    | (0.44      | )

The Company employed the Black-Scholes option-pricing model in order to calculate the above
adjustment in net income (loss) and earnings (loss) per unit/share. The effect on net earnings for 2006, and 2005 is not necessarily representative of the effect in future years. The following table describes the assumptions utilized by the
Black-Scholes option-pricing model for options granted during 1999, the last year stock options were granted by the Company.



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

Use of Estimates

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

Fair Value of Financial Instruments

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

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

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

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

Class B, C and D Units

The Company has outstanding Class B, C and D which are reflected on the Companys Balance Sheet as equity securities that were
designed and implemented to replicate the cash distributions the holders of such units would have received under certain former long-term transaction incentive plans. These former plans provided for bonus payments as a result of the sale of certain
assets at prices above certain minimum threshold requirements. Even though the Class B, C and D Units are classified as equity securities, the Company will account for any future distributions on the Class B, C and D Units by recording compensation
expense for the full amount of the distribution at the time a distribution become



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probable and estimateable. For additional information regarding the Class B, C and D Units. Please see Note 13. EQUITY and Note 16.
COMMITMENTS AND CONTINGENCIES - Contingent Distributions on Class B, C and D Units.

Note 3. ACCOUNTS RECEIVABLE AND OTHER

Accounts receivable and other as of December 31, 2006 consisted of the following:



|                                |  |   |         |  
|------------------------------- |  | - | ------- | -
|Prepaid Insurance               |  |   | 72,000  |  
|Marsh Insurance receivable      |  |   | 41,000  |  
|KSC Recovery                    |  |   | 9,000   |  
|Other                           |  |   | 114,000 |  
|                                |  |   |         |  
|Sub Total                       |  |   | 236,000 |  
|Allowance for doubtful accounts |  |   | (34,000 | )
|                                |  |   |         |  
|Total                           |  | $ | 202,000 |  
|                                |  |   |         |  

Note 4. INVESTMENT IN WEST VALLEY MRF, LLC

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

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

Most of the financing for the construction of the West Valley MRF of approximately $22,000,000, including reimbursement of previously incurred development costs of Burrtec and the Company, was obtained through the issuance and sale of two
California Pollution Control Financing Authority (the Authority) Variable Rate Demand Solid Waste Disposal Revenue Bonds (West Valley MRF, LLC Project) Series 1997A and Series 2000A (the Bonds). The Bonds are secured by an
irrevocable letter of credit issued by Union Bank of California, N.A. (Union Bank). The Bonds have stated maturity dates of June 1, 2012 for Series 1997A ($9,500,000) and June 1, 2030 Series 2000A ($8,500,000), although West
Valley MRF, LLC is required, pursuant to its agreement with Union Bank, to annually redeem a portion of the Bonds on a stated schedule. Pursuant to a Guaranty Agreement with Union Bank, the Company and Burrtec each are liable for fifty percent
(50%) of the principal and interest on the Bonds in the event of a default by the West Valley MRF, LLC. West Valley MRF, LLC also has established a $1,000,000 equipment line of credit with Union Bank in order to refinance and purchase
additional equipment.

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



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The condensed summarized balance sheet information of West Valley MRF, LLC as of November 30,
2006, is as follows:



|                                        |  |   |           
|--------------------------------------- |  | - | ----------
|Balance Sheet Information               |  |  
|Current Assets                          |  | $ | 8,564,000 
|Property and Equipment (net)            |  |   | 13,271,000
|Other Assets                            |  |   | 232,000   
|                                        |  |   |           
|Total Assets                            |  | $ | 22,067,000
|                                        |  |   |           
|Current Liabilities                     |  | $ | 6,312,000 
|Other Liabilities                       |  |   |          
|CPCFA Bonds Payable (long-term portion) |  |   | 6,870,000 
|Members Equity                         |  |   | 8,885,000 
|                                        |  |   |           
|Total Liabilities and Members Equity   |  | $ | 22,067,000
|                                        |  |   |           

The condensed summarized income statement information for the West Valley MRF, LLC as of
November 30, 2006 and 2005, is as follows:



|                             |  |                   |            |                   |   |           
|---------------------------- |  | ----------------- | ---------- | ----------------- | - | ----------
|Income Statement Information |  | November 30, 2006 |            | November 30, 2005
|Net Revenues                 |  | $                 | 14,752,000 |                   | $ | 14,527,000
|Gross Profit                 |  | $                 | 5,844,000  |                   | $ | 5,732,000 
|Net Income                   |  | $                 | 4,298,000  |                   | $ | 4,386,000 

The Company has recognized equity income from the West Valley MRF of $2,149,000, and $2,193,000,
in 2006 and 2005, respectively. The Company received cash distributions of $2,000,000 and $1,750,000 during 2006 and 2005, respectively, from its investment in the West Valley MRF.

Note 5. MINE RECLAMATION, LLC

The Company, in January 1995, acquired a 70% interest in Mine
Reclamation, the developer of the landfill project. As a result of subsequent equity fundings and purchases, the Companys ownership interest in Mine Reclamation as of December 31, 2005, is 82.48%. On August 9, 2000, MRC, entered into
that certain Agreement For Purchase and Sale of Real Property and Related Personal Property In Regard To The Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions (Landfill Project Sale Agreement) with the District. In
summary, the landfill project (which includes the Companys royalty payments under the MRC Lease) is being sold for $41 million, with an initial closing currently scheduled to occur on June 30, 2006, but the initial closing date has been
extended numerous times. However, payment of the purchase price will be delayed as described in more detail below. The sale of the landfill project is subject to the results of the Districts due diligence and satisfaction of numerous
contingencies. The contingencies include, but are not limited to, obtaining the transfer of the landfill projects permits to the District and obtaining all necessary consents to the transaction and resolving the outstanding federal land
exchange litigation.

In September 2005, the Company received an adverse U.S. District Court decision in the federal land exchange
litigation that may materially impact the validity of the landfill project. The decision was adverse to the landfill project in that it set aside the land exchange completed between the Company and BLM as well as two BLM rights-of-way. The Company
is appealing the decision. It is likely that the appeal process will take several years. If the decision is fully affirmed on appeal, the decision would jeopardize the viability of the landfill project. In addition, the decision could adversely
impact the agreement to sell the landfill project to the District, including termination of the agreement. For a more detailed discussion of this litigation and the risks associated with this litigation, see Note 17. LEGAL PROCEEDINGS - Eagle
Mountain Landfill Project Land Exchange Litigation. The Company has evaluated the adverse decision on the landfill project in the context of whether such asset should be considered impaired. The Company finds itself in much the same position
as it was in 2000 when the San Diego County Superior Court judge ruled that the environmental documentation was insufficient under



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California law. Believing that the Superior Court was in error, much like the Company believes the U.S. District Court is in error, the Company appealed the
San Diego County Superior Court decision. The Company won that appeal with the California Court of Appeals unanimously reversing the San Diego Superior Court. Accordingly, the Company has concluded that, although it is possible, it is not currently
probable or measurable that there has been impairment of the investment in MRC at this time due to the pending appeal of the decision to the U.S. 9thCircuit Court of Appeals.

Assuming there is a closing, $41 million of the total purchase
price is to be deposited into an escrow account and will be released when litigation contingencies are fully resolved. The litigation contingencies are the federal litigation challenging the completed federal land exchange. Even though the closing
has not taken place and these funds have not been deposited into an escrow account, interest began accruing on this portion of the purchase price on May 3, 2001.

The District has been undertaking extensive due diligence on the landfill project and has the right to terminate the Landfill Project Sale Agreement if it is not satisfied with the results of its due diligence and
other matters. Due diligence, joint use negotiations and other items are expected to continue during 2007. In addition, the parties will individually determine whether each chooses to continue to extend the closing date for the transaction.

There are numerous risks associated with MRC and the landfill project, including the competition represented by the Mesquite rail-haul
landfill project, which the District purchased. There are also numerous risks and contingencies associated with the pending sale of the landfill project to the District. There can be no assurance that all outstanding matters currently preventing an
initial closing with the District will be resolved to the satisfaction of the parties. Accordingly, there can be no assurance that the sale to the District will occur or that the current terms of the pending transaction may not be significantly
modified as a result of future discussions with the District or as to the timing of the receipt of the purchase price. There can be no assurance that the completed purchase of the Mesquite landfill by the District will not adversely impact the
negotiations and the closing on the sale of the landfill to the District. In addition, there are material litigation risks associated with the current federal land exchange litigation, and the appeal of the adverse U.S. District Court decision in
such litigation including reversal of the completed land exchange and the threatened litigation over the Endangered Species Act, all as discussed in Note 17. LEGAL PROCEEDINGS. No assurance can be made that the Company will successfully
and timely resolve these matters so as to avoid a material adverse effect on the Companys current plan to sell the landfill to the District. In addition, there are risks that the landfill project will be impacted by natural disasters like the
floods that caused significant damage to the rail line in 2003. Certain risks may be uninsurable or are not insurable on terms which the Company believes are economical.

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

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

Flood Damage to Railroad. The Company owns an approximate 52-mile private railroad that runs from Ferrum Junction near the Salton Sea to the Eagle
Mountain mine. In late August and early September of 2003, portions of the railroad and related protective structures sustained considerable damage due to heavy rains and flash floods. This damage included having some rail sections being buried
under silt while other areas had their rail bed undermined. Subsequent to the filing of the Companys report on Form 10-Q/A for the quarter ended September 30, 2003, the Company conducted a more complete investigation of the damage and of
the costs to return the railroad to the condition that it was in prior to the flood damage. As a result of such investigation, the Company currently estimates the cost to



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repair the damage to be a minimum of $4,500,000, an accrual for which was recorded in 2003. The Companys current plans has undertaken, the work
necessary to help preserve and protect the existing railroad. However, the major repairs to return the railroad to its condition prior to the flood damage will be deferred until a later date.

