An 82.48%83.13% ownership interest in Mine Reclamation, LLC, (referred to as MRC), which owns a permitted rail-haul municipal solid waste landfill at a property called the Eagle Mountain Site located in the California desert. This landfill project is currently subject to a contract for its sale

A 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station, a transfer station and materials recovery facility located on land acquired from Kaiser, which we refer to as the West Valley MRF; and

Approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the District. Millions of tons of stockpiled rock are located on this acreage. However, the September 2005 adverse U.S. District Court decision reversing a completed land exchange between Kaiser and the United States Bureau of Land Management (“BLM”), if upheld on appeal, will change the amount and nature of a material portion of Kaiser’s land holdings at the Eagle Mountain Site;

Over approximately 150 million tons of stockpiled rock that is located on our fee owned Eagle Mountain property that is not a part of the landfill project. The sale of such rock is subject to market conditions and the Company having all necessary permits; and

Land at Lake Tamarisk consisting of 72 residential lots and approximately 420 acres of other undeveloped property. Lake Tamarisk is an unincorporated community located approximately 70 miles east of Palm Springs, California, and approximately 8 miles from the Eagle Mountain Site.

Resolve the outstanding litigation in connection with the related federal land exchange for such project and complete the sale of the landfill project at the Eagle Mountain Site and to resolve the outstanding litigation in connection with the related federal land exchange at that site.Site;

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

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

Explore other opportunities for use of the Eagle Mountain Site, including the development of the millions of tons of rock stockpiled at the site;

Sell the Company’s other miscellaneous assets, such as surplus property and mineral interests in Southern California; and

Minimize our general and administrative expenses by continuing to reduce our staff as we sell our remaining assets.

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

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

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

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

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

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

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

KAISER VENTURES LLC AND SUBSIDIARIES

We continue to undertake activities that evaluate and implement the cash maximization strategy. However, it is unlikely that staff and related expenses will be reduced further given our remaining assets and activities. In addition, the September 2005 adverse U.S. District Court decision concerning the landfill project and the outcome of the appeal of that decision may ultimately alter and will certainly impact the timing of the continuing implementation of the cash maximization strategy. For additional information on the adverse U.S. District Court decision and its appeal to the U.S. 9^th Circuit Court of Appeals, please see “Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project and Pending SaleLitigation.”

Repurchase of Units Through a Tender Offer.In September 2008 an unaffiliated third party initiated a tender offer to purchase up to 1,400,000 of the Company’s Class A Units at a price of $.50 per unit less a pro-rata portion of the associated transfer costs. The Company’s Board of Managers recommended that the owners of the Company’s Class A Units not sell their units for such price. In response to such tender offer and in recognition that some unitholders may have had a pressing need or desire to sell their units in the Company, the Company commenced its own tender offer for Class A Units at $.90 per unit net of all transfer costs. Even though the Company commenced a self-tender offer, the Company’s Board of Mangers recommended that owners of Class A Units not sell their units. The unaffiliated third party ultimately terminated its tender offer without purchasing any units. The Company’s tender offer closed on December 1, 2008. The Company purchased 841,544 Class A Units as a result of its tender offer which closed on December 1, 2008. An additional 140 Class A Units were purchased by the Company in January 2009. All repurchased units were cancelled resulting in a corresponding decrease in the number of Class A Units issued and outstanding.

EAGLE MOUNTAIN LANDFILL PROJECT AND PENDING SALE

Description of the Eagle Mountain Site. Kaiser’s 10,108 acre Eagle Mountain Site located in the remote California desert approximately 200 miles east of Los Angeles, consistscurrently consisting of approximately 10,800 acres that contains three large open pit mines, the Eagle Mountain Townsite and a 52-mile private rail line that accesses the site. In 1988, Kaiser leased what is now approximately 4,654 acres of the idle mine site and the rail line to MRC for development of a rail-haul solid-waste landfill. As discussed in more detail below, the amount and nature of the acreage owned and controlled at the Eagle Mountain Site would change in the event the September 2005 U.S. District Court decision reversing a land exchange completed between the Company and the BLM in October 1999 is upheld on appeal.

In 1988, in anticipation of Southern California’s need for new environmentally safe landfill capacity, MRC began the planning and permitting for a 20,000 ton per day rail-haul, non-hazardous solid waste landfill at Kaiser’s Eagle Mountain Site. The landfill project has received all the major permits and approvals required for siting, constructing, and operating the landfill project.project in 1999. We believe that the Eagle Mountain Site has many unique attributes which make it particularly well-suited for a rail-haul, solid waste landfill, including, among other attributes, its remote location, arid climate, available and suitable materials for the proposed liner system and daily cover, and rail access.

Acquisition of Our Interest in MRC. We initially acquired our interest in MRC in 1995, as a result of the withdrawal of MRC’s previous majority owner, a subsidiary of Browning Ferris Industries. Before and in connection with this withdrawal, Browning Ferris invested approximately $45 million in MRC. In 2000, Kaiser assigned all of the economic benefits of the MRC lease and granted an option to buy the landfill property to MRC in exchange for an increase in Kaiser’s ownership interest in MRC. The MRC lease will terminate upon the sale of the landfill project to the District, assuming the sale is completed. We presently own 82.48%83.13% of MRC’s Class B Units (like common stock) and 100% of its Class A Units.Units (like preferred stock). See “Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale - MRC Financing” below.

KAISER VENTURES LLC AND SUBSIDIARIES

Pending Sale of the Landfill Project

Background.In August 2000, MRC entered into an agreement to sell the landfill project to the District for $41 million. Under the terms of that agreement, upon closing of the sale, $39 million of the total purchase price is to be deposited into an escrow account. This money willwould then be released to MRC on the resolution of certain litigation contingencies relating tocontingencies. Currently the only existing litigation contingency arises out of the federal litigation challenging the completed federal land exchange.exchange which is discussed below. Even though the closing has not taken place and these funds have not been deposited into an escrow account, interest began accruing on this portion of the purchase price on May 3, 2001, and will be paid out to MRC on a quarterly basis once the initial closing of the sale occurs and once there is a successful outcome of the federal litigation at the Federal District Court level.2001. The remaining $2 million of the purchase price would also be placed into an escrow account upon closing and was originally to be released upon the later of (1) the release of the $39 million as described above or (2) the permitting approvals of the District’s Puente Hills landfill for its remaining 10 years of capacity. However, in 2003 and early 2004 the District has received the necessary permits for the expansion of its Puente Hills landfill and thus, the full purchase price willwould be placed into escrow when the initial closing has occurred, and will be released upon resolutionoccurred. As discussed in more detail in “Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Exchange Litigation,” on September 20, 2005, the U.S. District Court for the Central District of California, Eastern Division, issued an adverse decision in the pending federal land exchange litigation. Receiptlitigation, which would, if fully affirmed on appeal, jeopardize the viability of the landfill project and its sale to the District. Accordingly, receipt of the purchase price, in whole or in part, if at all, is expectedwill continue to be delayed for several years pending satisfactory resolution of these contingencies. At this time, we cannot estimate when or if the sale may be completed.

Additionally, theThe sale of the landfill project is subject to the results of the District’s due diligence and satisfaction of numerous contingencies. The contingencies include, but are not limited to, obtaining the transfer of the landfill project’s permits to the District, obtaining all necessary consents to the transaction, resolving title matters, and negotiating mutually acceptable joint use agreements.agreements and resolution of outstanding litigation. We continue to workhave been working on resolving various title issues, obtaining necessary consents and otherwise working toward a closing. However, resolution of all remaining issues will not occur until and unless there is a positive decision in the land exchange litigation which is currently on appeal to the U.S. 9^th Circuit Court of Appeals. Although the contractual expiration date is currently June 30, 2004,2009, the date has already been extended numerous times. The conditions to closing are not expected to be met by the current expiration date, and the parties will individually determine whether to extend the closing date one or more additional times. In addition, as discussed in more detail below, the adverse decision in the federal land exchange may impact the sale of the landfill project to the District. There is no assurance or requirement that either party will continue to extend the closing date for the proposed sale of the landfill project. Kaiser has agreed with the District to vote its interest in MRC in favorSee “Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project and Pending Sale - Risks Factors” for a more detailed discussion of some of the sale ofmaterial risk factors facing the landfill project to the District onand its current terms prior to the initial closing.

sale.

Flood Damage to Railroad

The Company owns an approximate 52-mile private railroad that runs from Ferrum Junction near the Salton Sea to the Eagle Mountain mine. In late August and early September of 2003, portions of the railroad and related protective structures sustained considerable damage due to heavy rains and flash floods. This damage included having some rail sections being buried under silt while other areas had their rail bed undermined. Subsequent to the filing of our report on Form 10-Q for the quarter ended September 30, 2003, we conducted a more complete investigation of the damage and of the costs to return the railroad to the condition that it was in prior to the flood damage. As a result of suchthat investigation, we currently estimateestimated that the cost to repair the damage to be a minimum of $4,500,000. We currently plan to undertake, as soon as reasonably possible,$4.5 million for which an accrual has been made. Since the 2003 floods, work necessary to help preserve and protect the existing railroad.railroad has been undertaken. However, the major repairs required to return the railroad to its condition prior to the flood damage will be deferred until a later date.

MRC FinancingKAISER VENTURES LLC AND SUBSIDIARIES

MRC Financing

Since 1995 MRC has been funded through a series of private placements to its existing equity holders. DuringAs a result of prior MRC private placements and in exchange for releasing the second quartereconomic benefits of 2003,the lease with MRC commenced and thengranting MRC the option to acquire the landfill project site for $1.00, we have increased our original 70% ownership interest in MRC acquired in 1995 to 83.13%. A private placement to MRC’s existing members was completed in the third quarter of 2003 a $2,100,0002007. The private placement of its Class B Units to its existing members. Kaiser will fund at least $1,820,000 of the private placement. The funding iswas payable in two installments with the lastsecond installment due in July 2004. Kaiser made its first equity contribution of $910,000 under the private placement in August 2003, bringing its ownership interest in MRC to 82.48%. A second equity contribution of approximately $435,000 was madepaid in March 2004.2008. Future funding of MRC will be required to cover such items as the federal land exchange litigationcompletion of the pending sale to the District and the railroad repairs but there is no assurance that such funding will be obtained.

Current Status

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

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

In addition, the financial payments to or for the benefit of Riverside County and others are detailed in the Development Agreement as well as in the Purchase and Sale Agreement, which forms a part of the Development Agreement. The Purchase and Sale Agreement requires a per ton payment on non-County waste determined from a base rate which is the greater of $2.70 per ton or ten percent (10%) of the landfill tip fee up to 12,000 tons of non-County waste. The 10% number increases to 12½12 ¹/2% for all non-County waste in excess of 12,000 tons per day. The per ton payment to the County also increases as volume increases. The per ton payments on non-County Waste to Riverside County are summarized as follows:

Of the payments made to Riverside County by MRC on non-County municipal solid waste, $.90 of the per ton payment will be deposited into an environmental trust. In addition, MRC directly pays $.90

per ton into the environmental trust for in-County waste deposited into the landfill. Funds in the environmental trust are to be used within Riverside County for: (a) the protection, acquisition, preservation and restoration of parks, open space, biological habitat, scenic, cultural and scientific

KAISER VENTURES LLC AND SUBSIDIARIES

resources; (b) the support of environmental education and research; (c) the mitigation of the landfill project’s environmental impacts; and (d) the long term monitoring of the above mentioned items.

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

Other major payments include: (i) partial funding for up to four rail crossings with $1 million due atupon the occurrence of the earlier of: (y) the commencement of constructionlandfill construction; or (z) under certain circumstances, within 90-days of the landfillexecution of the Development Agreement between Riverside County and MRC; (ii) an additional $1 million for upgrading rail crossings is to be paid over the course of landfill operations; (ii)(iii) financial assistance of approximately $2 million for the host community, Lake Tamarisk, comprised of $500,000 due at the commencement of construction of the landfill plus approximately $1.5 million due over the course of landfill operations; and (iii)(iv) funding for the non-California Environmental Quality Act reduction air emission programs of $600,000 over the course of operations.

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

The Development Agreement will be effective with the resolution of Kaiser’s ownership of the land which is the subject of the current land exchange litigation that is on appeal to the U.S. 9^th Circuit Court of Appeals. We anticipate that the Development Agreement will be fully executed and recorded just prior to the anticipated closing of the sale of the landfill project. Riverside County has approved the assumption of the Development Agreement by the District as part of the sale of the landfill by MRC.

In October 2005 following the adverse U.S. District Court decision on the land exchange litigation, one member of the Riverside Board of Supervisors attempted to terminate the existing Riverside County approvals for the landfill project. Such attempt was defeated with the only supervisor voting in favor of the proposal to terminate the existing approvals being the supervisor that proposed the termination of the county’s approvals. This same county supervisor originally opposed and voted against the landfill project in 1997.

Successful Appeal of State EIR Litigation.After the September 1997 approval of the new EIR for the landfill project, litigation with respect to MRC’s EIR certification resumed. In February 1998, the San Diego County Superior Court issued a final ruling with respect to this litigation, finding that the EIR certification did not adequately evaluate the landfill project’s impact on the Joshua Tree National Park and the threatened desert tortoise. MRC, Kaiser and Riverside County appealed the Superior Court’s decision; opponents did not appeal.

On May 7, 1999, the Court of Appeal announced its decision to completely reverse the San Diego Superior Court’s prior adverse decision. The Court of Appeal’s decision, in effect, reinstated the EIR certification and reinstated the previous approval of the landfill project by Riverside County. In June 1999, opponents to the landfill project requested that the California Supreme Court review and overturn the Court of Appeal’s decision. In July 1999, the California Supreme Court declined to review the Court of Appeal’s decision.

KAISER VENTURES LLC AND SUBSIDIARIES

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

Following completion of the land exchange, two lawsuits were filed challenging it and requesting its reversal. The plaintiffs argue that the land exchange should be reversed because the BLM failed to comply with the National Environmental Policy Act and the Federal Land Management Policy Act. In November 2000,Nearly three years after the Ninthfinal brief in the case was filed, on September 20, 2005, the U.S. District Court for the Central District of California, Eastern Division, issued its opinion in Donna Charpied,et al., Plaintiffs v.United States Department of Interior, et al., Defendants (Case No. ED CV 99-0454 RT (Mex)) and inNational Parks and Conservation Association, Plaintiff v.Bureau of Land Management, et al., Defendants (ED CV 00-0041 RT (Mex)). The decision was adverse to the landfill project in that it set aside the land exchange completed between the Company and BLM as well as two BLM rights-of-way. The Company along with the U.S. Department of Interior appealed the decision to the U.S. 9^th Circuit Court of Appeals. The briefing for the appeal was completed in 2007 and oral argument was heard before a three judge panel on December 6, 2007. The U.S. 9^th Circuit Court of Appeals announcedgenerally announces its decisions six to twelve months following oral argument but on occasion the announcement of a decision may take substantially longer. Since oral argument in an unrelated caseour appeal was held more than a year ago, the decision may be announced at any time. However, we cannot predict when the decision will actually be announced. If the U.S. District Court’s decision is fully affirmed on appeal, such a decision would jeopardize the viability of the landfill project. In addition, such a decision could adversely impact the agreement to sell the landfill project to the District, including termination of the agreement. For a more detailed discussion of this litigation and the risks associated with this litigation, see “Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Land Exchange Litigation.”

In April 2007 Donna Charpied, et al, filed a motion with the same U.S. District Court that may have a material adverse impact on Kaiser’s federalhandled the land exchange litigation andseeking to enforce the pending salecourt’s order in such case. The allegations were that additional actions were necessary to the District. InDesert Citizens Against Pollution v. Bisson,(Ninth Circuit Court of Appeals, Case No. 97-55429), the Court of Appeals concluded, among other things, that the BLM did not properly valueset aside the land being acquired byexchange and to prevent the competing Mesquite rail-haul landfill projectuse of property at Eagle Mountain that would “change the character and ordered a reversal of the land exchange. The court concluded that the appraisal should have considered the lands being acquired from the BLM as a landfill. The court did not, however, determine the proper valuationuse of the exchanged lands.properties …”. The plaintiffs in Kaiser’s federalmotion sought to prevent our use of even the land exchange litigation amended their respective complaintswe owned prior to include allegations that the appraisal used in Kaiser’s land exchange withexchange.

