AMFAC JMB HAWAII INC, 10-Q, 2000-08-14

AMFAC JMB HAWAII INC
10-Q, 2000-08-14
REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934

For the quarter ended
June 30, 2000 Commission File Number 33-24180

AMFAC/JMB HAWAII, L.L.C.
----------------------------------------------------
(Exact name of registrant as specified in its charter)

Hawaii 36-3109397
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312-440-4800

See Table of Additional Registrants Below.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

As of May 12, 2000, all of Amfac/JMB Hawaii L.L.C.'s membership interest is
solely owned by Northbrook Corporation, an Illinois corporation, and not
traded on a public market.

<PAGE>

ADDITIONAL REGISTRANTS (1)

Address, including,
zip code, and
Exact name of State or other telephone number,
registrant as jurisdiction of IRS Employer including area code of
specified in incorporation Identification registrant's principal
its Charter or organization Number executive offices
------------- --------------- -------------- --------------------------

Amfac Land Hawaii 99-0185633 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited. 312/440-4800

Amfac Property Hawaii 99-0150751 900 North Michigan Avenue
Development Chicago, Illinois 60611
Corp. 312/440-4800

Amfac Hawaii 99-0202331 900 North Michigan Avenue
Property Chicago, Illinois 60611
Investment 312/440-4800
Corp.

H. Hackfeld Hawaii 99-0037425 900 North Michigan Avenue
& Co., Ltd. Chicago, Illinois 60611
312/440-4800

Kaanapali Hawaii 99-0176334 900 North Michigan Avenue
Estate Chicago, Illinois 60611
Coffee, Inc. 312/440-4800

Kekaha Sugar Hawaii 99-0044650 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800

The Lihue Hawaii 99-0046535 900 North Michigan Avenue
Plantation Chicago, Illinois 60611
Company, 312/440-4800
Limited

Oahu Sugar Hawaii 99-0105277 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800

Pioneer Mill Hawaii 99-0105278 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800

Puna Sugar Hawaii 99-0051215 900 North Michigan Avenue
Company, Chicago, Illinois 60611
Limited 312/440-4800

Waiahole Hawaii 99-0144307 900 North Michigan Avenue
Irrigation Chicago, Illinois 60611
Company, 312/440-4800
Limited

Waikele Golf Hawaii 99-0304744 900 North Michigan Avenue
Club, Inc. Chicago, Illinois 60611
312/440-4800

(1) The Additional Registrants listed are wholly-owned subsidiaries of
the registrant and are guarantors of the registrant's Certificate of Land
Appreciation Notes due 2008 (the "COLAs").

<PAGE>

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements. . . . . . . . . . . . . . . . .

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

PART II. OTHER INFORMATION

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . .

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . .

PART III. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . .

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMFAC/JMB HAWAII, L.L.C.

Consolidated Balance Sheets

June 30, 2000 and December 31, 1999
(Dollars in Thousands)

JUNE 30, DECEMBER 31,
2000 1999
(Unaudited) (Note 1)
----------- -----------
A S S E T S
-----------

Current assets:
Cash and cash equivalents. . . . . . $ 3,826 10,931
Receivables-net. . . . . . . . . . . 4,961 2,905
Inventories. . . . . . . . . . . . . 33,647 31,741
Prepaid expenses . . . . . . . . . . 1,395 1,623
-------- --------
Total current assets . . . . . 43,829 47,200
-------- --------

Investments. . . . . . . . . . . . . . 40 40
-------- --------
Property, plant and equipment:
Land and land improvements . . . . . 252,128 253,352
Machinery and equipment. . . . . . . 63,043 62,210
Construction in progress . . . . . . 610 488
-------- --------
315,781 316,050
Less accumulated depreciation
and amortization . . . . . . . . . 47,465 44,896
-------- --------
268,316 271,154
-------- --------
Deferred expenses, net . . . . . . . . 5,971 6,384
Other assets . . . . . . . . . . . . . 33,869 34,916
-------- --------
$352,025 359,694
======== ========

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Consolidated Balance Sheets - Continued

JUNE 30, DECEMBER 31,
2000 1999
(Unaudited) (Note 1)
----------- -----------
L I A B I L I T I E S
---------------------
Current liabilities:
Accounts payable . . . . . . . . . . $ 5,914 6,955
Accrued expenses . . . . . . . . . . 9,162 9,400
Current portion of long-term
debt . . . . . . . . . . . . . . . 5,206 5,184
Current portion of deferred
income taxes . . . . . . . . . . . 2,850 1,481
ERS debt in default. . . . . . . . . 76,206 73,004
Amounts due to affiliates. . . . . . 12,502 12,076
Amounts due to affiliates -
Senior Debt financing. . . . . . . 4,304 832
-------- --------
Total current liabilities. . . 116,144 108,932
-------- --------
Amounts due to affiliates -
Senior Debt financing. . . . . . . . 181,392 172,133
Accumulated postretirement
benefit obligation . . . . . . . . . 45,645 47,775
Long-term debt . . . . . . . . . . . . 27,395 27,557
Other long-term liabilities. . . . . . 17,609 16,851
Deferred income taxes. . . . . . . . . 52,918 52,550
Certificate of Land Appreciation
Notes. . . . . . . . . . . . . . . . 139,413 139,413
-------- --------
Total liabilities. . . . . . . 580,516 565,211
-------- --------
Commitments and contingencies
(notes 2, 3, 4, 6, 7 and 8)

M E M B E R ' S E Q U I T Y (D E F I C I T )
------------------------------------------------

Member's equity (deficit). . . . . . . (228,491) (205,517)
-------- --------
Total Member's equity
(deficit). . . . . . . . . . (228,491) (205,517)
-------- --------
$352,025 359,694
======== ========

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

<PAGE>

<TABLE>
AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Operations

Three and Six Months Ended June 30, 2000 and 1999
(Dollars in Thousands)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Agriculture. . . . . . . . . . . . . . . . . . . $ 6,587 18,816 12,802 19,723
Property . . . . . . . . . . . . . . . . . . . . 711 4,123 5,770 6,862
Golf . . . . . . . . . . . . . . . . . . . . . . 3,743 3,358 8,403 7,795
-------- -------- -------- --------
11,041 26,297 26,975 34,380
-------- -------- -------- --------
Cost of sales:
Agriculture. . . . . . . . . . . . . . . . . . . 9,231 16,386 15,472 17,276
Property . . . . . . . . . . . . . . . . . . . . 184 6,144 4,159 7,113
Golf . . . . . . . . . . . . . . . . . . . . . . 2,184 2,325 4,601 4,304
-------- -------- -------- --------
11,599 24,855 24,232 28,693
Operating expenses:
Selling, general and administrative. . . . . . . 2,040 1,467 4,336 3,893
Depreciation and amortization. . . . . . . . . . 1,313 1,522 2,651 3,099
-------- -------- -------- --------

Total costs and expenses . . . . . . . . . . . . . 14,952 27,844 31,219 35,685

Operating income (loss) . . . . . . . . . . . . . (3,911) (1,547) (4,244) (1,305)
-------- -------- -------- --------

Non-operating income (expenses):
Amortization of deferred costs . . . . . . . . . (212) (285) (423) (595)
Interest expense . . . . . . . . . . . . . . . . (8,722) (6,433) (16,728) (13,549)
Interest income. . . . . . . . . . . . . . . . . 58 144 158 607
-------- -------- -------- --------
(8,876) (6,574) (16,993) (13,537)
-------- -------- -------- --------

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Operations - Continued

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------

Loss before taxes and extraordinary item . . . (12,787) (8,121) (21,237) (14,842)
-------- -------- -------- --------

Income tax benefit . . . . . . . . . . . . . . . 5,295 3,347 8,545 5,943
-------- -------- -------- --------

Loss before extraordinary item . . . . . . . . (7,492) (4,774) (12,692) (8,899)
-------- -------- -------- --------

Extraordinary gain form extinguishment of debt
(less applicable income taxes of $7,256) . . . . -- 11,243 -- 11,243
-------- -------- -------- --------

Net income (loss). . . . . . . . . . . . . . . $ (7,492) 6,469 (12,692) 2,344
======== ======== ======== ========

<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2000 and 1999
(Dollars in Thousands)
(Unaudited)

2000 1999
-------- --------
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . $(12,692) 2,344
Items not requiring (providing) cash:
Depreciation and amortization. . . . . . . 2,651 3,099
Amortization of deferred costs . . . . . . 423 595
Income tax benefit . . . . . . . . . . . . (8,545) 1,313
Extraordinary gain from extinguishment
of debt. . . . . . . . . . . . . . . . . -- (18,499)
Interest on ERS debt in default. . . . . . 3,202 3,168
Interest on advances from affiliates . . . 9,259 5,784
Changes in:
Receivables - net. . . . . . . . . . . . . . (2,056) 844
Inventories. . . . . . . . . . . . . . . . . 732 8,957
Prepaid expenses . . . . . . . . . . . . . . 228 493
Accounts payable . . . . . . . . . . . . . . (1,041) 46
Accrued expenses . . . . . . . . . . . . . . (238) (485)
Amounts due to affiliates. . . . . . . . . . 426 (2,990)
Other long-term liabilities. . . . . . . . . (2,144) (2,232)
-------- --------
Net cash provided by (used in)
operating activities . . . . . . . . (9,795) 2,437
-------- --------
Cash flows from investing activities:
Property additions . . . . . . . . . . . . . (1,105) (1,541)
Property sales, disposals and
retirements - net. . . . . . . . . . . . . 45 9,933
Other assets . . . . . . . . . . . . . . . . (344) (1,745)
Other long-term liabilities. . . . . . . . . 772 (3,608)
-------- --------
Net cash provided by (used in)
investing activities . . . . . . . . (632) 3,039
-------- --------
Cash flows from financing activities:
Payment to redeem and purchase
Certificate of Land Appreciation
Notes (COLAs). . . . . . . . . . . . . . . -- (40,283)
Deferred expenses. . . . . . . . . . . . . . (10) (6)
Net (repayments) proceeds of
long-term debt . . . . . . . . . . . . . . (140) (3,514)
Net amounts due to affiliates. . . . . . . . 3,472 21,318
Other costs related to extinguishment
of debt. . . . . . . . . . . . . . . . . . -- (218)
-------- --------
Net cash provided by (used in)
financing activities . . . . . . . . 3,322 (22,703)
-------- --------
Net increase (decrease) in
cash and cash equivalents. . . . . . (7,105) (17,227)
Cash and cash equivalents,
beginning of year. . . . . . . . . . 10,931 26,526
-------- --------
Cash and cash equivalents,
end of period. . . . . . . . . . . . $ 3,826 9,299
======== ========

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Cash Flows - Continued

2000 1999
-------- --------

Supplemental disclosure of cash flow
information:
Cash paid for interest (net of
amount capitalized). . . . . . . . . . . . $ 4,299 5,565
======== ========

Schedule of non-cash investing and
financing activities:
Transfer of property actively held
for sale to real estate inventories. . . $ 2,638 272
======== ========

Disposition of debt:
Gain on extinguishment of debt . . . . . . . $ -- 18,499
Face value of debt extinguished. . . . . . . -- (81,291)
Other costs related to extinguish-
ment of debt . . . . . . . . . . . . . . . -- 218
Issuance of Senior Debt to
affiliates . . . . . . . . . . . . . . . . -- 26,375
Write-off of Contingent Base Interest. . . . -- (7,624)
Write-off of deferred COLA costs . . . . . . -- 3,540
-------- --------
Cash paid to redeem and
purchase COLAs . . . . . . . . . . . $ -- (40,283)
======== ========

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

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements

June 30, 2000 and 1999
(unaudited)

(Dollars in Thousands)

Readers of this quarterly report should refer to the Company's audited
financial statements for the fiscal year ended December 31, 1999, which are
included in the Company's 1999 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.

