<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-Q


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


For the Quarter Ended September 30, 1995          Commission File Number 0-18858



                              KAISER VENTURES INC.
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               DELAWARE                                      94-0594733
-----------------------------------------        -----------------------------
    (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                  Identification No.)
 
 
                   3633 East Inland Empire Blvd., Suite 850
                          Ontario, California  91764
------------------------------------------------------------------------------
             (Address of principal executive offices and zip code)


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes   X     No 
                                  -----      -----     

Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.

                              Yes   X     No 
                                  -----      -----

On November 1, 1995, the Company had 10,464,114 shares of Common Stock, $.03 par
value outstanding (including 749,138 shares deemed outstanding and held in
reserve by the Company for issuance to the former general unsecured creditors of
Kaiser Steel Corporation pursuant to its Plan of Reorganization).
<PAGE>
 
                        TABLE OF CONTENTS TO FORM 10-Q

<TABLE>
<CAPTION>
                                                                      PAGE
                                                                      ----
<S>                                                                   <C>
INTRODUCTION
 
  BUSINESS UPDATE..................................................    1
 
PART I
 
  Item 1.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS..............    5
 
  Item 2.         FINANCIAL STATEMENTS.............................   12
 
                  CONSOLIDATED BALANCE SHEETS......................   12
 
                  CONSOLIDATED STATEMENTS OF INCOME................   14
 
                  CONSOLIDATED STATEMENTS OF CASH FLOWS............   15
 
                  CONSOLIDATED STATEMENT OF CHANGES IN
                  STOCKHOLDERS' EQUITY.............................   16
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......   17
 
PART II
 
  Item 1.         LEGAL PROCEEDINGS................................   19
 
  Item 2.         CHANGES IN SECURITIES............................   20
 
  Item 3.         DEFAULTS UPON SENIOR SECURITIES..................   20
 
  Item 4.         SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS   20
 
  Item 5.         OTHER INFORMATION................................   20
 
  Item 6.         EXHIBITS AND REPORTS ON FORM 8-K.................   20
 
SIGNATURES.........................................................   21
</TABLE> 

                                       i
<PAGE>
 
                            AVAILABILITY OF REPORTS
                            -----------------------

     THE COMPANY WILL FURNISH WITHOUT CHARGE, TO EACH STOCKHOLDER, UPON WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994, AND COPIES OF THE FORM 10-Q REPORTS FOR
THE FIRST QUARTER AND SECOND QUARTER OF 1995, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENT SCHEDULES THERETO.  THOSE
REQUESTING A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR 1994 AND THE 1995 FORM
10-Q REPORTS THAT ARE NOT CURRENTLY STOCKHOLDERS OF THE COMPANY MAY ALSO OBTAIN
A COPY OF EACH REPORT DIRECTLY FROM THE COMPANY.  REQUESTS FOR COPIES OF SUCH
REPORTS SHOULD BE DIRECTED TO DIRECTOR OF INVESTOR RELATIONS, AT 3633 EAST
INLAND EMPIRE BOULEVARD, SUITE 850, ONTARIO, CALIFORNIA 91764.

     THE READER IS ENCOURAGED TO READ THIS FORM 10-Q REPORT IN CONJUNCTION WITH
THE COMPANY'S 1994 FORM 10-K REPORT AND 1995 FIRST QUARTER AND SECOND QUARTER
FORM 10-Q REPORTS SINCE THE INFORMATION CONTAINED HEREIN IS OFTEN AN UPDATE ON
THE INFORMATION IN SUCH REPORTS.

                                       ii
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                                 INTRODUCTION

BUSINESS UPDATE

GENERAL

   Kaiser Ventures Inc., formerly known as Kaiser Resources Inc. ("Kaiser" or
the "Company" which shall be deemed to include its wholly owned subsidiaries
unless otherwise provided herein), is an emerging company pursuing projects and
activities related to water resources, property redevelopment and solid waste
management.  A reader of this Form 10-Q is encouraged to read the entire report,
in addition to the Company's 1994 Form 10-K and 1995 First Quarter and Second
Quarter Form 10-Q Reports for background information and a complete
understanding as to material developments concerning the Company.

WATER RESOURCES

   The Company, through a wholly owned subsidiary, Fontana Water Resources,
Inc., leases its 50.9% ownership of the capital stock of Fontana Union Water
Company ("Fontana Union"), a mutual water company, to Cucamonga County Water
District ("Cucamonga") pursuant to a 102-year take-or-pay lease (the "Cucamonga
Lease"). Under the terms of the Cucamonga Lease, Cucamonga's payments to the
Company are based upon established fixed quantities of water for most of the
applicable sources, multiplied by a fixed percentage of the rate for untreated
and non-interruptable water from the Metropolitan Water District of Southern
California ("MWD") as available through the Chino Basin Municipal Water District
as it may change from time-to-time.

   On July 1, 1995, MWD implemented its previously announced changed rates and a
new rate structure. As a result of these changes, the Cucamonga Lease rate
increased by at least 2.7%, or up to approximately 5.1% if the Cucamonga Lease
is interpreted as the Company asserts to include all the changed rates and items
implemented by MWD. Cucamonga disputes the Company's interpretation of the
Cucamonga Lease. The Company and Cucamonga have been unable to resolve this
matter through negotiation and thus, legal action will probably be necessary to
resolve the interpretation dispute. Cucamonga timely paid its third quarter
payment but at a level that only reflected a 2.7% rate increase as opposed to
the 5.1% increase that the Company maintains it is entitled to receive pursuant
to the Cucamonga Lease.

