BREWER C HOMES INC, 10-K/A, 1998-04-24

BREWER C HOMES INC
10-K/A, 1998-04-24
OPERATIVE BUILDERS

Previous: ULTIMATE ELECTRONICS INC, DEF 14A, 1998-04-24

Next: MACERICH CO, DEF 14A, 1998-04-24

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
AMENDMENT NO. 2
TO

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1997
OR

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

FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-22948
------------------------
C. BREWER HOMES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE 99-0145055
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

(Address of principal executive offices) (Zip code)
255 EAST WAIKO ROAD WAILUKU, HAWAII 96793

Registrant's telephone number, including area code: (808) 242-6833

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

CLASS A COMMON STOCK
(TITLE OF CLASS)

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

Indicate by check mark if disclosure of delinquent files pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

The aggregate market value of the Class A Common Stock held by
non-affiliates of the registrant on June 6, 1997 was $6,829,132.

The number of shares outstanding of each of the registrant's classes of
common stock on June 6, 1997 was as follows:

Class A Common Stock (Par Value $.01 per share) 3,376,424 shares
Class B Common Stock (par value $.01 per share) 4,959,576 shares

DOCUMENTS INCORPORATED BY REFERENCE

Definitive Proxy Statement relating to the Company's 1997 Annual Meeting of
Stockholders to be filed hereafter (incorporated into Part III hereof).

Form 10-K/A

Amendment No. 1

The undersigned Registrant hereby:

1. Amends Items 1, 6, 7, 8 and 14 of its annual Report on Form 10-K
for the fiscal year ended March 31, 1997 (the "Form 10-K") and files such
amended Items 1, 6, 7, 8 and 14 herewith;

2. Amends Schedules III and IV of the Form 10-K and files such
amended Schedules III and IV herewith; and

3. Files Exhibits 10.56 and 10.57 herewith.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I

ITEM 1. BUSINESS.

GENERAL

C. Brewer Homes, Inc. (the "Company") is a land developer and homebuilder in
the State of Hawaii with operations on the islands of Maui, Kauai and Hawaii.
The Company has extensive landholdings, totaling approximately 2,689 acres on
these islands, and is one of the largest owners of entitled residential units on
the island of Maui. The Company believes that its existing landholdings will
provide sufficient inventory to enable the Company to develop and sell land, and
build and sell new homes for more than ten years without acquiring additional
land. In addition, for the next 20 years the Company will have access to
approximately 1,964 acres of additional land through a land purchase option
granted to the Company by its former parent, C. Brewer and Company, Limited
("CBCL").

From late 1993 through early 1997, the Company's business strategy was
focused primarily on the construction and sale of homes. In early 1997, the
Company expanded its business strategy to include the development and sale of
lots and parcels of land, which had been the Company's primary business strategy
prior to late 1993. The Company currently intends to continue in the business of
building and selling homes. The Company is presently selling homes on the island
of Maui at its Kaimana, Halemalu and Iao Parkside developments. The
single-family and multi-family homes included in the Kaimana, Halemalu and Iao
Parkside developments range in size from 657 square feet to 1,927 square feet,
and in price from $118,000 to $275,000.

Kaimana is a 179-unit single-family residential project and Halemalu is a
30-unit single-family residential project of the Kehalani master-planned
community on the island of Maui. In November 1994, the Company began selling
single-family homes at Kaimana and delivered the first homes in March 1995.
Through March 31, 1997, 67 home sales had closed at Kaimana. In October 1995,
the Company began selling the single-family homes at Halemalu and through March
31, 1997, 27 home sales had closed. The Company is currently planning the next
subdivision at Kehalani called Nanea. This subdivision would include 80
single-family residential homes. The Kehalani development is expected to consist
of a total of approximately 2,100 homes, ranging from affordably priced
multi-family condominiums to executive-quality single-family homes. The Kehalani
site provides panoramic vistas of the Pacific Ocean and Mount Haleakala and will
be one of the largest planned residential communities on the island of Maui.

Iao Parkside is a 28-acre, 480-unit low-rise garden condominium project
being constructed and sold through a 50% joint venture partnership with Schuler
Homes, Inc. ("SHI"). This project is targeted at first-time buyers under
Hawaii's affordable housing policy. The joint venture partnership began
accepting reservations at this project in March 1993 and executing sales
contracts in July 1993. Through March 31, 1997, 348 home sales had closed. In
addition, during fiscal year 1997, the Company and SHI mutually determined not
to jointly develop the Kula Lei project through this partnership as previously
contemplated.

The Company's Puueo I project is an 800-home master-planned community
located on 314 acres on the island of Hawaii, adjacent to the city of Hilo. The
County Council approved the Company's change of zone application to residential
and commercial, subject to certain water source verifications. The Company does
not anticipate any problems with providing such satisfactory assurances and is
proceeding with the preliminary planning for this residential development.

The Company's Kalihiwai Ridge II project on the island of Kauai is a rural
estate community in which the Company is currently offering homesites. For the
fiscal year ended March 31, 1997, two land parcel sales had closed at Kalihiwai
Ridge II.

The Company has also received entitlements for its Piihana project located
on 79 acres on the island of Maui near the Company's Iao Parkside project. The
Piihana project is located one mile northwest of the

2
<PAGE>
Wailuku business district at the base of the West Maui Mountains. The
entitlements allow for up to 600 residential units.

During fiscal year 1997, the Company completed the relocation of its
headquarters to the island of Maui from Honolulu, Hawaii.

The Company requires capital to plan projects, obtain entitlements, acquire
and develop land, construct homes, and for working capital. The Company intends
to fund its capital requirements through a combination of internally generated
funds, bank and other financing. The Company further intends to primarily rely
on bank financing for its home construction requirements. As a result, the
Company's business and earnings are substantially dependent on its ability to
obtain financing on acceptable terms. The Company also plans to seek additional
financing, a portion of the proceeds from which will be used to fund necessary
development work at its Kehalani master-planned community. No assurance can be
given that the Company will be able to obtain such financing or that any such
financing will be on terms acceptable to the Company.

For more than 20 years, the Company operated as the real estate development
and investment subsidiary of CBCL. In connection with the Company's initial
public offering of its Class A Common Stock (the "Initial Public Offering") in
December 1993, CBCL transferred to the Company CBCL's entire inventory of
entitled land, together with certain unentitled land, at historical cost, and
granted the Company an option to purchase up to approximately 1,982 additional
acres of unentitled land. The Company believes that the land transferred to it
by CBCL, together with the land subject to the option, constitute substantially
all of CBCL's real estate on which residential and commercial development are
feasible within the next 20 years.

The Company currently owns approximately 2,174 acres of entitled land in the
State of Hawaii, of which approximately 1,018 acres have the entitlements
necessary to build approximately 3,817 residential units and approximately 1,136
acres have entitlements for approximately 60 lots. In addition, the Company has
entitlements for approximately 20 acres designated for commercial use. Of the
Company's approximately 3,817 entitled residential units, approximately 2,697
are located on the island of Maui. Over the next several years, the Company
intends to seek entitlements for its unentitled land holdings of approximately
515 acres. The Company estimates that these unentitled land holdings could
represent up to approximately 900 additional residential units.

"Entitled" land has received all discretionary land use approvals necessary
for residential development from the appropriate state and county governments,
except for any required tract maps, subdivision approvals, and grading and
building permits. "Unentitled" land has not received all of such approvals.
"Entitled" units refers to residential units that are located on entitled land.

THE RESTRUCTURING

The Company was initially incorporated in the State of Hawaii in October
1970. In October 1994, the Company changed its state of incorporation from
Hawaii to Delaware. Prior to the Initial Public Offering in December 1993, the
Company was a wholly owned subsidiary of CBCL, which is a wholly owned
subsidiary of Buyco, Inc. ("Buyco"). Buyco is the common parent of an affiliated
group of corporations formed in connection with the acquisition of CBCL in 1986.
Pursuant to a restructuring and distribution (the "Restructuring"), which was
effected immediately prior to the consummation of the Company's Initial Public
Offering, all of the 5,750,000 outstanding shares of the Class B Common Stock of
the Company were distributed by CBCL to Buyco, which in turn distributed such
stock to its 74 stockholders on the basis of 1.08 shares of Company Class B
Common Stock for each share of Buyco common stock held.

As part of the Restructuring, CBCL and its subsidiaries transferred to the
Company CBCL's entire inventory of entitled land (approximately 731 acres) and
certain unentitled land (approximately 725 acres) at historical cost.
Furthermore, CBCL granted the Company an option to purchase up to approximately

3
<PAGE>
1,982 additional acres of currently unentitled land on the islands of Maui and
Hawaii at fair market value at the time of exercise of the option. See "--Land
Subject to Option/Right of First Refusal" and "--Relationship with C. Brewer and
Company, Limited." The Company believes that the entitled land and certain
unentitled land transferred to it by CBCL and the unentitled land subject to the
option together constitute substantially all of CBCL's real estate on which
residential and commercial development are feasible within the next 20 years
(based on the Company's estimate of the time necessary to obtain the required
entitlements and complete the necessary infrastructure for these land parcels).

Of the land transferred to the Company by CBCL, the transfer of
approximately 656 acres (principally comprising the Company's land on the island
of Maui) was effected as a contribution to capital. The transfer of the balance
of the land, consisting of approximately 800 acres on the island of Hawaii, was
effected as an exchange for approximately 11 acres of unentitled land located on
the island of Kauai and 18,130 acres of unentitled land located on the island of
Hawaii owned by the Company (on which land the Company believes residential and
commercial development are not feasible within the next 20 years based on the
Company's estimate of the time necessary to obtain the required entitlements and
complete the necessary infrastructure). The Company also transferred to CBCL all
of the capital stock of Kilauea Irrigation Co., Inc., a water irrigation
company.

In connection with the Restructuring, the Company and CBCL entered into a
number of agreements for the purpose of defining their ongoing relationship,
including certain tax and other indemnification arrangements. These agreements
were not the result of negotiations between independent parties. There can be no
assurance that each of such agreements is, or all of them taken as a whole are,
on terms comparable to those that would have resulted from negotiations between
unaffiliated parties. The ongoing relationship between the Company and CBCL,
including the amendment of any of the agreements between the Company and CBCL,
could result in conflicts of interest between the Company and CBCL. Such
conflicts of interest will be resolved by a committee of the Board of Directors
of the Company comprised of two directors who are not officers or employees of
the Company or any of its affiliates, including CBCL ("Outside Directors"), and
one employee-director. See "--Relationship with C. Brewer and Company, Limited."

Prior to the Restructuring, CBCL was indebted to The Prudential Insurance
Company of America ("Prudential") in the aggregate amount of approximately $54
million and, in addition, CBCL had a line of credit in the amount of $21.5
million with First Hawaiian Bank and SeaFirst Bank (together, the "Bank Group").
All of such debt was guaranteed by the Company. Subsequently, CBCL refinanced
the line of credit with First Hawaiian Bank as the sole lender. In connection
with the Restructuring, Prudential and the Bank Group agreed to release the
Company from all such guarantees. In connection with such release, the Company
issued an unsecured $25 million term note payable to CBCL (the "CBCL Note"). The
principal amount of the CBCL Note was determined as a result of negotiations
between the Company and CBCL and after consideration of a number of factors,
including the market value of the properties being transferred and the necessity
of pledging the CBCL Note to Prudential and First Hawaiian Bank in connection
with their release of the Company's guarantees. In September 1995, as a result
of obtaining new loan facilities, the Company paid off the remaining principal
balance of $19.3 million plus interest accrued and payable on the CBCL Note. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Financial Condition" and "Note 6 to Notes to
Financial Statements."

Buyco obtained a ruling from the Internal Revenue Service (the "IRS") that
the distribution of the shares of Class B Common Stock to the Buyco stockholders
as part of the Restructuring qualified as a tax-free "spin-off" under Section
355 of the Internal Revenue Code, and accordingly no taxable gain or loss was
recognized by the Company, Buyco or CBCL upon such distribution. The IRS ruling
does not cover all tax aspects of the Restructuring, and certain transactions
undertaken prior to or as part of the Restructuring could give rise to
substantial federal and state income taxes for CBCL and the Company. CBCL and
its affiliated companies (other than the Company) have agreed to indemnify the
Company against all such

4
<PAGE>
taxes, as well as against all taxes arising from operations of members of the
Buyco affiliated group (other than taxes arising from the Company's operations
during 1993 and after) and intercompany transactions between members of the
group prior to the Restructuring. To the extent that any taxes for periods
through the Restructuring are assessed against the Company, and CBCL and its
affiliated companies (other than the Company) are unable to satisfy their
indemnity obligations, there could be a material adverse effect on the Company.

THE HAWAII HOUSING MARKET

The Company presently conducts all of its business in the State of Hawaii,
primarily on the island of Maui and also on the islands of Kauai and Hawaii. In
addition, all of the Company's operations on Maui are concentrated in central
Maui. Although Hawaii was one of the country's fastest growing economies in the
late 1980s, the Company believes that the recessions in the United States,
particularly in California, and Japan have contributed to a slowdown in Hawaii's
economy during the 1990s. After adjusting for inflation, Hawaii's gross state
product grew 0.2% in each year from 1992 to 1994, and 0.5% in 1995, after having
grown by a total of 18.9% between 1986 and 1990. Estimated growth in gross state
product in 1996 has been reported at approximately 1.0%. The Company has
observed a reduction in the rate of new home sales since late 1993, which the
Company believes to be the result of increases in Hawaii unemployment rates and
the general lack of confidence in the Hawaii economy by prospective home buyers.
Any prolonged economic stagnation or downturn in Hawaii could have a material
adverse effect on the Company's business.

In addition, much of the land in the State of Hawaii, particularly on the
islands of Maui, Kauai and Hawaii, has historically not been supported by
adequate public infrastructure (e.g., roads, water utilities, sewage and
drainage facilities) necessary for residential development. As a result of the
high cost of providing infrastructure, developers face significant difficulty in
profitably pricing their homes. Infrastructure constraints also limit the speed
at which new housing could be constructed even if environmental and other land
use considerations could be resolved more quickly. For example, the availability
and cost of domestic water connection may pose a major limitation for developers
in certain areas of central Maui. Infrastructure construction is further
complicated by the terrain and climate of Hawaii, which may necessitate
extensive grading and constructing retaining walls and drainage systems to
control erosion. The total investment in infrastructure for a large residential
community in Hawaii can be substantial.

The Company's planned residential projects are long-term in duration. In
Hawaii it can take in excess of ten years from the decision to develop
unentitled land until the first home or homesite is sold, depending on the
nature of the governmental approval process, the project's size, the state of
the economy and the physical characteristics of the site. In addition, before
planned residential projects can generate any revenue, significant capital
expenditures and carrying costs are required for, among other things, compliance
with governmental land use and environmental requirements, land development and
installation of infrastructure.

The entitlement process for development of property in Hawaii is lengthy,
complex and costly, involving numerous state and county discretionary regulatory
approvals. Conversion of an unentitled parcel of land to residential zoning
usually requires the following approvals: adoption of or amendment to the County
Community Plan to reflect the desired general land use; approval by the State
Land Use Commission to reclassify the parcel to an urban designation; County
Council approval to rezone the property to the specific use desired; and, if the
parcel is located in the Coastal Zone Management area, the granting of a Special
Management Area Permit by the County Planning Commission. In obtaining the
necessary land entitlements at the state and county levels, the Company obtains
approvals from these authorities for related matters, including density,
provisions for affordable housing, roads, utilities and the dedication of
acreage for schools, parks and other purposes. County approval is typically
obtained after state approval. Subsequent to county approval of entitlements,
subdivision approvals and building permits must be obtained. The entitlement
process is complicated by the conditions, restrictions and exactions that

5
<PAGE>
are placed on these approvals, such as requirements for construction of
infrastructure improvements, payment of impact fees, restrictions on the
permitted uses of the land and provisions of affordable housing.

The County of Maui controls land use initially through a Community Plan
process prior to specific zoning designation. The Community Plan process results
in designations of general categories of land use--residential, commercial,
agricultural, resort, parks, etc. The Community Plan process involves approval
by a Citizens' Advisory Committee, the County Planning Commission and the County
Council. This entire process was approved in 1987, approximately eight years
after the process began. Maui County began the process of updating the present
Community Plan in 1992.

The development process for a planned residential project entails a range of
activities, including architectural design, civil engineering, grading raw land,
constructing public infrastructure such as streets, utilities and public
facilities, and finishing individual homesites. The Company intends to design
and control the construction and installation by contractors and subcontractors
of all infrastructure in its planned projects. As part of its planned projects,
the Company intends to contract with third parties to develop commercial zones,
public areas and recreational amenities, including shopping centers, schools,
libraries, community centers, parks and other essential facilities. The Company
believes that phased development of its projects will provide flexibility to
react to changing market conditions and to create stable and attractive
neighborhoods.

The climates and geology of Hawaii present certain risks of natural
disasters. In September 1992, Hurricane Iniki caused a delay in the construction
of roads and utilities at the Company's Kalihiwai Ridge project on the island of
Kauai as construction resources were directed to civil recovery projects for the
community. In addition, certain of the Company's projects are located on the
island of Hawaii, where the Kilauea volcano is currently active. To the extent
that hurricanes, severe storms, volcanoes or other natural disasters occur, the
Company's business may be adversely affected.

6
<PAGE>
SUMMARY OF CURRENT AND FUTURE PROJECTS

The following table presents information relating to the Company's projects
at March 31, 1997.

<TABLE>
<CAPTION>
ACTUAL OR HOMES
ANTICIPATED SUBJECT TO ESTIMATED
APPROXIMATE ESTIMATED DATE OF PENDING SALES PRICE
PRODUCT REMAINING REMAINING INITIAL CONTRACTS AT RANGE
LOCATION TYPE(1) ACRES UNITS CLOSINGS(S) 3/31/97(3) ($000S)
--------- ---------- ------------- ----------- ------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ENTITLED
Iao Parkside(4)......... Maui MF 8 132 1993 9 $ 118-160
Kehalani(5)
Kaimana............... Maui SF 18 112 1995 18 180-275
Halemalu.............. Maui SF 1 3 1995 -- 207-215
Nanea................. Maui SF 16 80 1998 -- 200-250
Commercial............ Maui P 20 -- -- -- --
Phase 2............... Maui MF/P 29 326 1998 -- 130-200
Phase 3............... Maui SF/MF/L 160 639 1998 -- 120-325
Phase 4............... Maui SF/MF/L 279 805 2000 -- 190-360
Piihana................. Maui SF/MF 79 600 2002 -- --
Kalihiwai Ridge II...... Kauai P 36 8 1991 -- 147-299
Kalihiwai Ridge III..... Kauai P 1,100 52 2001 -- --
Puueo I................. Hawaii SF/MF/L 314 800 1999 -- 85-350
Kulaimano............... Hawaii SF/MF/L 114 320 2002 -- --
----- ----- ---
Subtotal.............. 2,174 3,877 27
----- ----- ---
Untitled(6)
Puueo II(7)............. Hawaii SF/L 164 -- -- -- --
Wainaku(7).............. Hawaii SF/MF/L 121 -- -- -- --
Kaumana(8).............. Hawaii P 202 -- -- -- --
Iao II(9)............... Maui P 28 -- -- -- --
----- ----- ---
Subtotal.............. 515 -- --
----- ----- ---
Total................. 2,689 3,877 27
----- ----- ---
----- ----- ---
</TABLE>

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

(1) SF = Single-family units; MF = Multi-family units; P = Parcels; L=Lots.

(2) Calendar year. Anticipated closing dates are based upon the Company's
current planning estimates and forecasts.

(3) Refers to sales contracts that have not yet closed; because such contracts
are subject to numerous contingencies, no assurance can be given that they
will result in actual closings. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Deferred Revenue
and Backlog."

(4) Represents 100% of the project by Iao Partners, a joint venture partnership
(in which the Company has a 50% interest) between the Company and SHI.

(5) The Kehalani master-planned community includes approximately 127 acres
planned for schools, parks, and open space, including a community recreation
center.

(6) The land for these projects is not currently entitled for residential
development; therefore, estimates of price ranges are not currently
available. Because of the unentitled nature of this land and the uncertainty
as to when it may become available for residential development, the Company
considers this land as held for investment and not as part of its current
inventory.

7
<PAGE>
(7) The land for these projects is not currently entitled for residential
development. Based upon the Company's current planning estimates, the
unentitled land for the Puueo II and Wainaku projects could represent up to
approximately 900 residential units.

(8) This represents the Company's 55% undivided ownership of this 366-acre
parcel of land. The other 45% is owned by Mauna Kea Agribusiness Company,
Inc., a subsidiary of CBCL.

(9) The Company is currently contemplating the sale of its Iao II land.