All reference to "Notes" are to Notes to the Consolidated Financial
Statements contained in this report.

(1) BASIS OF ACCOUNTING

Amfac/JMB Hawaii, L.L.C. ("AHI", and collectively with the Additional
Registrants, as their respective interests may appear, the "Company") is a
Hawaii limited liability company. AHI is wholly-owned by Northbrook
Corporation ("Northbrook"). The primary business activities of the
Company, are land development and sales, golf course management and
agriculture. The Company owns approximately 31,000 acres of land located on
the islands of Oahu, Maui, Kauai and Hawaii in the State of Hawaii. In
addition to its owned lands, the Company leases approximately 45,000 acres
of land used primarily in conjunction with its agricultural operations.
The Company's operations are subject to significant government regulation.

AHI's sole member (Northbrook) is not obligated for any debt,
obligation or liability of the Company. However, AHI and certain of the
Additional Registrants are obligated to Northbrook and its affiliates
directly or as guarantors for the repayment of substantial loans and
advances made to them, as described below.

The Company has three primary business segments. The agriculture
segment ("Agriculture") is responsible for the Company's activities related
to the cultivation and processing of sugar cane and other agricultural
products. The real estate segment ("Property") is responsible for
development and sales activities related to the Company's owned land, all
of which is in the State of Hawaii. The golf segment ("Golf") is
responsible for the management and operation of the Company's golf course
facilities.

Due to the unpredictable nature of the timing and amount of land sales
and the seasonal nature of the agricultural operations, the Company has
experienced, and expects to continue to experience, significant variability
in quarterly revenues and costs of sales. The results of any interim
period are not necessarily indicative of the results that can be expected
for the entire year.

The consolidated financial statements include the accounts of AHI and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Investments in certain
partnerships and joint ventures, if any, over which the Company exercises
significant influence are accounted for by the equity method. To the extent
the Company engages in such activities as a general partner, the Company is
contingently liable for the obligations of its partnership and joint
venture investments.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

The Company's policy is to consider all amounts held with original
maturities of three months or less in U.S. Government obligations,
certificates of deposit and money market funds (approximately $1,500 and
$9,000 at June 30, 2000 and December 31, 1999, respectively) as cash
equivalents that are reflected at cost, which approximates market. These
amounts include $809 and $954 at June 30, 2000 and December 31, 1999,
respectively, which were restricted.

Project costs associated with the acquisition, development and
construction of real estate projects are capitalized and classified as
construction in progress. Such capitalized costs are not in excess of the
project's estimated fair value, as reviewed periodically or as considered
necessary. In addition, interest is capitalized to qualifying assets
(principally real estate under development) during the period that such
assets are undergoing activities necessary to prepare them for their
intended use. Such capitalized interest is charged to cost of sales as
revenue from the real estate development is recognized. Interest costs of
$273 and $482 have been capitalized for the six months ended June 30, 2000
and 1999, respectively.

Land actively held for sale and any related development costs
transferred from construction in progress are reported as inventories in
the accompanying consolidated balance sheets and are stated at the lower of
cost or fair value less costs to sell.

Impairment losses are to be recorded on long-lived assets used in
operation when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount. Land held for sale of approximately $25,022 is
included in inventory in the accompanying consolidated balance sheets at
June 30, 2000 and December 31, 1999 and is carried at the lower of cost or
fair value less cost to sell.

During the fourth quarter of 1999, the Company reduced the carrying
value of five land parcels which it had expected to dispose of during 2000
and recorded an $11,360 loss to reflect the estimated market value of those
parcels.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information (which assume that the Company will continue
as a going concern) and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three and six month period ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 2000.

Certain amounts in the 1999 financial statements have been
reclassified to conform to the 2000 presentation.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(2) AMOUNTS DUE TO AFFILIATES - SENIOR DEBT FINANCING

AHI has issued certain Certificates of Land Appreciation Notes due
2008 Class A (the "Class A COLAs") and Certificates of Land Appreciation
Notes Class B (the "Class B COLAs", and, collectively with the Class A
COLAs, the "COLAs") pursuant to an Indenture dated March 14, 1989 (the
"Indenture") (see note 3). Under the Indenture, the Company is entitled to
borrow certain amounts from affiliates and third parties that qualifies as
"Senior Indebtedness" under the Indenture and is senior in priority to the
repayment of the COLAs. Such "Senior Indebtedness" that is due and owing
to Northbrook and its affiliates from time to time is referred to herein as
the "Senior Debt". Commencing in August 1989 and from time to time
thereafter, Northbrook (or its predecessor in interest, Amfac, Inc.) has
made Senior Debt advances to the Company.

In February 1997, the outstanding balance of the Senior Debt, was
consolidated under a single $104,759 ten year promissory note, payable to
Northbrook. In 1998, the $104,759 note was replaced by two nine-year
notes: (i) a $99,595 note, and (ii) a $15,000 note (with an initial balance
of $7,920). The $99,595 note was transferred by Northbrook to its
affiliate Fred Harvey Transportation Company ("Fred Harvey") in 1998.
These notes are payable interest only until maturity, have a maturity date
of February 17, 2007 and accrue interest at the prime rate plus 2%.

As of December 31, 1998, AHI agreed to exercise its option to redeem
Class B COLAs that would be "put" to AMFAC/JMB Finance, Inc. ("AJF") for
repurchase in partial consideration for (a) the agreement by Fred Harvey to
defer until December 31, 2001 all interest accruing from January 1, 1998
through December 31, 2001 relating to the $99,595 note discussed above;
(b) the agreement of AF Investors, LLC ("AF Investors"), another affiliate
of Northbrook, to accept Senior Debt in lieu of cash for those COLAs it
held that it intended to put and to defer interest accruing on such Senior
Debt and any other Senior Debt it may thereafter hold relative to the put
of the COLAs in the same manner as the Fred Harvey Senior Debt (see below);
and (c) Northbrook agreeing to cause approximately $55,148 of the Senior
Debt that it held to be contributed to the capital of the Company. In
connection with the foregoing deferral of interest and contribution of
capital, the Company agreed to provide Northbrook and its affiliates with
security for the Senior Debt held by them. Such security consists of
mortgages on certain real property owned by the Company, pledges of stock
of AHI's direct and indirect subsidiaries, and such other unencumbered
assets of the Company and its subsidiaries as Northbrook and its affiliates
holding such Senior Debt may request. The deferral of interest, together
with this contribution to capital, were made as part of the Company's
effort to alleviate significant liquidity constraints and continue to meet
the Value Maintenance Ratio requirement under the Indenture. At current
interest rates, assuming no further advances of Senior Debt and excluding
additional short-term amounts borrowed in February and June of 2000,
approximately $66,892 of such deferred interest relating to all Senior Debt
existing at June 30, 2000 will become due and payable on December 31, 2001.

At such time, there can be no assurance that the Company will either (i)
have unrestricted cash available for meeting such obligation or (ii) have

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

the ability to refinance such $66,892 obligation. Failure to meet such
obligation, if called, would cause all Senior Debt owing to Northbrook,
Fred Harvey, AF Investors or other Northbrook affiliates to be immediately
due and payable. A default on Senior Debt of such magnitude would
constitute an event of default under the Indenture.

In connection with the "put" discussed above, on May 25, 1999, the
Company borrowed approximately $21,318 from AF Investors, to redeem a
portion of the Class B COLAs pursuant to the Class B COLA Redemption Offer
(see Note 3). Additionally, as of May 31, 1999, AF Investors submitted
Class B COLAs pursuant to the Class B Redemption Offer and agreed to take
back senior debt in the amount of $26,375 from the Company in lieu of cash.

Pursuant to the terms of the Indenture, such amounts borrowed from AF
Investors constitute Senior Debt that matures on December 31, 2008 and
bears interest at a rate per annum of prime (9.50% at June 30, 2000) plus
1%. Interest on such senior Debt is deferred through December 31, 2001, as
discussed above. Additional interest may be payable on such Senior Debt
upon its maturity based upon fair market value, if any, of the Company's
equity at that time.

In October of 1999, AF Investors paid approximately $808 to assume the
lender's position in the loan to the Lihue Plantation Company, Limited
("Lihue") which was originally used to fund the acquisition of the Lihue's
power generation equipment. The loan had an outstanding balance of $808 on
the date of the loan transfer and bears interest at the rate equal to prime
(9.50% at June 30, 2000) plus three and one half percent. The loan is
secured by the Lihue power generation equipment, sugar inventories and
receivables, certain other assets and real property of the Company, has
limited recourse to the Company and is Senior Debt. The outstanding
balance as of June 30, 2000 of $308 and related accrued interest of $8 is
included in current liabilities.

In February 2000, the Company borrowed approximately $2,788 from
Northbrook for purposes of satisfying the Mandatory Base Interest payment
related to the COLAs due February 28, 2000. In June 2000, the Company
borrowed an additional $1,200 to fund certain capitalizable property
development and agriculture disbursements. Such Senior Debt matures on
December 31, 2000, bears interest at a rate per annum equal to prime (9.50%
at June 30, 2000) plus 1%, is guaranteed by the Company and is also to be
secured by assets of the Company.

The total amount due Northbrook and its subsidiaries for Senior Debt
financing as of June 30, 2000 was $185,696, which includes accrued and
deferred interest to affiliates on Senior Debt of approximately $34,112 (of
which $34,104 has been deferred until December 31, 2001, as described
above). Under the terms of the Indenture, the amounts borrowed from
Northbrook or its affiliates are "Senior Indebtedness" to the COLAs.