   As an asset development company, Kaiser has focused its efforts primarily on
creating long-term value from the assets it inherited from the Kaiser Steel
Corporation bankruptcy estate. For the Fontana Union asset this has been
accomplished over the past several years by the development, execution and
implementation of the Cucamonga Lease. Today, the Cucamonga Lease is a mature,
stable asset with its primary variable being future MWD water rate changes.
Accordingly, the Company, in a continuing effort to maximize shareholder value,
is evaluating various strategic alternatives with respect to the Cucamonga
Lease. These alternatives include, but are not limited to, retention, sale,
securitization or monetization of the Cucamonga Lease, as well as pursuit of the
potential litigation described above, or any combination of the foregoing. The
Company has retained Merrill Lynch, Pierce, Fenner & Smith, Incorporated as its
financial adviser to assist the Company in exploring, evaluating and possibly
implementing the various financial alternatives either in conjunction with,
before, or after the potential litigation described above. The retention of
Merrill Lynch should not be

                                       1
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


viewed as a determination by the Company that it will ultimately pursue any
strategic alternative other than retaining the Cucamonga Lease.

PROPERTY REDEVELOPMENT

FONTANA PROPERTIES

   The Company owns approximately 1,175 acres near Fontana, California, which
was the location of Kaiser's former steel mill (the "Mill Site Property").  As
discussed in detail in the Company's 1994 Form 10-K Report and the 1995 First
and Second Quarter Form 10-Q Reports, the Company is pursuing several projects
for the redevelopment of the Mill Site Property, including a rail-served
municipal solid waste transfer and recycling facility, a motorsports complex,
and several industrial and commercial lots adjoining the motorsports complex.
Material developments with respect to these projects are described  below.

MOTORSPORTS COMPLEX

   During the third quarter, the Company and Penske Speedway, Inc. ("Penske"),
through their respective wholly owned subsidiaries, continued to undertake a
number of activities in furtherance of the planned motorsports complex.  The
motorsports complex involves approximately 475 acres of the Mill Site Property.

   After unanimous approval by the San Bernardino County Board of Supervisors of
the environmental impact report and land use approvals necessary for the
construction of The California Speedway ("TCS") in May, 1995, the Company
focused its efforts on completing the environmental remediation necessary for
TCS.  In the third quarter, among other items, the Company completed the
installation of a cap on approximately 13 acres in the by-products area of the
former steel mill and installation of a vapor extraction system for the same
area as required by the Company's 1988 Consent Order with the California
Environmental Protection Agency, Department of Toxic Substances ("DTSC").

   As a result of completing the required remedial work, the Company achieved a
major milestone on September 26, 1995, when the DTSC delivered to the Company a
letter stating that no further remedial action was necessary (except for certain
maintenance and monitoring obligations) for the property within Operable Unit
No. 2.  The property within Operable Unit No. 2 includes most, but not all, of
the property to be used for TCS.  Limited portions of the remaining TCS property
require some additional remediation and site cleanup work which Kaiser is
completing.  The Company's cost for these required remediation and site cleanup
activities for 1995 is currently estimated to total approximately $7.6 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part I, Item 1 of this Form 10-Q Report and "Legal Proceedings -
Environmental Insurance Litigation" in Part II, Item 1 of this Form 10-Q Report
for additional information.

   In addition to the environmental and site cleanup work, demolition activities
funded by Penske continued on the TCS property.  Demolition and site preparation
activities will continue in the fourth quarter of 1995 and into 1996.  Work on
the relocation of the rail lines serving the property also commenced during
the third quarter.  The Company also continued to work with Penske to refine the
development and construction plans for the motorsports complex.

                                       2
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


   Finally, Penske and the Company have been working on satisfying the
conditions necessary to consummate their agreement, as amended, whereby the
Company will contribute the property necessary for TCS in exchange for an
ownership interest in TCS and Penske's other two motorsports complexes, Michigan
International Speedway and Nazareth Speedway.  The Company currently
anticipates that the closing on this transaction will occur by the end of the
fourth quarter of 1995 assuming all conditions to closing can be satisfied.
Penske is also in the process of finalizing the financing for TCS.
 
WEST VALLEY MATERIALS RECYCLING FACILITY

   Kaiser and Burrtec Waste Industries, Inc. ("Burrtec"), a privately-held
company, are joint venture partners in the development of the West Valley
Materials Recycling Facility, a proposed rail-served municipal solid waste
transfer and recycling facility to be located on a portion of Kaiser's mill site
property near Fontana, California.  The transfer station and material recycling
facility are fully permitted, other than necessary construction and ancillary
permits.  Earlier this year, the joint venture negotiated an agreement with the
County of San Bernardino Solid Waste Management Department for the construction
of a County financed transfer station that would be capable of providing
transfer services for up to 2,000 tons per day of municipal solid waste.  San
Bernardino County has informed the joint venture that it will not enter into the
currently proposed agreement.  However, the County has expressed a desire to
negotiate a new agreement with the joint venture for the construction and
operation of the transfer station.  The joint venture will conduct discussions
with the County with regard to such a revised agreement.  However, due to
current market conditions, the joint venture is also exploring the possibility
of building one or more phases of the proposed transfer station and materials
recycling facility without any contract or financial assistance from the County.

SPEEDWAY BUSINESS PARK/NAPA LOTS

   Due to a decision to delay the construction of an access road until the
second quarter of 1996, the Napa lots will not be available for lease or sale
until  the second half of 1996.

WASTE MANAGEMENT

EAGLE MOUNTAIN LANDFILL PROJECT

   In 1988, the Company entered into a 100-year lease agreement (the "MRC
Lease") with Mine Reclamation Corporation ("MRC"). MRC is seeking to develop the
Company's former iron ore mine near Eagle Mountain, California into a large,
regional rail-haul, municipal solid waste landfill (the "Landfill Project"). MRC
became a subsidiary of the Company when the Company's subsidiary, Eagle
Mountain Reclamation, Inc., acquired a 70% interest in MRC during the first
quarter of 1995 in exchange for the elimination of the minimum monthly rent due
the Company under the MRC Lease. The elimination of the minimum monthly rent did
not change the future royalty payments due the Company once the landfill
commences operations.

   As discussed in the Company's 1994 10-K Report and 1995 First Quarter and
Second Quarter Form 10-Q Reports, MRC is focusing its efforts on re-permitting
the Landfill Project to address deficiencies determined to exist by the San
Diego Superior Court in the Landfill Project's environmental impact report
("EIR") certified by the Riverside County Board of Supervisors in

                                       3
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


November, 1992.  In the third quarter, MRC continued to pursue the activities
necessary to re-permit the Landfill Project.  It is currently anticipated that
the draft EIR will be circulated for comment in the first quarter of 1996.  It
is also the Company's current understanding that completion of the Landfill
Project's permitting will take until at least mid- to late 1997.