Note 6. INVESTMENTS

The Company has an Investment
Policy which provides for the investment of excess cash balances primarily in bond funds, commercial paper, and debt instruments. At December 31, 2006 the Company had investments in high grade commercial paper and U.S. governmental bonds which
were classified as available-for-sale. The classification of investment securities is reviewed by the Company at each reporting period.

As of December 31, 2005, the Companys available for sale securities had an unrealized net loss of $307,000 that was included in accumulated other comprehensive income (loss), a component of Members Equity on two bond funds.
Due to the diverse nature and return history of these bond funds, the Company decided to liquidate the funds during 2006 and invest its excess cash reserves in less speculative commercial paper and U.S. government bonds. As a result of the
liquidation of these funds, the Company recognized the $307,000 unrealized loss in the consolidated statement of operations during the third quarter of 2006. However, the recognition of this loss in the Consolidated Statement of Operations had no
net impact on members equity since the loss had previously been reflected in comprehensive income, a component of members equity.

The following is a summary of the fair value of investment securities classified as available-for-sale as of December 31, 2006:



|                              |  |                 
|----------------------------- |  | ----------------
|AVAILABLE-FOR-SALE
SECURITIES |  | DECEMBER 31,2006
|Bond funds                    |  | $              
|Commercial Paper              |  | $ 8,947,000     
|                              |  |                 

Of the $8,947,000 available for sale at December 31, 2006, $2,000,000 has a maturity of more
than one year and has been classified as long-term investments on the consolidated balance sheet.

As of December 31, 2006, the
Companys available for sale securities had an unrealized net gain of $42,000 that is included in other comprehensive income, a component of Members Equity.

Note 7. CONVERSION DISTRIBUTION

At December 31,
2006, the Company holds $1,190,000 in cash it had previously sent to its transfer agent in December 2001 for the payment of the $10.00 per share merger consideration to shareholders. This cash, classified as restricted cash, will ultimately be
distributed to shareholders once the correct paperwork is submitted by such shareholders, thereby reducing the related conversion distribution payable.

Note 8. ENVIRONMENTAL INSURANCE

One of the goals in the cash maximization strategy approved by Kaiser Ventures LLCs
Board of Directors in September 2000 was to reduce the liabilities associated with existing and potential future environmental and other similar types of claims. In furtherance of such goal, the Company purchased an insurance policy effective
June 30, 2001, that is designed to provide broad prospective commercial general liability, pollution legal liability, and contractual indemnity coverage for the Companys ongoing and historical operations. The policy has a twelve
(12) year term and limits of $50,000,000 in the



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aggregate for defense and indemnity, with no deductible or self-insured retention. The policy is designed to provide coverage for future claims in excess of
the Companys existing and historic insurance policies; however, to the extent that these other insurance policies are not responsive to a claim, the policy will provide first dollar coverage for a claim resulting from property damage, personal
injury, bodily injury, cleanup costs or violations of environmental laws. The policy also provides for a broad defense of claims that may be brought against the Company. The policy is specifically intended to provide additional coverage for
potential liabilities arising from pollution conditions or known and/or potential asbestos-related claims. The policy also provides contractual indemnity coverage for scheduled indemnity obligations of the Company arising from, e.g., prior corporate
transactions and real estate sales. The aggregate cost for this policy was approximately $5,800,000, of which, based upon discussions among the respective members of the Boards of Directors, KSC Recovery paid $2,000,000 and the Company paid the
balance of approximately $3,800,000. The portion of the policy paid by KSC Recovery was expected to cover known and/or potential asbestos claims; while the portion of the policy paid by the Company was expected to cover future potential claims
arising from the Companys historical operations. The Company expects this policy will cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company.

In June 2005, the Company was notified that it was to receive a refund of a portion of the cost of the policy relating to other commissions. The
refund, totaling $106,000, was recorded as a reduction in the cost of the policy and the future amortization of the policy cost will be adjusted accordingly as described below.

The Companys $3,800,000 premium for the prospective insurance policy was capitalized as a long-term asset and was being amortized on a
straight-line basis over the twelve (12) year term of the policy; approximately $80,000 per quarter or $320,000 per year. As a result of the refund discussed above, the Company adjusted the current years expense and the remaining balance,
thereby reducing the amortization to $75,000 per quarter or $300,000 per year as of June 2005. To the extent a pre-existing liability has not been recorded, claims made for environmental matters are recorded as litigation accruals in the
Companys consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage
under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated.

Note 9. BUILDINGS AND EQUIPMENT

Buildings and equipment as of December 31, 2006 consisted of the following:



|                         |  |   |            |  
|------------------------ |  | - | ---------- | -
|Buildings and structures |  | $ | 3,285,000  |  
|Machinery and equipment  |  |   | 1,830,000  |  
|                         |  |   |            |  
|                         |  |   | 5,115,000  |  
|Accumulated depreciation |  |   | (3,782,000 | )
|                         |  |   |            |  
|Total                    |  | $ | 1,333,000  |  
|                         |  |   |            |  

Depreciation expenses for the years ended December 31, 2006 and 2005 was $350,000 and $
60,000, respectively.

Note 10. ACCRUED LIABILITIES - CURRENT

The current portion of accrued liabilities as of December 31, 2006 consisted of the following:



|                                                   |  |   |        
|-------------------------------------------------- |  | - | -------
|Compensation, severance and related employee costs |  | $ | 232,000
|Accrued professional                               |  |   | 494,000
|Other                                              |  |   | 26,000 
|                                                   |  |   |        
|Total                                              |  | $ | 752,000
|                                                   |  |   |        



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Note 11. ENVIRONMENTAL REMEDIATION RESERVE

With the sale of approximately 588 acres of the Companys Mill Site Property to CCG Ontario, LLC (CCG) in August 2000, and as a result of
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 below, 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.

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

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

In 2004, this reserve was reduced to approximately $2.4 million to reflect settlement of a third party claim related to the groundwater plume discussed
above. This reserve was further reduced in 2005 as a result of reclassifying $500,000 to the Eagle Mountain Townsite Cleanup Reserve. Finally, this environmental reserve was increased by $1.2 million as of December 31, 2005, for Eagle Mountain
Townsite environmental related matters, as discussed in more detail in Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Buildings and Equipment.

As discussed above in Note 2, the Company, as a result of the adoption of FIN 47, increased its environmental reserve by $1,200,000 to account for the estimated cost of possible future abatement obligations relating
to asbestos-containing products in certain of the viable structures at Eagle Mountain and increased the cost basis of the associated structures at Eagle Mountain by a comparable amount. During 2006, $197,000 of the reserve was utilized primarily for
the abatement of these products. Thus, as of December 31, 2006, the Company estimates, based upon current information, that its future environmental liability related to certain matters not assumed by CCG in its purchase of the Mill Site
Property, such as the groundwater plume discussed below and other environmental related items, including, but not limited to remediation at the Eagle Mountain Site, potential third party property damage and bodily injury claims, would be
approximately $2,915,000. In the event a future claim for damages is filed against the Company that exceeds the remaining $2,915,000 environmental reserve,



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management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.

See also Note 2. Summary of Significant Accounting Policies - Buildings and Equipment, Note 9. Environmental Insurance, and Note
16. Commitments and Contingencies - Environmental Contingencies.

Note 12. EQUITY

Conversion into LLC

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

Class A Units Outstanding

At December 31, 2006 Kaiser LLC had 6,969,299 Class A Units outstanding.

At December 31, 2006, there are 298,100 Class A Units available for issuance relating to outstanding options.

At December 31, 2006, 104,267 Class A Units of the Company were being held for the benefit of the former general unsecured creditors of the
predecessor company pending the resolution of disputed bankruptcy claims. The final resolution of these claims will result in the final allocation of the held shares among the unsecured creditor group, which presents no liability to the Company. For
financial reporting purposes these shares have been considered issued and outstanding. Just prior to the Companys conversion into an LLC in November 2001, the then 136,919 shares were issued to the bankruptcy estate, and subsequently converted
into Class A units. Distribution of these units have been made periodically for the settlement of unsecured creditor claims. .

At
December 31, 2006, 113,690 Class A Units were deemed outstanding and reserved for issuance to holders of Kaiser Inc. stock that have yet to convert such stock to Kaiser LLC Class A Units.

Class B Units

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

These Class B Units are entitled to receive approximately 2% of any cash actually received by MRC, up to approximately $752,000 or $1.00 per unit, if MRC receives the
currently agreed upon price of $41,000,000. The Class B Units are not entitled to any distributions or profits, have no voting rights except as required by law and are not transferable. Please see Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Class B, C and D Units for the accounting treatment of the Class B Units.

At December 31, 2006, Kaiser LLC had
751,956 Class B Units outstanding.



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Class and D Units

During 2002, the Company issued Class C and D Units to certain officers and terminated the Long- Term Incentive Plan (TIP) as to future unearned payments that could have been payable to the Companys
executive officers. Payments to holders of the Class C and D Units will only be paid upon the monetization of the Companys major assets. Payments, if any, will be made under a formula that replicates the amount that would have been paid under
the TIP if it had been continued. Class C and D Units are not entitled to any other distributions or profits, have no voting rights except as required by law and are not transferable. Please see Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Class B, C and D Units for the accounting treatment of the Class C and D Units.

At December 31, 2006, Kaiser LLC had
800 and 200 Class C and D Units outstanding, respectively.

Unit/Stock Option and Unit/Stock Grant Programs

In October 1990, the Companys stockholders approved the Amended, Restated and Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan (the
1989 Stock Plan). The 1989 Stock Plan provided for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock or deferred stock awards. Certain options granted under the 1989 Stock Plan
are still outstanding. The Company incurred no compensation expense during 2006 related to these options.

