<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington D.C. 20549

                                   FORM 10-K

(Mark One)

    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 1999
                                      OR
    [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                       Commission File Number:  0-18858

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

                 DELAWARE                               94-0594733
     -------------------------------------   --------------------------------
         (State or other jurisdiction                (I.R.S. Employer
       of incorporation or organization)            Identification No.)

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

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

                           ________________________

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

                                               Name of Each Exchange on which
               Title of Each Class                         Registered
      ------------------------------------   ----------------------------------
          Common Stock ($.03) par value            Nasdaq Stock Market(SM)

                           ________________________

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

                           ________________________

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X   No ___
                                       ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [_]

The aggregate market value of the registrant's Common Stock, $.03 par value,
held by non-affiliates of the registrant was approximately $71,539,000 based
upon the average of the bid and ask prices of registrant's Common Stock on the
Nasdaq Stock Market(SM) at March 10, 2000, or $14.844 per share. (For purposes
of this calculation, shares of common stock held by each director, executive
officer, and by each person known by the registrant as owning 10% or more of the
outstanding common stock have been excluded. This determination of affiliate
status is not necessarily a conclusive determination for other purposes).

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

At March 10, 2000, 6,355,153 shares of the registrant's Common Stock, $.03 par
value, were outstanding, including 136,919 shares deemed outstanding but
reserved for issuance to the general unsecured creditors of Kaiser Steel
Corporation.

Documents Incorporated By Reference: Portions of the Company's Proxy Statement
for the combined 1999/2000 Annual Meeting of Stockholders are to be held on May
10, 2000, incorporated into Part III of this Form 10-K.
<PAGE>

                        TABLE OF CONTENTS TO FORM 10-K
                        ------------------------------

                                    PART I

<TABLE>
<S>                                                                        <C>
Item 1.   BUSINESS.....................................................      1

Item 2.   PROPERTIES...................................................     22

Item 3.   LEGAL PROCEEDINGS............................................     24

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
           HOLDERS.....................................................     28

                                    PART II

Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
           RELATED STOCKHOLDER MATTERS.................................     29

Item 6.   SELECTED FINANCIAL DATA......................................     31

Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS.........................     32

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................     41

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE......................     41

                                   PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE
           REGISTRANT..................................................     42

Item 11.  EXECUTIVE COMPENSATION.......................................     42

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT..............................................     42

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

                                    PART IV

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

                                       i
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                                    PART I


FORWARD-LOOKING INFORMATION

  Except for the historical statements and discussions contained herein,
statements contained in this 10-K Report constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  Any 10-K,
Annual Report to Stockholders, 10-Q or 8-K Report of the Company may include
forward-looking statements.  In addition, other written or oral statements,
which constitute forward-looking statements, have been made and may be made in
the future by the Company.  When used or incorporated by reference in this 10-K
Report or in other written or oral statements, the words "anticipate,"
"estimate," "project" and similar expressions are intended to identify forward-
looking statements.  Such statements are subject to certain risks, uncertainties
and assumptions.  Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, expected or projected.
For example, actual results could materially differ from those projected as a
result of factors such as, but not limited to: general economic conditions in
the United States and Southern California; the impact of federal, state, and
local laws and regulations on the Company's development activities; the impact
of weather on the Company's remediation or construction related activities; the
discovery of unanticipated environmental conditions on any of the Company's
properties; the failure of the bankruptcy discharge granted to the Company to
address claims and litigation that relate to the pre-bankruptcy activities of
Kaiser Steel Corporation; and/or the success of any material litigation
involving the Company or its projects such as legal challenges to the completed
federal land exchange for the Eagle Mountain landfill project or the litigation
commenced by one of the Company's shareholders against the Company and current
and past members of the Company's Board of Directors.  Readers are cautioned not
to put undue reliance on forward-looking statements.  The Company disclaims any
intention to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.


Item 1.  BUSINESS

General

  Kaiser Ventures Inc. ("Kaiser" or the "Company", including its wholly-owned
subsidiaries unless otherwise provided herein) is an asset development company
based in Southern California.  The Company is the reorganized successor to
Kaiser Steel Corporation ("KSC") which was an integrated steel manufacturer that
filed for bankruptcy protection in 1987.  Today, the Company's principal assets
include:  (i) an approximately 53.71% ownership interest in Fontana Union Water
Company ("Fontana Union") with 50.88% of the total outstanding stock of Fontana
Union leased to Cucamonga County Water District ("Cucamonga") by the Company
pursuant to a take-or-pay lease with a scheduled term ending in 2092; (ii)
approximately 634 acres (gross) of the former KSC steel mill site (the "Mill
Site Property") most of which is currently in escrow under a sales contract;
(iii) a 50% ownership interest in the West Valley Materials Recovery Facility
and Transfer Station ("WVMRF"), a transfer station and recycling facility
located on land acquired from the Company; (iv) an approximate 75% ownership
interest in Mine Reclamation Corporation ("MRC"), the company seeking to permit
a rail-haul municipal solid waste landfill (the "Landfill Project"); and (v) the
9,144 acre idle iron ore mine in the California desert (the "Eagle Mountain
Site") which includes the associated 1100 acre town of Eagle Mountain ("Eagle
Mountain Townsite") and the property which is leased to MRC for the Landfill
Project. During 1999 the Company's approximately 11.73% interest in Penske
Motorsports, Inc. ("PMI") was converted into cash and stock of International
Speedway Corporation ("ISC") as a result of the acquisition of PMI by ISC. The
Company's stock position in ISC was sold subsequent to the acquisition.

                                       1
<PAGE>

  In addition, the Company's financial position is enhanced by approximately $35
million of federal net operating loss tax carryforwards ("NOLs"), as of December
31, 1999, which arose through the KSC bankruptcy reorganization.  During 1999,
the Company used approximately $79 million in federal NOLs and all of its
California NOLs.  The remaining federal NOLs expire between 2006 and 2013.

  The Company's current primary business strategy is to convert its existing
under-utilized assets into equity in new businesses, joint ventures, long-term
leases, or to exchange its assets for an ownership interest in operating
companies. This strategy enables the Company to minimize its capital investment,
reduce its risk, and benefit from the operational expertise of its strategic
partners or lessees. This strategy is best illustrated by the successful
development of the Company's Fontana Union water rights into a long-term, take-
or-pay lease with Cucamonga, the Company's contribution of land into its WVMRF
venture, and its prior venture with PMI. While this is the Company's general
philosophy, the Company may choose to become more directly involved in a
particular project, such as the Landfill Project, when appropriate, or if the
Company believes its active participation will enhance long-term shareholder
value. The Company will continue to focus in the near-term primarily on its
existing projects and asset base. However, the Company will consider other new
opportunities particularly if they are related to or enhance the Company's
existing assets and projects. As particular assets or projects mature, the
Company regularly evaluates whether to retain, dispose or otherwise deal with
the assets.

  In the past, the Company was engaged in a number of short-term interim
activities on the Mill Site Property including month-to-month property rentals
and the sale of existing slag and other materials at the site.  These interim
activities have historically generated a material portion of the Company's
revenues and enabled the Company to remain profitable in each full fiscal year
since emerging from the KSC bankruptcy.  However, as anticipated, the amount of
these short-term property rentals and other interim revenues diminished
significantly in 1999 as a result of the planned redevelopment of the Mill Site
Property.

Summary of Significant Developments in 1999

  During 1999, a number of major events occurred which significantly affected
the Company.  Therefore, readers are encouraged to read this Report in its
entirety in order to adequately understand the impact of these events on the
Company.  However, management of the Company would like to particularly
highlight four areas:  (1) the success of the Landfill Project including, (i)
the positive outcome of the appeal of the San Diego Superior Court's prior
adverse ruling relative to the Landfill Project's environmental impact report
("EIR"), (ii) completion of the federal land exchange that is necessary for the
Landfill Project, and (iii) securing the last major permit necessary to site and
operate the Landfill Project; (2) the approval of the entitlements for the 406
acre Kaiser Commerce Center, a substantial portion of the Mill Site Property,
and the Company subsequently entering into a contract for the sale of virtually
all the Mill Site Property; (3) the merger of PMI into ISC and the Company's
subsequent sale of the ISC stock received in the merger; and (4) the Company's
repurchase of approximately 41% of its issued and outstanding common stock.

  (1) In regard to the Landfill Project, in May 1999, the California Fourth
      Circuit Court of Appeal announced its decision to completely reverse the
      prior adverse decision of the San Diego Superior Court on the Landfill
      Project's EIR. The Court of Appeal's decision in effect certified the EIR
      and reinstated the Riverside County approvals of the Landfill Project. The
      California Supreme Court denied further review of the Landfill Project in
      July 1999. In September 1999, the Interior Board of Land Appeals ("IBLA")
      denied the appeal of two opponents to the Landfill Project that were
      challenging the decision of the U.S. Bureau of Land Management ("BLM") to
      engage in a land exchange with the Company. This ruling in favor of the
      BLM and the Company paved the way for the federal land exchange that was
      completed in October 1999. Litigation again challenging the land

                                       2
<PAGE>

      exchange has been commenced in federal court. In December 1999, the
      Landfill Project received its last major permit when the California
      Integrated Waste Management Board unanimously approved the granting of the
      facilities permit for the Landfill Project. For more detailed information
      on this matter, please see "Part I, Item 1. Business - Municipal Solid
      Waste Management -Eagle Mountain Landfill Project."

  (2) In April 1999, the San Bernardino County Board of Supervisors Commission
      unanimously approved the Kaiser Commerce Center project, its related land
      use and environmental documentation. In October 1999, the Company entered
      into an agreement to sell approximately 592 acres of the Mill Site
      Property, which includes the Kaiser Commerce Center and the East Slag Pile
      Property, for $16 million plus the assumption of virtually all existing
      and future environmental liabilities and obligations associated with the
      Mill Site Property. Assuming that all due diligence is completed and that
      all contingencies are satisfied or waived by the buyer, this transaction
      is currently scheduled to close in the second quarter of 2000. For more
      information on this matter, please see "Part I, Item 1. Business -Property
      Redevelopment."

  (3) In May 1999, ISC and PMI announced the planned acquisition of PMI by ISC.
      The acquisition of PMI by ISC was completed in July 1999. As a result of
      the merger, the Company received approximately $24 million in cash and
      1,187,407 shares of ISC class A common stock for its 11.73% interest in
      PMI. Subsequent to the merger, the Company sold all of its shares of ISC
      common stock for a total of $64 million or approximately $53.52 per share.
      For more information on this matter, please see "Part 1, Item 1. Business-
      Investment in Penske Motorsports, Inc."

  (4) On November 22, 1999, the Company purchased 2,730,950 and 1,693,551 shares
      of its common stock from the New Kaiser Voluntary Employees' Beneficiary
      Association (the "VEBA") and from the Pension Benefit Guaranty Corporation
      (the "PBGC"), respectively. At the time of the purchase, the VEBA and the
      PBGC were the Company's two largest shareholders. The Company paid $13.00
      per share in cash. In addition, the VEBA and the PBGC received a
      contingent payment right in connection with a qualifying sale of the Mill
      Site if it generally occurs before December 31, 2000, and warrants to
      purchase 460,000 and 285,260 shares of the Company's common stock,
      respectively. The warrants expire on September 30, 2004 and have an
      exercise price of $17.00 per warrant. For more information on this matter,
      please see "Part II, Item 5. Market for the Company's Common Equity and
      Related Stockholder matters - Purchase of Shares."

Water Resources

  Background.  The Company, through a wholly-owned subsidiary, Fontana Water
Resources, Inc. ("FWR"), currently owns 53.71% of Fontana Union, a mutual water
company, which was a primary local source of water for KSC's former steel making
operations.  In March 2000, the Company increased its ownership interest in
Fontana Union from 50.88% to 53.71% by the acquisition of 424.4 shares of
Fontana Union at a price of approximately $1,540 per share.  The price per share
paid in the transaction reflects a substantial minority interest discount and
the settlement of a dispute between FWR and the seller of the shares.  Fontana
Union owns water rights to produce water from four distinct surface and
subsurface sources of water near Fontana, California, including:  (i)
adjudicated surface and streambed flow rights from the Lytle Creek area of the
San Gabriel Mountains; (ii) adjudicated rights to the Chino Basin subsurface
aquifer; (iii) adjudicated rights to the Colton/Rialto Basin subsurface aquifer;
and (iv) unadjudicated rights to a subsurface aquifer accessed by a well at the
base of Lytle Creek (Well No. 22).  Locally available water resources such as
owned by Fontana Union continues to be increasingly important and valuable in
Southern California.

                                       3
<PAGE>

  Kaiser's ownership of Fontana Union entitles the Company to receive, annually,
its proportionate share of Fontana Union's water which historically totals
approximately 34,000 acre feet per year (an acre foot equals approximately
325,000 gallons).  In addition, when other shareholders of Fontana Union do not
take their annual proportionate shares of water, the unclaimed water for each
year from those shareholders is divided pro rata among those shareholders that
do take such water.  Currently, the Company's pro rata interest in unclaimed
water raises its effective overall share to approximately 57.37%.  Over time,
the Company expects this supplemental source of water to be reduced or
eliminated as minority shareholders, who do not currently utilize all their
water, begin to use, sell, or lease their water interests.

  Lease to Cucamonga County Water District.  In 1989, the Company leased its
shares of Fontana Union stock it then owned to Cucamonga, a local water district
with an "A-" credit rating from Moody's Investor Services.  The recent purchased
shares in Fontana Union are not directly included in the lease with Cucamonga.
Under the terms of the 102-year take-or-pay lease (the "Cucamonga Lease"),
Cucamonga is entitled to receive all of the Company's proportionate share of
water from the foregoing sources.  Currently, Cucamonga pays the Company for all
of the Company's share of water based upon fixed quantities of water at a rate
of 68.13% of the Metropolitan Water District of Southern California's (the
"MWD") charge for untreated, non-interruptible water as available through Chino
Basin Municipal Water District.  Thus, on a quarterly basis, Cucamonga pays for
its proportionate share of the agreed upon annual quantities regardless of
fluctuations in actual water flows and actual receipt and use of water, except
in certain limited situations as discussed in more detail below.  During 1999
and 1998, the Cucamonga Lease generated $5.2 million in revenues to the Company
each year.

  Because of the 102-year lease agreement, which gives Cucamonga all of the
Company's ownership rights in Fontana Union for the leased shares, the Company
does not consolidate the accounts of Fontana Union for financial reporting
purposes.  Substantially all risks and costs of producing the water are borne by
Cucamonga.

  Under the Cucamonga Lease, the Company and Cucamonga agreed that the gross
annual quantity of Fontana Union water from all sources (except the annual Chino
Basin agricultural pool transfer for which the Company accrues revenues for its
share in the 4th quarter), is approximately 34,000 acre feet or approximately
8,500 acre feet per quarter.  Fixing the average quantities of water stabilized
the Company's revenues and Cucamonga's payments.  The water quantities under the
Cucamonga Lease were fixed based on the historical average of water available
from the applicable water sources according to over 80 years of records.

  There are, however, limited circumstances in which the agreed upon quantities
of water paid for under the Cucamonga Lease can be adjusted.  As an example, the
agreed upon quantity of water from one source of water, the Colton/Rialto wells,
can be temporarily reduced if the average water level in certain basin index
wells drops below a specified level.  This occurred in 1996, resulting in a
temporary decrease in production.  However, in the fourth quarter of 1996, the
wells again began pumping at their historical levels because the water level in
the index wells had sufficiently increased.

  Another source of water leased by the Company to Cucamonga pursuant to the
Cucamonga Lease is the Company's proportionate share of water from what is known
as the Chino Basin agriculture pool transfers.  These transfers represent that
portion of water allocated to agricultural users in the Chino Basin, which is
not used by such agricultural users in a particular water year.  As a result,
the Company through Fontana Union is entitled to a share of this surplus water,
which Cucamonga pays for under the Cucamonga Lease.  The historical average of
annual agricultural pool transfers to Fontana Union has fluctuated in recent
years.  For the most recent water year, the 1998/99 water year, the agricultural
transfer was 3,610 acre feet.  For the 1999/2000 water year, it is anticipated
that the agricultural pool transfer will be in the range of 3,400 to 3,800 acre
feet.  See "Part 1, Item 7.  Management's Discussion

                                       4
<PAGE>

and Analysis of Financial Condition and Results of Operations" for a complete
discussion of the revenues derived pursuant to the Cucamonga Lease.

  The Company's future lease revenue increases are primarily dependent upon any
adjustments in the MWD water rates and other fees upon which the lease rate is
calculated.  The MWD rate established for untreated, non-interruptible water is
based on a number of factors, including the MWD need for funds to finance
capital improvements and to cover its fixed operational and overhead costs.  The
MWD rate increases are often cyclical in nature depending upon such factors as
water availability, consumption, capital projects and available reserves.  As
discussed in more detail below, in 1995 a dispute arose as to MWD's rate
increase and the amount payable to the Company under the terms of the Cucamonga
Lease.  Past rate increases are not necessarily indicative of future rate
increases by MWD.

  On July 1, 1995, MWD implemented changed rates and a new rate structure.  As a
result of these changes, the Company asserted that all the changed rates and
items implemented by MWD, which must be paid in order to receive untreated, non-
interruptible water from MWD, are to be included in the calculation of the MWD
rate payable under the terms of the Cucamonga Lease.  Cucamonga disputed the
Company's interpretation of the Cucamonga Lease which would result in a rate
increase greater than 2.7%, the 1995 rate of increase Cucamonga asserted was the
appropriate rate increase.  Similarly, there is a dispute over the MWD rate and
thus the Cucamonga Lease rate for years 1996 through 1999.  Because the Company
and Cucamonga were unable to resolve this dispute, in 1996 the Company
instituted litigation against Cucamonga in San Bernardino County Superior Court.

  A trial on the matter was held in March 1998.  The Court concluded that the
MWD Rate as defined in the Cucamonga Lease was discontinued effective July 1,
1995, as a result of the rate restructuring implemented by MWD.  Therefore, the
terms of the Cucamonga Lease require the parties to seek to negotiate in good
faith a new substitute rate.  If the parties are unable to agree on a substitute
rate, the matter is to be resolved by reference, a form of private trial similar
to arbitration. Before and after the trial, there were sporadic attempts to
resolve the litigation and negotiate a new substitute rate.  However, since the
parties were not able to reach a resolution of the matter, the matter will be
determined as a result of a reference proceeding as required under the terms of
the Cucamonga Lease.  The reference proceeding commenced during the week of
February 28, 2000.  After the conclusion of all the testimony in the proceeding,
the court asked for further briefing and scheduled a final oral argument which
is currently scheduled for May 15, 2000.  A decision from the judge is expected
within approximately 60 days thereafter.

  Cucamonga has, to date, paid its obligations under the Cucamonga Lease on a
timely basis, but at a level that reflects the lower rates that the Company has
been disputing.  Although the Company bills Cucamonga for the full amount it
asserts it is entitled to receive under the Cucamonga Lease, the Company has
elected to report water revenues in the amounts Cucamonga is currently paying.
Consequently, the court decision does not affect the Company's historical
financial statements.  Similarly, it is not anticipated that the outcome of the
reference proceeding will affect the Company's historical financial statements,
but it may have an impact on the future revenues the Company receives from
Cucamonga.

  MWD is in the process of again evaluating and considering a major rate
restructuring.  While the Company understands that there are several proposed
rate restructuring alternatives, there has been no decision by MWD on the final
form of the rate restructuring.  It is currently anticipated that MWD will
select and adopt a new rate structure during 2000.

  Pursuant to the Cucamonga Lease, if any of the Fontana Union water sources
become sufficiently contaminated as to be unusable after treatment and/or
blending, Cucamonga is not obligated to pay for the quantities of available but
unusable water.  The Company is aware of only one limited source of water that
has been affected by contamination.  Two water wells owned by San Gabriel Water
Company but

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pumping Fontana Union Water have been closed because of contamination apparently
originating from the Mid-Valley Sanitary Landfill owned by San Bernardino
County. On October 9, 1998, the California Regional Water Quality Control
Board - Santa Ana Region, determined that the Mid-Valley Sanitary Landfill was
contaminating groundwater and it issued a clean-up and abatement order against
San Bernardino County. The closure of these two wells has, to date, not impacted
and is not currently anticipated to impact the payments received by the Company
pursuant to the Cucamonga Lease.

  Due to these water quality and quantity concerns, during the first quarter of
1998, FWR, initiated litigation under the California Environmental Quality Act
("CEQA") against San Bernardino County and various land owners in connection
with the proposed expansion of the Mid-Valley Sanitary Landfill owned by San
Bernardino County.  Cucamonga and others have settled the contamination issues
with San Bernardino County with the County taking responsibility for all
remediation costs.  In 1999, construction began on facilities necessary to treat
the contamination at these two wells.  These facilities are being constructed at
San Bernardino County's expense.  Thus, many of the contamination issues have
been resolved.  The remaining issues between the County and the Company have
been tentatively resolved, subject to final documentation and approval by the
San Bernardino County Board of Supervisors.

  In addition, if any of Fontana Union's water rights are challenged by a third
party, the Company and Cucamonga are obligated to share the costs of defending
such challenge.  Cucamonga also has an option to purchase the Company's Fontana
Union shares in the second half of the year 2042, at a price generally based
upon a multiple of 15 times the then current annual lease payment, as well as
the right to purchase all of the Company's Fontana Union shares for $1.00 in the
year 2092.

  The Company employed a consulting organization in its search for a lessee of
its Fontana Union shares.  The consulting agreement calls for a commission
payment of 5.42% of each payment received by the Company.

  The Company continues to view the Cucamonga Lease as a mature, stable asset
with its primary variable being future MWD water rate changes.  The Company, in
a continuing effort to maximize shareholder value, regularly evaluates various
alternatives with respect to the Cucamonga Lease.  These alternatives include,
but are not limited to, retention, sale, securitization and monetization of the
Cucamonga Lease.  The Fontana Union shares and the Cucamonga Lease are currently
pledged as collateral for the Company's revolving-to-term credit facility with
Union Bank.

Investment in Penske Motorsports, Inc.

  Until July 26, 1999, the Company owned 1,627,923 shares, or approximately
11.73% of the common stock of PMI, a publicly traded company. PMI was a leading
promoter and marketer of professional motorsports in the United States as well
as an owner and operator of speedway facilities.  The Company's ownership
interest in PMI was acquired as a result of:  (i) its contribution, in November
1995, to PMI of approximately 480 acres, as adjusted, of the Central Mill Site
Property on which The California Speedway was built and successfully commenced
operations in June 1997; and (ii) the subsequent sale of the Speedway Business
Park, totaling approximately 54 acres, to PMI in December 1996.

  On July 26, 1999, ISC acquired PMI.  ISC is a leading promoter of motorsports
activities in the United States, promoting over 100 events annually.  The
Company voted for the merger and elected to take the cash and stock election
afforded to PMI shareholders.  Pursuant to this election, Kaiser received
approximately $24 million in cash and 1,187,407 shares of ISC Class A common
stock which resulted in a gain of $35.7 million.  Subsequent to the merger, the
Company sold all of the shares it owned in ISC at an average price of
approximately $53.52 per share, realizing a gain of approximately $6.6 million.
The gross cash proceeds that the Company received in 1999 from the merger and
the subsequent sale of ISC stock totaled approximately $88 million.

                                       6
<PAGE>

  Beginning on April 1, 1996 and ending on March 31, 1999, the Company accounted
for its share of PMI's net income under the equity method of accounting.  The
Company ceased using the equity method of accounting, effective April 1, 1999,
as a result of the announced PMI/ISC merger and its reduced ownership and
management role in ISC.

Property Redevelopment

Mill Site Property

  Background.  From 1942 through 1983, KSC operated a steel mill in Southern
California near the junction of the Interstate 10 and Interstate 15 freeways and
approximately three miles to the northeast of Ontario International Airport.
The Mill Site Property is located approximately 45 miles east of Los Angeles in
one of California's fastest growing regions, and is served by two major
railroads, the Burlington Northern Santa Fe and the Union Pacific (formerly
Southern Pacific).  The original Mill Site Property consists of four distinct
parcels of land:  the Central Mill Site (originally approximately 595 acres
(gross)), the South Mill Site (approximately 290 acres (gross)), the West End
Property (approximately 240 acres (gross)), and the Valley Boulevard Property
(approximately 42 acres (gross)).  The property also includes approximately 35
acres used for the San Sevaine flood control channel.  Approximately 534 acres
of the Central Mill Site Property are now the California Speedway.  (See "Part
I, Item l.  Business - Investment in PMI"), the NAPA lots, consisting of
approximately 31 acres have been sold and approximately 23 acres have been
contributed for the benefit of the WVMRF. As discussed in more detail below, the
balance of the Company's Mill Site Property, except for the Tar Pits parcel
(approximately 5 acres) and the Rancho Cucamonga parcel (approximately 37
acres), is currently in escrow to be sold.

  Limited portions of the Mill Site Property have known environmental
contamination which require remediation.  (See "Part I, Item 1.  Business -
Property Development - The Mill Site Property - Mill Site Environmental
Matters.")  In addition, a substantial volume of non-hazardous rock by-product
called slag, resulting from the historical iron and steel business, was
deposited on the West Slag Pile and East Slag Pile Properties.  Although slag is
being removed and sold from the West Slag Pile Property by a third party,
thereby producing a current revenue stream for the Company, the amount of slag
is such that it is unlikely to be cleared in the next decade without cost to the
Company unless it can be used in conjunction with the redevelopment of the Mill
Site Property.  However, it is anticipated that a substantial amount of the slag
can be used in the grading and construction process associated with the Kaiser
Commerce Center discussed in more detail below.

  The Mill Site Property has its own water rights, originally 2,930 acre feet
per year, that are entirely distinct from the Company's interest in Fontana
Union.  A portion of these water rights, 1,300 acre feet, was sold as a part of
a settlement of litigation and other claims with an adjoining landowner, and
another portion, 475 acre feet, was contributed with the property now owned by
The California Speedway Corporation.  Thus, the Company now owns 1,155 acre feet
of annual water rights associated with the Mill Site Property of which 630 acre
feet are jointly owned with California Steel Industries ("CSI").  CSI has the
right of first use of the 630 acre feet, with payment to the Company, through
June 30, 2004, with the Company having the right of first use thereafter without
any payment to CSI.

  Mill Site Redevelopment Plan.  During 1999, the Company continued to undertake
appropriate steps to redevelop the bulk of its remaining Mill Site Property.
Redevelopment of the Mill Site Property requires various entitlements and
permits from San Bernardino County.  The entitlement and permitting process
formally commenced in the second quarter of 1997, with the Company filing an
application for the "Kaiser Commerce Center" Specific Plan with San Bernardino
County for all of its property except for approximately 37 acres within the City
of Rancho Cucamonga, approximately 135 acres of property commonly referred to as
the East Slag Pile Property and the remaining NAPA Lot and MRF property which
were already entitled.

                                       7
<PAGE>

  The Specific Plan and related applications identified a wide variety of
potential uses for the property.  Possible uses include a rail-served
distribution and commercial park, a multi-modal rail-truck distribution center,
warehousing, light manufacturing facilities, a commercial truck stop, as well as
commercial and recreational uses.  Of course, the final use for any specific
parcel of the Mill Site Property will be dependent upon the real estate market
and the needs of potential tenants, buyers and users of a particular parcel,
subject to the general limitations imposed by the final Specific Plan.

  In April 1999, the Specific Plan, environmental impact report and other
related land use documents for the Kaiser Commerce Center obtained unanimous
approval from the San Bernardino County Board of Supervisors.  In addition, a
conditional use permit for a proposed 73 acre truck stop was approved.  With
receipt of the entitlements for the Kaiser Commerce Center and the activity in
the real estate market where the Kaiser Commerce Center is located, the property
became an attractive candidate for immediate development to parties other than
the Company.

  Significant capital funds will be required to implement the infrastructure and
access improvements necessary for the Kaiser Commerce Center.  In addition to
the typical grading, street, curb, gutter, water, sewer, electrical and other
improvements, access improvements will include reconfiguring an exiting road and
interstate interchange.  The Company will seek other sources of funds, if
available, such as local tax increment financing as well as federal highway
improvement funds.  In this regard, in June 1998, Congress awarded approximately
$1.5 million toward the planning costs of the improvements to the Etiwanda/I-10
Interchange.  See "Part II, Item 7.  Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information.  In
addition to developing the Kaiser Commerce Center alone or with others, the
Company also pursued the possible sale of the Kaiser Commerce Center.  As
discussed below, the Company has entered into an agreement to sell the Kaiser
Commerce and the East Slag Pile Property.  If such transaction closes, the Buyer
will be responsible to pay or finance all of these infrastructure improvements.