   As previously disclosed, the Company, through its wholly owned subsidiary,
Eagle Mountain Reclamation, Inc., has decided to make an equity investment in
MRC. The first stage of funding, a $3.2 million private placement to existing
MRC shareholders, was recently completed. The Company's commitment in the
private placement offering is approximately $2.4 million of which the Company
funded $1.2 million in July, 1995 and $672,000 in October, 1995. A number of
MRC's other shareholders also participated in the private placement. In addition
to the funds committed pursuant to the just completed private placement, the
Company may invest approximately $2.6 million in additional funds in stages over
the next two years, dependent upon the continued satisfactory progress of the
Landfill Project.

   Additional funding will be necessary to complete all permitting activities in
the event there is a substantial delay in permitting or extensive challenges to
the environmental review or permits granted.  Therefore, MRC continues to engage
in discussions with potential investors and strategic participants in the
Landfill Project about financing, sales of air space, sales of capacity rights,
waste commitments and other similar types of arrangements or investments.  As
discussed in more detail in the Company's 1994 10-K Report, there are numerous
risks associated with MRC and the Landfill Project which must be overcome to
achieve the financing, permitting, construction and operation of the Landfill
Project.  See "Management's Discussion and Analysis of Financial Condition and
Results of Operation" in Part I, Item 1 of this Form 10-Q Report.



                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
                   ------------------------------------------

                                       4
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                                     PART I

ITEM 1.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

   Kaiser Ventures Inc. ("Kaiser" or the "Company") is an emerging company
pursuing projects and activities related to water resources, property
redevelopment and solid waste management.  The Company's long-term emphasis is
on the development of its principal assets:  (i) a 50.9% interest in Fontana
Union Water Company ("Fontana Union"), a mutual water company; (ii) the 1,175-
acre former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property"); and (iii) the 11,350 acre idle iron ore mine in the California
desert (the "Eagle Mountain Site"), which includes the associated 460 acre town
of Eagle Mountain ("Eagle Mountain Townsite").  During the third quarter of
1995, the Company recognized revenues primarily from the lease of its interest
in Fontana Union and from the redevelopment of its Eagle Mountain Townsite,
while also generating significant revenues from interim activities, primarily
related to its Mill Site Property.  The Company is also pursuing other related
longer-term growth opportunities, including the development, with Penske
Speedway, Inc., of approximately 475 acres of the Mill Site Property as The
California Speedway, a professional motorsports racing complex ("Penske Speedway
Venture"); a joint venture for the development of a transfer station and
materials recycling facility on the Mill Site Property ("Mill Site MRF"); and
the redevelopment of industrial and commercial parcels of land adjoining The
California Speedway and Mill Site MRF.  See "Introduction - Business Update" for
additional information concerning these projects.

   As disclosed in the 1995 First Quarter and Second Quarter Form 10-Q Reports,
the Company, in January, 1995 acquired a 70% interest in Mine Reclamation
Corporation ("MRC"), the developer of the Eagle Mountain Landfill Project (see
"Introduction - Business Update").  Concurrent with this acquisition, MRC and
the Company amended the MRC Lease to terminate the minimum rent payments by MRC
to the Company.  Consequently, the Company will not receive any rent payments
from MRC during 1995 or in the future until commencement of operations at the
Landfill Project.  The transaction was treated as a purchase, and the assets
acquired and liabilities assumed were recorded at their fair market value.  As
previously disclosed, the Company has decided to provide up to $5.0 million in
equity or other funding to MRC.  The Company's funding of MRC will be in stages
over the next two years and will be subject to periodic review by the Company's
Board of Directors.  The first stage of funding is a private placement involving
the Company and several other MRC shareholders, who jointly have agreed to
provide  up to $3.2 million in equity to MRC in order to support the continued
permitting and development of the Landfill Project through mid-1996. The
Company's maximum share of this first stage funding is $2.4 million. Under its
commitment, the Company funded $1.2 million and $672,000 to MRC, respectively,
in July, 1995 and October, 1995. In addition, as a second stage of funding, the
Company and other MRC shareholders have agreed to guarantee or lend up to
$800,000 to MRC. While the Company has made the decision to invest up to $5.0
million in equity in MRC, the Company is not obligated to provide additional
funding to MRC beyond its current commitments. The Company is consolidating MRC
for financial statement purposes.

                                       5
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


PRIMARY REVENUE SOURCES

ONGOING OPERATIONS

   The Company's revenues from ongoing operations are generally derived from the
development of the Company's long-term projects.  Revenues from water resources
represent payments under the lease of the Company's interest in Fontana Union to
Cucamonga County Water District ("Cucamonga").  Property redevelopment revenues
primarily reflect housing rental income, aggregate rock sales and lease payments
for the minimum security prison at the Eagle Mountain Townsite, and royalty
revenues from iron ore shipments from the Company's iron ore mine in California
(the "Silver Lake Mine").  Prior to 1995, waste management revenues reflected
the minimum lease payments under MRC's 100-year lease in connection with the
Landfill Project.

   The Company currently projects that revenues from ongoing operations for all
of 1995 will be reduced significantly as a result of the Company's acquisition
of a 70% equity interest in MRC in return for amending the MRC Lease to
eliminate the minimum rent payments, which totaled $2,400,000 in 1994.  However,
beyond 1995, the Company's revenues from ongoing operations should reflect, in
addition to the current operations, the possible impact of the Company's equity
interests in the Penske Speedway Venture and the proposed West Valley Materials
Recycling Facility plus revenues from the redeveloped portions of the Mill Site
Property.

INTERIM ACTIVITIES

   Revenues from interim activities are generated from various sources primarily
related to the Mill Site Property. Significant components of interim activities
include rentals under short-term tenant lease arrangements, royalty revenues
from the sale of slag to outside contractors, water and wastewater treatment
service revenues, revenues from the sale of recyclable materials and other
miscellaneous interim activities.