On September 18, 2008, the BLM is similarly defective. In light ofU.S. District Court denied theBisson decision, Plaintiffs’ motion and determined that: (i) the BLM has completed an independent review of the “highest and best use” analysis. The BLM’s independent appraiser concluded that there would be no change in the determination of the “highest and best use” in the appraisal used inactions to date to set aside the land exchange if the property involved was expressly considered as a landfill site. Given all the factswere sufficient and circumstances, the independent appraiser concluded that there was no premiumreconveyance documents needed to be paidrecorded; (ii) the military training activities that had taken place at Eagle Mountain did not change the character and use of the exchange lands; and (iii) the activities associated with the testing of the suitability of Eagle Mountain rock for use in a possible Salton Sea restoration plan were acceptable. The Court declined to rule on the property interests exchanged by the BLM even ifchallenge to a portion of such property interests were a part of a planned landfill. The scheduled briefing in this case was completed in January 2003. We are awaiting a decision from the court in this matter.

private prison project since there is no current private prison project at Eagle Mountain.

In addition to the federal land exchange litigation, the Company along with the U.S. Department of Interior, the BLM, the District and Metropolitan Water District of Southern California, received a letter in September 2002 from the Center for Biological Diversity, the Sierra Club, Citizens for the Chuckwalla Valley (“Complaining Groups”) declaring their intent to sue for violations of the Endangered Species Act in regard to actions or inactions related to the railroad that would serve the landfill project. Among other things, it is alleged that there has been a failurethreatened from time to complytime with a biological opinion issued by the U.S. Fish & Wildlife Service and that the BLM has failed to enforce the terms of that biological opinion. In summary, the Complaining Groups are demanding enforcement of the biological opinion or revocation by the BLM of the right-of-ways granted for the existing Eagle Mountain railroad and the Eagle Mountain road. The biological opinion contains, among other items, mitigation measures for the desert tortoise which could require substantial expenditures.

In reviewing the complaints of the Complaining Group, the BLM out of an abundance of caution conducted an informal consultation with the U.S. Fish & Wildlife Service with respect to the biological opinion. Although neither the construction ofadditional litigation over the landfill project norinvolving such matters as the regular usefederal Endangered Species Act. However, as of the railroaddate of the filing of this Annual Report on Form 10-K none of the previous threats have commenced,resulted in the BLM requested thatcommencement of a legal action against the Company develop a maintenance schedule for the railroad that would include addressing, among other things, the particular concerns of culverts and rail line ballast. The Company has submitted a proposed schedule which is under review by the BLM. See “Legal Proceedings—Eagle Mountain Landfill Project Land Exchange Litigation.”Company.

KAISER VENTURES LLC AND SUBSIDIARIES

Eagle Crest Energy Company. In November 2000, Eagle Crest Energy Company, referred to as ECEC, a previous opponent to the landfill project, filed an application foris pursuing a preliminary permit withlicense from the Federal Energy Regulatory Commission, referred to as FERC, for a proposed 1,0001,300 mega-watt hydroelectric pumppumped storage project and ancillary facilities. The proposed ECEC project would utilize two of the mining pits and other property at the Eagle Mountain Site, portions of which are currently leased to MRC and the subject of the pending sale to the District. ECEC has been pursuing this project for nearly 20 years. The Company has not agreed to sell or lease this property to ECEC. This project iswas essentially the same project that ECEC previously proposed and was dismissed by the FERC in July 1999. However, asECEC has filed for a necessary water quality permit from the State of California and has announced that it will file its license application with FERC in 2009. We, along with others, oppose the ECEC project. In addition, the ECEC project is not compatible with the Landfill Project regardless of claims to the opposite by ECEC. It is unclear to us if ECEC is anything more than a shell company and if it has the financial ability to pursue the project.

If the completed land exchange is ultimately and permanently reversed in accordance with the September 2005 U.S. District Court decision, certain lands currently owned in fee by Kaiser will revert back to federal lands, although a substantial amount of such lands will then be controlled by Kaiser because of its federal mining claims. As a result of the land exchange with the BLM, there is no title reservation on any final reversal to federal ownership, a portion of the property. FERC issuedland may be subject to a title encumbrance associated with the issuance of the preliminary permit to ECEC in June 2001. We, along with others, have objected to the ECEC project and have intervened in the matter. To

management’s knowledge, there was no material activity by Eagle Crest Energy Company in 2003 with regard to its permit application.

FERC.

Ongoing Considerations if the Sale is not CompletedRisk Factors

Successful resolution of the federal land exchange litigation could take a number of years. Due to delays in closing on the sale to the District, the additional threatened Endangered Species Act litigation, and the need to repair the flood damage to the railroad we anticipate that an additional investment in MRC will be necessary. We can make no assurance that sufficient and suitable funding will be available to MRC in order to allow it to continue to pursue the landfill project, to undertake the major railroad repairs and to resolve the federal litigation and any new litigation. Alternatively, MRC could decide not to pursue the continued development of the landfill project, which would likely materially hinder MRC’s ability to realize any value from the landfill project.

Governmental Regulation/Permitting. In the development and maintenance of our assets, we and other entities on which we rely are subject to extensive, expensive and increasingly stringent regulation by federal, state and local authorities. Entities operatingAs discussed in this arena must obtain and maintain numerous local, state and federal governmental permits and consents. Failure to comply with these regulations could result in the loss of a needed license, permit or consent or could result in significant monetary fines. Examples of the wide ranging regulations which apply to the development and maintenance of our assets include:

Competition. The waste management industry is highly competitive, with a few large, integrated waste management firms and a significant number of smaller, independent operators. The number of competitors has decreased over the past five years, but their size has greatly increased as a result of mergers and acquisitions of waste hauler and management companies. Due to this increasing competition and industry consolidation, there are fewer independent waste management operating companies than in the past and, as a result, fewer potential buyers of our waste related assets. If this reduction of industry operators negatively impacts our ability to operate or sell our assets on favorable terms, our results will likely be materially and adversely affected.

Currently, the Mesquite Regional Landfill located in Imperial County, California is the only other competing rail-haul project proposed in California. The District also entered into an agreement to purchase the Mesquite Regional Landfill at a price and on terms substantially similar to the sale of the landfill project by MRC to the District. The District completed its purchase of the Mesquite Regional Landfill in late 2002. We understand that the District has contracted for the engineering and other work necessary to be in a position to begin construction on the Mesquite project. The impact, if any, of the District’s completion of the purchase of the Mesquite landfill project prior to the completion of the purchase of the Eagle Mountain landfill project is unknown.

Truck-haul landfills in the Los Angeles Basin are also competitors to the proposed rail-haul landfills.

Risks. As is discussed in thisAnnual Report on Form 10-K, there are numerous risks associated with MRC and the landfill project, including the competition represented by the Mesquite rail-haulproject. The landfill project

has been and continues to be the subject of extensive litigation which has and will continue to substantially delay the District purchased in late 2002. There are also numerous riskslandfill project and contingencies associated with the pending salewhich could ultimately lead to termination of the landfill project toproject. If the District. There can be no assurance that all outstanding matters currently preventing an initial closing with the District will be resolved to the satisfaction of the parties. Accordingly, there can be no assurance that the sale to the District will occur or that the current terms of the pending transaction may not be significantly modified as a result of future discussions with the District or as to the timing of the receipt of the purchase price. There can be no assurance that the completed purchase of the Mesquite landfill by the District will not adversely impact the negotiations and the closing on the sale of the landfill to the District. In addition, there are material litigation risks associated with the current federal land exchange litigation including reversalis not favorably resolved or resolved in a manner that a cure can be reasonably undertaken, the landfill project will not be viable as currently permitted. Even if the appeal of the completed land exchange and the threatened litigation over the Endangered Species Act, all as discussed above. No assurance can be made that we will successfully and timely resolve these matters so as to avoid a material adverse effect on our current plan to sell the landfill to the District. If we are unable to manage any of these risks or uncertainties,U.S. District Court decision is successful, we may not be able to sellcure all of the concerns with regard to other title or due diligence matters in a timely fashion to permit the sale to the District to be completed. If the litigation is not favorably resolved and/or the Company cannot otherwise cure various alleged title and other closing issues in a timely fashion, then the District’s purchase of the landfill project would not be completed and the Company might have to abandon Eagle Mountain and its investment in MRC. If this should occur, the Company will likely seek to pursue any other possible opportunities or to re-solicit bids for the purchase of the landfill project, which may not result in a sale of the landfill project on favorable terms, if at all.

The ECEC pumped storage project may also be a risk to the successful completion of the landfill project and the value of our Class A Unitssignificant expenditures could be materially reduced.

required to oppose this potential project.

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

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

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

We are also dependent upon the continued services of our executive officers given the complex nature of the landfill project, the challenges it faces, and the importance of historical information. The loss of

KAISER VENTURES LLC AND SUBSIDIARIES

the services of our executive officers, especially without advance notice, could materially and adversely impact this project and well as our other business.

WEST VALLEY MATERIALS RECOVERY FACILITYWEST VALLEY MATERIALS RECOVERY FACILITY AND TRANSFER STATION TRANSFER STATION

Background

West Valley MRF, LLC, referred to as “West Valley,” was formed in June 1997 by Kaiser Recycling, CorporationInc. (now Kaiser Recycling, LLC (formerly Kaiser Recycling, Inc.))LLC), a wholly-owned subsidiary of Kaiser, and West Valley Recycling & Transfer, Inc., a wholly-owned subsidiary of Burrtec Waste Industries, Inc. This entity was formed to construct and operate the materials recovery facility referred to as the West Valley MRF. Under the terms of the parties’ business arrangements, Kaiser Recycling and Kaiser remain responsible for any pre-existing environmental conditions and West Valley MRF is responsible for environmental issues that may arise related to any future deposit or release of hazardous substances. Kaiser and Burrtec have each separately guaranteed the prompt performance of their respective subsidiary’s obligations.

Phase 1 of theThe West Valley MRF which included a 62,000includes an approximate 140,000 square foot building, sorting equipment and related facilities for waste transfer and recycling services was builtservices. The facility is currently permitted to handle 7,500 tons of municipal solid waste and equipped in 1997 for a total cost of approximately $10.3 million. Phase 2 of the West Valley MRF was completed in 2001 and increased the processing facility by an additional 80,000 square feet and included the installation of new recycling lines that increased the capacity of the facility to approximately 5,000 tonsrecyclable materials per day. Phase 2 was completed for a total approximate cost of $11 million. West Valley MRF is currently processing, on average, approximately 3,500-4,0004,000—4,400 tons of municipal solid waste and green wasterecyclable materials per operating day.

As part of its recyclable operations, the West Valley MRF processes for sale in the commodities markets certain materials, including paper, cardboard, aluminum, plastic and glass. The West Valley MRF generates cash flow in excess of that necessary to fund its cost of operations. Furthermore, the West Valley MRF shouldoperations and, therefore, has historically has been able to distribute sufficient cash to cover a significant portion of

Kaiser LLC’s foreseeable general and administrative costs. In 2003,2008, the West Valley MRF distributed a total of $2,250,000$2.5 million in cash to Kaiser.

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

Financing

Most of the financing for the West Valley MRF was obtained through California Pollution Control Financing Authority tax exempt bonds. Approximately $9,500,000$9.5 million in bonds were issued in June 1997 (Phase 1),1997. These bonds were for Phase 1 of the West Valley MRF which consisted of a 62,000 square foot building, sorting equipment and approximately $8,500,000ancillary facilities. Approximately $8.5 million in bonds were issued in May 2000 (Phase 2).which was for Phase 2 of the West Valley MRF which consisted of an 80,000 square foot facility expansion and new sorting equipment. The interest rate for the Bondsbonds varies weekly. The rates for 20032008 ranged from 1.20approximately 1.05% to 1.95%8.55%. The temporary extreme rise in the interest rate on the bonds was due to the adverse financial and credit market conditions experienced in 2008. The interest rates on the bonds have returned to their historic low levels. Bonds issued for Phase 1 have a stated maturity date of June 1, 2012, and bonds issued for Phase 2 have a stated maturity date of June 1, 2030,2013, although West Valley MRF is required, pursuant to an agreement with Union Bank, to annuallyperiodically redeem a portion of the Bonds.bonds. However, in the event the letters of credit securing such bonds, which are discussed immediately below, are not renewed, the full principal amount of the bonds would be due as a balloon payment.

KAISER VENTURES LLC AND SUBSIDIARIES

The bonds are secured by a pledge and lien on the loan payments made by West Valley MRF and funds that may be drawn on an irrevocable direct pay letter of credit issued by Union Bank of California, N.A. The bonds are backed by a letterletters of credit issued by Union Bank. The letter of credit for the 1997 Phase 1 bonds is currently scheduled to expire June 30, 2009 and the letter of credit for the 2000 Phase 2 bonds is currently scheduled to expire June 30, 2011. West Valley MRF is working toward the renewal of the letter of credit for the 1997 bonds with Union Bank. Kaiser and Burrtec have each severally guaranteed fifty percent (50%) of the principal and interest on the bonds to Union Bank in the event of a default by West Valley MRF.

In 2007 West Valley and Union Bank modified the bank’s repayment schedule for the bonds. It was agreed that the then required accelerated principal repayments of the indebtedness could be modified in accordance with the original issuance terms of the respective bond issues subject to the extension of the current letters of credit which serves as security for such bonds. If such letters of credit are not extended by their respective due date, then the outstanding principal balance of the bonds secured by such letter of credit would be due as a balloon payment. Union Bank and West Valley are in the process of extending the letter of credit that secures the 1997 bonds through June 2011.

As of December 31, 2008, the principal amount of bonds outstanding totaled approximately $7,710,000.

West Valley MRF and Union Bank have executed a Reimbursement Agreement that, among other things, sets the terms and conditions whereby West Valley MRF:

Kaiser and Kaiser Recycling have also provided environmental guaranty agreements to Union Bank. Under these agreements, Kaiser and Kaiser Recycling are jointly and severally liable for any liability that may be imposed on Union Bank for pre-existing environmental conditions on the West Valley MRF’s property acquired from Kaiser Recycling that the West Valley MRF fails to timely address.

Competition

Burrtec owns and operates a transfer and limited materials recovery facility in Agua Mansa, California. This facility is located approximately 15 miles from the West Valley MRF and could compete, in very limited areas,competes for certain waste that might otherwise go to the West Valley MRF. To date, the materials recovery facility in Agua Mansa has had little impact on the West Valley MRF’s market for customers.MRF monitors such waste to ensure that it receives its appropriate share of such waste. Burrtec also owns or controls materials recovery facilities in Victorville, California and in the Coachella Valley of California, which are not considered to be competitors of the West Valley MRF. Other entities have from time to time proposed to develop materials recovery facilities that would serve

the same broad geographic area as that served by West Valley. Except for a relativelyThere is one small materials recovery facility locatedoperating in Colton California owned by Republic Industries, we believe that none of them has yet completed the permitting process. However, theand two other transfer and materials recovery facility in Colton is a competitor and one municipality formerly usingfacilities are currently being proposed that could, if built, be competitors for certain of the waste now processed by the West Valley MRF has contracted for its recycling services withMRF. One such new facility would be in the Colton facility.City of Pomona and the other facility would be in the City of San Bernardino. Such competition would likely adversely impact the volume and profitability of the waste processed at West Valley.

KAISER VENTURES LLC AND SUBSIDIARIES

Tar Pits ParcelRisk Factors

The West Valley MRF faces a number of risks. These risks include risks related to general economic and market conditions that are outside its control.

