**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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** **

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**FORM 10-Q**

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| **x**      | ** ** | **QUARTERLY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|------------|-----------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                    |
|       | ** ** | **For the quarterly period ended June 30, 2007**                                              |
|       |       |                                                                                          |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Forthe transition periodfrom                  to                       **

** **

**CommissionFile No. 1-12248**

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** **

**KAISER GROUP HOLDINGS, INC.**

(successor issuer to KaiserGroup International, Inc.)

(Exact name of registrant asspecified in its charter)

 

 

| **Delaware**                              |   | **54-2014870**       |
|-------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer     |
| incorporation or  organization)           |   | Identification  No.) |
|                                      |   |                 |
| **9300  Lee Highway, Fairfax, Virginia**  |   | **22031-1207**       |
| (Address of  principal executive offices) |   | (Zip Code)           |

 

Registrant’s telephone numberincluding area code: **(703) 934-3413**

** **

 

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 (the “Exchange Act”) during the preceding 12 months (or for such shorterperiod that the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes x   No o

Indicate by check mark whether the registrant is a largeaccelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated Filer o             AcceleratedFiler o             Non-acceleratedFiler x

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act).Yes  o  No  x

**Applicable only to issuers involved in bankruptcy proceedings duringthe preceding five years:**

Indicate by check mark whether the registrant has filedall documents and reports required to be filed by Section 12, 13 or 15(d) ofthe Exchange Act subsequent to the distribution of securities under a planconfirmed by a court.  Yes x    No  o

The Plan of Reorganization of Kaiser Group International,Inc. under Chapter 11 of the Bankruptcy Code became effective on December 18,2000.  The Plan provided, among otherthings, that holders of shares of common stock of Kaiser Group International,Inc. receive shares of common stock of Kaiser Group Holdings, Inc. and thatholders of specified outstanding debt obligations and other specified claimantsreceive cash and shares of preferred stock and common stock of Kaiser GroupHoldings, Inc., all in accordance with the terms set forth in the Plan. The initialdistribution of securities occurred as of April 17, 2001.

As of August 10, 2007, there were 1,790,890 shares of Kaiser GroupHoldings, Inc. Common Stock, par value $0.01 per share, outstanding.

 

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**KAISER GROUP HOLDINGS, INC.**

**INDEX TO FORM 10-Q**
|                                                                                                                     | ** ** | **Page** |
|---------------------------------------------------------------------------------------------------------------------|------------|----------|
| **Part I  — Financial Information**                                                                       |       |     |
|                                                                                                                |       |     |
| Item  1. Financial Statements:                                                                                      |       |     |
|                                                                                                                |       |     |
| Consolidated Balance Sheets at June 30, 2007  (unaudited) and December 31, 2006                                |       | 3        |
|                                                                                                                |       |     |
| Consolidated Statements of Operations (unaudited) for  the Three Months and Six Months Ended June 30, 2007 and 2006 |       | 4        |
|                                                                                                                |       |     |
| Consolidated Statements of Cash Flows (unaudited) for  the Six Months Ended June 30, 2007 and 2006                  |       | 5        |
|                                                                                                                |       |     |
| Notes to Consolidated Financial Statements (unaudited)                                                              |       | 6        |
|                                                                                                                |       |     |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations                 |       | 12       |
|                                                                                                                |       |     |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                                 |       | 18       |
|                                                                                                                |       |     |
| Item 4. Controls and Procedures                                                                                     |       | 18       |
|                                                                                                                |       |     |
| **Part II  — Other Information**                                                                          |       |     |
| ** **                                                                                                          |       |     |
| Item  1. Legal Proceedings                                                                                          |       | 18       |
|                                                                                                                |       |     |
| Item  1A. Risk Factors                                                                                              |       | 18       |
|                                                                                                                |       |     |
| Item  5. Other Information                                                                                          |       | 21       |
|                                                                                                                |       |     |
| Item 6.  Exhibits                                                                                                   |       | 21       |
|                                                                                                                |       |     |
| **Signatures**                                                                                                      |       | 25       |

 

 

2

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**PART I — FINANCIALINFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share amounts)**
| ** **                                                                                               | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| ** **                                                                                               | ** ** | **(unaudited)**         | ** ** | ** **                  | ** ** |
| **ASSETS**                                                                                               | ** ** | ** **              | ** ** | ** **                  | ** ** |
| **Current Assets**                                                                                       | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Cash and cash  equivalents                                                                               |       | $                       | 40,359     |                        | $          | 55,779 |   |
| Certificates of deposit                                                                                  |       | 200                     |       | 1,268                       |       |
| Marketable securities —  available for sale                                                         |       | 9,175                   |       | 9,175                       |       |
| Restricted cash and  cash equivalents                                                                    |       | 3,417                   |       | 3,332                       |       |
| Accounts receivable                                                                                      |       | —                  |       | 35                          |       |
| Prepaid expenses and  other current assets                                                               |       | 275                     |       | 471                         |       |
| Income taxes receivable                                                                                  |       | 11,329                  |       | 8,452                       |       |
| Total Current  Assets                                                                                    |       | 64,755                  |       | 78,512                      |       |
|                                                                                                     |       |                    |       |                        |       |
| **Other Assets**                                                                                         | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Investments in and  advances to joint venture                                                            |       | 778                     |       | 2,278                       |       |
| Investment in  affiliates                                                                                |       | 2,800                   |       | 2,800                       |       |
| Deferred tax asset                                                                                       |       | 437                     |       | 2,909                       |       |
| Total Other  Assets                                                                                      |       | 4,015                   |       | 7,987                       |       |
| Total Assets                                                                                             |       | $                       | 68,770     |                        | $          | 86,499 |   |
| ** **                                                                                               | ** ** | ** **              | ** ** | ** **                  | ** ** |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                           | ** ** | ** **              | ** ** | ** **                  | ** ** |
|                                                                                                     |       |                    |       |                        |       |
| **Current Liabilities**                                                                                  | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Accounts payable                                                                                         |       | $                       | 219        |                        | $          | 168 |   |
| Post-retirement benefit  plan obligation                                                                 |       | 321                     |       | 6,468                       |       |
| Other accrued expenses                                                                                   |       | 2,792                   |       | 3,001                       |       |
| Dividend payable on  common stock                                                                        |       | —                  |       | 10,745                      |       |
| Total Current  Liabilities                                                                               |       | 3,332                   |       | 20,382                      |       |
| ** **                                                                                               | ** ** | ** **              | ** ** | ** **                  | ** ** |
| **Commitments and Contingencies**                                                                        | ** ** | ** **              | ** ** | ** **                  | ** ** |
|                                                                                                     |       |                    |       |                        |       |
| Common stock, par value  $0.01 per share:                                                                |       |                    |       |                        |       |
| Authorized—3,000,000  shares                                                                        |       |                    |       |                        |       |
| Issued and  outstanding—1,790,890 shares at June 30, 2007 and December 31, 2006,  respectively |       | 18                      |       | 18                          |       |
| Capital in excess of  par                                                                                |       | 11,796                  |       | 11,796                      |       |
| Retained earnings                                                                                        |       | 53,584                  |       | 54,263                      |       |
| Accumulated other  comprehensive income                                                                  |       | 40                      |       | 40                          |       |
| Total  Shareholders’ Equity                                                                         |       | 65,438                  |       | 66,117                      |       |
| Total Liabilities and  Shareholders’ Equity                                                         |       | $                       | 68,770     |                        | $          | 86,499 |   |

 

See notes to consolidatedfinancial statements.

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**KAISER GROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share amounts)**
| ** **                                                            | ** ** | **For the Three Months Ended  June 30** | ** ** | **For the Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **(unaudited)**                                                  | ** ** | **(unaudited)**                                                 | ** ** |
| ** **                                                            | ** ** | **2007**                                                         | ** ** | **2006**                                                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                  |       |                                                             |       |                                                            |       |   |   |   |   |
| Gross Revenue.                                                        |       | $                                                                | —     |                                                            | $          | 119 |   | $ | — |   | $ | 222 |   |
| Labor and subcontract costs.                                          |       | —                                                           |       | 268                                                             |       | — |   | 505 |   |
| Service Loss.                                                         |       | —                                                           |       | (149                                                            | )          | — |   | (283 | ) |
| Operating  Expenses                                                   |       |                                                             |       |                                                            |       |   |   |   |   |
| Administrative expenses.                                              |       | 1,053                                                            |       | 1,214                                                           |       | 2,052 |   | 2,619 |   |
| Reserve for contract losses .                                         |       | —                                                           |       | 3,000                                                           |       | — |   | 3,000 |   |
| Operating Loss.                                                       |       | (1,053                                                           | )          | (4,363                                                          | )          | (2,052 | ) | (5,902 | ) |
| Other Income:                                                         |       |                                                             |       |                                                            |       |   |   |   |   |
| Interest income.                                                      |       | 471                                                              |       | 537                                                             |       | 968 |   | 766 |   |
|  Loss Before Income Tax                                          |       | (582                                                             | )          | (3,826                                                          | )          | (1,084 | ) | (5,136 | ) |
| Income tax  benefit                                                   |       | 90                                                               |       | 1,645                                                           |       | 405 |   | 2,418 |   |
|  Loss Applicable to Common Shareholders.                         |       | ($492                                                            | )          | ($2,181                                                         | )          | ($679 | ) | ($2,718 | ) |
| Basic and  Diluted Loss Per Common Share:                             |       |                                                             |       |                                                            |       |   |   |   |   |
|  Net Loss Per  Share                                             |       | ($0.27                                                           | )          | ($1.22                                                          | )          | ($0.38 | ) | ($1.52 | ) |
| Weighted average shares  for basic and diluted loss per common share. |       | 1,791                                                            |       | 1,791                                                           |       | 1,791 |   | 1,790 |   |
|                                                                       |            |                                                                  |            |                                                                 |            |  |  |  |  |  |  |  |  |

 

See notes to consolidated financial statements.

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**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(In thousands)**
| ** **                                                                            | ** ** | **For the Six Months ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2007**                                                        | ** ** | **2006** | ** ** |
| ** **                                                                            | ** ** | **(unaudited)**                                                 | ** ** |
| Operating  Activities:                                                                |       |                                                            |       |   |   |
| Net loss.                                                                             |       | ($679                                                           | )          | ($2,718 | ) |
| Adjustments to  reconcile net income (loss) to net cash used in operating activities: |       |                                                            |       |   |   |
| Deferred taxes                                                                        |       | 2,472                                                           |       | (2,218 | ) |
| Writedown of contract receivable                                                      |       | —                                                          |       | 3,000 |   |
| Changes in operating assets and liabilities:                                          |       |                                                            |       |   |   |
| Account receivables                                                                   |       | 35                                                              |       | 115 |   |
| Prepaid expenses and other current assets.                                            |       | 196                                                             |       | (112 | ) |
| Accounts payable and accrued expenses.                                                |       | (6,305                                                          | )          | (446 | ) |
| Income taxes receivable                                                               |       | (2,877                                                          | )          | — |   |
| Income taxes payable.                                                                 |       | —                                                          |       | (32,010 | ) |
| Other operating activities                                                            |       | (85                                                             | )          | 23 |   |
| Net Cash Used in Operating Activities                                                 |       | (7,243                                                          | )          | (34,366 | ) |
| Investing  Activities:                                                                |       |                                                            |       |   |   |
| Maturity of certificates of deposit .                                                 |       | 1,068                                                           |       | — |   |
| Distributions from 50% Owned Joint Venture                                            |       | 1,500                                                           |       | 85,000 |   |
| Net Cash Provided by Investing Activities                                             |       | 2,568                                                           |       | 85,000 |   |
| Financing  Activities:                                                                |       |                                                            |       |   |   |
| Dividends Paid                                                                        |       | (10,745                                                         | )          | — |   |
| Net Cash Used in  Financing Activities.                                               |       | (10,745                                                         | )          | — |   |
| (Decrease)  Increase in Cash and Cash Equivalents.                                    |       | (15,420                                                         | )          | 50,634 |   |
| Cash and Cash  Equivalents at Beginning of Period.                                    |       | 55,779                                                          |       | 14,633 |   |
| Cash and Cash  Equivalents at End of Period.                                          |       | $                                                               | 40,359     |   | $ | 65,267 |   |
|                                                                                       |            |                                                                 |            |  |  |  |  |

 

See notes to consolidated financial statements.