  Agreement to Sell Mill Site Property.  In October 1999, the Company and its
wholly owned subsidiary, Kaiser Steel Land Development, Inc., entered into a
Purchase and Sale Agreement and Joint Escrow Instructions (the "Purchase
Agreement") with Ontario Partners I, LLC (the "Buyer") pursuant to which the
Company agreed to sell approximately 592 acres of its remaining Mill Site
Property for $16 million in cash plus the assumption of virtually all known and
unknown environmental obligations and risks associated with the property.  The
sale includes the proposed Kaiser Commerce Center with its proposed truck stop
and the East Slag Pile Property, as well as ancillary items such as the water
rights associated with the property.  As part of the transaction, the Buyer will
provide environmental insurance coverage and other financial assurance
mechanisms related to the known and unknown environmental obligations and risks
associated with the property being sold.  In addition, the Purchase Agreement
provides that, to the extent possible, the Company's Consent Order with the
California Department of Toxic Substances Control ("DTSC") will be terminated
and that the Buyer will enter into a new consent order with the DTSC.  A consent
order is essentially an agreement to investigate and remediate property.  The
Buyer is currently negotiating a new consent order with the DTSC.

  The Buyer is a new entity formed by LandBank Environmental Properties, LLC
("Landbank") and the Knowlton Group, a Salt Lake City based developer. LandBank,
a wholly owned subsidiary of the IT Group, specializes in the acquisition,
restoration and redevelopment of environmentally impaired real estate. It is
currently anticipated that a new entity will be formed in which LandBank, the
Knowlton Group and one or more other companies will become members and that such
new entity will ultimately be the buyer of the real estate if it closes. The
Buyer has discussed with several entities the possibility of participating in
the transaction, and it has currently identified Catellus Development
Corporation as its most likely additional development and financial partner.

  The transaction is subject to extensive due diligence and a number of
contingencies.  The Buyer has been engaged in, and continues to undertake,
extensive due diligence with respect to the property it may

                                       8
<PAGE>

purchase, including, among other things, environmental, development,
construction and market matters. The Buyer may terminate the transaction for any
reason prior to the close of its due diligence period. The Purchase Agreement
has been amended to allow Buyer additional time in which to conduct its due
diligence and to complete its negotiations with the DTSC. The contingency period
has been extended into the second quarter of 2000. If the Buyer is satisfied
with the results of its due diligence and all other contingencies are resolved,
such as the negotiation of the final terms of certain exhibits to the Purchase
Agreement, the transaction is currently scheduled to close during the second
quarter of 2000. Given the due diligence to be undertaken by the Buyer and the
contingencies involved, there can be no assurance that the transaction will be
ultimately consummated or, if consummated, that it will close under the current
terms set forth in the Purchase Agreement. For more complete and detailed
information see Exhibits 10.37 through 10.37.6 to this 10-K Report.

  Other Sales of Mill Site Property.  In addition to entering into an agreement
in 1999 to sell the bulk of the Company's Mill Site Property, with the exception
of the 5 acre Tar Pits Parcel, the Company has sold, or is in negotiation for
the sale of the remaining approximately 37 acres of the Mill Site not being sold
to Ontario Ventures I, LLC.  On November 5, 1999, one of the NAPA Lots of
approximately 7.8 acres was sold for a gross cash sales price of $1,699,000, or
$5.00 per square foot.  On the same day, a sliver of land of approximately .36
of an acre was sold to an adjoining landowner for approximately $68,000 or $4.30
per square foot.  The Company accepted a promissory note for the $68,000
purchase price.  The remaining NAPA Lot of approximately 5.2 acres was sold in
December 1999 for a cash sales price of $1,110,000, or $4.90 per square foot.

  The Company is negotiating the sale of the remaining 37 acres, known as the
Rancho Cucamonga property.  There is no assurance that the negotiations for this
property will ultimately lead to a sale of the property.

  Sewer Services.  The Company operates a sewage treatment facility that serves
property historically owned by the Company or KSC.  The Company currently
provides sanitary sewer services from its sewage treatment plant located on the
northeastern end of the South Mill Site Property to California Steel Industries,
Inc., the Budway facility, the WVMRF, the California Speedway and is anticipated
to serve the balance of the Mill Site Property.  In 1999, total revenue of
$326,000 was derived from the sewer treatment facility with the Company
receiving $95,000 of such revenue from The California Speedway Corporation
pursuant to a Sewer Services Agreement.

  The California Speedway Corporation currently also has the option to purchase
the Company's sewer treatment.

  Upgrades of the sewer treatment facility may be required to accommodate the
development of the Mill Site Property and future regulatory changes.

Mill Site Environmental Matters

  The operation of a steel mill by the Company's predecessor, KSC, resulted in
known contamination of limited portions of the Company's Mill Site Property,
including limited portions of the property previously sold by the Company.  The
Company is subject to a 1988 consent order (the "Consent Order") with the DTSC,
which requires the Company to investigate and remediate hazardous materials on
the Mill Site Property.  Under the Consent Order, as amended, the phased
remediation is scheduled to be completed by July 2005.  The Consent Order, as
amended, provides for a general outline of the known tasks and the timing of
performing such tasks.  Any particular item of investigation and/or remediation
can be modified with the consent of the DTSC.  As discussed above, under the
terms of the proposed sale for virtually all the Company's remaining Mill Site
Property, it is expected that the Consent Order will be terminated and the Buyer
will enter into a new consent order with the DTSC.  Thus, the Buyer will

                                       9
<PAGE>

become responsible for all future investigation and remediation of the Mill Site
Property if the Mill Site Property is sold under its current terms.

  During 1999 and in early 2000, as in prior years, the Company undertook a
number of activities with regard to environmental matters.  These activities
included, but were not limited to:  remediation of affected soils and materials
on approximately 7 acres of the West End Property; conducting tests for a
proposed solidification and capping remediation alternative for the Tar Pits;
investigation and closure of the West Slag Pile Property; completion of the
investigation and closure on the Household Recycling property (which is being
contributed to the WVMRF); and completion of the investigation and remediation
issues associated with the sewer treatment facility.

  In addition, in February 1998, the Company obtained approval for a corrective
action management unit ("CAMU") (now called a consolidated waste cell or "CWC")
from the DTSC. The CWC is in the northeast portion of the East Slag Pile
Property on land that was previously used by a bankrupt former tenant of KSC for
a waste pickling facility and is used for the on-site disposal of affected soils
and materials from the balance of the Mill Site Property. The CWC has been
constructed and remains open to potentially receive affected soils and materials
that may be uncovered during the grading of the Kaiser Commerce Center that is
acceptable for deposit into the CWC. Upon termination of the use of the CWC, the
CWC will be capped and closed in compliance with the DTSC's policies. The CWC is
a less expensive alternative than transporting the affected soils and materials
to an off-site disposal facility.

  While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company intends to implement, a supplemental groundwater
investigation study.  The principal purpose of the study upon its implementation
is to confirm the conclusion of historic tests that the groundwater does not
require any remedial action for hazardous substances.  A draft supplemental
groundwater study was submitted to the DTSC in 1997 for its review and comment.
The Company and the DTSC have been meeting on and exchanging comments on the
supplemental groundwater investigation plan and its implementation.  However,
with the possible sale of virtually all the Mill Site Property, the discussions
between the DTSC and the Company have been limited as the Buyer is engaged in
discussions on the method and scope of the groundwater investigation as a part
of its negotiations with the DTSC for a new consent order.

  As a part of the supplemental study of groundwater, in late 1996, the Company
drilled the first two test wells on the California Speedway ("TCS") property.
Results from these two test wells do indicate that groundwater at the location
of the test wells is not contaminated with hazardous substances and will not
require remediation.  Additional periodic testing of these wells is required.
The Company will also be required to begin testing groundwater monitoring wells
associated with the CWC within the next several months.

  In addition, the Company previously settled certain obligations of groundwater
contamination with the California Regional Water Quality Control Board
concerning a plume (containing total dissolved solids, sulfate and organic
carbon) to which the historic steel operations contributed.  The settlement
required a $1.5 million cash payment by the Company, which was made in February
1994, and the contribution of 1,000 acre feet of water annually for 25 years to
a water quality improvement project.  These water rights are unrelated to those
leased to Cucamonga.  Approximately 20 years ahead of schedule, the Company
contributed the full 25,000 acre feet required under the terms of the settlement
agreement with the California Regional Water Quality Control Board.  This
contribution of water completed all of the Company's obligations under the terms
of the settlement agreement.

  The Company's cost for investigation, remediation, site cleanup, and all other
environmental related activities for 1999 totaled approximately $ 1.8 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of this Form 10-K Report for additional
information.

                                       10
<PAGE>

  While there continue to be a number of smaller Mill Site Property
environmental projects, the major outstanding environmental issues to be
addressed, based on currently known information, are:  (i) the approximately 5
acre parcel containing the tar pits, which is located adjacent to the WVMRF
property; (ii) the East Slag Pile waste management unit (sometimes referred to
as the East Slag Pile landfill); (iii) groundwater related items, including
additional groundwater monitoring; and (iv) the completion of the above
described CWC.

  The Company estimates, based upon current information, that its future
remediation and other environmental costs for the balance of its land and
related matters will be between approximately $16 million and $26.4 million
depending both upon the ultimate extent of the environmental remediation and
clean-up involved and upon which approved remediation alternatives are
eventually selected. This range assumes: (a) a capping alternative can be used
for the East Slag Pile waste management unit on the East Slag Pile Property; (b)
a capping alternative can be used for the tar pits parcel; (c) that the CWC can
accept substantially all the affected soils and materials currently scheduled
for deposit into the CWC and any newly discovered affected soils and materials;
and (d) no significant groundwater remediation is required. To date, the CWC has
been able to accept substantially all the affected soils and materials
originally contemplated to be deposited into the CWC although there is no
assurance that the DTSC will allow future deposits of affected soils and
materials into the CWC. As of December 31, 1999, the total short-term and long-
term environmental remediation liability reflected on the Company's balance
sheet was approximately $26.4 million, the high end of the current probable
range of future remediation and other environmental costs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II, Item 7 of the Form 10-K Report.

  Although additional environmental investigations will be conducted on the
Company's property and management believes it is currently in a position to
estimate with some reasonable certainty future investigation and remediation
costs, there can be no assurance that the actual amount of environmental
remediation expenditures to be incurred will not substantially exceed those
currently anticipated or that additional areas of contamination may not be
identified.  Accordingly, future facts and circumstances could cause these
estimates to change significantly.  Further, the Company has provided certain
financial assurances to the DTSC in connection with anticipated remediation
activities, the primary one being the current dedication of approximately $4.8
million of Kaiser's Union Bank Credit facility.  See Part II, "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

  If the Kaiser Commerce Center and East Slag Pile Property are sold as
discussed above, the Buyer is assuming, with limited exceptions, all known and
unknown environmental obligations associated with the purchased property as well
as certain liabilities associated with property previously sold by the Company.

  The Company is also involved, from time-to-time, in legal proceedings
concerning environmental matters.  See "Part I, Item 3.  Legal Proceedings."

Eagle Mountain Townsite

  The Eagle Mountain Townsite, which is owned debt free by the Company and now
covers approximately 1,100 acres, consists of more than 300 houses (of which
approximately 100 have been renovated for current occupancy), a water supply and
sewage treatment system, an office building, machine shops, school facilities
and other structures.  The land exchange with the BLM that was completed in
October 1999, expanded the Eagle Mountain townsite from approximately 460 acres
to approximately 1,100 acres (see page 18 "Federal Land Exchange and Land
Exchange Litigation" in this Form 10-K Report

                                       11
<PAGE>

  When the Eagle Mountain iron ore mine was operational, the Eagle Mountain
Townsite provided housing for mine employees and their families.  Except for
many buildings and relating piping having asbestos containing materials, there
is no known material environmental remediation required at Eagle Mountain.

  The Company's wholly-owned subsidiary, Kaiser Eagle Mountain, Inc., owns and
operates the Eagle Mountain Townsite.  The Company currently leases a portion of
the Eagle Mountain Townsite to a private company, which operates a minimum
security prison for the State of California.  The lease for the private prison
currently goes through June 30, 2001.  In order to redevelop the Eagle Mountain
Townsite, the Company filed a Specific Plan with the County of Riverside.  The
Townsite Specific Plan was included in the processing of the Landfill Project's
land use and environmental documentation and approvals. Implementation of the
Townsite Specific Plan was in abeyance until resolution of the Landfill Project
EIR appeal.

Other Redevelopment Opportunities

  Other Property Ownership and Development.  The Company owns a number of real
estate parcels and mineral deposits in the California desert, including the
Morris Lode Properties, an active iron ore mine leased to a third party (the
"Silver Lake Mine"), and improved and unimproved property at Lake Tamarisk, an
unincorporated community located approximately eight miles from the Eagle
Mountain site.  The Company has decided to seek appropriate offers for the sale
of these miscellaneous assets.

Municipal Solid Waste Management

The West Valley MRF

  West Valley MRF, LLC.  California law currently requires all municipalities to
recycle or divert 50% of their solid waste streams from landfills.  In addition,
counties are required to demonstrate to the State of California that they have
at least 15 years of available landfill capacity.  In order to meet these
requirements, municipalities can arrange for transportation of solid waste to an
independent or municipally-owned materials recovery facility, commonly referred
to as a "MRF", which will separate recyclable materials for either storage or
sale to a variety of users.  The residue waste from the recycling process is
disposed of at landfills.  In response to this potential market opportunity, in
1997 the Company and Burrtec Waste Industries, Inc. ("Burrtec"), a local
municipal and commercial solid waste hauler, through wholly owned subsidiaries,
formed West Valley MRF, LLC.

  West Valley MRF, LLC was formed to construct and operate the WVMRF, a material
recovery and transfer facility.  Effective June 19, 1997, a wholly-owned
subsidiary of the Company, Kaiser Recycling Corporation ("KRC") and West Valley
Recycling & Transfer, Inc. ("WVRT"), Burrtec's wholly owned subsidiary, entered
into a Members Operating Agreement ("MOA") which is substantially the equivalent
of a joint venture agreement but for a limited liability company.  Other
ancillary and related agreements to the MOA were also entered into as of June
19, 1997.  Pursuant to the terms of the MOA, KRC contributed approximately 23
acres of the mill site on which Phase 1 of the WVMRF was constructed and WVRT
contributed all of the goodwill of Burrtec's recycling business that was
operated out of Riverside County entitling West Valley MRF, LLC to all revenues
generated from such business after the closing date.  Under the terms of the
MOA, KRC and the Company remain responsible for any pre-existing environmental
conditions and WVRT is responsible for environmental issues that may arise
related to the future deposit or release, if any, of hazardous substances.  The
MOA also addresses a number of other terms and conditions.  The Company and
Burrtec have each given their separate Performance Guaranty Agreement pursuant
to which they respectively guaranty the prompt performance of their respective
subsidiary's obligations under the MOA and in the case of Burrtec, also under
the Operations and Maintenance Agreement which deals with the daily operation of
the WVMRF by WVRT.

                                       12
<PAGE>

  Financing, Construction and Operation of the WVMRF.  Phase 1 of the WVMRF,
which includes a 62,000 square foot building, sorting equipment, and related
facilities for waste transfer and recycling services, was constructed and
initially equipped, at a total cost of approximately $10.3 million, in the last
half of 1997.  The WVMRF is currently operating at its capacity in that it
receives and processes approximately 2,000 tons per day of non-hazardous
commercial and municipal solid waste.  Waste is primarily received from
jurisdictions for which Burrtec has hauling contracts, from the City of Ontario,
and from a large public waste hauler.

  Most of the financing for Phase I was obtained through the issuance and sale
of $9,500,000 in California Pollution Control Financing Authority (the
"Authority") Variable Rate Demand Solid Waste Disposal Revenue Bonds Series
1997A (the "Bonds").  This was a tax-exempt financing transaction secured by a
pledge and lien on the loan payments made by West Valley MRF, LLC and funds that
may be drawn on an irrevocable direct pay letter of credit issued by Union Bank
of California, N.A. ("Union Bank").  The Bonds are backed by a letter of credit
issued by Union Bank.  Pursuant to a Guaranty Agreement with Union Bank, the
Company and KRC are liable for fifty percent (50%) of the principal and interest
on the Bonds in the event of a default by West Valley MRF, LLC.  Burrtec and its
affiliates in effect are also liable under a separate Guaranty Agreement with
Union Bank for the other fifty percent (50%) of the principal and interest on
the Bonds in the event of a default by Borrower.

  The interest rate for the Bonds varies weekly and averaged, for 1999, less
than 3.25%.  The Bonds have a stated maturity date of June 1, 2012, although the
West Valley MRF, LLC is required, pursuant to an agreement with Union Bank, to
annually redeem a portion of the Bonds on a stated schedule.

  West Valley MRF, LLC and Union Bank have also executed a Reimbursement
Agreement, which among other things, sets the terms and conditions whereby the
West Valley MRF, LLC is:  (i) required to repay Union Bank in the event of a
draw under the letter of credit; (ii) grants the Union Bank certain security
interests in the property of West Valley MRF, LLC; (iii) establishes the
redemption schedule for the Bonds; and (iv) sets forth certain financial and
other covenants West Valley MRF, LLC must comply with during the term of the
Bonds.  The Company and KRC have also provided to Union Bank an Environmental
Guaranty Agreement pursuant to which they are jointly and severally liable for
any liability that may be imposed on Union Bank for pre-existing environmental
conditions on the Borrower's property acquired from KRC that the Borrower fails
to timely address.  See also "Item 7.  Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."

  Since the WVMRF is currently at its Phase 1 capacity of 2,000 tons per day,
the WVMRF is expanding to its permitted capacity of approximately 3,500 tons per
day at an estimated cost of approximately $9.5 million.  This expansion, which
is anticipated to be completed in the fall of 2000, will increase the processing
facility by an additional 80,000 square feet and will provide for additional
materials recovery sorting capacity.  Phase II of the WVMRF will be financed
from cash on hand and from a construction loan from Union Bank.  WVMRF is
seeking again to secure approval of tax exempt bonds issued by the Authority for
permanent financing.  There is no guarantee that such financing will be made
available for the Phase II expansion project.

  Competition.  Although other entities have proposed to develop MRF's that
would serve the same broad geographic area as that of the WVMRF, the Company
believes that none of them has yet completed the permitting process. However, a
MRF is proposed in the City of Pomona (approximately 10 miles from the WVMRF),
which is nearing the completion of its permitting process. If the Pomona MRF is
built, it would be a competitor in a portion of the WVMRF's market. In addition,
Burrtec owns and operates a MRF in Agua Mansa, California located approximately
15 miles from the WVMRF that could compete in very limited areas for waste that
might otherwise go to the WVMRF. To date, the MRF in Agua Mansa has had little
impact on the WVMRF's market for customers.

                                       13
<PAGE>

Eagle Mountain Landfill Project

  Background.  Many of Southern California's current landfills are located in
urban areas and are old, unlined, lack current environmental safeguards and are
often considered nuisances by their neighbors.  Furthermore, it is becoming
increasingly expensive and difficult to permit and open new landfills or to
expand existing landfills in urban areas due to political opposition and
stringent government regulations.  The Company believes that Southern California
will begin to face a shortage of safe, permitted landfill capacity within the
next 5 to 10 years.

  The Eagle Mountain Site.  The Company's 9,144 acre Eagle Mountain site,
located in the remote California desert approximately 200 miles east of Los
Angeles, consists of three large open pit mines, the Eagle Mountain Townsite and
a 52-mile private rail line that accesses the site.  The Company has leased
approximately 4,654 acres of the idled mine site and the rail line to MRC for
development of a rail-haul solid-waste landfill (the "Landfill Project").  As
discussed in more detail below, effective as of January 1, 1995, the Company,
through a wholly-owned subsidiary, Eagle Mountain Reclamation, Inc. ("EMR"),
became a 70% shareholder in MRC and, through subsequent investments in MRC, is
currently an approximately 75% shareholder in MRC.

  In anticipation of Southern California's ultimate need for new environmentally
safe landfill capacity, MRC in 1988 began the planning and permitting for a
20,000 ton per day rail-haul, non-hazardous solid waste landfill at Kaiser's
Eagle Mountain Site.  As discussed in more detail below, the permitting process
was effectively completed in December 1999, when the Landfill Project received
its last major permit.  The Company believes that the Eagle Mountain site has
many unique attributes which make it particularly well-suited for a rail-haul,
solid waste landfill including, but not limited to, its remote location, arid
climate, available and suitable materials for the proposed liner system and
daily cover, and rail access.

  Current plans for operation of the landfill anticipate that non-hazardous
household solid waste will initially be delivered to MRF's and transfer
facilities throughout Southern California by municipalities and independent
waste haulers.  Recyclable and hazardous materials will be separated at these
facilities, and the remaining non-hazardous solid waste will be transported,
primarily by rail, in closed and locked containers to the Eagle Mountain
landfill.  MRC currently anticipates that the landfill's initial operations,
depending upon the level of disposal fees, could commence with a minimum of
approximately 4,000 tons of solid waste per day.

  Founding, Ownership and Restructuring of MRC.  MRC was formed in 1982 by waste
industry professionals to address the anticipated solid waste disposal problem
in Southern California.  In order to utilize Kaiser's Eagle Mountain Site, the
Company, through its subsidiary Kaiser Eagle Mountain, Inc., entered into a
lease with MRC in 1988 for the development of the Landfill Project (the "MRC
Lease").  In 1990, a subsidiary of Browning Ferris Industries ("BFI"), purchased
a 50% interest in MRC.  BFI provided a majority of MRC's funding subsequent to
its initial investment, which resulted in BFI becoming the majority owner of
MRC.

  As of August 1, 1994, the ownership of MRC was restructured as part of BFI's
withdrawal from MRC.  As part of the restructuring, BFI returned to MRC all of
its common and preferred stock in MRC and paid off all of MRC's outstanding bank
indebtedness leaving MRC substantially debt free.  In addition, BFI provided MRC
with funds in excess of $5,000,000 to be used to fund ongoing development
activities.

  MRC was further restructured effective January 1, 1995, when the Company
through Eagle Mountain Reclamation ("EMR"), a wholly-owned subsidiary separate
from the subsidiary that owns the land at Eagle Mountain, acquired common stock
in MRC representing a 70% ownership interest.  This transaction was effective as
of January 1, 1995.  In exchange for the ownership interest, the MRC Lease

                                       14
<PAGE>

was amended to eliminate MRC's obligation to pay minimum rent. MRC forgave all
current contingent non-recourse obligations the Company would have had to repay
MRC out of future royalties.

  Operation and Financing of MRC.  With the acquisition of the equity interest
in MRC in 1995, the Company, through MRC, has taken a more active role in making
rail-haul landfills a reality, permitting the Landfill Project and in assisting
MRC, as appropriate, in raising the funds necessary to operate conduct its
business.  The completion of the Landfill Project is dependent upon, among other
things, MRC's continuing ability to raise additional equity capital.

  Although neither the Company nor any subsidiary of the Company has any
obligation to invest funds in MRC, the Company has continued, to date, to make
investments in MRC.  Through a series of private placements with existing MRC
shareholders, from July 1995 through the end of 2000, a total of $20.9 million
will have been raised by MRC, with Kaiser contributing approximately $15.8
million of that amount.  It is anticipated that the Company may make additional
investments in MRC and may pursue other opportunities that the Company believes
are necessary or appropriate to make rail-haul landfills a reality.

  In order to bring the Landfill Project to full realization MRC continues to
pursue other alternatives and financing from prospective investors as well as
other means of raising funds or commitments such as the sale of capacity rights,
air space or disposal agreements.

  MRC Lease.  In connection with the reorganization of MRC, the MRC Lease was
amended effective July 29, 1994, and again amended effective January 1, 1995,
with the Company's acquisition of a 70% interest in MRC.  Under the terms of the
MRC Lease, as amended to date, MRC is responsible for substantially all project
costs and activities, including landfill design, permitting, construction and
operation.  MRC has also agreed to indemnify the Company against claims arising
from MRC's activities, including any environmental damage that may be caused to
the leased property by MRC's operations.  The MRC Lease also provides, among
other things that:  (i) the Company must give MRC notice of any proposed sale of
its interest in the Eagle Mountain property, and MRC has a right of first
refusal to purchase such interest under certain circumstances; (ii) the Company
and MRC may not participate in another project that employs a railroad in
connection with the storage or disposal of solid waste in counties surrounding
the landfill; and (iii) MRC has certain rights to terminate the MRC Lease
including:  (a) upon the Company's default under the terms of the MRC Lease; (b)
upon 180 days notice at any time during the six month period immediately
following the receipt of all the necessary permits for the Landfill Project; and
(c) at any time upon two year's notice.

  The MRC Lease was again amended as of January 1, 1996.  The amendment reduced
the amount of land that MRC leases from the Company by approximately 50%.  MRC
continues to lease from the Company all the real property necessary for the
Project.

  The Company maintains and may exercise all rights it has under the MRC Lease,
including the right to re-acquire the land leased to MRC through its subsidiary,
Kaiser Eagle Mountain, Inc., for the Landfill Project.  In the event the Company
re-acquires the Landfill Project, depending upon the circumstances, such as upon
MRC's default due to lack of funds, the non-BFI shareholders, at the time of the
July 1994 amendment to the MRC Lease, shall have the right to continue in the
project in some manner.

  Lease Economics.  Until January 1, 1995, MRC paid to the Company a minimum
monthly rent.  However, in conjunction with the Company's acquisition of its
equity interest in MRC, the MRC Lease was amended effective January 1, 1995, to
eliminate the minimum monthly rent.  The elimination of the minimum monthly rent
did not change the future royalty payments due the Company upon the commencement
of landfill operations.

                                       15
<PAGE>

  Once the landfill is operational, under the current terms of the MRC Lease,
the Company will receive, as landlord of the Eagle Mountain Site, the greater of
(i) a royalty of $2.00 per ton of waste received; or (ii) a royalty payment
calculated as a designated percentage of the landfill tipping fees charged by
MRC.  The future royalty payment paid to the Company by MRC is based on MRC's
gross collections, which are basically equivalent to the tipping fees to be
charged by MRC at the landfill.  In calculating gross collections, MRC may
deduct certain items, including any federal or state fees, the host fees paid to
Riverside County and other charges imposed or required to be collected at the
landfill.  Certain other revenues are also excluded from the definition of gross
collections, including any MRC revenue from salvage, recycling or reclamation
operations or from the disposal of waste from certain areas near the Landfill
Project.  In addition to the royalty payment, the Company will receive an
additional $0.15 royalty for every ton of waste transported to the landfill on
the Company's 52-mile rail line.

  The following table illustrates the royalty payment formula set forth in the
MRC Lease.

<TABLE>
<CAPTION>
  Monthly              Average                % Fee                     Net                   # Days
  Royalty      =        Daily       X      Payable to       X         Tipping        X          in
  Payment              Tonnage               Kaiser                 Fee Per Ton              Operation

             Average
         Daily Tonnage/1/                           Tipping Fee Percentage Payable to Kaiser
  -------------------------------     -------------------------------------------------------------------
  <S>                                 <C>
      0      -  3,500                   10.0% on all tonnage during applicable month
      3,501  -  4,999                   10.0% on first 3,500 tons; 15.0% on balance during
                                         applicable month
      5,000  -  8,999                   15.0% on all tonnage during applicable month
      9,000  - 20,000                   18.5% on all tonnage during applicable month
</TABLE>

  -------------------------------
  /1/  Determined over the number of operating days in a calendar month.


  The Company's revenues under the MRC Lease will be directly affected by the
amount of tonnage accepted at the Landfill Project and the applicable tipping
fees charged for such tonnage.  The amount of tonnage depends upon MRC's ability
to obtain contracts with municipalities and waste haulers for the receipt,
transfer and disposal of solid waste.  MRC has not, to date, obtained any
contract for the transfer or disposal of solid waste, although MRC is
undertaking limited marketing efforts to seek such contracts.  However, there
are no assurances that MRC will be able to secure contracts for sufficient waste
tonnage to make the Landfill Project successful.

