<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   -----------
                                    FORM 10-Q
                                   -----------

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

              FOR THE TRANSITION PERIOD FROM ________ TO ________.

                          Commission File Number 20418

                              KENNEDY-WILSON, INC.
             (Exact name of registrant as specified in its charter)


            Delaware                                  95-4364537
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
 incorporation or organization)
                                                         90210
 9601 Wilshire Blvd., Suite 220                       (Zip Code)
        Beverly Hills, CA
 (Address of principal executive
            offices)


                                 (310) 887-6400
              (Registrant's telephone number, including area code)

                                   -----------

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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common stock, $.01 par value;
8,719,233 shares outstanding at November 12, 2001.

<PAGE>

                              KENNEDY-WILSON, INC.
                     INDEX TO QUARTERLY REPORT ON FORM 10-Q
                               SEPTEMBER 30, 2001

<TABLE>
<CAPTION>
                                                                                  Page
PART I.   Financial Information
<S>                                                                               <C>
     Item 1.   Financial Statements

        Consolidated Balance Sheets as of September 30, 2001 and December 31,
        2000 (Unaudited)                                                            3

        Consolidated Statements of Income for the Three-Month and Nine-Month
        Periods Ended September 30, 2001 and 2000 (Unaudited)                       4

        Consolidated Statements of Cash Flows for the Nine-Month Periods Ended
        September 30, 2001 and 2000 (Unaudited)                                     5

        Notes to Consolidated Financial Statements (Unaudited)                      7

     Item 2.   Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                           11

     Item 3.   Quantitative and Qualitative Disclosure about Market Risk           15

PART II.  Other Information                                                        16

     Item 6.   Exhibits and Reports on Form 8-K                                    16
</TABLE>

                                       2

<PAGE>

                      KENNEDY-WILSON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                  September 30,
                                                      2001       December 31,
                                                  (Unaudited)        2000
                                                  ------------   ------------
ASSETS

Cash and cash equivalents                         $  9,279,000   $  5,228,000
Cash - restricted                                      191,000        696,000
Accounts receivable                                  8,477,000     12,399,000
Notes receivable                                    16,311,000     11,320,000
Real estate held for sale                            1,252,000     19,248,000
Investments in joint ventures                       48,780,000     43,167,000
Contracts and other assets, net                     16,803,000     16,599,000
Goodwill, net                                       24,184,000     24,447,000
                                                  ------------   ------------
Total assets                                      $125,277,000   $133,104,000
                                                  ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Accounts payable                                  $    762,000   $  2,283,000
Accrued expenses and other liabilities               5,833,000      6,404,000
Accrued salaries and benefits                        2,316,000      6,138,000
Deferred income taxes                                3,580,000      4,475,000
Notes payable                                        9,433,000      8,423,000
Borrowings under lines of credit                    29,678,000     28,938,000
Mortgage loans payable                                       -      4,637,000
Senior unsecured notes                              14,604,000     14,542,000
Subordinated debt                                    7,500,000      7,500,000
                                                  ------------   ------------
         Total liabilities                          73,706,000     83,340,000
                                                  ------------   ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 par value: 5,000,000
     shares authorized; none issued as of
     September 30, 2001 and December 31, 2000                -              -
Common stock, $0.01 par value: 50,000,000 shares
     authorized; 8,719,233 and 8,648,640 shares
     issued and outstanding as of September 30,
     2001 and December 31, 2000, respectively           88,000         87,000
Additional paid-in capital                          48,321,000     45,458,000
Restricted stock - deferred compensation            (2,751,000)             -
Retained earnings                                    6,023,000      4,365,000
Notes receivable from stockholders                    (110,000)      (146,000)
                                                  ------------   ------------
         Total stockholders' equity                 51,571,000     49,764,000
                                                  ------------   ------------
Total liabilities and stockholders' equity        $125,277,000   $133,104,000
                                                  ============   ============

                See notes to consolidated financial statements.