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**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

1.             Basis of Presentation

The accompanyingconsolidated financial statements of Kaiser Group Holdings, Inc. andsubsidiaries (“the Company”), except for the December 31 2006 balancesheet (derived from audited financial statements), are unaudited and have beenprepared in accordance with U.S. generally accepted accounting principles (“GAAP”)for interim financial information. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.In the opinion of management, all adjustments, consisting only of normalrecurring accruals,  considered necessaryfor a fair presentation have been included.

These statements shouldbe read in conjunction with the Company’s audited consolidated financialstatements and footnotes and the other information included in the Company’sAnnual Report on Form 10-K for the year ended December 31,2006. Certain reclassifications have been made to the prior period financialstatements to conform them to the presentation used in the June 30, 2007financial statements.

Kaiser Group Holdings,Inc. (“Kaiser Group Holdings” or the “Company”) is a Delaware corporation thatwas formed on December 6, 2000 for the purpose of owning all of the outstandingstock of Kaiser Group International, Inc. (“Old Kaiser”), which in turncontinues to own the stock of its remaining subsidiaries. On June 9, 2000, OldKaiser and 38 of its domestic subsidiaries voluntarily filed for protectionunder Chapter 11 of the United States Bankruptcy Code in the District ofDelaware (case nos. 00-2263 to 00-2301). Old Kaiser emerged from bankruptcywith an approved plan of reorganization (which was its Second Amended Plan ofReorganization and is referred to in this report as the “Plan of Reorganization”)that was effective on December 18, 2000 (the “Effective Date”).  The Company is deemed a “successor issuer” toOld Kaiser by virtue of Rule 12g-3(a) under the Securities Exchange Act of1934. A summary of the Plan of Reorganization for Old Kaiser can be found in aCurrent Report on Form 8-K dated December 5, 2000 filed by Old Kaiser.  In thisreport, unless the context states otherwise, the terms “we”, “our” and “Kaiser”refer to Kaiser Group Holdings (including Old Kaiser as its predecessor) andits subsidiaries.

As ofJune 30, 2007, apart from resolving remaining bankruptcy claims, the Company had only a limited number ofactivities, assets and liabilities, primarily consisting of:

·                  the ownership ofa 50% interest in Kaiser-Hill Company, LLC (“Kaiser-Hill”), which serves as thegeneral contractor at the U.S. Department of Energy’s (“DOE”) Rocky Flats sitenear Denver, Colorado for the performance of a contract for the closure of thesite (the “Closure Contract”) (See Note 4).

·                  thecloseout of a completed contract for the engineering and construction of asteel mini-mill in the Czech Republic for Nova Hut (“Nova Hut”) (See Note 7).

·                  awholly-owned captive insurance company that hasnot been issuing new policies since October 1, 2000 and has solely beeninvolved in resolving remaining claims made against previously issuedpolicies.  In the fourth quarter of 2004,the Company received regulatory approval and finalized the formation documentsof a sponsored captive subsidiary, MS Builders Insurance Company, to enable ourwholly-owned captive insurance company to offer derivative captive insuranceservices to third party clients.  As ofJune 30, 2007, MS Builders Insurance Company has not written any policies.

·                  acontingent obligation to add funds to a capped, post-retirement medical benefitplan for a fixed number of retirees that is currently being funded through aVoluntary Employee Beneficiary Association Plan established and funded by theCompany in the amount of approximately $6.1 million, effective April 30, 2007(See Note 7).

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Kaiser AnalyticalManagement Services, Inc. (“KAMS”), accounted for all of the Company’s grossrevenue in 2006.  Under prevailing marketconditions, effective June 30, 2006, the Company determined that there wereinsufficient business prospects for KAMS to expect future revenues.

The Companyadopted fresh start reporting in its consolidated balance sheet as of December31, 2000. The American Institute of Certified Public Accountants’ Statement ofPosition 90-7, “Financial Reporting by Entities in Reorganization Under theBankruptcy Code” (“SOP 90-7”), requires under certain circumstances resulting froma bankruptcy the creation of a new entity for financial reporting purposes uponthe emergence of an entity from bankruptcy. Accordingly, the value of the reorganized enterprise becomes theestablished amount for the emerging balance of shareholders’ equity, and anyaccumulated deficit of the predecessor entity is offset against availablecapital in excess of par, resulting in an emerging retained earnings ofzero.  Additionally, assets andliabilities are recorded at their fair values.

The value of theemerged enterprise used for fresh start reporting as of December 31, 2000 was$87.5 million. It was determined by management with the assistance ofindependent advisors.  The methodologyemployed involved estimation of the enterprise value taking into considerationa discounted cash flow analysis.  Thediscounted cash flow analysis was based on a seven-year cash flow projectionprepared by management, taking into consideration the terminal value of itsassets and liabilities as of immediately prior to its emergence from bankruptcyon December 18, 2000.  Terminal values ofassets and liabilities were determined based either on contracted amounts,actuarial present values and/or management’s estimates of the outcome ofcertain operating activities. Net after-tax cash flows, assuming a 40%effective tax rate, were discounted at 17% in order to take into considerationthe risks and uncertainties inherent in such projections.  The cash flow projections were based onestimates and assumptions about circumstances and events that had not yet takenplace.  Estimates and assumptionsregarding individual retained matters which form the collective composition ofthe overall enterprise value as of December 18, 2000 are inherently subject tosignificant economic and competitive uncertainties and contingencies beyond thecontrol of the Company.  Accordingly,there may be differences between projections and actual results because eventsand circumstances frequently do not occur as expected and may besignificant.  More specifically,assumptions within the valuation related to the amount and timing of theultimate performance and related cash flows of the Company’s investment inKaiser-Hill have the greatest impact on the overall enterprise valuation.

2.             GeneralTerms of Plan and Status of Bankruptcy Distributions

The effectiveness of thePlan of Reorganization as of December 18, 2000 did not, in and of itself,complete the bankruptcy process. The process of resolving claims initiallyfiled in the bankruptcy is ongoing.

By far the largest classof claims (“Class 4”) was made up of creditor claims other than trade creditoror equity claims.  Class 4 claimsincluded holders of Old Kaiser’s senior subordinated notes due 2003.  Holders of Class 4 claims allowed by theBankruptcy Court received a combination of cash and Company preferred (“NewPreferred”) and common stock (“Kaiser Common Stock”) in respect of theirclaims.  Each Class 4 claimant wasentitled to receive one share of New Preferred and one share of Kaiser CommonStock for each $100 of claims, subject to a reduction in the number of sharesof New Preferred issued to such claimant by one share for each $55.00 of cashreceived by the claimant.

Pursuant to the terms ofthe Plan of Reorganization, the Company was required to complete its initialbankruptcy distribution within 120 days of the Effective Date.  Accordingly, to satisfy approximately $136.8million of allowed Class 4 claims, the Company effected its initialdistribution on April 17, 2001.  Theamount of unresolved Class 4 claims remaining at April 17, 2001 wasapproximately $130.5 million. To address the remaining unresolved claims, theBankruptcy Court issued an order on March 27, 2001 establishing an AlternativeDispute Resolution (“ADR”) procedure whereby the remaining claimants and OldKaiser produced limited supporting data relative to their respective positionsand engaged in initial negotiation efforts in an attempt to reach an agreedclaim determination.  If necessary, theparties were thereafter required to participate in a non-binding mediationbefore a mediator pre-selected by the Bankruptcy Court.  All unresolved claims as of March 27, 2001are subject to the ADR process. Since April 17, 2001, the date of the initialdistribution, approximately $130.3 million of asserted Class 4 claims have beenwithdrawn, negotiated or mediated to an agreed amount, resulting in cashpayments approximating $3.0 million and issuances of 683 shares of NewPreferred (all of which have been redeemed) and 823 shares of Kaiser CommonStock.  As of June 30, 2007, theaggregate amount of unresolved claims was approximately $0.2 million and isrecorded as a component of other accrued expenses on the Company’s consolidatedbalance sheet.

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The equity class ofclaims recognized in the Old Kaiser bankruptcy are “Class 5” claims, consistingof holders of Old Kaiser common stock (“Old Common”) and other “EquityInterests” as defined in the Plan of Reorganization. The Plan of Reorganizationprovides that holders of Equity Interests receive a number of shares of KaiserCommon Stock equal to 17.65% of the number of shares of Kaiser Common Stockissued to allowed Class 4 claimants. In the initial distribution, one share ofKaiser Common Stock was issued for each 96 shares of previously outstanding OldCommon.  During 2005, the Company settleda significant Class 5 claim asserted by the former stockholders of ICT SpectrumConstructors, Inc. (“ICT Spectrum”), which Old Kaiser had acquired in 1998, andissued an aggregate of 175,003 additional shares of Kaiser Common Stock to suchclaimants pursuant to the settlement. With the settlement of the ICT SpectrumClass 5 claim and the subsequent issuance of 175,003 shares of Kaiser CommonStock to such claimants, no Class 5 claims remain unresolved at June 30, 2007.

As of June 30, 2007, theaggregate amount of unresolved claims was approximately $0.2 million andis  recorded as a component of otheraccrued expenses on the Company’s consolidated balance sheet.  As demonstrated by the claim settlementscompleted since April 17, 2001, and based on the belief that it is in the bestinterest of the Company and its current stockholders, the Company has beensettling certain remaining Class 4 claims entirely for cash payments in lieu ofthe combination of cash and New Preferred and Kaiser Common Stock ascontemplated in the Plan of Reorganization. The Company intends to continue to use this settlement alternativeduring the resolution of remaining Class 4 claims.  The Company expects to resolve the remainingclaims by the end of 2007.  Upon suchfinal resolution, the Company expects to take the necessary steps to close thebankruptcy cases.  Upon such closing, theBankruptcy Court would no longer be involved in the administration of theCompany’s affairs, and the Company’s obligation to pay certain fees and submitperiodic reports to the Bankruptcy Court would be terminated.  Since closing of the cases requiresresolution of all outstanding matters and such resolution is somewhat out ofthe Company’s control, there is a possibility that the cases will not be closedwithin the anticipated time period.

3.             Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividingnet (loss) income by the weighted average number of common shares outstandingfor the period. Diluted EPS normally includes the weighted-average effect ofdilutive securities outstanding during the period.  Pursuant to the Plan of Reorganization thatwas effective as of December 18, 2000, all then-outstanding common stockequivalents were cancelled.  As a result,the Company has no dilutive or anti-dilutive securities outstanding.

4.             Investmentin and Advances to Joint Venture

The Company’s netinvestment in and advances to joint venture totaled $0.8 million and $2.3****million at June 30, 2007 and December 31, 2006,respectively and consisted solely of the Company’s investment in theKaiser-Hill.  The Company accounts forits 50% ownership in the Kaiser-Hill investment using the equity method.

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site.  On December8, 2005, the DOE affirmed Kaiser-Hill’s declaration as required under theClosure Contract and the DOE authorized Kaiser-Hill to invoice all remainingperformance fees less a retained amount equaling $5.0 million.  On January 11, 2006, Kaiser-Hillreceived payment for all fees except for the retained amount. The project totalfee expected to be earned by Kaiser-Hill pursuant to the Contract is $510.9million based on Kaiser-Hill’s cost to complete the site closure of $3.44billion.  Through August 10, 2007,Kaiser-Hill has received $510.8 million of such fee from the DOE.