LAND SUBJECT TO OPTION/RIGHT OF FIRST REFUSAL

The Company believes that its existing landholdings will provide sufficient
inventory to enable the Company to develop and sell land, and build and sell new
homes for more than ten years. The Company and CBCL entered into an Option/Right
of First Refusal Agreement which provides that, among other things, for 20 years
from the date of the Initial Public Offering, the Company will have the option
to purchase up to approximately 1,982 acres of currently unentitled land on the
islands of Maui and Hawaii from CBCL at fair market value at the time of
exercise of the option (less a discount of 3.5% representing customary selling
costs avoided by CBCL). See "--Relationship with C. Brewer and Company,
Limited."

To date, the Company has purchased 18 acres of land pursuant to the
Option/Right of First Refusal Agreement, which it has since resold. As of March
31, 1997, the property subject to the Option/Right of First Refusal Agreement is
described in the following table. All such land is unentitled.

<TABLE>
<CAPTION>
APPROXIMATE
PROPERTY LOCATION ACREAGE
- -------------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Waiolani II............................................................... Maui 56
Iao III................................................................... Maui 80
Wailuku II................................................................ Maui 512
Maalaea................................................................... Maui 261
Paukukalo................................................................. Maui 5
Papaikou Point............................................................ Hawaii 113
Kukui Point............................................................... Hawaii 102
Pepeekeo Point............................................................ Hawaii 812
Papaikou.................................................................. Hawaii 23
-----
Total................................................................... 1,964
-----
-----
</TABLE>

LAND SALES

From late 1993 through early 1997, the Company's business strategy was
focused primarily on the construction and sale of homes. In early 1997, the
Company expanded its business strategy to include the development and sale of
lots and parcels of land, which had been the Company's primary business strategy
prior to late 1993. Therefore, the Company may from time to time develop and/or
sell certain parcels of its land, including certain commercial sites. For
example, at the Company's Kehalani project, there are approximately 20 acres of
land zoned for commercial use, which the Company may develop or sell to third
parties. In addition, the Company is offering homesites for sale at its
Kalihiwai Ridge II project, and may sell its Kalihiwai Ridge III project as bulk
property to a third party.

RECENT COMMENCEMENT OF HOMEBUILDING ACTIVITIES; THE HOMEBUILDING INDUSTRY

8
<PAGE>
performance is not necessarily a meaningful indicator of future results. For
example, the Company's cost of property sales has increased substantially and
therefore its gross margin as a percentage of property sales has declined as
compared to periods prior to the commencement of homebuilding activities.

Historically, most sectors of the homebuilding industry have been cyclical
and have been significantly affected by changes in general economic conditions,
levels of consumer confidence and income, housing demand, interest rates,
unemployment rates, and the availability of financing. In addition, homebuilders
such as the Company are subject to various risks including competitive
overbuilding, environmental risks, cost overruns, lack of public infrastructure,
changes in government regulation, availability and cost of capital, and
increases in real estate taxes and other local government fees.

The Company is also subject to certain risks associated with the
availability and cost of materials and labor, delays in construction schedules
and cost overruns. For example, homebuilders nationwide have experienced
significant volatility in the cost of lumber, with lumber prices varying by as
much as 50% over a several month period. The Company's developments are also
susceptible to delays caused by strikes or other events involving construction
trade unions. Environmental regulations can also have an adverse impact on the
availability and price of certain raw materials such as lumber. In addition, the
Company's operations are susceptible to delays caused by weather disturbances,
international events affecting the shipping industry and the transportation of
building materials necessary for the Company's business, and other factors not
within a developer's control.

CONSTRUCTION

In the past, all construction activities for the Company were typically
performed by experienced general contractors who enter into fixed-price
contracts for the construction of infrastructure and homes for specific
residential developments. However, the Company currently anticipates that in the
future it will operate as its own general contractor for the construction of
homes at its residential developments. The general contractor manages the
construction process, coordinates the activities of all subcontractors,
suppliers and building inspectors, and follows plans prepared by consulting
architects and engineers who are retained by the Company and whose designs are
responsive to the local market conditions. Engineering, site preparation and
environmental impact analysis work is contracted to independent firms that are
familiar with local requirements.

The Company employs a number of individuals with experience in residential
development and homebuilding, including architectural design, construction,
marketing and finance. These skills are collectively applied toward each
development opportunity to arrive at a product that incorporates the
recommendations of key staff, as well as outside consultants. Company management
makes all significant product design and building decisions and monitors the
construction of each project relative to the budget, timing and quality
standards established by the Company. Homes under construction are inspected
regularly by employees and professional consultants to ensure product quality.

The Company employs contractors who have significant experience in
constructing infrastructure and building residential dwellings in Hawaii, and
who have production capability sufficient to meet the Company's needs. To
demonstrate financial capability, the Company requires that contractors be able
to provide performance and payment bonds from rated surety companies. Contracts
are either bid or negotiated, depending upon the circumstances.

Construction time for the Company's homes depends on the time of year,
availability of labor, materials and supplies and other factors. See "--
Government Regulation and Environmental Matters." Materials and supplies are
generally secured by independent contractors, subcontractors and suppliers from
customary trade sources. Construction time for multi-family homes generally
ranges from five to nine months, and construction time for detached
single-family homes generally ranges from two to four months.

The Company is not presently experiencing any serious labor or material
shortages. However, in the past, the Company has experienced delays in obtaining
the necessary material and labor to install steel

9
<PAGE>
framing systems at its Waiolani I project. The Hawaii residential construction
industry has experienced serious labor and material shortages, including lumber,
insulation, drywall, cement and carpenters. Delays in construction of homes due
to these shortages or to inclement weather conditions could have an adverse
effect upon the Company's homebuilding operations. In addition, the Company's
operations are susceptible to delays caused by strikes, weather disturbances and
international events affecting the shipping industry and the transportation of
building materials to Hawaii.

The Company generally provides a limited warranty of workmanship and
materials with respect to each of its homes. The Company typically requires
contractors to provide a one-year warranty on materials and workmanship, and to
convey any extended warranties with respect to structural components to the
homeowner. However, to the extent that warranty claims are not covered by the
Company's contractors or subcontractors, the Company has established an
allowance to cover warranty expenses. The Company's historical experience is
that such warranty expenses generally fall within the allowance established
although no assurance can be given that this will be the experience in the
future. At Waiolani I, the Company contracted its homebuilding work to qualified
contractors who provided the Company with a warranty so that any claims relating
to workmanship and materials will generally be the primary responsibility of the
Company's contractors.

PRODUCT LINES

The Company plans to offer a variety of product lines tailored to meet the
specific demands of the demographic and socio-economic markets it serves. These
products range from entitled land, to lot sales, to the sale of finished homes.
The Company also plans to sell or develop the commercial areas designated in
certain of its projects. The particular product line selected by the Company is
dependent on a number of factors, including the Company's analysis of market
demand, the cost of acquiring and developing the underlying parcels of land, the
size and category of housing generally available in the area, and the
demographic and economic characteristics of the specific market.

Home prices, design and styles for each project are determined based on the
Company's experience and market research to ensure that each product line is
tailored to meet consumer demands. The Company's current product offerings
principally target entry-level and first-time move-up buyers. The Company
believes that it is positioned to meet the changing needs of the market as a
result of its intent to construct homes and/or develop land for sale in
relatively small phases to meet current demand and through its ability to modify
its plans as marketing circumstances change.

The Company believes that providing amenities for new home communities
enhances the inherent value of the communities and the desirability of the
Company's homes in the market. These amenities are designed to create a
family-oriented environment and an enhanced lifestyle. By developing homes in
close proximity to schools, parks, shopping and community recreation centers,
the Company believes it offers home buyers uniquely attractive living
opportunities. In addition, features within the homes, including high-quality
finishes and fixtures, create an appealing living environment. In many of its
homes, the Company offers the home buyer attractive options such as appliances,
cabinet and flooring upgrades, air conditioning, outdoor lanais and greenhouse
windows.

MARKETING AND SALES

The Company employs professional marketing and sales personnel, and
maintains its own real estate brokerage operation. Marketing programs and
materials are developed with the assistance of consultants in graphics,
advertising, copyrighting and public relations. The Company advertises and
promotes its products in local print media, including newspapers, magazines and
radio.

The Company is using four model homes at Kaimana to promote this subdivision
at its Kehalani project. The Company sells its products both through its own
sales force and in conjunction with cooperating brokerages. The Company has
negotiated an exclusive sales arrangement with a broker for its

10
<PAGE>
Kalihiwai Ridge II project. The Company's joint venture partnership with SHI has
entered into an exclusive sales arrangement with respect to Iao Parkside.

The Company seeks to price its homes very competitively and to market its
homes in advance of construction, in an effort to minimize levels of unsold
inventory upon completion of a project. The Company accomplishes these pre-sales
by publishing a pre-sale advertisement and entering into
pre-construction sales contracts with the purchasers. The sales contracts
generally provide for requisite mortgage approval within a specified period, and
the Company attempts to minimize cancellations by requiring a cash deposit and
assessing the financial qualifications of potential home buyers. The Company's
sales contracts are typically subject to cancellation by the purchaser under
specified circumstances, such as the failure to obtain financing.

The Company believes that the rate of new home sales continues to be
negatively effected by a lack of confidence in Hawaii's economy by prospective
home buyers. If new home sales rates continue at their current levels or decline
further, the Company's financial results will be adversely affected. In response
to current market conditions, the Company has provided, and may provide in the
future, certain sales incentives to stimulate buyer interest. In addition, the
Company has continued to lower sales prices to encourage buyers to purchase
homes. As a result, the Company's gross margin as a percentage of sales on
residential homes has declined, and may decline in the future.

CUSTOMER FINANCING

Substantially all home buyers utilize long-term mortgage financing to
purchase their homes and lenders generally make loans only to borrowers who
satisfy such lender's income and other requirements. Although mortgage financing
for qualified home buyers is currently available, there can be no assurance that
mortgage financing will remain readily available to the Company's customers due
to general economic conditions, the restricted ability of banks and savings and
loan institutions to finance the purchase of homes by home buyers and other
factors. In particular, during periods of high interest rates, it is generally
more difficult for people to qualify for mortgage loans due to the higher
payments associated with higher interest rates. Moreover, restrictions on the
deductibility of mortgage interest for federal income tax purposes could
adversely affect the Company's operations.

The Company's Iao Parkside project meets applicable Federal Housing
Administration ("FHA") or Veterans Administration ("VA") requirements. In
addition, the portion of the Company's projects at Kehalani and Piihana that are
required to be "affordable," as well as any additional projects whose
entitlements require "affordable" housing, are also expected to meet applicable
FHA or VA requirements. FHA and VA financing generally enables home buyers to
purchase homes with lower down payments than the down payments required by
conventional mortgage lenders. The principal reasons why certain of the
Company's projects may not meet applicable FHA or VA requirements is that the
base price of homes in those projects exceeds established FHA or VA maximum home
prices. The Company believes that the availability of FHA and VA financing
broadens the group of potential purchasers for the Company's homes. Loans are
generally permitted for up to 90% to 97% of the value of the home. In addition,
FHA and VA financing have other suitability requirements similar to conventional
financing requirements.

The Company has, from time to time, provided medium-term mortgage financing
to its customers in conjunction with the sales of land and residential lots. The
Company generally requires a down payment of 20% to 25% of the sales price on a
Company-financed transaction for lots and land parcels. The Company reviews each
loan application on the merits of each applicant. Consideration is given to,
among other factors, the applicant's monthly debt payments-to-income ratio, the
applicant's liquid assets, net worth and credit payment history. The Company
currently offers mortgage financing to purchasers of lots at its Kalihiwai Ridge
II project and, on a limited basis, a second mortgage of up to 20% of the
selling price for certain homes at its Kehalani project. The Company may
continue to provide customer mortgage financing for future land and home sales.

11
<PAGE>
COMPETITION AND MARKET FACTORS

The land development and homebuilding industries are highly competitive. The
Company competes for desirable properties, financing, raw materials and skilled
labor. Moreover, the Company competes for land and residential sales with
numerous large and small developers, including some developers with greater
financial and other resources than the Company, government built or subsidized
housing units, individual resales of existing homes and condominiums, and
available rental housing. Competition for the acquisition of raw land is
particularly intense in Hawaii, largely due to the concentration of land
ownership and the limited supply of land available for development.

The real estate industry is cyclical and affected by consumer confidence
levels, prevailing economic conditions generally and by interest rate and
unemployment levels in particular. The Company believes that the general
slowdown in Hawaii's economy, including a recent increase in the unemployment
rate, has caused a decline in Hawaii's home sales rates, which has increased the
competition for home buyers among Hawaii's homebuilders. Various other factors
affect the housing industry and demand for new homes, including the availability
of labor and materials and increases in the costs thereof, changes in costs
associated with home ownership such as increases in property taxes and energy
costs, changes in consumer preferences, demographic trends and the availability
of and changes in mortgage financing programs.

The Company is one of the leading real estate developers in Hawaii and
believes it competes favorably as a result of its real estate development
expertise, its knowledge of the Hawaii real estate market and the local
government permitting and approval process.

HAWAII'S "AFFORDABLE" HOUSING REQUIREMENTS

Governmental agencies in Hawaii have implemented formal and informal
policies at both the state and county levels to increase the supply of low-and
moderate-income housing. As a condition to classifying land for urban
development, the Hawaii State Land Use Commission and the County Councils for
each county in Hawaii determine, on a project-by-project basis, requirements for
the provision by residential developers of "affordable" housing, most often at
the time of entitlement proceedings before those bodies. Generally, the State of
Hawaii requires developers of residential projects to offer for sale to eligible
buyers a portion (typically 50% to 60%) of the total number of units in the
project at prices that are affordable to buyers whose incomes range up to 140%
of the local median income. Counties in Hawaii support this policy and normally
impose requirements that may be more restrictive than that imposed by the state.
For purposes of determining whether a home is "affordable," the Hawaii State
Land Use Commission and the counties assess whether a purchaser is able to
satisfy certain specified mortgage criteria. Margins on "affordable" homes could
decline if interest rates rise, since affordable home price levels vary
inversely with interest rates.

Generally, homes sold under government-imposed price limitations must first
be offered to owner-occupants. If after 180 days such homes have not been
purchased by qualified purchasers or the state or county, they may then be sold
to any other purchaser at the affordable price. In addition, to ensure that
homes sold pursuant to "affordable" housing requirements remain "affordable" to
other eligible buyers and to prevent speculation, state and local governments
typically impose transfer restrictions on purchasers of "affordable" homes.
These restrictions generally provide that if a home is to be sold or transferred
within a one-to-ten-year period following its original sale, the government has
the option to purchase the home on a formula price basis.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

Changes in federal income tax laws and state and local property tax laws may
affect demand for new homes and therefore the value of developable real
property. In addition, various federal, state and local authorities regulate the
manner in which the Company conducts its sales activities and other dealings
with its customers. Approvals may be required for sales literature and contract
forms, among others. The

12
<PAGE>
Company is also subject to a number of laws imposing registration, filing and
disclosure requirements with respect to its residential developments. For
example, the Federal Consumer Credit Protection Act requires that, among other
things, certain disclosures be made to purchasers about finance charges in
credit transactions.

The Company is subject to local, state and federal statutes, ordinances,
rules and regulations protecting health and safety, archeological preservation
laws and environmental laws, including laws protecting endangered species. The
particular laws which apply to any given project vary greatly according to the
site, the site's environmental condition and the present and former uses of the
site. Environmental laws (i) may cause the Company to incur substantial
compliance, mitigation and other costs, (ii) may prohibit or severely restrict
development in certain environmentally sensitive areas, and (iii) may delay
completion of the Company's projects. Some of the properties held for
development by the Company were formerly sites of large agricultural operations,
which involved the use of pesticides and other agricultural chemicals. Although
environmental laws have not had a material adverse effect on the Company to
date, and management is not currently aware of any environmental compliance
issues that are expected to have a material adverse effect on the Company, no
assurance can be given that such laws will not have a material adverse effect on
the Company's operations in the future.

LAND ACQUISITION COSTS; RESTRICTIONS ON LAND USE AND DEVELOPMENT

Although the Company believes that its existing landholdings will provide
sufficient inventory to enable the Company to develop and sell land, and build
and sell new homes for more than ten years, the Company intends, on a selective
basis, to acquire additional land for residential development. Such additional
land, including land subject to the option granted to it by CBCL and acquired at
fair market value, will not have the same low cost as the Company's owned
property. Therefore, the Company's costs for new projects will be significantly
higher than for projects on currently owned land.

In addition, the Company is subject to local, state and federal statutes,
ordinances, rules and regulations affecting land use and building design.
Approximately 515 acres of the Company's existing supply of land and the
approximately 1,964 acres currently subject to the option granted to the Company
by CBCL are not fully entitled. Before developing any of its unentitled land,
the Company will be required to obtain a variety of regulatory approvals from
state and local governmental authorities relating to such matters as permitted
land uses and levels of density, the installation of utilities, and the
dedication of acreage for open space, parks, schools and other community
purposes. After these entitlements are granted, subdivision approvals and
building permits must be obtained. Changes in circumstances or in applicable law
may require amended or additional approvals. Based on the Company's experience,
it may take over ten years from the decision to develop unentitled land until
the delivery of a first home. The Company may incur substantial costs in
connection with the land use approval process. In addition to costs and fees
required in connection with various applications, counties may assess "impact
fees" based on governmental assessment of the effects of the Company's projects
on existing communities, including such things as infrastructure,
transportation, waste disposal, education and air quality. The Company is
subject to risks associated with changes in governmental regulations and
increases in property taxes and other governmental fees.

INSURANCE

CBCL has agreed to continue to provide the Company with insurance coverage
under CBCL's policies and self-insurance programs. The insurance provided by
CBCL includes property damage, builders' risks, general and automobile
liability, workers' compensation, blanket crime and fiduciary liability. The
Company may elect to obtain its own insurance coverage in the future and may, in
such event, terminate the insurance coverage from CBCL after giving proper
notice thereof. The Company is required to reimburse CBCL for the Company's
share of the premiums for such coverage.

13
<PAGE>
In addition, subsequent to Hurricane Iniki in September 1992, many of the
insurance companies doing business in Hawaii have restricted, curtailed or
suspended the issuance of homeowners' insurance policies on single-family and
multi-family homes. This has had the effect of both reducing the availability of
hurricane insurance and, in general, increasing the cost of such insurance.
Mortgage financing for a new home is conditioned on, among other things, the
availability of adequate homeowners' insurance. There can be no assurance that
homeowners' insurance will be available or affordable to prospective purchasers
of the Company's homes. Long-term restrictions on or unavailability of
homeowners' insurance could have a material adverse effect on the Company's
business.

TITLE TO PROPERTIES

The Company is currently unable to obtain policies of insurance assuring it
of good and marketable title to certain parcels of land acquired from CBCL in
the Restructuring. The Company believes that the defects in title arise from a
variety of causes, including, but not limited to, defects in documenting
transfers of the property, lack of paper title, lack of conveyance by co-owners
and missing probate records, most of which defects occurred in the late 1800s
and early 1900s. The Company believes that this condition exists with respect to
approximately one acre of its 79 acres of land at its Piihana project. Title to
a 50% undivided interest in approximately one acre out of its 28 acres at its
Iao II project is vested in another party, and the Company is in the process of
attempting to acquire that 50% undivided interest. As a result of title
uncertainties, the Company is sometimes unable to obtain insurance policies,
delivery of which is typically a condition to obtaining financing for a project.
In order to cure title defects and obtain appropriate title insurance, the
Company has initiated, or intends to initiate, legal actions to "quiet title"
such parcels in its name. The process of prosecuting actions to quiet title is
sometimes lengthy and could have the effect of delaying the Company's planned
development of particular projects. Although in the past the Company has been
able to resolve title defects satisfactorily through this legal process, no
assurance can be given that the Company will prevail in its current or intended
title actions or will otherwise be able to obtain insurable title to such
properties. Based upon currently available information, the Company believes
that none of these property title matters will have a material adverse effect on
its business.

RELATIONSHIP WITH C. BREWER AND COMPANY, LIMITED

The Company was initially incorporated in the State of Hawaii in October
1970. In October 1994, the Company changed its state of incorporation from
Hawaii to Delaware. Prior to the Initial Public Offering in December 1993, the
Company was a wholly owned subsidiary of CBCL, which is a wholly owned
subsidiary of Buyco. Buyco is the common parent of an affiliated group of
corporations formed in connection with the acquisition of CBCL in 1986.
Initially a trading company, in 1876 CBCL's business became principally focused
on the operation of sugar plantations and, over the subsequent years, CBCL
increased its landholdings to support this business. In the late 1970s and early
1980s, CBCL diversified into other businesses, including the growing, packaging
and marketing of macadamia nut, guava, and coffee products, as well as the
distribution of industrial products and services. CBCL was an independent,
publicly traded company listed on the New York Stock Exchange until 1978, when
it was acquired by International Utilities Corporation. In 1986, a group of
investors led by John W.A. Buyers, CBCL's Chairman and Chief Executive Officer,
formed Buyco, which completed a leveraged buyout of CBCL.