                                       3

<PAGE>

                      KENNEDY-WILSON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  For the three months ended         For the nine months ended
                                                           September 30,                   September 30,
                                                 -----------------------------      -----------------------------
                                                     2001             2000              2001             2000
                                                 ------------     ------------      ------------     ------------
<S>                                              <C>              <C>               <C>              <C>
REVENUE

Property management and leasing fees             $  8,600,000     $  9,413,000      $ 24,650,000     $ 26,362,000
Commissions                                         2,668,000        3,944,000         9,642,000       12,578,000
Sales of residential real estate                    1,620,000                -        10,178,000       25,692,000
Equity in income of joint
  venture investments                               1,308,000          686,000         3,929,000        2,691,000
Gain on sale of commercial real estate                      -                -           281,000                -
Gain on restructured notes receivable                 130,000          516,000           177,000        2,803,000
Interest and other income                             454,000          963,000         1,052,000        2,295,000
                                                 ------------     ------------      ------------     ------------
         Total revenue                             14,780,000       15,522,000        49,909,000       72,421,000
                                                 ------------     ------------      ------------     ------------

OPERATING EXPENSES

Commissions and marketing expenses                  2,018,000        1,955,000         5,740,000        3,313,000
Cost of residential real estate sold                1,594,000                -         9,879,000       22,855,000
Compensation and related expenses                   5,721,000        6,602,000        17,880,000       22,201,000
General and administrative                          2,776,000        4,058,000         8,389,000       12,514,000
Depreciation and amortization                         978,000        1,313,000         2,904,000        3,045,000
Interest expense                                      659,000          158,000         2,441,000        3,012,000
                                                 ------------     ------------      ------------     ------------
         Total operating expenses                  13,746,000       14,086,000        47,233,000       66,940,000
                                                 ------------     ------------      ------------     ------------

Income before provision
  for income taxes                                  1,034,000        1,436,000         2,676,000        5,481,000

Provision for income taxes                            394,000          488,000         1,018,000        1,669,000
                                                 ------------     ------------      ------------     ------------
NET INCOME                                       $    640,000     $    948,000      $  1,658,000     $  3,812,000
                                                 ============     ============      ============     ============

Share data:
Basic net income per share                       $       0.07     $       0.11      $       0.19     $       0.42
Basic weighted average shares                       8,701,924        9,010,536         8,693,047        9,063,667

Diluted net income per share                     $       0.07     $       0.10      $       0.19     $       0.40
Diluted weighted average shares                     8,901,610       10,154,688         8,842,060       10,202,068
</TABLE>

                 See notes to consolidated financial statements.