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

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

In June 1995, the Companys stockholders approved the 1995 Stock Plan. The 1995 Stock Plan provides for the grant of incentive stock options,
non-qualified stock options, restricted stock and other stock related incentives. However, there are no outstanding options under this plan, as of December 31, 2006.

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.

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.



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A summary of the status of grants under the Companys unit/stock plans as of December 31,
2006 and 2005, and activities during the years ended on those dates is presented below:



|                                                               |  |         |         |                               |   |         |  |                               |         |  |   |     
|-------------------------------------------------------------- |  | ------- | ------- | ----------------------------- | - | ------- |  | ----------------------------- | ------- |  | - | ----
|                                                               |  | 2006    |         | 2005                         
|                                                               |  | Options |         | Weighted-AverageExercisePrice |   | Options |  | Weighted-AverageExercisePrice
|Outstanding at beginning of Year                               |  |         | 298,100 |                               | $ | 3.11    |  |                               | 298,100 |  | $ | 3.11
|Granted                                                        |  |         |        |                               |   |        |  |                               |        |  |   |    
|Exercised                                                      |  |         |        |                               |   |        |  |                               |        |  |   |    
|Forfeited                                                      |  |         |        |                               |   |        |  |                               |        |  |   |    
|                                                               |  |         |         |                               |   |         |  |                               |         |  |   |     
|Outstanding at end of year                                     |  |         | 298,100 |                               | $ | 3.11    |  |                               | 298,100 |  | $ | 3.11
|                                                               |  |         |         |                               |   |         |  |                               |         |  |   |     
|Options exercisable at year End                                |  |         | 298,100 |                               | $ | 3.11    |  |                               | 298,100 |  | $ | 3.11
|                                                               |  |         |         |                               |   |         |  |                               |         |  |   |     
|Weighted-average fair value of options granted during the year |  | $       | N/A     |                               |   |         |  | $                             | N/A     |  |   |     

The following table summarizes information about unit options outstanding as of December 31,
2006:



|                         |  |                                       |  |                                    |  |                               |     
|------------------------ |  | ------------------------------------- |  | ---------------------------------- |  | ----------------------------- | ----
|                         |  |                                       |  | Options Exercisableand Outstanding
|Range of Exercise Prices |  | Weighted-AverageRemainingLife (years) |  | Options                            |  | Weighted-AverageExercisePrice
|$0.55 to $1.625          |  | 2.0                                   |  | 161,600                            |  | $                             | 1.36
|$4.85 to $5.58           |  | 2.0                                   |  | 136,500                            |  | $                             | 5.18

Note 13. LOSS PER UNIT/SHARE

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



|                                                                                                    |  |      |           |   |      |   |            |  
|--------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ---------- | -
|                                                                                                    |  | 2006 |           |   | 2005 |  
|Numerator:                                                                                          |  |      |           |   |      |   |            |  
|Net loss                                                                                            |  | $    | (625,000  | ) |      | $ | (3,085,000 | )
|Numerator for basic loss per unit Loss available to Class A members                                 |  | $    | (625,000  | ) |      | $ | (3,085,000 | )
|Numerator for diluted loss per unit Loss available to Class A members                               |  | $    | (625,000  | ) |      | $ | (3,085,000 | )
|Denominator:                                                                                        |  |      |           |   |      |   |            |  
|Denominator for basic earnings per unit-weighted-average shares                                     |  |      | 6,960,000 |   |      |   | 6,938,000  |  
|Effect of dilutive options                                                                          |  |      |          |   |      |   |           |  
|                                                                                                    |  |      |           |   |      |   |            |  
|Denominator for diluted earnings per unit -adjusted weighted-average shares and assumed conversions |  |      | 6,960,000 |   |      |   | 6,938,000  |  
|                                                                                                    |  |      |           |   |      |   |            |  
|Basic loss per unit                                                                                 |  | $    | (0.09     | ) |      | $ | (0.44      | )
|                                                                                                    |  |      |           |   |      |   |            |  
|Diluted loss per unit                                                                               |  | $    | (0.09     | ) |      | $ | (0.44      | )
|                                                                                                    |  |      |           |   |      |   |            |  

For additional disclosures regarding the outstanding employee unit/stock options see Note 12.

The Company incurred a net loss during 2006 and 2005 and therefore all options are considered antidilutive for those years.



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Note 14. INCOME TAXES

Subsequent to the Companys conversion into an LLC, the Company is taxed as a partnership and thus, the Companys results of operations (on an income tax basis) are allocated to the unit holders for
inclusion in their respective income tax returns. Therefore, the only taxes imposed on the Company are a gross revenue tax imposed by the State of California, and income taxes imposed on Business Staffing Inc. These taxes amounted to $18,000 for
2006 and $11,000 for 2005.

Note 15. COMMITMENTS AND CONTINGENCIES

Environmental Contingencies

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

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

As discussed
above in Note 2., the Company, as a result of the adoption of FIN 47, increased its environmental reserve by $1,200,000 to account for its conditional asset retirement obligations related to possible future abatement obligations for
asbestos-containing products in certain of the viable structures at Eagle Mountain and increased the cost basis of the associated structures at Eagle Mountain by a comparable amount. Thus, as of December 31, 2006, the Company estimates, based
upon current information, that its future environmental liability related to certain matters not assumed by CCG in its purchase of the Mill Site Property, such as the groundwater plume discussed below and other environmental related items,
including, but not limited to remediation at the Eagle Mountain Site, potential third party property damage and bodily injury claims, would be approximately $2,915,000. In the event a future claim for damages is filed against the Company that
relates to the remaining $2,915,000 environmental reserve, management believes that the claim may be covered by insurance depending upon the nature and timing of the claim.

Pension Plans

The Company currently sponsors a voluntary qualified 401(k) savings plan and a
nonqualified pension plan, available to all full-time employees. Participants may make contributions of up to 15% of



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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, 2006 and 2005 was $91,100 and $104,211,
respectively.

MRC Financing

Since 1995 MRC has been funded through a series of private placements to its existing equity holders. The last private placement was completed bringing its ownership interest in MRC to 82.48%. Future funding of MRC will be required to cover
such items as the federal land exchange litigation appeal and the railroad repairs but there is no assurance that such funding will be obtained. It is anticipated a $1,200,000 private placement to existing MRC members will be undertaken during the
second quarter of 2007.

Contingent Distributions on Class B, C and D Units

Upon the sale of certain of the Companys assets at a price equal to or greater than certain minimum sales prices, distributions will be made on the Class B, C and D Units in accordance with their respective
terms. For additional information, see Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Class B, C and D Units and Note 12. EQUITY above.

Note 16. LEGAL PROCEEDINGS

In the normal course of our business we are involved in various claims
and legal proceedings. A number of litigation matters previously reported, were settled, dismissed or were inactive in 2006. For example, the Slemmer litigation (Thomas M. Slemmer, et al. v. Fontana Union Water Company, et al.,
(San Bernardino County Superior Court, California, Case No. SCVSS 086856)).and associated insurance coverage dispute were fully resolved in 2006. Significant legal proceedings, including those which may have a material adverse effect on our business
or financial condition, are summarized below. However, this Note 16 does not, and is not intended to, discuss all of the litigation matters to which we may be or become a party. Should we be unable to resolve any legal proceeding in the manner we
anticipate and for a total cost within close proximity to any potential damage liability we have estimated, our business and results of operations may be materially and adversely affected.

Eagle Mountain Landfill Project Land Exchange Litigation. In October 1999, Kaisers wholly-owned subsidiary, Kaiser Eagle Mountain, Inc. (now
Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. This completed land exchange has been challenged in two separate federal lawsuits. On September 20, 2005, the U. S. District Court for the Central District of California,
Eastern Division, issued its opinion inDonna Charpied,et al., Plaintiffs v. United States Department of Interior, et al., Defendants (Case No. ED CV 99-0454 RT (Mex)) and in National Parks and Conservation Association,
Plaintiff v. Bureau of Land Management, et al., Defendants (ED CV 00-0041 RT (Mex)). The decision is adverse to the landfill project in that it sets aside a land exchange completed between the Company and U.S. Bureau of Land Management
(BLM) in October 1999 as well as two BLM rights-of-way. It also effectively reinstates a reverter title issue involving the Eagle Mountain Townsite.

In the exchange, the Companys wholly owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC) transferred approximately 2,800 acres of Kaiser-owned property along its railroad right-of-way
to the BLM and a cash equalization payment in exchange for approximately 3,500 acres of land within the Eagle Mountain landfill project area. The land exchanged by the Company was identified as prime desert tortoise habitat and was a prerequisite to
completion of the permitting of the Eagle Mountain landfill project. Following completion of the land exchange, two lawsuits were filed challenging it and requesting its reversal. The plaintiffs argued that the land exchange should have been
reversed, because, among other reasons, the BLM failed to comply with the National Environmental



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Policy Act and the Federal Land Policy and Management Act. The U.S. District Court concluded that the environmental impact statement was deficient in its
explanation and/or environment analysis with regard to: (i) the issue of eutrophication which deals with the introduction of nutrients, in this case primarily nitrogen, as a result of the existence of the landfill project; (ii) Big Horn
Sheep, which is not an endangered species; (iii) the statement of purpose and need for the landfill project; and (iv) the reasonable range of alternatives to the proposed project. The court did rule in favor of the landfill project with
regard to the environmental analysis and explanation for: (i) noise; (ii) night lighting; (iii) visual impacts; (iv) the desert tortoise; (v) groundwater; and (vi) air. The court also ruled that the environmental impact
statement was deficient under the Federal Land Policy and Management Act with regard to: (i) the appraisal undertaken by the BLM in the land exchange; and (ii) a full discussion of the BLMs conclusions on the public need for the
landfill project. A copy of the decision can be found as Exhibit 99.1 to the Companys Report on Form 8-K dated September 20, 2005.