Currently,In 2008 risks associated with the only remaining property we own atfinancial and credit markets temporarily caused a dramatic increase in the Mill Site Property is an approximate 5 acre parcel known as the Tar Pits Parcel. Under our agreement withinterest rate on the West Valley MRF, we are obligated to contribute the Tar Pits Parcel to the West Valley MRF, at its option, upon the environmental remediationMRF’s outstanding bonds. However, as of the property. Except for ongoing inspection and monitoring activities, remediationdate of the Tar Pits Parcel was completed in 2002 at CCG Ontario, LLC’s, (referred to as CCG), expense. CCG is responsible for this property’s environmental remediation pursuant to the terms of the purchase agreement entered into between CCG and Kaiser in August 2000 relating to Kaiser’s sale of approximately 588 acres of the Mill Site Property. See “BUSINESS - Historical Operations and Completed Transactions - Mill Site Environmental Matters.”

EAGLE MOUNTAIN TOWNSITE

We own and operate the Eagle Mountain Townsite through a wholly-owned subsidiary, Kaiser Eagle Mountain, LLC. The Eagle Mountain Townsite covers approximately 1,300 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. As part of the District’s purchase of the landfill project from MRC, the District will acquire or control a substantial portion of this infrastructure, including utility and water distribution facilities, which serves the landfill property as well as the Eagle Mountain Townsite. However, the District will not be acquiring any houses as a part of the landfill property.

During 2003 a portion of the Eagle Mountain Townsite was leased on a month-to-month basis to Management Training Corporation (“MTC”), a company that operates a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from California’s 2003 - 2004 state budget as of December 31, 2003, including the private prison located at Eagle Mountain. Accordingly, effective December 31, 2003, the private prison at Eagle Mountain was closed. MTC surrendered most of the property it leased as of December 31, 2003, with the exception of several houses that it continued to lease through February 2004. As of the datefiling of this Report on Form 10-K, wethe interest rates on the West Valley MRF’s bonds have not had any successdeclined to historic low levels. A material increase in findingfuture interest rates could result in a replacement tenant and thus, we arematerial increase in the West Valley MRF’s interest expense. The risks associated with the financial and credit markets could also potentially impact the renewal and the terms of the West Valley MRF’s outstanding letters of credit which secures its bonds.

Waste volumes are also being negatively impacted by the economic down-turn in Southern California. Although the services of the West Valley MRF are generally considered of an essential nature, a weak economy usually results in decreases in the volume of waste generated, which in turn decreases revenues. Additionally, the processing of recyclable materials and their resale in the commodities markets are a significant source of revenue for the West Valley MRF. The volatility of commodity prices and the substantial reduction in commodity prices that began in the fourth quarter of 2008 have and will continue to negatively impact the revenues, margins and net income of the West Valley MRF for the foreseeable future.

The West Valley MRF also faces risks associated with rising and fluctuating operating costs that it may not be able to pass through, in whole or in part, to its customers. For example, the price of fuel is unpredictable and is based upon factors outside the control of the West Valley MRF. Until the fourth quarter of 2008, fuel prices had dramatically increased during the last two years. In addition to the fuel used by the West Valley MRF’s equipment and vehicles, many of its vendors raise their prices as a means to offset their own rising fuel costs. While the West Valley MRF usually attempts to pass through its increased costs such as the cost of fuel, it may not be able to timely pass through all of such increases due to competition or as a result of the terms of a customer’s contract. These increased operating costs would then likely negatively impact the profitability of the West Valley MRF.

Competition for and the loss of expiring waste contracts would also negatively impact the West Valley MRF. Most of the waste processed at the West Valley MRF is as a result, directly or indirectly, of hauler or municipal contracts or franchise agreements. Many of these arrangements are for a specified term and are subject to competitive bidding in the future In addition, under certain conditions, some of the customers of West Valley MRF may terminate their contracts prior to the scheduled contract term. Governmental action may also affect waste flow to the West Valley MRF. Municipalities may annex unincorporated areas within San Bernardino County and Riverside County where the West Valley MRF currently derives waste; as a result customers in annexed areas may be required to obtain services from competitors.

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

The West Valley MRF also faces the risks associated with extensive governmental regulation of the waste industry. The regulatory process requires firms in the waste hauling, waste recycling and/or landfill business to obtain and retain numerous governmental permits to conduct various aspects of developingtheir operations, any of which may be subject to revocation, modification or denial. Changes in such governmental policies and implementingattitudes relating to the industry could impair the West Valley MRF’s ability to obtain and maintain applicable permits from governmental authorities on a plantimely basis. Such regulations could also impact the

KAISER VENTURES LLC AND SUBSIDIARIES

expansion of existing facilities and/or the providing of new related waste services such as green waste composting. The Company is not in a position at the present time to mothballassess the extent of the impact of such potential changes in governmental policies and attitudes on the permitting processes, but they could be significant. Additionally, West Valley MRF cannot predict with certainty the extent of future costs that may be required under such regulation including the future costs associated with environmental, health and safety laws and regulations. For example, environmental groups and regulatory agencies in California and in the United States have increasingly focused their attention on the emission of greenhouse gases and the impact to climate of such emissions. The passage of laws and regulations to control green house gases, including the imposition of fees or taxes, could adversely impact the West Valley MRF’s operations and financial results. In addition to the governmental permitting and environmental restrictions and conditions that may be imposed directly on the West Valley MRF, governmental authorities may impose other conditions and regulations that impact the West Valley MRF. For example, waste hauling permits/agreements provided by some of the counties served by the West Valley MRF have restricted the flow of waste to the West Valley MRF.

The waste industry is highly competitive. West Valley MRF faces competition from governmental, quasi-governmental, and private sources for municipal solid waste and recyclable materials. See “Item. 1. DESCRIPTION OF BUSINESS-West Valley Materials Recovery Facility and Transfer Station-Competition” above.

Any of the factors described above could materially adversely affect the West Valley MRF’s results of operation and cash flows.

Miscellaneous Business

The Company is occasionally able to generate miscellaneous income from time to time from various activities. Such activities have historically included leasing our fee owned land at Eagle Mountain for films, commercials and military and law enforcement training and the sale of rock.

OTHER KAISER ASSETS

For a discussion of our other assets such as the Eagle Mountain Townsite, which should be completed by the end of the third quarter of 2004. With the closure of the private prison, Eagle Mountain’s ongoing operations and staffing will be reduced. The Company has recorded a reserve for the costs of such a reduction in activity, the adequacy of which management will continue to review.

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

OTHER KAISER ASSETS

Land adjacent to the Eagle Mountain Site

In and around the Eagle Mountain Townsite area, Kaiser has various possessory mining claims aggregating approximately 1,472 acres and holds approximately 7,344 acres in fee simple. This property is in addition to the approximate 1,300 acre Eagle Mountain Townsite. Approximately 4,654 acres of this property will be sold as a part of the sale of the landfill project.

Kaiser owns four deep water wells, two of which are currently being used, and two booster pump stations that serve the Eagle Mountain site and the Eagle Mountain Townsite.

Lake Tamarisk Californiaproperty, please see “Item 2. DESCRIPTION OF PROPERTIES.”

HISTORICAL OPERATIONS AND COMPLETED TRANSACTIONS

Lake TamariskThe following information is an unincorporated community located two miles northwest of Desert Center, Californiaprovided as historical background and approximately 8 miles from the Eagle Mountain mine. This community has 150 improved lots situated around two recreational lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home park, the community has an average year-round population in excess of 150. Lake Tamarisk Development, LLC, a wholly owned subsidiary of Kaiser, owns: (i) 77 improved lots,to put into context our current activities including among other lots, one residential structure; (ii) a 240 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk; (iii) and an approximate 200 acre unimproved parcel adjoining the nine-hole Lake Tamarisk golf course.

HISTORICAL OPERATIONSAND COMPLETED TRANSACTIONS

our current cash maximization strategy.

Water Resources

Background. Until the sale of its ownership interest in Fontana Union Water Company, or Fontana Union, to Cucamonga County Water District, referred to as “Cucamonga,” in March 2001 for $87.5 million or approximately $10,860 per share of Fontana Union stock, the Company’s results of operations depended, in large part, on water rights and successfully leasing such rights. Concurrently with the sale of its Fontana Union stock, the Company also received approximately $2.5 million in payments under its water lease with Cucamonga. Thus, the following information concerning Fontana Union and Cucamonga is provided for historical purposes and to assist the reader as toThe sale was completed in the context of settling outstanding litigation between Cucamonga and the Company. Prior to that time Kaiser leased all of its shares in Fontana Union stock sale.

to Cucamonga under the terms of 102-year take-or-pay lease.

Fontana Union owns water rights to produce water from four distinct surface and subsurfacevarious sources of water near Fontana, California. Kaiser’s ownership of Fontana Union entitled it to receive, annually, a proportionate share of Fontana Union’s water. In addition, when other shareholders of Fontana Union did not take their annual proportionate shares of water, the unclaimed water for each year was divided pro rata among the shareholders that did exercise their right to take water in that year. At the time we sold our interest in Fontana Union in March 2001, our pro rata interest in unclaimed water raised our effective overall ownership percentage to approximately 57.19%.

Lease of Interest in Fontana Union to Cucamonga County Water District. In 1989, Kaiser leased all of its then owned shares of Fontana Union stock to Cucamonga, a local water district, under the terms of the 102-year take-or-pay lease, referred to as the “Cucamonga Lease.” Under this lease, Cucamonga was entitled to receive all of our proportionate share of water from Fontana Union (including shares acquired after 1989) with lease payments based upon fixed quantities of water at a rate of 68.13% of rate charged by the Metropolitan Water District of Southern California, the “MWD,” for untreated, non-interruptible water as available through Chino Basin Municipal Water District.

Under the terms of the Cucamonga Lease, our future lease revenue increases depended primarily upon any adjustments in the MWD water rates and other fees upon which the lease rate was 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.

On July 1, 1995, MWD implemented changed rates and a new rate structure which was the subject of a dispute between Kaiser and Cucamonga. In December 2000, MWD approved another major rate restructuring. Without the Fontana Union stock sale, we anticipated that we would be engaged in an additional dispute with Cucamonga as a result of MWD’s continued adoption major rate restructuring programs every few years.

The Cucamonga Lease Dispute.As a result of these July 1995 changes in the MWD rates, we 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, were to be included in the calculation of the MWD rate payable under the terms of the Cucamonga Lease. Cucamonga disputed our interpretation and asserted that our interpretation of the Cucamonga lease in relation to the changes effected in 1995 by the MWD would result in a rate increase to Cucamonga in excess of the 1995 MWD rate of increase Cucamonga asserted was the appropriate rate increase (the “Dispute”). This Dispute, impacted all payments made by Cucamonga subsequent to July 1995. Because Kaiser and Cucamonga were unable to resolve this Dispute out of court, in 1996 Kaiser instituted litigation against Cucamonga in San Bernardino County Superior Court.KAISER VENTURES LLC AND SUBSIDIARIES

After a trial on the matterFontana Union’s water, which water was historically used 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.

Fontana Union Stock Sale.Prior to the determination of the outcome of an arbitration over the new MWD rate that would be used under the terms of the Cucamonga Lease, the parties negotiated a resolution to the Disputeconnection with the sale of the Company’s Fontana Union Stock to Cucamonga for a purchase price of $87.5 million. In addition, Cucamonga agreed to pay $2.5 million in payments under the Cucamonga Lease. Kaiser Inc.’s stockholders approved the Fontana Union stock sale in February 2001, and the Fontana Union stock sale was completed on March 6, 2001.

Kaiser’s steel making activities.

Mill Site Property

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

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

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

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

CCG Ontario, LLC (CCG).In August 2000, we sold approximately 588 acres of our remaining Mill Site Property to CCG for $16 million in cash plus the assumption of virtually all known and unknown environmental obligations and risks associated with the property as well as certain other environmental obligations. Included in the land sold to CCG were ancillary items such as the sewer treatment plant and the water rights associated with the property. As part of the transaction, CCG obtained environmental insurance coverage and other financial assurance mechanisms related to the known and unknown environmental obligations and risks associated with the transferred property as well as other environmental obligations subject to limited exceptions. In addition, before this sale transaction, we were party to a consent order with the California Department of Toxic Substances Control, referred to as the DTSC, which was essentially an agreement to investigate and remediate property. As part of the sale transaction, this consent order and our financial assurances to the DTSC were terminated, and CCG entered into a new consent order with the DTSC and provided the necessary financial assurances. CCG is a subsidiary of Catellus Corporation which in turn is owned by ProLogis. ProLogis is considered the world’s largest developer of commercial warehouse space. ProLogis and many of its subsidiaries are being adversely impacted by worldwide economic conditions. These adverse financial and credit conditions increase the risk that CCG could default in the obligations it assumed in connection with its

KAISER VENTURES LLC AND SUBSIDIARIES

purchase of the property. For additional information, see “Part I, Item 1. BUSINESS—DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill Site Environmental Matters” below.

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

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

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 Mill Site Property. As discussed above, the Company’s consent order with the DTSC was terminated in connection with the sale of approximately 588 acres of the remaining Mill Site Property to CCG for $16 million in cash plus the assumption of virtually all known and unknown environmental obligations and risks associated with the property as well as certain other environmental

obligations. Concurrently with that termination, CCG entered into a new consent order with the DTSC, in which CCG assumed responsibility for all future investigation and remediation of the Mill Site Property it purchased, as well as various other items covered under its CCG consent order. In addition, CCG assumed and agreed to indemnify the Company against various contractual environmental indemnification and operations and maintenance (“O&M”) obligations the Company has with purchasers of other portions of the Mill Site Property. In connection with this land sale, CCG entered into a fixed price environmental remediation services agreement with IT Corporation (“IT”), an environmental contractor, to remediate the known environmental conditions on the property. IT filed for bankruptcy in January 2002, but certain of the assets of IT were eventually acquired by The Shaw Group, including the fixed price environmental contract. Accordingly, the fixed price environmental remediation services contract continues to be performed. In addition, CCG is obligated to remediate the Tar Pits Parcel pursuant to a solidification and capping strategy. The remediation of the Tar Pits parcel is also covered by the fixed price environmental remediation contract. Except for continuing inspection and maintenance obligations, the remediation of the Tar Pits Parcel has been completed.completed although the Company may review additional remediation possibilities as a means of making such parcel useable property.

CCG is in the process of undertaking necessary investigation and remedial actions at the Mill Site Property, including a groundwater investigation.

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

KAISER VENTURES LLC AND SUBSIDIARIES

With regard to groundwater, we previously settled certain obligationsallegations of groundwater contamination with the California Regional Water Quality Control Board, or the RWQCB, concerning a plume (containing total dissolved solids, sulfate, and organic carbon) to which the historic steel operations allegedly contributed. The settlement required us to make a $1.5 million cash payment, 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. In 1999, approximately 20 years ahead of schedule, we contributed the full 25,000 acre feet required under the terms of the settlement agreement with the RWQCB. This contribution of water satisfied all of the Company’s obligations to the RWQCB under the terms of the settlement agreement. CCG did not assume any of the Company’s future obligations, if any, with regard to the specified plume, and we retained potential liability from certain third party claims alleging damages from the identified groundwater plume. One such claim has been asserted against the Company. See “Part 1. Item 3. LEGAL PROCEEDINGS.”

As a result of the transaction with CCG and the Company’s previous remediation activities in 2000, the Company’s estimated environmental liabilities were reduced by approximately $21.9 to $4.5 million. These potential environmental liabilities included, among other things, environmental obligations at the Mill Site Property that were not assumed by CCG, such as any potential third party damages from the identified groundwater plume discussed above, environmental remediation work at the Eagle Mountain Site, and third-party bodily injury and property damage claims, including asbestos claims not covered by insurance and/or paid by the KSC bankruptcy estate.