                                       4

<PAGE>

                      KENNEDY-WILSON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           For the nine months ended
                                                                                  September 30,
                                                                          -------------------------------
                                                                             2001                  2000
                                                                          ------------         ----------
<S>                                                                      <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                $  1,658,000        $ 3,812,000
Adjustments to reconcile net income to net
     cash used in operating activities:
     Depreciation and amortization                                           2,904,000          3,046,000
     Equity in income of joint venture investments                          (3,929,000)        (2,691,000)
     Compensation expense for restricted stock                                 223,000                  -
     Gain on restructured notes receivable - non-cash                                -           (744,000)
Change in assets and liabilities:
     Accounts receivable                                                     3,922,000         (1,681,000)
     Other assets                                                           (2,881,000)        (2,885,000)
     Accounts payable                                                       (1,521,000)          (906,000)
     Accrued expenses and other liabilities                                 (1,588,000)        (6,696,000)
                                                                          ------------        -----------
     Net cash used in operating activities                                  (1,212,000)        (8,745,000)
                                                                          ------------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of contracts, furniture, fixtures
     and equipment                                                            (250,000)          (597,000)
Additions to goodwill                                                         (400,000)        (1,103,000)
Settlements of notes receivable                                              3,994,000          9,629,000
Additions to notes receivable                                               (3,585,000)        (1,695,000)
Proceeds from sales of real estate held for sale                            11,434,000         23,226,000
Purchase and additions to real estate held for sale                         (2,538,000)       (22,900,000)
Distributions from joint ventures                                           19,321,000          6,191,000
Contributions to joint ventures                                            (20,298,000)       (16,824,000)
Cash - restricted decrease                                                     505,000          2,080,000
                                                                          ------------        -----------
    Net cash provided by investing activities                                8,183,000         (1,993,000)
                                                                          ------------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under notes payable                                               3,978,000          9,196,000
Repayment of notes payable                                                  (2,968,000)        (7,181,000)
Borrowings under lines of credit                                            20,879,000         22,152,000
Repayment of lines of credit                                               (20,139,000)       (22,063,000)
Issuance of mortgage loans payable                                           1,730,000          5,733,000
Repayment of mortgage loans payable                                         (6,367,000)        (5,133,000)
Senior unsecured notes                                                          62,000         14,514,000
Repayment of subordinated debt                                                       -         (9,000,000)
Issuance of common stock                                                        62,000            134,000
Repurchase of common stock                                                    (193,000)          (394,000)
Loan repayments from stockholders                                               36,000             18,000
                                                                          ------------         ----------
    Net cash (used in) provided by financing activities                     (2,920,000)         7,976,000
                                                                          ------------         ----------
Net increase (decrease) in cash and cash equivalents                         4,051,000         (2,762,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               5,228,000          5,243,000
                                                                          ------------         ----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $  9,279,000         $2,481,000
                                                                          ============         ==========
</TABLE>

                 See notes to consolidated financial statements.

                                        5

<PAGE>

                     KENNEDY-WILSON, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

Supplemental Disclosures of Non-Cash Investing and Financing Activities:

During 2001 the Company sold a real estate investment which, in addition to $1.4
million cash received, included the following consideration: reduction of real
estate held for sale of $10.2 million and a reduction of deferred taxes of $3.7
million, offset by a note receivable of $5.4 million.

During 2001 the Company acquired a preferred stock interest in a single purpose
entity with the following consideration, reduction of real estate held for sale
of $2.9 million offset against an investment in joint ventures, cost method of
$2.9 million.

During 2000 the Company acquired a preferred stock interest in a single purpose
entity with the following consideration, reduction of prepaid expenses of $1.2
million and reduction of accounts payable of $80,000, offset against an
investment in joint ventures, cost method of $1.12 million.


                                       6

<PAGE>

                      KENNEDY-WILSON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)

NOTE 1 - FINANCIAL STATEMENT PRESENTATION

The above financial statements have been prepared by Kennedy-Wilson, Inc. a
Delaware corporation, and subsidiaries (the "Company") without audit by
independent public accountants, pursuant to the Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934. The statements, in the opinion of the Company, present
fairly the financial position and results of operations for the dates and
periods indicated. The information presented as of and for the three and nine
month periods ended September 30, 2001 and 2000 has not been audited by
independent accountants, but includes all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the results for such periods. The results of operations for
the three and nine month periods ended September 30, 2001 are not necessarily
indicative of results that might be expected for the full fiscal year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the Rules and Regulations of the Securities and
Exchange Commission. The Company believes that the disclosures contained in the
financial statements are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000. Certain
reclassifications have been made to prior period balances to conform to the
current period presentation.

The Company's adoption of Statement of Financial Accounting Standard ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities", on
January 1, 2001 did not have a material impact on the Company's financial
position or results of operations.