   The Company currently believes that revenues from interim operations for 1995
will also change significantly, as compared to 1994, due to the Company's
tentative settlement with California Steel Industries ("CSI").  The CSI
settlement will result in a one-time gain on the sale of certain Mill Site
Property water rights and waste discharge units to CSI once final approval of
the settlement is received and all costs are known. Offsetting a part of the CSI
gain will be the impact of lower levels of service revenues and expenses for the
Company during 1995 under the amended Services Agreement which the Company and
CSI have negotiated as a part of the tentative settlement.  In addition, as
noted below, tenant lease income declined during the third quarter of 1995 as
tenants were displaced to start construction of The California Speedway.

SUMMARY OF REVENUE SOURCES

   Due to the development nature of certain Company projects and the Company's
recognition of revenues from bankruptcy-related and other non-recurring items,
historical period-to-period comparisons of total revenues may not be meaningful
for developing an overall understanding of the Company.  Therefore, the Company
believes it is important to evaluate the trends in the components of its
revenues as well as the recent developments regarding its long-term ongoing and
interim revenue sources.  See "Introduction - Business Update" for a discussion
of recent material events affecting the Company's revenue sources.

                                       6
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


RESULTS OF OPERATIONS

ANALYSIS OF RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1995 AND 1994

   An analysis of the significant components of the Company's resource revenues
for the three months ended September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED
                                                  SEPTEMBER 30,
                                    -------------------------------------------
                                        1995           1994       % INC. (DEC)
                                    ------------   ------------   -------------
<S>                                 <C>            <C>            <C>
ONGOING OPERATIONS
 Water resource..................    1,133,000      1,089,000            4%
 Property redevelopment..........      246,000        246,000            0%
 Waste management................          ---        600,000         (100%)
                                    ----------     ----------         ----
 
   TOTAL ONGOING OPERATIONS......    1,379,000      1,935,000          (29%)
                                    ----------     ----------         ----
 
INTERIM ACTIVITIES
 Lease and royalty...............      307,000        432,000          (29%)
 Service.........................      101,000        497,000          (80%)
 Miscellaneous...................      302,000        438,000          (31%)
                                    ----------     ----------         ----
 
   TOTAL INTERIM ACTIVITIES......      710,000      1,367,000          (48%)
                                    ----------     ----------         ----
 
   TOTAL RESOURCE REVENUES.......   $2,089,000     $3,302,000          (37%)
                                    ==========     ==========         ====
 
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
  Ongoing operations.............           66%            59%
  Interim activities.............           34%            41%
                                    ----------     ----------
 
   TOTAL RESOURCE REVENUES.......          100%           100%
                                    ==========     ==========
</TABLE>

   Resource Revenues.  Total resource revenues for the third quarter of 1995
were $2,089,000, as compared to $3,302,000 for the same period in 1994.
Revenues from ongoing operations declined 29% during the third quarter to
$1,379,000 from $1,935,000 in 1994, while revenues from interim activities
declined 48% to $710,000 from $1,367,000 in 1994.  Revenues from ongoing
operations as a percentage of total revenues increased to 66% in 1995 from 59%
in 1994.

   Ongoing Operations.  Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $1,133,000 during the third quarter of 1995 as
compared to $1,089,000 for the third quarter of 1994.  The 4% increase in water
revenues during the third quarter reflects the July, 1995 5.1% increase in water
rates of The Metropolitan Water District of Southern California ("MWD") offset
by a small decline, from 56.11% in 1994 to 55.53% in 1995, in the Company's
effective interest in Fontana Union.  As previously disclosed, the expected
decline in the Company's effective interest in Fontana Union is due to an
increase in the number of Fontana Union shareholders taking water.  However, the
Company's effective interest in Fontana Union's water cannot fall below its
equity interest of 50.9%.  As discussed in the "Introduction" section of this
Form 10-Q Report, MWD, effective July 1,

                                       7
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


1995, implemented changed rates and a changed rate structure which has resulted
in a continuing lease interpretation dispute with Cucamonga regarding the 
extent of the MWD rate increase. The amount in dispute as of September 30, 1995
is approximately $30,000.

   Property redevelopment revenues were $246,000 for the third quarter of 1995
as compared to $246,000 for the third quarter of 1994.

   Waste management revenues decreased to $0 during the third quarter of 1995
from $600,000 for the same period in 1994 as a result of the Company's
acquisition of a 70% equity interest in MRC effective January 1, 1995, and the
elimination of MRC's minimum rent payments to the Company.

   Interim Activities.  Revenues from interim activities for the third quarter
of 1995 were $710,000 as compared to $1,367,000 for the same period of 1994.  As
noted above, the 48% decline in revenues from interim activities in 1995 is
primarily attributable to lower levels of service revenues under the tentative
amended Services Agreement with CSI, lower tenant lease income as tenants were
displaced to start construction of The California Speedway and lower
miscellaneous revenues.

   Resource Operating Costs.  Resource operating costs are those costs directly
related to the resource revenue sources.  Total resource operating costs for the
third quarter of 1995 declined to $1,027,000 from $1,349,000 for the same period
in 1994.  Operations and maintenance costs for the third quarter of 1995 were
$403,000 compared to $500,000 for the third quarter of 1994.  The 19% decrease
in 1995 operations and maintenance costs was primarily due to lower expenses
associated with the reduced levels of services being provided to CSI.
Administrative support expenses for the third quarter of 1995 decreased 27% to
$624,000 from $849,000 for the third quarter of 1994.  The decrease was
primarily due to non-recurring environmental cleanup costs in 1994 relating to
two mill site tenants that went out of business.

   Corporate General and Administrative Expenses.  Corporate general and
administrative expenses for the third quarter of 1995 decreased 9% to $771,000
from $848,000 for the third quarter of 1994.  The decrease was due primarily to
lower legal and insurance expenses.

   Net Interest Expense (Income).  Net interest expense for the third quarter of
1995 was $183,000, compared with net interest income of $41,000 for the same
period in 1994 due primarily to a lower average cash balance and interest
expense on the $6.0 million note issued as part of the purchase of properties
from the Lusk Joint Ventures in July, 1994.