Kaiser-Hill recognized asubstantial amount of fee income from the DOE upon the declaration of physicalcompletion on October 13, 2005 and, accordingly, the Company’s proportionateshare of such income was recorded in Equity Income in Earnings of Joint Venturein the Company’s consolidated statement of operations for the year endedDecember 31, 2005.  As a result, upon thereceipt of the $80.0 million cash distribution from Kaiser-Hill on March 1,2006, and the receipt of $5.0 million distributed from Kaiser-Hill on June 30,2006, the Company made a corresponding reduction of $85.0 million in itsinvestment in Kaiser-Hill on its balance sheet as of December 31, 2006. TheCompany received an additional distribution of $1.5 million from Kaiser-Hill onFebruary 27, 2007, and made a corresponding reduction of $1.5 million in itsinvestment in Kaiser-Hill on its consolidated balance sheet as of June 30,2007.

The Closure Contract provides that Kaiser-Hill will earn revenue equal tothe actual cost of physical completion plus a performance fee.  The performance fee is based on (1)Kaiser-Hill’s cost to complete the site closure, which must be within the rangeof $3.1 billion and $4.9 billion, (2) the schedule of physical completion,which must be before 2007 and (3) Kaiser-Hill’s safety performance.  At the time of declaration of physicalcompletion on October 13, 2005, Kaiser-Hill’s cost estimate to complete theproject remained at $3.44 billion, which resulted in a total performance feepayable to Kaiser-Hill projected to be $510.9 million.

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Since Kaiser-Hilldeclared physical completion, many of the performance risks have beeneliminated, but contract risks and uncertainties remain. As a result ofdeclaration of physical completion in October 2005, Kaiser-Hill recognized allremaining performance fees under the Closure Contract in 2005 and hasestablished reserves for certain risks and uncertainties related to the ClosureContract.  Kaiser-Hill will reverse thesereserves to the extent it is successful in mitigating or eliminating theseremaining contract risks and uncertainties.

Underthe Closure Contract, Kaiser-Hill is not responsible for, and the DOE pays allcosts associated with any liability, including, without limitation, any claimsinvolving strict or absolute liability and any civil fine or penalty, expenseor remediation cost, but limited to those of a civil nature, which may beincurred by, imposed on, or asserted against Kaiser-Hill arising out of any actor failure to act, condition or exposure which occurred before Kaiser-Hillassumed responsibility on July 1, 1995 (“pre-existing conditions”). To theextent the acts or omissions of Kaiser-Hill constitute willful misconduct, lackof good faith, or failure to exercise prudent business judgment on the part ofKaiser-Hill’s managerial personnel and cause or add to any liability, expense,or remediation cost resulting from pre-existing conditions, Kaiser-Hill isresponsible, but only for the incremental liability, expense or remediationcaused by Kaiser-Hill.

The ClosureContract further provides that Kaiser-Hill will be reimbursed for thereasonable cost of bonds and insurance allocable to the contract and forliabilities and expenses incidental to these liabilities, including litigationcosts, to third parties not compensated by insurance or otherwise. There is anexception to this reimbursement provision applicable to liabilities caused bythe willful misconduct, lack of good faith or failure to exercise prudentbusiness judgment by Kaiser-Hill’s managerial personnel.

Kaiser-Hill nowoperates under the closeout phase of its Closure Contract with the DOE,primarily resolving the administrative issues and providing support to the DOEto achieve regulatory closure of the site. The closeout phase of the Closure Contract  is a cost reimbursable phase and is not fee -bearing; the Company does not expect that the closeout phase will impact feesearned. Effective December 31, 2005,Kaiser-Hill terminated its remaining employees. Staff necessary to complete closeout activities is being subcontractedor provided by CH2M Hill Companies Ltd. (“CH2M Hill”).

5.             Investmentin Affiliates

In 1997, the Company purchased a 4% ownership interestin a limited liability company (“the LLC”) that leases the land and owns thebuildings where the Company’s corporate headquarters are located.  Effective October 28, 2000, the Companynegotiated a settlement with the otherowners of the LLC resolving various issues between the Company and the otherowners.  As a part of that resolution,the Company fixed the maximum amount of potential future recovery of theinvestment, upon sale or refinancing of the property at $2.8 million.  At June 30, 2007 and December 31, 2006, therecorded amount of the investment remained unchanged.

6.             Common Stock

The Company declared a $6.00 per common share cashdividend on December 21, 2006 payable to shareholders of record on January 2,2007. The dividend was paid on January 16, 2007.  Any future determination to pay cashdividends will be at the discretion of our Board which determines our dividendpolicy based on our results of operations, capital requirements, and otherfactors that our Board deems relevant.

7.             OtherContingencies

The Company has variousobligations and liabilities from its continuing operations, including generaloverhead expenses in connection with maintaining, operating and winding downthe various entities and net assets comprising the Company.  Additionally, the Company believes contingentliabilities may exist in the following areas:

Nova Hut

On May 16, 2006,the Company was informed that an arbitration panel formed under the auspices ofthe International Chamber of Commerce (“ICC”) issued a ruling in thearbitration proceeding initiated by its subsidiary, Kaiser Netherlands B.V. (“KaiserNetherlands”) concerning the steel mini-mill that was constructed by KaiserNetherlands for Nova Hut, a.s. (now Mittal Steel Ostrava, a.s.) (“Nova Hut”) inOstrava, the Czech Republic.  Thedecision by the arbitration panel is not appealable.  After calculation of claim and counter-claimaward amounts as decided by the ICC arbitration panel, the net balance award againstKaiser Netherlands, including legal cost and interest amounts, is approximately$4.1 million in favor of Nova Hut.  TheCompany does not believe that Nova Hut has recourse to the Company to collectthis award amount.  However,  Nova Hut has submitted a court filing in TheNetherlands to enforce the award against Kaiser Netherlands which has limitedassets.

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The Companycontinues to evaluate its remaining options against Nova Hut and theInternational Finance Corporation (“IFC”). Among the options being considered are the filing of independentarbitration claims by the Company (as opposed to Kaiser Netherlands) againstNova Hut and the IFC in accordance with prior rulings of the BankruptcyCourt.  The Bankruptcy Court has enteredan order staying the Company’s claim against the IFC pending submission of thedispute to arbitration.  Similarly, theBankruptcy Court has entered an order staying the Company’s bankruptcy claimagainst Nova Hut pending arbitration. The Company recently filed a motion with the Bankruptcy Court to securediscovery against Nova Hut and the IFC, pending the initiation of internationalarbitration proceedings by the Company as previously ordered by the BankruptcyCourt.  In a combined hearing held inDelaware on April 25, 2007, the Bankruptcy Court denied the Company’s motionfor discovery in advance of the initiation of separate arbitration proceedingsagainst the IFC and Nova Hut, respectively. The Company has filed a motion with the District Court seeking appeal ofthe Bankruptcy Court’s denial of the Company’s discovery motion.

In December 2003,an ICC arbitration panel, under the dispute resolution provisions of the NovaHut mini-mill subcontract between Kaiser Netherlands and the mini-mill’s mainequipment supplier, Tippins, Inc., issued a final award that was on balancefavorable to Kaiser Netherlands.  As aresult of the ruling, Kaiser Netherlands was relieved of the obligation to payretention to Tippins, and Kaiser Netherlands was awarded a net cash settlementof $2.6 million.  The Company has notrecorded this award due to the uncertainties regarding collectibility.  However, the Company is actively pursuingcollection of this award.

The continuedlitigation of these disputes has had, and will continue to have, a negativeimpact on the cash flow of the Company.

Taking intoaccount the results of the ICC arbitration ruling against Kaiser Netherlands,in the second quarter of 2006 the Company wrote off the remaining Nova Hutcontract receivable of $3.0 million by recording an additional reserve of $3.0million.

Kaiser-Hill

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site.  DOE hasreviewed Kaiser-Hill’s declaration as required under the Closure Contract. OnDecember 8, 2005, the DOE accepted the physical completion declaration inaccordance with the Closure Contract. The projected total fee to be earnedpursuant to the Closure Contract is expected to be $510.9 million based onKaiser-Hill’s cost to complete the site closure of $3.44 billion.  As of August 10, 2007, Kaiser-Hill hasreceived $510.8 million of such fee from the DOE.  A substantial portion of the received feeremains subject to audit.

UnderKaiser-Hill’s contract with the DOE, Kaiser-Hill is not responsible for, andthe DOE pays all costs associated with, any liability, including, withoutlimitation, any claims involving strict or absolute liability and any civilfine or penalty, expense, or remediation cost, but limited to those of a civilnature, which may be incurred by, imposed on, or asserted against Kaiser-Hillarising out of any act or failure to act, condition, or exposure which occurredbefore Kaiser-Hill assumed responsibility on July 1, 1995 (pre-existingconditions). To the extent the acts or omissions of Kaiser-Hill constitutewillful misconduct, lack of good faith, or failure to exercise prudent businessjudgment on the part of Kaiser-Hill managerial personnel and cause or add toany liability, expense, or remediation cost resulting from pre-existingconditions, Kaiser-Hill is responsible, but only for the incremental liability,expense, or remediation caused by Kaiser-Hill.

TheClosure Contract further provides that Kaiser-Hill will be reimbursed for thereasonable cost of bonds and insurance allocable to the Rocky Flats contractand for liabilities and expenses incidental to these liabilities, includinglitigation costs, to third parties not compensated by insurance or otherwise.There is an exception to this reimbursement provision applicable to liabilitiescaused by the willful misconduct, lack of good faith or failure to exerciseprudent business judgment by Kaiser-Hill managerial personnel.

Asthe contract between Kaiser-Hill and the DOE is cost-reimbursable in nature,the costs invoiced by Kaiser-Hill for reimbursement by the DOE are subject toaudit by the U.S. government.  Also sincethe inception of Kaiser-Hill, the Company invoiced certain management oversightcosts to Kaiser-Hill. These Company-invoiced management oversight costs toKaiser-Hill have been reviewed by the DOE and remain subject to final approval.Government audits at Kaiser-Hill are ongoing. Although Kaiser-Hill and the Company have historically provided fortheir estimates of disallowed costs on cost-reimbursable contracts,uncertainties exist with regard to whether government audits will result in anydisallowed costs needing to be refunded to the government customer.  The continued adequacy of provisions forreserves with regard to unallowable costs is reviewed regularly.

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Kaiser-Hillnow operates under the closeout phase of the DOE Rocky Flats Closure Contract,primarily resolving open administrative issues and providing support to the DOEto achieve regulatory closure of the site. The closeout phase of the contract is a cost reimbursable phase and isnot fee - bearing; the Company does not expect that the closeout phase willimpact fees earned.

On December 8,2005, when the DOE accepted physical completion in accordance with the RockyFlats contract, it authorized Kaiser-Hill to invoice all remaining performancefees less a retained amount equaling $5.0 million which was retained by the DOEfor possible contract contingencies.  OnJanuary 11, 2006, Kaiser-Hill received payment for all fees except for theretained amount.  As a result of thispayment, on March 1, 2006, the Company received an $80.0 million cashdistribution (representing its 50% share) from Kaiser-Hill.  On April 14, 2006, $4.9 million of theremaining $5.0 million retention was released to Kaiser-Hill by the DOE.  It cannot be determined at this time whatportion of the remaining $0.1 million DOE retention balance will ultimately bereleased and when (if ever) such a release would occur.  On June 30, 2006, the Company received anadditional $5.0 million cash distribution from Kaiser-Hill.  On February 27, 2007, the Company receivedanother cash distribution from Kaiser-Hill in the amount of $1.5 million.

Asof August 10, 2007, Kaiser-Hill has withheld approximately $3.6 million fromdistribution to provision against potential risks associated with U.S.Government audits.  At this time, it isnot possible to predict the number of years that will be required to completethe government audit process.  TheCompany expects to receive its 50% share of any distribution of such funds fromKaiser-Hill.

Post-Retirement BenefitPlan Obligation 

In accordance withthe terms and provisions of the Plan of Reorganization for Old Kaiser, theCompany remains obligated to continue to fulfill the provisions of Old Kaiser’spreviously curtailed benefits plan, which provides certain medical, retirement,and death benefits to a group of retirees. The Company was self-insured for all benefits payable under the plan.