In July 2001, the Financial Accounting Standards Board ("FASB") approved SFAS
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 prospectively prohibits the pooling of interest
method of accounting for business combinations initiated after June 30, 2001.
SFAS No. 142, which is effective January 1, 2002, includes requirements to test
goodwill and indefinite lived intangible assets for impairment rather than
amortize them. The Company is currently evaluating the impact that these
standards will have on its financial statements. The expense for amortization of
goodwill and other intangible assets for the nine months ended September 30,
2001 and 2000 was approximately $1.7 million and $1.6 million, respectively.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which addresses the accounting and reporting for
the impairment and disposal of long-lived assets. SFAS No. 144 is effective
January 1, 2002. The Company is currently evaluating the impact that this
standard will have on its financial statements.

NOTE 2 - INVESTMENTS IN JOINT VENTURES

The Company has a number of partnerships and joint venture interests ranging
from 2% to 50% that were formed to acquire, manage, develop and/or sell real
estate. These investments are accounted for under the equity method. Investments
in joint ventures also include mezzanine loans to real estate developers for new
single-family residential developments. These investments are accounted for
under the cost method.


                                       7

<PAGE>

NOTE 3 - REAL ESTATE HELD FOR SALE

Real estate held for sale is comprised of residential properties and land, and
is accounted for at the lower of carrying amount or fair value less cost to
sell. Real estate is classified as held for sale since the Company's intent is
to acquire and dispose of properties as part of its normal course of business.

NOTE 4 - EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                     For the three months ended         For the nine months ended
                                             September 30,                     September 30,
                                    ------------------------------     -----------------------------
                                        2001              2000             2001             2000
                                    ------------      ------------     ------------     ------------
<S>                                 <C>               <C>              <C>              <C>
BASIC CALCULATION

Net income                          $    640,000      $    948,000     $  1,658,000     $  3,812,000
                                    ============      ============     ============     ============

Weighted average shares                8,701,924         9,010,536        8,693,047        9,063,667
                                    ============      ============     ============     ============

Earnings per share - Basic          $       0.07      $       0.11     $       0.19     $       0.42
                                    ============      ============     ============     ============

DILUTED CALCULATION

Net income                          $    640,000      $    948,000     $  1,658,000     $  3,812,000
Income effect of dilutive
   securities, tax effected                    -            74,000                -          223,000
                                    ------------      ------------     ------------     ------------
Diluted net income                  $    640,000      $  1,022,000     $  1,658,000     $  4,035,000
                                    ============      ============     ============     ============

Weighted average shares                8,701,924         9,010,536        8,693,047        9,063,667
Convertible debentures                         -           750,000                -          750,000
Common stock equivalents                 199,686           394,152          149,013          388,401
                                    ------------      ------------     ------------     ------------
Total diluted shares                   8,901,610        10,154,688        8,842,060       10,202,068
                                    ============      ============     ============     ============

Earnings per share - Diluted        $       0.07      $       0.10     $       0.19     $       0.40
                                    ============      ============     ============     ============
</TABLE>

At September 30, 2001, potentially dilutive convertible debentures are excluded
from the diluted earnings per share calculation as their effect is
anti-dilutive.

NOTE 5 - SEGMENT INFORMATION

The Company's business activities currently consist of property management,
commercial and residential brokerage, and various types of real estate and note
investments. The Company's segment disclosure with respect to the determination
of segment profit or loss and segment assets is based on these services and its
various investments:

Property Management - The Company is a national commercial and residential
property management and leasing company, providing a full range of services
relating to property management, including tenant representation. The

                                       8

<PAGE>

Company also provides asset management services for some of our joint ventures.

Brokerage - The Company provides specialized brokerage services for both
commercial and residential real estate and provides other real estate services
such as property valuations, development and implementation of marketing plans,
arranging financing, sealed bid auctions and open bid auctions.

Investments - With joint venture partners and on its own, the Company invests in
commercial and residential real estate and purchases and manages pools of
distressed notes. The Company's current real estate portfolio focuses on
commercial buildings and multiple and single-family residences. The Company has
entered into joint ventures with large international investors, to invest in
both U.S. and Japanese real estate and note pools. The Company also makes
mezzanine loans to real estate developers for new single-family, residential
developments.