In connection with the Restructuring, the Company and CBCL entered into a
number of agreements for the purpose of defining their ongoing relationship.
These agreements were not the result of negotiations between independent
parties. There can be no assurance that each of such agreements is, or that all
of the agreements taken as a whole are, on terms comparable to those that would
have resulted from negotiations between unaffiliated parties. Additional or
modified agreements, arrangements and transactions may be entered into by the
Company and CBCL and its affiliates. Any such future agreements, arrangements
and transactions will be determined through negotiation among the Company, CBCL
and its

14
<PAGE>
affiliates, as the case may be, and it is possible that conflicts of interest
may arise. A committee of the Board of Directors of the Company comprised of two
Outside Directors and one employee-director will resolve such conflicts of
interest.

Set forth below are summaries of certain agreements, arrangements and
transactions among the Company, CBCL and certain of their affiliates. Copies of
such agreements are included as exhibits to the Company's Registration Statement
on Form S-1, and the following discussions with respect to such agreements are
qualified in their entirety by reference to the agreements as filed with the
Securities and Exchange Commission.

INTERCOMPANY AGREEMENT

Management Services. The Intercompany Agreement provides that CBCL will make
available to the Company, at the Company's request, various services to the
Company, including human resources and risk management. The Company will pay
CBCL monthly the fully burdened cost of such services, including where
appropriate, a reasonable allocation of the costs of data processing facilities,
wage and fringe benefit costs, and occupancy and material costs. In addition,
CBCL will be reimbursed for any out-of-pocket expenses incurred in connection
with providing the services, as well as for extraordinary services.

The agreement between the Company and CBCL regarding provision of services
renews automatically for one-year periods unless written notice of termination
by either party is received by the other party not less than 60 days prior to
the end of the applicable term. CBCL makes no representations or warranties with
respect to services provided under the Intercompany Agreement, except that CBCL
agrees to perform such services with the same degree of care, skill and prudence
customarily exercised in its own operations. CBCL will not be liable for any
losses or damages suffered in respect to services performed under the
Intercompany Agreement, other than losses or damages arising from CBCL's
intentional or negligent failure to perform or its negligence in the performance
of such services.

Access to Information. The Intercompany Agreement provides that each of CBCL
and the Company will be granted access to certain records and information in the
possession of the other party. The Intercompany Agreement generally requires
each party to retain all such information in its possession for three years
after the Restructuring occurs (other than tax returns and related documents,
which may be requested to be retained for a longer period), and thereafter to
give the other party prior notice of any planned disposition of such
information.

Insurance. The Intercompany Agreement requires CBCL to provide insurance
coverage to the Company under insurance policies issued to CBCL and CBCL's
self-insurance programs, and requires the Company to pay a premium for such
coverage, subject to renegotiation annually. The insurance includes property
damage, builders' risk, general and automobile liability, workers' compensation,
blanket crime and fiduciary liability. Risks not covered under such policies or
programs will be borne by the Company. Either party may terminate the insurance
coverage, in whole but not in part, upon 120 days' prior written notice. If the
Company terminates the insurance coverage, the Company will nonetheless be
obligated to pay the then current annual premium. If CBCL terminates the
insurance coverage, the Company will receive a pro-rata refund on the premium
paid. The Intercompany Agreement also provides for the allocation of proceeds
under existing insurance policies between CBCL and the Company after the
Restructuring and sets forth procedures for the administration of insured
claims.

Trademark License. Under the Intercompany Agreement, CBCL granted to the
Company in perpetuity (subject to the conditions described below) an exclusive
royalty-free right and license to use the trade name, trademark and service mark
"C. Brewer" as the distinctive portion of the Company's name and in connection
with the development and sale of residential real estate. The Company may
sublicense the trademark and may change the form and manner of the trademark, in
each case subject to the prior written approval of CBCL, which shall not be
unreasonably withheld. As a condition of the trademark license, the Company will
establish and maintain quality control standards, policies and procedures

15
<PAGE>
acceptable to CBCL. The trademark license may be terminated by CBCL only upon an
uncured material breach of the section of the Intercompany Agreement relating to
the trademark license or upon the insolvency or liquidation of the Company.

Taxes. The Intercompany Agreement provides that Buyco, CBCL and their
affiliated companies (other than the Company) will pay all federal and state
income taxes and other taxes accruing to the Buyco affiliated group of
corporations prior to the Restructuring and pay all taxes arising from the
Restructuring (including any taxes resulting from the transfer of assets to CBCL
and its affiliates pursuant to the Restructuring); provided that the Company
will pay all taxes associated with the Company's operations accruing during 1993
and thereafter and certain fees and conveyance taxes arising from the transfer
of assets from the Company to affiliates of CBCL as part of the Restructuring.

ASSET EXCHANGE AGREEMENT AND CONTRIBUTION AGREEMENT

Allocation of Assets and Liabilities. The Company, CBCL and certain of their
subsidiaries entered into an Asset Exchange Agreement (the "Asset Exchange
Agreement") and a Contribution Agreement (the "Contribution Agreement"), which
together provided for the principal corporate transactions required to effect
the Restructuring, including the transfer to the Company of CBCL's inventory of
entitled land and certain unentitled land at CBCL's historical cost basis, the
transfer by the Company to CBCL of certain unentitled, undeveloped land as well
as the stock of Kilauea Irrigation Co., Inc., and the allocation between the
Company and CBCL of certain liabilities. The Asset Exchange Agreement contains
representations by the parties thereto regarding each company's ownership of the
real property being transferred by it in connection with the Restructuring. The
Contribution Agreement contains representations by CBCL and certain of its
subsidiaries regarding their ownership of the real property being contributed by
them to the Company in connection with the Restructuring.

Subject to certain exceptions, these agreements provide for assumptions and
cross-indemnities designed to allocate financial responsibility for general
corporate liabilities. The liabilities assumed by the Company include (i)
certain liabilities specifically assumed by the Company arising out of or in
connection with the real property transferred by the Company to CBCL and (ii)
certain liabilities arising under the Securities Act of 1933, as amended.
Liabilities assumed by CBCL include liabilities primarily arising out of or in
connection with real property transferred to the Company by CBCL and to CBCL by
the Company in the Restructuring, including environmental liabilities and
liabilities for any deferred or rollback taxes with respect to such property.
Both the Asset Exchange Agreement and the Contribution Agreement include
procedures for notice and payment of indemnification claims and provide that a
party required to indemnify another party for a claim or suit brought by a third
party may elect to assume the defense of such claim. Any indemnification
payments will be adjusted to reflect the receipt of insurance proceeds and the
effect of federal, state and local taxes. In addition, (i) to the extent that
CBCL or any affiliate of CBCL defaults in the making of any indemnification
payments owed to the Company and such default is not cured, the Company may
offset against such defaulted amounts any payments owed by it to CBCL pursuant
to the Option/Right of First Refusal Agreement (as described below) at a rate of
$1.20 for every $1.00 of unpaid indemnification obligation and (ii) to the
extent that the Company defaults in the making of any indemnification payments
owed CBCL or any of its affiliates and such default is not cured, CBCL may
offset against such defaulted amounts any payments owed by it to the Company
pursuant to the Development and Management Services Agreement (as described
below) at a rate of $1.20 for every $1.00 of unpaid indemnification obligation.

Office Sublease. The Asset Exchange Agreement provides that CBCL will
sublease approximately 2,800 square feet of office space to the Company in
Honolulu. The aggregate rental expense for this property was approximately
$150,000 annually. The Company's rental obligations under this sublease
terminated in fiscal year 1997 in connection with the relocation of its
corporate headquarters to the island of Maui.

16
<PAGE>
DEVELOPMENT AND MANAGEMENT SERVICES AGREEMENT

The Company and CBCL entered into a Development and Management Services
Agreement (the "Development and Management Services Agreement") pursuant to
which the Company provides certain land entitlement, development (including
planning and engineering) and management services to CBCL. CBCL pays the Company
on a monthly basis the fully burdened cost of such services plus 30%. In
addition, the Company is reimbursed for the actual cost of any out-of-pocket
expenses incurred in connection with providing the services, as well as for
extraordinary services.

The Development and Management Services Agreement expired in December 1996.
The Company and CBCL have agreed to continue the provisions of this Agreement
through March 31, 1998.

OPTION/RIGHT OF FIRST REFUSAL AGREEMENT

The Company, CBCL and certain of their subsidiaries entered into an
Option/Right of First Refusal Agreement which provides that, among other things,
for 20 years from the date of the Initial Public Offering in December 1993, the
Company will have the option to purchase up to approximately 1,982 acres of
currently unentitled land in the State of Hawaii from CBCL at its fair market
value (less a discount of 3.5% representing customary selling costs avoided by
CBCL) at the time of exercise of the option. The Company will undertake an
appraisal of such property at the time of exercise of the option and will not be
required to purchase any property at a price above such appraisal (less a
discount of 3.5% representing customary selling costs avoided by CBCL). In the
event the Company and CBCL are unable to agree on a fair market value, the fair
market value will be determined by a three-party appraisal procedure set forth
in the Option/Right of First Refusal Agreement.

If, prior to the Company's exercise of the option, CBCL desires to sell such
property, the Company will have a right of first offer and a right of first
refusal prior to the sale of such property to a third party upon the same terms
as those available to a third party. Except pursuant to the Development and
Management Services Agreement, for a period of ten years from the date of the
Initial Public Offering, CBCL will be restricted from developing or causing to
be developed any of its properties for residential use. However, CBCL will
retain the right (i) to subdivide its properties, (ii) subject to the option and
right of first refusal, to sell its properties, and (iii) subject to the option
and right of first refusal, to hold direct and indirect interests in entities
that are engaged in planning or construction of such properties, provided that
neither CBCL nor any of its subsidiaries controls any such entity or is actively
involved in the development of such residential real estate. CBCL has agreed
that for a period of five years from the date of the Initial Public Offering, it
will not, without the consent of the Company's Outside Directors, take any steps
to entitle any property not subject to the option and right of first refusal. If
the Company's Outside Directors consent to such entitlement activities or if
such property is otherwise entitled, such property will then become subject to
the right of first refusal.

BONDS AND OTHER OBLIGATIONS

The Company is frequently required, in connection with the development of
its projects, to obtain performance, maintenance and other bonds. The amount of
these bonds outstanding at any time varies in accordance with the Company's
pending development activities. In the event any such obligations are drawn upon
because of the Company's failure to build required infrastructure, the Company
would be obligated to reimburse the issuing surety company or bank. At March 31,
1997, there were approximately $6.2 million in outstanding bonds for such
purposes.

17
<PAGE>
EMPLOYEES

At March 31, 1997, the Company employed 20 persons full time, of whom 15
were executive, accounting and administrative personnel (including eight project
management and land development personnel), and five were sales and marketing
personnel. Although none of the Company's employees are covered by collective
bargaining agreements, certain of the general contractors and subcontractors
that the Company engages are represented by labor unions or are subject to
collective bargaining arrangements. The Company believes that its relations with
its employees are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following are the names and respective ages as of March 31, 1997 of the
executive officers of the Company who are elected by and serve at the discretion
of the Board of Directors:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------
<S> <C> <C>
Seth A. Bakes................. 43 President and Chief Executive Officer

Edward T. Foley............... 45 Executive Vice President and Chief Financial
Officer

Rodney L. Gilliland........... 57 Senior Vice President, Residential Sales and
Marketing

B. Eben Dale.................. 51 Vice President, Hawaii Operations/Legal
</TABLE>

Seth A. Bakes has been President and Chief Executive Officer and a Director
of the Company since January 1997. From August 1995 to January 1997, he was
Managing Director of Del Amo Financial Center. From March 1986 to August 1995,
he was Vice President--Finance and then a Development Partner with Winger
Development Company, a California real estate developer. Mr. Bakes has a masters
degree in Business Administration from the Amos Tuck School of Business
Administration at Dartmouth College.

Edward T. Foley has been the Company's Executive Vice President and Chief
Financial Officer since January 1997. From April 1994 to December 1996, he was
Senior Vice President and Chief Financial Officer of the Company. From June 1990
to June 1993, he was Vice President and Corporate Controller of Castle & Cooke
Properties, Inc., a large real estate developer in Hawaii and California. From
June 1985 to June 1990, he was Assistant Corporate Controller of Dole Food
Company, Inc.

Rodney L. Gilliland has been the Company's Senior Vice President of
Residential Sales and Marketing since September 1995. From December 1994 to
August 1995, he was the Company's Vice President of Residential Sales and
Marketing. From August 1992 to December 1994, he consulted on residential
development projects in Indonesia and Las Vegas. From March 1986 to February
1992, he was Vice President of Sales and Marketing for the Arvida Company, a
California real estate developer. From 1977 to 1986, he was Vice President of
Sales and Marketing for Ponderosa Homes, a major homebuilding company in
California.

B. Eben Dale has been the Company's Vice President, Hawaii Operations/Legal
since August 1993. From August 1991 through July 1993, he was the Company's Vice
President, Ka'u Projects/Legal and from October 1989 to July 1991, he was
Manager, Ka'u Projects/Legal. From January 1987 through September 1989 he was
the Company's Manager, Legal and Property Control. From November 1984 to
December 1986, he was Staff Attorney and Manager, Property Planning and Control,
and from September 1982 to October 1984, he was Staff Attorney.

18
<PAGE>
ITEM 2. PROPERTIES.

The Company terminated a sublease with CBCL in fiscal year 1997 for
approximately 2,800 square feet of office space for its corporate headquarters
in Honolulu, Hawaii in connection with the relocation of 18 its headquarters to
the island of Maui. On the island of Maui, the Company rents 2,500 square feet
of office space pursuant to a lease with a subsidiary of CBCL which expires in
October 1997. On the island of Hawaii, the Company leases approximately 645
square feet. This lease will expire in January 1999. The Company believes that
the rent it pays to CBCL is no more favorable than that which would be paid to a
third party for comparable space.

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in routine litigation arising in the ordinary course
of business. Such matters, if decided adversely to the Company, would not, in
the opinion of management, have a material adverse effect on the financial
condition of the Company.

In November 1993, the Hawaii State Housing Finance and Development
Corporation ("HFDC") approved the preliminary selection of the Company as the
developer of a 530-home project located in Lahaina, Maui. In September 1994, the
Company began marketing the homes and received reservations for 75 of the first
83 homes being offered. However, just prior to the sale of the land to the
Company by the HFDC, litigation was commenced against HFDC on behalf of certain
native Hawaiian interests asserting claims to the land and seeking to recover
damages from the State of Hawaii. Although the Company is not a party to this
litigation, it is currently unable to proceed with the project, primarily due to
the HFDC's inability to convey clear title to the land to the Company in light
of the litigation. The Company is currently pursuing a claim for recovery from
the HFDC of costs expended by the Company for this project. However, at this
time the Company cannot reliably estimate the amount, if any, to be recovered.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY--HOLDERS.

No matters were submitted during the fourth quarter of fiscal year 1997 to a
vote of security-holders, through the solicitation of proxies or otherwise.

19
<PAGE>
PART II

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

PRICE RANGE OF CLASS A COMMON STOCK

The Company's Class A Common Stock has been quoted on the Nasdaq National
Market under the symbol "CBHI" since December 14, 1993. The following table
shows the high and low closing sales prices for the Class A Common Stock of the
Company for the periods indicated, as reported by the Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
----------- ---------
<S> <C> <C>
Quarter ended June 30, 1995....................................................................... 6 4 1/4
Quarter ended September 30, 1995.................................................................. 6 5/8 5
Quarter ended December 31, 1995................................................................... 6 1/8 3 3/4
Quarter ended March 31, 1996...................................................................... 4 7/8 3 5/8
Quarter ended June 30, 1996....................................................................... 4 1/2 2 3/4
Quarter ended September 30, 1996.................................................................. 3 1/2 2 3/4
Quarter ended December 31, 1996................................................................... 3 1/4 1 5/8
Quarter ended March 31, 1997...................................................................... 3 3/4 1 5/8
Quarter ended June 30, 1997 (through June 6, 1997)................................................ 2 3/4 2 1/4
</TABLE>

The closing sale price of the Company's Class A Common Stock as reported on
the Nasdaq National Market on June 6, 1997 was 2 3/8 per share. There is no
established public trading market for the Company's Class B Common Stock. As of
June 6, 1997, there were approximately 64 holders of record of the Company's
Class A Common Stock and approximately 96 holders of record of the Company's
Class B Common Stock.

DIVIDENDS

The Company has not declared or paid any cash dividends on its Class A
Common Stock or Class B Common Stock since the Initial Public Offering. The
Company anticipates that all earnings in the foreseeable future will be retained
to finance the continuing development of its business and does not anticipate
paying cash dividends on its Class A Common Stock or Class B Common Stock in the
foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, the success of the Company's business activities,
capital requirements, the general financial condition of the Company and general
business conditions.

RECENT SALES OF UNREGISTERED SECURITIES

Between January 1, 1997 and March 31, 1997, the Registrant issued the
following securities which were not registered under the Securities Act of 1933
(the "Securities Act"): the Registrant granted stock options to three of its
employees and non-employee directors under its 1993 Stock Option/Stock Issuance
Plan covering an aggregate of 65,000 shares of the Registrant's Class A Common
Stock, at exercise prices ranging from $2.0625 to $2.125 per share.

The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, or Regulation D promulgated thereunder,
or Rule 701 promulgated under Section 3(b) of the Securities Act, as
transactions by an issuer not involving any public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under Rule 701.

20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data of the Company are qualified by
reference to and should be read in conjunction with the financial statements,
related notes thereto and other financial data included elsewhere herein.
Through March 28, 1993, the Company's revenue had been derived from the
development and sale of lots and parcels of land and did not include
homebuilding activities. These historical results are not necessarily indicative
of the results to be expected in the future.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 28,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER COMMON SHARE)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME (LOSS) DATA
Property sales......................................... $ 14,907 $ 7,820 $ 17,066 $ 30,347 $ 14,422
Cost of property sales................................. 13,216 5,413 11,829 17,447 3,716
----------- ----------- ----------- ----------- -----------
Gross margin......................................... 1,691 2,407 5,237 12,900 10,706
General and administrative expenses.................... 2,681 2,926 3,304 2,610 2,689
Asset impairment loss.................................. 3,537 1,325 -- -- --
Relocation charge...................................... -- 700 -- -- --
----------- ----------- ----------- ----------- -----------
Operating income (loss).............................. (4,527) (2,544) 1,933 10,290 8,017
Equity in earnings of Iao Partners..................... 137 712 1,340 2,137 --
Interest income (expense)--net......................... (14) 135 (236) 42 298
Other income (expense)--net............................ (238) (691) (162) 106 96
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes (benefit).......... (4,642) (2,388) 2,875 12,575 8,411
Income taxes (benefit)............................... (1,671) (921) 1,120 4,865 3,196
----------- ----------- ----------- ----------- -----------
Net income (loss).................................... $ (2,971) $ (1,467) $ 1,755 $ 7,710 $ 5,215
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average number of common shares outstanding... 8,332 8,333 8,336
----------- ----------- -----------
----------- ----------- -----------
Earnings (loss) per common share....................... $ (0.36) $ (0.18) $ 0.21
----------- ----------- -----------
----------- ----------- -----------
PRO FORMA DATA(1)
Income before income taxes............................. $ 11,082
Income taxes........................................... 4,283
-----------
Net income............................................. $ 6,799
-----------
-----------
Weighted average number of common shares outstanding... 6,506
-----------
-----------
Pro forma earnings per common share.................... $ 1.05
-----------
-----------
BALANCE SHEET DATA
Real estate developments............................... $ 34,230 $ 36,606 $ 27,424 $ 15,352 $ 14,996
Total assets........................................... 39,925 45,925 49,293 47,576 19,954
Notes payable.......................................... 24,939 27,395 22,125 25,000 --
Stockholders' equity................................... 8,716 11,687 13,178 11,451 8,892
</TABLE>

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

(1) Pro forma to give effect to the Restructuring, including (i) the transfer by
CBCL to the Company of certain land suitable for residential development and
the transfer by the Company to CBCL of non-strategic unentitled land and
other assets, (ii) the assumption of $25 million of indebtedness from CBCL
evidenced by the CBCL Note, and (iii) the recognition of additional revenue
for development and management services provided to CBCL. See "Item 1.
Business--The Restructuring." Earnings per common share are not considered
relevant for the periods prior to the Restructuring in December 1993. For
purposes of the Pro Forma Data, calculations assume such transactions were
effected as of the beginning of the fiscal year ended March 31, 1994.