The Company has received a notice from each of the holders of the
Senior Debt notifying the Company that all Senior Debt is currently in
default due to the existence of other defaults or circumstances that
constitute events of default under the Senior Debt, including, without
limitation (i) the failure of the Company to make quarterly interest
payments on the loan from the ERS related to their $66 million loan secured
by the Royal Kaanapali Golf Courses; and (ii) the entry of, and failure of
the Company to satisfy or otherwise stay, the judgment rendered against the
Company in Oahu Sugar Company, Limited v. Walter Arakaki and Steve Swift
(see Part II, Item 1, Legal Proceedings, below). Such holders have
notified the Company that they have reserved all rights and are assessing
their options respecting the Senior Debt. There can be no assurance that
such holders will not accelerate the Senior Debt and exercise their
remedies against the Company with respect thereto.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(3) CERTIFICATE OF LAND APPRECIATION NOTES

The COLAs are unsecured debt obligations of the Company, and are
subordinated in priority to all "Senior Indebtedness" (as defined in the
Indenture) including, but not limited to, the Senior Debt. Interest on the
COLAs is payable semi-annually on February 28 and August 31 of each year.
The COLAs mature on December 31, 2008. Reference is made to the Company's
Annual Report on Form 10-K for discussion of the issuance and redemption
history of the COLAs. Though the Company continues to be current with
respect to its obligation to pay Mandatory Base Interest (as defined in the
Indenture) on the COLAS, the Company has not generated a sufficient level
of Net Cash Flow to incur or pay Contingent Base Interest (as defined in
the Indenture) on the COLAs commencing in 1990. Approximately $87,675 of
cumulative deferred Contingent Base Interest (i.e. not due and payable in
the absence of events which have not occurred) related to the period from
August 31, 1989 (Final Issuance Date) through June 30, 2000 has not been
accrued in the accompanying consolidated financial statements as the
Company believes that it is not probable at this time that a sufficient
level of Net Cash Flow (as defined in the Indenture) will be generated in
the future or that there will be sufficient Maturity Market Value (as
defined in the Indenture) as of December 31, 2008 (the COLA maturity date)
to pay any unaccrued and deferred Contingent Base Interest. The following
table is a summary of Mandatory Base Interest and Contingent Base Interest
for the six months ended June 30, 2000 and the year ended December 31,
1999:

Six Months The Year
Ended Ended
June 30, December 31,
2000 1999
---------- ------------
Mandatory Base Interest paid . . . . . . . $ 2,788 7,202
Contingent Base Interest due and paid. . . -- --
Cumulative deferred Contingent Base
Interest . . . . . . . . . . . . . . . . $87,675 83,493

Net Cash Flow was $0 for 1999 and is expected to be $0 for 2000.

As a result of the Class B COLA repurchases on June 1, 1999, the
Company retired approximately $81,279 face value of Class B COLA debt and
correspondingly recognized a financial statement gain of approximately
$14,630 of which $8,841 is attributable to the retirement of COLA debt held
by persons unaffiliated with the Company. Such financial statement gain
was reduced by applicable income taxes of approximately $7,203, the write-
off of an applicable portion of deferred financing costs and other expenses
of approximately $3,786 and increased by the reversal of the previously
accrued deferred Contingent Base Interest of approximately $7,624 resulting
in a financial statement extraordinary gain of approximately $11,265. The
tax payable on the gain (approximately $2,009) related to the Class B COLAs
which were submitted for repurchase by persons unaffiliated with the
Company pursuant to the Class B COLA Redemption Offer is not indemnified
pursuant to the tax agreement with Northbrook.

As of June 30, 2000, the Company had approximately 155,271 Class A
COLAs and approximately 123,554 Class B COLAs outstanding, with a principal
balance of approximately $77,635 and $61,778, respectively.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

The terms of the Indenture place certain restrictions on the Company's
declaration and payment of dividends. Such restrictions generally relate to
the source, timing and amounts which may be declared and/or paid. The COLAs
also impose certain restrictions on, among other things, the creation of
additional indebtedness for certain purposes, the Company's ability to
consolidate or merge with or into other entities, and the Company's
transactions with affiliates.

(4) LONG-TERM DEBT

In June 1991, the Company obtained a five-year $66,000 loan from the
Employees' Retirement System of the State of Hawaii ("ERS"). The
nonrecourse loan is secured by a first mortgage on the Kaanapali Golf
Courses, and is "Senior Indebtedness" (as defined in the Indenture). The
loan bore interest at a rate per annum equal to the greater of (i) the base
interest rate announced by the Bank of Hawaii on the first of July for each
year or (ii) ten percent per annum through September 30, 1993 and nine
percent per annum thereafter.

In April 1996, the Company reached an agreement with the ERS to amend
the loan, extending the maturity date for five years. In exchange for the
loan extension, the ERS received the right to participate in the "Net
Disposition Proceeds" (as defined) related to the sale or the refinancing
of the golf courses or at the maturity of the loan. The ERS share of the
Net Disposition Proceeds increases from 30% through June 30, 1997, to 40%
for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter.
The loan amendment effectively adjusted the interest rate as of January 1,
1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears
interest at a rate per annum equal to 8.73%. The loan amendment requires
the Company to pay interest at the rate of 7% for the period from
January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997,
7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum
Interest"). The Minimum Interest for the years ended December 31, 1999 and
1998 was $5,610 and $5,365, respectively. The accrued Minimum Interest was
$1,414 as of December 31, 1999 and 1998. The scheduled minimum payments
are normally paid quarterly on the principal balance of the $66,000 loan.
The Company paid the Minimum Interest to the ERS on October 29, 1999 for
the payments due on January 1, April 1, July 1 and October 1, 1999, as
discussed below. The difference between the accrued interest expense and
the Minimum Interest payment due accrues interest and is payable on an
annual basis from excess cash flow, if any, generated from the Kaanapali
Golf Courses. The annual minimum interest payments have been in excess of
the cash flow generated by the Kaanapali Golf Courses. The total accrued
interest payable from excess cash flow was approximately $5,590 as of
December 31, 1999. Although the outstanding loan balance remains
nonrecourse, certain payments and obligations, such as the Minimum Interest
payments and the ERS's share of appreciation, if any, are recourse to the
Company. However, the Company's obligations to make future Minimum Interest
payments and to pay the ERS a share of appreciation would be terminated if
the Company tendered an executed deed to the golf course property to the
ERS in accordance with the terms of the loan amendment. Due to
insufficient cash flow generated by the golf courses and intransigence by
the ERS with respect to its obligation related to certain easements needed
by the Company's development operations, the Company chose not to pay to
the ERS the quarterly Minimum Interest payments beginning January 1, 1999,
through October 29, 1999. As expected, the Company received a default
notice from the ERS. On October 29, 1999, after receipt of consent to
certain easements, the Company paid the ERS the minimum interest payments
due beginning with the January 1, 1999 through October 1, 1999 payments
aggregating approximately

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

$5,743 (including other miscellaneous costs). For the same reasons, the
Company has not paid the ERS the minimum interest payments due on January
1, April 1, and July 1, 2000. As expected, the Company received a further
default notice from the ERS and is currently pursuing renegotiation of the
loan terms as well as attempting to obtain the other easements which the
Company believes the ERS is obligated to provide. There can be no
assurance that such negotiations will result in a definitive agreement to
settle the disputes between the Company and the ERS concerning this loan.

(5) SEGMENT INFORMATION

Agriculture, Property and Golf comprise separate industry segments of
the Company. Operating Income (Loss)-Other consists primarily of
unallocated overhead expenses and Total Assets-Other consists primarily of
cash and deferred expenses. Total assets at the balance sheet dates and
capital expenditures, operating income (loss) and depreciation and
amortization during the six months ended June 30, 2000 and June 30, 1999
are set forth below by each industry segment:

June 30, December 31,
2000 1999
-------- ------------
Total Assets:
Agriculture. . . . . . . . . . . . . . . $173,783 169,433
Property . . . . . . . . . . . . . . . . 92,857 96,937
Golf . . . . . . . . . . . . . . . . . . 76,605 76,893
Other. . . . . . . . . . . . . . . . . . 8,780 16,431
-------- --------
$352,025 359,694
======== ========

Six Months Ended
June 30,
------------------------
2000 1999
-------- --------
Capital Expenditures:
Agriculture. . . . . . . . . . . . . . . $ 909 983
Property . . . . . . . . . . . . . . . . 23 383
Golf . . . . . . . . . . . . . . . . . . 173 175
-------- --------
$ 1,105 1,541
======== ========
Operating income (loss):
Agriculture. . . . . . . . . . . . . . . $ (4,751) 274
Property . . . . . . . . . . . . . . . . (2,022) (3,012)
Golf . . . . . . . . . . . . . . . . . . 2,828 2,455
Other. . . . . . . . . . . . . . . . . . (299) (1,022)
-------- --------
$ (4,244) (1,305)
======== ========
Depreciation and amortization:
Agriculture. . . . . . . . . . . . . . . $ 1,786 1,878
Property . . . . . . . . . . . . . . . . 201 406
Golf . . . . . . . . . . . . . . . . . . 660 722
Other. . . . . . . . . . . . . . . . . . 4 93
-------- --------
$ 2,651 3,099
======== ========

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(6) TRANSACTIONS WITH AFFILIATES

The Company does not believe it is probable at this time that a
sufficient level of Net Cash Flow will be generated in the future to pay
the Qualified Allowance (as defined in the Indenture) that could, under
certain circumstances, become payable to JMB Realty Corporation ("JMB"), an
affiliate of the Company, under the Indenture. Accordingly, the Company
has not accrued for any Qualified Allowance in the accompanying
consolidated financial statements. For the years 1999, 2000 and 2001, JMB
has agreed that the Qualified Allowance shall in no event exceed $5,000 in
any year. The cumulative deficiency of Qualified Allowance is $79,102 as
of December 31, 1999. Net Cash Flow was $0 for 1999 and is expected to be
$0 for 2000.

The Company and its joint ventures reimburse Northbrook, JMB and their
affiliates for direct expenses incurred on their behalf, including salaries
and salary-related expenses incurred in connection with the management of
the Company's or the joint ventures' operations. The total of such costs
for the six months ended June 30, 2000 and 1999 was approximately $400 and
$334, respectively, of which $563 was unpaid as of June 30, 2000. In
addition, as of June 30, 2000, the current portion of amounts due to
affiliates includes $9,106 and $2,009 of income tax payable related to the
Class A COLA Redemption Offer and Class B COLA Redemption Offer,
respectively (see Note 3). Also, the Company pays a non-accountable
reimbursement of approximately $30 per month to JMB or its affiliates in
respect of general overhead expense, all of which was paid as of June 30,
2000.

JMB Insurance Agency, Inc., an affiliate of JMB, earns insurance
brokerage commissions in connection with providing the placement of
insurance coverage for certain of the properties and operations of the
Company. Such commissions are comparable to those available to the Company
in similar dealings with unaffiliated third parties. The total of such
commissions for the six months ended June 30, 2000 and 1999 was
approximately $459 and $552, respectively, all of which was paid as of
June 30, 2000.

Northbrook and its affiliates allocated certain charges for services
to the Company based upon the estimated level of services for the six
months ended June 30, 2000 and 1999 of approximately $240 and $146,
respectively, of which $822 was unpaid as of June 30, 2000. These services
and costs are intended to reflect the Company's separate costs of doing
business and are principally related to the inclusion of the Company's
employees in the Northbrook pension plan, payment of severance and
termination benefits and reimbursement for insurance claims paid on behalf
of the Company. All amounts described above, deferred or currently payable,
do not bear interest and are expected to be paid in future periods.