  Disposal costs consist principally of tipping fees and transportation costs
associated with the hauling of waste to the landfill.  Tipping fees currently
vary widely among landfills, partly as a result of real and perceived landfill
capacity shortages in areas, pending closure deadlines and partly as a result of
increased costs of construction, operation and/or closure.  Tipping fees do not
include transportation costs, which may vary significantly depending upon such
factors as distance to the landfill and method of handling the waste.  It is
unknown at this time if disposal costs in Southern California will sufficiently
increase as to make the Eagle Mountain landfill attractive to those controlling
the disposal of waste.  See the discussion on disposal fees below.

  Government Regulation/Permitting.  The design, operation and closure of solid
waste landfills are subject to stringent federal, state and local environmental
regulations.  These regulations, among other things, require upgraded or new
composite landfill liners, leachate collection and treatment, groundwater and
methane gas monitoring, stricter siting and location criteria, closure
requirements and financial assurances (such as a surety bond) from the owner or
operator.  The Eagle Mountain landfill is designed to meet or exceed these and
all other applicable requirements.

                                       16
<PAGE>

  In order to construct and operate the Landfill Project, MRC is required to
obtain and maintain numerous government permits and approvals relating to such
matters as land use compatibility, groundwater protection, air quality
emissions, habitat protection, and rodent, pest and litter controls.  The
process for obtaining these permits and approvals is often difficult, expensive
and time-consuming, particularly because the siting of landfills is a highly
political issue and often draws opposition from environmental groups and local
residents.

  By way of background, before any significant regulatory permit may be granted
relating to the construction and operation of the Landfill Project, an EIR/EIS
must be certified and approved by the appropriate regulatory agencies.  In
October 1992, the Riverside County Board of Supervisors approved the EIR for the
Landfill Project and MRC's local land use applications.  Legal challenges to the
certification of the EIR were mounted in late 1992 by a number of individuals, a
conservation group and Eagle Crest Energy Company ("ECEC"), formerly known as
Eagle Mountain Energy Company, which is a potential competitor for the use of a
portion of the Landfill Project site.

  In July 1994, the San Diego County Superior Court issued its decisions on the
challenges to the EIR for the Landfill Project.  The Court announced that it had
eight (8) areas of concern in which the EIR was deficient, thus requiring
corrective action.  As a result of the Court's determinations, the Court set
aside and declared void the Riverside County Board of Supervisors' EIR
certification and all Riverside County approvals rendered in connection with the
EIR certification.  The Court ordered activities related to the development of
the landfill suspended and directed the preparation of a new final environmental
impact report in compliance with applicable law and the Court's conclusions.
MRC and the Company disagreed with many of the Court's conclusions and initially
took steps to appeal the decisions, but later withdrew their appeal to focus
their efforts on re-permitting the Landfill Project.

  Approval by Riverside County of the Landfill Project.  In March 1995, MRC
initiated the necessary re-permitting process by filing its land use
applications with Riverside County and has worked with the County and BLM in the
preparation of a new EIR/EIS.  The draft EIR/EIS was made available to the
public in July 1996, with the comment period on the draft EIR/EIS closing in
September 1996.  The BLM held public hearings on the draft EIR/EIS and received
extensive public comment.  In addition, by the close of the public comment
period in September 1996, numerous written comments were received.  The new
final EIR/EIS was released to the public in January 1997, and received final
approval from the Riverside Board of Supervisors, by a vote of 4-1, on September
9, 1997.

  In addition, the Development Agreement for the Landfill Project and related
land use matters were also approved by the Board of Supervisors.

  The Landfill Project is approved to receive up to 20,000 tons per day (6 days
a week) of non-hazardous municipal solid waste.  However, MRC is limited during
the first ten years of operations to 10,000 tons per day of non-County waste
plus the waste generated from within the County.  After ten years, MRC may
request an increase in daily tonnage up to the maximum of 20,000 tons, but such
increase must be reviewed by and receive the approval of an independent
scientific panel as discussed in more detail below.

  EIR Litigation and Appeal.  After the September 1997 approval of the new
environmental impact report for the Landfill Project, (the "Project EIR"), the
litigation with respect to the Project EIR resumed.  In February 1998, Judge
Judith McConnell of the same San Diego County Superior Court issued its final
ruling with respect to the litigation before her on the new Project EIR.  Judge
McConnell, in her final ruling, found that the new Project EIR remained
inadequate in evaluating the Landfill Project's impacts in two general areas:
(i) the threatened desert tortoise; and (ii) impacts to Joshua Tree National
Park.  MRC, the Company, and Riverside County appealed the Superior Court's
decision.  Project opponents did not appeal any matter.

                                       17
<PAGE>

  On May 7, 1999, the Court of Appeal announced its decision to completely
reverse the San Diego Superior Court's prior adverse decision.  The Court of
Appeal's decision in effect certified the Project EIR and reinstated Riverside
County's approval of the Landfill Project.  The Court of Appeal concluded that
there was substantial evidence to support the decision of the Riverside County
Board of Supervisors to approve the Landfill Project in September 1997, and that
the San Diego Superior Court had improperly substituted its judgment in
concluding that the Project EIR was defective.  In June 1999, opponents to the
Landfill Project requested that the California Supreme Court review and overturn
the Court of Appeal's decision.  In July 1999, the California Supreme Court
declined to review the Court of Appeal's decision.

  In connection with the Landfill Project's EIR litigation, project opponents
also filed a motion with the San Diego Superior Court seeking the award of
approximately $450,000 in attorneys' fees against MRC, the Company and Riverside
County.  Total fees and costs ultimately awarded to landfill opponents was
approximately $300,000.  The award of attorneys' fees has been appealed.  A
decision on the attorneys' fees appeal is anticipated by the end of 2000.

  Federal Land Exchange and Land Exchange Litigation.  On October 13, 1999, the
Company's wholly owned subsidiary, Kaiser Eagle Mountain, Inc., completed a land
exchange with the BLM.  Completion of the land exchange was a necessary step for
completion of the permitting of the Landfill Project.

  By way of background, since the commencement of permitting of the Landfill
Project, the Company has been seeking to transfer to the BLM approximately 2,800
acres of Kaiser-owned property along its railroad right-of-way, which was
identified as prime desert tortoise habitat, in exchange for fee ownership of
approximately 3,500 acres of land within the Landfill Project area.  Subsequent
to the approval of the new joint EIR/EIS, the BLM originally issued a record of
decision approving the land exchange, but such decision was ultimately withdrawn
while the BLM together with Riverside County completed a new joint EIR/EIS as
discussed above.  In September 1997, the BLM issued a record of decision
approving the proposed land exchange as well as the grant of new rights-of-way
to replace existing rights-of-way.  A number of protests to the land exchange
were received, which protests were denied by the BLM in December 1998.  As
anticipated in January 1999, the same two opponents in the EIR litigation
discussed above filed an appeal with the Interior Board of Land Appeals ("IBLA")
challenging the BLM's decision to proceed with the land exchange.  On September
30, 1999, the IBLA issued its decision upholding the decision of the BLM to
engage in the proposed land exchange with the Company.  This positive decision
paved the way for completion of the land exchange on October 13, 1999.
Specifically, as a result of the land exchange the Company received fee
ownership of various non-fee mining interests currently held by the Company near
the large open pits and the termination of a contingent reversionary interest
associated with the Eagle Mountain Townsite.  The new rights-of-way had been
granted to the Company earlier since they were not stayed by the earlier appeal
of the land exchange.

  With the land exchange completed, the Eagle Mountain site consists of
approximately 9,144 acres with 5,635 acres held in fee (which includes the Eagle
Mountain Townsite) and approximately 3,509 acres held as various mining claims.

  Subsequent to the completion of the land exchange, two lawsuits were filed
challenging the land exchange and requesting its reversal.  To date, no
immediate injunctive relief has been sought. These two lawsuits generally
involve the same parties that were the plaintiffs in the unsuccessful state CEQA
litigation and the unsuccessful appeals before the IBLA. It is anticipated that
these two lawsuits filed in the Federal District Court located in Riverside,
California will be consolidated. For additional information on this federal land
exchange litigation see "Part 1, Item 3. Legal Proceedings."

  Permitting.  With the positive appellate decision on the new Project EIR land,
MRC resumed seeking the final technical permits for the landfill Project.  On
September 15, 1999, the California Regional Water Quality Control Board- Lower
Colorado Basin Region, unanimously approved the waste discharge

                                       18
<PAGE>

requirements permit for the Landfill Project. The grant of this permit was
appealed to the California Water Resources Board by one of the opponents to the
Landfill Project. A stay on the issuance of the permit was also being sought.
This appeal and the stay request were denied in December 1999.

  On December 15, 1999, the California Integrated Waste Management Board voted
unanimously to approve and concur in the issuance of the solid waste facilities
permit. With the receipt of this facilities permit, the Landfill Project had
received all 20 of the major permits and approvals required for siting,
constructing, and operating the Landfill Project. MRC is now in a position to
commence the detailed final engineering design of the Landfill Project and to
increase its marketing efforts for the Landfill Project.

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

  In addition, the financial payments to, or for the benefit of Riverside County
and others, are detailed in the Development Agreement and in the Purchase and
Sale Agreement, which is a part of the Development Agreement.  The Purchase and
Sale Agreement requires a per ton payment on non-County waste determined from a
base rate which is the greater of $2.70 per ton or ten percent (10%) of the
landfill tip fee up to 12,000 tons of non-County waste.  The 10% number
increases to 12 1/2% for all non-County waste once non-County waste exceeds
12,000 tons per day.  The per ton payment to the County also increases as volume
increases.  The per ton payments on non-County Waste to Riverside County are
summarized as follows:

      ======================================================================
         Average Tons Per Day of
             Non-County Waste           Payment to Riverside County
      ======================================================================
            0   -   7,000          Greater of 10% (12.5% once volume exceeds
                                   12,000 tpd) or $2.70 ("Base")

        7,000   -  10,000                     Base plus $.80

        10,000  -  12,000                     Base + $1.30

        12,000  -  16,000                     Base + $2.30

        16,000  -  20,000                     Base + $3.30
      ======================================================================

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

  The initial term of the Development Agreement is fifty years.  However, the
term can be extended to November 30, 2088.  In order to obtain an increase in
the initial 50-year term of the Development Agreement and/or an increase in the
initial 10,000 tons per day limit on out-of-County waste, an independent
scientific panel will be convened to review such a request.  The scientific
panel will be made

                                       19
<PAGE>

up of five independent scientists and engineers selected by the University of
California Riverside (the "University") with the approval of the Company and
MRC. If the University and the Company/MRC are unable to agree on the panel
members, two members are to be selected by the University, two by the
Company/MRC and the fifth member is to be selected by the other four members.
Alternative procedures are in place in the event the University does not
participate in the selection of the panel members for any reason. The panel will
conduct its review within eight months of any request for capacity expansion.
The panel, in effect, is to limit its review to confirming that MRC has
substantially complied with all development approvals, the environmental
mitigation measures and all regulatory permits and that the potential
environmental impacts of the landfill are the same as identified in the EIR.
Various appeal procedures are available depending upon the initial and final
findings of the panel.

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

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

  Competition.  The solid waste disposal industry is highly competitive with a
few large, integrated waste management firms and a significant number of
smaller, independent operators.  The number of competitors have diminished, but
their size has greatly increased as a result of mergers and acquisitions of
waste hauler and management companies.

  Assuming the Landfill Project is ultimately constructed, the success of the
Landfill Project depends largely upon MRC's ability to secure solid waste
disposal contracts from municipalities and waste haulers in this highly
competitive environment.  The ability of MRC to secure such waste disposal
contracts is predicated upon a number of factors including, but not limited to,
MRC's ability to (i) charge disposal fees comparable to those of its
competitors; (ii) provide financial and environmental safeguards against
potential liability; (iii) provide sufficient long-term capacity; and (iv)
commence operations prior to the expansion of existing landfills or the opening
of other large capacity, rail-haul landfills.  Currently, there are over 15
major existing municipal solid waste landfills in Southern California serving
the same geographic area as that proposed by the Landfill Project (primarily Los
Angeles, Orange, Riverside and San Bernardino Counties).  While a number of
Southern California landfills have closed and are scheduled to close in the next
several years as they reach capacity, several of them, including El Sobrante
Landfill in Riverside County, Mid-Valley Sanitary Landfill in San Bernardino
County, and Sunshine Canyon in Los Angeles County have received all or a portion
of needed approvals for major expansions in the past couple of years.  Other
landfills such as Puente Hills in Los Angeles County are in the process of
applying to expand the permitted capacities of their existing facilities.

  The Company is also currently aware of at least two other enterprises seeking
to develop rail-haul, solid waste disposal facilities which would be located in
Southern California and would compete directly with the Landfill Project.  These
proposed cut-and-fill landfills include:  (i) a landfill to be developed in a
desert site in San Bernardino County by Rail Cycle of Los Angeles, a joint
venture between Waste Management, Inc. (now owned by USA Waste) and the Santa Fe
Railway Company, Inc.; and (ii) Mesquite Regional Landfill owned by Goldfields
Mining Corporation and its subsidiary Arid Operations, Inc., to be developed in
Imperial County.  However, for the reasons discussed below, only the Mesquite
Regional Landfill project is currently believed by management of the Company to
be a viable California rail-hail competitor.

                                       20
<PAGE>

  The Rail Cycle project is contingent upon the approval of a business tax by
the voters, which has failed once.  In addition, the Rail Cycle project and
certain associated personnel also have been the subject of a criminal grand jury
investigation which has altered the prospects of this particular project as
currently being a viable competitor.

  The Mesquite Regional Landfill project has reported that it has received all
of its major permits and should soon be able to commence construction and is a
viable rail-haul competitor.  In addition, the Mesquite Landfill Project is
targeting many of the same customers that MRC also believes are potential
customers for the Landfill Project

  Competition also extends to rail-haul landfills in the states of Arizona, Utah
and Washington.  In Utah, East Carbon Development Corp. operates a rail-haul
landfill capable of receiving waste from Southern California and it is actively
marketing its services to waste generators in Southern California.  In addition,
BFI, the former majority shareholder of MRC, operates a landfill in La Paz
County, Arizona, with planned rail access, which will compete for Southern
California waste.

  To a lesser extent, the Landfill Project will also compete with alternatives
to landfills, such as recycling and "alternative technology" projects.

  Disposal Fees.  While the Company believes that it will take several years for
MRC's projected disposal fees to be aligned at competitive levels with other
urban landfills, it also currently believes that the advantages afforded by the
Eagle Mountain site should enable it, in the long-term, to compete effectively
with both existing and other proposed landfills.  Several years ago there was a
general reduction in disposal or "tipping fees" in several areas of Southern
California.  The reduction in tipping fees was accelerated with the bankruptcy
of Orange County, California.  As a means of generating revenue, Orange County
reduced its tipping fee to out-of-county trash from $38.50 to as low as $18.00
per ton depending upon the length of the time commitment.  Trash generated
within Orange County still pays approximately $38.50 per ton tipping fee.
Riverside County also adopted a two-tier tipping fee structure.  The tipping fee
would generally be $30.00 for direct haul to a landfill and $25.00 if the waste
is processed through a transfer station or materials recycling facility.  Facing
the loss of waste from its system, San Bernardino County dropped its tipping fee
from $35.50 per ton to $28.50 per ton for fifteen (15) year commitments.

  In addition, the Los Angeles Sanitation District with its Puente Hills
landfill is a low cost provider of landfill space by charging a tipping fee of
approximately $19.55 per ton.

  Marketing.  As a result of the litigation successes, completion of the federal
land exchange, and the Landfill Project's receipt of its last major permit, MRC
is accelerating its efforts to make rail-haul landfills a reality and to market
the Landfill Project.  MRC has had meetings with several governmental agencies
about the possibility of participating in the Landfill Project through the
purchase of air or capacity rights or other similar arrangements.  These
entities include, but are not limited to, the Los Angeles Sanitation District.
In fourth quarter of 1999, The Los Angeles Sanitation District publicly stated
that it has an interest in pursuing a possible transaction, including a possible
purchase transaction, with respect to the Landfill Project and/or with respect
to the competing Mesquite Regional Landfill project.  However, even though there
are periodic discussions with the Los Angeles Sanitation District and others,
there is no assurance that any discussions will ultimately lead to an agreement
with regard to the Landfill Project or as to the timing or terms of any
agreement if one is ultimately negotiated.

  Risk Factors.  As discussed throughout this 10-K Report, there are numerous
risks associated with rail-haul landfills, MRC and the Landfill Project which
must be overcome to achieve the financing, permitting, construction, opening,
and operation of the Landfill Project.  There have been and will continue to be
opponents to the Landfill Project.  Given the legal challenges that have
occurred to date

                                       21
<PAGE>

and the controversies that generally surround landfill projects, legal
challenges in addition to the current legal challenges are likely. The success
of the Landfill Project also depends upon the development of the anticipated
shortage in landfill capacity in Southern California over the next several
years.

  In addition, MRC and the Landfill Project will encounter intense competition
in the pricing and rendering of services from various sources in all phases of
its solid waste disposal operations.  In the solid waste transportation and
disposal phase, competition is encountered for the most part from regional
disposal facilities, as well as from municipalities (which may be able to
provide such services at lower direct charges to customers than can MRC).  There
is no assurance that rail-haul landfills will be a viable alternative to other
means of disposing municipal solid waste.  Furthermore, as previously discussed,
the Mesquite Regional Landfill is a viable competitor which could materially
adversely impact the chances of success of the Landfill Project.  There is no
assurance that the Company is currently able or will be able to compete
effectively with current and anticipated landfill space, pricing competition or
that other forms of competition will not result.

  There is also a risk that sufficient and suitable financing may not be made
available to MRC in order to allow it to continue to pursue the Landfill
Project.

  Finally, the waste management industry has become subject to extensive,
expensive and evolving regulation by federal, state and local authorities which
becomes increasing stringent.  The Company and MRC will make a continuing effort
to anticipate regulatory, political and legal developments that might impact the
Landfill Project, but they may not be able to do so.

  Given all these risks, there is no assurance that MRC and the Landfill Project
will be viable or will be constructed or that once constructed, it will be
commercially viable and profitable.

Employees

  As of March 10, 2000, Kaiser had 14 full-time and 9 part-time employees.  In
addition, as of March 10, 1999, MRC, the Company's subsidiary, had 5 full-time
employees.

Item 2.  PROPERTIES

Office Facilities

  The Company's principal offices are located at 3633 East Inland Empire
Boulevard, Suite 850, Ontario, California 91764.  The Company leases
approximately 5,500 square feet in Ontario, California, pursuant to a lease
agreement expiring in August 2002.  The Company also maintains offices on the
Mill Site Property and at the Eagle Mountain site.  MRC leases an office in Palm
Desert, California for a term that was extended in 1999 to August 2000, and
maintains an office at the Eagle Mountain site.

Eagle Mountain, California

  The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle Mountain
Townsite are located in Riverside County, approximately ten miles northwest of
Desert Center, California.  Desert Center is located on Interstate 10 between
Indio and Blythe.  The heavy duty maintenance shops and electrical power
distribution system have been kept substantially intact since the 1982 shutdown.
The Company also owns several buildings, a water distribution system, a sewage
treatment facility, and related infrastructure.  The Eagle Mountain Townsite
includes more than 300 single family homes, approximately 100 of which have been
renovated and are currently in use.  Most of the houses in use are leased to
Management and Training Corporation ("MTC") for use in conjunction with a
permitted 500-bed community-custody facility operated under a contract with the
California Department of Corrections.

                                       22
<PAGE>

Utilization of the remaining houses and related facilities will require
additional renovation activities plus approval by Riverside County of a Townsite
Specific Plan.

  In and around the Eagle Mountain area the Company has various possessory
mining claims of approximately 3,509 acres and holds approximately 5,635 acres
in fee simple (which includes the Eagle Mountain Townsite). See "Part I, Item 1.
Business - Eagle Mountain Landfill Project".

  The Company owns six deep water wells, of which two are currently being used,
and two booster pump stations that serve the Eagle Mountain mine and townsite.

Railroad

  To transport ore from the Eagle Mountain mine to the mill site (see below),
KSC constructed a 52-mile heavy duty rail line connecting the mine to the main
Southern Pacific rail line at Ferrum, California.  The Company owns in fee
approximately 10% of the 52-mile railroad right-of-way.  The major remaining
portion of the railroad right-of-way consists of various private leases and an
operating right-of-way from the BLM.  The railroad is included in the lease to
MRC for the Landfill Project.  See "Part I, Item 1.  Business."

Fontana, California

  With the acquisition of approximately 534 acres by The California Speedway
Corporation for the construction of TCS and related facilities, the contribution
and reservation of property for the West Valley MRF and the sale of the NAPA
Lots, the Company now owns approximately 634 acres (gross) near Fontana,
California.  All of the Company's property is debt free.  All the Company's
remaining property (except the Rancho Cucamonga parcel of approximately 37 acres
and the Tar Pits parcel of approximately 5 acres) is in escrow to be sold
pursuant to a Purchase and Sale Agreement and Joint Escrow Instructions with
Ontario Ventures I, LLC.  (See "Part 1, Item 1.  Business - Property
Development").  Located on the Mill Site Property is extensive infrastructure,
including, water and sewage treatment facilities, and one vacant major
industrial building.  All other major buildings previously on the Mill Site
Property have been demolished as part of the redevelopment of the Mill Site
Property.  The Company has historically had a number of short-term lease
arrangements with unaffiliated entities for portions of this Mill Site Property.
There are no tenants on the Mill Site Property except for one tenant whose right
to occupancy expires within four months and the company located on the West Slag
Pile Property that processes slag and pays the Company a royalty.

  There is one active deep water well on the property, with capacity
significantly in excess of the current water needs for the property.  This well
is currently used only for irrigation purposes by TCS.  See "Part I, Item 1.
Business."  The Company originally had adjudicated water rights to extract 2,930
acre-feet of water per year for use on the property.  However, the Company as
part of the transaction with PMI and the Company's agreement to sell a portion
of these water rights to CSI, an adjoining landowner, in connection with the
settlement of certain disputes and litigations with such company, the Company
owns the following water rights associated with the Mill Site Property:  (i) 525
annual acre feet; (ii) 475 annual acre feet as tenants in common with The
California Speedway Corporation which has the right of first use; and (iii) 630
acre feet as tenants in common with CSI, with CSI having the first right of use,
with payment to the Company, through June 30, 2004 and the Company having the
first right of use thereafter without any payment to CSI.  Pursuant to a
settlement agreement reached with the California Regional Water Quality Control
Board in 1993, the Company is obligated to contribute 1,000 acre feet of water
per year for 25 years for the purposes of a regional de-salter project.  In
1995, the Company contributed 18,000 acre feet of water in storage, which
satisfied the Company's obligation under the settlement agreement for the first
18 years.  In 1998, the Company contributed an additional 7,000 acre feet of
water in storage.  Thus, the Company's obligations are now fully satisfied.

                                       23
<PAGE>

  Further, the DTSC has determined that limited portions of the property require
environmental remediation.  The Company is working with the DTSC to remediate
the impacted areas.  As discussed in "Part I, Item 1.  Business - Property
Redevelopment - Mill Site Environmental Matters," the Company undertook a number
of remediation activities in 1999.  See "Part 1, Item 1.  Business."

Lake Tamarisk, California

  Lake Tamarisk is an unincorporated community located two miles northwest of
Desert Center, California and approximately 8 miles from the Eagle Mountain
mine.  This community has 150 improved lots situated around two recreational
lakes and a nine-hole golf course.  With 70 homes and a 150-space mobile home
park, the community has an average year-round population in excess of 150.  Lake
Tamarisk Development Corporation ("LTDC"), a wholly owned subsidiary of the
Company, owns 77 improved lots including one residential structure.  LTDC also
owns a 240 acre parcel of unimproved land across the highway from the main
entrance to Lake Tamarisk.

Other Real Estate Properties

  The Company owns numerous small land parcels and iron ore deposits in the high
desert area of Southern California and in Huerfano and Archuleta Counties in
Colorado, including the Silver Lake Mine west of Baker, California and
approximately 190 acres near Afton Canyon, California.

Fontana Union Water Company

  The Company, through a wholly owned subsidiary, currently owns 8,057.03 shares
or approximately 53.71% of the outstanding stock of Fontana Union, a California
mutual water company.  These shares entitle the Company (or its lessee) to
receive, at cost, its proportionate share of Fontana Union's water.  Fontana
Union owns surface and groundwater rights in the Fontana, California area with
annual average production of approximately 34,000 acre-feet (plus approximately
3,500-4,000 acre feet relating to the annual Chino Basin agricultural pool
transfer). All of the Company's shares of Fontana Union stock are currently
leased to Cucamonga, except for approximately 424.4 of the Fontana Union shares
purchased in March 2000. The lease of such shares to Cucamonga is currently
pledged as collateral for the Company's $30,000,000 revolving-to-term credit
facility. See "Part I, Item 1. Business - Water Resources." and "Item 3. Legal
Proceedings."

Item 3.  LEGAL PROCEEDINGS

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

Litigation

  Eagle Mountain Landfill Project Litigation.  This litigation involved legal
challenges to the EIR for the Landfill Project certified by the Riverside County
Board of Supervisors in October 1992.  These cases were heard in the San Diego
County Superior Court in 1994.  The Court's decisions required MRC to prepare a
new EIR, which was completed and certified in September 1997.  The original
litigation against the EIR was resumed before Judge Judith McConnell of the San
Diego County Superior Court.  In February 1998, the San Diego County Superior
Court announced its final decision and concluded that the new EIR was still
deficient in two principal respects.  The Court's two remaining areas of concern
involve

                                       24
<PAGE>

the threatened desert tortoise and Joshua Tree National Park. The Superior
Court's decision was appealed.

  On May 7, 1999, a unanimous three-judge panel of the California Court of
Appeal, 4th Appellate District, Division 1, completely overturned the prior
adverse decision of the San Diego Superior Court on the Landfill Project's
environmental impact report.  The California Supreme Court on July 21, 1999,
denied the opponents request that the Court of Appeal's decision be reviewed and
overturned.  Accordingly, landfill opponents have effectively exhausted their
challenges under the California Environmental Quality Act.

  Related to the EIR litigation was the award of approximately $300,000 of
attorneys' fees to project opponents prior to the announcement of the Court of
Appeal decision.  This matter has also been appealed, and all briefs have been
filed.  A decision in the matter is anticipated by year end.

  Separately, opponents to the Landfill Project appealed to the California Water
Board the issuance of the waste discharge requirements permit for the Landfill
Project unanimously approved in September 1999 by the California Regional Water
Quality Control Board, Lower Colorado River Basin. A stay of the issuance of the
permit was also sought. The appeal and the stay request were denied in December
1999.

  In October 1999, the Company's wholly owned subsidiary, Kaiser Eagle Mountain,
Inc., completed a land exchange with the U. S. Bureau of Land Management
("BLM").  This completed land exchange has been challenged in two separate
federal lawsuits.

  By way of background, for some time the Company had planned to transfer to the
BLM approximately 2,800 acres of Kaiser-owned property along its railroad right-
of-way, which was identified as prime desert tortoise habitat, in exchange for
fee ownership of approximately 3,500 acres of land within the Landfill Project
area.  In September 1997, the BLM approved the proposed land exchange.  A number
of protests to the land exchange were received, which protests were denied by
the BLM in December 1998.  As anticipated, in January 1999, the same two
opponents in the EIR litigation discussed above filed an appeal with the
Interior Board of Land Appeals ("IBLA") challenging the BLM's decision to
proceed with the land exchange.  On September 30, 1999, the IBLA issued its
decision upholding the decision of the BLM to engage in the proposed land
exchange with the Company.  This positive decision paved the way for completion
of the land exchange.

  In December 1999, the first case was filed challenging the land exchange -
Donna Charpied; Laurence Charpied; et al. v. United States Department of the
Interior; Bureau of Land Management; et al, (United States District Court for
the Central District of California, Riverside Division, Case No. EDCV 99-0454
RT(MCx)).  In January 2000, a second case was filed - National Parks and
Conservation Association v. Bureau of Land Management, et al. (United States
District Court for the Central District of California, Riverside Division, Case
No. EDCV-00-0041 VAX (JWJx)).  It is anticipated that both cases will be
consolidated into one hearing.  The same general opponents that lost the appeal
before the IBLA have brought these latest legal challenges.  In sum, plaintiffs
argue that the land exchange should be reversed because the BLM failed to comply
with the National Environmental Policy Act and the Federal Land Management
Policy Act.  The Company believes the challenges are without merit.