Since the December2000 approval of the reorganization plan, the Company had been negotiating withthe Bankruptcy Court-appointed Official Committee of Retirees (“OCR”) to designand implement a benefits funding plan that would provide for all retireebenefit obligations going forward.   Inan adversary claim hearing in the Bankruptcy Court held on April 12, 2006, theCourt accepted the Company’s proposal to establish a Voluntary Employees’Beneficiary Association (“VEBA”) to fund retirees’ future medical and deathbenefits in the present value amount of approximately $6.1 million.  The present value pension obligation of $0.3million will continue to be funded directly by the Company.  As of March 31, 2007, the Company had anaccrued liability of $6.4 million.  TheVEBA was established and funded by the Company in the amount of  approximately $6.1 million effective April30, 2007. Through April 30, 2007, the benefits had been funded by the Companythrough a claims administrator.

Furthermore,according to the terms of the Bankruptcy Court decision, after the VEBA hasbeen in place for five years, the Company will be required to undertake anactuarial analysis of the projected net present value of benefits remaining tobe paid out.  If the remaining VEBA fundamount is then not sufficient to pay the estimated present value of futurebenefits obligations, then the Company will be required to contribute theestimated shortfall amount to the VEBA fund. It is not possible to predict at this time whether a shortfall in theVEBA fund will exist after a period of five years and, if so, the requiredamount of the Company’s contribution  forthe shortfall.

8.             NewAccounting Standards

In June 2006, the Financial Accounting StandardsBoard, (“FASB”) issued FASB Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation ofFASB Statement No. 109, “Accounting for Income Taxes,” and seeks to reducethe diversity in practice associated with certain aspects of measurement andrecognition in accounting for income taxes. In addition, FIN 48 providesguidance on de-recognition, classification, interest and penalties, andaccounting in interim periods and requires expanded disclosure with respect tothe uncertainty in income taxes.  We adopted the provisions of FIN 48 on January 1, 2007. Therewas no cumulative effect as a result of applying FIN 48. No adjustment was madeto retained earnings on our opening consolidated balance sheet.

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In September 2006, the FASB issued Statements ofFinancial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFASNo. 157”). SFAS No. 157 defines fair value, establishes a framework formeasuring fair value in generally accepted accounting principles, and expandsdisclosures about fair value measurements. SFAS No. 157 applies to existingaccounting pronouncements that require or permit fair value measurements inwhich FASB had previously concluded fair value is the most relevant measurementattribute. Accordingly, SFAS No. 157 does not require any new fair valuemeasurements. SFAS No. 157 is effective for financial statements issued forfiscal years beginning after November 15, 2007, with early adoptionencouraged. The Company is currently evaluating the impact the adoption of thisstatement will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employer’sAccounting for Defined Benefit Pension and Other Postretirement Plans (anamendment of FASB Statements No. 87, 88, 106, and 123R)” (“SFAS No. 158”). Theobjectives of this Statement are for an employer to: (1) recognize theoverfunded or underfunded status of a single-employer defined benefitpostretirement plan as an asset or liability in its statement of financialposition and to recognize changes in funded status in comprehensive income inthe year in which the changes occur; and (2) measure the plan status as of thedate of its year-end statement of financial position. SFAS No. 158 is effectivefor the requirement to recognize the funded status of a benefit plan and thedisclosure requirements as of the end of the fiscal year ending after December15, 2006. The requirement to measure plan assets and benefit obligations as ofthe date of the employer’s fiscal year-end statement of financial positionshall be effective for fiscal years ending after December 15, 2008. Theadoption of SFAS No. 158 did not have a material impact on our consolidatedfinancial statements.

In February 2007, the FASB issued SFASNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities-Including an amendment of FASB Statement No. 115” (“SFAS No.159”). SFAS No. 159 permits entities to choose to measure eligible itemsat fair value at specified election dates. Unrealized gains and losses on itemsfor which the fair value option has been elected are reported in earnings ateach subsequent reporting date. The fair value option (i) may be appliedinstrument by instrument, with certain exceptions, (ii) is irrevocable(unless a new election date occurs) and (iii) is applied only to entireinstruments and not to portions of instruments. SFAS No. 159 is effectivefor the Company on January 1, 2008 and is not expected to have a significantimpact on the Company’s consolidated financial statements.

**I****TEM 2. MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

***Overview***

Since the Plan of Reorganization of Old Kaiser underChapter 11 of the Bankruptcy Code became effective on December 18, 2000, wehave completed the initial bankruptcy distributions to allowed claimholders,continued to progress in resolving remaining outstanding bankruptcy claims,managed our remaining assets, wound down unnecessary elements of previousactivities and corporate structure, redeemed all of the New Preferred sharesoutstanding and formed two new business opportunities, KAMS and MS BuildersInsurance Company. We do not expect future revenues from our KAMS subsidiary aswe ceased active operations of that subsidiary as of June 30, 2006.

Following the effectiveness of the Plan ofReorganization, we now have only a limited number of activities, assets andliabilities, primarily consisting of the following:

·                  Weown Kaiser-Hill equally with CH2M Hill. Kaiser-Hill has been our major source of income.  Kaiser-Hill served as the general contractorat the DOE’s Rocky Flats site. Kaiser-Hill has performed for the Department ofEnergy at this site since 1995 and in January 2000 was awarded a new contractto manage the closure of the site.  Thelevel of success experienced by Kaiser-Hill in achieving timely closure of theRocky Flats site, and the cost of achieving such closure, have been andcontinue to be the primary determinants of our long-term financial performance followingthe completion of the bankruptcy reorganization process.

·                  OnMay 16, 2006, we were informed that an arbitration panel formed under theauspices of the ICC issued a ruling in the arbitration proceeding initiated byour subsidiary, Kaiser Netherlands, concerning the steel mini-mill that wasconstructed by Kaiser Netherlands for Nova Hut, a.s. (now Mittal Steel Ostrava,a.s.) in Ostrava, the Czech Republic. After calculation of the amounts awarded on the claim and counterclaim,the net balance award against Kaiser Netherlands, including legal cost andinterest amounts, is approximately $4.1 million in favor of Nova Hut.  We do not believe that Nova Hut has recourseagainst us to collect this amount.  Weare currently evaluating our remaining options against Nova Hut and theIFC.  Taking into account the results ofthe ICC arbitration ruling against Kaiser Netherlands, in the second quarter of2006 we wrote off the remaining Nova Hut contract receivable of $3.0 million byrecording an additional reserve of $3.0 million.

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·                  We own a captive insurance company that has notbeen issuing new policies since October 1, 2000 and has solely been involved inresolving remaining claims made against previously issued policies.  In the fourth quarter of 2004, we receivedregulatory approval and finalized the formation documents of a sponsoredcaptive subsidiary, MS Builders Insurance Company, to enable our wholly-ownedcaptive insurance company to offer derivative captive insurance services tothird party clients.  As of August 10,2007, MS Builders Insurance Company has not written any policies.

·                  We have an ongoing obligation to fund a cappedpost-employment medical, pension, and death benefit plan for a fixed group ofretirees.  Effective April 30 , 2007, aVEBA has been established in the amount of $6.1 million to cover the medicaland death benefit obligations.  We have aone-time obligation to fund any shortfall in the VEBA, as described in Note 7to the unaudited consolidated financial statements included in Item 1 of Part IFinancial Statements, of this report. We will continue to fund the presentvalue pension obligation of $0.3 million directly.

***Outlook***

*Potential**Kaiser-Hill Distribution*. As we look forward, a significant factor in determining the value of ourCommon Stock is the closeout performance of Kaiser-Hill and the completion ofthe U.S. Government’s related project audits.

On October 13, 2005, Kaiser-Hill declared physical completion of theclean up and closure of the DOE’s Rocky Flats site.  On December 8, 2005, the DOE accepted thephysical completion in accordance with the contract.  The projected total fee to be earned pursuantto the contract is estimated to be $510.9 million based on Kaiser-Hill’s costto complete the site closure of $3.44 billion. As of August 10, 2007, Kaiser-Hill had received $510.8 million of suchfee from the DOE.

On December 8,2005, when the DOE accepted physical completion in accordance with the RockyFlats Closure Contract, it authorized Kaiser-Hill to invoice all remainingperformance fees less a retained amount equaling $5.0 million which wasretained by the DOE for possible contract contingencies.  On January 11, 2006, Kaiser-Hill receivedpayment for all fees except for the retained amount.  As a result of this payment, on March 1,2006, the Company received an $80.0 million cash distribution (representing its50% share) from Kaiser-Hill.  As of March31, 2006, Kaiser-Hill had received $505.9 million of the $510.9 million due fromthe DOE. On April 14, 2006, $4.9 million of the remaining $5.0 million wasreleased to Kaiser-Hill by the DOE.  Itcannot be determined at this time what amount, if any, of the remaining $0.1million DOE retention balance will ultimately be released and when, if ever,such a release will occur.  On June 30,2006, the Company received an additional $5.0 million cash distribution fromKaiser-Hill (representing its 50% share). On February 27, 2007, the Company received another $1.5 million cashdistribution from Kaiser-Hill (representing its 50% share).

Kaiser-Hill now operates under the closeout phase of itscontract with the DOE, primarily resolving open administrative issues andproviding support to the DOE to achieve regulatory closure of the site.  The closeout phase of the contract is a costreimbursable phase and is not fee-bearing; the Company does not expect that thecloseout phase will impact fees earned.

Asof August 10, 2007, Kaiser-Hill has withheld approximately $3.6 million fromdistribution to provision against potential risks associated with U.S.Government audits. We expect to receive our 50% share of any distribution ofsuch funds by Kaiser-Hill.

Atthis time, it is not possible to predict the number of years that will berequired to complete the government audit process.

*Nova Hut.*  Weare currently evaluating our remaining options against Nova Hut and theIFC.  Among the options being consideredis filing independent arbitration claims by Kaiser Holdings (as opposed toKaiser Netherlands) against Nova Hut and the IFC in accordance with priorrulings of the Bankruptcy Court.  TheBankruptcy Court has entered an order staying our bankruptcy claim against theIFC pending submission of the dispute for arbitration.  Similarly, the Bankruptcy Court has enteredan order staying our bankruptcy claim against Nova Hut, pending submission ofthe dispute to arbitration.

The continuedlitigation of these disputes has had, and will continue to have, a negativeimpact on our cash flow.

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Taking intoaccount the results of the ICC arbitration ruling against Kaiser Netherlands,in the second quarter of 2006 we wrote off the remaining Nova Hut contractreceivable of $3.0 million by recording an additional reserve of $3.0 million.

*PotentialDeregistration of Common Stock.* Our Kaiser Common Stock iscurrently registered under the Securities Exchange Act of 1934 (the “ExchangeAct”), and consequently we are subject to reporting obligations of the ExchangeAct.

The Company’sBoard of Directors continues to assess the costs and benefits associated withcontinuing as a public company versus pursuing a reverse split or othertransactions designed to enable the Company to****reducethe number of record holders of Kaiser Common Stock to below 300, which wouldallow us to terminate our reporting obligations under the Exchange Act andcontinue operations as a non-reporting company. In that event, we would file a Form 15 with the SEC.  Upon filing of the Form 15, our reportingobligations under the Exchange Act would be suspended, meaning that we would nolonger be required to file with the SEC certain reports and forms, includingForms 10-K, 10-Q and 8-K and proxy statements. In such event, thereafter, the Company would provide information aboutits quarterly and annual financial results to its remaining stockholders byother means, such as through its website.

***Critical AccountingPolicies and Significant Estimates***

Thepreparation of financial statements in conformity with GAAP requires that wemake estimates and assumptions affecting the assets and liabilities (includingcontingent assets and liabilities) reported at the date of the ConsolidatedFinancial Statements and the income statement amounts reported for the periodspresented.  We base our estimates onhistorical experience and on various other assumptions that we believe to bereasonable under the circumstances. Actual results may differ from these estimates under differentassumptions or conditions.