21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Except for the historical financial information contained herein, the
following discussion and analysis may contain "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
include declarations regarding the intent, belief or current expectations of the
Company and its management. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties. The Company's actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are: (i) variability in
quarterly operating results, (ii) risks associated with the concentration of the
Company's business in Hawaii, (iii) risks associated with the lack of adequate
public infrastructure in Hawaii, (iv) risks associated with the long-term nature
of planned residential projects, high capital investment and carrying costs, (v)
risks associated with the entitlement process for development of property in
Hawaii, (vi) risk of natural disasters, (vii) risks associated with the recent
commencement of homebuilding activities, (viii) risks associated with the
homebuilding industry, (ix) the rate of new home sales, (x) effects of interest
rate increases and the availability of mortgage financing, (xi) risks associated
with environmental and conservation matters, (xii) increased land acquisition
costs, (xiii) risks associated with competition, (xiv) restrictions on land use
and development, (xv) reduced availability of homeowners' insurance in Hawaii,
(xvi) risks associated with the inability to obtain policies of insurance
assuring the Company of good and marketable title to certain parcels of land,
(xvii) risks associated with obtaining performance, maintenance and other bonds,
(xviii) effects of increases in unemployment in Hawaii (xix) risks associated
with operating as a general contractor, and (xx) other risks identified from
time to time in the Company's reports and registration statements filed with the
Securities and Exchange Commission.

The following discussion of results of operations and financial condition
should be read in conjunction with the Selected Financial Data and the Financial
Statements and Notes thereto.

OVERVIEW

The Company, which was a subsidiary of CBCL before December 1993, had
historically performed the land entitlement, development and marketing functions
for CBCL. As such, before the quarter ended December 31, 1993, the Company's
revenue was derived from the sale of developed land, including sales of large
parcels and individual lots. From late 1993 through early 1997, the Company's
business strategy was focused primarily on the construction and sale of homes,
except for its Kalihiwai Ridge II project on the island of Kauai which included
the improvement and sale of large parcels suitable for homesites. In early 1997,
the Company expanded its business strategy to include the development and sale
of lots and parcels of land.

In fiscal year 1993, the Company sold approximately 28 acres of land to its
50% joint venture partner, Schuler Homes, Inc. ("SHI"), who subsequently
contributed this land to the partnership. As a result, the Company deferred 50%
of the revenue and costs relating to the sale. Through March 31, 1997, the
Company has recognized approximately $6.6 million of the deferred income from
this sale. The company is not required to fund the operation of Iao Partners
after its initial contribution of land. At March 31, 1997, the Company had
deferred income of approximately $1.0 million related to this sale that will be
recognized as home sales at the Iao Parkside project are closed.

During fiscal year 1997, the Company completed relocating its headquarters
to the island of Maui from Honolulu, Hawaii and, at the same time, completed
implementing a workforce reduction. As a result of such relocation and workforce
reduction, the Company recorded a pre-tax special charge of $700,000 in the
fourth quarter of fiscal year 1996.

22
<PAGE>
In addition, during the fourth quarter of fiscal year 1996, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that an impairment loss on long-lived assets be
recognized whenever events or circumstances indicate that the carrying amount of
such assets may not be recoverable. Pursuant to the adoption of SFAS No. 121,
the Company recognized an asset impairment loss of $1.3 million in fiscal year
1996 related to the Villages at Leiali'i project in Lahaina, Maui.

In fiscal year 1997, the Company determined that certain costs related to
the Kaimana subdivision of the Kehalani master-planned community would not be
recovered and, accordingly, recognized an asset impairment loss of $2.2 million.
In addition, the Company is contemplating the sale of its Iao II land. The
carrying cost of the Iao II land parcel has been reduced to the estimated sales
price, resulting in an asset impairment loss of $1.1 million. The Company also
recognized an asset impairment loss of $237,000 related to remnant costs
associated with certain developments.

Except as indicated above, the Company generally records a sale and
recognizes income when a closing occurs and title passes to the purchaser. To
the extent that the Company provides mortgage financing to a purchaser, minimum
down payment and continuing investment criteria required by generally accepted
accounting principles must be met before sales are recorded and income is
recognized. The Company currently offers mortgage financing only to purchasers
of lots at its Kalihiwai Ridge II and, on a limited basis, a second mortgage of
up to 20% of the selling price for certain homes at its Kehalani project. The
Company may continue to provide customer mortgage financing for future land and
home sales.

During fiscal year 1997, pursuant to a decree of foreclosure, the Company
reacquired certain property it had sold in fiscal year 1993 which was subject to
a mortgage note receivable. As a result, the Company reclassified approximately
$1.4 million from mortgage notes receivable to real estate developments in
fiscal year 1997.

RESULTS OF OPERATION

PROPERTY SALES. The Company's property sales consist of home sale closings
and land sales. The Company's revenue from property sales for the fiscal year
ended March 31, 1997 was $14.9 million compared to $7.8 million for the fiscal
year ended March 31, 1996. This increase was primarily the result of higher home
sale closings in fiscal year 1997 as compared to fiscal year 1996. At the
Kaimana at Kehalani subdivision on the island of Maui, the Company closed 36
single-family home sales at an average price of $240,000 in fiscal year 1997
compared to 22 home sale closings at an average price of $259,000 in fiscal year
1996. At the Halemalu at Kehalani subdivision, the Company closed 27 home sales
at an average price of $205,000 in fiscal year 1997 compared to no home sale
closings in the prior year. At Kalihiwai Ridge II on the island of Kauai, the
Company sold two land parcels for a total of $365,000 in fiscal year 1997
compared to two land parcel sales in fiscal year 1996 for a total of $340,000.
During fiscal year 1997, the Company recognized $300,000 compared to $500,000
recognized in the prior fiscal year related to the deferred gain on the land
sale to SHI, which property was subsequently contributed to the Iao Partners
50%-owned joint venture in fiscal year 1993. In addition, the Company had no
sales of land on the island of Hawaii in the 1997 fiscal year while 49 acres of
land on the island of Hawaii were sold in fiscal year 1996 for approximately
$1.0 million.

The Company's revenue from property sales for the fiscal year ended March
31, 1996 was $7.8 million compared to $17.1 million in the fiscal year ended
March 31, 1995. This decrease was the result of the Company closing the last
remaining home sale at its now completed Waiolani I project on the island of
Maui in fiscal year 1996 compared to 43 home sale closings at an average selling
price of $295,000 in fiscal year 1995. At the Kaimana at Kehalani project on the
island of Maui, the Company closed 22 single-family homes sales at an average
price of $259,000 in fiscal year 1996 compared to nine home sale closings at an
average price of $265,000 in fiscal year 1995. At Kalihiwai Ridge II on the
island of Kauai, the Company

23
<PAGE>
closed the sale of two land parcels for a total of $340,000 in fiscal year 1996
compared to one land parcel sale in fiscal year 1995 where the Company
recognized $922,000 in revenue. During fiscal year 1996, the Company recognized
$500,000 of revenue compared to $1.0 million recognized in the previous fiscal
year related to the deferred gain on the land sale to SHI, which property was
subsequently contributed to Iao Partners 50%-owned joint venture in fiscal year
1993. In addition, the Company sold 49 acres of land on the island of Hawaii in
fiscal year 1996 for approximately $1.0 million, while no such sales occurred in
fiscal year 1995.

COST OF PROPERTY SALES. Cost of property sales for fiscal year 1997 was
$13.2 million compared to $5.4 million in fiscal year 1996. The increase in cost
of property sales in fiscal year 1997 compared to fiscal year 1996 was
principally due to higher property sales. Cost of property sales as a percentage
of property sales increased from 69% in fiscal year 1996 to 89% in fiscal year
1997. This increase was primarily the result of lower home sales prices in
fiscal year 1997 compared to the previous fiscal year.

Cost of property sales for fiscal year 1996 decreased to $5.4 million
compared to $11.8 million in fiscal year 1995. The decrease in cost of property
sales in fiscal year 1996 compared to fiscal year 1995 was primarily
attributable to lower property sales. As a percentage of property sales, cost of
property sales was 69% in both fiscal years 1996 and 1995.

ASSET IMPAIRMENT LOSS. During the fourth quarter of fiscal year 1996, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." This accounting pronouncement requires that long-lived assets,
including homebuilding inventories, be reviewed for impairment and, if
circumstances indicate that the carrying amount of the asset may not be
recoverable, an impairment loss should be recognized.

In fiscal year 1997 the Company decided to lower the selling prices of units
at the Kaimana subdivision of the Kehalani development because of market
pressures. The Company determined that certain costs related to the Kaimana
subdivision of the Kehalani development would not be recovered and, accordingly,
recognized an asset impairment loss of $2.2 million based on the estimated
discounted cash flows for the project using the revised selling prices. In
addition, the Company is currently contemplating the sale of its Iao II land.
The carrying cost of the Iao II land parcel has been reduced to the estimated
sales price, resulting in an asset impairment loss of $1.1 million. The Company
also recognized an asset impairment loss of $237,000 related to remnant costs
associated with certain developments.

In November 1993, the Hawaii State Housing and Finance Development
Corporation ("HFDC") approved the preliminary selection of the Company as the
developer of Village I of the Villages at Leiali'i located in Lahaina, Maui. In
September 1994, the HFDC gave final approval to the terms of the financing and
development agreements. The Company then began marketing the homes and received
reservations for 75 of the first 83 homes being offered. However, just prior to
the sale of the land to the Company by HFDC, litigation was commenced against
the HFDC by the Office of Hawaiian Affairs and by certain other native Hawaiian
interests challenging the HFDC's right to sell the land and seeking, among other
things, an injunction preventing the sale of the land.

Although the Company is not a party to this litigation, it is currently
unable to proceed with the project, due to HFDC's inability to convey clear
title to the land. In April 1996, the Circuit Court of Hawaii denied a request
by HFDC for partial summary judgment, further delaying the project. In view of
the litigation and other facts and circumstances regarding the Leiali'i project,
the Company believes that the asset has been impaired as defined under SFAS 121
and, consequently, recognized an asset impairment loss, assuming no value to the
asset, of $1.3 million in fiscal year 1996.

The Company is pursuing a claim for the recovery from HFDC of costs expended
by the Company for Village I of the Villages at Leiali'i project, which
includes, but is not limited to, the costs written off as

24
<PAGE>
discussed above. The claim is based on the inability of the HFDC to convey clear
title to the Village I land to the Company. The Company cannot, at this time,
reliably estimate the amount, if any, to be recovered.

RELOCATION CHARGE. During the fourth quarter of fiscal year 1996, the
Company recorded a pre-tax special charge of $700,000 for costs related to the
relocation of the Company's headquarters from the island of Oahu to the island
of Maui and a related corporate workforce reduction.

GENERAL AND ADMINISTRATION EXPENSES. General and administrative expenses
declined from $2.9 million in fiscal year 1996 to $2.7 million in fiscal year
1997. General and administrative expenses include charges from CBCL for risk
management, employee benefits, human resources, office maintenance and other
services provided to the Company, offset by the Company's charges to CBCL for
certain land entitlement, development (including planning and engineering) and
management services. Net charges to CBCL for such services were approximately
$34,000 for fiscal year 1997 compared to approximately $500,000 for fiscal year
1996. The decrease was primarily due to management services provided to CBCL in
fiscal year 1996 by the Company for a specific land matter. No such service was
provided in fiscal year 1997.

General and administrative expenses for fiscal year 1996 declined 11% to
$2.9 million from $3.3 million in fiscal year 1995. The decrease in general and
administrative expenses in fiscal year 1996 as compared to fiscal year 1995 was
attributable to a reduction in the Company's management incentive compensation
and profit sharing costs.

EQUITY IN EARNINGS OF IAO PARTNERS. The Company and SHI entered into a
joint venture partnership agreement in October 1992 (which was subsequently
amended in October 1993), in connection with the acquisition by SHI of the Iao
Parkside property from the Company. SHI contributed the Iao Parkside property
and $25,000 to the joint venture partnership and the Company contributed
$25,000. Each partner has a 50% interest in the joint venture partnership, which
is engaged in the development and sale of 480 "affordable" multi-family
condominium homes on approximately 28 acres. The equity in earnings recognized
for this joint venture was $137,000 for the year ended March 31, 1997 compared
to $712,000 for the year ended March 31, 1996. The decrease represents the
Company's share of income from the closing of 36 multi-family home sales at the
Iao Parkside project in fiscal year 1997 compared to 60 multi-family home sales
closed in fiscal year 1996. To date, 348 home sales have been closed at the Iao
Parkside Project.

In fiscal year 1996, the Company recognized $712,000 in equity earnings
versus $1.3 million in fiscal year 1995 related to its 50% share of Iao
Partners. This represented the closing of 60 multi-family home sales in fiscal
year 1996 compared to 108 multi-family home sales closed in fiscal year 1995.

Because of declining demand for units at Iao Parkside and the resultant
decline in gross margins, Iao Partners continues to evaluate its marketing
strategy including selling prices and sales programs. Iao Partners is also
attempting to minimize its inventory of prebuilt inventory all in an effort to
improve financial results for Iao Partners.

INTEREST INCOME (EXPENSE)--NET. Interest income (expense)--net consists of
interest earned from the temporary investment of cash balances in
investment-grade, short-term, interest-bearing securities, and interest revenue
associated with purchase money mortgage notes owned by the Company, offset by
interest expense incurred which is not capitalized. Interest expense--net for
fiscal year 1997 was $14,000 compared to interest income--net of $135,000 in
fiscal year 1996. Interest expense--net for fiscal year 1997 declined over
fiscal year 1996 primarily as a result of lower interest income due to reduced
cash balances.

Interest income--net in fiscal year 1996 was $135,000 which compares to
interest expense--net of $236,000 in the fiscal year 1995. Interest income--net
for fiscal year 1996 was improved over fiscal 1995 primarily as a result of
increased construction activity at the Company's Kehalani project that resulted
in higher capitalization of interest costs.

25
<PAGE>
OTHER INCOME (EXPENSE)--NET. Other income (expense)--net consists of
miscellaneous income and expense items including certain marketing and
advertising expenses. Other income (expense)--net for fiscal year 1997 decreased
to $238,000 from $691,000 in the fiscal year 1996 primarily due to lower
marketing and advertising expenses.

Other income (expense)--net for fiscal year 1996 increased to $691,000 from
$162,000 in fiscal year 1995, principally the result of start-up marketing and
advertising expenses for the Company's Kehalani project incurred in fiscal year
1996.

DEFERRED REVENUE AND BACKLOG

The Company deferred 50% of the revenue from the land sold to SHI at its Iao
Parkside project. As of March 31, 1997, the Company had a total of $1.2 million
in deferred revenue that will be recognized as the homes in this project are
sold to the public.

At March 31, 1997, the Company's backlog subject to pending sales contracts
consisted of 27 homes with an aggregate sales value of $5.1 million. At
Kehalani, 18 homes were in backlog with an aggregate sales value of $3.9
million. At Iao Parkside, nine homes were in backlog with an aggregate sales
value of $1.2 million. The backlog at Iao Parkside represents 100% of the joint
venture's pending sales. The financial results of this joint venture partnership
are not consolidated into the Company's results but rather, are accounted for by
the equity method. Accordingly, the Company will not recognize the revenue from
such contracts, but will recognize 50% of the financial results of this joint
venture partnership. It is the Company's practice to include a sale in backlog
at the contract price upon execution of a pre-construction sales contract and
receipt of money on deposit. The Company's sales contracts are typically subject
to cancellation by the purchaser under specified circumstances such as the
failure to obtain financing. As a result, no assurances can be given that the
homes which presently comprise backlog will result in actual closings nor can
assurances be given as to when such closings may occur. In addition, the Company
believes that home sales rates at its projects continue to be adversely affected
by various factors, including uncertainty of prospective home buyers resulting
from a downturn in the Hawaiian economy.

LIQUIDITY AND FINANCIAL CONDITION

The Company requires capital to plan projects, obtain entitlements, acquire
and develop land, construct homes, and for working capital. Prior to the
Company's Restructuring and Initial Public Offering, the Company used internally
generated funds and funds from CBCL for working capital and development
purposes, including planning, entitling, engineering, site preparation,
construction of roads, water and sewer lines, as well as the construction and
marketing of its lots and parcels of land. In December 1993, the Company
consummated its Initial Public Offering of Class A Common Stock, which resulted
in net proceeds to the Company of $27.4 million.

In connection with the Restructuring and Initial Public Offering, the
Company issued a $25 million unsecured term note payable to CBCL that bore
interest at the rate of 9.32% per annum and was scheduled to mature in April
2003. During fiscal year 1996, the Company used a portion of the proceeds from a
new debt financing to pay off the outstanding balance of this note including
accrued but unpaid interest. See discussion below.

The Company has both short and long-term capital requirements, including
those relating to its Kehalani project. The Company intends to fund its capital
requirements through a combination of internally generated funds, and bank and
other financing. The Company further intends to primarily rely on bank financing
for its home construction requirements. As a result, the Company's business and
earnings are substantially dependent on its ability to obtain financing on
acceptable terms. The Company also plans to seek additional financing, a portion
of the proceeds from which will be used to fund necessary development work at
its Kehalani master-planned community. No assurance can be given that the

26
<PAGE>
Company will be able to obtain such financing or that any such financing will be
on terms acceptable to the Company.

On August 31, 1995, the Company entered into two secured revolving loan
agreements (an infrastructure loan agreement and a building loan agreement) with
the Bank of Hawaii and City Bank ("Lenders") that provide for a maximum
outstanding balance of $35 million and which were scheduled to expire in
September 1998. On September 5, 1996, the Company entered into two modification
agreements with the Lenders which amended the terms and conditions of the
existing revolving loan facilities to allow advances not to exceed an aggregate
of $4 million for working capital purposes. Under the infrastructure loan
modification agreement, the working capital advance shall not exceed $1.5
million with interest accruing at the Bank of Hawaii's base rate plus one-half
(0.5) percentage point with infrastructure loan advances accruing interest at
the base rate plus one (1.0) percentage point. Under the building loan
modification agreement, the working capital advance shall not exceed $2.5
million with interest accruing on both the working capital and the construction
advances at Bank of Hawaii's base rate plus one half (0.5) percentage point. The
infrastructure loan and building loan agreements were also amended to require
the Company to remit to the Lenders 100% of the net proceeds from the sale of
each home sold at the Company's Kehalani project. In addition to the collateral
already held by the Lenders, CBCL delivered a guaranty of payment for the
Company's indebtedness related to the working capital advances. Such guaranty by
CBCL is secured by a first mortgage lien on the Company's Kalihiwai Ridge III
property located on the island of Kauai.

Originally, all advances made under both loan modification agreements for
working capital purposes together will all accrued and unpaid interest were due
and payable in full on April 30, 1997. However, the Company has recently
received and accepted a commitment letter from the Lenders pursuant to which the
Lenders have agreed to amend the terms and conditions of the existing revolving
loan facilities, including an amendment to allow advances for working capital
purposes of up to $6 million. The Company has accepted the terms and conditions
as outlined in the commitment letter, which also provides that (i) the Company
must obtain a guaranty of payment from CBCL for the Company's indebtedness
related to the working capital advances, (ii) the Company must deliver a first
mortgage on its Puueo I and II properties on the island of Hawaii, in addition
to a first mortgage already held by the Lenders on the Company's Kehalani
property, as collateral to secure all of the loan facilities and, (iii) all
outstanding indebtedness related to the loan facilities will be due and payable
on May 31, 1998. The Company believes that such an amendment to the existing
loan facilities is necessary for the Company to meet its working capital
requirements through fiscal year 1998. In addition, the Company is also seeking
to generate additional funds through sales of certain land parcels. Moreover,
the Company anticipates that it will require additional long-term financing to
further develop its projects. The Company is continuing its ongoing efforts to
obtain such long-term financing. Failure to obtain such working capital facility
and long-term financing would have a material adverse effect on the Company's
business.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is required to be implemented for financial
statements for periods after December 15, 1997, including interim periods;
earlier application is not permitted. The Company does not anticipate the
adoption of SFAS No. 128 will have a material effect on its earnings (loss) per
common share.

INFLATION

The Company may be adversely affected during periods of high inflation
primarily because of the impact of higher interest rates, which may
significantly affect the ability of customers to obtain permanent mortgage
financing. In addition, inflation also increase the Company's construction and
financing costs. Price increases for affordable homes are based on annual
increases, if any, in local median income levels. In the last three years,
inflation has not had a material effect on the Company.

27
<PAGE>
CERTAIN FACTORS THAT MIGHT AFFECT FUTURE OPERATING RESULTS

In addition to other information in this Annual Report on Form 10-K, the
following are important factors that should be considered in evaluating the
Company and its business.

The Company presently conducts all of its business in the State of Hawaii,
primarily on the island of Maui but also on the islands of Kauai and Hawaii. In
addition, all of the Company's Maui operations are concentrated in central Maui.
Although Hawaii was one of the country's fastest growing economies in the late
1980s, the Company believes that the recessions in the United States,
particularly in California, and Japan have contributed to a slowdown in Hawaii's
economy during the 1990s. After adjusting for inflation, Hawaii's gross state
product grew 0.2% in each year from 1992 to 1994, and 0.5% in 1995, after having
grown by a total of 18.9% between 1986 and 1990. Estimated growth in gross state
product in 1996 has been reported at approximately 1.0%. The Company has
observed a reduction in the rate of new home sales since late 1993, which the
Company believes to be the result of increases in Hawaii unemployment rates and
the general lack of confidence in the Hawaii economy by prospective home buyers.
Any prolonged economic stagnation or downturn in Hawaii could have a material
adverse effect on the Company's business.