Reference is made to Note 2 - Amounts Due to Affiliates - Senior Debt
Financing.

(7) EMPLOYEE BENEFIT PLANS

The Company participates in benefit plans covering substantially all
of its employees, which provide benefits based primarily on length of
service and compensation levels. These plans are administered by
Northbrook in conjunction with other plans providing benefits to employees
of Northbrook and its affiliates.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(8) COMMITMENTS AND CONTINGENCIES

The Company continues to face a severe liquidity shortage. The
Company has made expense cuts and deferrals where possible. Additionally,
the Company has not paid the quarterly interest payments (due in January,
April and July, 2000) to the State of Hawaii Employee Retirement System
related to their $66 million loan secured by the Royal Kaanapali Golf
Courses. These measures, along with the closing of the sale of land
parcels in Kaanapali Golf Estates in January and July 2000 and the
additional Senior Debt borrowings from Northbrook made during 2000, have
kept the Company operating through the date of this report. However,
management does not expect any relief from the extremely tight cash
situation, at least until a new investor is admitted to the Kaanapali Ocean
Resort ("KOR") limited partnership or the Company otherwise sells a portion
of its North Beach property on Maui.

Unfortunately, there are several large, contingent cash expenditures
that may make any relief temporary. These include:

(1) the ultimate outcome of the litigation and environmental
matters described in Part II. "Legal Proceedings";

(2) a loss of sugar revenues resulting from an anticipated sugar
price that is 15% to 20% lower than the average price received in 1999;

(3) the cost of a possible closure of the sugar operations on
Kauai. Due to lower prices and yields, management is currently evaluating
a shutdown of the Kauai sugar plantations, which would trigger significant
employee severance and other closing costs.

(4) the uninsured portion of the costs associated with the
breakdown in February 2000 of the primary power generation equipment at the
Lihue Plantation Company power plant; and

(5) the possibility that Kauai Electric Company, if it is unable to
obtain certain land use permits, could attempt to exercise its option to
rescind its purchase of a parcel of land from the Lihue Plantation Company
(a subsidiary of the Company) and require the return of the approximately
$5 million purchase price paid to Lihue Plantation in 1992.

It is difficult to predict the ultimate outcome of these various
contingencies, any of which could have a material adverse effect on the
financial condition of the Company.

<PAGE>

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

"Senior Indebtedness" (as defined in the Indenture), (ii) to accrue
interest at the rate of prime plus 1%, and (iii) to have principal and
interest fully repayable prior to the end of year 2000. Moreover, as a
condition to the additional Senior Debt loans made by Northbrook and its
affiliates commencing in 1999, the Company has agreed to make substantial
portions of the remaining unencumbered real and personal property assets of
the Company security for all of the Senior Debt held by Northbrook and its
affiliates. The Company has implemented other alternatives to address the
projected cash deficits for 2000. These alternatives include expense cuts
and deferrals at several of the Company's businesses. Although these
expense cuts and deferrals have improved the Company's short-term cash
situation, the Company must either complete additional land or business
sales, or receive new loans from Northbrook or its affiliates, to provide
sufficient cash to operate through the end of 2000.

The Company's Property segment had contractual commitments (related to
project costs) of approximately $537 as of June 30, 2000. Additional
development expenditures are dependent upon the Company's ability to obtain
financing for such costs and on the timing and extent of property
development and sales.

As of June 30, 2000, certain portions of the Company's land not
currently under development are mortgaged as security for approximately
$1,417 of performance bonds related to property development.

(9) INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.

Northbrook's tax returns have been examined by the Internal Revenue
Service (the "IRS") for the period 1992-1994, and deficiencies were
proposed by the IRS. In April 2000, Northbrook and the IRS reached an
agreement related to the period 1992 through 1994, the result of which
requires no expenditures by the Company. The statutes of limitations with
respect to Northbrook's tax returns for the years 1995 through 1998 remain
open. The Company is a subsidiary of Northbrook and accordingly is subject
to tax liability exposure due to the several nature of the liability for
the payment of taxes for by entities filing consolidated tax returns.

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

General

In addition to historical information, this Quarterly Report contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act 1995. These statements are based on management's
current expectations about its businesses and the markets in which the
Company operates. Such forward-looking statements are not guarantees of
future performance and involve known and unknown risks, uncertainties or
other factors which may cause actual results, performance or achievements
of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Actual operating results may be affected by various factors
including, without limitation, changes in national and Hawaiian economic
conditions, competitive market conditions, uncertainties and costs related
to and the imposition of conditions on receipt of governmental approvals
and costs of material and labor, all of which may cause such actual results
to differ materially from what is expressed or forecast in this report.

A significant portion of the Company's cash needs result from the
nature of the real estate development business, which requires a
substantial investment in preparing development plans, seeking land
urbanization and other governmental approvals and completing infrastructure
improvements prior to realizing a cash return on the investment.
Additionally, the Company's sugar operations incur a cash deficit during
the first half of the year of $10 to $15 million. This seasonal cash
deficit is due to the sugar plantations' operating costs being incurred
fairly ratably during the year, while revenues are received between May and
December, concurrent with raw sugar deliveries to the California and
Hawaiian Sugar Company ("C&H"). In addition to seasonal cash needs, in many
years, including 2000, cash flow from sugar operations has been or is
expected to be negative, requiring a net cash investment to fund the
operating deficits and any capital costs. Other significant cash needs also
include overhead expenses and debt service.

As previously reported, the Company continues to face a severe
liquidity shortage. The Company has made expense cuts and deferrals where
possible. Additionally, the Company has not paid the quarterly interest
payments (due in January, April and July 2000) to the State of Hawaii
Employee Retirement System related to their $66 million loan secured by the
Royal Kaanapali Golf Courses. These measures, along with the closing of
the sale of land parcels in Kaanapali Golf Estates in January and July 2000
and the additional Senior Debt borrowings from Northbrook made during 2000,
have kept the Company operating through the date of this report. However,
management does not expect any relief from the extremely tight cash
situation, at least until a new investor is admitted to the KOR limited
partnership (as described below), or the Company otherwise sells a portion
of its North Beach property on Maui.

Unfortunately, there are several large, contingent cash expenditures
that may make any relief temporary. These include:

(1) the ultimate outcome of the litigation and environmental
matters described in Part II. "Legal Proceedings";

(2) a loss of sugar revenues resulting from an anticipated sugar
price that is 15% to 20% lower than the average price received in 1999;

<PAGE>

(4) the uninsured portion of the costs associated with the
breakdown in February 2000 of the primary power generation equipment at the
Lihue Plantation Company power plant; and

It is difficult to predict the ultimate outcome of these various
contingencies, any of which could have a material adverse effect on the
financial condition of the Company.

In the absence of additional land and business sales (none of which
are currently expected to close at the earliest until late in the third
quarter of 2000) or financing from third parties (which has generally not
been obtainable), the Company believes that additional Senior Debt
borrowings from Northbrook or its affiliates will be necessary to meet its
short-term and long-term liquidity needs. Northbrook and its affiliates
have made such borrowings available to the Company in the past. In
February 2000, the Company borrowed approximately $2.8 million from
Northbrook for the Mandatory Base Interest payment related to the COLAs due
February 28, 2000. In June 2000, the Company borrowed an additional $1.2
million to fund capitalizable property and agriculture disbursements. The
borrowings have met the requirements discussed below. However, there is no
assurance that Northbrook or its affiliates will have the financial
capability or willingness to make such funds available to the Company, to
meet the Company's short-term or long-term liquidity needs. To the extent
that Northbrook or its affiliates make such borrowings available to the
Company during 2000, any such borrowings would be required (i) to be
"Senior Indebtedness" (as defined in the Indenture), (ii) to accrue
interest at the rate of prime plus 1%, and (iii) to have principal and
interest fully repayable prior to the end of year 2000. Moreover, as a
condition to the additional Senior Debt loans made by Northbrook and its
affiliates commencing in 1999, the Company has agreed to make substantial
portions of the remaining unencumbered real and personal property assets of
the Company security for all of the Senior Debt held by Northbrook and its
affiliates. The Company has implemented other alternatives to address the
projected cash deficits for 2000. These alternatives include expense cuts
and deferrals at several of the Company's businesses. Although these
expense cuts and deferrals have improved the Company's short-term cash
situation, the Company must either complete additional land or business
sales, or receive new loans from Northbrook or its affiliates, to provide
sufficient cash to operate through the end of 2000.

In recent years, the Company has funded its significant cash
requirements primarily through Senior Debt borrowings from Northbrook and
its affiliates and from revenues generated by the development and sale of
its properties. Significant short-term cash requirements relate to the
funding of agricultural deficits, interest expenses and overhead expenses.
At June 30, 2000, the Company had unrestricted cash and cash equivalents of
approximately $3.0 million. The Company intends to use its cash reserves,
land sales proceeds and proceeds from new financings or joint venture
arrangements to meet its short-term liquidity requirements. However, there
can be no assurance that new financings can be obtained or property sales
completed.

The Company's land holdings on Maui and Kauai are its primary sources
of future land sale revenues. However, due to current market conditions,
the difficulty in obtaining land use approvals and the high development
costs of required infrastructure, the Company does not believe that it will
be able to generate significant amounts of cash in the short-term from the
development of these lands. As a result, the Company is also marketing
certain unentitled agricultural and conservation parcels to generate cash.

<PAGE>

Although only small portions of the Company's lands are formally
listed for sale, management is exploring the possible sale of other parcels
with prospects that the Company has identified through its own extensive
network of contacts in the real estate business. Additionally, it is well
known throughout the real estate industry in Hawaii that the Company has
been aggressively marketing and selling land and, thus, management receives
a significant number of direct inquiries from brokers and prospective
purchasers. From time to time certain of the Company's lands are under
contract for sale. However, the contracts typically have due diligence
investigation periods which allow the prospective purchasers to terminate
the agreements. There can be no assurance that any signed contracts for
sale will in fact close under the original terms and conditions or any
other terms or that the Company will be successful in selling the land at
an acceptable price.

During the first six months of 2000, the Company generated
approximately $3.5 million in land sales primarily from the sale of Parcel
16 at the Kaanapali Golf Estates on Maui. In July 2000, the Company
generated approximately $3.5 million in land sales primarily from the sale
of Parcel 19/20 at the Kaanapali Golf Estates on Maui.

During 1999, the Company generated approximately $14.9 million from
the sale of approximately 2,200 acres on Maui and Kauai, including the sale
of Kapaa 1400 on Kauai for $4.4 million (November 1999) and the sale of a
17 acre parcel in Kaanapali Golf Estates on Maui for $4.5 million (October
1999).

The Company continues to implement certain cost savings measures and
to defer certain development costs and capital expenditures for longer-term
projects. The Company's Property segment expended approximately $3.7
million in project costs during 1999 and anticipates expending (subject to
cash availability) approximately $6.0 million in project costs during 2000.