We and the U.S. Department of Interior have appealed the decision to the U. S. 9thCircuit Court of Appeals. There can be no assurance that we will be successful in any appeal. If the decision is fully
affirmed on appeal, the decision would jeopardize the viability of the landfill project. The U.S. Department of Interiors first brief and our separate first brief were filed in January 2007. The opponents first set of briefs are due in April
2007. The current briefing schedule, which may be modified, has the last brief as being filed in July 2007. It is likely that the complete appeal process will take several years. In addition, the decision could adversely impact the agreement to sell
the landfill project to the District, including termination of the agreement.

Asbestos Litigation. There are pending asbestos
litigation claims, primarily bodily injury, against Kaiser LLC and Kaiser Steel Corporation (the bankruptcy estate of Kaiser Steel Corporation is embodied in KSC Recovery, Inc.). There currently are approximately nine active suits. Many of the
plaintiffs allege that they or their family members were aboard Kaiser ships or worked in shipyards in the Oakland/San Francisco, California area or Vancouver, Washington area in the 1940s and that the Company and/or KSC Recovery were in some
manner associated with one or more shipyards or has successor liability. However, there is an increasing number of claims related to other facilities such as the former Kaiser Steel Mill Site Property.

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

Of the claims resolved to date, approximately 78% have been resolved without payment to the plaintiffs, and of the 46 cases that have been settled to
date involving a payment made to plaintiffs, the settlement amount was $37,500 or less for 38 of such cases. The Company believes that it currently has substantial insurance coverage for the asbestos claims and has tendered these suits to
appropriate insurance carriers.

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



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From time to time various environmental and similar types of claims that relate to Kaiser Steel
pre-bankruptcy activities, are asserted against KSC and Kaiser LLC. Excluding the asbestos claims, there has been an average of two to four such claims a year for the past several years. There were no such claims in 2005 but in 2006 a claim that was
settled in 2000 was reopened under the terms of the 2000 settlement agreement. It is currently not considered to be a material claim in that the first settlement was for a claim in the bankruptcy estate of less than $25,000. In connection with the
KSC plan of reorganization, Kaiser, as the reorganized successor to KSC, was discharged from all liabilities that may have arisen prior to confirmation of the plan, except as otherwise provided by the plan and by law. Although Kaiser believes that
in general all pre-petition claims were discharged under the KSC bankruptcy plan, there have been some challenges as to the validity of the discharge of certain specified claims, such as asbestos claims. If any of these or other similar claims are
ultimately determined to survive the KSC bankruptcy, it could have a materially adverse effect on Kaisers business and value.



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

None.



|Item 8A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedure

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

Internal Control over Financial Reporting

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

Limitations on the Effectiveness of Controls

We do not expect that the disclosure controls or our internal controls will prevent all errors and they cannot possibly prevent all fraud. A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of
two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent



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limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



|Item 8B. | OTHER INFORMATION
|-------- | -----------------

Not applicable.

[Remainder of this Page Intentionally Left Blank]



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KAISER VENTURES LLC AND SUBSIDIARIES



PART III



|Item 9. | MANAGERS AND EXECUTIVE OFFICERS OF THE COMPANY; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|------- | -------------------------------------------------------------------------------------------------

BOARD OF
MANAGERS

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



|                    |  |     |  |                                                             
|------------------- |  | --- |  | ------------------------------------------------------------
|NAME                |  | AGE |  | POSITION WITH THE
COMPANY                                   
|Richard E. Stoddard |  | 56  |  | Chief Executive Officer, President and Chairman of
the Board
|                    |  |    
|Ronald E. Bitonti   |  | 74  |  | Manager                                                     
|                    |  |    
|Todd G. Cole        |  | 86  |  | Manager                                                     
|                    |  |    
|Gerald A. Fawcett   |  | 74  |  | Vice Chairman                                               
|                    |  |    
|Marshall F. Wallach |  | 64  |  | Manager                                                     

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

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

Todd G. Cole has been a director or manager of Kaiser
since November 1989. Mr. Cole was Chief Executive Officer of CIT Financial Corporation before starting his present career as a consultant and corporate director. He currently is President of Cole & Wilds Associates, Inc., a consulting
company. He was a founding director of Coral Gable Trust Company, a Florida State chartered institution, which began operations in April 2004. Mr. Cole is a member of the Georgia Bar Association and is an accredited certified public accountant
(inactive status).

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

Marshall F. Wallach has been a director or manager of Kaiser since November 1991. Since 1984, Mr. Wallach served as President of The Wallach
Company, a Denver, Colorado based investment banking firm. The Wallach Company was sold to Keycorp on January 1, 2001. Mr. Wallach retired from The Wallach Company on Dec. 31, 2003. Prior to forming The Wallach Company, Mr. Wallach
managed the corporate finance department and established the mergers and acquisitions department of Boettcher & Company, a regional investment bank in Denver, Colorado. Mr. Wallach serves on the boards of several non-profit
organizations and privately-owned



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corporations. He is currently President of Wallach Capital Advisors, Inc. which was incorporated in early 2004 and is President of Gates Capital Partners,
LLC incorporated in 2005.

MANAGER EMERITUS

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

INDEPENDENT MANAGERS

Messrs. Bitonti, Cole and Wallach are considered independent managers (directors) under applicable rules.

COMMITTEES OF THE BOARD

Our Board has a standing
Audit Committee and Human Relations Committee.

AUDIT COMMITTEE MATTERS

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

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



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



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



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

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



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



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



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

In performing its duties, the Audit Committee seeks to maintain free and open communication between the
managers, the independent registered public accounting firm and our internal financial management. The Audit Committee is intended to provide an independent and, as appropriate, confidential forum in which interested parties can freely discuss
information and concerns.

The Audit Committee retained Moss Adams LLP as our independent registered public accounting firm for fiscal 2006
and also retained the firm as our independent registered public accounting firm for 2007.

In connection with our annual audit:



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



| | · |  | The Audit Committee reviewed the fees for our financial statements and the fees charged for other services rendered to Moss Adams LLP.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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

Based upon the foregoing, the Audit Committee recommended to the Board of Managers that the audited financial statements be included in our Annual Report
on Form 10-KSB for the year ended December 31, 2006.

HUMAN RELATIONS COMMITTEE

The duties and responsibilities of the Human Relations Committee are set forth in our Human Relations Committee Charter. Although Kaiser LLC leases its
employees from Business Staffing, Inc., the Human Relations Committee, along with Business Staffing, Inc. reviews compensation and benefit programs for the employees leased to Kaiser by Business Staffing, Inc.

The Human Relations Committee is composed of Messrs. Cole (Chairman) Bitonti and Fawcett.

EXECUTIVE OFFICERS

The current executive officers of the Company are:



|                    |  |     |  |                                                               
|------------------- |  | --- |  | --------------------------------------------------------------
|NAME                |  | AGE |  | POSITION WITH THE
COMPANY                                     
|Richard E. Stoddard |  | 56  |  | Chief Executive Officer, President and Chairman of
the Board  
|                    |  |    
|James F. Verhey     |  | 59  |  | Executive Vice President - Finance and Chief Financial Officer
|                    |  |    
|Terry L. Cook       |  | 51  |  | Executive Vice President - Administration,                    



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KAISER VENTURES LLC AND SUBSIDIARIES



General Counsel and Corporate Secretary


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

James F. Verhey joined Kaiser and was appointed Vice President - Finance and Chief Financial Officer
in August 1993, appointed Senior Vice President - Finance in January 1996, and appointed Executive Vice President of Kaiser in January 1998. In addition to his duties with Kaiser, Mr. Verhey was appointed Vice President of Finance and Chief
Financial Officer of Mine Reclamation Corporation in February 1995. Mr. Verhey is a certified public accountant and spent several years with PricewaterhouseCoopers LLP in Los Angeles, California. As of October 1, 1999, Mr. Verhey
began working less than full time for Kaiser. In addition to working for Kaiser, Mr. Verhey is the President of UCC Vineyard Group, which is headquartered in Napa, California, and which owns and manages wine grape vineyards.

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

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

Section 16(a) of the Securities Act of 1934, as amended, requires certain beneficial owners of our units to
file with the SEC initial reports of ownership and reports of changes in ownership of Kaiser LLC.

To our knowledge, based solely on a
review of the Form 3, 4 and 5 filings with the SEC of certain beneficial owners of our Class A Units, all Section 16(a) filing requirements applicable to Section 16 reporting persons were timely filed.