The Company has experienced, and expects to continue to experience,
variability in revenue and net income on a quarterly basis. Many factors
contribute to this variability including: (i) the timing of home closings and
land sales; (ii) the condition of the real estate markets and the economy in
general in Hawaii; (iii) the cyclical nature of the homebuilding industry and
changes in prevailing interest rates; (iv) costs of materials and labor; (v) the
availability and cost of capital; (vi) delays in construction schedules caused
by the timing of inspections and approvals by regulatory agencies including
zoning approvals and receipt of entitlements; the completion of necessary public
infrastructure, the timing of utility hookups, and adverse weather. Any
increases in home mortgage interest and local unemployment rates may also
adversely affect future demand for the Company's homes. This variability may
cause the Company's overall results of operations to fluctuate significantly on
a quarter-to-quarter basis and revenues anticipated to occur in a fiscal quarter
may not be earned until subsequent fiscal quarters.

In addition, much of the land in the State of Hawaii, particularly on the
islands of Maui, Kauai and Hawaii, has historically not been supported by
adequate public infrastructure (e.g., roads, water utilities, sewage and
drainage facilities) necessary for residential development. As a result of the
high cost of providing infrastructure, developers face significant difficulty in
profitably pricing their homes. Infrastructure constraints also limit the speed
at which new housing can be constructed even if environmental and other land use
considerations can be resolved more quickly. For example, the availability and
cost of domestic water connection may pose a major limitation for developers in
certain areas of central Maui. Infrastructure construction is further
complicated by the terrain and climate of Hawaii, which may necessitate
extensive grading and constructing retaining walls and drainage systems to
control erosion. The total investment in infrastructure for a large residential
community in Hawaii can be substantial.

28
<PAGE>
property to the specific use desired; and, if the parcel is located in the
Coastal Zone Management area, the granting of a Special Management Area Permit
by the County Planning Commission. In obtaining the necessary land entitlements
at the state and county levels, the Company obtains approvals from these
authorities for related matters, including density, provisions for affordable
housing, roads, utilities and the dedication of acreage for schools, parks and
other purposes. County approval is typically obtained after state approval.
Subsequent to county approval of entitlements, subdivision approvals and
building permits must be obtained. The entitlement process is complicated by the
conditions, restrictions and exactions that are placed on these approvals, such
as requirements for construction of infrastructure improvements, payment of
impact fees, restrictions on the permitted uses of the land and provisions of
affordable housing.

Although the Company has been holding, entitling, developing, marketing and
selling land for over 20 years, it has only been building homes since late 1993
and, to date, has closed a total of 558 home sales. As a result, the Company is
subject to the risks inherent in establishing a new line of business. Because
the Company has only recently commenced homebuilding operations, the Company's
historical financial performance is not necessarily a meaningful indicator of
future results. For example, the Company's cost of property sales as a
percentage of property sales has increased substantially and therefore its gross
margin has declined as compared to periods prior to the commencement of
homebuilding activities.

Historically, most sectors of the homebuilding industry have been cyclical
and have been significantly affected by changes in general economic conditions,
levels of consumer confidence and income, housing demand, interest rates and the
availability of financing. In addition, homebuilders such as the Company are
subject to various risks including competitive overbuilding, environmental
risks, cost overruns, lack of public infrastructure, changes in government
regulation, availability and cost of capital, and increases in real estate taxes
and other local government fees.

In the past, the Company has experienced delays in obtaining the necessary
material and labor to install steel framing systems at its Waiolani I project.
The Hawaii residential construction industry has experienced serious labor and
material shortages, including lumber, insulation, drywall, cement and
carpenters. Delays in construction of homes due to these shortages or to
inclement weather conditions could have an adverse effect upon the Company's
homebuilding operations. In addition, the Company's operations are susceptible
to delays caused by strikes, weather disturbances and international events
affecting the shipping industry and the transportation of building materials to
Hawaii.

The rate of new home sales in fiscal year 1997 was higher than the rate of
new home sales experienced in fiscal year 1996, which the Company believes to be
the result of substantially reduced home sales prices. If new home sales rates
continue at their current levels or decline further, the Company's financial
results will be adversely affected. In response to current market conditions,
the Company has provided, and may

29
<PAGE>
provide in the future, certain sales incentives to encourage buyer interest. As
a result, the Company's gross margin as a percentage of sales on residential
homes has declined, and may decline in the future.

Substantially all home buyers utilize long-term mortgage financing to
purchase their homes and lenders generally make loans only to borrowers who
satisfy the lenders' income and other requirements. Although mortgage financing
for qualified home buyers is currently available, there can be no assurance that
mortgage financing will remain readily available to the Company's customers due
to general economic conditions, the restricted ability of banks and savings and
loan institutions to finance the purchase of homes by home buyers and other
factors. In particular, during periods of high interest rates, it is generally
more difficult for people to qualify for mortgage loans due to the higher
payments associated with higher interest rates. Moreover, restrictions on the
deductibility of mortgage interest for federal income tax purposes could
adversely affect the Company's operations.

The Company is subject to local, state and federal statutes, ordinances,
rules and regulations protecting health and safety, archeological preservation
laws and environmental laws, including laws protecting endangered species. The
particular laws which apply to any given project vary greatly according to the
site, the site's environmental condition and the present and former uses of the
site. Environmental laws (i) may cause the Company to incur substantial
compliance, mitigation and other costs, (ii) may prohibit or severely restrict
development in certain environmentally sensitive areas, and (iii) may delay
completion of the Company's projects. Some of the properties held for
development by the Company were formerly sites of large agricultural operations,
which involved the use of pesticides and other agricultural chemicals. No
assurance can be given that such laws will not have a material adverse effect on
the Company's operations in the future.

The Company is subject to local, state and federal statutes, ordinances,
rules and regulations affecting land use and building design. Approximately 515
acres of the Company's existing supply of land and approximately 1,964 acres
currently subject to the option granted to the Company by CBCL are not fully
entitled. Before developing any of its unentitled land, the Company will be
required to obtain a variety of regulatory approvals from state and local
governmental authorities relating to such matters as permitted land uses and
levels of density, the installation of utilities, and the dedication of acreage
for open space,

30
<PAGE>
parks, schools and other community purposes. After these entitlements are
granted, subdivision approvals and building permits must be obtained. Changes in
circumstances or in applicable law may require amended or additional approvals.
Based on the Company's experience, it may take over ten years from the decision
to develop unentitled land until the delivery of a first home. The Company may
incur substantial costs in connection with the land use approval process. In
addition to costs and fees required in connection with various applications,
counties may assess "impact fees" based on governmental assessment of the
effects of the Company's projects on existing communities, including such things
as infrastructure, transportation, waste disposal, education and air quality.
The Company is subject to risks associated with changes in governmental
regulations and increases in property taxes and other governmental fees.

Subsequent to Hurricane Iniki in September 1992, many of the insurance
companies doing business in Hawaii have restricted, curtailed or suspended the
issuance of homeowners' insurance policies on single-family and multi-family
homes. This has had the effect of both reducing the availability of hurricane
insurance and, in general, increasing the cost of such insurance. Mortgage
financing for a new home is conditioned on, among other things, the availability
of adequate homeowners' insurance. There can be no assurance that homeowners'
insurance will be available or affordable to prospective purchasers of the
Company's homes. Long-term restrictions on or unavailability of homeowners'
insurance could have a material adverse effect on the Company's business.

The Company is currently unable to obtain policies of insurance assuring it
of good and marketable title to certain parcels of land. The Company believes
that the defects in title arise from a variety of causes, including, but not
limited to, defects in documenting transfers of the property, lack of paper
title, lack of conveyance by co-owners and missing probate records, most of
which defects occurred in the late 1800s and early 1900s. The Company believes
that this condition exists with respect to approximately one acre of its 79
acres of land at its Piihana project. Title to a 50% undivided interest in
approximately one acre out of its 28 acres at its Iao II project is vested in
another party, and the Company is in the process of attempting to acquire that
50% undivided interest. As a result of title uncertainties, the Company is
sometimes unable to obtain insurance policies, delivery of which is typically a
condition to obtaining financing for a project. In order to cure title defects
and obtain appropriate title insurance, the Company has initiated, or intends to
initiate, legal actions to "quiet title" such parcels in its name. The process
of prosecuting actions to quiet title is sometimes lengthy and could have the
effect of delaying the Company's planned development of particular projects. No
assurance can be given that the Company will prevail in its current or intended
title actions or will otherwise be able to obtain insurable title to such
properties.

The Company is frequently required, in connection with the development of
its projects, to obtain performance, maintenance and other bonds. The amount of
these bonds outstanding at any time varies in accordance with the Company's
pending development activities. In the event any such obligations are drawn upon
because of the Company's failure to build required infrastructure, the Company
would be obligated to reimburse the issuing surety company or bank, which could
have a material adverse effect on the Company's financial statements.

31
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants......................................................................... 33
Statements of Income (Loss) for the years ended March 31, 1997, March 31, 1996 and March 31, 1995......... 34
Balance Sheets as of March 31, 1997 and March 31, 1996.................................................... 35
Statements of Cash Flow for the years ended March 31, 1997, March 31, 1996 and March 31, 1995............. 36
Notes to Financial Statements............................................................................. 37-48
</TABLE>

32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE STOCKHOLDERS OF C. BREWER HOMES, INC.

We have audited the financial statements and the financial statement
schedules of C. Brewer Homes, Inc. as listed in Item 14(a) of this Form 10-K.
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of C. Brewer Homes, Inc. as of
March 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1997 in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.

COOPERS & LYBRAND L.L.P.

Honolulu, Hawaii
June 30, 1997

33
<PAGE>
C. BREWER HOMES, INC.

STATEMENTS OF INCOME (LOSS)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Property Sale.................................................................... $ 14,907 $ 7,820 $ 17,066
Cost of property sales........................................................... 13,216 5,413 11,829
--------- --------- ---------
Gross margin................................................................... 1,691 2,407 5,237
General and administrative expenses.............................................. 2,681 2,926 3,304
Asset impairment loss............................................................ 3,537 1,325 --
Relocation charge................................................................ -- 700 --
--------- --------- ---------
Operating income (loss)........................................................ (4,527) (2,544) 1,933
Equity in earnings of Iao Partners............................................... 137 712 1,340
Interest income (expense)--net................................................... (14) 135 (236)
Other income (expense)--net...................................................... (238) (691) (162)
--------- --------- ---------
Income (loss) before income taxes (benefit).................................... (4,642) (2,388) 2,875
Income taxes (benefit)......................................................... (1,671) (921) 1,120
--------- --------- ---------
Net income (loss).............................................................. $ (2,971) $ (1,467) $ 1,755
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per common share................................................. $ (0.36) $ (0.18) $ 0.21
--------- --------- ---------
--------- --------- ---------
Weighted average number of common shares outstanding............................. 8,332 8,333 8,336
--------- --------- ---------
--------- --------- ---------
</TABLE>

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

34
<PAGE>
C. BREWER HOMES, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................................................. $ 147 $ 3,080
Mortgage notes receivable................................................................. 794 2,636
Real estate developments.................................................................. 34,230 36,606
Investment in Iao Partners, net of deferred land gain..................................... 3,347 2,936
Property and equipment--net............................................................... 172 162
Income taxes receivable................................................................... 856 75
Other assets.............................................................................. 379 430
---------- ----------
Total assets............................................................................ $ 39,925 $ 45,925
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Notes payable to banks.................................................................... $ 24,939 $ 27,395
Accounts payable.......................................................................... 469 702
Accrued expenses.......................................................................... 3,821 3,777
Deferred income taxes..................................................................... 1,761 2,181
Other liabilities......................................................................... 219 183
---------- ----------
Total liabilities....................................................................... 31,209 34,238
---------- ----------
---------- ----------
Commitments and contingencies
Stockholders' equity
Class A Common Stock, $.01 par value, one vote per share, 3,087,200 shares issued and
outstanding at March 31, 1997 and 2,700,173 shares issued and outstanding at March 31,
1996.................................................................................. 31 27
Class B Common Stock, $.01 par value, three votes per share, 5,248,800 shares issued and
outstanding at March 31, 1997 and 5,635,827 shares issued and outstanding at March 31,
1996.................................................................................. 53 57
Additional paid-in capital................................................................ 27,370 27,370
Retained deficit.......................................................................... (18,714) (15,743)
Treasury stock, at cost, 4,335 shares..................................................... (24) (24)
---------- ----------
Total stockholders' equity................................................................ 8,716 11,687
---------- ----------
Total liabilities and stockholders' equity.............................................. $ 39,925 $ 45,925
---------- ----------
---------- ----------
</TABLE>

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

35
<PAGE>
C. BREWER HOMES, INC.

STATEMENTS OF CASH FLOW

(IN THOUSANDS)

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities
Net income (loss)........................................................... $ (2,971) $ (1,467) $ 1,755
Adjustments to net income (loss)
Depreciation.............................................................. 60 49 24
Deferred income taxes..................................................... (420) (485) 307
Equity in earnings of Iao Partners........................................ (137) (712) (1,340)
Amortization of deferred land gain........................................ (274) (458) (823)
Changes in operating assets and liabilities
Mortgage notes receivable................................................. 1,842 (63) 476
Real estate developments.................................................. 2,376 (9,182) (12,036)
Income taxes receivable................................................... (781) (75) --
Other assets.............................................................. 51 744 251
Accounts payable.......................................................... (233) (6,199) 4,769
Income taxes payable...................................................... -- (167) (1,358)
Accrued expenses.......................................................... 44 473 363
Other liabilities......................................................... 36 (769) (819)
---------- ---------- ----------
Cash flow used in operating activities.................................... (407) (18,311) (8,431)
---------- ---------- ----------
Investing activities
Capital expenditures........................................................ (70) (45) (208)
Other....................................................................... -- 11 10
---------- ---------- ----------
Cash flow used in investing activities.................................... (70) ( 34) (198)
---------- ---------- ----------
Financing activities
Loan proceeds............................................................... 11,306 32,714 --
Loan payments............................................................... (13,762) (27,444) (2,875)
Capital distributions to C. Brewer and Company, Ltd. Limited................ -- -- (28)
Purchase of treasury stock.................................................. -- (24) --
---------- ---------- ----------
Cash flow from (used in) financing activities............................. (2,456) 5,246 (2,903)
---------- ---------- ----------
Decrease in cash and cash equivalents......................................... (2,933) (13,099) (11,532)
Cash and cash equivalents at beginning of year................................ 3,080 16,179 27,711
---------- ---------- ----------
Cash and cash equivalents at end of year...................................... $ 147 $ 3,080 $ 16,179
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

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

36
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS

1. OPERATING, BASIS OF OPERATING AND RESTRUCTURING

C. Brewer Homes, Inc. (the "Company") is a land developer and homebuilder in
the State of Hawaii with operations on the islands of Maui, Kauai and Hawaii.

In December 1993, the Company completed an initial public offering ("IPO")
of 2,586,000 shares of its Class A Common Stock resulting in proceeds to the
Company, after deducting commissions and offering expenses, of $27.4 million.

Before the IPO, the Company was a wholly owned subsidiary of C. Brewer and
Company, Limited ("CBCL"), a wholly owned subsidiary of Buyco, Inc. ("Buyco").
Pursuant to a restructuring in connection with the IPO, all of the Company's
5,750,000 outstanding shares of Class B Common Stock were distributed by CBCL to
Buyco, which in turn distributed such stock to its stockholders on a pro-rata
basis. In connection with the restructuring of the Company in December 1993,
CBCL transferred to the Company its inventory of entitled land and granted the
Company an option to purchase up to approximately 1,982 additional acres of
unentitled land. The Company transferred to CBCL certain unentitled land,
undeveloped land and all of the stock of a water irrigation company on the
island of Kauai. The Company recognized the acquisition of such land at CBCL's
cost basis. Additionally, as part of the restructuring, the Company issued an
unsecured $25 million term note payable to CBCL.

In connection with the restructuring, the Company entered into various
agreements with CBCL defining their ongoing relationship, including a
Contribution Agreement, an Intercompany Agreement, a Development and Management
Service Agreement, an Asset Exchange Agreement and an Option/Right of First
Refusal Agreement.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include time deposits with maturities of less than
three months at time of purchase.

REAL ESTATE DEVELOPMENTS

Real estate developments are stated at cost and include undeveloped land,
partially improved land, finished lot and home construction costs. Costs are
amortized to cost of property sales as closings occur. Costs are allocated under
the relative sales value method, the specific identification method or the area
method, where deemed appropriate by the nature of the costs and/or the project.

REVENUE AND PROFIT RECOGNITION

Revenue from the sale of real estate is generally recognized when closings
have occurred, required down payments are received and other criteria for sale
and profit recognition are satisfied in accordance with generally accepted
accounting principles. The revenue and cost for property sold prior to
substantial completion of site improvements is deferred and recognized
proportionate to the percentage of completion of the project. In addition, the
cost recovery method is used for profit recognition where appropriate. Gains on
sales of property to non-controlled affiliates are recognized currently. For
real estate sales to affiliates, income is deferred to the extent of the
Company's proportionate ownership interest in the affiliate.

37
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation of
$164,000 and $104,000 at March 31, 1997 and March 31, 1996, respectively.
Depreciation is computed principally by the straight-line method over estimated
useful lives. The costs and accumulated depreciation of property and equipment
retired or otherwise disposed of are removed from the accounts and any gain or
loss is recognized in the year of disposition.

INVESTMENTS

Investments are recorded under the equity method of accounting. Investments
are carried at cost plus equity in undistributed earnings or losses.

INCOME TAXES

The provision for income taxes was determined using the liability approach
provided for by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax basis of assets and liabilities and are measured by applying enacted tax
rates in effect for the year in which the differences are expected to reverse.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of financial instruments are reasonable estimates of
their fair values, as such financial instruments are near maturity or bear
interest at a current market rate.

ASSET IMPAIRMENT

In fiscal year 1996, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets held and used by the Company be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be fully recoverable. If it is determined that the carrying amount of an
asset may not be recoverable, the Company is required to recognize an asset
impairment loss.

The Company's determination as to the recoverability of long-lived assets is
based, in part, on estimates of future cash flows expected to be generated or
realized from such assets.

STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." This standard encourages a
fair-value method of accounting for employee stock options or similar equity
instruments, but allows continued use of the intrinsic value based method of
accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company follows the accounting
provisions set forth in APB No. 25 and has adopted the disclosure-only
provisions required by SFAS No. 123 in its financial statements for the years
ended March 31, 1997 and 1996. The effect on net income (loss) for stock options
issued in fiscal years 1997 and 1996 using the fair value method was not
significant.

38
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share is computed using the weighted average
number of common shares outstanding during the period.

Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share," is required to be implemented for financial statements issued for
periods ending after December 15, 1997, including interim periods; earlier
application is not permitted. The Company does not anticipate that adoption of
SFAS No. 128 will have a material effect on its earnings (loss) per common
share.

3. MORTGAGE NOTES RECEIVABLE

Mortgage notes receivable bear interest at an annual rate of 8.5% to 9.5%
and are collateralized by real property. The weighted average interest rate of
mortgage notes receivable was approximately 9.1% and 9.2% at March 31, 1997 and
March 31, 1996, respectively.

The Company has sold certain of its mortgage notes receivable, primarily
with recourse. No mortgage notes receivable were sold during fiscal years 1997,
1996 or 1995. The balance of the recourse mortgage notes receivable which have
been sold and remain outstanding amounted to $204,000 at March 31, 1997 and
$383,000 at March 31, 1996.

4. REAL ESTATE DEVELOPMENTS

Real estate developments were as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Finished projects....................................................... $ 9,146 $ 14,034
Development projects in progress........................................ 16,725 14,475
Land held for future development........................................ 8,359 8,097
--------- ---------
$ 34,230 $ 36,606
--------- ---------
--------- ---------
</TABLE>

Development projects in progress consist principally of land, land
improvement costs and construction costs for projects which are in various
stages of development but not ready for sale.

39
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. REAL ESTATE DEVELOPMENTS (CONTINUED)
carrying cost of the Iao II land parcel has been reduced to the estimated sales
price, resulting in an asset impairment loss of $1.1 million. The Company also
recognized an asset impairment loss of $237,000 related to remnant costs
associated with certain developments.

The Company was selected by the Hawaii State Housing and Finance Development
Corporation (HFDC) as the developer for Village I of the Villages at Leiali'i.
Because of litigation against the HFDC regarding claims to this state-owned
land, the Company is not able to proceed with the project. In view of the
litigation and other facts and circumstances regarding the Leiali'i project, the
Company believes that the capitalized development costs have been impaired as
defined under SFAS No. 121 and, consequently, has written off approximately $1.3
million of the assets related to this project in fiscal year 1996.