   Income and Income Tax Provision.  The Company recorded income before income
tax provision of $108,000 for the third quarter of 1995, a 91% decrease from the
$1,146,000 recorded for the same period in 1994.  A provision for income taxes
of $46,000 was recorded in 1995 as compared with $496,000 in 1994.  Over 90% of
the income tax provisions in 1995 and 1994 are not payable due primarily to
utilization of the Company's net operating loss carryforwards ("NOLs").  For the
third quarter of 1995, the Company reported net income of $62,000 or $.01 per
share, a decrease of 90% from the $650,000, or $.06 per share, reported during
the same quarter of 1994.

ANALYSIS OF RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

   An analysis of the significant components of the Company's resource revenues
for the nine months ended September 30, 1995 and 1994 follows:

                                       8
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                NINE MONTHS ENDED
                                                  SEPTEMBER 30,
                                    -------------------------------------------
                                        1995           1994       % INC. (DEC)
                                    ------------   ------------   -------------
<S>                                 <C>            <C>            <C>
ONGOING OPERATIONS
 Water resource..................      3,290,000      3,141,000          5%
 Property redevelopment..........        766,000        807,000         (5%)
 Waste management................            ---      1,800,000       (100%)
                                      ----------     ----------       ----
 
   TOTAL ONGOING OPERATIONS......      4,056,000      5,748,000        (29%)
                                      ----------     ----------       ----
 
INTERIM ACTIVITIES
 Lease and royalty...............      1,191,000        845,000         41%
 Service.........................        334,000      1,777,000        (81%)
 Miscellaneous...................        657,000        724,000         (9%)
                                      ----------     ----------       ----

   TOTAL INTERIM ACTIVITIES......      2,182,000      3,346,000        (35%)
                                      ----------     ----------       ----
 
   TOTAL RESOURCE REVENUES.......     $6,238,000     $9,094,000        (31%)
                                      ==========     ==========       ====
 
REVENUES AS A PERCENTAGE OF TOTAL
RESOURCE REVENUES:
 Ongoing operations..............             65%            63%
 Interim activities..............             35%            37%
                                      ----------     ----------
 
   TOTAL RESOURCE REVENUES.......            100%           100%
                                      ==========     ==========
</TABLE>

   Resource Revenues. Total resource revenues for the first nine months of 1995
were $6,238,000, as compared to $9,094,000 for the same period in 1994. Revenues
from ongoing operations declined 29% during the first nine months to $4,056,000
from $5,748,000 in 1994, while revenues from interim activities declined 35% to
$2,182,000 from $3,346,000 in 1994. Revenues from ongoing operations as a
percentage of total revenues increased to 65% in 1995 from 63% in 1994.

   The reasons for the decrease in revenues for the first nine months of 1995 as
compared to the same period in 1994 are consistent with those indicated above
for the third quarter of 1995 as compared to the same period in 1994.

   Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for the
first nine months of 1995 decreased 19% to $2,937,000 from $3,641,000 for the
same period in 1994. Operations and maintenance costs decreased 19% to
$1,186,000 while administrative support costs also decreased 19% to $1,751,000
for the first nine months of 1995 as compared to 1994 as a result of the reasons
indicated above for the third quarter of 1995 as compared to the same period in
1994.

   Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the first nine months of 1995 decreased 6% to
$2,530,000 from $2,685,000 for the same period in 1994. The decrease was due
primarily to lower legal, insurance and professional expenses.

                                       9
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


   Net Interest Expense (Income).  Net interest expense for the first nine
months of 1995 was $488,000, compared with net interest income of $265,000 for
the same period in 1994.  The increase in net interest expense in 1995 was due
to a lower average cash balance and the addition of interest expense on the $6.0
million note issued as part of the purchase of properties from the Lusk Joint
Ventures in July, 1994.

   Income and Income Tax Provision.  The Company recorded income before income
tax provision of $283,000 for the first nine months of 1995, a 91% decrease from
the $3,033,000 recorded for the same period in 1994.  A provision for income
taxes of $123,000 was recorded in 1995 as compared with $1,313,000 in 1994.
Over 90% of the income tax provisions in 1995 and 1994 are not payable due
primarily to utilization of the Company's net operating loss carryforwards
("NOLs").  For the first nine months of 1995, the Company reported net income of
$160,000 or $.02 per share, a decrease of 91% from the $1,720,000, or $.16 per
share, reported during the same period of 1994.

LIQUIDITY AND CAPITAL RESOURCES

   Cash and Cash Equivalents.  The Company defines cash equivalents as highly
liquid debt instruments with original maturities of 90 days or less.  Cash and
cash equivalents were $10,330,000 at September 30, 1995 and $3,205,000 at
December 31, 1994.  Total cash and cash equivalents increased $7,125,000 during
the first nine months of 1995.  Included in cash and cash equivalents at
September 30, 1995 is $2,046,000 held solely for the benefit of MRC.  The
Company also had short-term investments, comprised of treasury bills and
certificates of deposit, of $74,000 at September 30, 1995, compared with
$3,624,000 at December 31, 1994.

   Total cash and cash equivalents plus short-term investments showed an
increase of $3,575,000 for the first nine months of 1995 to $10,404,000 due
primarily to the receipt of $8,101,000 in net proceeds from the first two
environmental insurance litigation settlements and by the recording of
$2,046,000 in cash from the acquisition of MRC being partially offset by the
$3,778,000 United Mine Workers of America ("UMWA") settlement payment, and the
payment for environmental remediation and site clearance costs at the Mill Site
Property.

   In addition, the Company is continuing to work toward reaching settlements
during 1995 of the environmental cleanup and property damage litigation with the
remaining insurance carriers for Kaiser Steel Corporation and of the CSI
litigation, which could produce additional significant cash recoveries for the
Company.  See Part II, Item 1.  "Legal Proceedings" for additional information.