Our accountingmeasurements that are most affected by our estimates of future events are:

·                  Recoverabilityof accounts receivable and investments;

·                  Incometax provision, deferred tax assets and liabilities;

·                  Use of the equity method of accounting forKaiser-Hill, an affiliate that we have the ability to significantly influencebut not control.  In accordance with theequity method of accounting, we record our proportionate share of the affiliate’sincome or losses;

·                  Estimatedfees on the Kaiser-Hill joint venture. Estimating future costs, contractcontingencies and revenues and profits, is a process requiring a high degree ofjudgment.  In the event of a change intotal estimated contract cost or profit, the cumulative effect of such changeis recorded in the period the change in estimate occurs.  Now that the contract has been declaredcomplete, additional revenue recognition and our profitability from theKaiser-Hill contract may be adversely affected to the extent that estimatedcost to complete or incentive or award fee estimates are revised upon auditfrom the U. S. Government. The Kaiser-Hill contract contains incentiveprovisions for increased or decreased revenue and profit based on actualperformance against established cost targets and schedule-related goals.  Incentive fees have been included inestimated contract revenue at the time the amounts can be reasonably determinedand are reasonably assured based on historical experience and other objectivecriteria.  Should total costs of theproject be revised based upon the results of U. S. Government audits,previously recognized revenues could be reversed and/or future period revenuescould be reduced; and

·                  Ourliability in connection with a post-employment medical benefit plan for a fixedgroup of retirees.  This liability isaffected by changes in the discount rate and certain actuarial assumptions.  Should actual rates and results differ fromthe assumptions used, revisions to the liability would be required resulting inadditional income statement charges.

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***New Accounting Pronouncements***

In June 2006, the Financial Accounting StandardsBoard, (“FASB”) issued FASB Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation ofFASB Statement No. 109, “Accounting for Income Taxes,” and seeks to reducethe diversity in practice associated with certain aspects of measurement andrecognition in accounting for income taxes. In addition, FIN 48 providesguidance on de-recognition, classification, interest and penalties, andaccounting in interim periods and requires expanded disclosure with respect tothe uncertainty in income taxes.  We adopted the provisions of FIN 48 on January 1, 2007. Therewas no cumulative effect as a result of applying FIN 48. No adjustment was madeto retained earnings on our opening consolidated balance sheet.

In September 2006, the FASB issued Statements ofFinancial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFASNo. 157”). SFAS No. 157 defines fair value, establishes a framework formeasuring fair value in generally accepted accounting principles, and expandsdisclosures about fair value measurements. SFAS No. 157 applies to existingaccounting pronouncements that require or permit fair value measurements inwhich FASB had previously concluded fair value is the most relevant measurementattribute. Accordingly, SFAS No. 157 does not require any new fair valuemeasurements. SFAS No. 157 is effective for financial statements issued forfiscal years beginning after November 15, 2007, with early adoptionencouraged. The Company is currently evaluating the impact the adoption of thisstatement will have on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employer’sAccounting for Defined Benefit Pension and Other Postretirement Plans (anamendment of FASB Statements No. 87, 88, 106, and 123R)” (“SFAS No. 158”). Theobjectives of this Statement are for an employer to: (1) recognize theoverfunded or underfunded status of a single-employer defined benefitpostretirement plan as an asset or liability in its statement of financialposition and to recognize changes in funded status in comprehensive income inthe year in which the changes occur; and (2) measure the plan status as of thedate of its year-end statement of financial position. SFAS No. 158 is effectivefor the requirement to recognize the funded status of a benefit plan and thedisclosure requirements as of the end of the fiscal year ending after December15, 2006. The requirement to measure plan assets and benefit obligations as ofthe date of the employer’s fiscal year-end statement of financial positionshall be effective for fiscal years ending after December 15, 2008. Theadoption of SFAS No. 158 did not have a material impact on our consolidatedfinancial statements.

In February 2007, the FASB issued SFASNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities-Including an amendment of FASB Statement No. 115” (“SFAS No.159”). SFAS No. 159 permits entities to choose to measure eligible itemsat fair value at specified election dates. Unrealized gains and losses on itemsfor which the fair value option has been elected are reported in earnings ateach subsequent reporting date. The fair value option (i) may be appliedinstrument by instrument, with certain exceptions, (ii) is irrevocable(unless a new election date occurs) and (iii) is applied only to entireinstruments and not to portions of instruments. SFAS No. 159 is effectivefor the Company on January 1, 2008 and is not expected to have a significantimpact on the Company’s consolidated financial statements.

**RESULTS OF OPERATIONS**

*Gross Revenues*

We had no gross revenues for thethree and six month periods ended June 30, 2007. For the comparable periods of2006, gross revenues were $0.1 million and $0.2 million, respectively.  The Company’s gross revenues reported for thefirst quarter and first six months in 2006 are directly attributable to theoperations of KAMS.  Gross revenues ofKAMS decreased in 2007 due to the wind-down and completion of work at the DOE’sRocky Flats site, at which KAMS provided services. Future revenue is notexpected from our KAMS subsidiary. Gross revenues in the quarter ended June 30,2006, and in the six month period ended June 30, 2006, from KAMS operationsresulted primarily from the performance of laboratory audits and datavalidation services.

*Equity Income (Loss) In Earnings of Joint Venture*

Ourcurrent primary remaining source of income is our 50% ownership in Kaiser-Hill.We own Kaiser-Hill equally with CH2M Hill. The financial information containedherein for Kaiser-Hill is reflected on the equity basis.

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*Contract Provisions for Revenue and Performance Award*

Kaiser-Hill’s contract with the DOE provides that Kaiser-Hill earnrevenue equal to the actual cost of physical completion plus a performancefee.  The performance fee is determinedbased on (1) Kaiser-Hill’s cost to complete the site closure, which must bewithin the range of $3.1 billion and $4.9 billion, (2) the schedule of physicalcompletion, which must be before 2007 and (3) Kaiser-Hill’s safety performance.  On October 13, 2005, Kaiser-Hill declaredphysical completion of the cleanup and closure of the DOE’s Rocky Flatssite.  At the time of declaration ofphysical completion on October 13, 2005, Kaiser-Hill’s cost estimate tocomplete the project remained at $3.44 billion, which resulted in a performancefee payable to Kaiser-Hill projected to be $510.9 million, of which$255.0 million had previously been received. On December 8, 2005, the DOE affirmed Kaiser-Hill’s declaration asrequired under the contract and the DOE authorized Kaiser-Hill to invoice allremaining performance fees less a retained amount equaling $5.0 million.  On January 11, 2006, Kaiser-Hill receivedpayment for all remaining fees except the retained amount.  As a result of this payment, on March 1,2006, the Company received an $80.0 million cash distribution (representing its50% share) from Kaiser-Hill.  On April14, 2006, $4.9 million of the remaining $5.0 million retention was released toKaiser-Hill by DOE.  It cannot bedetermined at this time what portion of the remaining $0.1 million DOEretention balance will ultimately be released and when (if ever) such a releasewould occur.  On June 30, 2006, theCompany received an additional $5.0 million cash distribution from Kaiser-Hill. On February 27, 2007, the Companyreceived another $1.5 million cash distribution from Kaiser-Hill.  As of August 10, 2007, Kaiser-Hill hadreceived $510.8 million of the $510.9 million fee due from the DOE pendingcompletion of the closeout phase of the contract.

Since Kaiser-Hilldeclared physical completion, many of the performance risks have beeneliminated, but contract risks and uncertainties remain.  As a result ofdeclaration of physical completion in October 2005, Kaiser-Hill recognized allremaining performance fees under the contract in 2005 and has establishedreserves for certain risks and uncertainties related to the contract (seedetails described below in “— Closure Contract Billing Provisions”).  Kaiser-Hill will reverse these reserves to theextent it is successful in mitigating or eliminating these remaining contractrisks and uncertainties.

Kaiser-Hillrecognized a substantial amount of the fee income from the DOE upon thedeclaration of physical completion on October 13, 2005 and, accordingly, theCompany’s proportionate share of such income was recorded in Equity Income inEarnings of Affiliates in its consolidated statement of operations for the yearended December 31, 2005. For the three and six months ended June 30, 2007, we reported no income from our 50% ownershipin Kaiser-Hill. In the future, we may have additional income from Kaiser-Hillto report to the extent Kaiser-Hill releases certain retained reserve amounts,as mentioned in “—the Outlook” above.

*Closure Contract Billing Provisions*

****Fromthe inception of Kaiser-Hill’s contract with the DOE in February 2000 throughDecember 31, 2006, Kaiser-Hill invoiced the DOE for the performance fee basedon the contract provisions of approximately $510.9 million, and collected anaggregate of $510.8 million in fees from the DOE****.  It is not known when, if ever, the remainingDOE retention balance of $0.1 million will be released to Kaiser-Hill.  By contract, this remaining retention balanceamount cannot be released until final contract closeout.

Fee payments madeby the DOE to Kaiser-Hill, less certain non-reimbursable costs and reserve andretention amounts, have been distributed to the joint venture owners uponreceipt.  Kaiser-Hill has historicallyincurred expenses that are not reimbursable by DOE pursuant to applicableFederal regulations.  Accordingly, suchexpenses, which Kaiser-Hill estimates could total approximately 15% to 20% ofthe total award fee, are deducted from the total fee earned and collected byKaiser-Hill prior to any distributions to either of its two owners.  From Kaiser-Hill’s inception through August10, 2007, Kaiser-Hill had distributed $194.2 million in cash to each of its twoowners.

As of August 10, 2007, Kaiser-Hill has withheld approximately $3.6million from distribution to provision against potential risks associated withU.S. Government audits.  As discussedabove, Kaiser-Hill also may receive an additional $0.1 million that has beenretained by DOE.  The Company expects toreceive its 50% share of any future distributions of such funds by Kaiser-Hill.

The Companyreceived distributions in the aggregate amount of****$85.0million from Kaiser-Hill during 2006.  Asa result, the Company had reduced its investment in Kaiser-Hill on its balancesheet by $85.0 million as of December 31, 2006. On February 27, 2007, the Company received another $1.5 million cashdistribution from Kaiser-Hill.  TheCompany has further reduced its investment in Kaiser-Hill on its consolidatedbalance sheet by $1.5 million as of March 31, 2007.

Kaiser-Hill now operates under the closeout phase of its contract withthe DOE, primarily resolving open administrative issues and providing supportto the DOE to achieve regulatory closure of the site.  The closeout phase of the contract is a cost- reimbursable phase and is not fee - bearing; the Company does not expect thatthe closeout phase will impact fees earned. Effective December 31, 2005, Kaiser-Hill terminated its remainingemployees. Staff necessary to complete closeout activities is subcontracted orprovided by CH2M Hill.

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*Administrative Expenses*

Administrative expensesfor the three months and six months ended June 30, 2007 were $1.1 million and $2.1 million, respectively, a decrease of $0.1 million and $0.5 million,respectively, compared to the three and six months ended June 30, 2006, whichis due primarily to a decrease in legal fees and salaries.

Our cost to provide certain on-going post-retirementmedical****benefits to a fixed numberof retirees is also treated as an administrative expense. In the three and sixmonth periods ended June 30, 2007, the expenses related to this plan were $0.1million and $0.3 million, respectively, compared to $0.3 million and $0.6million for the three and six month periods ended June 30, 2006.

* Interest Income*

Interest income for the three and six months ended June30, 2007 was  $0.5 million and $1.0million, respectively, which represents an increase of $0.0 million and $0.2million, respectively, compared to the three and six month period ended June30, 2006.

*Income Tax Benefit/Expense*

We recorded an income tax benefit of $0.1 million and$0.4 million on operating loss from continuing operations of $0.6 million and $1.1million, respectively, during the three and six months ended June 30, 2007. Oureffective income tax rates of 15%  and 37%,respectively, for the three and six months ended June 30, 2007, reflectrealizable value of income taxes receivables and the non-taxability of certainincome for federal income tax purposes. For the three and six months ended June30, 2006, we recorded an income tax benefit of $1.6 million and $2.4 million,respectively, on operating loss from continuing operations of $3.8 million and$5.1 million, respectively. Our effective tax rates of 43% and 47% for thethree and six months ended June 30, 2006, reflect the non-taxability of certainincome for federal income tax purposes.