The following tables reconcile the Company's income and expense activity for the
three and nine months ended September 30, 2001 and balance sheet data as of
September 30, 2001.

<TABLE>
<CAPTION>
              2001 Reconciliation of Reportable Segment Information

                                          For the three months ended September 30, 2001
                             ----------------------------------------------------------------------------------
                               Property
                              Management        Brokerage       Investments         Corporate      Consolidated
                             -----------       -----------      -----------       -----------      ------------
<S>                          <C>               <C>              <C>               <C>              <C>
Property management
   and leasing fees          $ 6,877,000       $ 1,367,000      $   341,000       $    15,000      $  8,600,000
Commissions                      419,000         2,142,000          253,000          (146,000)        2,668,000
Sales of residential
   real estate                                                    1,620,000                           1,620,000
Other                                            1,281,000          252,000           359,000         1,892,000
                             -----------       -----------      -----------       -----------      ------------
Total revenue                  7,296,000         4,790,000        2,466,000           228,000        14,780,000
Operating expenses             5,989,000         2,924,000        1,740,000         3,093,000        13,746,000
                             -----------       -----------      -----------       -----------      ------------
Income before provision
   for income taxes          $ 1,307,000       $ 1,866,000      $   726,000       $(2,865,000)     $  1,034,000
                             ===========       ===========      ===========       ===========      ============
</TABLE>

<TABLE>
<CAPTION>
                                           For the nine months ended September 30, 2001
                             ----------------------------------------------------------------------------------
                               Property
                              Management        Brokerage       Investments         Corporate      Consolidated
                             -----------       -----------      -----------       -----------      ------------
<S>                          <C>               <C>              <C>               <C>              <C>
Property management
   and leasing fees          $20,947,000       $ 2,923,000      $   765,000       $    15,000      $ 24,650,000
Commissions                    1,450,000         7,595,000          743,000          (146,000)        9,642,000
Sales of residential
   real estate                                           -       10,178,000                          10,178,000
Other                                            4,090,000          855,000           494,000         5,439,000
                             -----------       -----------      -----------       -----------      ------------
Total revenue                 22,397,000        14,608,000       12,541,000           363,000        49,909,000
Operating expenses            19,014,000         8,444,000       10,180,000         9,595,000        47,233,000
                             -----------       -----------      -----------       -----------      ------------
Income before provision
   for income taxes          $ 3,383,000       $ 6,164,000      $ 2,361,000       $(9,232,000)     $  2,676,000
                             ===========       ===========      ===========       ===========      ============

Total assets                 $16,298,000       $24,946,000      $58,342,000       $25,691,000      $125,277,000
                             ===========       ===========      ===========       ===========      ============
</TABLE>

                                       9

<PAGE>

The following tables reconcile the Company's income and expense activity for the
three and nine months ended September 30, 2000.

              2000 Reconciliation of Reportable Segment Information



<TABLE>
<CAPTION>
                                             For the three months ended September 30, 2000
                             ----------------------------------------------------------------------------------
                              Property
                             Management         Brokerage       Investments        Corporate       Consolidated
                             -----------       -----------      -----------       -----------      ------------
<S>                          <C>               <C>              <C>               <C>              <C>

Property management
   and leasing fees          $ 8,623,000       $   790,000                                         $  9,413,000
Commissions                    1,027,000         2,642,000      $   275,000                           3,944,000
Sales of residential
   real estate
Other                                              606,000        1,085,000       $   474,000         2,165,000
                             -----------       -----------      -----------       -----------      ------------
Total revenue                  9,650,000         4,038,000        1,360,000           474,000        15,522,000
Operating expenses             8,851,000         1,549,000        1,811,000         1,875,000        14,086,000
                             -----------       -----------      -----------       -----------      ------------
Income before provision
   for income taxes          $   799,000       $ 2,489,000      $  (451,000)      $(1,401,000)     $  1,436,000
                             ===========       ===========      ===========       ===========      ============
</TABLE>