CODE OF BUSINESS CONDUCT AND ETHICS

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



|Item 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------

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



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SUMMARY COMPENSATION TABLE(1)



|                                                    |  |      |  |             |  |                            |  |        
|--------------------------------------------------- |  | ---- |  | ----------- |  | -------------------------- |  | -------
|Name and Principal Position                         |  | Year |  | Salary(2) $ |  | All OtherCompensation(3) $ |  | Total $
|Richard E. Stoddard                                 |  | 2006 |  | 317,071     |  | 54,403                     |  | 371,474
|Chairman of the Board, President and CEO            |  | 2005 |  | 303,417     |  | 60,970                     |  | 364,387
|                                                    |  |      | 
|James F. Verhey                                     |  | 2006 |  | 145,371     |  | 24,539                     |  | 169,910
|Exec. Vice President - Finance & CFO                |  | 2005 |  | 139,111     |  | 31,621                     |  | 170,738
|                                                    |  |      | 
|Terry L. Cook                                       |  | 2006 |  | 238,524     |  | 31,305                     |  | 269,829
|Exec. Vice President, General Counsel and Secretary |  | 2005 |  | 235,453     |  | 34,764                     |  | 270,217
|                                                    |  |      | 
|                                                    |  |      | 

---

|(1) | All employees are leased to Kaiser LLC by Business Staffing, Inc., a subsidiary of the Company. The Bonus; Unit Awards; Option Awards;
Non-Equity Incentive Plan Compensation; and Change in Pension Value and Non-qualified Deferred Compensation Earnings columns have been eliminated from the Summary Compensation Table because there were no reportable
events/compensation earned for the applicable years for such items.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The salary amount was not reduced for any employee contributions to our 401(k) Savings Plan and Supplemental Executive Retirement Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(3) | Our executive officers are provided with certain health insurance, disability insurance and other non-cash benefits generally available to all salaried employees and therefore are
not included in this table under applicable SEC rules. Our contributions to the 401(k) Savings Plan and a Supplemental Executive Retirement Plan in 2006 and 2005 were as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                    |  |                    |  |                       |  |                    |  |        
|------------------- |  | ------------------ |  | --------------------- |  | ------------------ |  | -------
|NAME                |  | YEAR               |  | COMPANY CONTRIBUTIONS |  | TOTAL TO PLANS ($)
|                    |  | 401(K) PLAN(a) ($) |  | SERP(a) ($)           | 
|Richard E. Stoddard |  | 2006               |  | 18,604                |  | 12,624             |  | 31, 228
|                    |  | 2005               |  | 18,604                |  | 17,832             |  | 36,436 
|                    |  |                    |  |                      
|James F. Very       |  | 2006               |  | 12,223                |  |                   |  | 12,223 
|                    |  | 2005               |  | 16,102                |  |                   |  | 16,102 
|                    |  |                    |  |                      
|Terry L. Cook       |  | 2006               |  | 18,604                |  | 4,658              |  | 23,262 
|                    |  | 2005               |  | 18,604                |  | 8,117              |  | 26,721 

---

|(a) | Reported in the All Other Compensation column.
|--- | ------------------------------------------------

Like all
other employees employed more than five (5) years, our executive officers can participate in a program under which we will pay two-thirds (2/3) of the premium on a life insurance policy or policies with a total benefit equal to
approximately three (3) times an employees annual base salary. The premiums paid by us under this life insurance program for each of our executive officers was as follows:



|                    |  |      |  |                               
|------------------- |  | ---- |  | ------------------------------
|NAME                |  | YEAR |  | COMPANYS PREMIUM PAYMENTS ($)
|Richard E. Stoddard |  | 2006 |  | 1,715                         
|                    |  | 2005 |  | 1,715                         
|                    |  |     
|James F. Verhey     |  | 2006 |  | 959                           
|                    |  | 2005 |  | 959                           
|                    |  |     
|Terry L. Cook       |  | 2006 |  | 843                           
|                    |  | 2005 |  | 843                           

Both Mr. Stoddard and Mr. Verhey reside outside Southern California. As a part of the terms of their
employment, we pay or reimburse them for their commuting, rental car and hotel expenses as well as other miscellaneous commuting expenses such as parking fees and mileage reimbursement for use of a private vehicle.



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|                    |  |             |  |                    |  |                 |  |               |  |           |  |       |  |       
|------------------- |  | ----------- |  | ------------------ |  | --------------- |  | ------------- |  | --------- |  | ----- |  | ------
|NAME                |  | YEAR ($)    |  | COMMUTING EXPENSES |  | TOTAL ($)      
|                    |  | AIRFARE ($) |  | LODGING ($)        |  | CAR SERVICE ($) |  | RENTALCAR ($) |  | MISC. ($) | 
|Richard E. Stoddard |  | 2006        |  | 10,835             |  | 5,340           |  | 760           |  | 3,747     |  | 728   |  | 21,410
|                    |  | 2005        |  | 11,477             |  | 4,506           |  |              |  | 5,302     |  | 1,534 |  | 22,819
|                    |  |             |  |                    |  |                 | 
|James F. Verhey     |  | 2006        |  | 4,246              |  | 3,366           |  |               |  | 2,824     |  | 2,381 |  | 12,817
|                    |  | 2005        |  | 4,506              |  | 5,235           |  | 10            |  | 2,433     |  | 2,376 |  | 14,560

Mr. Cook receives an annual automobile allowance of $7,200.

OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END



|                                                                    |  |                                                              |  |                                                                     |  |                                                                     |  |                        |  |                          |  |                          |  |                                                        |  |                                                         |  |            
|------------------------------------------------------------------- |  | ------------------------------------------------------------ |  | ------------------------------------------------------------------- |  | ------------------------------------------------------------------- |  | ---------------------- |  | ------------------------ |  | ------------------------ |  | ------------------------------------------------------ |  | ------------------------------------------------------- |  | -----------
|                                                                    |  | Option Awards                                                |  | Stock Awards                                                       
|Name and Principal Position                                         |  | Number ofSecuritiesUnderlyingUnexercisedOptions(Exercisable) |  | Number of Securities Underlying Unexercised Options (Unexercisable) |  | EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercised |  | OptionExercisePrice($) |  | VestingDate              |  | OptionExpirationDate     |  | Number ofShares orUnits ofStock thathave notVested (3) |  | MarketValue ofShares orUnits ofStock thatHave notVested |  | VestingDate
|Richard E. StoddardChairman of the Board,    President & CEO        |  | 33,75014,80013,800                                           |  |                                                                  |  |                                                                  |  | 1.2504.8505.580        |  | 01/29/9401/10/9506/01/93 |  | 12/31/0812/31/0812/31/08 |  |                                                     |  |                                                      |  |         
|                                                                    |  |                                                              |  |                                                                     |  |                                                                     |  |                        | 
|James F. VerheyExec. Vice President - Finance    & CFO              |  | 30,00015,000                                                 |  |                                                                   |  |                                                                   |  | 1.6254.850             |  | 07/28/9401/10/95         |  | 12/31/0812/31/08         |  |                                                      |  |                                                       |  |          
|                                                                    |  |                                                              |  |                                                                     |  |                                                                     |  |                        | 
|Terry L. CookExec. Vice President, General    Counsel and Secretary |  | 20,00010,00032,000                                           |  |                                                                  |  |                                                                  |  | 1.2504.8505.580        |  | 01/29/9401/10/9506/01/93 |  | 12/31/0812/31/0812/31/08 |  |                                                     |  |                                                      |  |         

There were no option grants and no unit grants to the named executive officers in 2006.



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LONG-TERM INCENTIVE COMPENSATION PLAN

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

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

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

The Class C Units
are held by Participating Officers still employed by Kaiser LLC, and, upon a Participating Officers departure, all Class C Units are automatically converted into Class D Units. Two former officers of Kaiser LLC hold a total of 200 Class D
Units. In the event a Participating Officer is terminated for cause, Kaiser LLC may repurchase, for a nominal value, all of that officers Incentive Units. Any payment to the Participating Officers will be split with a full share to
each Class C Unit and a smaller share for each Class D Unit which will depend on the length of the period since its issuance. The following table sets forth the number of Incentive Units held by the Participating Officers that are also named
executive officers.



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

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

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



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

---

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

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

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

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

401(K) RETIREMENT PLAN

The Company, currently
sponsors a combined voluntary 401(k) savings and money purchase plan. This plan is available to all full time employees. Participants 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. Beginning January 1, 2007, a participant may defer up to 50% of his or her compensation but the Companys possible maximum contribution remains the same.

NON-QUALIFIED DEFERRED COMPENSATION PLANS

Supplemental Executive Retirement Plan. The Company also sponsors a non-qualified deferred compensation plan which mirrors the qualified 401(k) plan discussed immediately above. Contributions to such plan commence once a participant
reaches the maximum annual Social Security wage base. The assets of this plan are held in a rabbi trust.

Limited
Participation Deferred Compensation Plan. Business Staffing adopted the Business Staffing Supplemental Deferred Compensation Plan (the Supplemental Plan) and a related Non-Qualified Deferred Compensation Plan Trust
Agreement (the Trust) on January 10, 2007.

Business Staffing placed into the Supplemental Plan previously accrued
amounts due Richard E. Stoddard and Terry L. Cook upon termination of their employment in the amount of $660,872 and $260,121, respectively. Like the terms of their previous employment agreements, the amounts in the Plan remain subject to forfeiture
if the executive officer is terminated for cause as defined in the Supplemental Plan (which is the same definition as contained the employment agreements of the executive officers) or if the officer should voluntarily terminate his
employment. In addition, the amounts in the Supplemental Plan fully vest if the executive officer is terminated without cause, is constructively terminated without cause, dies, is permanently disabled or upon completion of the initial term of their
employment. Once vested, payments may commence, upon the officers death, permanent disability, or the termination of the officer for any reason except for cause as defined in the Supplemental Plan. The



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Supplement Plans assets will be held through the Trust which is a rabbi trust and all investment earnings or losses shall accrue to account
of each officer under the Supplemental Plan.

EXECUTIVE OFFICER COMPENSATION

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

During much of 2006, Kaisers Human Relations Committee along with Business Staffing engaged in an
extensive review of the existing compensation agreements and plans for our executive officers. The review recognized that elements of the compensation of the executive officers of Kaiser have been adopted and implemented at various times over the
years in relation to our cash maximization plan but the original estimates of the timing of such plans complete implementation and realization have proven to be too optimistic. Accordingly, Kaiser along with Business Staffing developed
modified or new compensation agreements and plans that will, among other things, further align the interests of the executive officers with those of the members of Kaiser and that will encourage the retention of the executive officers. Business
Staffing leases employees, including the executive officers of Kaiser, to Kaiser.

EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS

On January 10, 2007, Business Staffing entered into new employment agreements with each of the executive officers of Kaiser with such agreements
being effective as of January 1, 2007. The new employments agreements superseded the existing employment agreements for the executive officers.