**LIQUIDITYAND CAPITAL RESOURCES**

*Operating Activities*

We used $7.2 million of cash during the six months endedJune 30, 2007, compared to $34.4 million for the six months ended June 30,2006. The $27.2 million decrease in the use of cash for the six months endedJune 30, 2007, compared to the six months ended June 30, 2006, was primarilydue to a decrease in income tax payments made in 2007 compared to 2006.

*InvestingActivities*

We received $2.6 million frominvesting activities during the six months ended June 30, 2007, includingproceeds from the maturity of a certificate of deposit and a $1.5 milliondistribution from Kaiser-Hill, compared to $85.0 million received for the sixmonths ended June 30, 2006. The DOE accepted physical completion in accordancewith the Rocky Flats Contract in the last quarter of 2005 and Kaiser-Hillreceived all remaining project fees except for the DOE retention amount of $0.1million in the quarter ended June 30, 2006, resulting in the $85 million cashdistribution to us during the first six months of 2006.

*Financing Activities*

During the six months ended June 30, 2007, we used $10.8million of cash to pay a cash dividend to our common stockholders.   For the six months ended June 30, 2006, weengaged in no financing activities.

17

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*Liquidity and Capital Resource Outlook*

Wecurrently have no debt. We continue to finance the bankruptcy distributionrequirements and follow-on working capital needs primarily through the use ofthe available cash. Based on (i) current expectations for operatingactivities and results, (ii) expected Kaiser-Hill distributions,(iii) our current available cash position, (iv) recent trends andprojections in liquidity and capital needs (including funds that may be neededin connection with any potential going private transactions), (v) currentexpectations of total allowed claims upon the completion of the bankruptcyproceedings, and (vi) estimated amounts necessary to satisfy our obligationto provide future benefits to a fixed group of retirees, management believes wehave sufficient liquidity to cover our future operating needs and income taxrequirements.  We have established and funded a VEBA in theamount of approximately $6.1 million effective April 30, 2007.

*Other Matters*

We have various obligations andliabilities from our continuing operations, including general overhead expensesin connection with maintaining, operating and winding down the variousentities. Additionally, we believe contingent liabilities may exist in theareas described in Note 7 to the Consolidated Financial Statements.

**ITEM 3. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK**

We do not believe we have significant exposures tomarket risk. The interest rate risk associated with our obligation to fund acapped retiree medical obligation is not sensitive to interest rate risk otherthan through the determination of the present value of its remaining obligationthereunder.  The company has certificatesof deposit and marketable securities generally at prevailing market rates. A10% hypothetical increase or decrease in the average annual prime rate wouldnot result in a material impact to the company’s financial position or resultsof operations.

**ITEM 4. CONTROLS AND PROCEDURES**

As of June 30, 2007, anevaluation was performed under the supervision and with the participation ofthe Company’s management, including the Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures (as defined in Rule 13a-15(e) or15d-15(e) under the Exchange Act). Based on that evaluation, theCompany’s management, including the Chief Executive Officer and Chief FinancialOfficer, concluded that the Company’s disclosure controls and procedures wereeffective as of June 30, 2007. There were no significant changes in the Company’sinternal control over financial reporting (as defined in Rule 13a-15(f) or15d-15(f) ) that occurred during the period covered by this report thathave materially affected, or that are reasonably likely to materially affect,our internal control over financial reporting.

**PART II - OTHER INFORMATION**

**ITEM 1. LEGAL PROCEEDINGS**

See Item 3, “Legal Proceedings” in the Annual Report onForm 10-K for the year ended December 31, 2006. For adiscussion of material developments with respect to such legal proceedingsduring the quarter ended June 30, 2007, see Note 7 of the Notes to ConsolidatedFinancial Statements included in Part I hereof.

**ITEM 1A. RISK FACTORS**

**RISK FACTORS RELATING TO KAISER HOLDINGS AND FORWARD-LOOKINGSTATEMENTS**

This QuarterlyReport on Form 10-Q and our other periodic filings with theSecurities and Exchange Commission andwritten or oral statements made by our officers and directors to the press,potential investors, securities analysts and others, may containforward-looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934. These forward-looking statements are not historical facts, but rather arepredictions, and generally can be identified by use of statements that includeterms such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan”or “foresee” or other words or phrases of similar import. Similarly, statementsthat describe or contain informationrelated to matters such as our intent, belief, or expectation with respect tofinancial performance, claims resolution, cash availability, stock redemptionplans, contract awards and performance, potential acquisitions and jointventures****and cost-cutting measuresare forward-looking statements. These forward-looking statements oftenreflect a number of assumptions and involve known and unknown risks,uncertainties and other factors that could cause our actual results to differmaterially from those currently anticipated in these forward-lookingstatements. In light of these risks and uncertainties, including thosedescribed below, the forward-looking events might or might not occur. Weundertake no obligation to publicly update any forward-looking statement,whether as a result of new information, future events or otherwise.

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**We face significant contingencies, which may adversely impact ourability to fund our continuing operations and to undertake new operations.**

*We do not have a significant businessplan beyond Kaiser-Hill, and we may undertake new activities with start-up andother risks.*

Our long-term future profitability will be dependent, to a significantdegree, on the extent to which we carry out activities other than throughKaiser-Hill, particularly since Kaiser-Hill has entered the closeout phase ofits contract with the DOE and we have received most of the funds we expect toreceive from our investment in Kaiser-Hill. Unless and until we further developplans for such operations, we are unable to determine either the amount of riskthat future operations will involve or whether we have the ability to realizelong-term profitability.  The businessopportunities we have begun to explore, such as completion of the process toenable MS Builders Insurance Company to offer derivative captive insuranceservices, are in the development stage, are dependent to some extent onexternal market factors, may take a long time to develop, and may never beprofitable or successful at all.  SinceJune 30, 2006, KAMS has generated no revenues and we may have similarexperiences with other business opportunities that we undertake.  We currently have no active operations andare exploring potential acquisition and other strategic opportunities. However,we may not be able to identify attractive acquisition or strategicopportunities for our company.  Inaddition, efforts we make to develop business operations separate fromKaiser-Hill may involve start-up activities with risks specific to activitiesof this type, or may involve activities with which we are not familiar, any ofwhich may adversely impact our financial condition, cash flow and operatingresults.  A decrease in our cashflows and operating results could result in a decrease in the value of ourcommon stock.

*We havehad to, and may continue to have to, draw down existing cash balances to fundcurrent operating cash needs.*

In light ofphysical completion of Kaiser-Hill’s contract with the DOE, until and unlessthe Company is successful in developing a new revenue base through newcommercial activities or undertakings, it is anticipated that the Company willneed to rely on existing cash balances to fund its continuing operations,including overhead costs.  For thequarter ended June 30, 2007, the Company generated $0.0 million in grossrevenues and $0.5 million in interest income while generating operating lossesof $1.0 million, which were funded by cash on hand.  This draw down in cash balances could resultin a decrease in the value of Kaiser Common Stock.  Furthermore, if the Company does notestablish new operating activities, its existing cash balances could becomeinsufficient to satisfy its overhead costs. The Company has not identified an attractive potential acquisition orstrategic opportunity in the last year, and management cannot predict if andwhen such an opportunity may arise.  Inthe meantime, the Company generated no revenues in the first half of 2007 and thesecond half of 2006, from KAMS.  If theCompany does not begin to generate revenues again, it will continue to operateat a loss and will be required to fund all of its operating costs with cash onhand.

*If wederegister our common stock under the Exchange Act,  the amount of information about us that ispublicly available will be reduced, and the liquidity of our common stock willfurther decrease.*

Our Board of Directorscontinues to consider alternatives for terminating the registration of ourcommon stock under the Exchange Act.  If we were to deregister our commonstock under the Exchange Act, we would no longer be required to fileinformation with the SEC or provide certain information to our stockholdersunder the Exchange Act, and many provisions of the Exchange Act would becomeinapplicable to us.  Therefore, deregistration would substantially reducethe information we would be required to furnish to our stockholders.  We will use available cash to effectuate anytransaction designed to enable us to terminate the registration of our commonstock under the Exchange Act.

Furthermore, our commonstock is currently traded on the Pink Sheets. Broker-dealers often decline totrade in Pink Sheet stocks given that the market for such securities is oftenlimited, the stocks are more volatile, and the risks to investors are greater.These factors may reduce the potential market for our common stock by reducingthe number of potential investors, and if we deregister our common stock, thenumber of potential investors may be reduced further.  The market for ourcommon stock has been relatively illiquid in the past, and deregistration maymake it even more difficult for investors in our common stock to sell shares tothird parties or to otherwise dispose of them. This could cause our stock priceto decline. Additionally, there can be no assurance that our Common Stock  will continue to trade on the Pink Sheets.

19

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*We maybe unsuccessful funding the benefits funding plan to satisfy our obligation toprovide future benefits to a fixed group of retirees.*

The Companyremains obligated to continue to fulfill the provisions of Old Kaiser’spreviously curtailed benefits plan, which provides certain medical and deathbenefits to a group of retirees.  All ofthe benefits derived from the plan are fully covered by the Company’sself-insurance.

Since the December2000 approval of the reorganization plan, the Company had been negotiating withthe  Official Committee of Retirees (“OCR”)appointed by the Bankruptcy Court to design and implement a benefits fundingplan that would provide for all retiree benefit obligations going forward.   In an adversary claim hearing in theBankruptcy Court held on April 12, 2006, the Bankruptcy Court accepted theCompany’s proposal to establish a Voluntary Employees’ Beneficiary Association(“VEBA”)to fund retirees’ future medical and death benefits in the present value amountof approximately $6.1 million.  Thepresent value pension obligation of $0.3 million will continue to be fundeddirectly by the Company.  Effective April30, 2007, the VEBA was established and funded in the amount ofapproximately  $6.1 million.

According to theterms of the Bankruptcy Court decision, after the VEBA has been in place forfive years, the Company will be required to undertake an actuarial analysis ofthe projected net present value of benefits remaining to be paid out.  If the remaining VEBA fund amount is then notsufficient to pay the estimated present value benefits obligation, then theCompany will be required to contribute the estimated shortfall amount to theVEBA fund.  It is not possible to predictat this time whether a shortfall in the VEBA fund would exist after a period offive years and, if so, what the Company’s contribution requirement for ashortfall amount would be in this circumstance. A requirement to fund asignificant shortfall in the VEBA fund could result in a decrease in the valueof Kaiser Common Stock.

*We may beunable to obtain performance guarantees, which may limit our ability to undertakenew activities.*

Given the reorganization history of Old Kaiser,we may not be able to obtain satisfactory contract performance guarantymechanisms, such as performance bonds and letters of credit, on satisfactoryterms or at all, to the extent such mechanisms are needed for new activitiesand projects.  These factors could limitthe nature of the business activities in which we can engage, which mayadversely impact our cash flow and operating results and result in adecrease in the value of our common stock.

*We may be unable to generate funds tomeet our cash flow needs, and we may be unable to access additional capital.*

We have used available cash and interest earned on available cash to meetour cash flow obligations for the past twelve months. We may be unable togenerate sufficient funds to meet our cash flow needs in the future.  In the event our cash needs exceed ourcurrent estimates, we may not be able to obtain additional capital to meetthose needs on favorable terms, or at all. In particular, due to the reorganization history of Old Kaiser andcurrent financial markets, additional capital may not be available to us.  An inability to gain access to additionalcapital could also limit our ability to undertake new activities.  Ultimately, an inability to meet our existingobligations or to undertake new activities could adversely impact our cash flowand operating results.  A decreasein our cash flows and operating results could result in a decrease in the valueof our common stock.