<TABLE>
<CAPTION>
                                             For the nine months ended September 30, 2000
                             ----------------------------------------------------------------------------------
                              Property
                             Management         Brokerage       Investments        Corporate       Consolidated
                             -----------       -----------      -----------       -----------      ------------
<S>                          <C>               <C>              <C>               <C>              <C>
Property management
   and leasing fees          $24,952,000       $ 1,160,000      $   250,000                        $ 26,362,000
Commissions                    4,171,000         7,622,000          785,000                          12,578,000
Sales of residential
   real estate                                                   25,692,000                          25,692,000
Other                                            2,218,000        4,539,000       $ 1,032,000         7,789,000
                             -----------       -----------      -----------       -----------      ------------
Total revenue                 29,123,000        11,000,000       31,266,000         1,032,000        72,421,000
Operating expenses            24,152,000         4,808,000       28,067,000         9,913,000        66,940,000
                             -----------       -----------      -----------       -----------      ------------
Income before provision
   for income taxes          $ 4,971,000       $ 6,192,000      $ 3,199,000       $(8,881,000)     $  5,481,000
                             ===========       ===========      ===========       ===========      ============
</TABLE>

                                       10


<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

We are an international real estate services and investment company. We provide
property management and leasing services, asset management, commercial and
residential brokerage, and auction services to clients primarily in the U.S. and
Japan. Our clients include financial institutions, major corporations, real
estate developers, insurance companies and governmental agencies. We also invest
in commercial and residential real estate, as well as individual and pools of
distressed notes both in the U.S. and Japan.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

TOTAL REVENUE

Total revenue for the three months ended September 30, 2001 was approximately
$14.8 million, compared to $15.5 million during the same period in 2000.
Earnings before taxes for the three months ended September 30, 2001 were
approximately $ 1 million, compared to $1.4 million for the same period in
2000. Net income for the three months ended September 30, 2001 was $640,000,
compared to $948,000 million for the same period in 2000.

Property management and leasing operations generated $8.6 million of revenue in
the third quarter of 2001, representing 58% of our total revenue as compared to
approximately $9.4 million and 61% of total revenue for the same period in 2000.
As of September 30, 2001, we had under management a portfolio of approximately
70 million square feet of commercial, industrial and apartment properties
located in 24 states and Japan.

Brokerage commission revenue for the third quarter of 2001 was approximately
$2.7 million, representing 18% of total revenue, compared to approximately
$3.9 million and 25% of total revenue for the third quarter of 2000.

Sales of residential real estate were approximately $1.6 million for the three
months ended September 30, 2001, representing 11% of total revenue compared to
no sales for the same three months in 2000. Revenue for the three months ended
September 30, 2001 represents the sale of seven units in a 109-unit, single
family residential development near Palm Springs, California. The sales of
residential real estate reflect our continuing strategy to sell upon completion
of planned improvements, rather than holding for speculation.

Equity in income of joint venture investments totaled approximately $1.3
million for the third quarter in 2001, or 9% of total revenue compared to
$686,000 realized in the third quarter of 2000. The increase was due primarily
to the increased income from our joint venture investments in Japan.

Gain on restructured notes totaled $130,000 for the three months ended September
30, 2001, compared to $516,000 for the same period in 2000. The decrease
reflects the fact that most of the large notes have been settled or

                                       11

<PAGE>

restructured and we are now in the process of settling the smaller notes. Our
strategy to collect the note balances consists of either restructuring the note
to performing status, negotiating a payoff, or foreclosing and selling the
related collateral.

TOTAL OPERATING EXPENSES

Operating expenses for the third quarter of 2001 were approximately $13.7
million, compared to approximately $14.1 million for the same period in 2000.
Compensation and general and administrative expenses decreased by $2.2 million
which represents a 20% reduction from the same quarter last year, due to our
continuing cost reduction initiatives.