   Working Capital.  During the first nine months of 1995, current assets
increased $3,396,000 to $13,238,000 while current liabilities decreased $440,000
to $6,969,000.  Included in current liabilities is $1,198,000 for MRC.  The
increase in current assets is due primarily to the receipt of the environmental
insurance litigation settlement while the decrease in current liabilities was
due primarily to the UMWA settlement payment.  As a result, working capital
increased during the first nine months of 1995 by $3,836,000 to $6,269,000 at
September 30, 1995.

   Long-Term Assets.  Since the environmental insurance litigation settlements
of $8.1 million received through September 30, 1995, are intended to cover
current and future environmental claims, the Company has recorded approximately
$6.8 million of the net settlement proceeds received as a reimbursement of
capitalized environmental remediation costs.  As a result, land and land
improvements

                                       10
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


has declined by approximately $1.8 million during 1995. The remaining $1.3
million of net proceeds received to date was recorded as a reserve for future
environmental remediation.

   Long-Term Debt.  As of September 30, 1995, the Company had $5,520,000 in
long-term debt associated with the note the Company issued as part of the
purchase of properties from the Lusk Joint Ventures in July 1994.  The Company
has no outstanding borrowings under its $20.0 million revolving-to-term credit
facility.

   Long-Term Liabilities.  The increase in long-term liabilities, is primarily
due to the recording of the remaining $1.3 million of net proceeds received from
the environmental insurance settlements as a reserve for future environmental
remediation.

   Minority Interest and Other Liabilities.  The $691,000 relates to the
minority interest associated with MRC in which the Company acquired a 70%
interest in January 1995.

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

   Capital Resources. The Company expects that its current cash balances and
short-term investments together with: (a) cash provided from operating
activities; (b) proceeds from the anticipated future settlements of the CSI and
environmental insurance litigation; and (c) amounts available under its
$20,000,000 revolving-to-term credit facility will be sufficient to satisfy both
the Company's near-term operating cash requirements and to enable the Company to
continue the development of its long-term projects. To the extent that
additional capital resources are required, such capital will be raised through
bank borrowings, partnerships, joint venture arrangements, additional equity or
asset value realization.

   The Company expects to commit, in 1995, a total of approximately $10.3
million for capital projects of which approximately $6.2 million had been
incurred as of September 30, 1995.  Of the total capital commitment for 1995,
$7.6 million is in connection with the required environmental remediation and
site cleanup activities associated with the development of The California
Speedway complex and approximately $1.3 million is for redevelopment of certain
parcels of land adjoining The California Speedway complex.


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

                                       11
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                             SEPTEMBER 30,    DECEMBER 31,
                                                 1995            1994
                                              -----------     -----------
<S>                                           <C>             <C>
                                              (UNAUDITED)
ASSETS
 
Current Assets
 Cash and cash equivalents..................  $10,330,000     $ 3,205,000
 Short-term investments.....................       74,000       3,624,000
 Accounts receivable and other, net of
  allowance for doubtful accounts of
  $397,000 and $156,000, respectively.......    2,834,000       3,013,000
                                              -----------     -----------
 
 Total current assets.......................   13,238,000       9,842,000
                                              -----------     -----------
 
Property, Plant and Equipment
 Land and land improvements.................   49,276,000      51,103,000
 Buildings and structures...................    2,457,000       2,383,000
 Machinery and equipment....................    2,183,000       1,910,000
                                              -----------     -----------
                                               53,916,000      55,396,000
 Less accumulated depreciation..............   (2,010,000)     (1,587,000)
                                              -----------     -----------
 
 Net property, plant and equipment..........   51,906,000      53,809,000
                                              -----------     -----------
 
Other Assets
 Investment in Fontana Union Water Company..   16,046,000      16,046,000
 
 Other assets and investments...............    2,122,000       1,881,000
                                              -----------     -----------
 
 Total other assets.........................   18,168,000      17,927,000
                                              -----------     -----------
 
Total Assets................................  $83,312,000     $81,578,000
                                              ===========     ===========
</TABLE>

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

                                       12
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                               SEPTEMBER 30,    DECEMBER 31,
                                                   1995            1994
                                               ------------     -----------
<S>                                            <C>               <C>
                                                (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current Liabilities
 Accounts payable...........................   $  4,291,000     $ 1,170,000
 Accrued liabilities........................      2,438,000       5,999,000
 Current portion of long-term debt..........        240,000         240,000
                                               ------------     -----------
 
   Total current liabilities................      6,969,000       7,409,000
                                               ------------     -----------
 
Non-Current Liabilities
 Groundwater remediation reserve............      1,667,000       1,667,000
 Environmental remediation reserve..........      1,285,000             ---
 Long-term debt.............................      5,520,000       5,700,000
                                               ------------     -----------
 
   Total non-current liabilities............      8,472,000       7,367,000
                                               ------------     -----------
 
   Total liabilities........................     15,441,000      14,776,000
                                               ------------     -----------
 
Minority Interest and Other Liabilities       
 (See Note 2)...............................        691,000             ---
                                               ------------     ----------- 
Commitments and Contingencies
 
Stockholders' Equity
 Common stock, par value $.03 per share,
  authorized 13,333,333 shares; issued
  and outstanding 10,455,114 and 
  10,437,362, respectively..................        314,000         313,000
 Capital in excess of par value.............     59,973,000      59,756,000
 Retained earnings since November 15, 1988..      6,893,000       6,733,000
                                               ------------     -----------
 
   Total stockholders' equity...............     67,180,000      66,802,000
                                               ------------     -----------
 
Total Liabilities and Stockholders' Equity..   $ 83,312,000     $81,578,000
                                               ============     ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       13
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                       CONSOLIDATED STATEMENTS OF INCOME
        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED           NINE MONTHS ENDED
                                                        SEPTEMBER 30                 SEPTEMBER 30
                                                 --------------------------   ---------------------------
                                                    1995           1994          1995            1994
                                                 -----------   ------------   -----------    ------------
<S>                                              <C>           <C>            <C>            <C> 
RESOURCE REVENUES
 Ongoing Operations
   Water resource..............................  $ 1,133,000   $ 1,089,000    $ 3,290,000    $ 3,141,000
   Property redevelopment......................      246,000       246,000        766,000        807,000
   Waste management............................          ---       600,000            ---      1,800,000
                                                 -----------   -----------    -----------    -----------
 