As of June 30, 2000, contractual commitments related to project costs
totaled approximately $0.5 million. However, the Company also has made a
number of commitments to fund certain infrastructure costs relating to the
future construction of a new Lahaina/Kaanapali bypass highway on Maui, that
could require additional significant expenditures in the longer term should
such highway be built (see discussion of Maui Infrastructure Costs below).

In 1998, the Company completed the purchase of its former joint
venture partner's 50% interest in the 96 acre beachfront parcel commonly
referred to as Kaanapali North Beach. The Company and Tobishima Pacific,
Inc. ("TPI") had been unable to agree on key operating decisions related to
the development of the Kaanapali Ocean Resort ("KOR") and the future
development plan for the entire North Beach property. To break the
deadlock on these issues, the Company exercised a buy/sell option using a
$12 million stated purchase price, and TPI elected to sell its interest.
The Company financed 80% of the purchase price for TPI's interest in North
Beach and signed a note and first mortgage in favor of TPI for $9.6
million. The note is payable in five equal annual principal installments
of approximately $1.9 million beginning in September 1999 and with interest
at 8.5% per annum payable quarterly. In addition to the scheduled
principal and interest payments, in January 1999, the Company paid TPI $2.2
million on its note to release Lot #1 for KOR and the new 10-acre public
recreation area at North Beach.

The Company has made significant changes in the operations of its
sugar plantations in an effort to reduce operating costs and increase
productivity. The sugar industry in Hawaii has experienced significant
difficulties for a number of years. Growers in Hawaii have long struggled
with high costs of production relative to the prevailing market price for
raw sugar, which have led to the closure of many plantations, including the

<PAGE>

Oahu Sugar Company and more recently Pioneer Mill Company. Transportation
costs of raw sugar to the C&H refinery are also significant. Over the
years, the Company has implemented numerous cost reduction and
consolidation plans. In a further effort to reduce operating costs, the
Company recently instituted a temporary furlough program at the Kauai
plantation. The plan (which primarily involves the planting crews at the
plantation) will reduce operating costs in the short-term. As discussed
above, management is currently evaluating a shutdown of the plantation.
Such evaluation involves consideration of the affect of the temporary
furlough on the volume of future sugar crops and therefore future revenues
and the significant costs associated with closure such as severance and
other closing costs.

After lengthy negotiations with the union, in April 1998, the union
membership at the Kauai plantation ratified a two-year contract which
included a 10% reduction in wages as well as other concessions. The two-
year contract, which covers approximately 89% of the workforce, expired on
January 31, 2000 and has been extended on a day-to-day basis. The
extension agreement allows either party to cancel upon three days notice.
Renewal of the contract is currently being negotiated; however, there can
be no assurance that the prior concessions and any additional changes that
may be necessary will be obtained. The absence of these concessions and/or
changes would cause the Company to consider the possible shutdown of its
sugar operations on Kauai. Although the prior concessions provided a
meaningful, positive impact on operations, they did not provide the type of
structural changes necessary to provide for long-term profitability and a
secure future for the Company's sugar operations.

The Lihue Plantation Company ("Lihue Plantation") on Kauai recently
suffered a breakdown of its power-generating turbine in February 2000. The
Company believes that the turbine repair costs and lost profits (net of a
$0.5 million policy deductible) are covered by insurance (although there
can be no assurance that all of the lost profits will be so covered).
Lihue Plantation has completed the repair of the turbine and has incurred
expenditures of approximately $2.2 million in connection with the turbine
repair and certain other related expenditures. As of June 30, 2000, Lihue
Plantation has received $0.9 million in advances against the claim from the
insurance carriers.

The Company completed its final harvest of sugar cane at Pioneer Mill
on Maui in September 1999 in conjunction with its shutdown. Pioneer Mill
had consistently incurred losses in prior years and it was expected that
those losses would continue in the future. The Company intends to use
portions of the land at Pioneer Mill for alternative crops.

Company management cannot predict precisely the actual cost of a
plantation shutdown until a shutdown plan is developed. There are a
significant number of factors that impact the actual cost including: the
exact timing of the shutdown, potential environmental issues (currently
unknown), the market and pricing for the possible sale or lease of the
plantation's field and mill equipment, and employee termination costs
(which are subject to union negotiation). Other significant unknowns (in
the case of Kauai) relate to the costs associated with terminating the
power sale agreements with the local utility company.

The price of raw sugar has fallen from approximately 22 cents/lb. to a
range of 18 cents/lb. to 16 cents/lb. for current deliveries. Futures
prices for 2000 range from 18 cents/lb. to 19 cents/lb. While the Company
had hedged (effectively pre-sold) a portion of the 1999 deliveries and did
not experience any material impact in 1999 resulting from the 1999 raw
sugar price reduction, the Company anticipates receiving (at the current
price levels) approximately $3 to $5 million less in net sugar proceeds
from its 2000 harvest than originally forecasted. As the futures prices
for 2000 have generally not exceeded the Company's break-even price, the
Company was only 5% hedged for year 2000 deliveries. If the USDA continues

<PAGE>

to manage the sugar program at the current price levels, losses will be
approximately $4 million greater than projected and it is doubtful that the
Company will be able to sustain its sugar business on Kauai for more than
another year or two. As described, changes in the price of raw sugar could
also impact the level of agricultural deficits and, as a result, the annual
cash needs of the Company. Although government legislation, which is in
place through 2002, sets a target price range (currently approximately 21.5
cents to 23 cents per pound) for raw sugar, it is possible that such
legislation could be amended or repealed resulting in a reduction in the
price of raw sugar to world levels (currently approximately 5 cents to
6 cents/lb). Such a reduction could also cause the Company to consider the
shutdown of its remaining sugar plantations on Kauai.

As the Company's sugar production decreases, the Company's water needs
will also decrease. Subject to significant state regulatory restrictions,
excess water may be used for other purposes and the Company is exploring
alternative uses for such water. Waiahole Irrigation Company, Limited
("WIC") is a wholly-owned subsidiary of the Company and previously owned
and operated a water collection and transmission system on the island of
Oahu commonly referred to as the "Waiahole Ditch" (a series of tunnels and
ditches constructed in the early 1900's). After the closure of Oahu Sugar
in 1995, the Company negotiated an agreement in June 1998 with the State of
Hawaii pursuant to which the State purchased the Waiahole Ditch from WIC
for $8.5 million (which includes 450 acres of conservation land). The sale
was consummated in July 1999 (with a payment by WIC of approximately $2.5
million to a third party to resolve its water claim related to the Waiahole
Ditch).

In February 1999, the Company signed a stock purchase agreement for
the sale of Kaanapali Water Corporation, the Company's water utility
business on West Maui for $5.5 million. This water utility serves the
Kaanapali Beach Resorts. The sale received the approval of the State of
Hawaii Public Utilities Commission and successfully closed on May 25, 1999.

During the first six months of 2000, cash decreased by $7.1 million
from December 31, 1999. Net cash was used in operating activities of $9.8
million, investing activities of $0.6 million and provided by financing
activities of $3.3 million.

During the first six months of 2000, net cash flow used in operating
activities was $9.8 million, as compared to net cash provided by operating
activities of $2.4 million during the first six months of 1999. The $12.2
million increase in cash flow used in operating activities was due
primarily to (i) a $2 million increase in receivables primarily from sugar
operations during the first six months of 2000 compared to an $0.8 million
decrease in receivables for the first six months of 1999 and (ii) a $0.7
million decrease in agricultural and real estate related inventories for
the six months ended June 30, 2000 compared to an $8.9 million decrease in
1999. The decrease in agricultural inventories of $3.4 million in 1999
compared to the $2.0 million increase in 2000, is primarily due to the
decrease in inventory due to the final sugar harvest at Pioneer Mill on
Maui in 1999 and the higher percentage of sugar tons produced relative to
the estimated annual production at the Kauai plantation of 58% and 37%,
respectively, at June 30, 1999 and 2000.

During the first six months of 2000, net cash flow used in investing
activities was $0.6 million as compared to $3.0 million provided during the
first six months of 1999. The $3.6 million increase in net cash used in
investing activities was principally due to a decrease in net property
sales, disposals and retirements and a decrease in other liabilities for
the six months ended June 30, 1999 primarily due to the stock sale of
Kaanapali Water Corporation (discussed above).

<PAGE>

During the first six months of 2000, net cash flow provided by
financing activities was $3.3 million compared to $22.7 million used in the
first six months of 1999. The $26 million increase in cash provided from
financing activities is due primarily to (i) the $40.3 million of cash used
to redeem the Class B COLASs in June 1999 offset in part by $21.3 million
in advances from affiliates compared to $3.5 million in advances from
affiliates for the first six months of 2000 and (ii) to a decrease in net
long-term debt payments of $0.2 million for the six months ended June 30,
2000 compared to $3.5 million for the six months ended June 30, 1999
primarily for the $2.2 million principal payment to TPI discussed above.

Reference is made to Note 2 - Amounts Due to Affiliates - Senior Debt
Financing. The total amount due Northbrook and its subsidiaries for Senior
Debt financing as of June 30, 2000 was $185,696, which includes accrued and
deferred interest to affiliates on senior debt of approximately $34,112 (of
which $34,104 has been deferred until December 31, 2001, as described
above). Under the terms of the Indenture, the amounts borrowed from
Northbrook or its affiliates are "Senior Indebtedness" to the COLAs.

RESULTS OF OPERATIONS

AGRICULTURE SEGMENT:

The Company's Agriculture segment is responsible for activities
related to the cultivation, processing and sale of sugar cane and coffee.
Agriculture's revenues are primarily derived from the Company's sale of its
raw sugar. Reference is made to the "Liquidity and Capital Resources"
section of "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of potential uncertainties
regarding the price of raw sugar and the continuation of the Company's
sugar cane operations.

The Company's sugar plantations sell all their raw sugar production to
the Hawaiian Sugar and Transportation Company ("HSTC"), which is an
agricultural cooperative owned by the major Hawaii producers of raw sugar
(including the Company). Pursuant to a long term supply contract, HSTC is
required to sell, and the California and Hawaiian Sugar Company ("C&H") is
required to purchase, all raw sugar produced by the HSTC's cooperative
members. HSTC remits to its cooperative members the remaining proceeds
from its sugar sales after storage, delivery and administrative costs. The
Company recognizes revenues and related cost of sales upon delivery of its
raw sugar by HSTC to C&H.

During the first six months of 2000 and 1999, agriculture revenues
were $12.8 and $19.7 million, respectively.

<PAGE>

Agriculture revenues and cost of sales decreased for the six months
ended June 30, 2000 as compared to the six months ended June 30, 1999 due
to the shutdown of sugar operations at Pioneer Mill which completed its
final harvest in September 1999, the decrease in tons produced and the
timing of sugar production deliveries. For the six months ended June 30,
2000 the Company sold approximately 29,346 tons of sugar, a 38% decrease
over the same period in 1999. The average price of sugar sold for the six
months ended June 30, 2000 of approximately $334 represents a 10% decrease
over the same average price for the six months ended June 30, 1999. The
Company harvested 3,787 and 7,131 acres for the six months ended June 30,
2000 and 1999, respectively.