In 2004, this reserve was again reduced to approximately $2.4 million to reflect settlement of a third party claim related to the groundwater plume discussed above. This reserve was further reduced in 2005 as a result of reclassifying $500,000 to the Eagle Mountain Townsite Cleanup Reserve. This environmental reserve was increased by $1.2 million as of December 31, 2005, for Eagle Mountain Townsite environmental related matters, as discussed in more detail in “Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Section 2: New Accounting Pronouncements.” As a result of some remediation actives that took place at Eagle Mountain in 2007 the environmental reserve was further reduced by $33,000 and the reserve was again reduced in 2008 by $72,000 as a result of work conducted in 2008 associated with the former Kaiser Mill Property.

In keeping with our goal to minimize our potential liabilities, including the potential liabilities outlined above, we purchased an insurance policy effective June 30, 2001. This2001, a 12-year $50 million insurance policy, which is designedexpected to provide broad commercial general liability, pollution legal liability,cover substantially any and contractual indemnity coverage for Kaiser’s ongoing andall environmental claims (up to the $50 million policy limit) relating to the historical operations. Withoperations of the purchase of this policy, we were able to reduce our estimated environmental liabilities to zero.Company. See “MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in Part II, Item 7.6., of this Annual Report on Form 10-K.

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

Tar Pits Parcel

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

Employees

As of March 23, 2004,16, 2009, Kaiser LLC had no employees. However, Kaiser LLC leases employees through Business Staffing, Inc., a subsidiary of Kaiser LLC, and reimburses Business Staffing for the costs associated with 86 full-time (4 at Ontario, California and 42 at Eagle Mountain, California) and 35 permanent part-time employees at(4 in Ontario, California. It is anticipated that the number of full time employeesCalifornia and 1 at Eagle Mountain, will be reducedCalifornia).

KAISER VENTURES LLC AND SUBSIDIARIES

We are a smaller reporting company as defined in 2004 as a resultRule 12b-2 of the closureExchange Act and are not required to provide the information required under this item.

We are a smaller reporting company as defined in Rule 12b-2 of the private prison that was operated throughExchange Act and are not required to provide the end of 2003. All of the full-time and part time employees were previously employed by Kaiser Inc.information required under this item.

Office Facilities

Our principal offices are located at 3633 East Inland Empire Boulevard, Suite 480, Ontario, California, 91764. The Company currently leases approximately 2,9503,130 square feet in Ontario, California at a current cost of approximately $6,900$7,300 per month. However, as result of the negotiations in connection with our exercising the option to extend our lease through August 31, 2011, we will receive three months of free rent beginning June 1, 2009, and the monthly base rent will be reduced to approximately $6,413 for one year beginning September 1, 2009, and will increase on September 1, 2010 to approximately $6,600. Accordingly, our total base rent for 2009, 2010 and 2011 (unless the lease is extended beyond August 31, 2011) will be approximately $62,148, $77,696 and $52,800, respectively. The office lease expires on August 31, 2007,2011, with the rightCompany having the option to terminateextend the lease upon prior written notice effective as of February 28, 2006.after August 31, 2011. Our subsidiary, Kaiser Eagle Mountain, LLC, also currently maintains an office at the Eagle Mountain Site. We own the building used as an office at the Eagle Mountain Site.

Eagle Mountain, California

The Kaiser Eagle Mountain idle iron ore mine and the adjoining Eagle Mountain Townsite are located in Riverside County, approximately ten miles northwest of Desert Center, California. Desert Center is located on Interstate 10 between Indio and Blythe. The heavy duty maintenance shops and electrical power distribution system have been kept substantially intact since the 1982 shutdown. The Company also owns several buildings, a water distribution system, a sewage treatment facility, and related infrastructure. The District, upon its purchase of the landfill project, will own or control a substantial portion of this infrastructure. Accordingly, the District and the Company are negotiating a number of agreements addressing access and joint use of infrastructure facilities. The Eagle Mountain Townsite includes more than 300 single family homes, approximately 100 of which have been renovated. However, dueDue to the closurepassage of time and the impacts of weather, a number of the private prisonbuildings and houses at the Eagle Mountain Townsite effectiveare deteriorating at a faster rate than anticipated and may not be salvageable. Accordingly, we may need to demolish or rehabilitate a number of structures over the next several years and we have established a $2.5 million reserve for such purposes. In 2006, 27 homes were remediated and demolished. No homes were demolished in 2007. See also “Part II, Item 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Section 2: Liquidity and Capital Resources - New Accounting Pronouncements”.

Until December 31, 2003, we are in the process of developing and implementing a plan to mothball the Townsite.

During 2003 a portion ofprivate prison was operated at the Eagle Mountain Townsite was leased on a month-to-month basis to MTC that operated a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from California’s 2003 - 2004 state budget as of December 31, 2003, including the private prison located at Eagle Mountain. Accordingly, effective December 31, 2003, the private prison at Eagle Mountain was closed with most of the leased property returned to us as of that date, with the exception of several houses that it continued to lease through February 2004. As of the date of this Report on Form 10-K, we have not had any success in finding a replacement tenant and thus, we are in the process of developing and implementing a plan to mothball the Eagle Mountain Townsite which we expect to complete by the end of the third quarter of 2004.Townsite. With the closure of the private prison we implemented a “mothball” plan in 2004 for the Eagle Mountain’sMountain Townsite. We are continuing to seek appropriate tenants for a lease of all or portions of the Eagle Mountain Townsite but have been unsuccessful to date in finding permanent tenants. The September 2005 adverse U.S. District Court decision involving a completed land exchange between Kaiser and the BLM may hinder these efforts.

KAISER VENTURES LLC AND SUBSIDIARIES

Other than possible future environmental remediation associated with asbestos containing products in certain structures for which a reserve has been recorded, we are not aware of any material environmental remediation required at the Eagle Mountain Townsite that could require us to expend substantial funds or that could lead to material liability. However, under the terms of a reclamation plan for a portion of the mine site there are ongoing operations and staffing will be reduced. Thereclamation activities for which the Company has also recorded a reserve for the costsestimated cost of such a reduction in activity, the adequacy of which management will continue to review.activities.

In and around the Eagle Mountain areasite the Company currently has various possessory mining claims of approximately 3,5091,472 acres and holds approximately 5,6358,644 acres in fee simple (which includes the approximate 1,300 acre Eagle Mountain Townsite). Approximately 4,654 acres of this property will be sold as a part of sale of the landfill project, assuming such sale is completed. See “Part I, Item 1. DESCRIPTION OF BUSINESS - Eagle Mountain Landfill Project.”

However, if the adverse U.S. District Court decision is upheld on appeal it will impact the amount and nature of our land holdings. If the land exchange is finally reversed, and we are placed back to the same position as prior to the land exchange, we would own or control in and around Eagle Mountain approximately 1,800 acres in fee and 9,550 acres in various possessory mining claims. In addition, the reversal of the land exchange would reinstate a reversionary interest contained in the original grant of approximately 460 acres of the Eagle Mountain Townsite.

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

Rock/Aggregate

As a result of previous mining at Eagle Mountain, millions of tons of rock of various sizes have been stockpiled on portions of the property around the Eagle Mountain Townsite. We have shipped rock products in various quantities in the recent past and we are exploring opportunities to increase future rock shipments.

Railroad

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

Fontana, California

With exception of the approximate 5 acre Tar Pits Parcel, the Company no longer owns any property at the former Mill Site Property. With the exception of ongoing maintenance and inspection obligations, the environmental remediation of this parcel has been completed.completed although the Company is exploring additional remediation alternatives as a means to make the parcel usable. See “Part 1, Item 1.

KAISER VENTURES LLC AND SUBSIDIARIES

DESCRIPTION OF BUSINESS - Historical Operations and Completed Transactions - Mill Site Property.”

Lake Tamarisk, California

Lake Tamarisk is an unincorporated community located two miles northwest of Desert Center, California and approximately 8 miles from the Eagle Mountain mine. This community has 150 improved lots situated around two recreational lakes and a nine-hole golf course. With 70 homes and a 150-space mobile home park, the community has an average year-round population in excess of 150. Lake Tamarisk Development, LLC, a wholly-ownedwholly owned subsidiary of the Company, owns 77Kaiser, owns: (i) 72 single family improved lots, including, one residential structure. Lake Tamarisk, LLC also owns a 240structure; (ii) 3 multi-family lots totaling 12.42 acres; (iii) 1 commercial lot totaling approximately 3.31 acres; (iv) an approximate 170 acre parcel of unimproved land across the highway from the main entrance to Lake Tamarisk andTamarisk; (v) an approximate 200 acre parcel of unimproved landparcel adjoining the nine-hole Lake Tamarisk golf course.course; and (vi) an approximate 39 acre unimproved parcel adjacent to Lake Tamarisk. We are seeking to sell our Lake Tamarisk properties but are also looking at other development opportunities that may enhance the ultimate value and sale of such properties.

Other Real Estate Properties

Several parcels near Walsenburg, Colorado were sold on an “as is” basis in 2003 for less than $100,000 with the Kaiser Steel bankruptcy estate receiving the net proceeds from the sale.

Kaiser, inIn the normal course of itsour business iswe are 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 our financial statements. Significant legal proceedings, including those which may have a material adverse effect on our business or financial condition, are summarized below. However, the following discussion does not, and is not intended to, discuss all of the litigation matters to which we

may be or become a party. Should we be unable to resolve any legal proceeding in the manner we anticipate and for a total cost within close proximity to any potential damage liability we have estimated, our business and results of operations may be materially and adversely affected.

Litigation

Eagle Mountain Landfill Project Land Exchange Litigation.In October 1999 Kaiser’s wholly-owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC), completed a land exchange with the BLM. This completed land exchange has been challenged in two separate federal lawsuits.

Federal Land Exchange Litigation. There are two separate, but related, litigation matters in federal district court involving On September 20, 2005, the completed land exchange between Kaiser Eagle Mountain, Inc, and the BLM. The details of each case are as follows:

A. Donna Charpied; Laurence Charpied; The Desert Protection Society (Plaintiffs) v. United States Department of the Interior; Bureau of Land Management; Bruce Babbitt, in his official capacity as Secretary of the Interior; Tom Fry, in his official capacity as Acting Director of the Bureau of Land Management; Al Wright, in his official capacity as Acting California State Director of the Bureau of Land Management; Tim Salt, in his official capacity as Bureau of Land Management California Desert District Manager; Robert Stanton, in his official capacity as Director of the National Park Service, Kaiser Eagle Mountain, Inc., and Mine Reclamation Corporation (Defendants), (United StatesU. S. District Court for the Central District of California, RiversideEastern Division, Caseissued its opinion in Donna Charpied,et al., Plaintiffs v.United States Department of Interior, et al., Defendants (Case No. EDCVED CV 99-0454 RT(MCx)RT (Mex)) and inNational Parks and Conservation Association, Plaintiff v.Bureau of Land Management, et al., Defendants (ED CV 00-0041 RT (Mex)). The decision is adverse to the landfill project in that it sets aside a land exchange completed between the Company and U.S. Bureau of Land Management (“BLM”) in October 1999 as well as two BLM rights-of-way. It also effectively reinstates a reverter title issue involving the Eagle Mountain Townsite.

In December 1999, opponentsthe exchange, the Company’s wholly owned subsidiary, Kaiser Eagle Mountain, Inc. (now Kaiser Eagle Mountain, LLC) transferred approximately 2,800 acres of Kaiser-owned property along its railroad right-of-way to the BLM and a cash equalization payment in exchange for approximately 3,500 acres of land within the Eagle Mountain landfill project filedarea. The land exchanged by the Company was identified as prime desert tortoise habitat and was a lawsuit inprerequisite to completion of the federal district court located in Riverside, California seeking to stoppermitting of the Eagle Mountain landfill project. In summary,Following completion of the lawsuit challenges the BLM’s approval of a land exchange, betweentwo lawsuits were filed challenging it and requesting its reversal. The plaintiffs argued that the Company and the BLM. The challenges are based upon,land exchange should have been reversed, because, among other things,reasons, the Company’s and the BLM’s alleged failureBLM failed to comply with the National Environmental Policy Act and the Federal Land Policy Management’sand Management Act. The relief sought is an unwinding of the land exchange that was completed on October 13, 1999, and the award of attorneys’ fees. The National Park Service has been dismissed out of the lawsuit. InDesert Citizens Against Pollution v. Bisson,(Ninth CircuitU.S. District Court of Appeals, Case No. 97-55429), the Court of Appeals concluded, among other things, that the BLM did not properly value the land being acquired by the competing Mesquite rail-haul landfill project and ordered a reversal of the land exchange. The court concluded that the appraisal should have consideredenvironmental impact statement was deficient in its explanation and/or environment analysis with regard to: (i) the highest best useissue of eutrophication which deals with the introduction of nutrients, in this case primarily nitrogen, as a result of the lands being acquired fromexistence of the BLM as a landfill.landfill project; (ii) Big Horn Sheep, which is not an endangered species; (iii) the statement of purpose and need for the landfill project; and (iv) the reasonable range of alternatives to the proposed project. The court did not, however, determine the proper valuationrule in favor of the exchanged lands. The plaintiffs in Kaiser’s federal land exchange litigation have amended their respective complaintslandfill project with regard to include allegations that the appraisal used in Kaiser’s land exchange with the BLM is similarly defective.environmental analysis and explanation for: (i) noise; (ii) night lighting; (iii) visual impacts; (iv)

KAISER VENTURES LLC AND SUBSIDIARIES

In light of theBisson ruling, desert tortoise; (v) groundwater; and (vi) air. The court also ruled that the environmental impact statement was deficient under the Federal Land Policy and Management Act with regard to: (i) the appraisal undertaken by the BLM has completed an independent review of the “highest and best use” analysis consistent with that discussed in theBisson decision. The BLM’s independent appraiser concluded that there would be no change in the determination of the “highest and best use” analysis in the appraisal used in the land exchange ifexchange; and (ii) a full discussion of the property involved was expressly considered as a land fill site. Given allBLM’s conclusions on the facts and circumstances, the independent appraisal concluded that there was no premium to be paidpublic need for the property interests exchanged by the BLM even if a portion of such property interests were a part of a planned landfill.

All scheduled briefing for the case was completed in January 2003. We are currently awaiting a decision from the court. Kaiser is vigorously defending the litigation.

B. National Parks and Conservation Association (Plaintiff) v. Bureau of Land Management; United States Departmentlandfill project. A copy of the Interior; Kaiser Eagle Mountain, Inc.; and Mine Reclamation Corporation

(Defendants), (United States District Court for the Central District of California, Riverside Division, Case No. EDCV 000041 VAP(JWJx)).

This lawsuit was brought by the National Parks Association and alleges causes of action that are virtually identicaldecision can be found as Exhibit 99.1 to the causes of action asserted in theCharpied litigation. All scheduled briefing has been completed for this litigation. Kaiser is also vigorously defending this matter.

Company’s Report on Form 8-K dated September 20, 2005.

Threatened Endangered Species Act Litigation. The Company along withWe and the U.S. Department of Interior appealed the BLM,adverse decision to the Los Angeles County Sanitation District and Metropolitan Water DistrictU. S. 9^th Circuit Court of Southern California, received a letter dated September 26, 2002, from the Center for Biological Diversity, the Sierra Club, CitizensAppeals. The briefing for the Chuckwalla Valley (“Complaining Groups”) declaring their intentappeal was completed in 2007 and oral argument was heard by a three judge panel on December 6, 2007. The U.S. 9^th Circuit Court of Appeals usually announces its decisions six to sue for violationstwelve months following oral argument but on occasion the announcement of a decision may take substantially longer. Since oral argument was completed more than one year ago, a decision can be announced at any time. There can be no assurance that we will be successful in any appeal. If the decision is fully affirmed on appeal, the decision would jeopardize the viability of the Endangered Species Act in regardlandfill project. In addition, the decision could adversely impact the agreement to actions or inactions relatedsell the landfill project to the railroadDistrict, including termination of the agreement.