  For additional information on the Landfill Project litigation, see
"Introduction - Business Update - Waste Management - Eagle Mountain" of this 10-
K Report.

  Cucamonga Litigation.  In 1996, the Company initiated legal action against
Cucamonga.  The dispute involved amounts owed to the Company under the terms of
its lease of Fontana Union Water stock to Cucamonga.  The dispute arose out of a
change made by the Metropolitan Water District in its water rates and rate
structure effective July 1, 1995.  After a trial on the matter, the San
Bernardino County Superior

                                       25
<PAGE>

Court ruled that the lease rate had been discontinued effective July 1, 1995.
Thus, the parties are required to negotiate in good faith a substitute lease
rate as provided under the terms of the lease with Cucamonga. Since the parties
have been unable to negotiate a new substitute rate, the Cucamonga Lease
requires that the matter will be resolved in a reference proceeding. A reference
proceeding is in effect a private trial. During the week of February 28, 2000,
all the testimony in the reference proceeding was presented. The judge requested
further briefing and a final oral argument which is currently scheduled for May
15, 2000. The decision in the matter is anticipated within approximately 60 days
following the closing agrument. For more detailed information, please see "Part
I, Item 1. Water Resources - Lease to Cucamonga County Water District."

  Mushegain Litigation Settlement.  During the third quarter of 1999, a
settlement was reached with regard to the litigation brought by a landowner that
had rented out his property to a tenant that performed work during the
construction of the California Speedway.  The landowner alleged that debris,
including possible hazardous substances, were deposited in and on the
landowner's property by the former tenant and that the source of some of the
debris was from the demolition activities on the California Speedway property.
The tenant acknowledged responsibility for the conditions created on the
property but effectively became bankrupt.  The landowner then sought
contribution from The California Speedway Corporation and the Company.  Given
the time and expense involved in the case, the parties ultimately reached a
settlement.  The Company's final allocation of the settlement has yet to be
determined, but it will not exceed $500,000.  Mary Mushegain v. The California
Speedway, et. al (United States District Court, Central District of California,
Case No. CV 98-6786).

  City of Richmond Litigation.  During the third quarter of 1999, the City of
Richmond, located in Northern California, joined the Company in federal
litigation it commenced against several entities, alleging that the City was
entitled to recover past and future environmental clean-up costs associated with
property owned by the City of Richmond.  Apparently, the property currently
owned by Richmond includes portions of World War II era shipyard construction
and demolition facilities.  It is alleged that the Company's predecessor
demolished ships for approximately a two-year period in the 1940's and thus,
contributed to the contamination of the property.  Litigation was commenced
against the City of Richmond in the U.S. Bankruptcy Court for the District of
Colorado to hold the City of Richmond and certain officials in contempt for
violating the bankruptcy order.  Subsequent to the commencement of the contempt
proceeding, a settlement was reached whereby the City of Richmond was allowed a
late unsecured general creditor claim in the KSC bankruptcy estate.  The amount
in stock and cash to be paid by the bankruptcy estate is currently estimated to
be less than $150,000.  City of Richmond, et al v. Levin Enterprises, Inc., et
al. (United States District Court, Northern District of California, Case No. C-
97-3213 CRB).

  7-7 PRP Site.  The U.S. Environmental Protection Agency has alleged that the
Company, along with a number of other entities, is responsible for clean-up and
oversight costs associated with the remediation of one of more sites located in
Ohio formally owned or operated by 7-7, Inc.  7-7, Inc. was a remediation
contractor.  7-7, Inc. was retained by the Company in connection with certain
remediation projects.  Since, the Company believes it could be found to be a de
minimis potentially responsible party, the Company along with a number of other
entities entered into a consent order with the EPA.  The Company's liability, if
any, is currently estimated to be less than $150,000.

  Asbestos Suits.  The Company along with KSC are currently named in
approximately forty (40) active asbestos lawsuits.  The Company and KSC have
been previously named in other asbestos suits but for various reasons those
suits are not currently being pursued.  Most of the plaintiffs alleged that they
worked in shipyards in the Oakland/San Francisco, California area in the 1940's
and that KSC was in some manner associated with one or more shipyards or has
successor liability from another "Kaiser" entity.  Most of these lawsuits are
third party premises claims claiming injury resulting from exposure to asbestos
and involve multiple defendants.  The Company anticipates that it will be named
as a defendant in additional asbestos lawsuits.  Virtually of the complaints are
non-specific.  As such it is not practical at

                                       26
<PAGE>

this time to determine the true nature and extent of the claims against the
Company and KSC. To date, several, but not all, of the plaintiffs have agreed
that they will not personally pursue the Company, but they have been granted the
right to pursue the Company's insurance coverage, to the extent there is
coverage. The Company currently believes that it does have insurance coverage
for at least a portion of the claims and has tendered these suits for defense.
The Company also currently believes that it has various defenses to these
claims, including the discharge granted to it in connection with KSC's
bankruptcy reorganization. The KSC bankruptcy estate, through KSC Recovery has
been incurring defense costs, which should in large part be reimbursed by
insurance. However, there currently is a dispute as to the amount of insurance
coverage. The Company and KSC Recovery are engaged in settlement negotiations
with insurance carriers with regard to the coverage dispute. Asbestos litigation
is an evolving area of the law and the factual discovery with respect to many of
these lawsuits has not been completed.

  City of Ontario Litigation.  There has been no material change in this matter
since the 1998 10-K Report.  By way of background, on February 27, 1996, the
City of Ontario, California served on the Company a complaint filed in San
Bernardino County Superior Court (City of Ontario v. Kaiser Ventures Inc., et
al.; Case No. RCV 17334).  In sum, the complaint alleges that a plume or plumes
containing organic carbon, dissolved solids and mercury originating from the
Company's Mill Site Property due to activities of KSC and/or a former tenant of
the Mill Site Property have impacted one of the City of Ontario's water wells.
Ontario seeks reimbursement for remedial costs, replacement of the allegedly
impacted well and replacement or improvement or refurbishment of related
facilities.

  The Company challenged Ontario's ability to bring this litigation given the
KSC bankruptcy and the discharge granted to the Company.  In April 1996, Ontario
brought a declaratory judgment action in the U.S. District Court for the
District of Colorado in Bankruptcy (the "U.S. Bankruptcy Court") against the
Company, (City of Ontario v. Kaiser Ventures Inc., Adversary Proceeding No. 96-
1215 MSK).  In the U.S. Bankruptcy Court action, Ontario in effect sought a
determination that the matters and damages alleged in its California lawsuit
were not discharged as a part of the KSC bankruptcy proceedings.

  The Company and the City reached a settlement concerning the matter before the
U.S. Bankruptcy Court which was approved by the U.S. Bankruptcy Court in
October.  Under the terms of the settlement, the Company has agreed to waive its
bankruptcy-related defenses to the City's prosecution of claims for groundwater
contamination caused by mercury or other priority pollutants.  In return, the
City agreed to dismiss the California litigation as to all claims related to
total dissolved solids, total dissolved carbons and sulfates, and to be bound by
the 1993 Settlement Agreement between Kaiser and the California Regional Water
Quality Control Board.  The City has informed the Company that its well tests do
not currently indicate the presence of mercury.  However, the City continues to
assert that the Company is responsible for the impact of total dissolved solids
at the well.  The City has not yet filed an amended complaint.  The Company and
the City of Ontario are continuing to engage in informal discovery and
discussions.  The Company currently believes it has numerous defenses in the
litigation.

  Willow Creek Shareholder Litigation.  On December 20, 1999, the Company was
served with a complaint challenging and seeking damages in connection with a
transaction completed on November 22, 1999, pursuant to which the Company
purchased a substantial portion of its common stock from The New Kaiser
Voluntary Employees' Beneficiary Association ("VEBA") and the Pension Benefit
Guaranty Corporation ("PBGC").  The litigation was initiated by a shareholder of
the Company, but the matter was not a class action lawsuit.  On March 9, 2000,
this federal lawsuit was voluntarily dismissed, without prejudice, by the
plaintiffs.  However, it is the Company's understanding that the plaintiffs
intend to file a new lawsuit in California State Court in the near future.
Willow Creek Capital Partners, L.P. a Delaware limited partnership; and Willow
Creek Offshore, v. Kaiser Ventures Inc. et al. (United States District Court,
Northern District of California, Case No. C99 5188 SBA).

                                       27
<PAGE>

Bankruptcy Claims

  The Company's predecessor, KSC, was in reorganization under Chapter 11 of the
United States Bankruptcy Code from February 1987 until November 1988.  Pursuant
to the KSC Plan of Reorganization (the "KSC Plan"), the Company established a
subsidiary, KSC Recovery, which was engaged in the process of pursuing certain
legal actions on behalf of the former creditors of KSC and handling the
remaining administrative duties of the KSC bankruptcy estate, including claims
resolution.  All litigation and bankruptcy administration costs are borne by KSC
Recovery, which maintains a cash reserve from previous litigation and other
recoveries to fund anticipated ongoing litigation and administration costs.  All
major remaining claims in the bankruptcy estate were settled in 1995, with
completion of one major settlement occurring in 1996.  Resolution of these
claims allowed for a distribution of cash and stock to most of the unsecured
creditors of the KSC bankruptcy estate in the second quarter of 1996.
Consistent with KSC Recovery's role solely as an agent of the former KSC
creditors, the Company's consolidated statements of operations and cash flows do
not reflect any of KSC Recovery's activities.  Because of the minimum activities
of the KSC bankruptcy estate, the Bankruptcy Court terminated its supervision
over the estate in October 1996.  However, the bankruptcy estate was reopened in
1999 to address certain litigation matters.

  From time-to-time, various other environmental and similar types of claims,
such as the environmental and asbestos litigation mentioned above, that relate
to KSC pre-bankruptcy activities are asserted against KSC Recovery and the
Company.  In connection with the KSC Plan, the Company, as the reorganized
successor to KSC, was discharged from all liabilities that may have arisen prior
to confirmation of the KSC Plan, except as otherwise provided by the KSC Plan
and by law.  Although the Company believes that in general all pre-petition
claims were discharged under the KSC Plan, in the event any of these claims or
other similar claims are ultimately determined to survive the KSC bankruptcy, it
could have a material adverse effect on the Company.


Item 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

  Not applicable.

                                       28
<PAGE>

                                    PART II

Item 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  The Company's Common Stock commenced trading on the NASDAQ Stock Marketsm  in
the fourth quarter of 1990 under the symbol "KSRI."  In June 1993, Kaiser
changed its name to Kaiser Resources Inc. and symbol to "KRSC."  Most recently,
the Company changed its name, in June 1995, to Kaiser Ventures Inc., but its
trading symbol remained the same.  The following table sets forth the range of
the high and low reported bid price of the Company's Common Stock for the
periods indicated, as reported on the NASDAQ Stock Marketsm.

                                                             Low         High
                                                             ---         ----

          1999:
          Fourth quarter..............................      $11.88      $16.75
          Third quarter...............................      $12.13      $14.13
          Second quarter..............................      $ 8.13      $14.00
          First quarter...............................      $ 8.00      $10.00

          1998:
          Fourth quarter..............................      $ 8.25      $11.38
          Third quarter...............................      $ 8.00      $12.13
          Second quarter..............................      $ 9.88      $14.25
          First quarter...............................      $ 9.50      $12.75

  As of March 10, 2000, there were approximately 2,200 holders of record of the
Company's Common Stock.

  As of March 10, 2000, the Company held 136,919 shares that are deemed
outstanding but reserved for issuance to the former general unsecured creditors
of KSC pursuant to the KSC Plan.

  The Company has neither declared nor paid any cash dividends on its Common
Stock since emerging from the KSC bankruptcy in November 1988.  Any future
decisions by the Company to pay cash on other dividends will depend upon its
growth, profitability, financial condition and other factors the Board of
Directors may deem relevant.  No assurance can be given that the Company will
pay dividends at any time in the future.

Purchase of Shares

  On November 22, 1999, the Company purchased 2,730,950 and 1,693,551 shares of
its common stock from The New Kaiser Voluntary Employees' Beneficiary
Association ("VEBA") and The Pension Benefit Guaranty Corporation ("PBGC"),
respectively.  The shares were repurchased in accordance with a separate Stock
Purchase Agreement entered into between each seller and the Company.  The
Company paid $13.00 per share in cash.  In addition, VEBA and PBGC have the
opportunity to receive a contingent real estate payment calculated in accordance
with an agreed upon formula if there is a bulk sale of the Company's real estate
generally before December 31, 2000 ("Contingent Payment Agreement").
Furthermore, warrants for 460,000 and 285,260 shares of the Company's stock were
issued to VEBA and PBGC, respectively ("Stock Purchase Warrants").  The warrants
have a term of five years and an exercise price of $17.00 per share.  VEBA and
the PBGC each have demand registration rights for the shares issued upon
exercise of the warrants as long as the registration can be accomplished through
the use of a Form S-3 or a comparable form, subject to the terms and conditions
of a Registration Rights Agreement.

                                       29
<PAGE>

     If all currently contemplated real estate transactions are closed under
their current terms as of the date of this Report, VEBA and PBGC would receive
an additional cash payment of approximately $1.10 per share. The Company has
reserved the right to distribute to the Company's shareholders the same amount
of cash that would be received by VEBA and PBGC pursuant to the Contingent
Payment Agreement without adjustment of the warrant price.

     The Company used cash on hand to fund the purchase of the stock, including
the cash resulting from the merger between PMI and ISC, and subsequent sale of
ISC common stock.

     The foregoing summary description of each Stock Purchase Agreement,
Contingent Payment Agreement, Stock Purchase Warrants, Registration Rights
Agreement, and the exhibits thereto (collectively the "Transaction Documents"),
and the transactions contemplated therein, does not purport to be complete and
is qualified in its entirety by reference to each of the Transaction Documents
which are exhibits to this 10-K Report.

Annual Meeting

     A combined 1999/2000 meeting of the Company's shareholders is currently
scheduled for May 10, 2000, beginning at 9:00 a.m. (California time) in Ontario,
California.

                          [Intentionally Left Blank]

                                       30
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
Selected Statement of Income Data
for the years ended December 31:                           1999          1998          1997          1996           1995
                                                           ----          ----          ----          ----           ----
<S>                                                    <C>           <C>           <C>           <C>           <C>
Total revenues.......................................  $ 51,626,000  $  9,873,000   $10,006,000   $ 15,331,000   $ 11,053,000

Costs and expenses...................................    15,898,000     7,315,000     7,815,000      7,066,000      7,938,000
                                                       ------------  ------------   -----------   ------------   ------------

Income from operations...............................    35,728,000     2,558,000     2,191,000      8,265,000      3,115,000

Net interest expense.................................       498,000     1,083,000       672,000        819,000        665,000
                                                       ------------  ------------   -----------   ------------   ------------

Income before income tax provision...................    35,230,000     1,475,000     1,519,000      7,446,000      2,450,000

Taxes currently payable..............................     8,364,000        12,000        43,000         92,000             --
Deferred tax expense (benefit).......................    (3,211,000)      126,000        74,000        840,000        721,000
Deferred tax expense credited to equity..............     6,048,000       105,000       554,000      3,945,000        335,000
                                                       ------------  ------------   -----------   ------------   ------------

Net income...........................................  $ 24,029,000  $  1,232,000   $   848,000   $  2,569,000   $  1,394,000
                                                       ============  ============   ===========   ============   ============

Earnings per share
 Net Income
   Basic.............................................  $       2.35  $        .12   $       .08   $        .24   $        .13
   Diluted...........................................  $       2.31  $        .11   $       .08   $        .24   $        .13

Basic Weighted average
number of shares outstanding.........................    10,226,000    10,664,000    10,536,000     10,486,000     10,456,000

Diluted Weighted average
number of shares outstanding.........................    10,386,000    10,840,000    10,740,000     10,730,000     10,654,000
</TABLE>

<TABLE>
<CAPTION>
Selected Balance Sheet Data
as of December 31:                                         1999          1998           1997          1996           1995
                                                           ----          ----           ----          ----           ----
<S>                                                    <C>           <C>            <C>           <C>            <C>
Cash, cash equivalents and
   short-term investments............................  $ 14,686,000  $  3,409,000   $  4,330,000  $  8,482,000   $ 10,937,000
Working capital......................................     5,170,000    (2,487,000)    (4,685,000)   (1,240,000)     2,821,000
Total assets.........................................   103,445,000   142,942,000    139,265,000   134,067,000    126,803,000
Long-term debt.......................................           ---    13,750,000      8,982,000     8,102,000      5,342,000
Long-term environmental
   remediation reserves..............................    23,868,000    24,465,000     24,673,000    26,466,000     32,176,000
Stockholders' equity.................................    60,890,000    87,838,000     86,204,000    81,448,000     68,697,000
Shares outstanding...................................     6,317,000    10,685,000     10,591,000    10,488,000     10,471,000
Book value per share.................................  $       9.64  $       8.22   $       8.14  $       7.77   $       6.56
</TABLE>

(1)  The deferred tax expense credited to equity represents taxes that are
     recorded by the Company for financial reporting purposes, but are not
     payable due to the Company's utilization of Net Operating Loss ("NOL")
     benefits from losses arising prior to and through the KSC bankruptcy.
     Although the amount of this benefit is not included in net income,
     stockholders' equity is increased in an amount equal to the NOL tax benefit
     reported. NOL carryforwards at December 31, 1999, were approximately $35
     million for federal income tax purposes.

(2)  The earnings per share amounts prior to 1997 have been restated as required
     to comply with Statement of Financial Accounting Standards No. 128,
     Earnings Per Share. For further discussion of earnings per share and the
     impact of Statement No. 128, see the notes to the consolidated financial
     statements beginning on page 62.

                                       31
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

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

                         Section 1:  Operating Results

     Kaiser Ventures Inc. ("Kaiser" or the "Company") is an asset development
company pursuing project opportunities and investments in water resources,
property redevelopment and solid waste management. The Company's long-term
emphasis is on the further development of its principal assets: (i) an
approximately 53.71% ownership interest in Fontana Union Water Company ("Fontana
Union"), a mutual water company; (ii) approximately a 75% ownership interest in
Mine Reclamation Corporation ("MRC"), the developer of the Eagle Mountain
Landfill Project (the "Landfill Project"); (iii) a 50% ownership interest in the
West Valley MRF ("WVMRF"), a transfer station and recycling facility located on
land acquired from the Company; (iv) approximately 634 acres (gross) of the
former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property") which is currently undergoing redevelopment; and (v) the 9,144 acre
idle iron ore mine in the California desert (the "Eagle Mountain Site"), which
includes the associated 1,100 acre town of Eagle Mountain ("Eagle Mountain
Townsite") and the land leased to MRC for the Landfill Project. During 1999
Penske Motorsports Inc. ("PMI") merged with International Speedway Corporation
("ISC"). As a result of the merger, the Company received cash and common stock
in ISC. The Company sold all of its ISC common stock during 1999. The Company is
also pursuing other related longer-term growth opportunities on the balance of
its Mill Site Property, including the redevelopment of industrial and commercial
parcels of land near TCS and the WVMRF.

Summary of Significant Developments in 1999

     During 1999, a number of events occurred which affected the Company.
Therefore, readers are encouraged to read this Report it in its entirety in
order to adequately understand the impact of these events on the Company.
However, management of the Company would like to particularly highlight four
areas: (1) the success of the Landfill Project including, (i) the positive
outcome of the appeal of the San Diego Superior Court's prior adverse ruling
relative to the Landfill Project's environmental impact report ("EIR"), (ii)
completion of the federal land exchange that is necessary for the Landfill
Project, and (iii) securing the last major permit necessary to site and operate
the Landfill Project; (2) the approval of the entitlements for the 406 acre
Kaiser Commerce Center, a substantial portion of the Mill Site Property, and the
Company subsequently entering into a contract for the sale of virtually all the
Mill Site Property; (3) the merger of PMI into ISC and the Company's subsequent
sale of the ISC stock received in the merger; and (4) the Company's repurchase
of approximately 41% of its issued and outstanding stock.

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. Property redevelopment revenues primarily reflect
revenues from long-term redevelopment activities at the Mill Site Property,
including water and waste water treatment revenues; housing rental income,
aggregate and 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"). Income from
equity method investments reflect Kaiser's share of income related to those
equity investments (i.e., PMI) and, starting in 1997, a limited liability
company (i.e., West Valley MRF) which the Company accounts for under the equity
method.

                                       32
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

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, royalty revenues from the
sale of recyclable revert materials and other miscellaneous short-term
activities. Revenues from these activities are declining rapidly as the
development of the remaining Mill Site property proceeds.

Summary of Revenue Sources

     Due to the developmental 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 "Part I, Item 1. Business"
for a discussion of recent material events affecting the Company's revenue
sources.

Results of Operations

Analysis of Results for the Years Ended December 31, 1999 and 1998

     An analysis of the significant components of the Company's resource
revenues for the years ended December 31, 1999 and 1998 follows:

<TABLE>
<CAPTION>
                                                                         1999            1998        % Inc. (Dec)
                                                                         ----            ----        ------------
          <S>                                                         <C>              <C>           <C>
          Ongoing Operations
           Water resource..........................................   $ 5,228,000      $5,201,000           1%
           Property redevelopment..................................     1,480,000       1,487,000          --%
           Gain on merger of PMI into ISC..........................    35,713,000             ---         N/A
           Gain on sale of ISC common stock........................     6,575,000             ---         N/A
           Income (loss) from equity method
             investments
              Penske Motorsports Inc...............................      (329,000)      1,903,000         N/A
              West Valley MRF, LLC.................................       910,000          40,000        2175%
           Mill Site land sales....................................     1,622,000             ---         N/A
                                                                      -----------      ----------   ---------

            Total ongoing operations...............................    51,199,000       8,631,000         493%
                                                                      -----------      ----------   ---------

          Interim Activities.......................................       427,000       1,242,000         (66%)
                                                                      -----------      ----------   ---------

            Total resource revenues................................   $51,626,000      $9,873,000         423%
                                                                      ===========      ==========   =========

          Revenues as a Percentage of Total Resource Revenues:
           Ongoing operations...................................               99%             87%
           Interim activities...................................                1%             13%
                                                                      -----------      ----------

            Total resource revenues.............................              100%            100%
                                                                      ===========      ==========
</TABLE>

     Resource Revenues. Total resource revenues for 1999 were $51,626,000,
compared to $9,873,000 for 1998. Revenues from ongoing operations increased 493%
during the year to $51,199,000 from $8,631,000 in 1998, while revenues from
interim activities declined 66% to $427,000 from $1,242,000 in 1998. Revenues
from ongoing operations as a percentage of total revenues increased to 99% in
1999 from 87% in 1998. This significant increase reflects the unusual non-
recurring on-going revenues recorded during 1999.

                                       33
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

     Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $5,228,000 during 1999 compared to $5,201,000
for 1998. The slight increase in water revenues primarily reflects an increase,
effective January 1, 1999, in the Company's effective interest in Fontana Union
from 57.33% to 57.37%, due to a decline in the number of Fontana Union
shareholders taking water. As previously disclosed, Metropolitan Water District
of Southern California ("MWD"), effective July 1, 1995, implemented changed
rates and a changed rate structure which resulted in the continuing lease
interpretation dispute with Cucamonga regarding the extent of the MWD rate
increases. Although the Company is continuing to bill Cucamonga at what it
believes is the correct MWD rate under the lease with Cucamonga, the Company has
elected to report revenues on the basis of amounts Cucamonga is currently
paying. The total amount of lease payments in dispute as of December 31, 1999 is
approximately $2,575,000. In addition, MWD has stated that it may further refine
its rate structure in the future.

     Property redevelopment revenues were $1,480,000 for 1999 compared to
$1,487,000 for 1998. The slight decrease from 1998 is primarily a result of
lower other revenue sources.

     Income (loss) from equity method investments decreased to $581,000 for 1999
from $1,943,000 for 1998. The decrease of $1,362,000 reflects the discontinuance
of recording equity income from PMI ($2,082,000) effective April 1, 1999 due to
the merger between ISC and PMI that was announced in May 1999, and an increase
in the reported first quarter net loss of PMI ($150,000) being partially offset
by an increase in equity income from the WVMRF ($870,000).

     During the third quarter of 1999, ISC consummated its merger with PMI,
purchasing the 88% of PMI's common stock it did not already own for $50.00 per
share. Kaiser received, under the cash and stock election of 30% and 70%
respectively, $24.4 million in cash and 1,187,407 shares of ISC Class A common
stock. As a result of the merger the Company recognized a gain of $35.7 million.

     Subsequent to the merger of PMI into ISC, the Company commenced an orderly
liquidation of its position in the common stock of ISC. By the middle of
November 1999, the Company had completed the sale of its ISC common stock
resulting in a gain of $6.6 million. The Company's average sales price for a
share of ISC common stock was $53.52 during this orderly sale.

     Interim Activities. Revenues from interim activities for 1999 were $427,000
compared to $1,242,000 for 1998. The 66% decrease in revenues from interim
activities in 1999 is primarily attributable to lower revenues from tenant
rental and services and from sales of metallics and scrap at the Mill Site
Property due to the continuing real estate redevelopment activities ($843,000)
being partially offset by higher tenant service and miscellaneous revenue at
Eagle Mountain ($28,000).

     Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for 1999
increased to $11,112,000 from $3,468,000 in 1998. The principal reason for this
increase was the pending bulk sale of virtually all the Mill Site Property to
Ontario Ventures I, LLC, which required the Company to record a write-down to
net realizable value of $8,350,000 during 1999. Operations and maintenance costs
for 1999 were $863,000 compared to $1,260,000 for 1998. The 32% decrease in 1999
operations and maintenance costs was primarily due to lower salaries at the Mill
Site ($51,000) and lower maintenance and supply costs for buildings and
equipment at both the Mill Site Property and Eagle Mountain ($346,000).
Administrative support expenses for 1999 decreased 14% to $1,899,000 from
$2,208,000 for 1998. This decrease was primarily due to: (a) lower outside legal
and professional costs ($230,000); (b) the reduction of certain reserves for bad
debt ($112,000); and (c) lower employee compensation expenses ($60,000) being
partially offset by restructuring charges relating to planned layoffs at the
Mill Site ($100,000).

                                       34
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

     Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1999 increased 24% to $4,786,000 from $3,847,000 for
1998. The increase was due to higher compensation and related expenses
($424,000) and higher professional and outside consulting expenses ($514,000).
All of the increase in professional and outside consulting expenses was related
to the VEBA/PBGC share repurchase that was completed in November 1999.

     Net Interest Expense. Net interest expense for 1999 was $498,000 compared
to $1,083,000 in 1998. The decrease was due primarily to higher interest income
from higher cash/investment balances from the proceeds of the merger of PMI into
ISC and subsequent sale of ISC common stock ($777,000) slightly offset by higher
interest expense ($192,000) associated with the additional long term debt from
January 1999 thru early December 1999, when all of the outstanding debt was
paid-off.

     Income and Income Tax Provision. The Company recorded income before income
tax provision of $35,230,000 for 1999, a 23-fold increase from the $1,475,000
recorded in 1998. A provision for income taxes of $11,201,000 was recorded in
1999 as compared with $243,000 in 1998. In 1999 approximately 75% of the tax
provision is currently payable as the Company reported income in excess of its
California NOLs. Historically, over 90% of the tax provision was not currently
payable, as was the case in 1998, due primarily to utilization of the Company's
net operating loss carryforwards ("NOLs") for both federal and California
purposes. Consequently, pretax income is an important indicator of the Company's
performance.

     Net Income. For 1999, the Company reported net income of $24,029,000, or
$.2.35 per share, a 19-fold increase from the $1,232,000, or $.12 per share,
reported for 1998.