General Terms and Compensation. Except for the name, title, duties, amount of salary, and a special bonus that may be earned by James Verhey upon the sale of Kaisers interest in the West Valley MRF, the
terms of the new employment agreements are the same in all material respects. The agreements commence as of January 1, 2007, and continue for a term of five (5) years (the Initial Term) and continue thereafter on a
month-to-month basis until Kaiser has disposed of all of its material assets. Under the terms of the employment agreements, Messrs. Stoddard, Verhey and Cook have base salaries of $332,945; $152,640 and $275,450, respectively. Base salaries will be
adjusted annually by no less than utilizing the Consumer Price Index for Urban Wage Earners and Clerical Workers, U.S. City Average, All Items, published by the Bureau of Labor Statistics of the United Stated Department of Labor.

During the term of their employment, each executive officer is to be awarded 25,000 Kaiser Class A Units as of January 15 of each year
beginning January 15, 2007; provided, however, the amount of the annual award of units will be reviewed prior to the January 15, 2010 grant.

The discretionary annual bonus for executive officers was eliminated in the new employment agreements. A new performance based incentive bonus program was adopted to commence effective January 1, 2007, as
discussed in more detail below.

Unique to Mr. Verheys employment agreement is that if during his employment Kaisers
interest in the West Valley MRF is sold, he will be paid a bonus based upon the collected net sales price. At this time, the projected bonus would be approximately $100,000 but the actual amount of the bonus would increase or decrease if the value
of Kaisers West Valley MRF interest increases or decreases after January 1, 2007.

Like all other employees, the executive
officers receive medical, dental, vision, and long-term disability insurance benefits. In addition, like other employees employed more than five (5) years, the



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executive officers have the opportunity to participate in life insurance whereby Business Staffing will pay two-thirds (2/3) of the premium on a life
insurance policy or policies with a total benefit equal to three times an employees salary. As in previous employment agreements, Mr. Cook receives a car allowance of $600 per month and Messrs. Stoddard and Verhey are reimbursed for their
commuting costs to Ontario, California and any rental car and lodging costs. In addition, the new employment agreements provide that the executive officers are entitled to reimbursement of certain wellness benefits which are directed toward an
annual medical physical and a comprehensive medical physical and appropriate tests every two (2) years. If an executive fails to timely have a comprehensive physical performed, the annual award of Class A Units for such executive will be
delayed until such time as the comprehensive medical physical and any related medical tests are completed.

Severance. If any
officer is terminated without cause during the Initial Term, including, among other reasons, constructive termination, such officer is entitled to receive cash severance pay equal to two (2) years base salary. Severance is payable in one
lump sum or, if mutually agreed by the executive and Business Staffing, over a period of time. In addition, Business Staffing will continue to pay benefits, such as health and dental insurance, for two years. In the event an executive officer
voluntarily terminates his employment, Business Staffing will not be obligated to pay him any severance or other additional compensation, other than the compensation due and owing up to the date of termination.

Change of Control. None of the employment agreements contain change of control provisions. No compensation is due an officer upon a
change of control absent an officers employment being terminated.

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

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

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

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

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

No severance is payable if an executive is terminated for cause.

Current Salary of Executive Officers. Set forth below is the annual base salary of Kaisers Chief Executive Officer and each of its other
named executive officers as of March 1, 2007:



|                    |  |                    |        
|------------------- |  | ------------------ | -------
|NAME                |  | ANNUAL BASE SALARY
|Richard E. Stoddard |  | $                  | 332,945
|                    | 
|Terry L. Cook       |  | $                  | 275,540
|                    | 
|James F. Verhey     |  | $                  | 152,640



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EXECUTIVE OFFICER NEW REVENUE INCENTIVE PARTICIPATION PLAN

On January 10, 2007, Business Staffing approved the Executive Officer New Revenue Incentive Bonus Plan to be effective commencing
January 1, 2007 (the Performance Bonus Plan). The previous discretionary bonus plan was terminated and replaced with the Performance Bonus Plan.

Pursuant to this incentive plan, eighteen percent (18%) of the annual New Net Revenue of the Company, as defined in the Performance Bonus Plan shall be awarded as a bonus pool to the current executive officers
and to any new executive officer as may be provided in the Performance Bonus Plan. Any performance bonus payable under the Performance Bonus Plan shall be paid equally among the executive officers and shall be paid 50% in Class A Units and 50%
either in cash or by a contribution to the account of the respective officer under the SERP or any other tax deferred plan that may be established in the discretion of Business Staffing.

New Revenue means all revenue generated from new lines of business or new sources of revenue for Kaiser that are not historically
recurring revenues as of January 1, 2006. New Revenue does not include revenues generated from the sale of Kaisers existing assets and projects, except as provided in the Performance Bonus Plan, distributions from Kaisers interest
in West Valley MRF, LLC, revenues generated as a result of landfill operations at Eagle Mountain, interest and investment income. New Revenue Expenses means all incremental and new direct and indirect expenses incurred in the generation
of New Revenue but New Revenue Expenses shall not include the amortization or depreciation cost of any existing asset or an allocation of any fixed expense or charge, including the allocation of the base salary and benefits of existing employee
positions of the Company. Net New Revenue is the positive difference, if any, of New Revenue less New Revenue Expenses for any give calendar year. The Performance Bonus Plan is administered by a committee composed of the individuals
serving on Kaisers Human Relations Committee. The bonus, if any, is to be paid by March 14 of each year.

HUMAN RELATIONS COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATIONS

During the year ending December 31, 2006, the Human Relations Committee consisted of Messrs.
Cole (Chairman), Bitonti, and Fawcett. Mr. Fawcett was President and Chief Operating Officer of Kaiser from January 1996, until his retirement from full time duties on January 15, 1998. Mr. Fawcett continues to perform work for us
from time-to-time. Mr. Fawcetts compensation is summarized in the Manager Compensation table located on the next page.

MANAGER
COMPENSATION

During 2006, non-employee managers were paid on the following basis:



|                                                      |  |        |                                                            
|----------------------------------------------------- |  | ------ | -----------------------------------------------------------
|DESCRIPTION OF COMPENSATION FOR NON-EMPLOYEE MANAGERS |  | AMOUNT
|Annual Cash Retainer                                  |  | $      | 20,000                                                     
|                                                      | 
|Chairman of Committee-Additional Annual Cash Retainer |  | $$     | 7,500Audit Committee5,000Any Other Active StandingCommittee
|                                                      | 
|Meeting Fee-(In Person)                               |  | $      | 1,500                                                      
|                                                      | 
|Meeting Fee-(Telephonic)                              |  | $      | 1,000                                                      
|                                                      | 
|Annual equity grant                                   |  |        | 5,000Class A Units                                         



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Each grant vests on
January 31stof the year following the grant, subject to acceleration upon the occurrence of certain events.
Accordingly, the restricted 5,000 Class A Units granted to Messrs. Bitonti, Cole, Fawcett and Wallach in 2006, fully vested on January 31, 2007.

We do not provide retirement benefits for non-employee managers.

MANAGER COMPENSATION TABLE(1)



|                       |  |                              |     |  |                    |  |          
|---------------------- |  | ---------------------------- | --- |  | ------------------ |  | ---------
|Name                   |  | FeesEarned orPaid in Cash($) |     |  | Unit Awards ($)(2) |  | Total ($)
|Ronald E. Bitonti      |  | 34,500                       | (3) |  | 2,500              |  | 37,000   
|                       |  |                              |    
|Todd G. Cole           |  | 41,500                       |     |  | 2,500              |  | 44,500   
|                       |  |                              |    
|Gerald A. Fawcett(4)   |  | 60,000                       |     |  | 2,500              |  | 62,500   
|                       |  |                              |    
|Richard E. Stoddard(5) |  |                             |     |  |                   |  |         
|                       |  |                              |    
|Marshall F. Wallach    |  | 39,000                       |     |  | 2,500              |  | 41,500   

---

|(1) | The Option Awards; Non-Equity Incentive Plan Compensation; Change in Pension Value and Non-qualified Deferred Compensation; and All Other
Compensation columns have been eliminated from the Manager Compensation Table because there were no reportable events/compensation earned for such items in 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Companys Class A Units are not publicly traded. However, the Company is aware of a very limited number of private third-party sales of Class A Units in 2006. The
$.50 per Class A Unit value is based upon the average sales price of those sales that did occur during the six-month period prior to the date of the units issuance in June 2006.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Included in this amount is the annual retainer of $2,000 per year Mr. Bitonti receives for serving on the Board of Directors of KSC Recovery, Inc., the bankruptcy estate of
Kaiser Steel Corporation.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr. Fawcett works on our behalf through Business Staffing, Inc. on various matters and projects in addition to his work on the Board of Managers. Accordingly, he is considered
an employee for compensation purposes and is paid an annual salary of $60,000. He is not paid additional compensation for serving on the Board of Managers except for the annual award of 5,000 Class A Units. Mr. Fawcett also receives
medical, dental, and vision insurance and other similar benefits made available to all employees of Business Staffing, Inc.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | As an employee - manager, Mr. Stoddard receives no additional compensation for serving on the Companys Board of Managers. His compensation as an executive officer is
summarized under Item 10. EXECUTIVE COMPENSATION - Summary Compensation Table.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 11. | SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | ----------------------------------------------------------------

PRINCIPAL UNIT MEMBERS

The following table sets forth, based upon the latest available filings with the Securities and Exchange Commission and from the Companys
Class A Unit member ownership list (generally reporting ownership as of December 31, 2006), the number of Class A Units owned by each person known by us to own of record or beneficially five percent (5%) or more of such units.