Cost of residential real estate sold was approximately $1.6 million for the
three months ended September 30, 2001, compared to no cost for the same period
in 2000. The increase correlates with the increased revenues from the sales of
residential real estate discussed above.

Compensation and related expenses were approximately $5.7 million for the third
quarter of 2001, representing a 13% decrease from approximately $6.6 million for
the third quarter of 2000. The decrease was primarily a result of the cost
reduction initiatives mentioned above.

General and administrative expenses were approximately $2.8 million for the
third quarter of 2001, representing a 32% decrease from the same period in 2000
expenses of approximately $4.1 million. Again, the decrease was due primarily to
the continuing cost reduction initiatives.

Depreciation and amortization expense was $978,000 for the three months ended
September 30, 2001, compared to $1.3 million for the same period of 2000.

Interest expense was $659,000 for the third quarter of 2001, compared to
$158,000 during the same period in 2000.

The provision for income taxes was $394,000 for the third quarter in 2001,
compared to $488,000 for the third quarter of 2000, as a result of the change in
income before provision for income taxes.

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

TOTAL REVENUE

Total revenue for the nine months ended September 30, 2001 was approximately
$49.9 million, as compared to $72.4 million during the same period in 2000.
Earnings before taxes for the nine months ended September 30, 2001 were
approximately $2.7 million, compared to $5.5 million for the same period in
2000. Net income for the nine months ended September 30, 2001 was approximately
$1.7 million, compared to approximately $3.8 million for the same period in
2000.

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Property management and leasing operations generated approximately $24.7 million
of revenue in the first nine months of 2001, representing 49% of our total
revenue as compared to approximately $26.4 million for the same period in 2000.

Brokerage commission revenue for the first nine months of 2001 was $9.6 million,
representing 19% of total revenue, compared to brokerage commission revenue for
the same period of 2000 of approximately $12.6 million.

Sales of residential real estate were approximately $10.2 million for the nine
months ended September 30, 2001, representing 20% of total revenue compared to
approximately $25.7 million for the same period in 2000. Revenue for the first
nine months of 2001 represents the sale of 43 units in a 109-unit, single family
residential development near Palm Springs, California. This compares to sales in
the same period of 2000 of three projects, a 53-unit condominium complex in West
Los Angeles, 25 units in the same single family residential development
mentioned above and two single family homes in West Los Angeles.

Equity in income of joint venture investments totaled approximately $3.9 million
for the first nine months of 2001, or 8% of total revenue compared to $2.7
million realized in the same period of 2000. The increase was due primarily to
the increased income from our joint venture investments in Japan.

Gain on sale of commercial real estate totaled $281,000 for the nine months
ended September 30, 2001. There was no such similar gain in the same period of
2000.

Gain on restructured notes was $177,000 for the nine months ended September 30,
2001 compared to approximately $2.8 million for the same period in 2000. The
decrease reflects the fact that most of the large notes have been settled or
restructured and we are now in the process of settling the smaller notes. Our
strategy to collect the note balances consists of either restructuring the note
to performing status, negotiating a payoff, or foreclosing and selling the
related collateral.

TOTAL OPERATING EXPENSES

Operating expenses for the first nine months of 2001 were approximately $47.2
million, representing a 29% decrease from $66.9 million for the same period in
2000. The decrease was due, in part, to aggressive cost reduction initiatives
that reduced compensation and general and administrative expenses by $8.4
million, or 24%, compared to the same period last year. Total expenses also
decreased due to the reduced costs related to the sales of residential real
estate as discussed above.

Commissions and marketing expenses were $5.7 million for the nine months ended
September 30, 2001 compared to $3.3 million during the same period of 2000, as a
result of the increased broker commission expense associated with commission
revenue and the leasing commission component of property management and leasing
revenue.

Cost of residential real estate sold was approximately $9.9 million for the nine
months ended September 30, 2001, a 57% decrease from approximately $22.9 million
for the same period in 2000. The decrease correlates with the decreased revenues
from the sales of residential real estate discussed above.