Analysis of Results for the Years Ended December 31, 1998 and 1997

     An analysis of the significant components of the Company's resource
revenues for the years ended December 31, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                                                 1998                1997            % Inc. (Dec)
                                                                 ----                ----            ------------
<S>                                                            <C>                <C>                <C>
Ongoing Operations
 Water resource.............................................   $5,201,000         $ 5,143,000                 1%
 Property redevelopment.....................................    1,487,000           1,213,000                23%
 Income from equity method investments......................    1,943,000           2,003,000                (3%)
                                                               ----------         -----------           -------

  Total ongoing operations..................................    8,631,000           8,359,000                 3%
                                                               ----------         -----------           -------
Interim Activities
 Lease, service and other...................................    1,242,000           1,647,000               (25%)
                                                               ----------         -----------           -------

  Total interim activities..................................    1,242,000           1,647,000               (25%)
                                                               ----------         -----------           -------

  Total resource revenues...................................   $9,873,000         $10,006,000                (1%)
                                                               ==========         ===========           =======

Revenues as a Percentage of Total Resource Revenues:
 Ongoing operations.........................................           87%                 84%
 Interim activities.........................................           13%                 16%
                                                               ----------         -----------

  Total resource revenues...................................          100%                100%
                                                               ==========         ===========
</TABLE>

     Resource Revenues. Total resource revenues for 1998 were $9,873,000,
compared to $10,006,000 for 1997. Revenues from ongoing operations increased 3%
during the year to $8,631,000 from $8,359,000 in 1997, while revenues from
interim activities declined 25% to $1,242,000 from $1,647,000 in 1997.

                                       35
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

Revenues from ongoing operations as a percentage of total revenues increased to
87% in 1998 from 84% in 1997.

     Ongoing Operations. Water lease revenues under the Company's 102-year take-
or-pay lease with Cucamonga were $5,201,000 during 1998 compared to $5,143,000
for 1997. The slight increase in water revenues primarily reflects: (a) an
increase, as of July 1, 1998, in the lease rate being paid by Cucamonga from
$351.75 to $354.00 per acre foot; and (b) an increase, effective January 1,
1998, in the Company's effective interest in Fontana Union from 55.66% to
57.33%, due to a decline in the number of Fontana Union shareholders taking
water. As previously disclosed, Metropolitan Water District of Southern
California ("MWD"), effective July 1, 1995, implemented changed rates and a
changed rate structure which resulted in the continuing lease interpretation
dispute with Cucamonga regarding the extent of the MWD rate increases. Although
the Company is continuing to bill Cucamonga at what it believes is the correct
MWD rate under the lease with Cucamonga, the Company has elected to report
revenues on the basis of amounts Cucamonga is currently paying. The total amount
of lease payments in dispute as of December 31, 1998 is approximately
$1,895,000. In addition, MWD has stated that it may further refine its rate
structure in the future.

     Property redevelopment revenues were $1,487,000 for 1998 compared to
$1,213,000 for 1997. The 23% increase from 1997 is primarily a result of higher
sewer treatment plant and other revenues.

     Income from equity method investments decreased slightly to $1,943,000 for
1998 compared to $2,003,000 for 1997. The $60,000 decrease is primarily the
result of: (a) the reduction in the management fee which the Company had
received from PMI through March 31, 1997 ($163,000) partially offset by
increases in the Company's share of the reported net income of PMI for the year
($63,000), of which the Company recorded its 11.53% weighted average share, and
equity income from the operation of the WVMRF ($40,000). The Company's equity
interest in PMI increased during the fourth quarter of 1998, from 11.51% to
11.73% as a result of a stock repurchase plan implemented by PMI. As previously
disclosed, the Company is recording its investment in PMI on the equity method
and began recording its share of PMI's net income concurrent with conversion of
the Company's preferred stock into common stock at the end of the first quarter
of 1996.

     Interim Activities. Revenues from interim activities for 1998 were
$1,242,000 compared to $1,647,000 for 1997. The 25% decrease in revenues from
interim activities in 1998 is primarily attributable to: (a) lower revenues from
tenant rental and services and from sales of metallics and scrap at the Mill
Site Property due to the continuing real estate redevelopment activities
($356,000); and (b) lower tenant service and miscellaneous revenue at Eagle
Mountain ($50,000).

     Resource Operating Costs. Resource operating costs are those costs directly
related to the resource revenue sources. Total resource operating costs for 1998
decreased to $3,468,000 from $3,654,000 in 1997. Operations and maintenance
costs for 1998 were $1,260,000 compared to $1,311,000 for 1997. The 4% decrease
in 1998 operations and maintenance costs was primarily due to lower maintenance
and supplies for buildings and equipment at both the Mill Site Property and
Eagle Mountain ($96,000) plus lower security costs at the Mill Site Property
($45,000), partially offset by higher property tax expense ($25,000) and outside
labor and professional expenses at both the Mill Site Property and Eagle
Mountain ($67,000). Administrative support expenses for 1998 decreased 6% to
$2,208,000 from $2,343,000 for 1997. This decrease was primarily due to: (a)
lower insurance expense ($122,000); (b) lower outside legal and professional
costs ($79,000); and (c) lower employee compensation expenses ($38,000) being
partially offset by higher depreciation expense mainly related to the recently
completed sewer plant improvements at the Mill Site Property ($109,000).

     Corporate General and Administrative Expenses. Corporate general and
administrative expenses for 1998 decreased 8% to $3,847,000 from $4,161,000 for
1997. The decrease was due to lower

                                       36
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

compensation and related expenses ($393,000) and lower insurance expense
($40,000) being partially offset by higher professional and outside consulting
expenses ($117,000).

     Net Interest Expense. Net interest expense for 1998 was $1,083,000 compared
to $672,000 in 1997. The increase was due primarily to: (a) higher interest
expense ($122,000) associated with the $4,650,000 in additional long term debt
($9,750,000 in additional borrowings under the Company's Union Bank
revolving-to-term credit facility less the $5,102,000 payoff of the Lusk note
which occurred in June 1998); (b) lower capitalized interest relating to the
development of the Mill Site Property ($180,000); (c) an increase in the
amortization of deferred loan fees ($88,000); and (d) lower interest income from
lower cash/investment balances ($17,000).

     Income and Income Tax Provision. The Company recorded income before income
tax provision of $1,475,000 for 1998, and 3% decrease from the $1,519,000
recorded in 1997. A provision for income taxes of $243,000 was recorded in 1998
as compared with $671,000 in 1997. Over 90% of the tax provisions for 1998 and
1997 are not currently payable due primarily to utilization of the Company's net
operating loss carryforwards ("NOL's"). Consequently, pretax income is an
important indicator of the Company's performance.

     Net Income. For 1998, the Company reported net income of $1,232,000, or
$.12 per share, a 45% increase from the $848,000, or $.08 per share, reported
for 1997.

                        Section 2:  Financial Position

     Cash, Cash Equivalents and Short-Term Investments. The Company defines cash
equivalents as highly liquid debt instruments with original maturities of 90
days or less. Cash and cash equivalents increased $11,277,000 to $14,686,000 at
December 31, 1999 from $3,409,000 at December 31, 1998. Included in cash and
cash equivalents is $3,474,000 and $2,545,000 held solely for the benefit of MRC
at December 31, 1999 and 1998, respectively. The increase in cash and cash
equivalents is due primarily to: (a) proceeds from the sale of ISC common stock
($63,552,000); (b) proceeds of the merger of PMI into ISC ($24,419,000) (c)
borrowings under the Company's Union Bank revolving-to-term credit facility
($3,000,000); (d) the sale of Mill Site Property ($2,662,000); (e) equity
fundings by the MRC minority partners ($997,000); (f) distribution from the West
Valley MRF, LLC ($450,000); and (g) the issuance of common stock relating to the
exercise of stock options ($379,000). These increases were partially offset by:
(a) repurchase of common stock from two major shareholders ($57,519,000); (b)
payoff of the Company's Union Bank revolving-to-term credit facility
($16,750,000); (c) cash used by operations ($4,610,000); (d) capital
expenditures ($3,570,000); and (e) environmental remediation costs ($1,808,000).
It should be noted that the large amount of cash used by operations was
primarily due to a partial payment of $4,900,000 for income taxes during the
year.

     Working Capital. During 1999, current assets increased $11,208,000 to
$17,056,000 while current liabilities increased $3,551,000 to $11,886,000. The
increase in current assets resulted primarily from the $11,277,000 increase in
cash and cash equivalents and a $285,000 increase in current deferred tax assets
being partially offset by a $361,000 decline in accounts receivable. The
increase in current liabilities resulted primarily from an increase in income
taxes payable ($3,501,000) and an increase in accrued liabilities ($1,176,000)
being partially offset by a decrease in anticipated 2000 environmental
remediation expenditures ($1,305,000). Included in current liabilities for 1999
is $651,000 in accounts payable and accrued liabilities relating to MRC. As a
result, working capital increased during 1999 by $7,657,000 to $5,170,000 at
December 31, 1999.

     Real Estate. Real estate decreased $8,865,000 during 1999 due to the write-
down of the Mill Site Property to net realizable value ($8,350,000) and the two
sales of the Napa Lots ($1,040,000) being partially offset by continuing
redevelopment of the Mill Site properties ($525,000).

                                       37
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

     Investments. As a result of the PMI/ISC merger in July 1999, the Company's
investment in PMI was converted into $24.4 million of cash and $57.0 million (or
1,187,407 shares) of ISC Class A common stock valued at $47.98 per share.
Subsequent to the merger, the Company liquidated its investment in ISC common
stock over a period of three months at an average price of $53.52 per share.
There was a $460,000 increase in the Company's investments in WVMRF during 1999.
The increase is due to the Company's recording of its equity share of WVMRF's
income during 1999 of $910,000 being partially offset by the receipt of a
distribution of $450,000.

     Other Assets. The increase in other assets ($3,484,000) is primarily
related to: (a) capitalized landfill permitting and development costs incurred
by MRC ($3,159,000); (b) capital improvements at the Mill Site and Eagle
Mountain ($286,000); and (c) creation of a long term deferred tax asset
($577,000) being partially offset by an increase in accumulated depreciation as
of December 31, 1999 ($430,000) and the amortization of deferred loan fees
($121,000).

     Environmental Remediation. As is discussed extensively in "Part I, Item 1.
Business - Property Redevelopment, Mill Site Environmental", the Company
estimates, based upon current information, that its future remediation and other
environmental costs for the balance of its land and related matters, including
groundwater and other possible third party claims, will be between approximately
$16 million and $26.4 million, depending both upon the ultimate extent of the
environmental remediation and clean-up effort involved and which approved
remediation alternatives are eventually selected.

     As of December 31, 1999, the total short-term and long-term environmental
liabilities including remediation reflected on the Company's balance sheet were
approximately $26.4 million, the high end of the probable range of future
remediation and other environmental costs, which declined from the $28.3 million
as of December 31, 1998. The decrease is a result of the $1.9 million in
remediation and other environmental costs incurred during 1999 on the Mill Site
property.

     Although ongoing environmental investigations are being conducted on the
Mill Site Property and management believes it is currently in a position to
estimate with some reasonable certainty future investigation and remediation
costs, there can be no assurance that the actual amount of environmental
remediation expenditures to be incurred will not substantially exceed those
currently anticipated or that additional areas of contamination may not be
identified. Accordingly, future facts and circumstances could cause these
estimates to change significantly. In addition, under the terms of the proposed
sale of virtually all the Mill Site Property, all environmental liabilities,
with limited exceptions, assumed by the buyer of the property.

     Long-term Debt. As of December 31, 1999, the Company had no long-term debt
as a result of the payoff of $16,750,000 of previous borrowings under the
Company's $30,000,000 revolving-to-term credit facility with Union Bank during
December 1999.

     Other Long-term Liabilities. The decrease in other long-term liabilities is
primarily due to: (a) the reclassification of $1,305,000 of the environmental
remediation reserve from a current to a long term liability which was offset by
$1,902,000 in environmental remediation activities undertaken during 1999; (b) a
decrease in deferred tax liabilities ($2,349,000); and (c) a decrease in accrued
liabilities ($469,000).

     Minority Interest and Other Liabilities. As of December 31, 1999, the
Company has recorded $4,772,000 of minority interest relating to the
approximately 25% ownership interest in MRC the Company does not own.

     Contingent Liabilities. The Company has contingent liabilities that are
described in the notes to the financial statements.

                                       38
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

     Impact of the Year 2000 Issue. The Company successfully achieved compliance
with the Year 2000 requirements and Year 2000 related issues had no material
adverse effect on the Company's results of operations, liquidity or financial
condition. However, no assurance can be given that unforeseen problems may not
occur in the future that may have a material adverse effect on the Company's
results of operations, liquidity or financial condition.

                         Section 3:  Business Outlook

     The statements contained in this Business Outlook are based upon current
operations and expectations. In addition to the forward-looking statements and
information contained elsewhere in this 10-K Report, these statements are
forward-looking and, therefore, actual results may differ materially.

     On-Going Operations. As noted above, the Company's revenues from ongoing
operations are generally derived from the development of the Company's major
long-term projects and investments. The development of a number of these
projects and investments, such as the 102-year take-or-pay lease with Cucamonga,
and the 50% equity ownership of the West Valley MRF, are essentially complete
and the Company is recognizing significant revenues and income from these
investments. The Company anticipates revenues from these projects and
investments to increase moderately over time as certain key economic factors
impacting these projects and investments increase. In addition, the Company
continues to evaluate these completed projects and investments in light of how
to best provide maximum value to its shareholders.

     In regard to the lease with Cucamonga, the most significant economic factor
affecting future water lease revenues is likely to be adjustments in the MWD
rate for untreated and non-interruptible water as available through the Chino
Basin Municipal Water District (now called Inland Empire Utilities Agency (the
"Lease Rate") upon which the lease payments are currently calculated. The MWD
rate established for untreated, non-interruptible water is based on a number of
factors, including MWD's need for funds to finance capital improvements and to
cover large fixed overhead costs. After increasing at an average of over 8% per
year during the past 25 years, MWD is projecting that the MWD rate for
untreated, non-interruptible water, including all of the changed rates and
charges implemented by MWD since July 1, 1995, will likely increase at less than
5.0% per year for the next 2-4 years. This reduction is due to a reduced capital
budget, lower overhead, lower borrowing costs and reduced levels of inflation.
Also affecting the Company's future water lease revenues is the dispute with
Cucamonga regarding the calculation of the Lease Rate. In March 1998, the San
Bernardino Superior Court ruled that the Lease Rate had been discontinued as of
July 1, 1995. Therefore, the terms of the Cucamonga Lease require the parties to
seek to negotiate in good faith a new substitute rate. If the parties are unable
to agree on a substitute rate, the matter is to be resolved by reference, a form
of private trial similar to arbitration. Before and after the trial, there were
sporadic attempts to resolve the litigation and negotiate a new substitute rate.
However, since the parties were not able to reach a resolution of the matter,
the matter will be determined as a result of a reference proceeding as required
under the terms of the Cucamonga Lease. The reference proceeding commenced
during the week of February 28, 2000. After the conclusion of all the testimony
in the proceeding, the court asked for further briefing and scheduled a final
oral argument which is currently scheduled for May 15, 2000. A decision from the
judge is expected within 60 days thereafter.

     With regard to the Company's investment in Fontana Union, the Company
purchased, in March 2000, an additional 424.4 shares of Fontana Union from
Western Water Company for approximately $653,000 or $1,540 per share. The price
per share reflects a substantial minority discount and also reflects the
resolution of a legal dispute between the seller of the shares and the Company.
The purchase of these additional shares, which are not covered by the take-or-
pay lease with Cucamonga, will assist in protecting the Company's effective
interest in Fontana Union, which is utilized in calculating the revenue under
the take-or-pay lease with Cucamonga.

                                       39
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

     In regard to the WVMRF, the most significant factor affecting the Company's
future equity income from the WVMRF is the expansion of the facility's capacity
from 2,000 to 3,500 tons per day. This expansion, which is anticipated to be
completed in the fall of 2000, will increase the processing facility by an
additional 80,000 square feet and will provide for additional materials recovery
sorting capacity. The success of this expansion will depend heavily on the
continuing closures of local landfills and the future construction, if any, of
competing facilities.

     The Company has historically spent a significant amount of capital in the
development of its two other major project and investment opportunities: the re-
permitting of the Eagle Mountain Landfill by MRC, the Company's 75% owned
subsidiary, and the redevelopment of approximately 634 acres (gross) of the
Company's Mill Site Property. As a result of the litigation successes,
completion of the federal land exchange, and the Landfill Project's receipt of
its last major permit, MRC is accelerating its efforts to make rail-haul
landfills a reality and to market the Landfill Project. MRC has had meetings
with several governmental agencies about the possibility of participating in the
Landfill Project through the purchase of air or capacity rights or other similar
arrangements. These entities include, but are not limited to, the Los Angeles
Sanitation District. In fourth quarter of 1999, The Los Angeles Sanitation
District publicly stated that it has an interest in pursuing a possible
transaction, including a possible purchase transaction, with respect to the
Landfill Project and/or with respect to the competing Mesquite Regional Landfill
project. However, even though there are periodic discussions with the Los
Angeles Sanitation District and others, there is no assurance that any
discussions will ultimately lead to an agreement with regard to the Landfill
Project or as to the timing or terms of any agreement if one is ultimately
negotiated.

     In regard to the redevelopment of approximately 634 acres (gross) of the
Mill Site Property, the Company completed the entitlement and permits process
for a substantial portion of the property in April 1999, for a variety of
possible commercial, industrial and recreational uses. In the fourth quarter of
1999, the Company entered into a contract to sell substantially all of its
remaining Mill Site Property. Due to the extensive amount of due diligence and
the number of contingencies involved, it is currently estimated that, if this
transaction is consummated, it will close in the second quarter of 2000. Based
on this potential sale the Company is not currently spending significant capital
on the Mill Site. Should this transaction ultimately fail to be consummated, it
is anticipated that the Company would spend approximately $2.5 million for
required environmental remediation and approximately $500,000 for real estate
entitlement and improvement expenditures over the remainder of 2000. The $2.5
million to be spent in 2000 for required environmental remediation is a
component of the $16-26 million estimate to complete all remaining required
remediation for the Mill Site Property. As previously disclosed, the Company has
recorded a write-down to net realizable value on the Mill Site property in
anticipation of this or a similar transaction closing, thus the Company will not
recognize a significant gain on the sale of the Mill Site Property.

     Although neither the Company nor any subsidiary of the Company has any
obligation to invest funds in MRC, the Company has, to date, continued to make
investments in MRC. Through a series of private placements with existing MRC
shareholders, from July 1995 through December 31, 1999, a total of $18.5 million
has been raised by MRC, with Kaiser contributing approximately $14.0 million of
that amount. The Company's 1999 advances approximated $3.0 million out of a
total funding of $4.0 million. The Company has also approved advances to MRC
totaling $1.8 million for 2000, which together with the minority shareholders
advances are anticipated to fund MRC through December 31, 2000.

     Capital Resources. The Company expects that its current cash balances and
short-term investments together with: (a) cash provided from operating
activities; (b) amounts available under its $30,000,000 revolving-to-term credit
facility (less $4,850,000 reserved for financial assurances required by the DTSC
and relating to environmental remediation on the Mill Site Property) will be
sufficient to satisfy both the Company's near-term operating cash requirements
and to enable the Company to continue to fund the development of its long-term
projects and investments. As was discussed in more detail above, the Company
expects to commit, in 2000, a total of approximately $5.4 million for capital
projects and

                                       40
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

investments. To the extent that additional capital resources are required, such
capital will be raised through bank borrowings, partnerships, joint venture
arrangements, additional equity or the sales or monetization of assets.

     Improved Cash Flow from Use of Net Operating Loss Tax Carryforwards. Due to
the Company's status as successor to KSC and its use of KSC-related NOLs, income
taxes actually paid by the Company are substantially less than the income tax
provision reported in its financial statements. The tax benefit associated with
the utilization of these NOLs is reflected as an increase to stockholders'
equity rather than as an increase to net income. The Company expects that its
use of these NOLs will substantially reduce the cash paid for income taxes until
these NOLs are fully utilized. The total NOLs at December 31, 1999, are
estimated to be approximately $35 million for federal purposes. These federal
NOLs expire in varying amounts over a period from year 2000 to 2013.

     If within a three-year period, 50% or more of the stock of the Company
changes ownership, the future annual use of NOLs may be limited. The annual
limitation would be calculated as the product of: (i) the highest long-term tax-
exempt rate for a designated period prior to the ownership change; and (ii) the
market value of the Company at such time.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

     Not Applicable.

                                       41
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

                                   PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by this item is incorporated by reference from the
Executive Compensation Section of the Company's Proxy Statement for its combined
1999/2000 Annual Meeting of Stockholders (the "2000 Proxy Statement"), a
definitive copy of which will be filed within 120 days of December 31, 1999.

Item 11. EXECUTIVE COMPENSATION

     Information required by this item is incorporated by reference from the
Executive Compensation Section of the 2000 Proxy Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

     Information required by this item is incorporated by reference from the
Security Ownership of Principal Shareholders and Management Section of the 2000
Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required by this item is incorporated by reference from the
2000 Proxy Statement.

                                       42
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES


                                    PART IV


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


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


     (1)  Financial Statements                                           Page
          --------------------                                           ----

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

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

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

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

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

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


     (2)  Financial Statement Schedules
          -----------------------------

          II   Valuation and Qualifying Accounts and Reserves............ 82


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

(b)  Reports on Form 8-K.

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

     (1)  8-K Report dated November 22, 1999, and filed with the Securities and
          Exchange Commission on November 23, 1999, regarding the purchase of
          2,730,950 and 1,693,551 shares of the Company's common stock from the
          New Kaiser Employees' Beneficiary Association and Pension Benefit
          Guaranty Corporation, respectively, and the terms of such transaction.

     (2)  8-K Report dated December 15, 1999, and filed on December 22, 1999,
          regarding the Eagle Mountain Landfill Project securing its final major
          permit, disclosing litigation filed by one of the Company's
          stockholders' over the Company's stock repurchase transition and
          disclosing litigation over the Company's completed federal land
          exchange.

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

                                       43
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                                 EXHIBIT INDEX

(* Indicates compensation plan, contract or arrangement)


   Exhibit
   Number                          Document Description
  ------------     -------------------------------------------------------------

   2.1             Second Amended Joint Plan of Reorganization as Modified, as
                   filed with the United States Bankruptcy Court for the
                   District of Colorado on September 9, 1988, incorporated by
                   reference from Exhibit 2.1 of the Company's Form 10-K Report
                   for the year ended December 31, 1988.

   2.2             Second Amended Joint Plan of Reorganization Modification, as
                   filed with the United States Bankruptcy Court on September
                   26, 1988, incorporated by reference from Exhibit 2.2 of the
                   Company's Form 10-K Report for the year ended December 31,
                   1988.

   2.3             United States Bankruptcy Court Order dated October 4, 1988,
                   confirming the Second Amended Joint Plan of Reorganization as
                   Modified, incorporated by reference from Exhibit 2.3 of the
                   Company's Form 10-K Report for the year ended December 31,
                   1988.

   2.4             Stock Purchase Agreement between Kaiser Ventures Inc. and the
                   New Kaiser Voluntary Employees' Beneficiary Association dated
                   November 22, 1999, incorporated by reference from Exhibit 2.1
                   of the Company's Form 8-K dated November 22, 1999.

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

   3.1             Restated Certificate of Incorporation of Kaiser Steel
                   Corporation filed with the Secretary of State of Delaware on
                   November 17, 1988, incorporated by reference from Exhibit
                   D(i) to the Company's Form 8-A dated November 21, 1988.

   3.1.1           Certificate of Amendment to Restated Certificate of
                   Incorporation of Kaiser Steel Resources, Inc. filed with the
                   Delaware Secretary of State on October 2, 1990, incorporated
                   by reference from the Company's Form 8-K Report dated
                   September 18, 1990.

   3.1.2           Certificate of Amendment to Restated Certificate of
                   Incorporation of Kaiser Steel Resources, Inc. changing the
                   Corporation's name to Kaiser Resources Inc., filed with the
                   Delaware Secretary of State on June 14, 1993, incorporated by
                   reference from Exhibit 4.1.2 of the Company's Form 10-K
                   Report for the year ended December 31, 1993.

   3.1.3           Certificate of Amendment to Restated Certificate of
                   Incorporation of Kaiser Resources Inc. changing the
                   Corporation's name to Kaiser Ventures Inc., filed with the
                   Delaware Secretary of State on June 19, 1995.

   3.2             Amended and Restated Bylaws of Kaiser Ventures Inc.,
                   effective January 6, 2000.

                                       44
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)

   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

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

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

   10.1             Lease Entered Into Between Kaiser Eagle Mountain, Inc., and
                    Mine Reclamation Corporation, dated November 30, 1988,
                    incorporated by reference from Exhibit 10.1 of the Company's
                    Form 10-K Report for the year ended December 31, 1988.

   10.1.1           First Amendment dated December 18, 1990, to Lease dated
                    November 30, 1990 between Kaiser Eagle Mountain, Inc. and
                    Mine Reclamation Corporation, incorporated by reference from
                    the Company's Form 8-K Report dated December 18, 1990.

   10.1.2           Second Amendment dated July 29, 1994, to Lease dated
                    November 30, 1990, between Kaiser Eagle Mountain, Inc. and
                    Mine Reclamation Corporation, incorporated by reference from
                    Exhibit 4 of the Company's Form 10-Q Report for the period
                    ending June 30, 1994.

   10.1.3           Third Amendment dated January 29, 1995, but effective as of
                    January 1, 1995, to Lease dated November 30, 1990, between
                    Kaiser Eagle Mountain, Inc. and Mine Reclamation
                    Corporation, incorporated by reference from Exhibit 10.1.3
                    of the Company's Form 10-K Report for the year ended
                    December 31, 1994.

   10.1.4           Fourth Amendment dated effective January 1, 1996, between
                    Kaiser Eagle Mountain, Inc. and Mine Reclamation
                    Corporation, incorporated by reference from Exhibit 10.1.4
                    of the Company's Form 10-K Report for the year ended
                    December 31, 1995.

   10.1.5           Indemnification Agreement dated September 9, 1997 among
                    Riverside County, Mine Reclamation Corporation, Kaiser Eagle
                    Mountain, Inc. Eagle Mountain Reclamation, Inc. and Kaiser
                    Ventures Inc, incorporated by reference from Exhibit 10.1 of
                    the Company's Form 10-Q Report for the period ended
                    September 30, 1997.

   10.1.6           Development Agreement to be executed upon consummation of
                    federal land exchange among Riverside County, Mine
                    Reclamation Corporation, Kaiser Eagle Mountain, Inc. Eagle
                    Mountain Reclamation, Inc. and Kaiser Ventures Inc.,
                    incorporated by reference from Exhibit 10.2 of the Company's
                    Form 10-Q Report for the period ended September 30, 1997.

   10.2             Eagle Mountain Lease Between Management and Training
                    Corporation and Kaiser Steel Corporation, dated November 16,
                    1987, incorporated by reference from Exhibit 10.4 of the
                    Company's Form 10-K Report for the year ended December 31,
                    1988.

                                       45
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)

   Exhibit
   Number                             Document Description
 ------------     --------------------------------------------------------------

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

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

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

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

   10.3*            Amended and Restated Employment Agreement between Kaiser
                    Ventures Inc. and Richard E. Stoddard dated as of January
                    15, 1998, incorporated by reference from Exhibit 10.4 of the
                    Company's Form 10-K Report for the year ended December 31,
                    1998.

   10.3.1*          First Amendment to the Amended and Restated Employment
                    Agreement between Richard E. Stoddard and Kaiser Ventures
                    Inc. dated as of January 6, 2000.

   10.4*            Employment Agreement between Kaiser Ventures Inc. and Gerald
                    A. Fawcett dated as of January 18, 1999, incorporated by
                    reference from Exhibit 10.5 of the Company's 10-K Report for
                    the year ended December 31, 1998.

   10.5*            Employment Agreement between Kaiser Ventures Inc. and Terry
                    L. Cook dated effective June 17, 1996, incorporated be
                    reference from Exhibit 10.2 of the company's Form 10-Q
                    Report for quarter ended June 30, 1996.

   10.5.1*          First Amendment to Employment Agreement, between Kaiser
                    Ventures Inc. and Terry L. Cook dated as of January 6, 2000.

   10.6*            Transition Employment Agreement between Kaiser Ventures
                    Inc., and Lee R. Redmond dated as of January 6, 2000.

   10.7*            Employment Agreement between Kaiser Ventures Inc. and Paul
                    E. Shampay dated as of January 6, 2000.