In April 2007 Donna Charpied, et al, filed a motion with the same U.S. District Court that handled the land exchange litigation seeking, in their opinion, to enforce the court’s order in such case. The allegations were that additional actions are necessary to set aside the land exchange and to prevent the use of property at Eagle Mountain that would serve“change the character and use of the exchanged properties …”. In the motion, the opponents objected to the military training that has taken place and that may take place on Kaiser fee owned land at Eagle Mountain (even though military and law enforcement training previously took place at Eagle Mountain), the possible use of a portion of the Eagle Mountain landfill project. Among other things, it is alleged that there has beenTownsite for a failure to comply with a biological opinion issued by the U.S. Fish & Wildlife Service and that the BLM has failed to enforce the terms of that biological opinion. In summary, the Complaining Groups are demanding enforcement of the biological opinion or revocation by the BLM of the right-of-ways granted for the existing Eagle Mountain railroad andprison facility (even though one operated successfully at the Eagle Mountain road.Townsite for over 12 years) and the possible use of rock from Eagle Mountain to help remediate acknowledged environmental problems at the Salton Sea located in Imperial and Riverside counties in Southern California.

On September 18, 2008, the U.S. District Court denied the Plaintiffs’ motion and determined that: (i) the BLM’s actions to date to set aside the land exchange were sufficient and that no reconveyance documents needed to be recorded; (ii) the military training activities that had taken place at Eagle Mountain did not change the character and use of the exchange lands; and (iii) the activities associated with the testing of the suitability of Eagle Mountain rock for use in a possible Salton Sea restoration plan were acceptable. The biological opinion contains, among other items, mitigation measuresCourt declined to rule on the challenge to a private prison project since there is no current private prison project at Eagle Mountain.

Iron Partners Litigation.In April 2008, the Company, along with KSC Recovery, Inc. (the Kaiser Steel Corporation bankruptcy estate), and the federal government were sued by Iron Partners LLC in the U.S. District Court for the desert tortoiseWestern District of Washington (Iron Partners, LLC v. Maritime Association, United States Department of Transportation, et al., U.S. District Court, Western District Washington at Tacoma, Case No. C08-5217 RJB). The allegations in the case are that the Company and KSC Recovery, Inc. are the successors to the Kaiser Company, Inc. and such company leased or owned certain property in Vancouver, Washington in the 1940’s that served as a shipyard. It is further alleged that hazardous wastes were buried on such property for which could require substantial expenditures.

In reviewing the complaintsCompany is liable. The plaintiff, Iron Partners, LLC, now owns such property. The plaintiff seeks damages under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Washington Model Toxic Control Act and under common law trespass. The City of Vancouver, Washington has indicated that it may intervene as a plaintiff in the case since a portion of the Complaining Group,buried debris appears to extend onto property owned by the BLM, outcity. However, the City of an abundance of caution, conducted an informal consultation withVancouver has yet to intervene in the matter. The federal government filed a motion to dismiss all common law claims against it except for the CERCLA claims. On March 5, 2009, the U.S. Fish & Wildlife ServiceDistrict Court announced its decision in favor of the government dismissing the remaining common law claims against the government. The government, however, remains in the case with respect to the biological opinion. Although neitherCERCLA claims. While we are still in the constructionearly stages of the landfill project nor the regular use of the railroad has commenced, the BLM requested the Company to develop a maintenance schedule for the railroad that would address, among other things, the particular concerns of culvertslitigation and rail line ballast. The Company has submitted a proposed schedule which is under review by the BLM.

Warrant Dispute.New Kaiser Employees’ Voluntary Benefit Association, VEBA, and Pension Benefit Guaranty Corporation, PBGC, are the beneficial owners of warrants to purchase, respectively, 460,000 and 285,260 Class A Unitsinformal discovery in the Company (the warrants were initially for common stock of Kaiser Inc. and were converted into Class A Units of Kaiser LLC in the merger). VEBA and PBGC have each claimedthis matter, we understand that the treatment of its warrant inclaim is between $1.5 million and $2.5 million. However, if the conversion violated the terms of the warrant. Prior to the vote on the conversion proposal, it was agreed by Kaiser, VEBA and PBGC that the rights of each VEBA and PBGC, under its warrant, would not be changed or waived by (i) any consent to or approval of the conversion proposal by either VEBA, PBGC or any director representing either of them, or (ii) any decision by either the VEBA or the PBGC to delay any potential legal challenge until after the adoption and completion of the conversion proposal. VEBA and PBGC voted their respective shares in Kaiser Inc. in 2001 in favor of the conversion proposal. VEBA and PBGC each occasionally continue to assert that the conversion proposal violated the terms of its warrant. We have had several discussions with VEBA representatives concerning the claim and we believe the claim does not have any merit. Neither the VEBA nor the PBGC have taken legal action to pursue the claim.City

KAISER VENTURES LLC AND SUBSIDIARIES

of Vancouver becomes a plaintiff, the size of the claim will likely increase. This matter has been tendered to our insurance carrier which has accepted the defense of this matter subject to a reservation of rights.

Tex Tin ClaimPortland Harbor Superfund Site. In February 2004 we receivedlate March 2009 KSC Recovery, Inc., the bankruptcy estate of the former KSC, and the Company were notified that they each may be a potential responsible party in connection with the investigation and clean-up of the Portland Harbor Superfund Site, Portland, Oregon. No information was provided in the correspondence identifyingconcerning the reasons why KSC Recovery, Inc or the Company have been identified as a potentially responsible party for remediation and related costs at a property in Texas known asno amount of damages was alleged although apparently over $69 million has been spent to date to characterize the Tex Tin site. It appears thatenvironmental problems affecting the basis for such identification is thatPortland Harbor. Since this claim was just received, the Company is consideredand KSC Recovery are in the reorganized successor to KSC. However,very preliminary stages of investigating the factual basismatter. KSC Recovery, Inc. and the monetary extent of the alleged liability are currently unknown. No legal action has been commenced against the Company. WeCompany have informed those giving the notice that we believe such liability, if any, was discharged in the bankruptcy of KSC. We also believe that there is coverage under our existingtendered this claim to their appropriate insurance for this claim.carrier.

Asbestos Litigation. There are pending asbestos litigation claims, primarily bodily injury, against Kaiser LLC and Kaiser Steel Corporation (the bankruptcy estate of Kaiser Steel Corporation is embodied

in KSC Recovery, Inc.). There currently are approximately 1418 active suits. MostMany of the plaintiffs allege that they or their family members were aboard Kaiser ships or worked in shipyards in the Oakland/San Francisco, California area or Vancouver, Washington area in the 1940’s and that the Company and/or KSC Recovery were in some manner associated with one or more shipyards or has successor liability. However, we are beginning to see the focusthere is an increasing number of the claims shifting from ships and shipyardsrelated to other facilities such as the former Kaiser Steel Mill Site Property. Plaintiffs attorneys are increasingly requesting mill site and Eagle Mountain related documents in an effort to build a “war chest” of documents for future litigation.

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

Of the claims resolved to date, approximately 76%70% have been resolved without payment to the plaintiffs, and of the 40 cases that have been settled to date involving a payment made to plaintiffs, the settlement amount was $37,500 or less for 32 of such cases.plaintiffs. The Company believes that it currently has substantial insurance coverage for the asbestos claims and has tendered these suits to appropriate insurance carriers.

City of Ontario Claim. In 2001,Claims Against the California Regional Water Quality Control Board (“RWQCB”) communicated with us that the City of Ontario had asserted that we were responsible for the damage caused by a plume of high total dissolved solids (such as salt) to one of its wells, which plume allegedly emanated from our former mill site property. By way of background, in the fall of 1993, RWQCB approved a settlement agreement resolving the Company’s groundwater remediation obligation. The settlement agreement provided that the Company would: (i) pay $1,500,000 upon approval of the settlement agreement; and (ii) contribute 1,000 acre feet of water in storage per year for 25 years for the benefit of a regional groundwater de-salter program either by direct transfer to the de-salter project or abandonment to the basin with a Watermaster waiver of the de-salter replenishment obligation. We have satisfied all of its obligations under the settlement agreement. However, the settlement agreement left open the possibility of certain third party claims. The City of Ontario’s claims were fully settled in March 2004 with the settlement paid by one of our insurance carriers.

Slemmer Litigation. Thomas M. Slemmer, et al v. Fontana Union Water Company, et al., (San Bernardino County District Court, California, Case No. SCVSS 086856). The defendants in the lawsuit are Kaiser, Fontana Union Water Company, Cucamonga County Water Company, San Gabriel Valley Water and individuals serving on the Board of Directors of Fontana Union Water Company. In summary, plaintiffs allege that they are the owners of 175 shares of the stock of Fontana Union Water Company, a mutual water company, and that the defendants conspired and committed acts that constitute an unlawful restraint of trade, a breach of fiduciary duty by the controlling shareholders of Fontana Union and fraudulent business practices in violation of California law. Among other things, plaintiffs have requested $25,000,000 in damages and the trebling of such damages under California law. In October 2003, the court ruled that the lawsuit could proceed as a class action lawsuit. With this ruling, discovery will proceed in the case. We believe that the allegations against us are without merit and we will vigorously defend this suit.

Port of Oakland. The Port of Oakland continues to assert a potential claim arising out of alleged contamination of soil from underground storage tanks. The Port of Oakland alleged that KSC used these tanks at property owned by the Port of Oakland and leased by Kaiser Steel Corporation pursuant to a lease agreement that terminated in 1986. Based upon the communication received, the Port of Oakland claims damages of approximately $150,000 plus unknown potential remediation costs. We believe, based upon the information provided to date, that the allegations are without merit and that any potential claim would be barred under the statute of limitations.

Port of Los Angeles. On March 21, 2003, KSC received a Third Party Complaint captionedSanta Monica Baykeeper, et al (Plaintiffs) v. Kaiser International Corporation, et al (Defendants) / American Bulk Loading Enterprises, Inc. et al (Third-Party Plaintiffs) v. AMICOR, et al (Third Party Defendants) United States District Court Central District of California; Case Number CV-97-7761 DDP (RCx). The underlying litigation involves a citizens enforcement action commenced against the Port of Los Angeles, Kaiser International Company, and others by the Santa Monica Baykeepers for alleged contamination to the San Pedro Inner Harbor in the Port of Los Angeles arising from the operation of a bulk loading facility. The Third Party Plaintiffs subsequently commenced litigation against KSC and thirty-nine other Third Party Defendants seeking recovery for any amount paid by the Third Party Defendants under theories of equitable indemnity, negligence and contribution. While we understand the case is still open, the litigation is not being actively pursued against KSC.

London Market Claim. In 2002, litigation was commenced by Truck Insurance Exchange (“Truck”) against Lloyd’s, London, and certain London Market Insurance Companies (collectively “London Carriers”), captioned Truck Insurance Exchange v. Fremont Indemnity, et al, Los Angeles Superior Court Case No. BC 260738. In essence Truck was claiming that the London Carriers were obligated to participate in the payment of a litigation settlement that Truck had made. The London Carriers tendered the claim to the Company for indemnification pursuant to a 1995 settlement agreement between the London Carriers and the Company. The Company in turn submitted the London Carriers’ claim to IMACC, which is a third party that we believe is ultimately responsible for the payment of any amount that it determined to be owed in litigation. During the second quarter of 2003, the Truck litigation was dismissed because of Truck’s failure to commence its law suit within the applicable statute of limitations. As of the date of this Report on Form 10-K, IMACC has been reimbursing the London Carriers for the reasonable attorneys’ fees and costs of this litigation. We understand the Truck has decided to appeal the trial court’s decision to dismiss the case.

Dismissal of Product Liability Litigation. In March 2002, we received a complaint in the mail captioned Explorer Pipeline Company, et al v. Kaiser Steel Corporation, et al., (District Court of Tarrant County, Texas, Case No. 96-191821-02). The plaintiffs in this suit allege that KSC, or possibly other steel companies may have manufactured or sold pipe that was used in a portion of a petroleum pipeline that runs from the Texas Gulf Coast to Hammond, Indiana. It was further alleged that this portion of the pipeline was defective and ruptured on March 9, 2000, releasing gasoline and causing damage to the plaintiffs’ respective interests in land and that there were business interruption damages to certain of the plaintiffs. Plaintiffs filed this lawsuit because of statute of limitations concerns without knowing who may have actually sold or manufactured the pipe in the ruptured section of the pipeline. A National Transportation & Safety accident report identified another company as the maker of the ruptured pipe. On March 2, 2004, the Company was dismissed from the lawsuit.

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

From time to time various environmental and similar types of claims that relate to Kaiser Steel pre-bankruptcy activities, are asserted against KSC and Kaiser LLC. Excluding the asbestos claims, there has been an average of twoone to fourthree such claims a year for the past several years. TheExplorer PipelinelitigationFor example, as discussed above in “Portland Harbor Superfund Site” KSC Recovery, Inc. the KSC bankruptcy estate, was notified in late March 2009 that it was identified as a potentially responsible party in connection with the investigation and thePort of Oakland claims are examplesclean-up of the types of claims that are occasionally alleged to have arisen out of pre-bankruptcy activities. Portland Harbor Superfund Site.

In connection with the KSC plan of reorganization, Kaiser, as the reorganized successor to KSC, was discharged from all liabilities that may have arisen prior to confirmation of the plan, except as otherwise

KAISER VENTURES LLC AND SUBSIDIARIES

provided by the plan and by law. Although Kaiser believes that in general all pre-petition claims were discharged under the KSC bankruptcy plan, there have been some challenges as to the validity of the discharge of certain specified claims, such as asbestos claims. If any of these or other similar claims are ultimately determined to survive the KSC bankruptcy, or if they are not covered by insurance it could have a materially adverse effect on Kaiser’s business and value.

None. We anticipate holding our next members’ meeting sometime following the decision in the land exchange litigation that is currently before the U.S. 9^th Circuit Court Appeals.

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KAISER VENTURES LLC AND SUBSIDIARIES

PART II

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

The Class A Units are subject to substantial transfer restrictions and, therefore, the Class A Units are not traded on an established securities market and are not readily tradable on a secondary market or the substantial equivalent thereof. However, we are aware that there have been a very limited number of private purchase and sale transactions since November 30, 2001, with no single2001. There were a limited number of private transactions in 2008 at prices ranging from $.50 to $1.60 per unit. There was one block sale to a third party in May 2008 involving approximately 170,000 units at $.50 per unit. In the third quarter of 2008 a third-party commenced a tender offer to purchase and sale transaction involving more than 15,000up to 1,400,000 of our Class A Units at a price of $.50 per unit less a pro-rata share of transfer costs. This third party ultimately terminated its tender offer. In response to such third party tender offer, we conducted a self-tender offer for a portion of our Class A Units. We understandAs a result of the tender offer conducted by us that the sales price in the private transactions has ranged from $1.00 to $1.50 perclosed on December 1, 2008, we purchased 841,544 of our Class A Unit. In connection withUnits at a price of $.90 per unit. We also paid all related transfer costs for the merger,units purchased by the Company.

Since the Class A Units were independently appraisedare not publicly traded and determined to have a value of $1.50 as of November 30, 2001.

there is no secondary market for the units, there is no performance graph.

As of March 23, 2004,16, 2009, there were approximately 3,1083,375 holders of record of our Class A Units which includes holders of Kaiser Inc. stock that have yet to convert their shares to Class A Units as a result of the merger.

As of March 23, 2004,16, 2009, KSC Recovery held 126,598104,267 Class A Units that are outstanding but reserved for distribution to the former general unsecured creditors of KSC pursuant to the KSC Plan. It is anticipated that a distribution of up to 65,000In addition there are 113,250 Class A Units will be madedeemed outstanding that are reserved for those investors that have yet to the former general unsecured creditorsconvert their Kaiser Inc. stock to Kaiser LLC Class A Units as a result of the KSC bankruptcy estate in the second quarter of 2004.

merger.