*There arerisks associated with the resolution of additional financial and administrativecontract closeout issues that may affect the timing and award of future cashdistributions  from Kaiser-Hill to theCompany.*

On October 13,2005, Kaiser-Hill declared physical completion of the cleanup and closure ofthe DOE’s Rocky Flats site.  Kaiser-Hillhas withheld approximately $3.6 million from the DOE final distribution**,** pending resolution of certain financial and administrativecontract closeout issues, including those associated with the potential risksarising from U.S. Government audits.  Itis possible that there will be disputes between the U.S. Government andKaiser-Hill as to how these issues should be addressed and dealt with.  Such disputes could delay or reduce futuredistributions of cash from Kaiser-Hill to the Company and could cause adecrease in the value of our common stock.

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*There are potential risks associated with U.S.Government audits of Kaiser-Hill which could result in disallowed costs or costreclassifications requiring refunds of cash from Kaiser-Hill to the DOE.*

As the contract between Kaiser-Hill and the DOE contains costreimbursement provisions, the costs invoiced by Kaiser-Hill for reimbursementby the DOE are subject to audit by the U.S. Government.  Government audits of costs invoiced byKaiser-Hill are ongoing and are expected to take many years to complete.  Although Kaiser-Hill has historicallyprovided its estimates of disallowed costs, uncertainties exist with regard tothe government audit of Kaiser-Hill.  Tothe extent that costs are disallowed and cash refunds are made to the DOE,future cash distributions from Kaiser-Hill to the Company would be reduced andcould cause a decrease in the value of our common stock.

**ITEM 5. OTHER INFORMATION**

Our Annual Meeting ofstockholders will be held in the auditorium at 9302 Lee Highway, Fairfax, VA22031-1207 on Wednesday, October 31, 2007 at 9:30 a.m. EST. The record date forthe determination of shareholders entitled to vote at the Annual Meeting willbe September 4, 2007.

Any stockholder wishingto present a proposal to be included in the proxy statement for the 2007 AnnualMeeting of Stockholders may submit such proposal in writing to Kaiser GroupHoldings, Inc., 9300 Lee Highway, Fairfax, VA 22031-1207.  Such proposalsmust be received no later than Friday, August 31, 2007.  Submitting astockholder proposal does not guarantee that we will include it in our proxystatement.

The matters to bediscussed at the Annual Meeting will be described in detail in a ProxyStatement to be mailed to stockholders on or about September 30, 2007.

**ITEM 6. EXHIBITS**

**Exhibits (listed according to the number assignedin the table in Item 601 of Regulation S-K)**
| 2      |   | Second Amended Plan of  Reorganization (Incorporated by reference to Exhibit 2 to Current  Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 3.1    |   | Certificate of Incorporation of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on  December 14, 2000)                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 3.2    |   | By-laws of Kaiser Group Holdings, Inc. (Incorporated  by reference to Exhibit 3(ii) to Current Report on Form 8-K (Registrant No.  1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 4      |   | Form of Put Agreement relating  to preferred stock of Kaiser Group Holdings, Inc. (Incorporated by reference  to Exhibit 4 to Current Report on Form 8-K (Registrant No. 1-12248) filed  with the Commission on  December 14, 2000)                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.1   |   | Kaiser Group International,  Inc. Employee Stock Ownership Plan (as amended and restated as of January 1,  1996) (Incorporated by reference to Exhibit No. 10(b) to Annual Report on  Form 10-K (Registrant No. 1-12248) filed with the Commission on  April 17, 2000)                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.2   |   | Amendment No. 1 to Kaiser  Group International, Inc. Employee Stock Ownership Plan, effective January 1,  1998 (Incorporated by reference to Exhibit No. 10(b)(1) to Annual Report on  Form 10-K (Registrant No. 1-12248) filed with the Commission on  April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.3   |   | Amendment No. 2 to  Kaiser Group International, Inc. Employee Stock Ownership Plan, effective  January 1, 1996 (Incorporated by  reference to Exhibit No. 10(b)(2) to Annual Report on Form 10-K (Registrant  No. 1-12248) filed with the Commission on April 17, 2000)                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.4   |   | Amendment No. 3 to Kaiser  Group International, Inc. Employee Stock Ownership Plan, dated April 19, 1999  (Incorporated by reference to Exhibit No. 10(b)(3) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17,  2000)                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.5   |   | Amendment No. 4 to Kaiser  Group International, Inc. Employee Stock Ownership Plan dated June 25, 1999  (Incorporated by reference to Exhibit No. 10(b)(4) to Annual Report on Form  10-K (Registrant No. 1-12248) filed with the Commission on April 17,  2000)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                              |
| 10.6   |   | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of August 31, 1995, in connection with the  ICF Kaiser International, Inc. Employee Stock Ownership Plan (Incorporated by  reference to Exhibit No. 10(c) to Registration Statement on Form S-1  (Registrant No. 33-64655) filed with the Commission on November 30,  1995) |

 

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|        |   |                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.7   |   | ICF Kaiser International, Inc. Retirement Plan (as  amended and restated as of March 1, 1993, and further amended with respect to  name change only as of June 26, 1993) (Incorporated by reference to Exhibit  No. 10(d) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on October 15, 1993)     |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.8   |   | Amendment No. 1 to ICF Kaiser International, Inc.  Retirement Plan, dated April 24, 1995 (Incorporated by reference to Exhibit  No. 10(d)(1) to Annual Report on Form 10-K (Registrant No. 1- 12248) filed  with the Commission on May 23, 1995)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.9   |   | Amendment No. 2 to ICF  Kaiser International, Inc. Retirement Plan, dated December 15, 1995 (Incorporated by reference to Exhibit No.  10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the  transition period from March 1, 1995 to December 31, 1995 filed with the Commission  on March 29, 1996)             |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.10  |   | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.11  |   | Amendment No. 4 to ICF  Kaiser International, Inc. Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit No. 10(d)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 17, 2000)                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.12  |   | Amendment No. 5 to ICF  Kaiser International, Inc. Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(d)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 17, 2000)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.13  |   | Amendment No. 6 to ICF  Kaiser International, Inc. Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit No.  10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on April 17, 2000)                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.14  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.15  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.16  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit  10(c)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on August 14, 2003)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.17  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.18  |   | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of August 31, 1995, in connection with the  ICF Kaiser International, Inc. Retirement Plan (Incorporated by reference to  Exhibit No. 10(e) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995)           |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.19  |   | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |   |                                                                                                                                                                                                                                                                                                                                         |
| 10.20  |   | Amendment No. 1 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on May 23, 1995)                                                                                     |

 

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|        |   |                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.21  |   | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996) |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.22  |   | Amendment No. 3 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to Exhibit No.  10(q)(3) to Registration Statement on Form S-1 (Registrant No. 333-19519)  filed with the Commission on January 10, 1997)                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.23  |   | Amendment No. 4 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 8, 1999 (Incorporated by reference to Exhibit No. 10(k)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 17, 2000)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.24  |   | Amendment No. 5 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(k)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 17, 2000)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.25  |   | Amendment No. 6 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to  Exhibit 10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the Commission  on May 2, 2000)                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.26  |   | Amendment No. 7 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference to  Exhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 2, 2001)                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.27  |   | Amendment No. 8 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 10, 2002 (Incorporated by reference to  Exhibit 10(e)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.28  |   | Amendment No. 9 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 19, 2003 (Incorporated by reference to  Exhibit 10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.29  |   | Amendment No. 10 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated March 17, 2004 (Incorporated by reference to  Exhibit 10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on May 24, 2004)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.30  |   | Amendment No. 11 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated November 11, 2004 (Incorporated by reference to  Exhibit 10(e)(11) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on November 15, 2004)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.31  |   | Amendment No. 12 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 12, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.32  |   | Amendment No. 13 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 30, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.33  |   | Amendment No. 14 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 18, 2006 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)*                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                 |
| 10.34  |   | Amendment No. 1 to Kaiser Analytical Management  Services, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated by  reference to Exhibit 10.31 to Annual Report on Form 10-K (Registrant No.  1-12248) filed with the Commission on March 28, 2006)*                                                                      |

 

23

----

 
|        |   |                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.35  |   | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of March 1, 1989, in connection with the  ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by reference  to Exhibit No. 28(b) to Registration Statement on Form S-8 (Registrant No.  33-51460) filed with the Commission on August 31, 1992)                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.36  |   | Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy dated January 24, 2000  (Incorporated by reference to Exhibit No. 10(o) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.37  |   | Modification M116 to Contract between Kaiser-Hill Company, LLC and the U.S. Department of  Energy , effective March 24, 2004 (Incorporated by reference to  Exhibit 10(g)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 30, 2004)                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.38  |   | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and Nutley Partners, LC (Assignee),  dated January 1, 2001 (Incorporated by reference to Exhibit No. 10(i)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 2, 2001) |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.39  |   | Subcontract between The S.M.  Stoller Corporation and Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated  by reference to Exhibit No. 10(i) to Quarterly Report on Form 10-Q  (Registrant No. 1-12248) filed with the Commission on August 13, 2004)                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.40  |   | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)*                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.41  |   | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)*                         |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.42  |   | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.43  |   | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No. 1-12248)  filed with the Commission on February 9, 2006)*                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.44  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Douglas W. McMinn, effective December 4, 2006 (Incorporated  by reference to Exhibit 10.44 to Annual Report on Form 10-K (Registration  No. 1-12248) filed with the Commission on March 30, 2007)*                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.45  |   | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Dr. Nicholas Burakow, effective December 4, 2006 (Incorporated  by reference to Exhibit 10.45 to Annual Report on Form 10-K (Registration  No. 1-12248) filed with the Commission on March 30, 2007)*                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 31.1   |   | Certification of Chief  Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 31.2   |   | Certification of Chief  Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 32.1   |   | Certification of Chief  Executive Officer, pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
| 32.2   |   | Certification of Chief  Financial Officer, pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                    |

----

*******                    Represents Compensation Arrangements**

24

----

 

**SIGNATURES**

Pursuant to the requirements of the Securities ExchangeAct of 1934, the registrant has duly caused this report on Form 10-Qto be signed on its behalf by the undersigned thereunto duly authorized.
|                            | ** ** | **KAISER GROUP HOLDINGS,  INC.**                |
|----------------------------|------------|-------------------------------------------------|
|                       |       | (Registrant)                                    |
| Date: August 14, 2007 |       |                                            |
|                       |       |                                            |
|                       |       |                                            |
|                       |       | /s/ Nicholas Burakow                            |
|                       |       | Nicholas Burakow, Ph.D.,                        |
|                       |       | Executive Vice President and  Chief Financial   |
|                       |       | Officer (Duly authorized  officer and principal |
|                       |       | financial officer)                              |

 