   10.8*            Employment Agreement between Kaiser Ventures Inc. and
                    Anthony Silva dated as of January 15, 1998, incorporated by
                    reference from Exhibit 10.9 of the Company's Form 10-K
                    Report for the year ended December 31, 1998.

                                       46
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)

   Exhibit
   Number                          Document Description
 ------------     --------------------------------------------------------------

   10.8.1*          First Amendment to Employment Agreement between Kaiser
                    Ventures Inc. and Anthony Silva dated as of January 6, 2000.

   10.9*            Employment Agreement between Kaiser Ventures Inc. and James
                    F. Verhey dated as of June 17, 1996, incorporated by
                    reference Exhibit 10.10 of the Company's Form 10-Q Report
                    for the quarter ended June 30, 1996.

   10.9.1*          First Amendment to Employment Agreement between Kaiser
                    Ventures Inc and James F. Verhey dated as of January 15,
                    1998, incorporated by reference from Exhibit 10.10.1 of the
                    Company's Form 10-K Report for the year ended December 31,
                    1998.

   10.9.2*          Second Amendment to Employment Agreement between Kaiser
                    Ventures Inc. and James F. Verhey dated as of October 1,
                    1999.

   10.9.3*          Third Amendment to Employment Agreement between Kaiser
                    Ventures Inc. and James F. Verhey dated as of January 6,
                    2000.

   10.10            Lease Agreement between American Trading Estate Properties
                    (now known as Lord Baltimore Properties), Landlord and
                    Kaiser Resources Inc., Tenant, dated June 6, 1994,
                    incorporated by reference from Exhibit 10.8 of the Company's
                    Form 10-K Report for the year ended December 31, 1994.

   10.10.1          Second Amendment to Lease Agreement between Lord Baltimore
                    Properties and Kaiser Ventures Inc. dated September 27,
                    1999.

   10.11            Environmental Agreement, State of California, Health and
                    Welfare Agency, Department of Health Services, Consent Order
                    Health and Safety Code Sections 205, 25355.1(a)(B),
                    25355.5(a)(C), dated August 22, 1988, incorporated by
                    reference from Exhibit 10.14 of the Company's Form 10-K
                    Report for the year ended December 31, 1988.

   10.11.1          Amendment issued as of November 13, 1997 by the California
                    Environmental Protection Agency to Consent Order dated
                    August 22, 1988 issued by the State Department of Health
                    Services to Kaiser Steel Corporation, incorporated by
                    reference from Exhibit 10.12.1 of the Company's Form 10-K
                    Report for the year ended December 31, 1998.

   10.12            Environmental Agreement, California Regional Water Quality
                    Control Board, Santa Ana Region, Cleanup and Abatement Order
                    No. 87-121, dated August 26, 1987, incorporated by reference
                    from Exhibit 10.15 of the Company's Form 10-K Report for the
                    year ended December 31, 1988.

   10.12.1          Environmental Agreement, California Regional Water Quality
                    Control Board, Santa Ana Region, Cleanup and Abatement Order
                    No. 91-40, dated March 11, 1991, incorporated by reference
                    from Exhibit 10.11.1 of the Company's Form S-2 (Registration
                    No. 33-56234).

                                       47
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)

   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

   10.12.2          Settlement Agreement between Kaiser Resources Inc. and
                    California Regional Water Quality Control Board, Santa Ana
                    Region, dated October 21, 1993, incorporated by reference
                    from Exhibit 10.11.2 of the Company's Form 10-K Report for
                    the year ended December 31, 1993.

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

   10.14            Assignment from Kaiser Steel Resources, Inc. to KSC
                    Recovery, Inc., dated December 29, 1989, incorporated by
                    reference from Exhibit 10.20 of the Company's Form 10-K
                    Report for the year ended December 31, 1989.

   10.15*           Amended, Restated and Substituted Kaiser Steel Resources,
                    Inc. 1989 Stock Plan, incorporated by reference from the
                    Company's Proxy Statement for the Special Meeting of
                    Stockholders held on October 2, 1990.

   10.16*           Kaiser Steel Resources, Inc. 1992 Stock Option Plan, as
                    amended, incorporated by reference from Exhibit 10.16 of the
                    Company's Form S-2 (Registration No. 33-56234).

   10.17*           Kaiser Ventures Inc. 1995 Stock Plan incorporated by
                    reference from Exhibit 10.15 of the Company's 10-K Report
                    for the year ended December 31, 1995.

   10.17.1*         First Amendment to Kaiser Ventures Inc. 1995 Stock Option
                    Plan, incorporated by reference from Exhibit 4.1.1 of the
                    Company's Form S-8 Registration Statement (Registration No.
                    333-17843).

   10.18            Third Amended Plan of Reorganization of Fontana Union Water
                    Company dated September 26, 1990, incorporated by reference
                    from Exhibit 10.18 of the Company's Form S-2 (Registration
                    No. 33-56234).

   10.19            Settlement Agreement among Fontana Union Water Company,
                    Kaiser Steel Resources, Inc., San Gabriel Valley Water
                    Company and Cucamonga County Water District dated February
                    7, 1992, incorporated by reference from Exhibit 10.19 of the
                    Company's Form S-2 (Registration No. 33-56234).

   10.20            Organization Agreement, dated November 22, 1995 by and among
                    PSH Corp., Kaiser Ventures Inc. and Penske Motorsports, Inc.
                    (f/k/a Penske Speedway Holdings Corp.), incorporated by
                    reference from Exhibit 10.23 of the Company's 8-K Report
                    dated November 22, 1995.

   10.20.1          First Amendment to Organization Agreement dated March 21,
                    1996, by and among PSH Corp., Kaiser Venture Inc., and
                    Penske Motorsports, Inc. incorporated by reference from
                    Exhibit 10.20.1 of the Company's Form 10-K Report for the
                    year ended December 31, 1995.

                                       48
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)


   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

   10.21            Water Rights Agreement, dated November 21, 1995 by and among
                    Kaiser Ventures Inc., Kaiser Inc. and The California
                    Speedway Corporation (successor by merger to Speedway
                    Development Corporation), incorporated by reference from
                    Exhibit 10.22 of the Company's Form 10-K Report for the year
                    ended December 31, 1995.

   10.22            Access Agreement, dated as of November 22, 1995 by and among
                    Kaiser Ventures Inc., Kaiser Land Development, Inc. and The
                    California Corporation, incorporated by reference from
                    Exhibit 10.23 of the Company's Form 10-K Report for the year
                    ended December 31, 1995.

   10.23            Sewer Services Agreement, dated as of November 21, 1995
                    between Kaiser Ventures Inc. and The California Speedway
                    Corporation (successor by merger to Speedway Development
                    Corporation), incorporated by reference from Exhibit 10.24
                    of the Company's Form 10-K Report for the year ended
                    December 31, 1995.

   10.24            Purchase Agreement and Escrow Instructions (without
                    exhibits) dated October 8, 1996, among Kaiser Ventures Inc.,
                    The California Speedway Corporation and Penske Motorsports,
                    Inc., incorporated by reference from Exhibit 10.1 of the
                    Company's Form 10-Q Report for the quarter ended September
                    30, 1995.

   10.25            Revolving Credit and Term Loan Agreement between Fontana
                    Water Resources, Inc. and Union Bank, dated September 30,
                    1994, (Excluding the exhibits), incorporated by reference
                    from Exhibit 10.21 of the Company's Form 10-K Report for the
                    year ended December 31, 1994.

   10.25.1          First Amendment of Credit and Term Loan Agreement between
                    Fontana Water Resources, Inc. and Union Bank, dated January
                    30, 1997, incorporated by reference from Exhibit 10.29.1 of
                    the Company's Form 10-K Report for the year ended December
                    31, 1996.

   10.25.2          Guaranty executed by Kaiser Resources Inc. in favor of Union
                    Bank, dated September 30, 1994, incorporated by reference
                    from Exhibit 10.21.1 of the Company's Form 10-K Report for
                    the year ended December 31, 1994.

   10.25.3          First Amendment to Guaranty by Kaiser Ventures Inc. in favor
                    of Union Bank dated January 30, 1997, incorporated by
                    reference from Exhibit 10.29.3 of the Company's 10-K Report
                    for the year ended December 31, 1996.

   10.25.4          Third Amendment to Guaranty by Kaiser Ventures Inc. in favor
                    of Union Bank dated September 22, 1999.

   10.25.5          First Amendment to Pledge and Security Agreement; Second
                    Amendment to Guaranty; First Amendment to Stock Pledge
                    Agreement; and Guarantor Consent by Kaiser Ventures Inc. in
                    favor of Union Bank dated August 14, 1997, incorporated by
                    reference form Exhibit 10.29.4 of the Company's 10-K Report
                    for the year ended December 31, 1998.

                                       49
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)


   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

   10.25.6          Second Modification of Deed of Trust and Assignment of
                    Leases and Rents dated as of August 14, 1997 by Fontana
                    Water Resources, Inc. and Union Bank of California,
                    incorporated by reference form Exhibit 10.29.5 of the
                    Company's10-K Report for the year ended December 31, 1998.

   10.25.7          Third Modification of Deed of Trust and Assignment of Leases
                    and Rents dated as of September 22, 1999, by Fontana Water
                    Resources, Inc. and Union Bank of California.

   10.25.8          Second Amendment to Revolving Credit and Term Loan Agreement
                    dated August 14, 1997 by Fontana Water Resources, Inc. and
                    Union Bank of California, incorporated by reference form
                    Exhibit 10.29.6 of the Company's10-K Report for the year
                    ended December 31, 1998.

   10.25.9          Third Amendment to Revolving Credit and Term Loan Agreement
                    dated September 22, 1999, by Fontana Water Resources, Inc.
                    and Union Bank of California.

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

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

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

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

   10.28            Members Operating Agreement dated June 19, 1997 between
                    Kaiser Recycling Corporation and West Valley Recycling &
                    Transfer, Inc., incorporated by reference from Exhibit 10.1
                    of the Company's 10-Q Report for the period ended June 30,
                    1997.

   10.28.1          Performance Guaranty and Indemnification Agreement (KRC
                    Obligations) dated June 19, 1997 given by Kaiser Ventures
                    Inc. for the benefit of West Valley MRF, LLC and West Valley
                    Recycling & Transfer, Inc., incorporated by reference from
                    Exhibit 10.1.1 of the Company's 10-Q Report for the period
                    ended June 30, 1997.

                                       50
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)



   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

   10.29            Loan Agreement dated as of June 1, 1997 between West Valley
                    MRF, LLC and California Pollution Control Financing
                    Authority, incorporated by reference from Exhibit 10.2 of
                    the Company's 10-Q Report for the period ended June 30,
                    1997.

   10.30.1          Indenture Agreement dated as of June 1, 1997 between
                    California Pollution Control Financing Authority and BNY
                    Western Trust Company for the benefit of $9,500,000
                    California Pollution Control Financing Authority Variable
                    Rate Demand Solid Waste Disposal Revenue Bonds (West Valley
                    MRF, LLC Project) Series 1997A, incorporated by reference
                    from Exhibit 10.2.1 of the Company's 10-Q Report for the
                    period ended June 30, 1997.

   10.31            Remarketing Agreement dated as of June 1, 1997, and among
                    West Valley MRF, LLC and Westhoff, Cone & Holmstedt and
                    Smith Barney, Inc. with regard to $9,500,000 California
                    Pollution Control Financing Authority Variable Rate Demand
                    Stock Waste Disposal Revenue Bonds (West Valley MRF, LLC
                    Project) Series 1997A, incorporated by reference from
                    Exhibit 10.3 of the Company's 10-Q Report for the period
                    ended June 30, 1997.

   10.32            Reimbursement Agreement dated as of June 1, 1997 between
                    West Valley MRF, LLC and Union Bank of California, N.A.,
                    incorporated by reference from Exhibit 10.4 of the Company's
                    10-Q Report for the period ended June 30, 1997.

   10.32.1          Guaranty and Mandatory DSR Agreement dated as of June 1,
                    1997 given by Kaiser Ventures Inc. and Kaiser Recycling
                    Corporation for the benefit of Union Bank of California,
                    N.A., incorporated by reference from Exhibit 10.4.1 of the
                    Company's 10-Q Report for the period ended June 30, 1997.

   10.33            Environmental Compliance Agreement dated as of June 19, 1997
                    between West Valley MRF, LLC and Union Bank of California,
                    N.A., incorporated by reference from Exhibit 10.5 of the
                    Company's 10-Q Report for the period ended June 30, 1997.

   10.33.1          Environmental Guaranty Agreement dated as of June 19, 1997
                    given by Kaiser Ventures Inc. and Kaiser Recycling
                    Corporation for the benefit of Union Bank of California,
                    N.A., incorporated by reference from Exhibit 10.5.1 of the
                    Company's 10-Q Report for the period ended June 30, 1997.

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

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

                                       51
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                          EXHIBIT INDEX - (Continued)


   Exhibit
   Number                          Document Description
 ------------    ---------------------------------------------------------------

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

   10.37            Purchase and Sale Agreement and Joint Escrow Instructions
                    among Kaiser Ventures Inc., Kaiser Steel Land Development,
                    Inc. and Ontario Ventures I, LLC dated October 19, 1999,
                    incorporated by reference from Exhibit 10.1 of the Company's
                    10-Q Report for the period ended September 30, 1999.

   10.37.1          Fourth Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    November 30, 1999.

   10.37.2          Fifth Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    February 4, 2000.

   10.37.3          Sixth Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    March 6, 2000.

   10.37.4          Seventh Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    March 10, 2000.

   10.37.5          Eighth Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    March 13, 2000.

   10.37.6          Ninth Amendment to Purchase and Sale Agreement and Joint
                    Escrow Instructions among Kaiser Ventures Inc., Kaiser Steel
                    Land Development, Inc. and Ontario Ventures I, LLC dated
                    March 14, 2000.

   21               The Company has ten active subsidiaries. Fontana Water
                    Resources, Inc., Kaiser Eagle Mountain, Inc., Kaiser Steel
                    Corporation, Kaiser Steel Land Development, Inc., Kaiser
                    Waste Treatment, Inc., Kaiser Recycling Corporation, Kaiser
                    Reclamation, Inc., and KSC Recovery, Inc. are incorporated
                    under the laws of the State of Delaware. Lake Tamarisk
                    Development Corporation and Mine Reclamation Corporation are
                    incorporated under the laws of the State of California. KSC
                    Recovery, Inc.'s activities are limited to those permitted
                    by the Second Amended Joint Plan of Reorganization as
                    modified (Exhibit 2.1 of this Report).

   23               Consent of Ernst & Young LLP.

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

   27               Financial Data Schedule.

                                       52
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES


                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


     Date: March 15, 2000             KAISER VENTURES INC.


                                      By: /s/ Richard E. Stoddard
                                      ------------------------------------------
                                      Name:  Richard E. Stoddard
                                      ------------------------------------------
                                      Title: President, Chief Executive Officer
                                      ------------------------------------------
                                             and Chairman of the Board
                                             -----------------------------------

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

                              (Power of Attorney)

                                       53
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

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

     Signature                             Title                      Date
     ---------                             ------                     ----

1.   Principal Executive Officer


     /s/ Richard E. Stoddard       President, Chief Executive    March 15, 2000
     ---------------------------   Officer and Chairman of the
     Richard E. Stoddard           Board (Principal Executive
                                   Officer)


2.   Principal Financial and
     Accounting Officer


     /s/ James F. Verhey           Executive Vice President,     March 15, 2000
     --------------------------    and Chief Financial Officer
     James F. Verhey               (Principal Financial and
                                   Accounting Officer)

                                       54
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES


          Signature                            Title                     Date
          ---------                            -----                     ----

4.   Directors


     /s/ Ronald E. Bitonti                     Director          March 15, 2000
     -------------------------------
     Ronald E. Bitonti

     /s/ Todd G. Cole                          Director          March 15, 2000
     ------------------------------------
     Todd G. Cole

     /s/ Gerald A. Fawcett                     Vice Chairman     March 15, 2000
     ------------------------------------
     Gerald A. Fawcett

     /s/ Reynold C. MacDonald                  Director          March 15, 2000
     ------------------------------------
     Reynold C. MacDonald

     /s/ Charles E. Packard                    Director          March 15, 2000
     ------------------------------------
     Charles E. Packard

     /s/ Marshall F. Wallach                   Director          March 15, 2000
     ------------------------------------
     Marshall F. Wallach

                                       55
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES


                        REPORT OF INDEPENDENT AUDITORS
                        ------------------------------


Board of Directors
Kaiser Ventures Inc. and Subsidiaries

     We have audited the accompanying consolidated balance sheets of Kaiser
Ventures Inc. and Subsidiaries (the "Company") as of December 31, 1999 and 1998,
and the related consolidated statements of income, cash flows, and stockholders'
equity for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kaiser Ventures Inc. and Subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.


                                        ERNST & YOUNG LLP


Riverside, California
January 25, 2000

                                       56
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                               as of December 31



<TABLE>
<CAPTION>
                                                                                    1999               1998
                                                                                    ----               ----

ASSETS
<S>                                                                              <C>                <C>
Current Assets
   Cash and cash equivalents...........................................          $ 14,686,000       $  3,409,000
   Accounts receivable and other, net of allowance for
    doubtful accounts of $90,000 and $303,000,
    respectively.......................................................             1,978,000          2,339,000
   Deferred tax assets.................................................               285,000                ---
   Note receivable.....................................................               107,000            100,000
                                                                                 ------------       ------------

                                                                                   17,056,000          5,848,000
                                                                                 ------------       ------------

Investment in Common Stock of Penske Motorsports, Inc..................                   ---         45,784,000
                                                                                 ------------       ------------

Investment in Fontana Union Water Company..............................            16,108,000         16,108,000
                                                                                 ------------       ------------

Investment in West Valley MRF..........................................             3,009,000          2,549,000
                                                                                 ------------       ------------

Real Estate
   Land and improvements...............................................             8,543,000         15,621,000
   Real estate held for sale...........................................            38,820,000         40,607,000
                                                                                 ------------       ------------

                                                                                   47,363,000         56,228,000
                                                                                 ------------       ------------

Other Assets
   Note receivable.....................................................               700,000            714,000
   Deferred tax assets.................................................               577,000                ---
   Landfill permitting and development.................................            15,800,000         12,641,000
   Buildings and equipment (net).......................................             2,805,000          2,949,000
   Other assets........................................................                27,000            121,000
                                                                                 ------------       ------------

                                                                                   19,909,000         16,425,000
                                                                                 ------------       ------------

Total Assets...........................................................          $103,445,000       $142,942,000
                                                                                 ============       ============
</TABLE>

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

                                       57
<PAGE>

                    KAISER VENTURES INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                               as of December 31



<TABLE>
<CAPTION>
                                                                                    1999               1998
                                                                                    ----               ----

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
<S>                                                                              <C>                <C>
   Accounts payable.......................................                       $    887,000       $    708,000
   Income taxes payable...................................                          3,501,000                ---
   Accrued liabilities....................................                          4,998,000          3,822,000
   Environmental remediation..............................                          2,500,000          3,805,000
                                                                                 ------------       ------------

                                                                                   11,886,000          8,335,000
                                                                                 ------------       ------------

Long-term Liabilities
   Deferred gain on sale of real estate...................                            724,000            656,000
   Accrued liabilities....................................                          1,305,000          1,774,000
   Deferred tax liabilities...............................                                ---          2,349,000
   Long-term debt.........................................                                ---         13,750,000
   Environmental remediation..............................                         23,868,000         24,465,000
                                                                                 ------------       ------------

                                                                                   25,897,000         42,994,000
                                                                                 ------------       ------------

Total Liabilities.........................................                         37,783,000         51,329,000
                                                                                 ------------       ------------

Minority Interest.........................................                          4,772,000          3,775,000
                                                                                 ------------       ------------

Commitments and Contingencies

Stockholders' Equity
   Common stock, par value $.03 per share, authorized
    13,333,333 shares; issued and outstanding
    6,316,853 and 10,685,257, respectively................                            189,000            321,000
   Capital in excess of par value.........................                         48,745,000         74,741,000
   Retained earnings......................................                         11,956,000         12,776,000
                                                                                 ------------       ------------

Total Stockholders' Equity................................                         60,890,000         87,838,000
                                                                                 ------------       ------------

Total Liabilities and Stockholders' Equity................                       $103,445,000       $142,942,000
                                                                                 ============       ============
</TABLE>

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

                                       58
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
                        for the Years Ended December 31


<TABLE>
<CAPTION>
                                                                          1999          1998         1997
                                                                          ----          ----         ----
<S>                                                                   <C>            <C>          <C>
Resource Revenues
 Ongoing Operations
  Water resource....................................................   $ 5,228,000   $ 5,201,000  $ 5,143,000
  Property redevelopment............................................     1,480,000     1,487,000    1,213,000
  Gain on merger of PMI into ISC....................................    35,713,000           ---          ---
  Gain on sale of ISC common stock..................................     6,575,000           ---          ---
  Income (loss) from equity method investments
      Penske Motorsports Inc........................................      (329,000)    1,903,000    2,003,000
      West Valley MRF, LLC..........................................       910,000        40,000          ---
  Gain on Mill Site land sales......................................     1,622,000           ---          ---
                                                                       -----------   -----------  -----------

        Total ongoing operations....................................    51,199,000     8,631,000    8,359,000
                                                                       -----------   -----------  -----------

 Interim Activities
  Lease, service and other..........................................       427,000     1,242,000    1,647,000
                                                                       -----------   -----------  -----------

        Total resource revenues.....................................    51,626,000     9,873,000   10,006,000
                                                                       -----------   -----------  -----------

Resource Operating Costs
 Operations and maintenance.........................................       863,000     1,260,000    1,311,000
 Administrative support expenses....................................     1,899,000     2,208,000    2,343,000
 Write-down to net realizable value.................................     8,350,000           ---          ---
                                                                       -----------   -----------  -----------

        Total resource operating costs..............................    11,112,000     3,468,000    3,654,000
                                                                       -----------   -----------  -----------

Income from Resources...............................................    40,514,000     6,405,000    6,352,000

 Corporate general and administrative expenses......................     4,786,000     3,847,000    4,161,000
                                                                       -----------   -----------  -----------

Income from Operations..............................................    35,728,000     2,558,000    2,191,000

 Net interest expense...............................................       498,000     1,083,000      672,000
                                                                       -----------   -----------  -----------

Income before Income Tax Provision..................................    35,230,000     1,475,000    1,519,000

 Income tax provision
  Currently payable.................................................     8,364,000        12,000       43,000
  Deferred tax expense (benefit)....................................    (3,211,000)      126,000       74,000
  Deferred tax expense credited to equity...........................     6,048,000       105,000      554,000
                                                                       -----------   -----------  -----------

Net Income..........................................................   $24,029,000   $ 1,232,000  $   848,000
                                                                       ===========   ===========  ===========

Basic Earnings Per Share............................................   $      2.35   $       .12  $       .08
                                                                       ===========   ===========  ===========

Diluted Earnings Per Share..........................................   $      2.31   $       .11  $       .08
                                                                       ===========   ===========  ===========

Basic Weighted Average Number of Shares Outstanding.................    10,226,000    10,664,000   10,536,000

Diluted Weighted Average Number of Shares Outstanding...............    10,386,000    10,840,000   10,740,000
</TABLE>

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

                                       59
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        for the Years Ended December 31

<TABLE>
<CAPTION>
                                                                       1999                1998                1997
                                                                       ----                ----                ----
<S>                                                                <C>                  <C>                 <C>
Cash Flows from Operating Activities
 Net income.................................................       $ 24,029,000         $ 1,232,000         $   848,000
 Provision for income tax which is credited to equity.......          6,048,000             105,000             554,000
 Income from equity method investments......................           (581,000)         (1,943,000)         (1,840,000)
 Deferred tax expense (benefit).............................         (3,211,000)            126,000              74,000
 Depreciation and amortization..............................            511,000             552,000             389,000
 Gain on merger of PMI into ISC.............................        (35,713,000)                ---                 ---
 Gain on sale of ISC common stock...........................         (6,575,000)                ---                 ---
 Write-down to net realizable value.........................          8,350,000                 ---                 ---
 Accelerated vesting of stock options.......................             54,000                 ---                 ---
 Gain on sale of Mill Site Property.........................         (1,622,000)                ---                 ---
 Allowance for doubtful accounts............................           (213,000)              4,000              13,000
 Changes in assets:
   Receivable and other.....................................            574,000             196,000             865,000
 Changes in liabilities:
   Current liabilities......................................            294,000            (361,000)            684,000
   Income taxes payable.....................................          3,501,000                 ---                 ---
   Long-term accrued liabilities............................            (56,000)            111,000                 ---
                                                                   ------------         -----------         -----------

 Net cash flows from operating activities...................         (4,610,000)             22,000           1,587,000
                                                                   ------------         -----------         -----------

Cash Flows from Investing Activities
 Minority interest and other liabilities....................            997,000             897,000           1,260,000
 Proceeds from the sale of Mill Site Property...............          2,662,000                 ---           1,500,000
 Collection of note receivable..............................             75,000             456,000             174,000
 Capital expenditures.......................................         (3,570,000)         (4,480,000)         (7,174,000)
 Environmental remediation expenditures.....................         (1,808,000)         (2,547,000)         (1,496,000)
 Proceeds from the sale of ISC common stock.................         63,552,000                 ---                 ---
 Proceeds of the merger of PMI into ISC.....................         24,419,000                 ---                 ---
 Distribution from West Valley MRF..........................            450,000                 ---                 ---
 Other investments..........................................                ---                 ---            (759,000)
                                                                   ------------         -----------         -----------

 Net cash flows from investing activities...................         86,777,000          (5,674,000)         (6,495,000)
                                                                   ------------         -----------         -----------

Cash Flows from Financing Activities
 Issuance of common stock...................................            379,000             133,000             196,000
 Repurchase of common stock.................................        (57,519,000)                ---                 ---
 Borrowings under revolver-to-term credit facility..........          3,000,000           9,750,000           2,000,000
 Principal payments on revolver-to-term credit facility and
  note payable..............................................        (16,750,000)         (5,102,000)         (1,240,000)

 Payment of loan fees.......................................                ---             (50,000)           (200,000)
                                                                   ------------         -----------         -----------

 Net cash flows from financing activities...................        (70,890,000)          4,731,000             756,000
                                                                   ------------         -----------         -----------

Net Changes in Cash and Cash Equivalents....................         11,277,000            (921,000)         (4,152,000)

Cash and Cash Equivalents at Beginning of Year..............          3,409,000           4,330,000           8,482,000
                                                                   ------------         -----------         -----------

Cash and Cash Equivalents at End of Year....................       $ 14,686,000         $ 3,409,000         $ 4,330,000
                                                                   ============         ===========         ===========
</TABLE>

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

                                       60
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
             for the Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                             Capital In
                                                Common Stock                 Excess of          Retained
                                    -----------------------------------
                                         Shares             Amount           Par Value          Earnings            Total
                                    ------------------------------------------------------------------------------------------
<S>                                 <C>                     <C>              <C>               <C>                <C>
Balance at December 31, 1996......        10,488,114          $ 315,000      $ 70,437,000      $ 10,696,000       $ 81,448,000

   Increase in investment in
       Penske Motorsports, Inc.
       due to issuance of stock...               ---                ---         2,937,000               ---          2,937,000

   Provision for income tax,
       credited to equity.........               ---                ---           554,000               ---            554,000

   Issuance of shares of
       common stock...............           103,126              3,000           414,000               ---            417,000

   Net Income.....................               ---                ---               ---           848,000            848,000
                                          ----------          ---------      ------------      ------------       ------------

Balance at December 31, 1997......        10,591,240            318,000        74,342,000        11,544,000         86,204,000
                                          ----------          ---------      ------------      ------------       ------------

   Provision for income tax,
       credited to equity.........               ---                ---           105,000               ---            105,000

   Issuance of shares of
       common stock...............            94,017              3,000           294,000               ---            297,000

   Net Income.....................               ---                ---               ---         1,232,000          1,232,000
                                          ----------          ---------      ------------      ------------       ------------

Balance at December 31, 1998......        10,685,257            321,000        74,741,000        12,776,000         87,838,000
                                          ----------          ---------      ------------      ------------       ------------

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

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

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


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

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

Balance at December 31, 1999......         6,316,853          $ 189,000      $ 48,745,000      $ 11,956,000       $ 60,890,000
                                          ==========          =========      ============      ============       ============
</TABLE>

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

                                       61
<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  NATURE OF BUSINESS

  On November 16, 1988, the Company began operations as Kaiser Steel Resources,
Inc. upon the successful completion of the reorganization of Kaiser Steel
Corporation ("KSC") under Chapter 11 of the Bankruptcy Code.  The Company has
changed its name twice since reorganization in June 1993 and 1995, to Kaiser
Resources Inc. and to Kaiser Ventures Inc. ("Kaiser" or the "Company"),
respectively.