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

As discussed above, we purchased 841,544 of our Class A Units at $.90 per unit pursuant to a self-tender offer that closed December 1, 2009.

Equity Compensation Plan Information

As required by Item 201(d) of Regulation S-K, the following table provides certain information as of December 31, 2003,2008, with respect to our equity compensation plans under which equity securities of the Company are authorized for issuance. All outstanding unexercised options expired as of December 31, 2008. Thus, we no long have any outstanding options. As discussed in more detail in this Report on

KAISER VENTURES LLC AND SUBSIDIARIES

Form 10-K, all options with an exercise price of $1.25 or less per unit or were exercised and all options with an exercise price of greater than $1.25 per unit were forfeited as of midnight of December 31, 2008.

Item 6.

Item 6.

SELECTED FINANCIALFIANCIAL DATA

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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.

KAISER VENTURES LLC AND SUBSIDIARIES

Item 7.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATION

Section 1: Operating Results

Summary Background

Kaiser, including its wholly-owned subsidiaries unless otherwise provided herein, is the reorganized successor to Kaiser Steel Corporation which was an integrated steel manufacturer that filed for bankruptcy protection in 1987 (“KSC”). Since the KSC bankruptcy, we have been developing certain assets remaining after the bankruptcy. As of the date of this Report on Form10-K,Form 10-K, our remaining principal assets include: (i) an 82.48%83.13% ownership interest in Mine Reclamation, LLC, which owns a permitted rail-haul municipal solid waste landfill located at the Eagle Mountain Site; (ii) a 50% ownership interest in the West Valley Materials Recovery Facility and Transfer Station; and (iii) approximately 5,400 additional acres owned or controlled by Kaiser at the Eagle Mountain Site that are not included in the pending sale to the County District No. 2 of Los Angeles County (which we refer to as the District). However, if the September 2005 U.S. District Court decision providing that a land exchange completed in October 1999 is to be unwound is upheld on appeal, the reversal of the land exchange will impact the amount and nature of the land we own and control; (iv) over approximately 150 million tons of stockpiled rock that is located on our fee owned Eagle Mountain property that is not a part of the Landfill Project. Sale of such rock is subject to market conditions and the Company having all necessary permits; and (v) land at Lake Tamarisk consisting of 72 residential lots and approximately 420 acres of other undeveloped property. Lake Tamarisk is an unincorporated community located approximately 70 miles east of Palm Springs, California, and approximately 8 miles from the Eagle Mountain Site. As of December 31, 2003,2008, we also had cash and cash equivalents, receivables and long-termshort-term investments in securities of approximately $15.2$7.66 million. As previously discussed, the permitted rail-haul municipal solid waste landfill project at Eagle Mountain is currently under contract to be sold to the District for approximately $41 million.

million plus interest from 2001.

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

Annual Report on Form 10-K

Kaiser qualifies as a smaller reporting company under SEC rules and under such rules Kaiser is required to include and discuss in this Annual Report on Form 10-K its consolidated balance sheets, its consolidated statements of operations, cash flows and changes in members’ equity for the years ended December 31, 2008, and 2007. The reader of this Annual Report on Form 10-K is encouraged to read our prior reports filed with the SEC for our financial statements for other previous years.

Primary Revenue Sources

Ongoing Operations

Kaiser’s revenues from ongoing operations are generally derived from the development of our long-term projects. Income from equity method investments reflectreflects Kaiser’s share of income related to those equity investments (i.e., West Valley MRF) which we account for under the equity method. Revenues from water resources represent payments received under the lease of our interest in Fontana Union to Cucamonga, which was sold in 2001.

Interim Activities (net)

Revenues and expenses from interim activities are also generated from various miscellaneous sources. Significant components of interimHistorically, miscellaneous revenue activities includehave included housing rental income, aggregate and rock sales and lease payments for the minimum security prison at the Eagle Mountain Site. Due tofacility. During 2007 and 2008, the interim nature of these activities, we are presenting these revenues net of their related expenses. Due to the termination of the minimum security prison leaseCompany generated miscellaneous income at the Eagle Mountain Townsitefrom activities such as of December 31, 2003, interim revenues are expected to decline significantly in 2004. Expenses at the Eagle Mountain Townsite will remain at historical levels while the Townsite operations are being closed downleasing its fee owned land for media-related activities and we are in the process of developingmilitary and implementing a plan to mothball its facilities.law enforcement training.

Summary of Revenue SourcesKAISER VENTURES LLC AND SUBSIDIARIES

Due to the developmental nature of certain of ourthe Company’s projects and ourthe 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, we believethe Company believes it is important to evaluate the trends in the components of ourits revenues as well as the recent developments regarding ourits long-term ongoing and interim revenue sources. See “Part I, Item 1. BUSINESS”2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - BUSINESS UPDATE” for a discussion of recent material events affecting the Company’s revenue sources.

Results of Operations

Table summarizing major variances in net loss between the years ended December 31, 2008 and 2007:

For additional information on the items constituting the major variances, please read the discussion and analysis of our financial condition and results of operations below.

Analysis of Results for the Years Ended December 31, 20032008 and 20022007

An analysis of the significant components of our resource revenues for the years ended December 31, 2003 and 2002 follows:

Resource Revenues. Total resource revenues for 20032008 were $2,274,000,$2,389,000, compared to $1,394,000$2,794,000 for 2002. 2007. The reasons for this decrease are discussed below.

Revenues from ongoing operations increased 48% for 2003 to $2,388,000 from $1,609,000 in 2002, while the loss from interim activities (net of related expenses) decreased 47% to $114,000 from $215,000 in 2002.

Ongoing Operations. Income fromCompany’s equity method investments increased by $779,000 to $2,281,000 due to increased equity income frominvestment, the West Valley MRF, during 2003decreased by $178,000 to $2,271,000 for 2008 as compared to 2002.2007. This increase in equity income indecrease, which correlates to lower operating profit at the West Valley MRF, is mainly due to: (a)primarily to lower revenues as a 17% increaseresult of a drop in volumevolumes of waste processed, atwhich were partially offset by lower operating and partnership expenses and lower depreciation expenses relating to fully depreciated equipment. The reduced volume levels reflect the current economic recession. The West Valley MRF also experienced a significant drop in recyclable commodity prices in the fourth quarter of 2008 which will likely adversely affect the West Valley MRF ($626,000);MRF’s operating profits in 2009.

Revenue from Eagle Mountain operations decreased to $118,000 from $345,000 for 2007. This decrease is primarily the result of decreased utilization of our fee owned property for military training and media activities.

Operating Costs. Operating expenses increased to $1,883,000 from $1,623,000 for 2007. This increase relates primarily to: (a) legal and consulting services associated with the development of the Eagle Mountain rock resources and the development of the Company’s land at Lake Tamarisk; and (b) an increase in net recyclable sales mainly due to higher commodity prices ($140,000); (c) reduced repairs and maintenance expenses ($172,000); and (d) a decrease in interest expense ($40,000). These increases in revenues and reductions in expenses were partially offset by an increase in payroll and related operating expenses ($221,000).

Gain on Mill Site land sales. The Company recognized gains of $107,000 during both 2003 and 2002, from the sales of certain Mill Site property parcels that closed in 1997 and 1999.

Interim Activities (net). Interim activities, net of expenses, for 2003 were a loss of $114,000 compared to a loss of $215,000 for 2002. This reduction in interim activities losses is only temporary and was primarily due to higher nonrecurring revenues ($108,000) being offset by slightly higher operating expenses ($7,000). This nonrecurring revenue consists of income from a salvage/scrap contract and onetime location fees for a movie. Due to the termination of the minimum security prison lease at the Eagle Mountain Townsite as of December 31, 2003, (see the following paragraph for details) interim revenues are expected to decline significantly in 2004. Expenses at the Eagle Mountain Townsite will remain at historical levels while the Townsite operations are being closed down and its facilities are being mothballed.

During 2003, a portion of the Eagle Mountain Townsite was leased on a month-to-month basis to Management Training Corporation (“MTC”), a company that operates a minimum security prison under contract with the State of California. Funding for many private prisons was eliminated from California’s 2003 - 2004 state budget as of December 31, 2003, including the private prison located at Eagle

Mountain. Accordingly, effective December 31, 2003, the private prisonpersonnel costs at Eagle Mountain was closed. MTC surrendered most of the property it leased as of December 31, 2003, with the exception of several houses that it continued to lease through February 2004. As of the date of this Report on Form 10-K, we have not had any success in finding a replacement tenant and thus, we are in the process of developing and implementing a plan to mothball the Eagle Mountain Townsite which should be completed by the end of the third quarter of 2004. With the closure of the private prison, Eagle Mountain’s ongoing operations and staffing will be reduced. The Company has recorded a reserve for the costs of such a reduction in activity, the adequacy of which management will continue to review.

MRC Casualty Loss. During the third quarter of 2003, portions of the 52-mile Eagle Mountain railroad and related protective structures sustained considerable damage due to heavy rains and flash floods. The damage included some rail sections being buried under silt while other areas had their rail bed undermined. We currently estimate the cost of repairing this damage to be $4,500,000, $300,000 of which we expect to be incurred in 2004. As a result, the Company has recorded a reserve and a charge to earnings in the amount of $4,500,000 during 2003 to cover the cost of these repairs.Mountain.

Corporate General and Administrative Expenses.ExpensesTotal corporate. Corporate general and administrative expenses for 20032008 increased 10%8% to $2,791,000$1,983,000 from $2,526,000$1,832,000 for 2002. The2007. This increase is primarily duerelated to one time retention payments ($1,031,000) made as of June 30, 2003, to senior management under the terms of their respective employment agreements negotiated in 2000. This increase was substantially offset by: (a) reduced staffing expenses ($330,000); (b) lower non-recurring severance costs ($193,000); (c)incurred for the elimination of a previously established reserveCompany’s tender offer completed during 2003 ($189,000); and (d) lower office rent expenses ($52,000). The reserve eliminated had been established in previous years for certain possible liabilities that were resolved during 2003, and thus the reserve was determined to be unnecessary and was reversed against general and administrative expenses.2008.

Net Interest and Investment Income (Loss). Net interest and investment incomeloss for 20032008 was $627,000$91,000 compared to $497,000a gain of $482,000 for 2007. This change is primarily the result of a temporary reduction in 2002. The change was due to increased gains on investments ($243,000) and increased dividend income ($118,000) being partially offset by lower interest income ($232,000).

KAISER VENTURES LLC AND SUBSIDIARIES

the “Market Value” of the investments during the year. The current U.S. credit crisis has caused some of the Company’s commercial paper and other investments to decline in market value as of December 31, 2008. The Company expects to hold these investments either to maturity or to disposition so that this decline in market value amounting to $343,000 at December 31, 2008, is considered temporary. As of January 1, 2008, the Company adopted FAS 159 “The Fair Value Option for Financial Assets and Financial Liabilities” which permits entities to choose to measure many financial instruments and certain other items at fair value. Investments are marked to market and unrealized earnings or losses are reflected in income for the period in which they are earned.

Pre-Tax Loss before Minority Interest and Income Tax Provision. The Company recorded a pre-tax loss before minority interest and income tax provision of $4,390,000$1,568,000 for 2003 versus $635,000 for 2002.

Minority Interest. The minority unitholders in MRC were allocated $789,000, or 17.52%, of the $4,500,000 recorded casualty loss that was incurred due the heavy rains and flash flood damage on the 52-mile Eagle Mountain railroad.

Pre-Tax Income (Loss) and Income Tax Provision. The Company recorded a loss before income tax provision of $3,601,000 for 2003,2008 versus a pre-tax loss of $635,000 recorded in 2002. Subsequent to the Company’s conversion into an LLC, the$179,000 for 2007. The Company is taxed as a partnership and, thus, the Company’s results of operations (on an income tax basis) are distributedallocated to the unit holders for inclusion in their respective income tax returns. Therefore, the onlyThere are, however, income taxes imposed on the Company areCompany; and on Business Staffing Inc. (“BSI”), the Company’s only corporate subsidiary; and a small gross revenue tax imposed by the State of California, and income taxes imposed on Business Staffing Inc., a subsidiary of the Company. These taxesCalifornia. The tax provision amounted to $16,000$531,000 for 2003,2008, versus $18,000$10,000 for 2002. Additionally, during 2003,2007.

The significant increase in the Company recorded a $46,000 tax expense whileprovision in 2002, the Company recorded a tax benefit of $585,000, both of which related to activity prior to its conversion to a limited liability company. The additional income tax expense for 2003 was2008 is the result of the following:

The major component of this tax provision of $328,000 relates to the Company’s determination to establish a finalization of a State of California incomevaluation reserve against the deferred tax audit for 1999. The benefit for 2002 was the result of changesasset representing amounts originally believed to be recoverable in the Federal tax law and finalization of the Company’s Federalfuture due to anticipated income tax returns for 2001.in BSI, our corporate subsidiary.

Net Income (Loss).Loss.For 2003,2008, the Company reported a net loss of $3,663,000$2,024,000 or $0.53$0.29 per unit, versus a net loss of $68,000,$189,000 or $0.01$0.03 per unit, reported for 2002.2007.

Results of Operations

Analysis of Results for the Years Ended December 31, 2002 and 2001

An analysis of the significant components of our resource revenues for the years ended December 31, 2002 and 2001 follows:

Resource Revenues. Total resource revenues for 2002 were $1,394,000, compared to $68,051,000 for 2001. Revenues from ongoing operations decreased 98% for 2002 to $1,609,000 from $68,307,000 in 2001, while the loss from interim activities (net of related expenses) decreased 16% to $215,000 from $256,000 in 2001.

Ongoing Operations. During the first quarter of 2001, we completed the sale of our investment in Fontana Union to Cucamonga (to whom the shares were leased under a 102 year lease) for $87.5 million, resulting in a gain of $65.2 million. Included in the net gain of $65.2 million was the payment of $1.0 million to management pursuant to our Long-Term Transaction Incentive Program. Accordingly, water lease revenues under our 102-year take-or-pay lease with Cucamonga were $0 during 2002 compared to $295,000 for 2001.

During the first quarter of 2001, we also sold our California Mine properties for $2.0 million, resulting in a gain of $1,756,000. Finally in both 2002 and 2001, we recognized deferred gains of $107,000 from the sales of certain Mill Site property parcels that closed in 1997 and 1999.

Income from equity method investments increased by $524,000 to $1,502,000 due to increased equity income from the West Valley MRF during 2002 compared to 2001. This increase in equity income in the West Valley MRF is mainly due to a 12% increase in volume of waste processed at the West Valley MRF ($575,000); an increase in net recyclable sales due to higher commodity prices ($400,000); and a decrease in interest expense ($60,000). These increases were partially offset by increases in (a) repairs and maintenance ($185,000); (b) depreciation expense due to the facility expansion that was completed in May 2001 ($165,000); and (c) other operational and overhead expenses ($165,000).

Interim Activities (net). Interim activities, net of expenses, for 2002 were a loss of $215,000 compared to a loss of $256,000 for 2001. This reduction in interim activities losses is only temporary and is primarily due to the reimbursement of salaries and expenses by Mine Reclamation LLC on a capital improvement project which was concluded during the second quarter of 2002 ($75,000).

Resource Operating Costs. Resource operating costs are those costs directly related to the associated resource revenue. Total resource operating costs for 2002 decreased to $0 from $42,000 in 2001. This decrease was due to a decrease in the commission and outside legal costs associated with the Cucamonga lease. These expenses terminated with the sale of the Company’s investment in Fontana Union on March 6, 2001.