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<PAGE>

Compensation and related expenses were approximately $17.9 million for the first
nine months of 2001, representing a 19% decrease from approximately $22.2
million for the same period of 2000. The decrease was primarily a result of the
continuing cost reduction initiatives mentioned above.

General and administrative expenses were approximately $8.4 million for the
first nine months of 2001, representing a 33% decrease from the same period in
2000 expenses of approximately $12.5 million. Again, the decrease is due
primarily to the continuing cost reduction initiatives.

Depreciation and amortization expense was $2.9 million for the nine months ended
September 30, 2001 compared to $3 million during the same period of 2000.

Interest expense was approximately $2.4 million for the first nine months of
2001, compared to approximately $3 million during the same period in 2000,
representing a 19% decrease.

The provision for income taxes was $1 million for the first nine months of 2001,
compared to approximately $1.7 million for the same period of 2000, as a result
of the change in income before provision for income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resource requirements include expenditures for joint
venture investments, distressed note pools, real estate held for sale, and
working capital needs. Historically, we have not required significant capital
resources to support our property management and brokerage operations. We
finance our operations with internally generated funds and borrowings under our
revolving lines of credit as described below. Our investments in real estate are
typically financed by mortgage loans secured primarily by that real estate.
These mortgage loans are generally nonrecourse in that, in the event of default,
recourse will be limited to the mortgaged property serving as collateral,
subject to certain exceptions that are standard in the real estate industry.

Cash used in operating activities during the nine months ended September 30,
2001 was approximately $1.2 million, compared to approximately $8.7 million in
cash used in operating activities for the same period in 2000. The change
included a decrease in accrued expenses offset by a decrease in accounts
receivable.

Cash provided by investing activities during the nine months ended September 30,
2001 was approximately $8.2 million, compared to approximately $2 million in
cash used in investing activities during the same period in 2000. The change
resulted primarily from the sale of residential real estate.

Cash used in financing activities was approximately $2.9 million for the first
nine months of 2001, compared to cash provided by financing activities for the
same period of 2000 of approximately $8 million. The change resulted, in part,
from a reduction in mortgage loans payable in 2001 and the issuance of senior
unsecured notes in 2000.

We intend to retain earnings to finance our growth and, therefore, do not
anticipate paying any dividends. To the extent that we engage in additional
strategic investments, we may need to obtain third party financing which could
include bank financing or the public sale or private placement of debt or equity
securities. We believe


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<PAGE>

that existing cash, plus capital generated from operations as well as our
unsecured lines of credit will provide us with sufficient capital requirements
for the foreseeable future. Our need, if any, to raise additional funds to meet
our working capital and capital requirements will depend on numerous factors,
including the success and pace of the implementation of our strategy for growth.
We regularly monitor capital raising alternatives to be able to take advantage
of other available avenues to support our working capital and investment needs,
including strategic partnerships and other alliances, bank borrowings, and the
sale of equity or debt securities.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's exposure to market risk has not materially changed from what was
reported on the Company's Form 10-K for the year ended December 31, 2000.

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements as well as historical
information. Forward looking statements, which are included in accordance with
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, may involve known and unknown risks, uncertainties and other factors that
may cause the company's actual results and performance to be materially
different from any results or performance suggested by the statements in this
report. When used in our documents or oral presentations, the words "plan,"
"believe," "anticipate," "estimate," "expect," "objective," "projection," "
forecast," "goal," or similar words are intended to identify forward-looking
statements.

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<PAGE>

                           PART II - OTHER INFORMATION


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

                  None

         (b) Reports on Form 8-K

                  None

SIGNATURE

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

                                                   KENNEDY-WILSON, INC.
                                                  ---------------------
                                                        Registrant
Date: November 12, 2001

     /S/ Freeman A. Lyle
------------------------
Freeman A. Lyle
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)

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