  The Company's business focuses on the long-term development of its principal
assets including water resources, land and waste management assets.  The
development of these assets is financed primarily through joint venture and
long-term lease arrangements.  Ongoing operations refer to those revenue
resources which the Company is developing over the long-term while interim
activities refer to those revenue resources which are temporary or short-term in
nature and which are earned while the Company is evaluating the appropriate
long-term use of the asset or property.

  At December 31, 1999, Company's long-term emphasis is on the further
development of its principal assets:  (i) a 50.88% interest in Fontana Union
Water Company ("Fontana Union"), a mutual water company; (ii) approximately a
75% interest in Mine Reclamation Corporation ("MRC"), the developer of the Eagle
Mountain Landfill Project (the "Landfill Project"); (iii) a 50% joint venture
interest in the West Valley MRF ("WVMRF"), a transfer station and recycling
facility located on land acquired from the Company; (iv) approximately 632 acres
of the former Kaiser Steel Corporation ("KSC") steel mill site (the "Mill Site
Property") which is currently undergoing redevelopment and all of which, except
40 acres is currently in escrow to be sold; and (v) the 9,144 acre idle iron ore
mine in the California desert (the "Eagle Mountain Site"), which includes the
associated 1,100 acre town of Eagle Mountain ("Eagle Mountain Townsite") and the
land leased to MRC for the Landfill Project.  During 1999 Penske Motorsports
Inc. ("PMI") merged with International Speedway Corporation ("ISC").  As a
result of the merger, the Company received cash and common stock in ISC.  The
Company sold all of its ISC common stock during 1999.

  The Company's consolidated financial statements include the following
significant entities:  Fontana Water Resources, Inc., Kaiser Steel Land
Development, Inc., Eagle Mountain Reclamation, Inc., Lake Tamarisk Development
Corporation, Kaiser Eagle Mountain, Inc., Kaiser Recycling Corporation, and Mine
Reclamation Corporation.  See Note 2 below for additional information concerning
the Company's subsidiaries.

Ongoing Operations

  The Company's revenues from ongoing operations are generally derived from the
development of the Company's long-term projects.  Revenues from water resources
represent payments under the lease of the Company's interest in Fontana Union to
Cucamonga County Water District ("Cucamonga").  Property redevelopment revenues
primarily reflect revenues from long-term development activities at the Mill
Site property, including water and waste water treatment revenues; housing
rental income, aggregate and 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").  Income from equity method investments reflect Kaiser's share of income
related to those equity investments (i.e., PMI from April 1, 1996 through March
31, 1999) and, starting in 1998, a joint venture (i.e., West Valley MRF) which
the Company accounts for under the equity method.

                                       62
<PAGE>

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, royalty revenues from the sale of
recyclable revert materials and other miscellaneous short-term activities.
Revenues from these activities are declining rapidly as the development of the
remaining Mill Site property proceeds.


Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

  The stated value of the assets and liabilities of the Company were carried
forward from those of KSC except as adjusted in reorganization.

Principles of Consolidation

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

  Fontana Union Water Company ("Fontana Union").  The Company, through its
wholly-owned subsidiary Fontana Water Resources, Inc. ("FWR"), owns 50.88% of
Fontana Union, a mutual water company, which entitles the Company to its
proportionate share of Fontana Union water.  The Company has effectively
transferred its control in Fontana Union to Cucamonga pursuant to a 102-year
lease of its Fontana Union shares ("Cucamonga Lease") which the Company entered
into in March 1989, and which was amended in 1989, 1992 and 1993.  Therefore,
Kaiser receives no direct benefit from nor has any direct exposure to the
operations or financial performance of Fontana Union.  Consequently, Kaiser's
investment in Fontana Union is recorded on the cost method with revenues from
the Cucamonga Lease being recorded on a current basis pursuant to the terms and
conditions of the Lease.  (See Note 4.)

  KSC Recovery, Inc. ("KSC Recovery").  The Company's wholly-owned subsidiary,
KSC Recovery, Inc., which is governed and controlled by a Bankruptcy Court
approved Plan of Reorganization, acts solely as an agent for KSC's former
creditors in pursuing bankruptcy related adversary litigation and administration
of the KSC bankruptcy estate.  Kaiser exercises no significant control or
influence over nor does Kaiser have any interest in the operations, assets or
liabilities of KSC Recovery except as provided by the terms of the approved Plan
of Reorganization.  In addition, KSC Recovery's cash on hand and potential
future recoveries funds all costs and expenses of KSC Recovery.  It is
anticipated that the bankruptcy estate of KSC Recovery expects to make all final
distributions within the next 18 to 24 months.  Consequently, activity of KSC
Recovery is not included in Kaiser's financial statements; however, KSC Recovery
is a member of the Kaiser consolidated group for tax purposes and is therefore,
included in the consolidated tax return.

Cash and Cash Equivalents

  The Company considers all highly liquid debt instruments purchased with
original maturities of 90 days or less to be cash equivalents.  The Company
maintains its cash balances with high quality financial institutions and are
insured by the Federal Deposit Insurance Corporation up to $100,000 at each
institution.

                                       63
<PAGE>

Real Estate

  In accordance with Financial Accounting Standards Board ("FASB") Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (FASB 121), the Company records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.

  On October 29, 1999 the Company announced that it has entered into an
agreement with Ontario Ventures I, LLC to sell the bulk of its remaining Fontana
Mill Site Property for $16 million in cash plus the assumption of virtually all
known and unknown environmental obligations and liabilities associated with the
Mill Site Property.  The Buyer is a new entity formed by LandBank and The
Knowlton Group, a Salt Lake City based developer.  LandBank is a national leader
in the acquisition, restoration and redevelopment of environmentally impaired
real estate.  The transaction is subject to extensive due diligence and a number
of contingencies.  If the buyer is satisfied with the results of its due
diligence investigation and all other contingencies are resolved, the
transaction would close during the first half of 2000.  Due to this pending
sale, the Company during 1999, recorded an impairment loss of $8,350,000 on its
Mill Site Property as required under FASB 121.

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

Investment in Penske Motorsports, Inc.

  The Company accounted for its investment in Penske Motorsports, Inc. ("PMI")
under the equity method of accounting because the Company exercised significant
influence over the operations of PMI through its representation on the Board of
Directors and PMI Board Committees from April 1, 1996 through March 31, 1999.
As a result of the PMI/ISC merger in July 1999, the Company's investment in PMI
was converted into $24.4 million of cash and $57.0 million (or 1,187,407 shares)
of ISC Class A common stock valued at $47.98 per share which resulted in a gain
of $35.7 million.  Subsequent to the merger of PMI into ISC, the Company
commenced an orderly liquidation of its position in the common stock of ISC.  By
the middle of November 1999, the Company had completed the sale of its ISC
common stock resulting in a gain of $6.6 million.  The Company's average sales
price for a share of ISC common stock was $53.52 during this orderly
liquidation.

Investment in West Valley MRF, LLC

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

Buildings and Equipment

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

Revenue Recognition

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

                                       64
<PAGE>

Income Taxes

  The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of temporary timing differences between the financial
statement and tax bases of assets and liabilities at the applicable enacted tax
rates.

Earnings Per Share

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

Stock Options

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

Use of Estimates

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

Fair Value of Financial Instruments

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

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

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

  Long-Term Debt.  The carrying approximates fair value based on the current
rates offered to the Company for debt of the same remaining maturities.

                                       65
<PAGE>

Note 3.  ACCOUNTS RECEIVABLE AND OTHER

  Accounts receivable as of December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                      1999          1998
                                                      ----          ----
  <S>                                              <C>          <C>
  Cucamonga County Water District................. $1,680,000   $1,807,000
  Other...........................................    388,000      835,000
                                                   ----------   ----------
                                                    2,068,000    2,642,000

  Allowance for doubtful accounts                     (90,000)    (303,000)
                                                   ----------   ----------
        Total..................................... $1,978,000   $2,339,000
                                                   ==========   ==========
</TABLE>


Note 4. CUCAMONGA LEASE

  The Company, through a wholly-owned subsidiary, Fontana Water Resources, Inc.,
leases its 50.88% ownership of the capital stock of Fontana Union, a mutual
water company, to Cucamonga County Water District ("Cucamonga") pursuant to a
take-or-pay lease (the "Cucamonga Lease") that terminates in the year 2092.  In
1996, the Company instituted litigation against Cucamonga due to a dispute
concerning the amount payable to the Company pursuant to the terms of the
Cucamonga Lease.  The dispute centers on the Company's assertion that either the
MWD Rate in the Cucamonga Lease was discontinued on July 1, 1995, or that the
Lease Rate should be interpreted to include all the changed rates and items
implemented by Metropolitan Water District of Southern California ("MWD") since
July 1, 1995.  A five-day trial on the matter was held in March 1998.  The Court
ruled, in favor of the Company, that the rate on which the Cucamonga Lease had
been based was discontinued effective July 1, 1995.  Therefore the terms of the
Cucamonga Lease require the parties to negotiate in good faith a new substitute
MWD rate.  To date, the parties have been unable to negotiate a substitute Lease
Rate; consequently, the matter is being submitted to a reference process, which
is a private trial much like arbitration.  The reference proceeding commenced
during the week of February 28, 2000.  After the conclusion of all the testimony
in the proceeding, the court asked for further briefing and scheduled a final
oral argument which is currently scheduled for May 15, 2000.  A decision from
the judge is expected within 60 days thereafter.  Cucamonga continues to pay
under the terms of the Cucamonga Lease, but at a rate substantially less than
the Lease Rate that the Company maintains it is entitled to receive pursuant to
the Cucamonga Lease.  Although the Company is continuing to bill Cucamonga at
what it believes is the correct MWD rate under the lease with Cucamonga, the
Company has elected to report revenues on the basis of amounts Cucamonga is
currently paying.  The total amount of lease payments in dispute as of December
31, 1999 is approximately $2,575,000.


Note 5. INVESTMENT IN PENSKE MOTORSPORTS, INC.

  Until the close of business July 26, 1999, the Company owned 1,627,923 shares,
or approximately 11.73 % of the common stock of PMI.  The Company's ownership
interest in PMI was acquired as a result of:  (i) its contribution in November
1995, to PMI of approximately 480 acres, as adjusted, of the Central Mill Site
Property on which the California Speedway ("TCS") has been built; and (ii) the
subsequent sale of the Speedway Business Park, totaling approximately 54 acres
to PMI in December 1996.  Until the close of business on July 26, 1999, PMI was
traded on the NASDAQ National Market under the symbol "SPWY".

  On July 26, 1999, ISC acquired all of the outstanding common stock of PMI.
ISC is a leading promoter of motorsports activities in the United States,
currently promoting more than 100 events annually.  The Company voted for the
merger and elected to take the cash and stock election afforded to

                                       66
<PAGE>

PMI shareholders. Thus, under the cash and stock election, Kaiser received
approximately $24 million in cash and 1,187,407 shares of ISC Class A common
stock valued at approximately $57 million as of the date of the merger resulting
in a gain of $35.7 million. Subsequent to the merger of PMI into ISC, the
Company commenced an orderly liquidation of a portion of its position in the
common stock of ISC. By the middle of November 1999, the Company had completed
the sale of its ISC common stock resulting in a gain of $6.6 million. The
Company's average sales price for a share of ISC common stock was $53.52 during
this orderly liquidation.


Note 6.  INVESTMENT IN WEST VALLEY MRF, LLC

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

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

  Most of the financing for the projected cost of the WVMRF of approximately
$10,300,000, including reimbursement of most of the previously incurred
development costs of Burrtec and the Company, was obtained through the issuance
and sale of $9,500,000 in California Pollution Control Financing Authority (the
"Authority") Variable Rate Demand Solid Waste Disposal Revenue Bonds (West
Valley MRF, LLC Project) Series 1997A (the "Bonds").  The Bonds are secured by
an irrevocable letter of credit issued by Union Bank of California, N.A. ("Union
Bank").  The Bonds have a stated maturity date of June 1, 2012, although West
Valley MRF, LLC is required, pursuant to its agreement with Union Bank, to
annually redeem a portion of the Bonds on a stated schedule.  Pursuant to a
Guaranty Agreement with Union Bank, the Company and Burrtec are each liable for
fifty percent (50%) of the principal and interest on the Bonds in the event of a
default by the West Valley MRF, LLC.

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

  On an unaudited basis, gross revenues for the WVMRF for 1999 and 1998 were
$17.6 and $12.1, respectively.  The Company's share of undistributed equity in
the earnings of WVMRF during 1999 and 1998 was $910,000 and $40,000,
respectively.  The condensed unaudited balance sheets of West Valley MRF, LLC as
of December 31, are as follows:

<TABLE>
<CAPTION>
                                                                  1999          1998
                                                                  ----          ----
  <S>                                                          <C>           <C>
  Current Assets............................................   $ 3,699,000   $ 2,051,000
  Property and Equipment (net)..............................    10,806,000    11,240,000
  Other Assets..............................................     2,168,000     2,340,000
                                                               -----------   -----------
       Total Assets.........................................   $16,673,000   $15,631,000
                                                               ===========   ===========

  Current Liabilities.......................................   $ 1,610,000   $ 1,715,000
  Other Liabilities.........................................       249,000       421,000
  CPCFA Bonds Payable.......................................     9,200,000     9,400,000
  Stockholders' Equity......................................     5,614,000     4,095,000
                                                               -----------   -----------
       Total Liabilities and Stockholders' Equity...........   $16,673,000   $15,631,000
                                                               ===========   ===========
</TABLE>

                                       67
<PAGE>

Note 7.  MINE RECLAMATION CORPORATION

  The Company, in January 1995, acquired a 70% interest in Mine Reclamation
Corporation ("MRC"), the developer of the Eagle Mountain Landfill Project.
Concurrent with this acquisition, MRC and the Company amended the MRC Lease to
terminate the minimum monthly rent payments by MRC to the Company.
Consequently, the Company has not received any rent payments from MRC since
1994, nor will it in the future until commencement of operations at the Landfill
Project.  The transaction which was insignificant to the operating results,
financial position and total assets of the Company has been treated as a
purchase, and the assets acquired and liabilities assumed were recorded at their
fair market values.

  Through a series of private placements with existing MRC shareholders, from
July 1995 through December 31, 1999, a total of $18.5 million has been raised by
MRC, with Kaiser contributing approximately $14 million of that amount.  The
Company's 1999 advances approximated $3.0 million out of a total funding of $4.0
million.  As a result of these equity fundings, the Company's ownership interest
in MRC as of December 31, 1999, is approximately 75%.  The Company has also
approved advances to MRC totaling $1.8 million for 2000, which together with the
minority shareholders advances will fund MRC through December 31, 2000.

  The environmental impact report ("EIR") for the Eagle Mountain Landfill
Project received approvals from the Riverside County Planning Commission and
Board of Supervisors in 1997.  This EIR was subsequently challenged and the San
Diego Superior Court ruled that the EIR was defective in two general areas.  The
Company and MRC ultimately appealed the adverse ruling.  In May 1999, the
California Court of Appeal completely reversed the prior adverse ruling
reinstating the EIR and Riverside County land use approvals.  However, depending
upon the course of action ultimately selected by MRC and the Company with regard
to the landfill project, there could be a material adverse impact to the
financial statements of the Company, including a possible write down of the
Company's investment in MRC to the lower of cost or fair market value.


Note 8.  NOTES RECEIVABLE

  As of December 31, 1999, the Company has two notes receivable from McLeod
Properties, Fontana LLC (Budway Trucking, Inc.) totaling $807,000, of which
$107,000 has been included in current assets and the balance of $700,000, is
classified as a long term asset.  The outstanding balance of the notes bears
interest at 10% per annum with quarterly payments of $26,700 plus accrued
interest with the remaining balance due October, 2004.  The Company has agreed
to subordinate its notes receivable to a construction/permanent loan in order to
facilitate the construction of a building on the property.  (See Note 15, Sale
of Mill Site Property.)


Note 9.  BUILDINGS AND EQUIPMENT (Net)

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

<TABLE>
<CAPTION>
                                                              1999         1998
                                                              ----         ----
  <S>                                                      <C>          <C>
  Buildings and structures................................ $ 2,095,000  $ 2,095,000
  Machinery and equipment.................................   3,427,000    3,141,000
                                                           -----------  -----------
                                                             5,522,000    5,236,000
  Accumulated depreciation................................  (2,717,000)  (2,287,000)
                                                           -----------  -----------
         Total............................................ $ 2,805,000  $ 2,949,000
                                                           ===========  ===========
</TABLE>

                                       68
<PAGE>

Note 10. ACCRUED LIABILITIES - CURRENT

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

<TABLE>
<CAPTION>
                                                                         1999          1998
                                                                         ----          -----
  <S>                                                                  <C>           <C>
  Environmental insurance settlement costs..........................   $1,313,000    $1,313,000
  Compensation and related employee costs...........................    1,371,000       545,000
  Other.............................................................    2,314,000     1,964,000
                                                                       ----------    ----------
       Total........................................................   $4,998,000    $3,822,000
                                                                       ==========    ==========
</TABLE>


Note 11. ENVIRONMENTAL REMEDIATION RESERVE

  The Company estimates, based upon current information, that its future
remediation and other environmental costs, including groundwater and other
possible third party claims, will be between approximately $16 million and $26.4
million, as determined on an undiscounted basis, depending both upon the
ultimate extent of the environmental remediation and clean-up involved and upon
which approved remediation alternatives are eventually selected.

  As of December 31, 1999, the total short-term and long-term environmental
remediation liabilities reflected on the Company's balance sheet was
approximately $26.4 million, which is the high end of the probable range of
future remediation and other environmental costs.  Below is a table showing the
activity in the remediation liability accounts for the years ended December 31:

<TABLE>
<CAPTION>
                                                   1999            1998
                                                   ----            ----

          <S>                                   <C>             <C>
          Beginning Estimated Liability         $28,270,000     $30,727,000

           Remediation Costs Incurred            (1,902,000)     (2,457,000)
                                                -----------     -----------

          Ending Estimated Liability             26,368,000      28,270,000

           Less:  Current Portion                (2,500,000)     (3,805,000)
                                                -----------     -----------

          Long-term Portion                     $23,868,000     $24,465,000
                                                ===========     ===========
</TABLE>

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


Note 12. LONG-TERM DEBT

  The Company, through FWR, has a $30,000,000 revolving-to-term credit facility
with Union Bank at floating interest rates and collateralized by the Company's
shares of Fontana Union and the lease of those shares to Cucamonga.  The
borrowing base available under the credit facility is limited to the discounted
present value of an eight-year projection of future payments under the Cucamonga
Lease, as defined in the credit facility agreement.  The net available funds
under the $30,000,000 revolving-to-term credit facility (less $4,850,000
reserved for financial assurances required by the DTSC and relating to
environmental remediation on the Mill Site Property and $1,000,000 in an unused
outstanding standby letter of credit) was $24,150,000 as of December 31, 1999.
The credit facility's five year revolving period ends October 1, 2001 with the
maturity date on the term loan being September 30, 2006.

  As of December 31, 1999, the Company had no outstanding borrowings under the
Company's $30,000,000 revolving-to-term credit facility with Union Bank.

                                       69
<PAGE>

  Total interest expense incurred in 1999, 1998, and 1997 was $1,272,000
$1,083,000, and $980,000, respectively.

Note 13.  STOCKHOLDERS' EQUITY

Equity Transactions

  During 1999, 1998 and 1997 the Company recorded transactions directly to
stockholders' equity other than changes resulting from net income or equity
transactions with shareholders.  These transactions include deferred tax expense
credited to equity due to the utilization of the Company's reorganization NOL
carryforwards, the accelerated vesting of stock options and the increase in
equity due to PMI's purchase of North Carolina Motor Speedway ("NCMS") in May
1997.  These amounts for the years ended December 31, 1999, 1998 and 1997 are as
follows:

<TABLE>
<CAPTION>
                                                                1999              1998            1997
                                                                ----              ----            ----
<S>                                                       <C>               <C>              <C>
Deferred tax expense credited to equity............       $   6,048,000     $    105,000     $    554,000
Accelerated vesting of stock options...............              54,000              ---              ---
Investment increase in Penske  Motorsports, Inc....                 ---              ---        2,937,000
                                                          -------------     ------------     ------------
                                                          $   6,102,000     $    105,000     $  3,491,000
                                                          =============     ============     ============
</TABLE>

Common Stock Outstanding

  At December 31, 1999 and 1998, Kaiser Ventures Inc. common stock has a par
value of $0.03 and 13,333,333 authorized shares, of which 6,316,853 and
10,685,257 were outstanding, respectively.

  In November 1988, 10,000,000 shares of common stock (after giving effect for a
3 for 1 reverse stock split that took place in 1990) were issued pursuant to the
KSC Plan of Reorganization.  As of December 31, 1999, 136,919 of these shares
are being held for the benefit of the former general unsecured creditors of the
predecessor company pending the resolution of disputed bankruptcy claims.  The
final resolution of these claims will result in the final allocation of the held
shares among the unsecured creditor group, which presents no liability to the
Company.  For financial reporting purposes these shares have been considered
issued and outstanding.

  In November 1999, the Company purchased 2,730,950 and 1,693,551 shares of its
common stock from the New Kaiser Voluntary Employees' Beneficiary Association
(the "VEBA") and from the Pension Benefit Guaranty Corporation (the "PBGC"),
respectively. VEBA and the PBGC were the Company's two largest shareholders.
The Company paid $13.00 per share in cash.  In addition, the VEBA and the PBGC
will have certain limited participation rights in the future success of the
Company.  First, if there is a qualifying sale of the Company's Mill Site
Property generally prior to December 31, 2000, they would receive their pro rata
portion of any proceeds in excess of a certain threshold.  (This contingent
payment would equal approximately $1.10 per share if the previously announced
transaction for the sale of the Company's remaining Mill Site property to
Ontario Ventures I, LLC were to close on its current terms.)  In addition, VEBA
and the PBGC received five-year warrants to purchase 460,000 and 285,260 shares
of the Company's common stock, respectively.  The warrants have an exercise
price of $17.00 per warrant.

Stock Option and Stock Grant Programs

  In October 1990, the Company's stockholders approved the Amended, Restated and
Substituted Kaiser Steel Resources, Inc. 1989 Stock Plan (the "1989 Stock
Plan").  The 1989 Stock Plan provided for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock or
deferred stock awards.  Certain options granted under the 1989 Stock Plan are
still outstanding.  During

                                       70
<PAGE>

1999 the Company incurred $54,000 of compensation expense associated with the
accelerated vesting of certain stock options. The Company incurred no
compensation expense during 1998 and 1997.

  In June 1995, the Company's stockholders approved the 1995 Stock Plan. The
1995 Stock Plan provides for the grant of incentive stock options, non-qualified
stock options, restricted stock and other stock related incentives. In June
1996, the 1995 Stock Plan was amended to reserve up to 859,102 shares for
issuance upon exercise of stock options, grants of stock and other stock related
incentives. As a result of the increase in the 1995 Stock Plan reserve, the
Company had 859,102 reserved shares as of December 31, 1999. Grants are
generally established at fair market value of the Company's common stock on the
date of the grant and the exercise thereof may extend for up to 10 years with
various vesting schedules.

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

  A summary of the status of the stock option grants under the Company's stock
plans as of December 31, 1999, 1998 and 1997 and activities during the years
ending on those dates is presented below:

<TABLE>
<CAPTION>
                                             1999                             1999                             1999
                                 ------------------------         ------------------------         ------------------------
                                              Weighted-                        Weighted-                        Weighted-
                                               Average                          Average                          Average
                                              Exercise                         Exercise                         Exercise
                                   Options     Price                Options     Price                Options     Price
                                   -------     -----                -------     -----                -------     -----
<S>                                <C>         <C>                  <C>         <C>                  <C>         <C>
Outstanding at beginning of
   Year........................   1,502,961   $  11.33             1,471,161   $  11.28             1,431,161    $ 11.35
Granted........................      46,000       9.00                53,000      10.67                44,000       8.05
Exercised......................     (60,000)      6.33               (21,200)      6.17                (4,000)      5.83
Forfeited......................    (158,000)     13.96                   ---        ---                   ---        ---
                                 ----------                       ----------                       ----------

Outstanding at end of year.....   1,330,961   $  11.17             1,502,961   $  11.33             1,471,161    $ 11.28
                                 ==========                       ==========                       ==========

Options exercisable at year
                                 ==========   $  11.22            ==========   $  11.41            ==========    $ 11.08
   End.........................   1,289,461                          836,837                          676,987
                                 ==========                       ==========                       ==========

Weighted-average fair value
   of options granted during
   the year....................  $     2.54                       $     2.27                       $     1.55
</TABLE>

                                       71
<PAGE>

  The following table summarizes information about fixed stock options
outstanding as of December 31, 1999:

<TABLE>
<CAPTION>
                                                       Options Outstanding                          Options Exercisable
                                            ----------------------------------------    ------------------------------------------
                               Weighted-
                                Average                             Weighted-                                      Weighted-
                               Remaining                             Average                                        Average
Range of Exercise Prices      Life (years)          Options      Excercise Price             Options            Excercise Price
------------------------      -----------           -------      ---------------             -------            ---------------
<S>                           <C>                   <C>          <C>                         <C>                <C>
$3.00  to   7.50                 4.6                 124,061             5.61                  121,811                $ 5.61
$7.51  to 17.58                  5.4               1,206,900            11.74                1,167,650                $11.81
</TABLE>

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

<TABLE>
<CAPTION>
                                            1999                 1998                  1997
                                            ----                 ----                  ----
<S>                                    <C>                   <C>                   <C>
Net Earnings
 As reported                           $   24,029,000        $  1,232,000          $  848,000
 Pro forma                             $   23,650,000        $    757,000          $  263,000

Earnings per share (Basic)
 As reported                           $         2.35        $       0.12          $     0.08
 Pro forma                             $         2.31        $       0.07          $     0.02

Earnings per share (Diluted)
 As reported                           $         2.31        $       0.11          $     0.08
 Pro forma                             $         2.28        $       0.07          $     0.02
</TABLE>

  The Company employed the Black-Scholes option-pricing model in order to
calculate the above reduction in net income and earnings per share.  The effect
on net earnings for 1999, 1998 and 1997 is not necessarily representative of the
effect in future years.  The following table describes the assumptions utilized
by the Black-Scholes option-pricing model and the resulting fair value of the
options granted:

<TABLE>
<CAPTION>
                                            1999                 1998                  1997
                                            ----                 ----                  ----
<S>                                         <C>                 <C>                    <C>
Volatility                                    .415                 .313                  .255
Risk-free interest rate                       6.00%                6.00%                 6.38%
Expected life in years                        2.28                 2.05                  2.10
Forfeiture rate                               0.00%                0.00%                 0.00%
Dividend yield                                0.00%                0.00%                 0.00%
</TABLE>

  In 1988, the Company granted stock options totaling 533,333 shares with a
nominal exercise price to certain of its officers as part of the emergence from
bankruptcy reorganization. These options became 50% vested at the date of grant
with the remaining options ratably vesting through June 1, 1991. As of December
31, 1999, 52,000 of these options remain vested and unexercised.

                                       72
<PAGE>

Note 14.  EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                      1999                     1998                    1997
                                                                      ----                     ----                    ----

Numerator:
<S>                                                                <C>                      <C>                    <C>
   Net Income..............................................        $24,029,000              $ 1,232,000            $   848,000

   Numerator for basic earnings per share
    -income available to common stockholders.   ...........        $24,029,000              $ 1,232,000            $   848,000

   Numerator for diluted earnings per share
    -income available to common stockholders.   ...........        $24,029,000              $ 1,232,000            $   848,000

Denominator:

   Denominator for basic earnings per share
    -weighted-average shares...............................         10,226,000               10,664,000             10,536,000

   Effect of dilutive options..............................            160,000                  176,000                204,000
                                                                   -----------              -----------            -----------

   Denominator for diluted earnings per share
    -adjusted weighted-average shares and
    assumed conversions....................................         10,386,000               10,840,000             10,740,000
                                                                   ===========              ===========            ===========

   Basic earnings per share................................        $      2.35              $       .12            $       .08
                                                                   ===========              ===========            ===========

   Diluted earnings per share..............................        $      2.31              $       .11            $       .08
                                                                   ===========              ===========            ===========
</TABLE>

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

  The following table discloses the number of vested and outstanding options
during 1999, 1998 and 1997 that were not included in the computation of diluted
earnings per share because the options' exercise price was greater than the
average market price of the common shares and, therefore, the effect would be
antidilutive.