|                                                                                                                        |  |                                         |  |                                             |  
|----------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------------------------------------- | -
|Name and Address of Beneficial Owner                                                                                    |  | Number ofClass A UnitsBeneficiallyOwned |  | % of Issuedand OutstandingClass A Units (1) |  
|Ascend Capital Holdings Corporation One Montgomery St., Suite 3300 San Francisco, CA 94104                              |  | 656,000                                 |  | 9.3                                         | %
|                                                                                                                        |  |                                        
|First Eagle SOOFN Global Fund. 1345 Avenue of the Americas, 44thFloor New York, New York 10105                          |  | 365,000                                 |  | 5.2                                         | %
|                                                                                                                        |  |                                        
|Kaisers Voluntary Employees Beneficiary Association Trust (VEBA)(2) 9786 Sierra Avenue Fontana, CA 92335              |  | 656,987                                 |  | 9.3                                         | %
|                                                                                                                        |  |                                        
|Pension Benefit Guaranty Corporation(3) Pacholder Associates,
Inc. 8044 Montgomery Road, Suite 382 Cincinnati, OH 45236 |  | 407,415                                 |  | 5.8                                         | %
|                                                                                                                        |  |                                        
|Pequot Capital Management Inc.(4) 500 Nyala Farm Road Westport, CT 06880                                                |  | 756,200                                 |  | 10.7                                        | %

---

|(1) | The percentage for each member is based on the total number if issued and outstanding Class A Units including the 104,267 Class A Units reserved but not yet distributed to
the Class 4A unsecured creditors of KSC and 113,690 Class A Units deemed outstanding and reserved for issuance to holders of Kaiser Ventures Inc. stock that have to convert such stock into Kaiser Ventures LLC Class A Units.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | VEBA received its shares in Kaiser as a creditor of the KSC bankruptcy. VEBAs shares in Kaiser are held in trust by AST Trust Company.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(3) | PBGC received its shares in Kaiser as a creditor of the KSC bankruptcy. The Company understands that Pacholder Associates, Inc. has a contract with PBGC pursuant to which it has
full and complete investment discretion with respect to substantially all of the units owned by PBGC, including the power to vote such securities. Substantially all of the PBGCs units are held through a nominee Beat & Co.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The owner of these units was previously identified as being held by Willow Creek Capital Partners and by Willow Creek Offshore Fund. The Company understands that these funds were
acquired by Peqout Capital Management Inc. in 2005.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SECURITY OWNERSHIP OF MANAGEMENT

This table below reflects the number of Class A Units beneficially owned by the Companys (1) managers and manager nominees,
(2) named executive officers, and (3) all of its managers and named executive officers as a group, as of March 1, 2007, as well as the number of options exercisable within 60 days of that date.



|                                                                                                |  |                                                 |  |                                                                         |  |                                 |  |                                           |  
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------------- |  | ----------------------------------------------------------------------- |  | ------------------------------- |  | ----------------------------------------- | -
|                                                                                                |  | Column 1                                        |  | Column 2                                                                |  | Column 3                        |  | Column 4                                  |  
|Name                                                                                            |  | Class A UnitsBeneficiallyOwned,ExcludingOptions |  | Class A UnitsUnderlyingOptionsExercisableWithin 60-Days ofMarch 1,
2007 |  | Total # ofClass A UnitsOwned(1) |  | % of IssuedandOutstandingClass A Units(1) |  
|Richard E. Stoddard, CEO, President & Chairman                                                  |  | 145,194                                         |  | 62,350                                                                  |  | 207,544                         |  | 2.9                                       | %
|                                                                                                |  |                                                 |  |                                                                        
|Gerald A. Fawcett, Vice Chairman(2)                                                             |  | 105,578                                         |  | 62,000                                                                  |  | 167,578                         |  | 2.4                                       | %
|                                                                                                |  |                                                 |  |                                                                        
|James F. Verhey, Executive Vice President - Finance & CFO                                       |  | 67,035                                          |  | 45,000                                                                  |  | 112,035                         |  | 1.6                                       | %
|                                                                                                |  |                                                 |  |                                                                        
|Terry L. Cook, Executive Vice President - Administration, General Counsel & Corporate Secretary |  | 92,966                                          |  | 45,000                                                                  |  | 137,966                         |  | 1.9                                       | %
|                                                                                                |  |                                                 |  |                                                                        
|Ronald E. Bitonti, Manager(3)                                                                   |  | 28,396                                          |  | 1,500                                                                   |  | 29,896                          |  | *                                         |  
|                                                                                                |  |                                                 |  |                                                                        
|Todd G. Cole, Manager                                                                           |  | 35,188                                          |  | 0                                                                       |  | 38,188                          |  | *                                         |  
|                                                                                                |  |                                                 |  |                                                                        
|Marshall F. Wallach, Manager                                                                    |  | 38,250                                          |  | 1,500                                                                   |  | 39,750                          |  | *                                         |  
|                                                                                                |  |                                                 |  |                                                                        
|All officers and managers as a group (7 persons)(1)                                             |  |                                                 |  |                                                                         |  |                                 |  | 10.1                                      | %

---

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

|(1) | The percentage for each individual is based on the total number if issued and outstanding Class A Units (including the 104,267 Class A Units which have been issued but are
reserved and not yet distributed to the Class 4A unsecured creditors of KSC and 113,690 Class A Units reserved for those who have yet to convert their Kaiser Inc. stock to Kaiser LLC Class A Units as a result of the merger) and was
determined as if all the options listed in Column 2 had been exercised by that particular individual. All options are vested.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



|Item 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------

None reportable.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]



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PART IV



|Item 13. | EXHIBITS
|-------- | --------



|(a) | Exhibits.
|--- | ---------

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

EXHIBIT INDEX

(* Indicates compensation plan, contract or arrangement)



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



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.1.2        |  | Second Amendment dated July 29, 1994, to Lease dated November 30, 1990, between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation, incorporated by reference from Exhibit 4
of Kaiser Ventures Inc.s Form 10-Q Report for the period ending June 30, 1994.                                                                                                                                                                                                                                         
|              | 
|10.1.3        |  | Third Amendment dated January 29, 1995, but effective as of January 1, 1995, to Lease dated November 30, 1990, between Kaiser Eagle Mountain, Inc. and Mine Reclamation
Corporation, incorporated by reference from Exhibit 10.1.3 of Kaiser Ventures Inc.s Form 10-K Report for the year ended December 31, 1994.                                                                                                                                                                                            
|              | 
|10.1.4        |  | Fourth Amendment dated effective January 1, 1996, between Kaiser Eagle Mountain, Inc. and Mine Reclamation Corporation, incorporated by reference from Exhibit 10.1.4 of Kaiser Ventures
Inc.s Form 10-K Report for the year ended December 31, 1995.                                                                                                                                                                                                                                                         
|              | 
|10.1.5        |  | Indemnification Agreement dated September 9, 1997 among Riverside County, Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle Mountain Reclamation, Inc. and Kaiser Ventures Inc,
incorporated by reference from Exhibit 10.1 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended September 30, 1997.                                                                                                                                                                                  
|              | 
|10.1.6        |  | Development Agreement to be executed upon consummation of federal land exchange among Riverside County, Mine Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle Mountain Reclamation, Inc.
and Kaiser Ventures Inc., incorporated by reference from Exhibit 10.2 of Kaiser Ventures Inc.s Form 10-Q Report for the period ended September 30, 1997.                                                                                                                                                   
|              | 
|10.1.7        |  | Operating Agreement for Mine Reclamation, LLC dated June 1, 2000, incorporated by reference from Exhibit 10.1.7 of Kaiser Ventures Inc.s Form 10-K Report for the year ended
December 31, 2000.                                                                                                                                                                                                                                                                                                               
|              | 
|10.2          |  | Agreement for Purchase and Sale of Real Property and Related Personal Property in Regard to the Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions between County Sanitation
District No. 2 of Los Angeles County and Mine Reclamation, LLC incorporated by reference from Exhibit 10.3 of the Companys Form 10-Q Report for the quarter ended June 30, 2000, incorporated by reference from Exhibit 10.2 of Kaiser
Ventures Inc.s Form 10-K Report for the year ended December 31, 2000.
|              | 
|10.3*         |  | Employment Agreement between Business Staffing, Inc. and Richard E. Stoddard dated as of January 1, 2007, incorporated by reference from Exhibit 10.1 of Kaiser Ventures LLCs Form 8-K
dated January 10, 2007.                                                                                                                                                                                                                                                                                                
|              | 
|10.4*         |  | Employment Agreement between Kaiser Ventures Inc. and Gerald A. Fawcett dated as of January 18, 1999, incorporated by reference from Exhibit 10.5 of Kaiser Ventures Inc.s Form 10-K
Report for the year ended December 31, 1998.                                                                                                                                                                                                                                                                             
|              | 
|10.5*         |  | Employment Agreement between Business Staffing, Inc. and Terry L. Cook dated as of January 1, 2002, incorporated by reference from Exhibit 10.3 of Kaiser Ventures LLCs Form 8-K Report
dated January 10, 2007.                                                                                                                                                                                                                                                                                               
|              | 
|10.6*         |  | Employment Agreement between Business Staffing, Inc. and James F. Verhey dated as of January 1, 2007, incorporated by reference from Exhibit 10.2 of Kaiser Ventures LLCs 8-K Report
dated January 10, 2007.                                                                                                                                                                                                                                                                                                  
|              | 
|10.7          |  | 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.                                                                                                                                                                                                              
|              | 
|10.7.1        |  | 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.                                                                                                                                                                                                                                                                   