Agriculture revenues and cost of sales decreased for the three months
ended June 30, 2000 as compared to the three months ended June 30, 1999 due
to the decrease in tons produced and the shutdown of sugar operations at
Pioneer Mill in 1999. For the three months ended June 30, 2000 the Company
sold approximately 15,043 tons of sugar, a 68% decrease over the same
period in 1999. Approximately 50% of the decrease in the tons of sugar
sold is attributable to the 1999 shutdown of sugar operations at Pioneer
Mill; the remaining approximately 50% decrease in tons sold is attributed
to an approximately 55% decrease in sugar production at the Kauai
plantations due to a 33% decline in yield per acre of sugarcane harvested.
The average price of sugar sold for the three months ended June 30, 2000 of
approximately $323 represents a 13% decrease over the same average price
for the three months ended June 30, 1999. The Company harvested 2,668 and
5,956 acres for the three months ended June 30, 2000 and 1999,
respectively.

The operating loss of $3.7 million and $4.8 million for the three and
six months ended June 30, 2000 as compared to the $1.3 million and $.2
million operating income for the three and six months ended June 30, 1999,
reflects the decrease in the average price of sugar sold and the decrease
in tons of sugar sold and produced without a commensurate decrease in
expenses.

GOLF SEGMENT:

The Company's golf segment is responsible for the management and
operation of the two golf courses at Kaanapali Golf Courses in Kaanapali,
Maui and the Waikele Golf Club on Oahu.

Golf revenues were $3.7 and $8.4 million, during the three and six
months ended June 30, 2000 as compared to $3.4 and $7.8 million for the
three and six months ended June 30, 1999. During the three and six months
ended June 30, 2000, approximately 47,000 and 101,000 rounds of golf were
played as compared to 44,000 and 97,000 during the first three and six
months of 1999.

Golf cost of sales were $2.2 and $4.6 million during the three and six
months ended June 30, 2000 as compared to $2.3 and $4.3 million for the
three and six months ended June 30, 1999. Golf operating expenses of $0.5
and $1.0 million during the first three and six months of 2000 and 1999,
consisted primarily of depreciation expense.

Operating income of $1.0 and $2.8 million increased during the three
and six months ended June 30, 2000 as compared to $0.5 and $2.5 million
during the three and six months ended June 30, 1999 primarily due to the
increase in revenue as a result of the increase in rounds of golf played.

PROPERTY SEGMENT:

The Company's Property segment is responsible for land planning and
development activities; obtaining land use, zoning and other governmental
approvals; selling or financing developed and undeveloped land parcels.

<PAGE>

Revenues decreased to $0.7 and $5.8 million during the three and six
months ended June 30, 2000 from $4.1 and $6.9 million during the three and
six months ended June 30, 1999. Land sales included revenues for the six
months ended June 30, 2000 of approximately $3.5 million primarily from the
sale of approximately 17 acres on Maui. Revenues for the six months ended
June 30, 1999 included approximately $5.5 million from the sale of 826
acres of primarily agricultural lands on Kauai and Maui.

During the three and six months ended June 30 2000, property cost of
sales were $0.2 and $4.2 million as compared to $6.1 and $7.1 million for
the three and six months ended June 30, 1999. The decrease in costs was
due primarily to a decrease in land sales (as discussed above).

Property sales and cost of sales decreased for the three and six
months ended June 30, 2000 as compared to the three and six months ended
June 30, 1999 due to a decrease in land sales. Operating loss decreased to
$1.4 and 2.0 million during the three and six months ended June 30, 2000
compared to $2.9 and 3.0 million for the three and six months ended
June 30, 1999.

(a) OAHU.

After the closure of the Oahu Sugar plantation in 1995, the Company
began developing the 64-acre mill site located in Waipahu, which is
approximately 10 miles west of downtown Honolulu near Pearl Harbor. The
Company received county zoning approval for a light industrial subdivision
on the property. In November 1998, the Company sold a portion of this mill
site property.

The Company also owns the Waikele Golf Course located at the Company's
completed Waikele project. Waikele is located directly north of the Oahu
Sugar mill site development in Central Oahu. The Waikele Golf Course has
experienced a significant drop in play from eastbound (primarily Japanese)
tour groups which has depressed rounds played, average rate and, as a
result, net operating income. The Company has developed and implemented
marketing plans to return the golf course to its previous levels of
profitability. However, these programs have had limited success to date
due to additional competition from new and existing golf courses and
continued softness in the Japanese tour group market. At this point, it is
difficult to predict if and when previous levels of sales and profitability
can be achieved again.

(b) MAUI.

The Company has determined that the focus of its future development
efforts should be on its Kaanapali/Honokowai land holdings (approximately
3,200 acres) on Maui. Although additional governmental approvals are
required for most of these lands, approximately 900 acres of the Company's
Kaanapali/Honokowai land holdings already have some form of entitlements.
The Company believes its development efforts are best concentrated in this
area where it has certain development approvals already secured and where
successful resort development has occurred during the past thirty years.

The Company owns and operates the Royal Kaanapali Golf Courses
("RKGC"), which are two 18-hole golf courses located at the Kaanapali Beach
Resort on West Maui. The courses occupy approximately 320 acres of land.
(Reference is made to Note 4 concerning the default notice issued by the
lender concerning the indebtedness secured by the golf courses.)

KAANAPALI GOLF ESTATES. The Company is marketing Kaanapali Golf
Estates ("KGE"), a residential community that is part of the Kaanapali
Beach Resort in West Maui. KGE is divided into several parcels and the
Company has sold approximately 210 homesites (through individual lot and
bulk parcel sales) as of June 30, 2000.

<PAGE>

In October 1999, the Company sold in bulk the 17-acre Parcel 21 for
$4.5 million. In January 2000, the Company sold the 17-acre Parcel 16 for
$3.5 million. In July 2000, the Company sold the 19-acre Parcel 19/20 for
$3.5 million.

NORTH BEACH. In October 1998, the Company received the final Maui
County approval (an SMA permit) needed to develop the Kaanapali Ocean
Resort ("KOR"), a 280 unit time share project on the 14 acre Lot 1 ("KOR
Site") of Kaanapali North Beach.

In February 1997, the Company formed a limited partnership with an
experienced time share management team to proceed with the planning and
development of KOR. The limited partnership was unable to obtain financing
for KOR on a basis acceptable to the Company. As a result, in February
2000, a subsidiary of the Company purchased all of the interests of the
limited partnership and entered into negotiations with several larger
timeshare companies. In May 2000, an investment agreement was signed to
admit one of the timeshare companies to the limited partnership, subject to
due diligence and certain pre-closing requirements. If such agreement is
consummated, it would result in a cash infusion to the Company. The due
diligence period has expired and this transaction is currently scheduled to
close in August 2000. In an effort to resolve certain outstanding issues
with the buyer, the Company is currently negotiating a possible amendment
of the investment agreement, that would, among other things, extend the
closing date until the fourth quarter of 2000. There can be no assurance
that such transaction will be consummated on any terms.

<PAGE>

NORTH BEACH MAUKA. The Company has plans for an additional 18-hole
golf course, condominiums, commercial/retail and residential uses. The
Company also plans to evaluate adding a significant time-share component to
the development plans for this 318-acre parcel. Currently, the Company has
Community Plan approvals and R-3 zoning (residential, minimum 10,000 square
foot lots) for North Beach Mauka. State urbanization is required, along
with final zoning and subdivision.

PUUKOLII VILLAGE. The Company has regulatory approval to develop a
project, known as "Puukolii Village", on approximately 249 acres located
"Mauka" ("towards the mountains") of Kaanapali Beach Resort. A significant
portion of this project will be affordable housing. Development of most of
Puukolii Village cannot commence until after completion of the planned
Lahaina/Kaanapali bypass highway. As such, development of this parcel is
not assured and is expected to be long term in any event.

MAUI INFRASTRUCTURE COSTS. In connection with certain of the
Company's land use approvals on Maui, the Company has agreed to provide
employee and affordable housing and to participate in the funding of the
design and construction of the planned Lahaina/Kaanapali bypass highway.
The Company has entered into an agreement with the State of Hawaii
Department of Transportation covering the Company's participation in the
design and construction of the bypass highway. In conjunction with state
urbanization of the Company's Kaanapali Golf Estates project, the Company
committed to spend up to $3.5 million (of which approximately $0.8 million
has been spent as of June 30, 2000) toward the design of the highway. Due
to lengthy delays by the State in the planned start date for the bypass
highway, the Company recently funded approximately $1.1 million for the
engineering and design of the widening of the existing highway through the
Kaanapali Beach Resort. The Company believes this $1.1 million will be
credited against the $3.5 million commitment discussed above. The Company
has also committed another $6.7 million for the construction of the bypass
highway, subject to the Company obtaining future entitlements on Maui and
the actual construction of the bypass highway. The development and
construction of the bypass highway is expected to be a long-term project
that will not be completed until the year 2007 or later, if ever.

The Company has reached an agreement with Maui County pursuant to
which the Company has agreed to exchange the Pioneer Mill office building
and five acres of agricultural land for affordable, employee housing
credits. The Company has received sufficient credits for its planned KOR
development and the development of single family homes on parcels in the
Kaanapali Golf Estates.

The Company has state urbanization and county zoning for a 552 acre
master-planned community known as the Lihue/Hanamaulu Town Expansion, which
includes approximately 1,800 affordable and market rate residential units,
commercial and industrial facilities and a number of community and other
public uses. The Company does not plan to pursue subdivision and building
permits for this project until the real estate market on Kauai improves.

<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 20, 1996, Oahu Sugar Company, Limited ("Oahu Sugar")
filed a lawsuit, Oahu Sugar v. Walter Arakaki and Steve Swift, Case No. 96-
3880-09, in the Circuit Court of the First Circuit, State of Hawaii. In
the lawsuit, Oahu Sugar alleged that it entered into an agreement to sell
to defendants certain sugar cane processing equipment at Oahu Sugar's sugar
cane mill in Waipahu. Oahu Sugar alleged that defendants failed to timely
dismantle and remove the equipment, as required by the agreement, and that
defendants were obligated to pay Oahu Sugar rent for the area occupied by
the equipment beyond the time provided for by the parties. Oahu Sugar
further alleged that it provided notice to defendants that Oahu Sugar was
entitled to treat the equipment as abandoned property and to sell the
equipment, because the equipment had not been removed from the property in
a timely fashion, as required by the parties' agreement. In its complaint,
Oahu Sugar sought, among other things, declaratory relief that it was
entitled to treat the equipment as abandoned, damages for breach of
contract, and rent under an unjust enrichment theory.