5. INVESTMENT IN IAO PARTNERS, NET OF DEFERRED LAND GAIN

During fiscal year 1993, the Company sold land to Schuler Homes, Inc.
("SHI"), an unrelated entity, for $8 million. SHI subsequently contributed the
land to a joint venture partnership, Iao Partners, which is owned 50% by both
the Company and SHI. The Company recognized 50% of the gain on the original sale
in fiscal year 1993 and deferred the remainder of the gain, which gain
represented the Company's proportionate interest in Iao Partners. The deferred
gain will be recognized as the property is developed and homes are sold to
unrelated individuals. To date, 348 multi-family homes have been sold at the Iao
Parkside Project. The deferred gain amounted to $1,047,000 at March 31, 1997 and
$1,332,000 at March 31, 1996.

Iao Partners is engaged in the development and sale of 480 condominium
homes. The construction of the project and the day-to-day activities of the
joint venture partnership are managed by SHI. Under the partnership agreement,
SHI realizes 70% of any favorable budget variance relating specifically to
building construction costs. As a result, SHI was allocated $137,000 and
$712,000 of Iao's total pre-tax income for the years ended March 31, 1997 and
March 31, 1996, respectively.

40
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INVESTMENT IN IAO PARTNERS, NET OF DEFERRED LAND GAIN (CONTINUED)
During fiscal year 1996, the Company and SHI agreed to an early distribution
from Iao Partners to SHI of $4 million which represents a partial distribution
of SHI's capital account. Condensed financial information relating to the
Company's investment in Iao Partners is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C> <C>
Assets
Cash....................................................... $ 1,397 $ 8
Real estate development.................................... 10,176 12,476
Other assets............................................... 2,030 1,523
--------- ---------
Total assets............................................. $ 13,603 $ 14,007
--------- ---------
--------- ---------
Liabilities & Partners' Capital
Accounts payable........................................... $ 10 $ 57
Due to SHI................................................. -- 762
Deferred revenue........................................... 118 --
Other liabilities.......................................... 12 --
--------- ---------
Total liabilities........................................ 140 819
Partners' capital
SHI...................................................... 9,110 8,973
The Company.............................................. 4,353 4,215
--------- ---------
Total liabilities & partners' capital.................... $ 13,603 $ 14,007
--------- ---------
--------- ---------

1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Statement of Income
Sales of residential real estate........................... $ 4,656 $ 7,830 $ 13,871
Cost of residential real estate sold....................... 4,499 6,521 10,934
--------- --------- ---------
Gross profit............................................. 157 1,309 2,937
Interest income............................................ 127 122 72
General and administrative expense......................... (9) (6) (4)
--------- --------- ---------
Pre-tax income............................................. $ 275 $ 1,425 $ 3,005
--------- --------- ---------
--------- --------- ---------
</TABLE>

41
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. DEBT

NOTES PAYABLE TO BANKS

Originally, all advances made under both loan modification agreements for
working capital purposes together with all accrued and unpaid interest were due
and payable in full on April 30, 1997. However, the Company has recently
received and accepted a commitment letter from the Lenders pursuant to which the
Lenders have agreed to amend the terms and conditions of the existing revolving
loan facilities, including an amendment to allow advances for working capital
purposes of up to $6 million. The Company has accepted the terms and conditions
as outlined in the commitment letter, which also provides that (i) the Company
must obtain a guaranty of payment from CBCL for the Company's indebtedness
related to the working capital advances, (ii) the Company must deliver a first
mortgage on its Puueo I and II properties on the island of Hawaii, in addition
to a first mortgage already held by the Lenders on the Company's Kehalani
property, as collateral to secure all of the loan facilities and, (iii) all
outstanding indebtedness related to the loan facilities will be due and payable
on May 31, 1998. The Company believes that such an amendment to the existing
loan facilities is necessary for the Company to meet its working capital
requirements through fiscal year 1998. In addition, the Company is also seeking
to generate additional funds through sales of certain land parcels. Moreover,
the Company anticipates that it will require additional long-term financing to
further develop its projects. The Company is continuing its ongoing efforts to
obtain such long-term financing. Failure to obtain such working capital facility
and long-term financing would have a material adverse effect on the Company's
business.

NOTE PAYABLE TO C. BREWER AND COMPANY, LIMITED

In connection with the fiscal year 1994 restructuring, the Company issued an
unsecured $25 million term note payable to CBCL. The loan had an interest rate
of 9.32% per annum and was repaid in fiscal year 1996.

42
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. DEBT (CONTINUED)
INTEREST COST

Total interest incurred was as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest capitalized to real estate developments................. $ 2,296 $ 2,245 $ 915
Interest expense................................................. 141 203 1,419
--------- --------- ---------
$ 2,437 $ 2,448 $ 2,334
--------- --------- ---------
--------- --------- ---------
Interest paid.................................................... $ 1,760 $ 2,820 $ 2,125
--------- --------- ---------
--------- --------- ---------
</TABLE>

7. INCOME TAXES

The components of income tax expense (benefit) and tax payments for the last
three fiscal years were as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current.......................................................... $ (856) $ (76) $ 813
Deferred......................................................... (815) (845) 307
--------- --------- ---------
$ (1,671) $ (921) $ 1,120
--------- --------- ---------
--------- --------- ---------
Payments (refunds)............................................... $ (473) $ (193) $ 2,153
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company's reported income tax expense varied from the expense calculated
using the U.S. federal statutory income tax rate for the last three fiscal years
as follows (in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Expenses computed at U.S. federal statutory income tax rate...... $ (1,624) $ (836) $ 1,006
State tax, net of federal income tax impact...................... (181) (92) 114
Other............................................................ 134 7 --
--------- --------- ---------
$ (1,671) $ (921) $ 1,120
--------- --------- ---------
--------- --------- ---------
</TABLE>

The sources of deferred tax assets (liabilities) and the tax effect are as
follows (in thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Basis difference in property............................................. $ (1,107) $ (1,127)
Expenses deducted in different period for tax return purposes............ (362) (733)
Revenue recognized in different period for tax return purposes........... (1,382) (950)
Expenses not currently deductible for tax return purposes................ 1,925 1,259
Other.................................................................... (835) (630)
--------- ---------
$ (1,761) $ (2,181)
--------- ---------
--------- ---------
</TABLE>

43
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. INCOME TAXES (CONTINUED)
Total deferred tax assets and deferred tax liabilities were as follows (in
thousands):

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets...................................................... $ 542 $ 309
Deferred tax liabilities................................................. (2,303) (2,490)
--------- ---------
$ (1,761) $ (2,181)
--------- ---------
--------- ---------
</TABLE>

8. RETIREMENT PLANS

Substantially all employees of the Company are eligible to participate in a
qualified 401(k) plan sponsored by CBCL. The terms of the plan provide for the
Company to partially match tax deferred employee contributions. The cost of this
plan was not significant.

9. STOCKHOLDER'S EQUITY

Authorized capital at March 31, 1997 consisted of 20,000,000 of $.01 par
value Class A Common Stock entitled to one vote per share, 5,750,000 shares of
$.01 par value Class B Common Stock entitled to three votes per share, and
1,000,000 shares of $.01 par value Preferred Stock issuable in series. At March
31, 1997, there were 200,500 shares of Class A Common Stock reserved for
issuance under the Company's 1993 Stock Option/Stock Issuance Plan. There were
no shares of Preferred Stock outstanding.

Changes in stockholders' equity were as follows (in thousands):

<TABLE>
<CAPTION>
CLASS CLASS
A B ADDITIONAL RETAINED
COMMON COMMON PAID-IN EARNINGS TREASURY
STOCK STOCK CAPITAL (DEFICIT) STOCK TOTAL
------ ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance March 1, 1994................... $26 $ 58 $27,370 $(16,003) $-- $11,451
Net Income............................ -- -- -- 1,755 -- 1,755
Capital distributions to CBCL......... -- -- -- (28) -- (28)
------ ------ ---------- -------- -------- -------
Balance, March 31, 1995................. 26 58 27,370 (14,276) -- 13,178
Net loss.............................. -- -- -- (1,467) -- (1,467)
Purchase of 4,335 shares of Treasury
Stock............................... -- -- -- -- (24) (24)
Conversion of Class B
Common Stock to Class A
Common Stock........................ 1 (1) -- -- -- --
------ ------ ---------- -------- -------- -------
Balance, March 31, 1996................. 27 57 27,370 (15,743) (24) 11,687
Net loss.............................. -- -- -- (2,971) -- (2,971)
Conversion to Class B
Common Stock of Class A
Common Stock........................ 4 (4) -- -- -- --
------ ------ ---------- -------- -------- -------
Balance, March 31, 1997................. $31 $ 53 $27,370 $(18,714) $ (24) $ 8,716
------ ------ ---------- -------- -------- -------
------ ------ ---------- -------- -------- -------
</TABLE>

44
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS

The Company's 1993 Stock Option/Stock Issuance (the "Plan") is divided into
three components: the discretionary option grant program, the stock issuance
program and the automatic stock option grant program. The discretionary option
grant program provides for the grant of options to purchase shares of the
Company's Class A Common Stock to key employees (including officers and
directors) and consultants of the Company or its parent or subsidiary
corporations. Under the stock issuance program, such individuals may be issued
shares of the Company's Class A Common Stock either through a purchase of such
shares or as a bonus tied to performance of services or the Company's attainment
of financial objectives. The automatic option grant program provides for the
automatic grant of options to non-employee members of the Board of Directors.
The Company has authorized 825,000 shares of Class A Common Stock under the
Plan. Stock options granted under the Plan may be exercised for up to ten years
from the date of grant.

Options currently expire no later than ten years from the grant date and
generally vest over a period of six months to five years. Proceeds received by
the Company from exercises are credited to common stock and additional paid-in
capital. A summary of the Company's stock option activity and related
information is as follows:

<TABLE>
<CAPTION>
NUMBER OF AVERAGE PRICE
SHARES PER SHARE
----------- -------------
<S> <C> <C>
Outstanding at March 31, 1994...................................... 480,250 $ 12.02
Granted.......................................................... 60,000 9.70
Canceled......................................................... (15,000) 9.75
----------- ------
Outstanding at March 31, 1995...................................... 525,250 11.82
Granted.......................................................... 50,000 5.21
Canceled......................................................... (48,000) 11.22
----------- ------
Outstanding at March 31, 1996...................................... 527,250 11.24
Granted.......................................................... 147,500 3.45
Canceled......................................................... (50,250) 12.00
----------- ------
Outstanding at March 31, 1997 624,500 $ 9.34
----------- ------
----------- ------
Options exercisable at:
March 31, 1995................................................... 133,275 $ 12.01
March 31, 1996................................................... 237,233 $ 11.82
March 31, 1997................................................... 341,056 $ 10.89
</TABLE>

The range of exercise prices for options outstanding at March 31, 1997 was
$2.0625 to $12.75

45
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. STOCK OPTIONS (CONTINUED)
The following tables summarize information about options outstanding at
March 31, 1997.
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------
AVERAGE PRICE PER
RANGE OF EXERCISE PRICES NUMBER OF SHARES SHARE
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
$ 2.065--$ 5.375 197,500 $ 3.89
$ 9.750--$ 9.938 30,000 $ 9.78
$12.000--$12.750 397,000 $ 12.01
------- ------
624,500 $ 9.34
------- ------
------- ------

EXERCISABLE OPTIONS
------------------------------------
<S> <C> <C>
AVERAGE PRICE PER
RANGE OF EXERCISE PRICES NUMBER OF SHARES SHARE
- --------------------------------------------------------- ----------------- -------
$ 2.065--$ 5.375 47,535 $ 4.93
$ 9.750--$ 9.938 22,708 $ 9.79
$12.000--$12.750 270,813 $ 12.03
------- ------
341,056 $ 10.89
------- ------
------- ------
</TABLE>

These options will expire if not exercised at specific dates ranging from
December 1997 to January 2007. No options were exercised during the three-year
period ended March 31, 1997.

11. OFFICE SPACE

The Company has a noncancelable lease on office space used in its operations
expiring in fiscal year 1999. The lease provides for the Company to pay its
share of operating expenses based on the rentable floor area.

At March 31, 1997, the future minimum lease payments under this lease was as
follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ----------------------------------------------
<S> <C>
1998.......................................... $ 12,226
1999.......................................... 10,630
-------
$ 22,856
-------
-------
</TABLE>

In fiscal year 1996, the Company made the decision to move its corporate
office from Honolulu to the island of Maui. The cost of the relocation and a
related workforce reduction of $700,000 has been reflected in the Statement of
Income (Loss).

46
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

12. RELATED PARTY TRANSACTIONS

The Company has acquired the majority of its property for development from
CBCL and recognized such acquisitions at CBCL's cost basis. No such acquisition
was made during the last three fiscal years.

CBCL has allocated to the Company certain general and administrative
expenses for various corporate services including legal, tax, accounting and
human resources. These allocations were generally based on actual costs incurred
and estimates of time devoted to supporting the Company. The allocations for the
last three fiscal years were as follows (in thousands):

During fiscal years 1997, 1996 and 1995 the Company leased various office
space from CBCL or its affiliates under short-term or month-to-month leases.
Rents paid to CBCL or its affiliates under these leases were as follows (in
thousands):

13. COMMITMENTS AND CONTINGENCIES

There are various claims and lawsuits pending against the Company involving
complaints which are normal and reasonably foreseeable in light of the Company's
business. In the opinion of management, the resolution of these claims will not
have a material adverse effect on the business, operating results, or financial
position of the Company.

47
<PAGE>
C. BREWER HOMES, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents quarterly financial data (in thousands, except
earnings (loss) per common share):

<TABLE>
<CAPTION>
EARNINGS
(LOSS) PER
PROPERTY GROSS NET INCOME COMMON
SALES MARGIN (LOSS) SHARE
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
1997
First Quarter................................... $ 2,423 $ 357 $ (265) $ (.03)
Second Quarter.................................. 5,321 534 (82) (.01)
Third Quarter................................... 5,321 678 82 .01
Fourth Quarter.................................. 1,842 122 (2,706) (.33)
--------- --------- ----------- -----------
Year.......................................... $ 14,907 $ 1,691 $ (2,971) $ (.36)
--------- --------- ----------- -----------
--------- --------- ----------- -----------

1996
First Quarter................................... $ 195 $ 149 $ (520) $ (0.06)
Second Quarter.................................. 4,132 1,209 327 0.04
Third Quarter................................... 823 198 (265) (0.03)
Fourth Quarter.................................. 2,670 851 (1,009) (0.12)
--------- --------- ----------- -----------
Year.......................................... $ 7,820 $ 2,407 $ (1,467) $ (0.18)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>

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

None.

PART III

The registrant's Proxy Statement for its 1997 Annual Meeting of
Stockholders, which, when filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934, will be incorporated by reference in this Annual Report on
Form 10-K pursuant to General Instruction G(3) of Form 10-K, provides the
information required under Part III (Items 10, 11, 12 and 13), except for the
information with respect to the registrant's executive officers, which is
included in "Item 1. Business--Executive Officers of the Registrant."

48
<PAGE>
PART IV

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

(a) FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES.

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
1. The financial statements are included in Item 8........................................................ 32-48
2. The following financial statements schedules are included in this Report:
Schedule III--Real Estate and Accumulated Depreciation................................................ 54
Schedule IV--Mortgage Loans on Real Estate............................................................ 55
</TABLE>

Information required by other schedules has either been incorporated in the
financial statements and accompanying notes, or is not applicable to the
Company.

(b) REPORTS ON FORM 8-K.

The Company filed a report on Form 8-K on January 31, 1997, in which it
reported (i) the appointment, effective January 28, 1997, of Seth A. Bakes as
President, Chief Executive Officer and a Director of the Company, (ii) the
resignation, effective December 31, 1996, of B.G. Moynahan as President, Chief
Executive Officer and a Director of the Company and (iii) the promotion,
effective January 28, 1997, of Edward T. Foley, formerly the Company's Senior
Vice President and Chief Financial Officer, to the position of Executive Vice
President and Chief Financial Officer of the Company.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated October 21, 1994, between C. Brewer Homes, Inc., a Hawaii
corporation, and C. Brewer Homes, Inc., a Delaware corporation. (Incorporated by reference to Exhibit
2.1 of the Registrant's Current Report on Form 8-K dated October 21, 1994.)
3.1 Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K dated October 21, 1994.)
*3.2 Bylaws of the Registrant.
4.1 Specimen of Class A Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 of the
Registrant's registration statement under the Securities Act on Form S-1, Registration Statement No.
33-68924.)
4.2 Restated Certificate of Incorporation of the Registrant. (Incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K dated October 21, 1994.)
4.3 Section 1 of Bylaws of Registrant. See Exhibit 3.2
4.4 Amended and Restated Declaration of Registration Rights. (Incorporated by reference to Exhibit 4.1 of
the Registrant's registration statement under the Securities Act on Form S-3, Registration Statement
No. 33-88310.)
10.1 Form of Indemnification Agreement. (Incorporated by reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q dated September 30, 1994.)
+10.2 1993 Stock Option/Stock Issuance Plan. (Incorporated by reference to Exhibit 99.1 of the Registrant's
registration statement under the Securities Act on Form S-8, Registration Statement No. 33-75230.)
+10.3 Form of Automatic Option Grant Agreement. (Incorporated by reference to Exhibit 10.3 of the
Registrant's Registration statement under the Securities Act on Form S-1, Registration Statement No.
33-68924.)
</TABLE>

49
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
+10.4 Form of Employee Benefits Allocation Agreement. (Incorporated by reference to Exhibit 10.4 of the
Registrant's registration statement under the Securities Act on Form S-1, Registration Statement No.
33-68924.)
+10.5 C. Brewer and Company, Limited Pension Plan for Salaried, Non-Bargaining Unit Employees and Hilo Coast
Processing Company Pension Plan for Salaried, Non-Bargaining Unit Employees (Defined Benefit Plan).
(Incorporated by reference to Exhibit 10.5 of the Registrant's registration statement under the
Securities Act on Form S-1, Registration Statement No. 33-68924.)
+10.6 C. Brewer Homes, Inc. Performance Incentive Plan. (Incorporated by reference to Exhibit 10.6 of the
Registrant's registration statement under the Securities Act on Form S-1, Registration Statement No.
33-68924.)
10.7 Form of Intercompany Agreement. (Incorporated by reference to Exhibit 10.7 of the Registrant's
registration statement under the Securities Act on Form S-1, Registration Statement No. 33-68924.)
10.8 Form of Asset Exchange Agreement. (Incorporated by reference to Exhibit 10.8 of the Registrant's
registration statement under the Securities Act on Form S-1, Registration Statement No. 33-68924.)
10.9 Form of Option/Right of First Refusal Agreement. (Incorporated by reference to Exhibit 10.9 of the
Registrant's registration statement under the Securities Act on Form S-1, Registration Statement No.
33-68924.)
10.10 Form of Development and Management Services Agreement. (Incorporated by reference to Exhibit 10.10 of
the Registrant's registration statement under the Securities Act on Form S-1, Registration Statement
No. 33-68924.)
10.12 Manager's Revocable License (Lease) of premises located at 90 Waiko Road, Maui, Hawaii dated February
8, 1993. (Incorporated by reference to Exhibit 10.12 of the Registrant's registration statement under
the Securities Act on Form S-1, Registration Statement No. 33-68924.)
10.13 Central Maui Source Development Agreement dated July 28, 1975. (Incorporated by reference to Exhibit
10.13 of the Registrant's registration statement under the Securities Act on Form S-1, Registration
Statement No. 33-68924.)
10.14 Partnership Agreement between the Registrant and Schuler Homes, Inc. dated as of October 15, 1992.
(Incorporated by reference to Exhibit 10.14 of the Registrant's registration statement under the
Securities Act on Form S-1, Registration Statement No. 33-68924.)
10.17 Memorandum of Agreement among the Registrant, Schuler Homes, Inc. and Maui County dated June 11, 1992.
(Incorporated by reference to Exhibit 10.17 of the Registrant's registration statement under the
Securities Act on Form S-1, Registration Statement No. 33-68924.)
10.23 Sublease of premises located at 888 Kalanianaole Avenue, Hilo, Hawaii, dated as of October 1, 1993.
(Incorporated by reference to Exhibit 10.23 of the Registrant's registration statement under the
Securities Act on Form S-1, Registration Statement No. 33-68924.)
+10.32 Form of Notice of Grant to be generally used in connection with the 1993 Stock Option/ Stock Issuance
Plan. (Incorporated by reference to Exhibit 99.2 of the Registrant's registration statement under the
Securities Act on Form S-8, Registration Statement No. 33-75230.)
</TABLE>