     Total ongoing operations..................    1,379,000     1,935,000      4,056,000      5,748,000
                                                 -----------   -----------    -----------    -----------
 
Interim Activities
   Lease and royalty...........................      307,000       432,000      1,191,000        845,000
   Service.....................................      101,000       497,000        334,000      1,777,000
   Miscellaneous...............................      302,000       438,000        657,000        724,000
                                                 -----------   -----------    -----------    -----------
 
     Total interim activities..................      710,000     1,367,000      2,182,000      3,346,000
                                                 -----------   -----------    -----------    -----------
 
     Total resource revenues...................    2,089,000     3,302,000      6,238,000      9,094,000
                                                 -----------   -----------    -----------    -----------
 
RESOURCE OPERATING COSTS
Operations and maintenance.....................      403,000       500,000      1,186,000      1,470,000
Administrative support expenses................      624,000       849,000      1,751,000      2,171,000
                                                 -----------   -----------    -----------    -----------
 
     Total resource operating costs............    1,027,000     1,349,000      2,937,000      3,641,000
                                                 -----------   -----------    -----------    -----------
 
INCOME FROM RESOURCES..........................    1,062,000     1,953,000      3,301,000      5,453,000
 
  Corporate general and administrative expenses      771,000       848,000      2,530,000      2,685,000
                                                 -----------   -----------    -----------    -----------
 
INCOME FROM OPERATIONS.........................      291,000     1,105,000        771,000      2,768,000
 
  Net Interest expense (income)................      183,000       (41,000)       488,000       (265,000)
                                                 -----------   -----------    -----------    -----------
 
INCOME BEFORE INCOME TAX PROVISION.............      108,000     1,146,000        283,000      3,033,000
 
 Income tax provision
   Currently payable...........................        3,000        35,000          9,000         94,000
   Deferred tax expense credited to equity.....       43,000       461,000        114,000      1,219,000
                                                 -----------   -----------    -----------    -----------
 
NET INCOME.....................................  $    62,000   $   650,000    $   160,000    $ 1,720,000
                                                 ===========   ===========    ===========    ===========
 
EARNINGS PER SHARE.............................         $.01          $.06           $.02           $.16
                                                 ===========   ===========    ===========    ===========
 
Weighted Average Number of Shares
 Outstanding...................................   10,653,000    10,684,000     10,652,000     10,683,000
                                                 ===========   ===========    ===========    ===========
 </TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       14
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                             1995          1994
                                                         -----------    -----------
<S>                                                      <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net income............................................. $   160,000    $ 1,720,000
 Provision for income tax which is credited to equity...     114,000      1,219,000
 Depreciation and amortization..........................     379,000        257,000
 Gain on sale of equipment..............................     (11,000)       (10,000)
 Allowance for doubtful accounts........................     241,000         18,000
 Changes in assets:
   Accounts receivable and other........................     355,000        326,000
   Other assets.........................................      (4,000)           ---
 Changes in liabilities:
   Current liabilities..................................    (350,000)      (910,000)
   Long-term groundwater remediation costs..............         ---         (9,000)
                                                         -----------    -----------
                                                   
NET CASH FLOWS FROM OPERATING ACTIVITIES................     884,000      2,611,000
                                                         -----------    -----------
 
CASH FLOWS FROM INVESTING ACTIVITIES
 Short-term investments and marketable securities.......   3,550,000      3,942,000
 Minority interest and other liabilities................   1,216,000            ---
 Capital expenditures...................................  (6,162,000)    (1,687,000)
 Purchase of Lusk Joint Venture Properties..............         ---     (8,814,000)
 Investments in joint ventures..........................    (297,000)      (160,000)
                                                         -----------    -----------
 
NET CASH FLOWS FROM INVESTING ACTIVITIES................  (1,693,000)    (6,719,000)
                                                         -----------    -----------
 
CASH FLOWS FROM FINANCING ACTIVITIES
 Issuance of common stock...............................      13,000         46,000
 Payment of loan fees...................................         ---       (635,000)
 Principal payments on note payable.....................    (180,000)           ---
 Net environmental insurance proceeds...................   8,101,000            ---
                                                         -----------    -----------
 
NET CASH FLOWS FROM FINANCING ACTIVITIES................   7,934,000       (589,000)
                                                         -----------    -----------
 
NET CHANGES IN CASH AND CASH EQUIVALENTS................   7,125,000     (4,697,000)
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..........   3,205,000      5,880,000
                                                         -----------    -----------

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30............... $10,330,000    $ 1,183,000
                                                         ===========    ===========
</TABLE>


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

                                       15
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               
                                          COMMON STOCK         CAPITAL IN             
                                    -------------------------  EXCESS OF      RETAINED 
                                      SHARES       AMOUNT      PAR VALUE      EARNINGS        TOTAL
                                    ------------------------------------------------------------------
<S>                                 <C>          <C>          <C>            <C>           <C>
Balance at December 31, 1994.....   10,437,362   $ 313,000    $59,756,000    $6,733,000    $66,802,000
 
 Provision for income tax,
   which is not accruable
   or payable....................          ---         ---        114,000           ---        114,000
 
 Issuance of restricted
   shares of common stock
   to officers...................       15,451       1,000         90,000           ---         91,000
 
 Issuance of shares of
   common stock..................        2,301         ---         13,000           ---         13,000
 
 Net Income......................          ---         ---            ---       160,000        160,000
                                    ----------   ---------    -----------   -----------    -----------
 
Balance at September 30, 1995....   10,455,114   $ 314,000    $59,973,000    $6,893,000    $67,180,000
                                    ==========   =========    ===========   ===========    ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

                                       16
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


NOTE 1.  BASIS OF PRESENTATION

   The unaudited, consolidated financial statements as of September 30, 1995,
and for the three-month and nine-month periods ended September 30, 1995 and
1994, as well as related notes should be read in conjunction with the audited
consolidated financial statements and related notes as of December 31, 1994. In
the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary (all of which are normal and/or recurring in
nature) to present fairly the Company's financial position at September 30,
1995, and results of operations and cash flows for the three-month and nine-
month periods ended September 30, 1995 and 1994.