<TABLE>
<CAPTION>
                                                       1999                     1998                      1997
                                                       ----                     ----                      ----
<S>                                               <C>                      <C>                       <C>
   Number of antidilutive options.........          325,000                  478,000                   364,000

   Range of option prices
     for the antidilutive options....  ...        $12.55 - 17.58           $11.25 - 17.58            $11.25 - 17.58
</TABLE>


Note 15.  SALE OF MILL SITE PROPERTY

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

  Also during 1999, the Company sold approximately one-third of an acre of its
Mill Site Property to McLeod Properties, Fontana LLC (Budway Trucking, Inc.) for
$68,000, or $4.30 per square foot, as additional acreage for use in its rail-
truck intermodal distribution facility for Budway Trucking, Inc. The transaction
closed on November 3, 1999 at which time the Company received a note receivable
for the entire purchase price. The Company has agreed to subordinate its new
note receivable to an existing permanent loan that was used to construct the
building on the property. As was the case with the 1997

                                       73
<PAGE>

sale to Budway Trucking, the gain of $68,000 is deferred and recognized under
the cost recovery method, once proceeds received from the buyer exceed the
Company's basis in the property sold.

  Effective October 19, 1999, the Company announced that it has entered into an
agreement with Ontario Ventures I, LLC to sell the bulk of its remaining Fontana
Mill Site Property for $16 million in cash plus the assumption of virtually all
known and unknown environmental obligations and liabilities associated with the
Mill Site Property. The Buyer is a new entity formed by LandBank and The
Knowlton Group, a Salt Lake City based developer. LandBank is a national leader
in the acquisition, restoration and redevelopment of environmentally impaired
real estate. The transaction is subject to extensive due diligence and a number
of contingencies. If the buyer is satisfied with the results of its due
diligence investigation and all other contingencies are resolved, the
transaction would close during the second quarter of 2000.

  During 1997, the Company sold approximately 15.7 acres of its Mill Site
Property to McLeod Properties, Fontana LLC (Budway Trucking, Inc.) for
$2,943,000, or $4.30 per square foot, for use as a rail-truck intermodal
distribution facility for Budway Trucking, Inc. The transaction closed on
September 30, 1997 at which time the Company received $1,500,000 in cash and a
note receivable for $1,443,000. The Company has agreed to subordinate its note
receivable to a construction/permanent loan in order to facilitate the
construction of a building on the property. Although the Company considers the
sale to have been fully consummated during 1997, generally accepted accounting
principles require the gain of $656,000 to be deferred and recognized under the
cost recovery method, once proceeds received from the buyer exceed the Company's
basis in the property sold.


Note 16. SUPPLEMENTAL CASH FLOW INFORMATION

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

  The Company paid interest during 1999, 1998, and 1997 of $1,314,000,
$1,042,000, and $968,000, respectively.

  Income taxes paid in 1999, 1998 and 1997 were $4,863,000, $48,000 and $92,000,
respectively.

  During 1999, the Company issued $62,000 of common stock for payment of 1997
bonuses. During 1998, the Company issued $142,000 of common stock for payment of
1997 bonuses. During 1997, the Company issued $360,000 of common stock for
payment of 1996 bonuses and 1997 compensation.

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

  During 1997 the Company carried back a note receivable for $1,443,000 from
McLeod Properties, Fontana LLC (Budway Trucking, Inc.) from the sale of 15.7
acres of Mill Site Property.

  During 1997, in connection with the contribution of the land to the West
Valley MRF, LLC, the Company reclassified $1,485,000 of land to the investment
in West Valley MRF, LLC.

  As a result of the acquisition by PMI of 70% of the common stock of North
Carolina Motor Speedway during 1997, the Company increased its investment in PMI
by $3,128,000 and recorded corresponding increases in deferred income taxes and
stockholders equity of $191,000 and $2,937,000, respectively.

                                       74
<PAGE>

     During 1997, the Company capitalized interest and property taxes on
property real estate under development of $187,000. There was no capitalization
of interest or property taxes during 1999 and 1998.


Note 17. INCOME TAXES

     The income tax provisions for the years ended December 31, 1999, 1998 and
1997 are composed of the following:

<TABLE>
<CAPTION>
                                                               1999                1998                1997
                                                               ----                ----                ----
<S>                                                       <C>                 <C>                 <C>
Current tax expense (credit):
  Federal...........................................      $ 1,582,000         $       ---         $     5,000
  State.............................................        6,782,000              12,000              38,000
                                                          -----------         -----------         -----------
                                                            8,364,000              12,000              43,000
                                                          -----------         -----------         -----------
Deferred tax expense (credit) credited to equity:
  Federal...........................................        6,048,000             105,000             554,000
  State.............................................              ---                 ---                 ---
                                                          -----------         -----------         -----------
                                                            6,048,000             105,000             554,000
                                                          -----------         -----------         -----------
Deferred tax expense (credit):
  Federal...........................................       (1,000,000)                ---                 ---
  State.............................................       (2,211,000)            126,000              74,000
                                                          -----------         -----------         -----------
                                                           (3,211,000)            126,000              74,000
                                                          -----------         -----------         -----------

                                                          $11,201,000         $   243,000         $   671,000
                                                          ===========         ===========         ===========
</TABLE>

     In accordance with FASB 109, the tax benefits of all deductible temporary
differences and loss carryforwards that existed at the date of a reorganization
must be credited directly to additional paid-in capital when the initial
recognition of these benefits occurs subsequent to the reorganization.

     Deferred tax liabilities (assets) are comprised of the following as of
December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                           1999                      1998
                                                                           ----                      ----
<S>                                                                <C>                       <C>
       Land held for development............................       $           ---           $     2,604,000
       Investment in Fontana Union..........................             6,392,000                 6,392,000
       Investment in PMI....................................                   ---                13,501,000
       Depreciation.........................................               116,000                    73,000
                                                                   ---------------           ---------------
                                                                         6,508,000                22,570,000
                                                                   ---------------           ---------------

       Land held for development............................            (1,103,000)                      ---
       Environmental remediation............................              (523,000)               (1,384,000)
       Investment in MRC....................................            (1,823,000)               (1,823,000)
       Accounts receivable reserve..........................              (107,000)                 (187,000)
       State Taxes..........................................            (2,306,000)                   (6,000)
       Other................................................            (1,817,000)               (2,221,000)
       Loss carryforwards...................................           (14,055,000)              (39,599,000)
                                                                   ---------------           ---------------
                                                                       (21,734,000)              (45,220,000)
                                                                   ---------------           ---------------
       Less:  Deferred tax asset valuation allowance........            14,364,000                24,999,000
                                                                   ---------------           ---------------
                                                                   $      (862,000)          $     2,349,000
                                                                   ===============           ===============
</TABLE>

     The net change in the valuation allowance during 1999, 1998 and 1997 was a
reduction of $10,635,000, $759,000, and $1,731,000, respectively.

                                       75
<PAGE>

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

<TABLE>
<CAPTION>
                                                                             1999           1998           1997
                                                                             -----          -----          -----
<S>                                                                          <C>            <C>            <C>
     Federal statutory rate.........................................          34.0%          34.0%          34.0%
     Increase resulting from state tax, net of federal benefit......          12.7            8.1            6.1
     Federal Alternative Minimum Tax................................           4.5            ---            ---
     Other..........................................................           ---            1.5            3.6
     Additional recognition of pre-reorganization benefits..........          17.2            3.6           30.2
     Decrease in post-reorganization valuation allowance............         (40.5)           ---            ---
     Non taxable equity earnings....................................           3.9          (30.7)         (29.8)
                                                                             -----          -----          -----
                                                                              31.8%          16.5%          44.1%
                                                                             =====          =====          =====
</TABLE>

     The consolidated Net Operating Loss ("NOL") carryforwards available
for federal income tax purposes as of December 31, 1999, are approximately
$35,000,000 and will expire over a period from year 2006 through 2013.  There
may be certain limitations as to the future annual use of NOLs if 50% or more of
the stock of the Company changes ownership.


Note 18.  LEASED ASSETS AND SIGNIFICANT CUSTOMERS

Long-Term Leases

     The Company has long-term lease agreements with Cucamonga pursuant to the
Cucamonga Lease (Note 4), and Management Training Corporation ("MTC").  Minimum
lease payments expected to be received by the Company through the next five
years are as follows:

<TABLE>
<CAPTION>
          Year Ending           Cucamonga
          December 31             Lease                 MTC Lease                  Total
          -----------             -----                 ---------                  -----
          <S>                   <C>                     <C>                     <C>
              2000              $5,228,000              $764,000                $5,992,000
              2001              $5,228,000              $764,000                $5,992,000
              2002              $5,228,000              $382,000                $5,610,000
              2003              $5,228,000              $    ---                $5,228,000
              2004              $5,228,000              $    ---                $5,228,000
</TABLE>

     The amounts for the Cucamonga Lease are based upon: (a) the quantities of
water as of December 31, 1999, and as provided for under the Lease; and (b) the
current disputed lease rate paid by Cucamonga, (which is less than the lease
rate the Company bills Cucamonga by approximately $660,000 on an annual basis).

     The net book values of Fontana Union and Eagle Mountain at December 31,
1999 were $16,108,000 and $8,862,000, respectively. Only a portion of Eagle
Mountain is being utilized for the MTC Lease.

Significant Customers

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

                Year Ended           Cucamonga
               December 31             Lease                MTC Lease
               -----------             -----                ---------

                   1999              $5,228,000             $764,000
                   1998              $5,201,000             $729,000
                   1997              $5,143,000             $714,000

                                       76
<PAGE>

Note 19.  COMMITMENTS AND CONTINGENCIES

Environmental Contingencies

     As discussed in Note 11 above, the Company estimates, based upon current
information that its future remediation and other environmental costs, including
groundwater and other possible third party claims, will be between approximately
$16 million and $26.4 million, depending upon which approved remediation
alternatives are eventually selected.

     Although ongoing environmental investigations are being conducted on the
Company's property, and management believes it is currently in a position to
estimate with some reasonable certainty future investigation and remediation
costs, there can be no assurance that the actual amount of environmental
remediation expenditures and incurred will not substantially exceed those
currently anticipated or that additional areas of contamination may not be
identified.  Accordingly, future facts and circumstances could cause these
estimates to change significantly.  The Company anticipates recovery of the
remediation costs incurred through redevelopment of the property, primarily in
connection with specific redevelopment projects or joint ventures.  Further, the
Company has provided certain financial assurances to the DTSC in connection with
anticipated remediation activities, the primary one being the dedication of
approximately $4.8 million of Kaiser's Union Bank Credit facility.

     While the Company has monitored certain groundwater wells in the past, the
DTSC requested and the Company will implement a supplemental groundwater
monitoring system.  The Company has settled obligations of groundwater
contamination with the California Regional Water Quality Control Board.  The
settlement required a $1,500,000 cash payment by the Company, which was made in
February 1994, and the contribution of 1,000 acre feet of water annually for 25
years to a water quality project.  These water rights are unrelated to those
leased to Cucamonga.  In 1995, the Company contributed 18,000 acre feet of its
water in storage thus satisfying the first 18 years of its obligation.  In
September 1998, the Company contributed an additional 7,000 acre feet of its
water in storage.  This additional contribution of water completed all of the
Company's obligations under the terms of the settlement agreement approximately
20 years ahead of schedule.  The Company remains contingently liable for any
impacts the groundwater plume may have on water wells owned by third parties.
The City of Ontario, California has commenced litigation against the Company
alleging that the Company has contaminated one of its municipal wells.  The
Company believes sufficient amounts have been accrued for this contingency if it
should arise.

Pension Plans

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

     Total expense relative to these plans for the years ended December 31,
1999, 1998, and 1997 was $156,000, $191,000, and $223,000, respectively.

Letters of Credit

     At December 31, 1999, the Company had guaranteed letters of credit
outstanding on its behalf to third parties totaling $158,000. These letters of
credit were issued for reclamation activities performed at two idled coal
properties, on behalf of and at the expense of the KSC bankruptcy estate.

                                       77
<PAGE>

Note 20.  LEGAL PROCEEDINGS

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

Litigation

     Eagle Mountain Landfill Project Litigation.  This litigation involved legal
challenges to the EIR for the Landfill Project certified by the Riverside County
Board of Supervisors in October 1992.  These cases were heard in the San Diego
County Superior Court in 1994.  The Court's decisions required MRC to prepare a
new EIR, which was completed and certified in September 1997.  The original
litigation against the EIR was resumed before Judge Judith McConnell of the San
Diego County Superior Court.  In February 1998, the San Diego County Superior
Court announced its final decision and concluded that the new EIR was still
deficient in two principal respects.  The Court's two remaining areas of concern
involve the threatened desert tortoise and Joshua Tree National Park.  The
Superior Court's decision was  appealed.

     On May 7, 1999, a unanimous three-judge panel of the California Court of
Appeal, 4th Appellate District, Division 1, completely overturned the prior
adverse decision of the San Diego Superior Court on the Landfill Project's
environmental impact report.  The California Supreme Court on July 21, 1999,
denied the opponents request that the Court of Appeal's decision be reviewed and
overturned.  Accordingly, landfill opponents have effectively exhausted their
challenges under the California Environmental Quality Act.

     Related to the EIR litigation was the award of approximately $300,000 of
attorneys' fees to project opponents prior to the announcement of the Court of
Appeal decision.  This matter has also been appealed, and all briefs have been
filed.  A decision in the matter is anticipated by year end.

     In October 1999, the Company's wholly owned subsidiary, Kaiser Eagle
Mountain, Inc., completed a land exchange with the U. S. Bureau of Land
Management ("BLM"). This completed land exchange has been challenged in two
separate federal lawsuits.

     It is anticipated that both cases will be consolidated into one hearing.
The same general opponents that lost the appeal before the IBLA have brought
these latest legal challenges. In sum, plaintiffs argue that the land exchange
should be reversed because the BLM failed to comply with the National
Environmental Policy Act and the Federal Land Management Policy Act. The Company
will vigorously defend against such litigation. Donna Charpied; Laurence
Charpied; et al. v. United States Department of the Interior; Bureau of Land
Management; et al, (United States District Court for the Central District of
California, Riverside Division, Case No. EDCV 99-0454 RT(MCx)) and National
Parks and Conservation Association v. Bureau of Land Management, et al. (United
States District Court for the Central District of California, Riverside
Division, Case No. EDCV-00-0041 VAX (JWJx)).

     Cucamonga Litigation.  In 1996, the Company initiated legal action against
Cucamonga.  The dispute involved amounts owed to the Company under the terms of
its lease of Fontana Union Water stock to Cucamonga.  The dispute arose out of a
change made by the Metropolitan Water District in its water rates and rate
structure effective July 1, 1995.  After a trial on the matter, the San
Bernardino County Superior Court ruled that the lease rate had been discontinued
effective July 1, 1995.  Thus, the parties are required to negotiate in good
faith a substitute lease rate as provided under the terms of the lease with
Cucamonga.  Since the parties have been unable to negotiate a new substitute
rate, the Cucamonga Lease requires that

                                       78
<PAGE>

the matter will be resolved in a reference proceeding. A reference proceeding is
in effect a private trial. During the week of February 28, 2000, all the
testimony in the reference proceeding was presented. The judge requested further
briefing and a final oral argument which is currently scheduled for May 15,
2000. The decision in the matter is anticipated within approximately 60 days
following the closing agreement.

     Mushegain Litigation Settlement.  During the third quarter of 1999, a
settlement was reached with regard to the litigation brought by a landowner that
had rented out his property to a tenant that performed work during the
construction of the California Speedway.  The landowner alleged that debris,
including possible hazardous substances, were deposited in and on the
landowner's property by the former tenant and that the source of some of the
debris was from the demolition activities on the California Speedway property.
The tenant acknowledged responsibility for the conditions created on the
property but effectively became bankrupt.  The landowner then sought
contribution from The California Speedway Corporation and the Company.  Given
the time and expense involved in the case, the parties ultimately reached a
settlement.  The Company's final allocation of the settlement has yet to be
determined, but it will not exceed $500,000.  Mary Mushegain v. The California
Speedway, et. al (United States District Court, Central District of California,
Case No. CV 98-6786).

     City of Richmond Litigation.  During the third quarter of 1999, the City of
Richmond, located in Northern California, joined the Company in federal
litigation it commenced against several entities, alleging that the City was
entitled to recover past and future environmental clean-up costs associated with
property owned by the City of Richmond.  Apparently, the property currently
owned by Richmond includes portions of World War II era shipyard construction
and demolition facilities.  It is alleged that the Company's predecessor
demolished ships for approximately a two-year period in the 1940's and thus,
contributed to the contamination of the property.  Litigation was commenced
against the City of Richmond in the U.S. Bankruptcy Court for the District of
Colorado to hold the City of Richmond and certain officials in contempt for
violating the bankruptcy order.  Subsequent to the commencement of the contempt
proceeding, a settlement was reached whereby the City of Richmond was allowed a
late unsecured general creditor claim in the KSC bankruptcy estate.  The amount
in stock and cash to be paid by the bankruptcy estate is currently estimated to
be less than $150,000.  City of Richmond, et al v. Levin Enterprises, Inc., et
al. (United States District Court, Northern District of California, Case No. C-
97-3213 CRB).

     7-7 PRP Site. The U.S. Environmental Protection Agency has alleged that the
Company, along with a number of other entities, is responsible for clean-up and
oversight costs associated with the remediation of one of more sites located in
Ohio formally owned or operated by 7-7, Inc. 7-7, Inc. was a remediation
contractor. 7-7, Inc. was retained by the Company in connection with certain
remediation projects. Since, the Company believes it could be found to be a de
minimis potentially responsible party, the Company along with a number of other
entities entered into a consent order with the EPA. The Company's liability, if
any, is currently estimated to be less than $150,000.

     Asbestos Suits.  The Company along with KSC are currently named in
approximately forty (40) active asbestos lawsuits.  The Company and KSC have
been previously named in other asbestos suits but for various reasons those
suits are not currently being pursued.  Most of the plaintiffs alleged that they
worked in shipyards in the Oakland/San Francisco, California area in the 1940's
and that KSC was in some manner associated with one or more shipyards or has
successor liability from another "Kaiser" entity.  Most of these lawsuits are
third party premises claims claiming injury resulting from exposure to asbestos
and involve multiple defendants.  The Company anticipates that it will be named
as a defendant in additional asbestos lawsuits.  Virtually of the complaints are
non-specific.  As such it is not practical at this time to determine the true
nature and extent of the claims against the Company and KSC.  To date, several,
but not all, of the plaintiffs have agreed that they will not personally pursue
the Company, but they have been granted the right to pursue the Company's
insurance coverage, to the extent there is coverage.  The Company currently
believes that it does have insurance coverage for at least a portion of the
claims and has tendered these suits for defense.  The Company also currently
believes that it has

                                       79
<PAGE>

various defenses to these claims, including the discharge granted to it in
connection with KSC's bankruptcy reorganization. The KSC bankruptcy estate,
through KSC Recovery has been incurring defense costs, which should in large
part be reimbursed by insurance. However, there currently is a dispute as to the
amount of insurance coverage. The Company and KSC Recovery are engaged in
settlement negotiations with insurance carriers with regard to the coverage
dispute. Asbestos litigation is an evolving area of the law and the factual
discovery with respect to many of these lawsuits has not been completed.

     City of Ontario Litigation. There has been no material change in this
matter since the 1998 10-K Report. By way of background, on February 27, 1996,
the City of Ontario, California served on the Company a complaint filed in San
Bernardino County Superior Court (City of Ontario v. Kaiser Ventures Inc., et
al.; Case No. RCV 17334). In sum, the complaint alleges that a plume or plumes
containing organic carbon, dissolved solids and mercury originating from the
Company's Mill Site Property due to activities of KSC and/or a former tenant of
the Mill Site Property have impacted one of the City of Ontario's water wells.
Ontario seeks reimbursement for remedial costs, replacement of the allegedly
impacted well and replacement or improvement or refurbishment of related
facilities.

     The Company challenged Ontario's ability to bring this litigation given the
KSC bankruptcy and the discharge granted to the Company.  In April 1996, Ontario
brought a declaratory judgment action in the U.S. District Court for the
District of Colorado in Bankruptcy (the "U.S. Bankruptcy Court") against the
Company, (City of Ontario v. Kaiser Ventures Inc., Adversary Proceeding No. 96-
1215 MSK).  In the U.S. Bankruptcy Court action, Ontario in effect sought a
determination that the matters and damages alleged in its California lawsuit
were not discharged as a part of the KSC bankruptcy proceedings.

     The Company and the City reached a settlement concerning the matter before
the U.S. Bankruptcy Court which was approved by the U.S. Bankruptcy Court in
October. Under the terms of the settlement, the Company has agreed to waive its
bankruptcy-related defenses to the City's prosecution of claims for groundwater
contamination caused by mercury or other priority pollutants. In return, the
City agreed to dismiss the California litigation as to all claims related to
total dissolved solids, total dissolved carbons and sulfates, and to be bound by
the 1993 Settlement Agreement between Kaiser and the California Regional Water
Quality Control Board. The City has informed the Company that its well tests do
not currently indicate the presence of mercury. However, the City continues to
assert that the Company is responsible for the impact of total dissolved solids
at the well. The City has not yet filed an amended complaint. The Company and
the City of Ontario are continuing to engage in informal discovery and
discussions. The Company currently believes it has numerous defenses in the
litigation.

     Willow Creek Shareholder Litigation.  On December 20, 1999, the Company was
served with a complaint challenging and seeking damages in connection with a
transaction completed on November 22, 1999, pursuant to which the Company
purchased a substantial portion of its common stock from The New Kaiser
Voluntary Employees' Beneficiary Association ("VEBA") and the Pension Benefit
Guaranty Corporation ("PBGC").  The litigation was initiated by a shareholder of
the Company, but the matter was not a class action lawsuit.  On March 9, 2000,
this federal lawsuit was voluntarily dismissed, without prejudice, by the
plaintiffs.  However, it is the Company's understanding that the plaintiffs
intend to file a new lawsuit in California State Court in the near future.
Willow Creek Capital Partners, L.P. a Delaware limited partnership; and Willow
Creek Offshore, v. Kaiser Ventures Inc. et al. (United States District Court,
Northern District of California, Case No. C99 5188 SBA).

Bankruptcy Claims

     The Company's predecessor, KSC, was in reorganization under Chapter 11 of
the United States Bankruptcy Code from February 1987 until November 1988.
Pursuant to the KSC Plan of Reorganization (the "KSC Plan"), the Company
established a subsidiary, KSC Recovery, which was engaged in the process of
pursuing certain legal actions on behalf of the former creditors of KSC and

                                       80
<PAGE>

handling the remaining administrative duties of the KSC bankruptcy estate,
including claims resolution. All litigation and bankruptcy administration costs
are borne by KSC Recovery, which maintains a cash reserve from previous
litigation and other recoveries to fund anticipated ongoing litigation and
administration costs. All major remaining claims in the bankruptcy estate were
settled in 1995, with completion of one major settlement occurring in 1996.
Resolution of these claims allowed for a distribution of cash and stock to most
of the unsecured creditors of the KSC bankruptcy estate in the second quarter of
1996. Consistent with KSC Recovery's role solely as an agent of the former KSC
creditors, the Company's consolidated statements of operations and cash flows do
not reflect any of KSC Recovery's activities. Because of the minimum activities
of the KSC bankruptcy estate, the Bankruptcy Court terminated its supervision
over the estate in October 1996. However, the bankruptcy estate was recently
reopened to address certain litigation matters.

     From time-to-time, various other environmental and similar types of claims,
such as the environmental and asbestos litigation mentioned above, that relate
to KSC pre-bankruptcy activities are asserted against KSC Recovery and the
Company.  In connection with the KSC Plan, the Company, as the reorganized
successor to KSC, was discharged from all liabilities that may have arisen prior
to confirmation of the KSC Plan, except as otherwise provided by the KSC Plan
and by law.  Although the Company believes that in general all pre-petition
claims were discharged under the KSC Plan, in the event any of these claims or
other similar claims are ultimately determined to survive the KSC bankruptcy, it
could have a material adverse effect on the Company.


                          [Intentionally Left Blank]

                                       81
<PAGE>

Note 21.  QUARTERLY FINANCIAL DATA (Unaudited)

<TABLE>
<CAPTION>
                                                         First            Second                Third            Fourth
                                                        Quarter           Quarter              Quarter           Quarter
                                                        -------           -------              -------           -------
<S>                                                   <C>                <C>                 <C>               <C>
1999
Resource revenues.............................        $1,274,000         $1,865,000          $40,932,000       $ 7,555,000

Income (loss) from operations.................        $ (223,000)        $  304,000          $39,254,000       $(3,607,000)

Income (loss) before income tax provision.....        $ (542,000)        $  (30,000)         $39,150,000       $(3,348,000)

Net (loss) income.............................        $ (327,000)        $  (26,000)         $29,307,000       $(4,925,000)

Earnings (loss) per share
 Basic........................................        $     (.03)        $      .00          $      2.77       $      (.39)
 Diluted......................................        $     (.03)        $      .00          $      2.73       $      (.39)

1998

Resource revenues.............................        $1,673,000         $3,066,000          $ 2,416,000       $ 2,718,000

Income (loss) from operations.................        $ (371,000)        $1,113,000          $   586,000       $ 1,230,000

Income (loss) before income tax provision.....        $ (586,000)        $  854,000          $   332,000       $   875,000

Net (loss) income.............................        $ (339,000)        $  491,000          $   189,000       $   891,000

Earnings (loss) per share
 Basic........................................        $     (.03)        $      .05          $       .02       $       .08
 Diluted......................................        $     (.03)        $      .05          $       .02       $       .07

1997

Resource revenues.............................        $1,837,000         $3,221,000          $ 2,977,000       $ 1,971,000

Income (loss) from operations.................        $ (112,000)        $1,288,000          $ 1,149,000       $  (134,000)

Income (loss) before income tax provision.....        $ (295,000)        $1,051,000          $   873,000       $  (110,000)

Net (loss) income.............................        $ (174,000)        $  604,000          $   493,000       $   (75,000)

Earnings (loss) per share
 Basic........................................        $     (.02)        $      .06          $       .05       $      (.01)
 Diluted......................................        $     (.02)        $      .06          $       .05       $      (.01)
</TABLE>

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<PAGE>

                     KAISER VENTURES INC. AND SUBSIDIARIES


         SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
                                           Balance at    Charged to    Deductions
                                            Beginning    Costs and        from          Balance at
          Classification                    of Period   Expenses (A)    Reserves       End of Period
-------------------------------------      ----------   ------------   ----------      -------------
  <S>                                        <C>          <C>            <C>              <C>
  Year Ended December 31, 1999
  ----------------------------

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

  Year Ended December 31, 1998
  ----------------------------

  Allowance for losses in collection
  of current accounts receivable.....      $  299,000   $     31,000   $   27,000      $     303,000
                                           ==========   ============   ==========      =============


  Year Ended December 31, 1997
  ----------------------------

  Allowance for losses in collection
  of current accounts receivable.....      $  286,000   $     54,000   $   41,000      $     299,000
                                           ==========   ============   ==========      =============
</TABLE>



(A) Although the Company is continuing to bill Cucamonga at what it believes is
the correct Metropolitan Water District of Southern California ("MWD") rate
under the lease with Cucamonga, the Company has elected to report revenues on
the basis of amounts Cucamonga is currently paying.  The amounts for 1996 and
1997 above have been restated to remove the disputed amounts which had
previously been included in accounts receivable and the account receivable
reserve.  The total amount of lease payments in dispute for the years ended
December 31, 1999, 1998, and 1997 are approximately $680,000, $658,000, and
$488,000, respectively.

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