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|              |  |                                                                                                                                                                                                                                                                                                                                   
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                              
|10.7.2        |  | Third Amendment to Lease Agreement between Lord Baltimore Properties and Kaiser Ventures LLC dated February 19, 2002, incorporated by reference from Exhibit 10.16.2 of Kaiser Ventures LLC
Report for the year ended December 31, 2001.                                                                                          
|              | 
|10.7.3        |  | Fourth Amendment to Lease Agreement between CIP Empire Tower LLP and Kaiser Ventures LLC dated November 13, 2006 incorporated by reference from Exhibit 10.1 of Kaiser Ventures LLCs
Form 10-QSB Report for the period ended September 30, 2006.                                                                                 
|              | 
|10.8*         |  | 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.                                                                                                            
|              | 
|10.9*         |  | 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).                                                                                                                                                     
|              | 
|10.10*        |  | 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.                                                                                                                                                                     
|              | 
|10.10.1*      |  | First Amendment to Kaiser Ventures Inc. 1995 Stock Option Plan, incorporated by reference from Exhibit 4.1.1 of Kaiser Ventures Inc.s Form S-8 Registration Statement (Registration No.
333-17843).                                                                                                                              
|              | 
|10.11         |  | Executive Officer New Revenue Participation Incentive Plan adopted to be effective January 1, 2007, incorporated by reference from Exhibit 10.4 of Kaiser Ventures LLCs Form 8-K Report
dated January 10, 2007.                                                                                                                  
|              | 
|10.12         |  | Business Staffing, Inc. Supplemental Deferred Compensation Plan dated January 10, 2007, incorporated by reference from Exhibit 10.5 of Kaiser Ventures LLCs Form 8-K Report dated
January 10, 2007.                                                                                                                              
|              | 
|10.12.1       |  | Non-Qualified Deferred Compensation Agreement dated January 10, 2007, incorporated by reference from Exhibit 10.6 of Kaiser Ventures LLCs Form 8-K Report dated January 10,
2007.                                                                                                                                                
|              | 
|10.13*        |  | 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.                                                                                                                                                 
|              | 
|10.14         |  | Form of Indemnification Agreement for individuals serving on the Board of Managers of Kaiser Ventures LLC, incorporated by reference from Exhibit 10.25 of Kaiser Ventures LLCs 10-K Report
for the year ended December 31, 2001.                                                                                                
|              | 
|10.15         |  | Form of Indemnification Agreement for officers of Kaiser Ventures LLC, incorporated by reference from Exhibit 10.26 of Kaiser Ventures LLCs 10-K Report for the year ended December 31,
2001.                                                                                                                                    
|              | 
|10.16         |  | 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.                                                                            
|              | 
|10.16.1       |  | Second Amendment to Members Operating Agreement dated December 1, 2001, incorporated by reference from Exhibit 10.18.1 of Kaiser Ventures LLCs 10-KSB Report for the year ended
December 31, 2004.                                                                                                                               
|              | 
|10.16.2       |  | Performance Guaranty and Indemnification Agreement (KRC Obligations) dated June 19, 1997 given by Kaiser Ventures Inc. for the benefit of West Valley MRF, LLC and West Valley Recycling
& Transfer, Inc., incorporated by reference from Exhibit 10.1.1 of Kaiser Ventures Inc.s 10-Q Report for the period ended June 30, 1997.
|              | 
|10.17         |  | Loan Agreement dated as of June 1, 1997 between West Valley MRF, LLC and California Pollution Control Financing Authority, incorporated by reference from Exhibit 10.2 of the Companys
10-Q Report for the period ended June 30, 1997.                                                                                           



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.17.1       |  | 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.
|              | 
|10.17.2       |  | 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.     
|              | 
|10.18         |  | 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.                                                                                                                                                                                                        
|              | 
|10.19         |  | 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.                                                                                                                                        
|              | 
|10.20         |  | 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.                                                                                                                                                                                            
|              | 
|10.21         |  | 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.                                                                                                                                           
|              | 
|10.21.1       |  | First Amendment and Restated Environmental Guaranty Agreement between West Valley MRF, LLC and Union Bank of California dated May 1, 2000, incorporated by reference from Exhibit 10.4 of
Kaiser Ventures Inc.s Form 10-Q Report for the period ended June 30, 2000.                                                                                                                                                                          
|              | 
|10.22         |  | 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.                                                                                                                                                                                       
|              | 
|10.23         |  | 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.                                                                                                                                                                
|              | 
|10.24         |  | 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.                                                                                                                                                                                                        
|              | 
|10.25         |  | 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.                                                                                                                                                                                                                 
|              | 
|10.26         |  | 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.                                                                                                                                                                                                                  
|              | 
|14            |  | Code of Business Conduct and Ethics of Kaiser Ventures LLC incorporated by reference from Exhibit 14.1 of Kaiser Ventures LLCs Form 10-K Report for the year ended December 31,
2002.                                                                                                                                                                                                                                                         



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|              |  |                                                                                                                                                                                                                                                                                                             
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DOCUMENT DESCRIPTION                                                                                                                                                                                                                                                                                        
|21            |  | Active subsidiaries of Kaiser Ventures LLC are: Lake Tamarisk Development, LLC; Kaiser Eagle Mountain, LLC; Kaiser Recycling, LLC; Business Staffing, Inc.; and Mine Reclamation,
LLC.                                                                                                                      
|              | 
|23            |  | Consent of Moss Adams LLP Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                    
|              | 
|24            |  | Power of Attorney (included in the signature page).                                                                                                                                                                                                                                                         
|              | 
|31.1          |  | Certificate of Richard E. Stoddard, Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.                                                                                                                                                                                   
|              | 
|31.2          |  | Certificate of James F. Verhey, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a) filed with this Report.                                                                                                                                                                                       
|              | 
|32            |  | Certificates of Richard E. Stoddard, Chief Executive Officer, and James F. Verhey, Chief Financial Officer, pursuant to Section 1350, filed with this Report.                                                                                                                                               
|              | 
|99            |  | Preliminary Opinion and related analysis of Duff & Phelps, LLC, relating to its independent valuation of the Class A Units as of November 30, 2001, incorporated by reference from
Exhibit 99.3 of Amendment No. 2 to Kaiser Ventures LLCs Registration Statement on Form S-4, filed on September 30, 2001.
|              | 
|99.1          |  | Amended and Restated Audit Committee Charter of Kaiser Ventures LLC adopted November 11, 2005 incorporated by reference from Exhibit 99. of Kaiser Ventures LLCs Report on Form 10-QSB
for the period ended September 30, 2005.                                                                            



|(b) | Reports on Form 8-K.
|--- | --------------------

No reports on Form 8-K were filed
during the fourth quarter of 2006. However, a Form 8-K report was filed on January 10, 2007, regarding various new compensation agreements and arrangements with our executive officers.



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|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

Independent Auditor and Fees

The Audit Committee appointed Moss Adams as the Companys independent registered public accounting firm for 2005, 2006 and for the current fiscal
year.

Fees (including reimbursements for out-of-pocket expenses) paid to Moss Adams LLP for services in fiscal 2005 and 2006 were as
follows:



|                     |  |                    |         |                  |   |        
|-------------------- |  | ------------------ | ------- | ---------------- | - | -------
|                     |  | Moss Adams LLP (1)
|Fee Category         |  | Fiscal 2005 Fees   |         | Fiscal 2006 Fees
|Audit  Fees         |  | $                  | 110,700 |                  | $ | 110,500
|Audit  Related Fees |  | $                  |        |                  | $ |        
|Tax Fees             |  | $                  | 60,300  |                  | $ | 65,000 
|All Other Fees       |  | $                  | 4,500   |                  | $ | 26,250 
|                     |  |                    |         |                  |   |        
|Total Fees           |  | $                  | 175,500 |                  | $ | 201,750
|                     |  |                    |         |                  |   |        

---

|(1) | Audit Committee appointed Moss Adams LLP as our independent registered public accounting firm on
January 26, 2005, and on the same date terminated Ernst & Young as our independent registered public accounting firm.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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



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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 26, 2007 |  | KAISER VENTURES LLC
|                     |  |                    
|                     |  | By:                 |  | /s/ Richard E. Stoddard                                                 
|                     |  | Name:               |  | Richard E. Stoddard                                                     
|                     |  | Title:              |  | President, Chief Executive Officer and Chairman of the Board of Managers

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



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(Power of Attorney)

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



|   |  |                                             |  |                                                                                                        |  |               
|-- |  | ------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | --------------
|   |  | Signature                                   |  | Title                                                                                                  |  | Date          
|1. |  | Principal Executive Officer                 |  |                                                                                                        |  |               
|   |  |                                             | 
|   |  | /s/ Richard E. Stoddard Richard E.
Stoddard |  | President, Chief Executive Officer and Chairman of
the Board of Managers (Principal Executive Officer) |  | March 26, 2007
|   |  |                                             | 
|2. |  | Principal Financial and Accounting Officer  |  |                                                                                                        |  |               
|   |  |                                             | 
|   |  | /s/ James F. Verhey James F.
Verhey         |  | Executive Vice President, and Chief Financial Officer
(Principal Financial and Accounting Officer)     |  | March 26, 2007



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|   |  |                                             |  |               |  |               
|-- |  | ------------------------------------------- |  | ------------- |  | --------------
|   |  | Signature                                   |  | Title         |  | Date          
|4. |  | Managers                                    |  |               |  |               
|   |  |                                             | 
|   |  | /s/ Ronald E. Bitonti Ronald E.
Bitonti     |  | Manager       |  | March 26, 2007
|   |  |                                             | 
|   |  | /s/ Todd G. Cole Todd G.
Cole               |  | Manager       |  | March 26, 2007
|   |  |                                             | 
|   |  | /s/ Gerald A. Fawcett Gerald A.
Fawcett     |  | Vice Chairman |  | March 26, 2007
|   |  |                                             | 
|   |  | /s/ Marshall F. Wallach Marshall F.
Wallach |  | Manager       |  | March 26, 2007



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