   The Company has reclassified the 1994 quarterly information to conform with
the 1995 presentation.


NOTE 2.  MINE RECLAMATION CORPORATION

   In January 1995, the Company acquired a 70% interest in MRC.  Concurrent with
this acquisition, MRC and the Company amended the MRC Lease to terminate the
minimum rent payments by MRC to the Company.  The transaction was treated as a
purchase, and the assets acquired and liabilities assumed were recorded at their
fair market value. The Company is consolidating MRC for financial statement
purposes.


NOTE 3.  ENVIRONMENTAL INSURANCE LITIGATION SETTLEMENT PROCEEDS

   As detailed in the Company's 1994 10-K Report and in Part II - Item 1.
"Legal Proceedings" of this Report, the Company is the plaintiff against a
number of insurance companies which had provided comprehensive general liability
coverage to KSC.  In June, 1995 and September, 1995, the Company consummated
settlements with a number of the defendant insurance carriers resulting in net
settlement payments to the Company of approximately $8.1 million.  In addition,
the Company has reached a tentative agreement on a settlement amount and
principal terms with the remaining defendant insurance carriers.  Assuming that
the tentative settlement is consummated, the Company anticipates receiving the
final settlement amounts during the 4th quarter of 1995 and the first quarter of
1996.  The Company anticipates net proceeds from all settlements to total
approximately $12 to $13 million after payment of all litigation expenses and
third party obligations.

   In the Company's financial statements as of September 30, 1995, the Company
has recorded approximately $6.8 million of the net settlement proceeds received
as a reimbursement of costs capitalized for environmental remediation.  The
remaining $1.3 million of net proceeds received was recorded as a reserve for
future environmental remediation.

                                       17
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


NOTE 4.  COMMITMENTS AND CONTINGENCIES

ENVIRONMENTAL CONTINGENCIES

   The Company is under a consent order with the California Environmental
Protection Agency, Department of Toxic Substances Control ("DTSC"), to take
appropriate remedial actions to cleanup portions of the Mill Site Property.
During 1995, the Company expects to incur approximately $5.2 million for the
environmental remediation required by the DTSC.  The remaining required
remediation, which is scheduled to be performed in phases through 1998, is 
estimated by the Company to cost between $8 million and $24 million depending
upon which redevelopment or remediation alternatives are eventually selected. As
has been the Company's policy, these remedial costs will be capitalized and the
Company anticipates being able to recover these costs through redevelopment
and/or sale of the property.

   The Company is also under an agreement with the California Regional Water
Quality Control Board that has settled its obligations to monitor and mitigate a
groundwater plume in the general area of the Mill Site Property.  Under the
settlement agreement, the Company remains contingently liable for impacts the 
groundwater plume may have on water wells owned by third parties. The Company
believes sufficient amounts have been accrued for this contingency.


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                                       18
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                                    PART II


ITEM 1.  LEGAL PROCEEDINGS

   As discussed in the Company's Form 10-K Report for 1994 and the Company's
1995 First Quarter and Second Quarter 10-Q Reports, the Company is engaged in
certain claims and litigation which, if resolved adverse to the Company or the
Company's interests, could have a material adverse impact on the Company. In
addition, as discussed below, the Company is currently involved in litigation
matters that should have a positive impact on the Company as they are being
resolved in the Company's favor. There have been no material developments in any
legal proceeding except as noted below and as discussed in the "Introduction -
Business Update" section of this 10-Q Report.


CALIFORNIA STEEL INDUSTRIES, INC.

   As previously announced and discussed in detail in the Company's 1994 10-K
Report, last year the Company reached a tentative settlement with California
Steel Industries, Inc. ("CSI") resolving all the issues and disputes among CSI,
the Company and KSC Recovery Inc., the KSC bankruptcy estate.  Definitive 
settlement documents were recently executed by the Company and KSC Recovery,
Inc. and it is anticipated that they will soon be executed by CSI. The Chino
Basin Watermaster has approved the settlement agreement, with approval of the
settlement agreement by the bankruptcy court and the San Bernardino County
Superior Court anticipated by year end. Upon receipt of these approvals, the
parties will consummate the settlement.

ENVIRONMENTAL INSURANCE LITIGATION

   As is detailed in the Company's 1994 10-K Report, the Company is the
plaintiff against a number of insurance companies which had provided
comprehensive general liability coverage to KSC.  The lawsuit seeks coverage for
certain costs of defense, environmental clean-up costs, and property damages
that the Company has incurred and may incur in the future.  In the second
quarter, the Company consummated a settlement with one of the defendant
insurance carriers resulting in a settlement payment to the Company.  Similarly,
in the third quarter, the Company consummated a settlement with a number of the
other defendant insurance carriers resulting in a settlement payment to the
Company.

   Finally, as previously reported, the Company has reached a verbal agreement
on a settlement amount and principal terms with the remaining defendant
insurance carriers.  This tentative settlement is subject to the negotiation,
preparation and execution of a definitive settlement agreement with the
remaining carriers.  The parties are currently working on the preparation of a
settlement agreement.  It is currently anticipated that the settlement will be
executed with substantial settlement payments collected pursuant to such
settlement by year end.

   Assuming the one remaining tentative settlement is consummated, the Company
anticipates reporting in 1995 net settlements totaling approximately $12 to $13
million after payment of all litigation expenses and third party obligations.

                                       19
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


ITEM 2.  CHANGES IN SECURITIES

         None.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.


ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         None


ITEM 5.  OTHER INFORMATION

         See the "Introduction" Section of this Form 10-Q Report.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         None.

                                       20
<PAGE>
 
                     KAISER VENTURES INC. AND SUBSIDIARIES


                                   SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                KAISER VENTURES INC.



Dated:  November 13, 1995       /s/ James F. Verhey
                                ------------------
                                James F. Verhey
                                Principal Financial Officer

                                       21