Corporate General and Administrative Expenses.Total corporate general and administrative expenses for 2002 decreased 63% to $2,526,000 from $6,861,000 for 2001. The decrease is primarily due to: (a) lower professional and outside consulting expenses ($1,740,000); (b) the absence of expenses relating to the exercise of nonqualified stock options ($1,288,000); (c) lower salary and benefit expense ($975,000); and (d) lower non-cash variable stock option accounting expenses ($428,000) being partially offset by the elimination of a previously established reserve during 2001 ($100,000). This reserve was established for certain assets that were sold in the first quarter of 2001, and thus was determined to be unnecessary and was reversed against general and administrative expense.

Net Interest Income. Net interest income for 2002 was $497,000 compared to $2,532,000 in 2001. The reduction was due primarily to: (a) a decrease in interest income due to lower cash and investment balances on hand and lower interest rates ($2,073,000); and (b) a decrease in interest expense ($39,000) primarily associated with the Company’s $30,000,000 revolving-to-term credit facility with Union Bank which was terminated prior to the Company’s sale of its Fontana Union stock (the collateral for the debt).

Loss before Minority Interest and Income Tax Provision. The Company recorded a loss before minority interest and income tax provision $635,000 for 2002, versus income of $63,680,000 recorded in 2001.

Pre-Tax Income (Loss) and Income Tax Provision. The Company recorded a loss before income tax provision of $635,000 for 2002, versus income of $63,680,000 recorded in 2001. Subsequent to the Company’s conversion into an LLC, the Company is taxed as a partnership and, thus, the Company’s results of operations (on an income tax basis) are distributed to the unit holders for inclusion in their respective income tax returns. Therefore, the only taxes imposed on the Company are a small gross revenue tax imposed by the State of California, and income taxes imposed on Business Staffing Inc., a subsidiary of the Company. The total tax expense recorded for 2002 was $18,000. Additionally, during 2002, the Company recorded an income tax benefit of $585,000. This benefit was the result of changes in the Federal tax law and finalization of the Company’s income tax returns for 2001 and related solely to activity prior to its conversion to a limited liability company.

Net Income (Loss).For 2002, the Company reported a net loss of $68,000 or $0.01 per unit, versus net income of $49,024,000, or $7.45 per unit, reported for 2001.

Section 2: Financial PositionLiquidity and Capital Resources

Cash, Cash Equivalents and Investments. We define cash equivalents as highly liquid debt investment instruments with original maturities of 90 days or less. Cash and cash equivalents decreased $6,785,000$302,000 to $3,562,000$1,117,000 at December 31, 2003 from $10,347,000 at December 31, 2002.2008. Included in cash and cash equivalents is $2,069,000 and $1,335,000$785,000 held solely for the benefit of MRC at December 31, 2003 and2008.

Below is a table showing the major changes in cash:

Working Capital. During 2008, current assets decreased $2,231,000 to $9,510,000, while current liabilities decreased $270,000 to $1,992,000. As a result working capital decreased by $1,960,000 to $7.5 million at December 31, 2002, respectively.2008.

KAISER VENTURES LLC AND SUBSIDIARIES

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

Tender Offer. In 2008 an unaffiliated third party initiated a tender offer to purchase up to 1,400,000 of the Company’s Class A Units at $.50 per unit less a pro-rata portion of associated transfer costs. In response to such tender offer the Company initiated its own tender offer. The decreaseCompany’s Board of Managers recommended that neither tender offer be accepted. The Company incurred legal, tax advice and other expenses associated with the tender offers totaling $252,000. The Company’s tender offer closed on December 1 2008, with the Company purchasing 841,599 units at $.90 per unit for a total expenditure of $757,390. The units purchased by the Company were retired.

Accounts Receivable and Other (net). During 2008, accounts receivable and other (net) decreased by $38,000 primarily as a result of the increased collection of trade receivables.

Short-Term Investments. During 2008, short-term investments decreased by $1,630,000. This is the result of the sale of a portion of the Company’s investments to provide cash for operations and for funds required to fund the Company’s tender offer completed in cash and cash equivalents is primarily due to: (a)December 2008. At December 31, 2008, the net investment ofCompany had $6.4 million of its excess cash reserves invested in short-term investments; (b) $2.1 millionshort term investments.

Investments. The Company’s recording of cash used by operations (exclusive$2,271,000 relating to its share of purchase of investments); and (c) capitalized MRC expenditures of $1.1 million. These cash uses were partiallyincome from its investment in the West Valley MRF was offset by the receipt of cash distributions from the West Valley MRF of $2.3 million and collections on notes and accounts receivable totaling $593,000.

Working Capital. During 2003, current assets increased $4.7 million to $16.2 million, while current liabilities increased $1.8 million to $2.8 million. The increase$2,500,000. This resulted in current assets resulted primarily from the $10.1 million increase in short-term investments and a $1.3 million increase in restricted cash, being mostly offset by a $6.8 million$229,000 decrease in cash and cash equivalents as discussed above. The restricted cash is the result of receiving $1,300,000 in cash from the Company’s transfer agent as discussed below. The increase in current liabilities resulted primarily from: (a) the $1,340,000 increase in the conversion distribution payable, as discussed below; (b) the moving of the balance of the deferred real estate gain to current; and (c) the $300,000 current portion of the $4,495,000 accrual to repair the 52-mile Eagle Mountain railroad. Included in current liabilities as of December 31, 2003 is $376,000 in accounts payable and accrued liabilities relating to MRC. As a result, working capital increased during 2003 by $2.9 million to $13.3 million at December 31, 2003.

Accounts Receivable and Other (net). During 2003, accounts receivable decreased by $308,000 primarily as the result of collections from MTC ($450,000) being partially offset by advances to vendors for insurance related matters ($173,000). At December 31, 2003, the Company’s accounts receivable and other balances totaled $455,000. A portion of this balance, $281,000, relates to amounts advanced by the Company to certain third party vendors for claim expenses that will be reimbursed by the insurance companies in accordance with the provisions of the Company’s insurance policies. The balance at December 31, 2002, was $763,000, of which $455,000 was receivable from MTC. This large receivable from MTC was a result of the late budget approval by the State of California, which delayed payments to service providers.

Short-Term and Long-Term Investments. At December 31, 2003 the Company had $10.1 million of its excess cash reserves invested in high-grade marketable commercial paper, and bond mutual funds. Based on the maturity dates of these investments, the entire amount was classified as a current asset. During the course of 2003, the Company made investments totaling $14.4 million and had maturities of $8.0 million. At December 31, 2002, the Company had investments totaling $3.8 million in high-grade marketable commercial paper, certificates of deposit, corporate bonds and U.S. government securities all of which were classified as long-term assets.

Investments. There was a $31,000 increase in our investment in the West Valley MRF during 2003 due to the recording ofMRF. In addition, our equity share of income of $2,281,000 being mostly offset by the receipt of $2,250,000 in cash distributions during the year. Our investment in the Eagle Mountain Landfill increased $1,137,000$428,000 during 20032008 due to continuing landfill development activities.activities which were capitalized. On June 19, 2007 the Company approved a subscription agreement with MRC to provide, at a minimum, an additional $990,000 in working capital for MRC. The first installment of the minimum subscription amount ($594,000) was paid during the second quarter, with the second and final installment paid on March 31, 2008. Since all the owners of MRC did not purchase their respective pro rata interest in the private placement, we purchased the balance of such units, resulting in an additional investment of $431,000 during 2008. As a result, our ownership interest in MRC increased from 82.48% to 83.13%.

Other Assets. TheThere was a decrease in other assets ($904,000)of $838,000 which is mainly related to decreases in notes receivable due to the receipt of principal payments during 2003 ($356,000), the reclassificationnet result of the balanceamortization of a note receivable into current assets ($307,000) andthe environmental insurance policy of $300,000, an increase in accumulated depreciation ($227,000).as of December 31, 2008 of $371,000, the valuation allowance recorded against the deferred tax asset of $328,000 and the recording of a $75,000 receivable for overpayment of estimated income taxes for 2008. These decreases were partially offset by the capitalization of building and water system repairs of $59,000.

Environmental Remediation. We estimated, asThe Company purchased, effective June 30, 2001, a 12-year $50 million insurance policy, which is expected to cover substantially any and all environmental claims (up to the $50 million policy limit) relating to the historical operations of the Company. As of December 31, 2003,2007, based upon current information, we estimate that our future environmental liability related to

KAISER VENTURES LLC AND SUBSIDIARIES

certain matters and risks not assumed by CCG Ontario, LLC, a subsidiary of Catellus Development Corporation, a New York Stock Exchange company, in its purchase of the Mill Site Property (August 2000) (Catellus Development Corporation merged with and into Palmtree Acquisition Corporation, a subsidiary of ProLogis on September 15, 2005), including a certain groundwater matter as well as potential matters at Eagle Mountain and at other historical locations and other possible third party claims, would be approximately $3.9 million. However, we purchased, effective June 30, 2001,$2.8 million for which a 12 year $50 millionreserve has been established. In the event a claim for damages is filed against the Company that relates to this reserve, management believes that the claim may be covered by such insurance policy at a cost of approximately $3.8 million. This policy will cover, among other things, virtually anydepending upon the nature and all environmental liabilities and claims, including defense costs, (up to the $50 million policy limit) relating to the historical operations and assetstiming of the Company reflected in the above approximate $3.9 million liability. Due to the nature of the insurance policy, generally accepted accounting practices require that the cost of the policy be capitalized, as an asset, separately

from the related liability. The Company amortizes this policy on a “claims paid” basis, and therefore expensed $14,000 of the policy premium during 2003.

Long-term Liabilities. The increase in other long-term liabilities is primarily due to the accrual of the MRC casualty loss ($4,195,000) being partially offset by decreases in the environmental remediation reserve ($18,000), the recognition of deferred gains on prior real estate sales ($107,000) and the reclassification of the balance of the deferred real estate gain to current liabilities to coincide with its note receivable classification.

claim.

Minority Interest. As of December 31, 2003, we2008, the Company has recorded $5,038,000$5,322,000 of minority interest relating to the approximately 17.52%16.87% ownership interest in MRC we dothe Company does not own. This balance reflects current year contributions by minority owners of $240,000, and the absorption of the $789,000 loss allocated to the minority owners. Upon termination of MRC, each minority unitholder is entitled to receive his pro-rata share of the net proceeds (if any) from the disposition of MRC’s assets.

Contingent Liabilities. We haveThe Company has contingent liabilities that are more fully described above and in the notes to the financial statements.

Critical Accounting Policies

The Company’s accounting policies are more fully described in the Notes to the Financial Statements. As disclosed in the Notes to the Financial Statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty and therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.

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

results of operations.

Investments. The Company accounts for investments under the provisions of Statement of Financial Accounting Standards (SFAS) No. 115,Accounting for Certain Investments in Debt and Equity SecuritiesSecurities.. The investments are classifiedCompany invests its’ excess cash reserves in high grade commercial paper (Standard & Poor’s rating of “A” or above), and U.S. government bonds which it classifies as “available-for-sale” and which are recorded at the purchase price of the security plus or minus the amortization of the discount or premium paid. ChangesAs of January 1, 2008, the Company has adopted (SFAS) No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Investments are marked to market and unrealized earnings are reflected in income for the marketperiod in which they are earned. Due to the current U.S. credit crisis, the fair value of the Company’s commercial paper investments are recorded as a changehave fluctuated significantly. However, the Company expects to the investment with a corresponding changehold these investments to comprehensive income, which is a component of members’ equity. In addition, realized gains or losses, and interest income or dividends are reflectedmaturity, thereby mitigating any unknown fluctuations in the statement of operations.fair market value.

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

Landfill Permitting and Development. Through its 82.48%83.13% interest in Mine Reclamation, LLC, the Company has been developing, for sale to a municipal entity or operating company, its property known as the Eagle Mountain Site in the California desert for use as a rail-haul municipal solid waste landfill. Pursuant to SFAS No. 67,Accounting for Costs and Initial Rental Operations of Real Estate Projects, capitalizable landfill site development costs are recorded at cost and expensed when management determines that the capitalized costs provide no future benefit.

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

Environmental Insurance and Environmental Remediation Liabilities. The Company’s $3.8 million premium for the prospective insurance policy, which was reduced by a refund from the insurance carrier, is capitalized as a long-term asset and is being amortized on a straight-line basis over the twelve (12) year

KAISER VENTURES LLC AND SUBSIDIARIES

term of the policy. To the extent a pre-existing liability has not been recorded, claims made for environmental matters are recorded as litigation accruals in the Company’s consolidated financial statements pursuant to FAS No. 5 when it becomes probable that a loss has been incurred and the amount of such loss can be reasonably estimated. Claims accepted by the insurance company pursuant to coverage under the policy are recorded as insurance receivables when coverage is accepted and the amount to be paid by the insurance company can be reasonably estimated.

Accounting for Conditional Asset Retirement Obligations.The Company adopted FIN 47, Accounting for Conditional Asset Retirement Obligations, or FIN 47, effective December 31, 2005. Upon adoption of FIN 47, the Company recorded a liability of $5.2 million which related to estimated costs to remove asbestos that is contained within the Eagle Mountain Townsite facilities.

The Company has determined that a conditional asset retirement obligation exists for asbestos remediation. Though not a current health hazard, upon demolition, the Company may be required to take the appropriate remediation procedures in compliance with state law to remove the asbestos. The Company determined the fair value of the conditional asset retirement obligation as the present value of the estimated future cost of remediation based on an estimated expected date of remediation. This computation is based on a number of assumptions which may change in the future based on the availability of new information, technology changes, changes in costs of remediation, and other factors.

The determination of the asset retirement obligation is based upon a number of assumptions that incorporate the Company’s knowledge of the facilities, the asset life, the estimated time frame, the current cost for remediation of asbestos and the current technology at hand to accomplish the remediation work. These assumptions to determine the asset retirement obligation may be imprecise or be subject to changes in the future. Any change in the assumptions can impact the value of the determined liability and impact our future earnings.

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

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

Environmental ReservesUncertain Tax Benefits.. The Company has obligations for environmental liabilities and, based on management’s estimates, the Company has recorded reserves for these obligations. In addition, the Company has purchased an insurance policy related to these environmental liabilities and due to the nature of the insurance policy, accounting principles generally accepted in the United States require that the cost of the policy be capitalized as an Other Asset separately from the related liability and amortized as the related liabilities are resolved.

New Accounting Pronouncements

In January 2003, the FASB issuedadopted Financial Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities”48 Accounting for Uncertainty in Income Taxes (“Interpretation 46”FIN 48”), an interpretation of ARB No. 51. Interpretation 46 addresses consolidation by business enterprises of variable interest entities. Interpretation 46 applies immediately to variable interest entities created afterFASB Statement 109 (“SFAS 109”) effective January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. For interests in special-purpose entities, it applies in the first year or interim period ending after December 15, 2003, and for all other types of variable interest entities, it applies for periods ending after March 15, 2004, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. Based upon its review of this interpretation, as amended,2007. Because the Company does not believeis a limited liability company, it has any variable interest entitiesno unrecognized tax benefits and the adoption of FIN 48 will have no impact on the Company’s financial statements.

Fair Value Measurements. Effective January 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) which provides guidance for using fair value to measure assets and liabilities and information about the extent to which Interpretation 46 would apply.

In May 2003, FASB issued Statementcompanies measure assets and liabilities at fair value. SFAS 157 also expands financial statement disclosure requirements about a company’s use of Financial Accounting Standards No. 150,Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both debt and equity and requires an issuer to classify the following instruments as liabilities in its balance sheet:

issuer’s equity shares, or (3) variations inversely related to changes in the fair value of the issuer’s equity shares.