50
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
+10.33 Form of Stock Option Agreement to be generally used in connection with the 1993 Stock Option/Stock
Issuance Plan. (Incorporated by reference to Exhibit 99.2 of the Registrant's registration statement
under the Securities Act on Form S-8, Registration Statement No. 33-75230.)
+10.34 Addendum to Stock Option Agreement (Financial Assistance). (Incorporated by reference to Exhibit 99.2
of the Registrant's registration statement under the Securities Act on Form S-8, Registration
Statement No. 33-75230.)
+10.35 Addendum to Stock Option Agreement (Limited Stock Appreciation Right). (Incorporated by reference to
Exhibit 99.2 of the Registrant's registration statement under the Securities Act on Form S-8,
Registration Statement No. 33-75230.)
+10.36 Addendum of Stock Option Agreement (Special Tax Elections). (Incorporated by reference to Exhibit 99.2
of the Registrant's registration statement under the Securities Act on Form S-8, Registration
Statement No. 33-75230.)
+10.37 Form of Stock Issuance Agreement to be generally used in connection with the 1993 Stock Option/Stock
Issuance Plan. (Incorporated by reference to Exhibit 99.2 of the Registrant's registration statement
under the Securities Act on Form S-8, Registration Statement No. 3-75230.)
10.39 Commercial Lease and Deposit Receipt dated as of January 18, 1995 between George Hotniansky, et al. and
the Registrant. (Incorporated by reference to Exhibit 10.39 of the Registrant's registration
statement on Form 10-K dated June 28, 1995.)
10.40 Revolving Loan Agreement (Infrastructure) between the Registrant and Bank of Hawaii dated as of August
31, 1995. (Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form
10-Q dated September 30, 1995.)
10.41 Revolving Loan Agreement (Building) between the Registrant and Bank of Hawaii dated as of August 31,
1995. (Incorporated by reference to Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q
dated September 30, 1995.)
10.42 Form of Revolving Note (Infrastructure) between the Registrant and Bank of Hawaii dated as of August
31, 1995. (Incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form
10-Q dated September 30, 1995.)
10.43 Form of Revolving Note (Building) between the Registrant and Bank of Hawaii dated as of August 31,
1995. (Incorporated by reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q
dated September 30, 1995.)
10.44 First Mortgage, Security Agreement and Financing Statement between the Registrant and Bank of Hawaii
dated as of August 31, 1995. (Incorporated by reference to Exhibit 10.4 of the Registrant's Quarterly
Report on Form 10-Q dated September 30, 1995.)
10.45 UCC-1 Financing Statement between the Registrant and Bank of Hawaii dated as of August 31, 1995.
(Incorporated by reference to Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q dated
September 30, 1995.)
10.46 Hazardous Materials Indemnity Agreement between the Registrant and Bank of Hawaii dated as of August
31, 1995. (Incorporated by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form
10-Q dated September 30, 1995.)
10.47 Form of Agreement between Registrant and Fletcher Pacific Construction Co., Ltd. dated as of May 30,
1995. (Incorporated by reference to Exhibit 10.6 of the Registrant's Quarterly Report on Form 10-Q
dated September 30, 1995.)
10.48 First Loan Modification Agreement (Infrastructure Facility) between the Registrant and Bank of Hawaii
dated as of September 5, 1996. (Incorporated by reference to Exhibit 10.48 of the Registrant's
Quarterly Report on Form 10-Q dated November 14, 1996.)
</TABLE>

51
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.49 First Loan Modification Agreement (Building Facility) between the Registrant and Bank of Hawaii dated
as of September 5, 1996. (Incorporated by reference to Exhibit 10.49 of the Registrant's Quarterly
Report on Form 10-Q dated November 14, 1996.)
10.50 Amendment to First Mortgage, Security Agreement and Financing Statement between the Registrant and Bank
of Hawaii dated as of September 5, 1996. (Incorporated by reference to Exhibit 10.50 of the
Registrant's Quarterly Report on Form 10-Q dated November 4, 1996.)
10.51 Guaranty between C. Brewer and Company, Limited and Bank of Hawaii dated as of September 5, 1996.
(Incorporated by reference to Exhibit 10.51 of the Registrant's Quarterly Report on Form 10-Q dated
November 14, 1996.)
10.52 Corporate Resolution Re: Guaranty to Bank of Hawaii from Board of Directors of C. Brewer and Company,
Limited dated as of September 5, 1996. (Incorporated by reference to Exhibit 10.52 of the
Registrant's Quarterly Report on Form 10-Q dated November 14, 1996.)
10.53 Agreement to Guaranty between the Registrant and C. Brewer and Company, Limited dated as of September
5, 1996. (Incorporated by reference to Exhibit 10.53 of the Registrant's Quarterly Report on Form
10-Q dated November 14, 1996.)
10.54 Release and Separation Agreement, dated January 15, 1997, between the Company and B.G. Moynahan.
(Incorporated by reference to Exhibit 10.54 of the Registrant's Current Report on Form 8-K dated
January 31, 1997.)
10.55 Consultant Agreement, dated January 16, 1997, between the Company and B.G. Moynahan. (Incorporated by
reference to Exhibit 10.55 of the Registrant's Current Report on Form 8-K dated January 31, 1997.)
*10.56 Letter dated January 7, 1997 from the Company to Seth A. Bakes regarding terms of employment.
*10.57 Letter dated January 16, 1997 from Seth A. Bakes to the Company regarding terms of employment.
*11.1 Statement Regarding Computation of Earnings (Loss) Per Common Share.
*23.1 Consent of Independent Accountants.
*23.2 Consent of Independent Accountants.
*27.1 Financial Data Schedule
</TABLE>

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

* Filed herewith

+ Management contract or compensatory plan or arrangement

52
<PAGE>
SIGNATURES

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

<TABLE>
<S> <C> <C>
C. BREWER HOMES, INC.

By: /s/ SETH A. BAKES
-----------------------------------------
Seth A. Bakes
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AND DIRECTOR
Dated: June 30, 1997
</TABLE>

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

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ JOHN W.A. BUYERS
- ------------------------------ Chairman of the Board June 30, 1997
John W.A. Buyers

President and Chief
/s/ SETH A. BAKES Executive Officer and
- ------------------------------ Director (principal June 30, 1997
Seth A. Bakes executive officer)

Executive Vice President
and
Chief Financial Officer
/s/ EDWARD T. FOLEY Edward T. Foley
- ------------------------------ (principal June 30, 1997
Edward T. Foley financial officer and
principal accounting
officer)

/s/ KENT T. LUCIEN
- ------------------------------ Director June 30, 1997
Kent T. Lucien

/s/ CLINTON R. CHURCHILL
- ------------------------------ Director June 30, 1997
Clinton R. Churchill

/s/ DAVID A. HEENAN
- ------------------------------ Director June 30, 1997
David A. Heenan

/s/ PAUL C.T. LOO
- ------------------------------ Director June 30, 1997
Paul C.T. Loo

53
<PAGE>
C. BREWER HOMES, INC SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

(IN THOUSANDS)
<TABLE>
<CAPTION>
COST
CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO
ACQUISITION
---------------------------- -------------
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
- ------------------------------------------------------------------- ------------- --------- ----------------- -------------
<S> <C> <C> <C> <C>
March 31, 1997
Iao I (available for sale)....................................... None $ -- $ -- $ 245
Kalihiwai Ridge II (available for sale).......................... None 416 -- 1,470
Waiolani II (future development)................................. None -- -- 1,175
Kehalani (in progress)........................................... Mortgage 1,257 -- 15,609
Kaimana at Kehalani (available for sale)......................... None 85 -- 7,030
Halemalu at Kehalani (available for sale)........................ None -- -- 290
Iao II (available for sale)...................................... None 605 -- 1,266
Kalihiwai III (future development)............................... Mortgage 906 -- 222
Hilo Land (future development)................................... None 1,117 -- 751
Other land held for future development........................... None 377 -- 681
--------- --- -------------
$ 4,763 $ -- $ 28,738
--------- --- -------------
--------- --- -------------
March 31, 1996
Iao I (available for sale)....................................... None $ -- $ -- $ 233
Kalihiwai Ridge II (available for sale).......................... None 416 -- 1,723
Waiolani II (future development)................................. None -- -- 1,401
Kehalani (in progress)........................................... Mortgage 1,257 -- 11,956
Kaimana at Kehalani (available for sale)......................... None 85 -- 8,904
Halemalu at Kehalani (available for sale)........................ None -- -- 1,471
Iao II (future development)...................................... None 605 -- 1,963
Kalihiwai III (future development)............................... None 906 -- 194
Hilo Land (future development)................................... None 1,117 -- 700
Other land held for future development........................... None 377 -- 644
--------- --- -------------
$ 4,763 $ -- $ 29,189
--------- --- -------------
--------- --- -------------
March 31, 1995
Iao I (available for sale)....................................... None $ -- $ -- $ 211
Kalihiwai Ridge II (available for sale).......................... None 416 -- 1,895
Waiolani I (available for sale).................................. None 39 -- 170
Waiolani II (future development)................................. None -- -- 959
Kehalani (in progress)........................................... None 1,257 -- 2,731
Kaimana at Kehalani (available for sale)......................... None 85 -- 11,587
Halelani (in progress)........................................... None -- -- 1,052
Iao II (future development)...................................... None 605 -- 1,913
Kalihiwai III (future development)............................... None 906 -- 167
Hilo Land (future development)................................... None 1,117 -- 661
Other land held future development............................... None 377 -- 964
--------- --- -------------
$ 4,802 $ -- $ 22,310
--------- --- -------------
--------- --- -------------

GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD
-------------------------------------
DESCRIPTION CARRYING COSTS LAND IMPROVEMENTS TOTAL(1)(2)
- ------------------------------------------------------------------- --------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
March 31, 1997
Iao I (available for sale)....................................... $ -- $ -- $ 245 $ 245
Kalihiwai Ridge II (available for sale).......................... -- 58 1,470 1,528
Waiolani II (future development)................................. -- -- 1,175 1,175
Kehalani (in progress)........................................... 2,906 1,116 15,609 16,725
Kaimana at Kehalani (available for sale)......................... 1,725 52 7,030 7,082
Halemalu at Kehalani (available for sale)........................ 22 1 290 291
Iao II (available for sale)...................................... 371 605 1,266 1,871
Kalihiwai III (future development)............................... -- 906 221 1,127
Hilo Land (future development)................................... -- 2,387 751 3,138
Other land held for future development........................... -- 367 681 1,048
------- --------- ------------- -----------
$ 5,024 $ 5,492 $ 28,738 $ 34,230
------- --------- ------------- -----------
------- --------- ------------- -----------
March 31, 1996
Iao I (available for sale)....................................... $ -- $ -- $ 233 $ 233
Kalihiwai Ridge II (available for sale).......................... -- 71 1,723 1,794
Waiolani II (future development)................................. -- -- 1,401 1,401
Kehalani (in progress)........................................... 1,266 1,253 13,222 14,475
Kaimana at Kehalani (available for sale)......................... 1,467 70 10,371 10,441
Halemalu at Kehalani (available for sale)........................ 91 4 1,562 1,566
Iao II (future development)...................................... 371 605 2,334 2,939
Kalihiwai III (future development)............................... -- 906 194 1,100
Hilo Land (future development)................................... -- 944 700 1,644
Other land held for future development........................... -- 369 644 1,013
------- --------- ------------- -----------
$ 3,195 $ 4,222 $ 32,384 $ 36,606
------- --------- ------------- -----------
------- --------- ------------- -----------
March 31, 1995
Iao I (available for sale)....................................... $ -- $ -- $ 211 $ 211
Kalihiwai Ridge II (available for sale).......................... -- 79 1,895 1,974
Waiolani I (available for sale).................................. 11 1 181 182
Waiolani II (future development)................................. -- -- 959 959
Kehalani (in progress)........................................... 148 1,257 2,879 4,136
Kaimana at Kehalani (available for sale)......................... 425 80 12,012 12,092
Halelani (in progress)........................................... 57 -- 1,109 1,109
Iao II (future development)...................................... 56 605 1,969 2,574
Kalihiwai III (future development)............................... -- 906 167 1,073
Hilo Land (future development)................................... -- 1,120 661 1,781
Other land held future development............................... -- 369 964 1,333
------- --------- ------------- -----------
$ 697 $ 4,417 $ 23,007 $ 27,424
------- --------- ------------- -----------
------- --------- ------------- -----------

ACCUM. DATE OF DATE
DESCRIPTION DEPREC. CONSTRUCTION ACQUIRED DEPREC.
- ------------------------------------------------------------------- ----------- ------------ ----------- -----------
March 31, 1997
Iao I (available for sale)....................................... $ -- N/A N/A N/A
Kalihiwai Ridge II (available for sale).......................... -- 05/04/92 01/16/91 N/A
Waiolani II (future development)................................. -- N/A N/A N/A
Kehalani (in progress)........................................... -- N/A N/A N/A
Kaimana at Kehalani (available for sale)......................... -- 06/01/94 12/15/93 N/A
Halemalu at Kehalani (available for sale)........................ -- 10/01/95 12/15/93 N/A
Iao II (available for sale)...................................... -- N/A Various N/A
Kalihiwai III (future development)............................... -- N/A Various N/A
Hilo Land (future development)................................... -- N/A Various N/A
Other land held for future development........................... -- N/A Various N/A
---
$ --
---
---
March 31, 1996
Iao I (available for sale)....................................... $ -- N/A N/A N/A
Kalihiwai Ridge II (available for sale).......................... -- 05/04/92 01/16/91 N/A
Waiolani II (future development)................................. -- N/A N/A N/A
Kehalani (in progress)........................................... -- N/A N/A N/A
Kaimana at Kehalani (available for sale)......................... -- 06/01/94 12/15/93 N/A
Halemalu at Kehalani (available for sale)........................ -- 10/01/95 12/15/93 N/A
Iao II (future development)...................................... -- N/A Various N/A
Kalihiwai III (future development)............................... -- N/A Various N/A
Hilo Land (future development)................................... -- N/A Various N/A
Other land held for future development........................... -- N/A Various N/A
---
$ --
---
---
March 31, 1995
Iao I (available for sale)....................................... $ -- N/A N/A N/A
Kalihiwai Ridge II (available for sale).......................... -- 05/04/92 01/16/91 N/A
Waiolani I (available for sale).................................. -- 03/01/93 10/15/92 N/A
Waiolani II (future development)................................. -- N/A N/A N/A
Kehalani (in progress)........................................... -- N/A N/A N/A
Kaimana at Kehalani (available for sale)......................... -- 06/01/94 12/15/93 N/A
Halelani (in progress)........................................... -- N/A N/A N/A
Iao II (future development)...................................... -- N/A Various N/A
Kalihiwai III (future development)............................... -- N/A Various N/A
Hilo Land (future development)................................... -- N/A Various N/A
Other land held future development............................... -- N/A Various N/A
---
$ --
---
---
</TABLE>

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

N/A = Not applicable.

(1) A reconciliation of total amount at which real estate was carried to the
amount at the beginning of the year is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------
<S> <C>
Balance at beginning of year........................................................................... $ 36,606
Additions during the year:
Acquisitions from foreclosure...................................................................... 1,443
Improvements....................................................................................... 11,858
-------
Total additions.................................................................................. 13,301
-------
Deductions during the year:
Cost of real estate sold............................................................................. 12,140
Other asset impairment loss.......................................................................... 3,537
-------
Total deductions................................................................................. 15,677
-------
Balance at close of year............................................................................... $ 34,230
-------
-------

<CAPTION>
MARCH 31, 1996
---------------
<S> <C>
Balance at beginning of year........................................................................... $ 27,424
Additions during the year:
Acquisitions from foreclosure...................................................................... --
Improvements....................................................................................... 15,237
-------
Total additions.................................................................................. 15,237
-------
Deductions during the year:
Cost of real estate sold............................................................................. 4,894
Other asset impairment loss.......................................................................... 1,251
-------
Total deductions................................................................................. 6,145
-------
Balance at close of year............................................................................... $ 36,606
-------
-------

<CAPTION>
MARCH 31, 1995

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

Balance at beginning of year........................................................................... $ 15,352

Additions during the year:
Acquisitions from foreclosure...................................................................... --

Improvements....................................................................................... 22,710

-------

Total additions.................................................................................. 22,710

-------

Deductions during the year:
Cost of real estate sold............................................................................. 10,638

Other asset impairment loss.......................................................................... --

-------

Total deductions................................................................................. 10,638

-------

Balance at close of year............................................................................... $ 27,424

-------

</TABLE>

(2) The cost of real estate for federal income tax purposes approximates the
financial statement carrying value.

54
<PAGE>
C. BREWER HOMES, INC. SCHEDULE IV

MORTGAGE LOANS ON REAL ESTATE

(IN THOUSANDS)

<TABLE>
<CAPTION>
FINAL PERIODIC CARRYING AMOUNT
INTEREST MATURITY PAYMENT PRIOR FACE AMOUNT OF DELINQUENT
DESCRIPTION RATE DATE TERMS(1) LIENS OF MORTGAGE MORTGAGE(2)(3) MORTGAGES
- --------------------------------------- ----------- --------- ----------- --------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1997
First mortgage on land:
Foy-Kalihiwai........................ 9.5% 04/15/96 $ 3.9 None $ 455 $ 365 $ --
Schuster-Wailea...................... 9.5% 08/15/96 0.4 None 41 39 --
M 10-Wilder Road..................... 9.3% 04/01/00 14.5 None 263 255 --
Rosendahl-Kaiwiki.................... 8.5% 04/15/99 1.2 None 146 135 --
------ -----------
794 0
------ -----------
------ -----------
March 31, 1996
First mortgage on land:
Foy-Kalihiwai........................ 8.5% 04/15/96 $ 3.9 None $ 455 $ 371 $ --
Fergerstrom-Kaumana.................. 9.0% 06/01/96 0.9 None 105 99 --
Takebayashi-Opea Peleau.............. 9.0% 07/01/96 1.9 None 206 195 --
Schuster-Wailea...................... 9.0% 08/15/96 0.4 None 41 39 --
Coffman-Piha......................... 9.0% 09/01/96 0.7 None 75 71 --
KCC-Kaumana.......................... 10.0% 12/23/94 N/A None 1,450 1,443 1,443
Johnston-Naalehu..................... 9.3% 09/20/99 0.4 None 46 44 --
M 10-Wilder Road..................... 9.3% 04/01/00 14.5 None 263 241 --
Rosendahl-Kaiwiki.................... 8.5% 04/15/99 1.2 None 146 133 --
------ -----------
$ 2,636 $ 1,443
------ -----------
------ -----------
March 31, 1995
First mortgage on land:
Foy-Kalihiwai........................ 8.5% 04/15/96 $ 3.9 None $ 455 $ 364 --
MacWhinnie-Kalihiwai................. 11.5% 12/15/95 3.1 None 443 325 --
Fergerstrom-Kaumana.................. 9.0% 06/01/96 0.9 None 105 97 --
Takebayashi-Opea Peleau.............. 9.0% 07/01/96 1.9 None 206 192 --
Schuster-Wailea...................... 9.0% 08/15/96 0.4 None 41 39 --
Coffman-Piha......................... 9.0% 09/01/96 0.7 None 75 71 --
KCC-Kaumana.......................... 10.0% 12/23/94 N/A None 1,450 1,443 1,443
Other................................ 9.5% 11/15/95 N/A N/A N/A 42 --
------ -----------
$ 2,573 $ 1,443
------ -----------
------ -----------
</TABLE>

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

N/A = Not applicable.

(1) Level monthly principal payment, except for semi-annual principal payment
for M 10-Wilder Road mortgage loan.

(2) A reconciliation of the total amount at which mortgage loans were carried to
the amount at the beginning of the year is as follows:

<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ 2,636 $ 2,573 $ 3,049
Additions during the year:
New mortgage loans given on real estate sales....................... -- 497 --
Loan repurchased.................................................... -- -- --
------ ------ ------
Total additions................................................... -- 497 --
------ ------ ------
Deductions during the year:
Collections of principal............................................ 1,842 434 192
Cost of mortgages sold.............................................. -- -- 284
------ ------ ------
Total deductions 1,842 434 476
------ ------ ------
Balance at end of year.............................................. $ 794 $ 2,636 $ 2,573
------ ------ ------
------ ------ ------
</TABLE>

(3) The cost of mortgage loans for federal tax purposes approximates the
financial statement carrying value.

55
<PAGE>
C. BREWER HOMES, INC.

FORM 10-K FOR FISCAL YEAR ENDED MARCH 31, 1997

EXHIBIT INDEX

10.56 Letter dated January 7, 1997 from the Company to Seth A. Bakes regarding terms of employment.

10.57 Letter dated January 16, 1997 from Seth A. Bakes to the Company regarding terms of employment.

11.1 Statement Regarding Computation of Earnings Per Share.

23.1 Consent of Independent Accountants.

23.2 Consent of Independent Accountants.

27.1 Financial Data Schedule.
</TABLE>

<PAGE>

Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
C. BREWER HOMES, INC.
(A DELAWARE CORPORATION)

ARTICLE 1 - STOCKHOLDERS

1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.

1.2 ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held each year beginning in the
calendar year 1994 on such date and at such time as the Board of Directors
determines. If this date shall fall upon a legal holiday at the place of the
meeting, then such meeting shall be held on the next succeeding business day at
the same hour. If no annual meeting is held in accordance with the foregoing
provisions, the Board of Directors shall cause the meeting to be held as soon
thereafter as convenient.

1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called
only in accordance with Article SIXTH of the Certificate of Incorporation as it
may be amended from time to time (the ``Certificate of Incorporation'').