25

----

**EXHIBITINDEX**
| Exhibit   No. | ** ** | **Description**                                                                                                                                                                                                                                                                                                                              | ** ** | ** ** |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| 2             |       | Second  Amended Plan of Reorganization (Incorporated by reference to Exhibit 2 to  Current Report on Form 8-K (Registrant  No. 1-12248) filed with the Commission on December 14, 2000)                                                                                                                                                      |
| ** **    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                   |
| 3.1           |       | Certificate of Incorporation  of Kaiser Group Holdings, Inc. (Incorporated by reference to Exhibit 3(i) to  Current Report on Form 8-K (Registrant No. 1-12248) filed with the Commission  on December 14, 2000)                                                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 3.2           |       | By-laws of Kaiser Group  Holdings, Inc. (Incorporated by reference to Exhibit 3(ii) to Current Report  on Form 8-K (Registrant No. 1-12248) filed with the Commission on December  14, 2000)                                                                                                                                                 |
| ** **    | ** ** | ** **                                                                                                                                                                                                                                                                                                                                   |
| 4             |       | Form  of Put Agreement relating to preferred stock of Kaiser Group Holdings, Inc.  (Incorporated by reference to Exhibit 4 to Current Report on Form 8-K  (Registrant No. 1-12248) filed with the Commission on December 14, 2000)                                                                                                           |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.1          |       | Kaiser  Group International, Inc. Employee Stock Ownership Plan (as amended and  restated as of January 1, 1996) (Incorporated by reference to Exhibit No.  10(b) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.2          |       | Amendment  No. 1 to Kaiser Group International, Inc. Employee Stock Ownership Plan,  effective January 1, 1998 (Incorporated by reference to Exhibit No. 10(b)(1)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                      |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.3          |       | Amendment No. 2 to Kaiser Group International, Inc. Employee  Stock Ownership Plan, effective January 1, 1996 (Incorporated by reference to Exhibit No.  10(b)(2) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on April 17, 2000)                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.4          |       | Amendment  No. 3 to Kaiser Group International, Inc. Employee Stock Ownership Plan,  dated April 19, 1999 (Incorporated by reference to Exhibit No. 10(b) (3) to  Annual Report on Form 10-K (Registrant No. 1-12248) filed with the Commission  on April 17, 2000)                                                                          |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.5          |       | Amendment  No. 4 to Kaiser Group International, Inc. Employee Stock Ownership Plan dated  June 25, 1999 (Incorporated by reference to Exhibit No. 10(b)(4) to Annual  Report on Form 10-K (Registrant No. 1-12248) filed with the Commission on  April 17, 2000)                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.6          |       | Trust  Agreement with Vanguard Fiduciary Trust Company, dated as of August 31, 1995,  in connection with the ICF Kaiser International, Inc. Employee Stock  Ownership Plan (Incorporated by reference to Exhibit No. 10(c) to  Registration Statement on Form S-1 (Registrant No. 33-64655) filed with the  Commission on November 30, 1995) |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.7          |       | ICF Kaiser  International, Inc. Retirement Plan (as amended and restated as of March 1,  1993, and further amended with respect to name change only as of June 26,  1993) (Incorporated by reference to Exhibit No. 10(d) to Quarterly Report on  Form 10-Q (Registrant No. 1-12248) filed with the Commission on October 15,  1993)         |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.8          |       | Amendment No. 1 to ICF  Kaiser International, Inc. Retirement Plan, dated April 24, 1995  (Incorporated by reference to Exhibit No. 10(d)(1) to Annual Report on Form  10-K (Registrant No. 1- 12248) filed with the Commission on May 23, 1995)                                                                                             |
|          |       |                                                                                                                                                                                                                                                                                                                                         |
| 10.9          |       | Amendment No. 2 to ICF  Kaiser International, Inc. Retirement Plan, dated December 15, 1995 (Incorporated by reference to Exhibit No.  10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248) for the  transition period from March 1, 1995 to December 31, 1995 filed with the  Commission on March 29, 1996)                  |

 

26

----

 
|        | ** ** | ** **                                                                                                                                                                                                                                                                                                                              |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.10  |       | Amendment No. 3 to ICF Kaiser International, Inc.  Retirement Plan, dated December 13, 1996 (Incorporated by reference to  Exhibit No. 10(d)(3) to Registration Statement on Form S-1 (Registrant No.  333-19519) filed with the Commission on January 10, 1997)                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.11  |       | Amendment No. 4 to ICF  Kaiser International, Inc. Retirement Plan, dated April 19, 1999 (Incorporated by reference to Exhibit No. 10(d)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.12  |       | Amendment No. 5 to ICF  Kaiser International, Inc. Retirement Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(d)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.13  |       | Amendment No. 6 to ICF  Kaiser International, Inc. Retirement Plan, dated August 30, 1999 (Incorporated by reference to Exhibit No.  10(d)(6) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on April 17, 2000)                                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.14  |       | Amendment No. 7 to ICF Kaiser International, Inc.  Retirement Plan, dated April 13, 2000 (Incorporated by reference to Exhibit  10(d)(7) on Form 8-K (Registrant No. 1-12248) filed with the Commission on  May 2, 2000)                                                                                                                |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.15  |       | Amendment No. 8 to ICF Kaiser International, Inc.  Retirement Plan, dated June 8, 2000 (Incorporated by reference to Exhibit  10(d)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with  the Commission on September 6, 2000)                                                                                       |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.16  |       | Amendment No. 9 to ICF Kaiser International, Inc.  Retirement Plan, dated June 19, 2003 (Incorporated by reference to Exhibit 10(c)(9)  to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed with the  Commission on August 14, 2003)                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.17  |       | Amendment No. 10 to ICF Kaiser International, Inc.  Retirement Plan, dated March 17, 2004 (Incorporated by reference to Exhibit  10(c)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248) filed  with the Commission on May 24, 2004)                                                                                        |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.18  |       | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of August 31, 1995, in connection with the  ICF Kaiser International, Inc. Retirement Plan (Incorporated by reference to  Exhibit No. 10(e) to Registration Statement on Form S-1 (Registrant No.  33-64655) filed with the Commission on November 30, 1995)           |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.19  |       | ICF Kaiser International, Inc. Section 401(k) Plan  (as amended and restated as of March 1, 1993, and further amended with  respect to name change only as of June 26, 1993) (Incorporated by reference  to Exhibit No. 10(f) to Quarterly Report on Form 10-Q (Registrant No.  1-12248) filed with the Commission on October 15, 1993) |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.20  |       | Amendment No. 1 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 24, 1995 (Incorporated by reference to Exhibit No. 10(p)(1)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on May 23, 1995)                                                                                     |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.21  |       | Amendment No. 2 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 15, 1995 (Incorporated by reference to  Exhibit No. 10(p)(2) to Transition Report on Form 10-K (Registrant No.  1-12248) for the transition period from March 1, 1995 to December 31, 1995  filed with the Commission on March 29, 1996)         |
|   |       |                                                                                                                                                                                                                                                                                                                                    |
| 10.22  |       | Amendment No. 3 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated December 13, 1996 (Incorporated by reference to Exhibit No.  10(q)(3) to Registration Statement on Form S-1 (Registrant No. 333-19519)  filed with the Commission on January 10, 1997)                                                                    |

 

27

----

 
|        | ** ** | ** **                                                                                                                                                                                                                                                                                                                    |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.23  |       | Amendment No. 4 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated April 8, 1999 (Incorporated by reference to Exhibit No. 10(k)(4)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.24  |       | Amendment No. 5 to ICF  Kaiser International, Inc. Section 401(k) Plan, dated June 25, 1999 (Incorporated by reference to Exhibit No. 10(k)(5)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 17, 2000)                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.25  |       | Amendment No. 6 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated April 13, 2000 (Incorporated by reference to  Exhibit 10(k)(6) on Form 8-K (Registrant No. 1-12248) filed with the  Commission on May 2, 2000)                                                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.26  |       | Amendment No. 7 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 1, 2001 (Incorporated by reference to  Exhibit No. 10(m)(7) to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on April 2, 2001)                                                                         |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.27  |       | Amendment No. 8 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 10, 2002 (Incorporated by reference to  Exhibit 10(e)(8) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                      |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.28  |       | Amendment No. 9 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated June 19, 2003 (Incorporated by reference to  Exhibit 10(e)(9) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on August 14, 2003)                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.29  |       | Amendment No. 10 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated March 17, 2004 (Incorporated by reference to  Exhibit 10(e)(10) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on May 24, 2004)                                                                          |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.30  |       | Amendment No. 11 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated November 11, 2004 (Incorporated by reference to  Exhibit 10(e)(11) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)  filed with the Commission on November 15, 2004)                                                                  |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.31  |       | Amendment No. 12 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 12, 2005 (Incorporated by reference to  Exhibit 10.31 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.32  |       | Amendment No. 13 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated December 30, 2005 (Incorporated by reference to  Exhibit 10.32 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)                                                                            |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.33  |       | Amendment No. 14 to ICF Kaiser International, Inc.  Section 401(k) Plan, dated January 18, 2006 (Incorporated by reference to  Exhibit 10.33 to Annual Report on Form 10-K (Registrant No. 1-12248) filed  with the Commission on March 28, 2006)                                                                             |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.34  |       | Amendment No. 1 to Kaiser Analytical Management  Services, Inc. Section 401(k) Plan, dated February 15, 2006 (Incorporated by  reference to Exhibit 10.34 to Annual Report on Form 10-K (Registrant No. 1-12248)  filed with the Commission on March 28, 2006)                                                                |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.35  |       | Trust Agreement with Vanguard  Fiduciary Trust Company, dated as of March 1, 1989, in connection with the  ICF Kaiser International, Inc. Section 401(k) Plan (Incorporated by reference  to Exhibit No. 28(b) to Registration Statement on Form S-8 (Registrant No.  33-51460) filed with the Commission on August 31, 1992) |
|   |       |                                                                                                                                                                                                                                                                                                                          |
| 10.36  |       | Contract between Kaiser-Hill  Company, LLC and the U.S. Department of Energy dated January 24, 2000  (Incorporated by reference to Exhibit No. 10(o) to Annual Report on Form 10-K  (Registrant No. 1-12248) filed with the Commission on April 17, 2000)                                                                     |

 

28

----

 
|            | ** ** | ** **                                                                                                                                                                                                                                                                                                                                  |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.37      |       | Modification M116 to Contract between Kaiser-Hill Company, LLC and the U.S. Department of  Energy, effective March 24, 2004 (Incorporated by reference to Exhibit  10(g)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) filed with  the Commission on March 30, 2004)                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.38      |       | Assignment of Membership Interest in Hunters Branch  Leasing, LLC by and between Kaiser Holdings Unlimited, Inc. (Assignor) and Nutley Partners, LC (Assignee),  dated January 1, 2001 (Incorporated by reference to Exhibit No. 10(i)  to Annual Report on Form 10-K (Registrant No. 1-12248) filed with the  Commission on April 2, 2001) |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.39      |       | Subcontract between The S.M.  Stoller Corporation and Kaiser Group Holdings, Inc., dated June 30, 2004 (Incorporated  by reference to Exhibit No. 10(i) to Quarterly Report on Form 10-Q  (Registrant No. 1-12248) filed with the Commission on August 13, 2004)                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.40      |       | Kaiser Group Holdings, Inc. 2002 Equity Compensation  Plan, as amended (Incorporated by reference to Exhibit No. 10 to Registration  Statement on Form S-8 (Registration No. 333-107912) filed with the Commission  on August 13, 2003)                                                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.41      |       | Amended and Restated Employment Agreement with John  T. Grigsby, Jr., President and Chief Executive Officer, effective as of  December 18, 2000 (Incorporated by reference to Exhibit No. 10(m) to  Registration Statement on Form S-4 (Registrant No. 333-100640) filed with the  Commission on October 18, 2002)*                         |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.42      |       | Transition Agreement between Kaiser Group Holdings,  Inc. and John T. Grigsby, Jr. effective as of August 31, 2004 (Incorporated  by reference to Exhibit 99 to Current Report on Form 8-K (Registration No.  1-12248) filed with the Commission on September 1, 2004)*                                                                     |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.43      |       | Separation Agreement between Kaiser Group Holdings,  Inc. and Marian P. Hamlett effective February 8, 2006 (Incorporated by  reference to Exhibit 10.1 to Current Report on Form 8-K (Registration No. 1-12248)  filed with the Commission on February 9, 2006)*                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.44      |       | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Douglas W. McMinn, effective December 4, 2006 (Incorporated  by reference to Exhibit 10.44 to Annual Report on Form 10-K (Registration  No. 1-12248) filed with the Commission on March 30, 2007)*                                                   |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 10.45      |       | Executive Employment Agreement between Kaiser Group  Holdings, Inc. and Dr. Nicholas Burakow, effective December 4, 2006 (Incorporated  by reference to Exhibit 10.45 to Annual Report on Form 10-K (Registration  No. 1-12248) filed with the Commission on March 30, 2007)*                                                |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 31.1       |       | Certification of Chief  Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended **                                                                                                                                                                                                  |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                  |
| 31.2       |       | Certification of Chief  Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities  Exchange Act of 1934, as amended **                                                                                                                                                                                                  |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 32.1       |       | Certification of Chief  Executive Officer, pursuant to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                                            |
|       |       |                                                                                                                                                                                                                                                                                                                                        |
| 32.2       |       | Certification of Chief  Financial Officer, pursuant to 18 U.S.C. Section 1350 **                                                                                                                                                                                                                                                            |

----

*                    Designates management or compensatory plans orarrangements.

**             Filed herewith.

29

----