In November 2003, FASB issued FASB Staff Position No. 150-3 (“FSS 150-3”) which deferred the effective dates for applying certain provisionssuch measures on earnings. The adoption of SFAS 150 related to mandatorily redeemable financial instruments of certain non-public entities and certain mandatorily redeemable non-controlling interests for public and non-public companies. For public entities, SFAS 150 is effective for mandatorily redeemable financial instruments entered into or modified after May 31, 2003 and is effective for all other financial instruments as of the first interim period beginning after June 15, 2003. For mandatorily redeemable non-controlling interests that would not have to be classified as liabilities by a subsidiary under the exception in paragraph 9 of SFAS 150, but would be classified as liabilities by the parent, the classification and measurement provisions of SFAS 150 are deferred indefinitely. The measurement provisions of SFAS 150 are also deferred indefinitely for other mandatorily redeemable non-controlling interests that were issued before November 4, 2003. For those instruments, the measurement guidance for redeemable shares and non-controlling interests in other literature shall apply during the deferral period.

The Company adopted the provisions of SFAS 150 effective June 30, 2003 and such adoption157 did not have a material impact on itsthe Company’s consolidated financial statements.

As noted above, effective January 1, 2008, the Company adopted SFAS No. 159 “The Fair Value option for Financial Assets and Liabilities” which permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement expanded the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for

KAISER VENTURES LLC AND SUBSIDIARIES

financial instruments. The adoption of SFAS 159 did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”) which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect SFAS No. 141R to have a significant impact on its consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date. The Company has evaluated the impact of this standard on future acquisitions and currently does not expect it to have a significant impact on its financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS160”). SFAS 160 introduces significant changes in the accounting and reporting for business acquisitions and noncontrolling interest (“NCI”) in a subsidiary. SFAS 160 also changes the accounting for and reporting for the deconsolidation of a subsidiary. Companies are required to adopt the new standard for fiscal years beginning after December 15, 2008. The Company has evaluated the impact of this standard and currently does not expect it to have a significant impact on its financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”), which changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Companies are required to adopt SFAS 161 for fiscal years beginning after November 15, 2008. The Company has evaluated the impact of this standard and currently does not expect it to have a significant impact on its financial position, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting principles. Unlike Statement on Auditing Standards (SAS) No. 69, “The Meaning of Present in Conformity With GAAP,” FAS No. 162 is directed to the entity rather than the auditor. The statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with GAAP,” and is not expected to have any impact on the Company’s results of operations, financial condition or liquidity.

In May 2008, FASB Staff Position (“FSP”) No. APB 14-1, “Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP No. APB 14-1”) was issued which specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the issuer’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP No. APB 14-1 is effective for financial

KAISER VENTURES LLC AND SUBSIDIARIES

statements issued for fiscal years beginning after December 15, 2008. Early adoption is not permitted. In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company’s results of operations, financial condition or cash flows.

In April 2008, FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. FAS 142-3”) was issued which provides for additional considerations to be used in determining useful lives and requires additional disclosure regarding renewals. FSP No. FAS 142-3 is effective for fiscal years beginning after December 15, 2008. Early adoption is not permitted. The Company is currently evaluating the impact of this standard.

In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active”, (“FSP 157-3”), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 was effective upon issuance and applies to the Company’s current financial statements. The application of the provisions of FSP 157-3 did not materially affect the Company’s results of operations or financial condition as of and for the year ended December 31, 2008.

Section 3: Business Outlook

The statements contained in this Business Outlook, as well as in “Part I.I, Item 1. DESCRIPTION OF BUSINESS”, are based upon current operations and expectations. In addition to the forward-looking statements and information contained elsewhere in this Annual Report on Form 10-K, these statements are forward-looking and, therefore, actual results may differ materially. See the Company’s disclosure regarding forward-looking statements in the section entitled “Forward-Looking Statements” above.

Ongoing Operations. As noted above, our revenues from ongoing operations have, in the past, generally been derived from the performance of our major long-term development projects and investments. CertainWe have previously sold most of theseour projects and investments, such asinvestments. Our principal remaining assets and projects, other than cash and securities, are: (i) the landfill project; (ii) our 50% equity ownership of the West Valley MRF, are essentially completeMRF; and we(iii) miscellaneous property at or near the Eagle Mountain Townsite that is not a part of the landfill project. A substantial amount of rock is stock piled on property at Eagle Mountain that is not a part of the landfill project. We have been recognizing significant revenues and income from them. However, the revenues fromno material ongoing operations were significantly reduced in 2001 as a result of completing the sale of our stock in Fontana Union to Cucamonga. In addition, we distributed a significant portion of the net proceeds received from the Fontana Union stock sale ($69,285,000) to Kaiser Inc.’s stockholders in December 2001except in connection with such assets and projects. Our principal sources of ongoing income are derived from the merger.West Valley MRF and our investments although we are occasionally generating miscellaneous income from the lease of our Eagle Mountain property for various activities. We alsowill continue to evaluate our remaining assets and investments in light of how to best provide maximum value to our members.

In regard to the West Valley MRF, the most significant factorfactors affecting our future equity income from the West Valley MRF is the profitability of the expansion of the facility’s capacity from 2,000 to 5,000 tons per day completed in 2001. The expansion enlarged the processing facility by an additional 80,000 square feet and provides for additional materials recovery sorting capacity. The ultimate success of this expansion will continue to depend: (a) ondepend upon: (i) the ability of the West Valley MRF to attract new customers and waste volumes at attractive processing rates; (b) on(ii) recyclable commodity prices; (iii) the ability to increase prices to reflect increases in such items as fuel and (c) onpersonnel costs; and (iv) future competition from competing facilities. During 2007 and 2008, the West Valley MRF was able to increase it rates to many of its customers as a result of increases in operating and disposal expenses as well as the increase in the minimum wage laws in California that went into effect in January 2007. However, these rate increases may not be sufficient to cover all past and future anticipated increases in the costs of operation. In addition, commodity prices have fluctuated dramatically and this volatility impacts the West Valley MRF’s revenue both positively and negatively. Due to the volatility of commodity prices and the current adverse worldwide economic conditions West Valley MRF may need to restructure its prices in certain

KAISER VENTURES LLC AND SUBSIDIARIES

markets which could have a negative impact on revenues and profitability. In order to address anticipated future demand, the West Valley MRF in 2007 received an increase in its permitted waste processing capacity to 7,500 tons per day. Additionally, West Valley is in the process of evaluating possible waste-to-energy and composting projects that might be capable of profitably utilizing a portion of the municipal solid waste received at the facility.

As part of our strategy, we intend to evaluate any potential offers to purchase our interest in the West Valley MRF or other alternatives in light of our primary objective of maximizing value. The West Valley MRF currently generates more than sufficient cash flow to fund its cost of operations and does not require additional investment by us. Furthermore, although such distributions may decline due to the adverse worldwide economic conditions West Valley MRF should continue to generate sufficient cash distributions to cover a significant portion of Kaiser LLC’s foreseeable general and administrative costs.

Pending Sale of Eagle Mountain Landfill Project. As discussed in more detailed in “Part I, Item 1. MANAGEMENT’S DISCUSSION AND ANALYSISDESCRIPTION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - BUSINESS - Eagle Mountain Landfill Project and Pending Site.Sale,” Inin August 2000, MRC entered into that certain Agreement For Purchase and Sale of Real Property and Related Personal Property In Regard To The Eagle Mountain Sanitary Landfill Project and Joint Escrow Instructions (“Landfill Project Sale Agreement”) with the District. In summary, the landfill project (which includes our royalty payments under the MRC Lease) is under contract to be sold to the District for $41 million. The exact future timingmillion plus an estimated approximate $8 million in accrued interest from May 2001 to the date of any initial closingthis Report on Form 10-K. Kaiser’s equity interest in MRC is currently unknown and83.13%.

Assuming there areis a number of risks associated with the project and certain conditions that must be satisfied before the sale of the District.

Upon closing of the sale of the landfill project, $39$41 million of the total purchase price will be deposited into an escrow account and will be released when any litigation contingencies are fully resolved. As of the date of this Report, on Form 10-K, the only litigation contingency is the federal litigation challenging the completed federal land exchange. In September 2005 the Company received an adverse U.S. District Court decision in the land exchange litigation that may materially impact the validity of the landfill project. The decision was adverse to the landfill project in that it set aside the land exchange completed between the Company and BLM as well as two BLM rights-of-way. The Company along with the U.S. Department of Interior appealed the decision to the U.S. 9^th Circuit Court of Appeals. The briefing for the appeal was completed in 2007 and oral argument was heard before a three judge panel on December 6, 2007. While a decision may be announced at any time, the U.S. 9^th Circuit Court of Appeals usually announces its decisions six to twelve months following oral argument. However, on occasion, the announcement of a decision may take substantially longer. If the U.S. District Court’s decision is fully affirmed on appeal, the decision would jeopardize the viability of the landfill project. In addition, the decision could adversely impact the agreement to sell the landfill project to the District, including termination of the agreement. For a more detailed discussion of this litigation and the risks associated with this litigation, see “Item 3. LEGAL PROCEEDINGS - Eagle Mountain Landfill Project Land Exchange Litigation.” Although closing has not occurred, interest began to accrue on this portion of the purchase price in May 2001, and will be paid out to MRC after the initial closing on a quarterly basis beginning with a successful outcome of the federal litigation regarding the land exchange with the BLM at the Federal District Court level for a period of up to four years. Also upon closing, the remaining $2 million of the purchase price will also be placed into an escrow account as a result of the District’s Puente Hills landfill receiving in 2003 and early 2004 the necessary permit approvals for its remaining 10 years of capacity.

2001.

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

Sale of Miscellaneous Properties.Properties, Eagle Mountain Townsite, and other Possible Opportunities. We are continuing to seek buyers for our miscellaneous properties, most of which are located at or near our Eagle Mountain facilities.facilities and we are continuing to seek tenants for the private prison facility in the Eagle Mountain Townsite. We were successful in selling two Lake Tamarisk lots in July 2007. However, the September 2005 adverse U.S. District Court decision involving a completed land exchange between Kaiser and the BLM may hinder our efforts at Eagle Mountain. Additionally, due to the passage of time and the impacts of weather, a number of the buildings and houses at the Eagle Mountain Townsite are

KAISER VENTURES LLC AND SUBSIDIARIES

deteriorating at a faster rate than anticipated and may not be salvageable. Accordingly, we will need to demolish or rehabilitate a number of structures over the next several years and we have established a reserve for such purposes.

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

We will continue to explore the development and use of our property at Lake Tamarisk and at Eagle Mountain for other purposes. For example, in the past, military and law enforcement training exercises have taken place on portions of the Eagle Mountain property. A recent example of this is that in January 2007 the U.S. Marines conducted troop training exercises on portions of our fee owned land at Eagle Mountain property. In March 2009 portions of the property were used as a location for a film. However, litigation has slowed the use of such property for alternative uses.

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

Capital Resources. Kaiser LLC expects that its current cash balances and short-term investments together with cash generated from the West Valley MRF, note receivables and any future asset sales will be sufficient to satisfy the Company’s ongoing projected operating cash requirements for the next 3-4 years.requirements.

Cash Maximization Strategy

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

KAISER VENTURES LLC AND SUBSIDIARIES

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

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

Not applicable.We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

KAISER VENTURES LLC AND SUBSIDIARIES

Please see Item 15 of this Report on Form 10-K for financial statements and supplementary data.

Not applicable.

Item 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and ProcedureKAISER VENTURES LLC AND SUBSIDIARIES

The Company maintains controlsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members and procedures designed to ensure that it is able to collectBoard of Managers of Kaiser Ventures LLC

We have audited the information it is required to discloseaccompanying consolidated balance sheet of Kaiser Ventures LLC and subsidiaries as of December 31, 2008 and the related consolidated statements of operations, members’ equity and cash flows for each of the years in the reports it files withtwo-year period ended December 31, 2008. These consolidated financial statements are the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on an evaluationresponsibility of the Company’s disclosure controls and procedures asmanagement. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the endPublic Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of the period covered by this report conducted by the Company’s management, with the participation of the Chief Executive and Chief Financial Officer, the Chief Executive and Chief Financial Officer believe that these controls and procedures are effective at the “reasonable assurance level” to ensure that thematerial misstatement. The Company is able to collect, process and disclose the information it isnot required to disclosehave, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the reports it files withcircumstances, but not for the SEC withinpurpose of expressing an opinion on the required time periods.

Internal Control Over Financial Reporting

During the period covered by this report, there have been no changes ineffectiveness of the Company’s internal control over financial reportingreporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that have materially affected or are reasonably likelyour audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to materially affectabove present fairly, in all material respects, the Company’s internal control overconsolidated financial reporting.

Limitations onposition of Kaiser Ventures LLC and subsidiaries as of December 31, 2008, and the Effectivenessconsolidated results of Controls

We do not expect that the disclosure controls or our internal controls will prevent all errorsits operations and they cannot possibly prevent all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectivesits cash flows for each of the control system are met. Further,years in the designtwo-year period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.America.

/s/ Moss Adams LLP

Irvine, California

March 27, 2009

PART III

BOARDOF MANAGERS

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

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

Ronald E. BitontiCONSOLIDATED BALANCE SHEET is Chairman

as of December 31

The accompanying notes are an integral part of the Benefits Committee for the VEBA and was Chairmanconsolidated financial statements.

KAISER VENTURES LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

as of December 31

The accompanying notes are an integral part of the Reorganized Creditors’ Committee formed during the KSC bankruptcy until dissolution of this committee in 1991. From 1985 to 1991, Mr. Bitonti served as International Representative for the United Steelworkers of America. Mr. Bitonti retired from KSC in 1981 and has been a director or manager of Kaiser since November 1991.consolidated financial statements.

KAISER VENTURES LLC AND SUBSIDIARIES

Todd G. ColeCONSOLIDATED STATEMENTS OF OPERATIONS has been a director or manager of Kaiser since November 1989. Mr. Cole was Chief Executive Officer of CIT Financial Corporation before starting his present career as a consultant and corporate director. He currently is President of Cole & Wilds Associates, Inc., a consulting company. Mr. Cole served on

for the Board of Directors of Hawaiian Airlines, Inc. until his resignation in May 2003. (Hawaiian Airlines, Inc. is a certificated air carrier, which filed for Chapter 11 bankruptcy reorganization on March 21, 2003). He is a founding director of Coral Gable Trust Company, a Florida State chartered institution, which will begin operations in April 2004. Mr. Cole isYears Ended December 31

The accompanying notes are an active memberintegral part of the Georgia Bar Association and is an accredited certified public accountant (inactive status).consolidated financial statements.

KAISER VENTURES LLC AND SUBSIDIARIES

Gerald A. FawcettCONSOLIDATED STATEMENTS OF CASH FLOWS was President and Chief Operating Officer of Kaiser Inc. from January 1996 until his retirement from full time duties on January 15, 1998. He was appointed to Kaiser’s Board on January 15, 1998, and currently serves as Vice Chairman

for the Years Ended December 31

The accompanying notes are an integral part of the Board and undertakes special projects on behalf of the Company from time-to-time. Mr. Fawcett began his employment with KSC in 1951, holding various positions in the steel company and ultimately becoming Division Superintendent of the Cold Rolled and Coated Products Division. After working five years consulting with domestic and overseas steel industryconsolidated financial statements.

clients, Mr. Fawcett joined Kaiser in 1988 as Senior Vice President and became Executive Vice President in October 1989. He is also Vice Chairman of the Board of MRC.

Marshall F. Wallach has been a director or manager of Kaiser since November 1991. Since 1984, Mr. Wallach has served as President of The Wallach Company, a Denver, Colorado based investment banking firm. The Wallach Company was sold to Keycorp on January 1, 2001. Mr. Wallach retired from The Wallach Company on Dec. 31, 2003. Prior to forming The Wallach Company, Mr. Wallach managed the corporate finance department and established the mergers and acquisitions department of Boettcher & Company, a regional investment bank in Denver, Colorado. Mr. Wallach serves on the boards of several non-profit organizations and privately-owned corporations. He also serves on the Board of Tomkins, PLC and is currently President of Wallach Capital Advisors, Inc. which was incorporated in early 2004.KAISER VENTURES LLC AND SUBSIDIARIES

MANAGER EMERITUSCONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

for the Years Ended December 31, 2008 and 2007