1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.

1.5 VOTING LIST. The officer who has charge of the stock ledger of
the corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.

1.6 QUORUM. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.

1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to
another time and to any other place at which a meeting of stockholders may be
held under these Bylaws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place

<PAGE>

of the adjourned meeting are announced at the meeting at which adjournment is
taken, unless after the adjournment a new record date is fixed for the adjourned
meeting. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting.

1.8 VOTING AND PROXIES. Each stockholder shall have one vote for
each share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to
vote at a meeting of stockholders may vote in person or may authorize another
person or persons to vote or act for him by written proxy executed by the
stockholder or his authorized agent and delivered to the Secretary of the
corporation. No such proxy shall be voted or acted upon after three years from
the date of its execution, unless the proxy expressly provides for a longer
period.

1.9 ACTION AT MEETING. In all matters other than the election of
directors, when a quorum is present at any meeting, the holders of a majority of
the stock present or represented and entitled to vote on the subject matter (or
if there are two or more classes of stock entitled to vote as separate classes,
then in the case of each such class, the holders of a majority of the stock of
that class present or represented and entitled to vote on the subject matter)
shall decide any matter to be voted upon by the stockholders at such meeting,
except when a different vote is required by express provision of law, the
Certificate of Incorporation or these Bylaws. Any election of directors by
stockholders shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the election.

ARTICLE 2 - DIRECTORS

2.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by or under the direction of a Board of Directors, who may
exercise all of the powers of the corporation except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law, may exercise the powers of the full Board of Directors until
the vacancy is filled.

2.2 NUMBER; ELECTION; TENURE AND QUALIFICATION. The number of
Directors of the Corporation shall be six (6), subject to amendment in
accordance with Article FIFTH of the Certificate of Incorporation. Each
director shall by elected by the stockholders at the annual meeting and shall
hold office until the next annual meeting and until his successor is elected and
qualified, or until his earlier death, resignation or removal. No reduction in
the authorized number of directors shall have the effect of removing any
director before that director's term of office expires. Directors need not be
stockholders of the corporation.

2.3 ENLARGEMENT OF THE BOARD OF DIRECTORS. The authorized number of
directors on the Board of Directors may be increased in accordance with Article
FIFTH of the Certificate of Incorporation.

2.4 VACANCIES. Unless and until filled by the stockholders, any
vacancy in the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board of Directors, may be filled by vote
of a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the term and until
such director's successor shall have been elected and qualified, or until such
director's earlier death, resignation or removal.

2.5 RESIGNATION. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.

<PAGE>

2.6 REMOVAL. Any director or the entire Board of Directors may be
removed, only as permitted by applicable law and Article SEVENTH of the
Certificate of Incorporation.

2.7 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held without notice at such time and place, within or without the State of
Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.

2.8 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board, President, two or more
directors, or by one director in the event that there is only a single director
in office.

2.9 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be given to each
director in person, by telephone, by facsimile transmission or by telegram sent
to his business or home address at least 48 hours in advance of the meeting, or
by written notice mailed to his business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.

2.10 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members
of any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.

2.11 QUORUM. A majority of the number of directors fixed pursuant to
Section 2.2 shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.

2.12 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Bylaws.

2.13 ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent to the action in writing,
and the written consents are filed with the minutes of proceedings of the Board
of Directors or committee.

2.14 COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the

<PAGE>

resolution of the Board of Directors and subject to the provisions of the
General Corporation Law of Delaware, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
Board of Directors.

2.15 COMPENSATION FOR DIRECTORS. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.

ARTICLE 3 - OFFICERS

3.1 ENUMERATION. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.

3.2 ELECTION. The President, Treasurer and Secretary shall be
elected by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.

3.3 QUALIFICATION. The Chairman must be an officer of the
corporation. The President need not be a director. No officer need be a
stockholder. Any two or more offices may be held by the same person.

3.4 TENURE. Except as otherwise provided by law, by the Certificate
of Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.

3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering
his written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.

The Board of Directors, or a committee duly authorized to do so,
may remove any officer with or without cause. Except as the Board of Directors
may otherwise determine, no officer who resigns or is removed shall have any
right to any compensation as an officer for any period following his resignation
or removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.

3.6 VACANCIES. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other

<PAGE>

than those of President, Treasurer and Secretary. Each such successor shall
hold office for the unexpired term of his predecessor and until his successor is
elected and qualified, or until his earlier death, resignation or removal.

3.7 CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD. If the
Board of Directors appoints a Chairman of the Board, he shall, when present,
preside at all meetings of the Board of Directors. He shall perform such duties
and possess such powers as are usually vested in the office of the Chairman of
the Board or as may be vested in him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.

3.8 PRESIDENT. The President shall be the chief operating officer of
the corporation. He shall also be the chief executive officer of the
corporation unless such title is assigned to a Chairman of the Board. The
President shall, subject to the direction of the Board of Directors, have
general supervision and control of the business of the corporation. Unless
otherwise provided by the directors, he shall preside at all meetings of the
stockholders and of the Board of Directors (except as provided in Section 3.7
above). The President shall perform such other duties and shall have such other
powers as the Board of Directors may from time to time prescribe.

3.9 VICE PRESIDENTS. Any Vice President shall perform such duties
and possess such powers as the Board of Directors or the President may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.

3.10 SECRETARY AND ASSISTANT SECRETARY. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess
such powers as the Board of Directors, the President or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Secretary, the Assistant Secretary (or if there shall be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.

3.11 TREASURER AND ASSISTANT TREASURER. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer
shall perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds

<PAGE>

and securities of the corporation, to deposit funds of the corporation in
depositories selected in accordance with these Bylaws, to disburse such funds as
ordered by the Board of Directors, to make proper accounts of such funds, and to
render as required by the Board of Directors statements of all such transactions
and of the financial condition of the corporation.

The Assistant Treasurers shall perform such duties and possess
such powers as the Board of Directors, the President or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Treasurer, the Assistant Treasurer (or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.

3.12 CONTROLLER AND ASSISTANT CONTROLLERS. The Controller shall be
the chief accounting officer of the corporation. He shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation in accordance with accepted accounting methods and procedures. He
shall initiate periodic audits of the accounting records, methods and systems of
the corporation. He shall render to the Board of Directors, the Chairman and
the President, as and when required by them, or any of them, a statement of the
financial condition of the corporation.

The Assistant Controllers shall perform such duties and possess
such powers as the Board of Directors, the President or the Controller may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Controller, the Assistant Controller (or if there shall be more than
one, the Assistant Controllers in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Controller.

3.13 BONDED OFFICERS. The Board of Directors may require any officer
to give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors upon such terms and conditions
as the Board of Directors may specify, including without limitation a bond for
the faithful performance of his duties and for the restoration to the
corporation of all property in his possession or under his control belonging to
the corporation.

3.14 SALARIES. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.

ARTICLE 4 - CAPITAL STOCK

4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders
and subject to the provisions of the Certificate of Incorporation, the whole or
any part of any unissued balance of the authorized capital stock of the
corporation held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.

4.2 CERTIFICATES OF STOCK. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or
in the name of the corporation by, the Chairman or Vice-Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a
facsimile.

Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Bylaws, applicable securities laws or any agreement among

<PAGE>

any number of stockholders or among such holders and the corporation shall have
conspicuously noted on the face or back of the certificate either the full text
of the restriction or a statement of the existence of such restriction.

4.3 TRANSFERS. Subject to the restrictions, if any, stated or noted
on the stock certificates, shares of stock may be transferred on the books of
the corporation by the surrender to the corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by
the Certificate of Incorporation or by these Bylaws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these Bylaws.

4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation may
issue a new certificate of stock in place of any previously issued certificate
alleged to have been lost, stolen, or destroyed, upon such terms and conditions
as the Board of Directors may prescribe, including the presentation of
reasonable evidence of such loss, theft or destruction and the giving of such
indemnity as the Board of Directors may require for the protection of the
corporation or any transfer agent or registrar.

4.5 RECORD DATE. The Board of Directors may fix in advance a date as
a record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.

If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the close of business on the day before the day on which notice is given, or,
if notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.

A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

ARTICLE 5 - INDEMNIFICATION

The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, as that Section may be amended and
supplemented from time to time, indemnify any director or officer which it shall
have power to indemnify under the Section against any expenses, liabilities or
other matters referred to in or covered by that Section. The indemnification
provided for in this Article: (i) shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement or
vote of stockholders or disinterested directors or otherwise, both

<PAGE>

as to action in their official capacities and as to action in another capacity
while holding such office; (ii) shall continue as to a person who has ceased to
be a director or officer; and (iii) shall inure to the benefit of the heirs,
executors and administrators of such a person. The corporation's obligation to
provide indemnification under this Article shall be offset to the extent of any
other source of indemnification or any otherwise applicable insurance coverage
under a policy maintained by the corporation or any other person.

Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware.

To assure indemnification under this Article of all such persons who
are determined by the corporation or otherwise to be or to have been
``fiduciaries'' of any employee benefit plan of the corporation which may exist
from time to time, such Section 145 shall, for the purposes of this Article, be
interpreted as follows: an ``other enterprise'' shall be deemed to include such
an employee benefit plan, including, without limitation, any plan of the
corporation which is governed by the Act of Congress entitled ``Employee
Retirement Income Security Act of 1974,'' as amended from time to time; the
corporation shall be deemed to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed ``fines''; and action taken or omitted by a
person with respect to an employee benefit plan in the performance of such
person's duties for a purpose reasonably believed by such person to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the corporation.

ARTICLE 6 - GENERAL PROVISIONS

6.1 FISCAL YEAR. Except as from time to time otherwise designated by
the Board of Directors, the fiscal year of the corporation shall end on March
31.

6.2 CORPORATE SEAL. The corporate seal shall be in such form as
shall be approved by the Board of Directors.

6.3 EXECUTION OF INSTRUMENTS. The President, any Vice President, the
Secretary or the Treasurer shall have power to execute and deliver on behalf and
in the name of the corporation any instrument requiring the signature of an
officer of the corporation, except as otherwise provided in these Bylaws, or
where the execution and delivery of such an instrument shall be expressly
delegated by the Board of Directors to some other officer or agent of the
corporation.

6.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to
be given by law, by the Certificate of Incorporation or by these Bylaws, a
waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, cable or any
other available method, whether before, at or after the time stated in such
waiver, or the appearance of such person or persons at such meeting in person or
by proxy, shall be deemed equivalent to such notice.

<PAGE>

6.5 VOTING OF SECURITIES. Except as the directors may otherwise
designate, the President, any Vice President, the Secretary or Treasurer may
waive notice of, and act as, or appoint any person or persons to act as, proxy
or attorney-in-fact for this corporation (with or without power of substitution)
at, any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by this corporation.

6.6 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.

6.7 CERTIFICATE OF INCORPORATION. All references in these Bylaws to
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
These Bylaws are subject to the provisions of the Certificate of Incorporation
and applicable law.

6.8 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum;

(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or

(c) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.

Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.

6.9 SEVERABILITY. Any determination that any provision of these
Bylaws is for any reason inapplicable, illegal or ineffective shall not affect
or invalidate any other provision of these Bylaws.

6.10 PRONOUNS. All pronouns used in these Bylaws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.

ARTICLE 7 - AMENDMENTS

7.1 BY THE BOARD OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, these Bylaws may be altered, amended or repealed
or new Bylaws may be adopted by the

<PAGE>

affirmative vote of a majority of the directors present at any regular or
special meeting of the Board of Directors at which a quorum is present.

7.2 BY THE STOCKHOLDERS. Subject to the provisions of the
Certificate of Incorporation, these Bylaws may be altered, amended or repealed
or new Bylaws may be adopted by the affirmative vote of the holders of at least
66-2/3% of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new bylaws shall have been stated in the notice
of such special meeting.

<PAGE>

CERTIFICATE OF SECRETARY

I hereby certify that:

I am the duly elected and acting Secretary of C. Brewer Homes, Inc., a
Delaware corporation (the "Company"); and

Attached hereto is a complete and accurate copy of the Amended and
Restated Bylaws (the "Bylaws") of the Company as duly adopted by the Board of
Directors at a Meeting held on January 28, 1997 and said Bylaws are presently in
effect.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of the Company this 28th day of January, 1997.

/S/ B. EBEN DALE
_______________________
B. Eben Dale, Secretary

<PAGE>
EXHIBIT 10.56

January 7, 1997

Mr. Seth A. Bakes

3301 Vista Drive

Manhattan Beach, CA 90266

Dear Seth:

Thank you for coming to visit us in Hawaii last week to observe first hand
the operations of C. Brewer Homes, Inc. I believe that you understand and
welcome the challenge of this unique Company and on behalf of the Board of
Directors, I am pleased to offer you the position of President and Chief
Executive Officer of this Corporation under the following terms of employment:

1. Effective January 20, 1997 you would join the Company at a basic salary
of $175,000 which will be increased to $200,000 on July 20, 1997 if the
financial health of the Company improves.

2. Effective April 1, 1997 at the start of the new fiscal year you will
have a MICP guideline opportunity of 40% of basic salary. On October 1,
1997 that MICP guideline will be increased to 50% which will then provide
you with an annual cash compensation opportunity of $300,000 per year.
The target for payout will be the official 1998 Operating Plan which you
will submit as CEO prior to the start of the fiscal year on April 1,
1997. Your Annual Operating Plan must be approved by the Board of
Directors and you will have complete operating responsibilities for the
results of fiscal year 1998 (4/1/97 to 3/31/98).

3. Immediately following your joining the Company, the Board will grant you
an option for 50,000 shares of CBHI stock under the Company's Qualified
Option Plan which means your price will be the market price on the NASDAQ
at the close of business on January 20, 1997. We will grant you another
50,000 share options at the closing market price on the successful
completion of a merger of C. Brewer Homes and another Hawaiian company
that we have discussed. The Company will then grant you another option
for 50,000 shares of CBHI stock when the stock reaches 5 in the market
place, provided this event happens by December 31, 1998. The Company will
grant you another option for 50,000 shares when the stock price reaches
8, provided this event happens by December 31, 1999. The Company will
then grant you another 50,000 shares when the stock price reaches 11
under the same provisions of the CBHI Qualified Option Plan provided this
event happens by December 31, 2000. If the stock reaches 14, before
December 31, 2001, the Company will grant you another option for 50,000
shares. When the stock price reaches 17, the Company will grant you
another 50,000 share option, provided this event takes place before
December 31, 2002. All these shares would be awarded under the CBHI
Qualified Option Plan sometimes referred to as the 1993 Stock
Option/Stock Issuance Plan.

4. The Company will provide a rent free home, owned by Wailuku
Agribusiness, Inc., for one year as the Company is anxious for you to
maximize your CEO effectiveness by living near the central operations of
the Company on Maui.

5. You will be appointed a member of the Board of Directors (without
further compensation) at the first Board meeting following your joining
the Company.

6. You will be eligible for all the standard CBHI corporate benefits
including two weeks vacation after six month's service and four weeks
vacation beginning January 20, 1998. I have asked Kim Peterson to send
you a packet of all the CBHI benefit programs.

7. The Company will pay for moving expenses for you and your family from
Los Angeles to Wailuku, Maui under the standard CBHI relocation policy.

8. As a transition allowance, the Company will pay you one month's salary
immediately upon joining the Company on January 20, 1997.
<PAGE>
9. In the event this new position does not `work out' for you or the
Company within the first year, you will receive six month's salary and
relocation expenses for your family back to California. However, if you
take another position with another company, or if you and the Company
part ways `for cause', this provision will not be valid.

10. The Company will provide an MICP minimum guideline payment of 40% for
the fiscal year 1998 provided the Company has reasonable earnings and
your performance is satisfactory.

11. The Company will pay for normal living expenses (hotel, etc.) until the
Wailuku Agribusiness house is available and the Company will make its
best efforts to make the house available by February 1, 1997.

We trust that this is a competitive offer for you and for the Company whose
balance sheet needs immediate improvement. A very high priority for you will be
the reduction of G and A expense which is too high for the number of homes that
are presently being built and sold. I'm also enclosing an interesting article
entitled KEY ATTRIBUTES FOR THE SUCCESSFUL CEO as I want you to succeed in your
first position as a Chief Executive Officer.

Nearly 37 years ago, I moved my family consisting of a daughter 6, a
daughter 3, and a daughter 6 months, to a new community where I undertook a new
position of leadership. Although it was a total adjustment, it was one of the
best things that ever happened to my career. I had the same experience 21 years
ago when I came to Hawaii to become the CEO of C. Brewer and Company, Limited
when I received an option for `only' 10,000 shares. I know the tasks and
challenges that are ahead of you, but there is no greater satisfaction than
tackling a new difficult challenge and I want to wish you every success. Running
CBHI is a wonderful opportunity and I am confident that you will do a fine job.
Best wishes for your continued success and please sign below to indicate your
acceptance of this generous offer of employment.

Yours very sincerely,

/s/ J.W.A. BUYERS
--------------------------------------

J.W.A. Buyers

JWAB:llm

enclosure

/s/ SETH A. BAKES
- --------------------------------------

Seth A. Bakes

Accepted

<PAGE>
EXHIBIT 10.57

[Letterhead]

January 16, 1997

Mr. J.W.A. Buyers

Chairman of the Board

C. Brewer Homes, Inc.

P.O. Box 1826

Honolulu, Hawaii 96806

Re: Terms of Employment

Dear Doc:

Attached is the original copy of your letter dated January 7, 1997 regarding
the offer of employment and terms of employment. I have signed the letter
indicating my acceptance of the offer and agreement to the terms of employment.

Since I accepted the offer last week via facsimile and expressed my
sentiments then, I will not repeat my thoughts other than to say I will do my
best to ensure that your confidence in me is rewarded.

Since you wrote the letter, we agreed to change the starting date of
employment from January 20 to January 27, 1997. To be consistent and avoid
confusion I think we should also change the terms of employment that refer to or
are based on the starting date. I suggest the following:

Paragraph 1--move the date of the planned salary increase from July 20
to July 27, 1997.

Paragraph 3--move the date of the initial grant of stock option from the
close of business on January 20 to the close of business on January 27,
1997.

Paragraph 6--move the eligibility date for four weeks of vacation from
January 20 to January 27, 1998.

Paragraph 8--move the date of payment of the transition allowance from
January 20 to January 27, 1997.

All the other terms and provisions of your letter dated January 7, 1997
would remain the same.

I think that this should be sufficient. If you agree, please sign below and
send me a copy for my files.

<TABLE>
<S> <C>
Sincerely, Agreed to by:

/s/ SETH A. BAKES /s/ J.W.A. BUYERS
- ------------------------ ------------------------
Seth A. Bakes J.W.A. Buyers
</TABLE>

<PAGE>

EXHIBIT 11.1

C. BREWER HOMES, INC.

STATEMENT REGARDING COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>

Fiscal Year Ended

-------------------------------------------------
March 31, 1997 March 31, 1996 March 31, 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Class A common shares............. 3,087 2,700 2,591
Class B common shares............. 5,245 5,633 5,745
----- -------- -----
Weighted average number of common
shares outstanding........... 8,332 8,333 8,336
----- ----- -----
----- ----- -----
Net income (loss)................. (2,791) (1,467) 1,755
----- ----- -----
----- ----- -----
Earnings (loss) per common share.. $(0.36) $(0.18) $ 0.21
------- ------- ------
------- ------- ------

</TABLE>

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
C. Brewer Homes, Inc. on Form S-8 (File No. 33-75230) of our report dated
June 30, 1997, on our audit of the financial statements and financial
statement schedules of C. Brewer Homes, Inc. as of March 31, 1997 and 1996
and for each of the three years in the period ended March 31, 1997, which report
is included in this Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P

Honolulu, Hawaii
June 30, 1997

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
C. Brewer Homes, Inc. on Form S-3 (File No. 33-88310) of our report dated
June 30, 1997, on our audit of the financial statements and financial
statement schedules of C. Brewer Homes, Inc. as of March 31, 1997 and 1996
and for each of the three years in the period ended March 31, 1997, which report
is included in this Annual Report on Form 10-K.

COOPERS & LYBRAND L.L.P

Honolulu, Hawaii
June 30, 1997

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 147
<SECURITIES> 0
<RECEIVABLES> 794
<ALLOWANCES> 0
<INVENTORY> 34,230
<CURRENT-ASSETS> 147
<PP&E> 336
<DEPRECIATION> 164
<TOTAL-ASSETS> 39,925
<CURRENT-LIABILITIES> 4,290
<BONDS> 0
0
0
<COMMON> 84
<OTHER-SE> 8,632
<TOTAL-LIABILITY-AND-EQUITY> 39,925
<SALES> 14,907
<TOTAL-REVENUES> 14,907
<CGS> 13,216
<TOTAL-COSTS> 13,216
<OTHER-EXPENSES> 863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141
<INCOME-PRETAX> (4,642)
<INCOME-TAX> (1,671)
<INCOME-CONTINUING> (2,971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,971)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)

</TABLE>