Defendants filed an answer, as amended, denying the substantive
allegations of Oahu Sugar's complaint and asserting various affirmative
defenses. In addition, the defendants filed a seven-count counterclaim
against Oahu Sugar. In the counterclaim, defendants alleged, among other
things, that Oahu Sugar failed to make the equipment available for removal
on a timely basis, and that Oahu Sugar otherwise improperly interfered with
defendants' plans for the removal and subsequent sale of the equipment. In
the counterclaim, defendants sought, among other things, general, special
and punitive damages, attorneys' fees, costs, and such other relief as the
Court may have deemed appropriate.

Oahu Sugar's declaratory relief claim was settled in advance of trial.

Oahu Sugar obtained dismissals and directed verdicts on six of defendants'
claims. The remaining portions of the complaint and counterclaim proceeded
to a jury trial and verdict. On December 2, 1999, the jury denied Oahu
Sugar relief on its remaining claims and awarded the defendants
approximately $2.6 million in damages on their counterclaim. On March 22,
2000, the trial court entered judgment against Oahu Sugar for the $2.6
million in damages awarded by the jury. In addition, the trial court
awarded counterclaimants $751,000 in attorneys' fees, $28,000 in costs and
$866,000 in prejudgment interest. Oahu Sugar's post trial motions for
judgment as a matter of law and for a new trial have been denied. Oahu
Sugar has filed a notice of appeal and intends to pursue the appeal.
Interest on the $4.22 million award continues to accrue at a rate of 10%
per annum. The defendants have begun efforts to collect the amounts
awarded to them. Defendants have caused garnishee summons to be issued to
various affiliated and unaffiliated entities. In addition, the defendants
have scheduled a debtor's examination for August 23, 2000. The Hawaii
Supreme Court has scheduled the case for an appellate conference and
mediation on August 31, 2000. Oahu Sugar continues to believe that it is
entitled to affirmative relief on its complaint and that it has meritorious
defenses to the counterclaim that it intends to pursue on appeal. The
Company, however, can provide no assurances that it will be successful in
obtaining affirmative relief or overturning the verdict against Oahu Sugar.

This verdict, if upheld, could have a material adverse effect on the Oahu
Sugar's financial condition.

On October 7, 1999, Oahu Sugar Company was named in a lawsuit
entitled, Akee, et al. v. Dow Chemical Company, et al., Civil No. 99-3757-
10, and filed in Hawaii State Court (Circuit Court of the First Circuit of
Hawaii). This multiple plaintiff toxic tort case named Oahu Sugar and a
number of additional defendants including several large chemical, petroleum
and agricultural companies. In March 2000, Oahu Sugar Company was
dismissed without prejudice.

<PAGE>

On September 30, 1999, Oahu Sugar was one of several defendants named
in a lawsuit entitled, City and County of Honolulu v. Leppert, et al.
Civil No. CV 99 00670 ACK-FIY, and filed in the federal court, District of
Hawaii. In the complaint, as amended, plaintiff files this environmental
action in an attempt to assert several causes of action including actions
for (1) clean-up and other response costs under the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"); (2)
owner/operator liability, contribution and indemnity under Hawaii statutory
law; (3) strict liability for ultrahazardous activity; and (4) negligence.
Plaintiff alleges that defendant Oahu Sugar previously operated a sugar
mill on property currently owned by plaintiff, and used pesticides,
herbicides, fumigants, petroleum products and by-products and other
hazardous chemicals which were allegedly released into the soil and/or
groundwater at the subject property. Plaintiff seeks recovery of response
costs it has incurred and to be incurred, a declaration of the rights and
liabilities for past and any future claims, damages for lost property
value, technical consulting and legal costs in investigating the property,
increased construction costs, and attorneys' fees and costs. Two of the
other defendants, Clinton Churchill and David Heenan, as trustees under the
will and estate of James Campbell ("Campbell Estate"), have filed a third
party complaint, as amended, seeking indemnity and contribution from Oahu
Sugar arising from, among other things, a lease between Oahu Sugar and
Campbell Estate concerning the land which is allegedly contaminated. The
Campbell Estate has also filed a third party compliant, as amended, against
the Northbrook Corporation seeking a defense and indemnity. Campbell
Estate has filed a motion for summary judgment regarding these third party
complaints. The matter is currently being briefed. Oahu Sugar intends to
defend itself vigorously.

On September 30, 1999, Oahu Sugar was named in a related lawsuit
entitled, City and County of Honolulu v. Leppert, et al., Civil No. 99-
3678-09, and filed in Hawaii State Court, Circuit Court for the First
Circuit of Hawaii. Oahu Sugar has been served in this matter. This case is
the same case as the CERCLA action above, except that it asserts causes of
action under the Hawaii Environmental Response Law, the state law
equivalent of CERCLA. The alleged specific causes of action include actions
for (1) owner/operator liability, contribution and indemnity under Hawaii
Revised Statue Section 128D-18; (2) strict liability; (3) negligence, and,
(4) declaratory relief on state claims. On July 3, 2000, the Hawaii state
court issued a stay of this action, pending the outcome of the federal
litigation and subject to various other stated conditions. In any event,
Oahu Sugar intends to vigorously defend itself.

One of Oahu Sugar's insurance carriers is partially funding the
defense of these environmental-related cases, subject to a reservation of
rights. Oahu Sugar can give no assurances as to the portion of defense
costs and indemnity costs, if any, that will ultimately be borne by the
insurance carrier.

These environmental-related lawsuits are in the beginning stages of
litigation. The Company believes that Oahu Sugar has meritorious defenses
to these lawsuits and Oahu Sugar will defend itself vigorously. However,
there can be no assurances that these cases (or any of them), when once
adjudicated, will not have a material adverse effect on the financial
condition of Oahu Sugar.

On May 10, 2000, Oahu Sugar was named in a civil action entitled,
Albert and Marciana Kalakai v. Oahu Sugar, et. al., pending in the Circuit
Court of the First Circuit, State of Hawaii, Civil No. 00-1-1497-05. In
this case, plaintiffs seek damages for alleged asbestos related injuries
sustained, among other things, from exposure to asbestos-containing
products over the course of in excess of forty years and at numerous
locations including the Oahu Sugar mill site over the period of 1950-1960.
The case is in the beginning stages of litigation and Oahu Sugar intends to
defend itself vigorously. The case has been tendered to one of Oahu
Sugar's insurance carriers for defense and indemnity. No response has yet
been received from the carrier. The extent to which this matter will be
covered by insurance is unknown.

<PAGE>

Oahu Sugar is also a defendant in another alleged asbestos related
personal injury action entitled, Anthony Fiori and Stella Fiori v.
Raybestos-Manhattan, filed in the San Francisco County Superior Court, Case
No. 304868, filed on or about July 13, 1999. In the complaint, plaintiffs
seek $3.0 million in economic and non-economic damages, as well as $1.0
million in punitive damages, for injuries alleged sustained. This matter
has been tendered to one of Oahu Sugar's insurance carriers for defense and
indemnity. Oahu Sugar has not received a response to the tender. The
extent to which this matter will be covered by insurance is unknown.

Oahu Sugar is substantially without assets to satisfy any judgments in
these actions. However, the liability, if any, of Oahu Sugar in these
matters should not extend to other subsidiaries.

The Hawaii Department of Health ("Health Department") has conducted
inspections of the plantation properties of Kekaha Sugar Co., Ltd., Lihue
Plantation Co., Ltd., and Pioneer Mill Co. As a result of the inspections,
the Health Department has noted various areas of alleged non-compliance
with environmental law. In the case of Kekaha Sugar Co., Ltd., the Health
Department issued a complaint, order and notice of hearing. The complaint
alleged, among other things, storage of hazardous waste without a permit
and failure to make a hazardous waste determination, and assessed a penalty
of $67,848. The order required Kekaha Sugar Co. to take corrective action.
At this time Kekaha Sugar Co. does not anticipate further enforcement
actions in connection with the issues identified by the Health Department.
As a result of the inspections of its properties, Lihue Planation Co., Ltd.
was advised of various areas of non-compliance with rules regarding the
labeling and storage of oil and hazardous waste materials. On February 25,
2000, the Health Department issued a warning letter requiring Lihue
Plantation Co., Ltd. to take certain corrective action. Lihue Plantation
Co., Ltd. has submitted and implemented its corrective actions plans, and
has notified the Health Department of the same. While the Health
Department has reserved the right to take further enforcement action, Lihue
Plantation Co., does not anticipate any further assessment of penalties in
connection with the February 25, 2000 letter; however, Lihue Plantation
Co., Ltd. can give no assurances that further penalties may not be assessed
in connection with inspections conducted by the Health Department. In
connection with the inspection of Pioneer Mill Co., the Health Department
noted various areas of non-compliance in a May 12, 2000 warning letter
issued to Pioneer Mill Co. Pioneer Mill Co. has corrected, or is in the
process of correcting, the identified areas of non-compliance and has
submitted documentation of same to the Health Department. Pioneer Mill Co.
does not anticipate that any further penalties will be issued in connection
with the inspections; however, Pioneer Mill Co. can give no assurances that
further penalties may not be assessed in connection with the inspections
conducted by the Health Department.

As a result of an administrative order issued it Oahu Sugar Company by
the Hawaii Department of Health, Order No. CH 98-0012, dated January 27,
1998, Oahu Sugar is currently engaged in environmental site assessment of
lands it leased from the U.S. Navy and located on the Waipio Peninsula.
Sampling is underway and the investigation is otherwise still in its
preliminary stages.

While there can be no assurance that the above matters will be
concluded without a material adverse effect on the financial condition of
the Company, the Company believes that it has made adequate provision in
the accompanying financial statements for its reasonably estimated loss
contingencies.

Other than as described above, the Company is not involved in any
material pending legal proceedings, other than ordinary routine litigation
incidental to its business. The Company and/or certain of its affiliates
have been named as defendants in several pending lawsuits. While it is
impossible to predict the outcome of such routine litigation that is now
pending (or threatened) and for which the potential liability is not
covered by insurance, the Company is of the opinion that the ultimate
liability from any of this litigation will not materially adversely affect
the Company's results of operations or its financial condition.

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following documents are included as an exhibits to this
report.

Exhibit
No. Exhibit
------- --------

4.1 Indenture, including the form of COLAs, among Amfac/JMB
Hawaii, Inc., its subsidiaries as Guarantors and Continental Bank National
Association, as Trustee (dated as of March 14, 1989). (2)

4.2 Amendment dated as of January 17, 1990 to the Indenture
relating to the COLAs. (2)

4.3 $28,097,832 Promissory Note from Amfac, Inc. to Amfac/JMB
Hawaii, Inc. Extended and Reissued Effective December 31, 1993. (3)

4.4 The five year $66,000,000 loan with the Employees' Retirement
System of the State of Hawaii to Amfac/JMB Hawaii, Inc. as of June 25,
1991. (4)

4.5 $15,000,000 Credit Agreement dated March 31, 1993 among
AMFAC/JMB Hawaii, Inc. and Continental Bank N.A (5).

4.6 $10,000,000 loan agreement between Waikele Golf Club, Inc. and
ORIX USA Corporation. $10,000,000 loan agreement between Waikele Golf
Club, Inc. and Bank of Hawaii. (6)

4.7 $52,000,000 Promissory Note to Northbrook Corporation from
Amfac/JMB Hawaii, Inc., effective May 31, 1995. (7)

4.8 Agreement for delivery and sale of raw sugar between Hawaii
Sugar Transportation Corporation, as seller, and C&H, as Buyer, dated June
4, 1993. (8)

4.9 Standard Sugar Marketing Contracts between Hawaiian Sugar
Transportation Company and Hawaii Sugar Growers dated June 4, 1993. (9)

4.10 Amendment to the $66,000,000 loan with the Employees'
Retirement System of the State of Hawaii to Amfac/JMB Hawaii, Inc. as of
April 18, 1996. (9)

4.11 Amended and Restated $52,000,000 Promissory Note to Northbrook
Corporation from Amfac/JMB Hawaii, Inc. extended and reissued effective
June 1, 1996. (10)

4.12 Amended and Restated $28,087,832 Promissory Note from Amfac,
Inc. to Amfac/JMB Hawaii, Inc. extended and reissued effective June 1,
1996. (10)

4.13 $10,000,000 loan agreement between Amfac Property Development
Corp. and City Bank at December 18, 1996. (11)

4.14 Amended and Restated $25,000,000 loan agreement with the Bank
of Hawaii dated February 4, 1997. (12)

4.15 Limited Partnership Agreement for Kaanapali Ownership Resorts,
L.P. dated February 1, 1997 for development of time-share resort on
Kaanapali. (11)

4.16 Second Supplement to the Indenture dated as of March 1, 1998.
(13)

<PAGE>

Exhibit
No. Exhibit
------- --------

4.17 $104,759,324 promissory Note between Northbrook Corporation
and Amfac Land Company, Ltd. dated January 1, 1998. (13)

4.18 Revolving Credit Note between Fred Harvey Transportation
Company, Inc. and Amfac Land Company, Ltd., dated January 1, 1998. (13)

4.19 Note Split Agreement between Northbrook Corporation and
Amfac/JMB Hawaii, Inc., effective January 1, 1998. (15)

4.20 $99,594,751.09 Promissory Note between Northbrook Corporation
and Amfac/JMB Hawaii, Inc., dated January 1, 1998. (15)

4.21 $15,000,000.00 Promissory Note between Northbrook Corporation
and Amfac/JMB Hawaii, Inc., dated January 1, 1998. (15)

10.1 Escrow Deposit Agreement. (1)

10.2 General Lease S-4222, dated January 1, 1969, by and between
the State of Hawaii and Kekaha Sugar Company, Limited. (1)

10.3 Grove Farm Haiku Lease, dated January 25, 1974 by and between
Grove Farm Company, Incorporated and The Lihue Plantation Company, Limited.
(1)

10.4 General Lease S-4412, dated October 31, 1974, by and between
the State of Hawaii and the Lihue Plantation Company, Limited. (1)

10.5 General Lease S-4576, dated March 15, 1978, by and between the
State of Hawaii and The Lihue Plantation Company, Limited. (1)

10.6 General Lease S-3821, dated July 8, 1964, by and between the
State of Hawaii and East Kauai Water Company, Ltd. (1)

10.7 Amended and Restated Power Purchase Agreement, dated as of
June 15, 1992, by and between The Lihue Plantation Company, Limited and
Citizens Utilities Company. (1)

10.8 U.S. Navy Waipio Peninsula Agricultural Lease, dated May 26,
1964, between The United States of America (as represented by the U.S.
Navy) and Oahu Sugar Company, Ltd. (1)

10.9 Amendment to the Robinson Estate Hoaeae Lease, dated May 15,
1967, by and between various Robinsons, heirs of Robinsons, Trustees and
Executors, etc. and Oahu Sugar Company, Limited amending and restating the
previous lease. (1)

10.10 Amendment to the Campbell Estate Lease, dated April 16, 1970,
between Trustees under the Will and of the Estate of James Campbell,
Deceased, and Oahu Sugar Company, Limited amending and restating the
previous lease. (1)

10.11 Bishop Estate Lease No. 24,878, dated June 17, 1977, by and
between the Trustees of the Estate of Bernice Pauahi Bishop and Pioneer
Mill Company, Limited. (1)

10.12 General Lease S-4229, dated February 25, 1969, by and between
the State of Hawaii, by its Board of Land and Natural Resources and Pioneer
Mill Company, Limited. (1)

10.13 Honokohau Water License, dated December 22, 1980, between Maui
Pineapple Company Ltd. and Pioneer Mill Company, Limited. (1)

<PAGE>

Exhibit
No. Exhibit
------- --------

10.14 Water Licensing Agreement, dated September 22, 1980, by and
between Maui Land & Pineapple Company, Inc. and Amfac, Inc. (1)

10.15 Joint Venture Agreement, dated as of March 19, 1986, by and
between Amfac Property Development Corp. and Tobishima Properties of
Hawaii, Inc. (1)

10.16 Development Agreement, dated March 19, 1986, by and between
Kaanapali North Beach Joint Venture and Amfac Property Investment Corp. and
Tobishima Pacific, Inc. (1)

10.19 Keep-Well Agreement between Northbrook Corporation and
Amfac/JMB Finance, Inc. (2)

10.20 Repurchase Agreement, dated March 14, 1989, by and between
Amfac/JMB Hawaii, Inc. and Amfac/JMB Finance, Inc. (2)

10.21 Amfac Hawaii Tax Agreement, dated November 21, 1988 between
Amfac/JMB Hawaii, Inc., and Amfac Property Development Corp.; Amfac
Property Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali
Water Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited;
The Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer
Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co.,
Ltd.; and Waiahole Irrigation Company, Limited. (2)

10.22 Amfac-Amfac Hawaii Tax Agreement, dated February 21, 1989
between Amfac, Inc. and Amfac/JMB Hawaii, Inc. (2)

10.23 Services Agreement, dated November 18, 1988, between Amfac/JMB
Hawaii, Inc., and Amfac Property Development Corp.; Amfac Property
Investment Corp.; Amfac Sugar and Agribusiness, Inc.; Kaanapali Water
Corporation; Amfac Agribusiness, Inc.; Kekaha Sugar Company, Limited; The
Lihue Plantation Company, Limited; Oahu Sugar Company, Limited; Pioneer
Mill Company, Limited; Puna Sugar Company, Limited; H. Hackfeld & Co.,
Ltd.; and Waiahole Irrigation Company, Limited and JMB Realty Corporation.
(2)

10.24 Amended buy-sell notice dated August 27, 1998 from APIC. (14)

10.25 Assignment and assumption agreement dated September 30, 1998,
executed by TPI and APIC. (14)

10.26 Purchase money promissory note secured by mortgage dated
September 30, 1998, executed by APIC. (14)

10.27 Assignment and Contribution Agreement effective December 31,
1998 between Northbrook Corporation and Amfac/JMB Hawaii, L.L.C. (15)

10.28 Note Modification Agreement dated December 31, 1998 between
Amfac/JMB Hawaii, L.L.C. and Fred Harvey Transportation Company. (15)

19.0 $35,700,000 agreement for sale of C&H and certain other C&H
assets, to A&B Hawaii, Inc. in June 1993. (7)

22.1 Subsidiaries of Amfac/JMB Hawaii, Inc. (1)

<PAGE>

Exhibit
No. Exhibit
------- --------

99.1 A copy of pages 19, 41-45 and 51 of the Prospectus of the
Company dated December 5, 1988 (relating to SEC Registration Statement on
Form S-1 (as amended) File No. 33-24180) and hereby incorporated by
reference. (2)

Pursuant to Item 6.01 (b)(4) of Regulation SK, the registrant
hereby undertakes to provide the Commission upon its request a copy of any
agreement with respect to long-term indebtedness of the registrant and its
consolidated subsidiaries that does not exceed 10 percent of the total
assets of the registrant and its subsidiaries on a consolidated basis.

(1) Previously filed as exhibits to the Company's Registration
Statement of Form S-1 (as amended) under the Securities Act of 1933 (File
No. 33-24180) and hereby incorporated by reference.

(2) Previously filed as exhibits to the Company's Form 10-K report
under the Securities Act of 1934 (File No. 33-24180) filed on March 27,
1989 and hereby incorporated by reference.

(3) Previously filed as exhibits to the Company's Form 10-K report
under the Securities Act of 1934 (File No. 33-24180) filed on March 27,
1991 and hereby incorporated by reference.

(4) Previously filed as exhibits to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed on August 13,
1991 and hereby incorporated by reference.

(5) Previously filed as exhibit to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed on May 14, 1993
and hereby incorporated by reference.

(6) Previously filed as exhibit to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed on November 11,
1993 and hereby incorporated by reference.

(7) Previously filed as exhibits to the Company's Form 10-K report
under the Securities Act of 1934 (File No. 33-24180) filed on March 27,
1994 and hereby incorporated by reference.

(8) Previously filed as an exhibit to the Company's Form 10-Q
report under the Securities Act of 1934 (File No. 33-24180) filed May 12,
1995 and hereby incorporated by reference.

(9) Previously filed as an exhibit to the Company's Form 10-Q
report under the Securities Act of 1934 (File No. 33-24180) filed May 13,
1996 and hereby incorporated by reference.

(10) Previously filed as exhibit to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed on August 13,
1996 and hereby incorporated by reference.

(11) Previously filed as exhibit to the Company's Form 10-K report
under the Securities Act of 1934 (File No. 33-24180) filed March 21, 1997
and hereby incorporated by reference.

(12) Previously filed as exhibit to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed May 15, 1996 and
hereby incorporated by reference.

<PAGE>

(13) Previously filed as exhibit to the Company's Form 8-K report
under the Securities Act of 1934 (File No. 33-24180) filed March 3, 1998
and hereby incorporated by reference.

(14) Previously filed as exhibit to the Company's Form 10-Q report
under the Securities Act of 1934 (File No. 33-24180) filed November 12,
1998 and hereby incorporated by reference.

(15) Previously filed as exhibit to the Company's Form 10-K report
under the Securities Act of 1934 (File No. 33-24180) filed March 8, 1999
and hereby incorporated by reference.

PART III DEFAULTS UPON SENIOR SECURITIES

The Company has not paid the ERS the minimum interest payments due on
January 1, April 1, and July 1, 2000. Amounts due on such indebtedness
aggregated $76,206 as of June 30, 2000 and are included in "ERS debt in
default" in the accompanying Consolidated Balance Sheets. Reference is
made to Note 4 of the Notes to Consolidated Financial Statements.

<PAGE>

SIGNATURES

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

AMFAC/JMB HAWAII, L.L.C.

/s/ GAILEN J. HULL
-------------------
By: Gailen J. Hull
Vice President
Date: August 14, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.