SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarter ended
September 30, 1998 Commission File Number 33-24180

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

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

For the quarter ended
September 30, 1998 Commission File Number 33-24180-01

AMFAC/JMB FINANCE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Illinois 36-3611183
(State of organization) (IRS Employer Identification No.)

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

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

See Table of Additional Registrants Below.

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

As of November 12, 1998, all of Amfac/JMB Hawaii L.L.C.'s membership
interest is solely owned by Northbrook Corporation, an Illinois
corporation, and not traded on a public market.

As of November 12, 1998, Amfac/JMB Finance, Inc. had 1,000 shares of Common
Stock outstanding. All such Common Stock is owned by its respective parent
and not traded on a public market.

ADDITIONAL REGISTRANTS (1)

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

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

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

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

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

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

Kaanapali Hawaii 99-0185634 900 North Michigan Avenue
Water Chicago, Illinois 60611
Corporation 312/440-4800

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

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

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

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

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

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

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

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

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . 4

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 26

PART II. OTHER INFORMATION

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 42

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 42

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

AMFAC/JMB HAWAII, L.L.C.

Consolidated Balance Sheets

September 30, 1998 and December 31, 1997
(Dollars in Thousands)
(Unaudited)

SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -----------

A S S E T S
- -----------

Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 21,073 9,115
Receivables-net . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,519 6,743
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,251 61,469
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,316 2,648
-------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 99,159 79,975
-------- --------

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 46,496
-------- --------
Property, plant and equipment:
Land and land improvements. . . . . . . . . . . . . . . . . . . . . . 301,087 262,233
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . 64,407 63,497
Construction in progress. . . . . . . . . . . . . . . . . . . . . . . 1,502 1,035
-------- --------
366,996 326,765
Less accumulated depreciation and amortization. . . . . . . . . . . . 43,176 38,726
-------- --------
323,820 288,039
-------- --------
Deferred expenses, net. . . . . . . . . . . . . . . . . . . . . . . . . 11,106 11,872
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,509 37,863
-------- --------
$471,634 464,245
======== ========

AMFAC/JMB HAWAII, L.L.C.

Consolidated Balance Sheets - Continued

September 30, 1998 and December 31, 1997
(Dollars in Thousands)
(Unaudited)

SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ -----------
L I A B I L I T I E S
- ---------------------

Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,977 6,289
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,831 9,213
Current portion of long-term debt . . . . . . . . . . . . . . . . . . 13,166 11,243
Current portion of deferred income taxes. . . . . . . . . . . . . . . 6,067 4,325
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . 11,867 10,719
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . 46,908 41,789
-------- --------
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . . 161,392 125,290
Accumulated postretirement benefit obligation . . . . . . . . . . . . . 51,735 54,375
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,903 94,312
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . 32,807 34,525
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 72,073 84,151
Certificate of Land Appreciation Notes. . . . . . . . . . . . . . . . . 220,692 220,692
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 686,510 655,134
-------- --------
Commitments and contingencies (notes 2, 3, 4, 6, 7 and 8)

S T O C K H O L D E R 'S E Q U I T Y (D E F I C I T )
- ---------------------------------------------------------

Common stock, no par value; authorized, issued and
outstanding 1,000 shares. . . . . . . . . . . . . . . . . . . . . . . 1 1
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . 14,384 14,384
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . (229,261) (205,274)
-------- --------
Total stockholder's equity (deficit). . . . . . . . . . . . . . (214,876) (190,889)
-------- --------
$471,634 464,245
======== ========

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

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Operations

Three and Nine Months Ended September 30, 1998 and 1997
(Dollars in Thousands)
(Unaudited)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------

Revenue:
Agriculture . . . . . . . . . . . . . . . . . . $ 19,572 17,508 22,999 25,774
Property. . . . . . . . . . . . . . . . . . . . 15,775 13,880 48,672 33,462
-------- -------- -------- --------
35,347 31,388 71,671 59,236
-------- -------- -------- --------
Cost of sales:
Agriculture . . . . . . . . . . . . . . . . . . 20,506 18,530 23,847 25,948
Property. . . . . . . . . . . . . . . . . . . . 14,957 12,117 44,050 28,330
-------- -------- -------- --------
35,463 30,647 67,897 54,278
Operating expenses:
Selling, general and administrative . . . . . . 2,518 2,754 7,791 9,332
Depreciation and amortization . . . . . . . . . 1,632 1,523 4,898 4,572
-------- -------- -------- --------
Total costs and expenses. . . . . . . . . . . . . 39,613 34,924 80,586 68,182

Operating loss. . . . . . . . . . . . . . . . . . (4,266) (3,536) (8,915) (8,946)
-------- -------- -------- --------
Non-operating income (expenses):
Amortization of deferred costs. . . . . . . . . (323) (301) (951) (1,022)
Interest expense. . . . . . . . . . . . . . . . (8,576) (7,431) (24,790) (21,438)
Interest income . . . . . . . . . . . . . . . . 147 206 333 286
-------- -------- -------- --------
(8,752) (7,526) (25,408) (22,174)
-------- -------- -------- --------
Loss before taxes . . . . . . . . . . . . . . (13,018) (11,062) (34,323) (31,120)
-------- -------- -------- --------
Income tax benefit. . . . . . . . . . . . . . . 5,053 4,202 14,101 11,893
-------- -------- -------- --------
Net loss. . . . . . . . . . . . . . . . . . . $ (7,965) (6,860) (20,222) (19,227)
======== ======== ======== ========

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

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 1998 and 1997
(Dollars in Thousands)
(Unaudited)

1998 1997
--------- ---------

Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(20,222) (19,227)
Items not requiring (providing) cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 4,898 4,572
Amortization of deferred costs. . . . . . . . . . . . . . . . . . . . . 951 1,022
Equity in earnings of investments . . . . . . . . . . . . . . . . . . . 75 10
Income tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . (14,101) (11,893)
Deferred interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 650 790
Interest on advances from affiliates. . . . . . . . . . . . . . . . . . 11,275 8,629

Changes in:
Receivables - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,776) (6,825)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,469 21,998
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332 841
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688 511
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (1,853)
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,589
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . (2,821) (3,540)
-------- --------
Net cash used in operating activities . . . . . . . . . . . . . . . (3,816) (3,376)
-------- --------
Cash flows from investing activities:
Property additions. . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,101) (1,945)
Property sales, disposals and retirements - net . . . . . . . . . . . . . 92 29
Investments in joint ventures and partnerships. . . . . . . . . . . . . . -- (359)
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (371) (4,513)
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . (2,187) (583)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . . . (17,567) (7,371)
-------- --------

AMFAC/JMB HAWAII, L.L.C.

Consolidated Statements of Cash Flows - Continued

Nine Months Ended September 30, 1998 and 1997
(Dollars in Thousands)
(Unaudited)

1998 1997
--------- ---------
Cash flows from financing activities:
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (244)
Net (repayments) proceeds of long-term debt . . . . . . . . . . . . . . . 8,514 4,188
Net amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . 24,827 16,628
-------- --------
Net cash provided by financing activities . . . . . . . . . . . . . 33,341 20,572
-------- --------
Net increase in cash and cash equivalents . . . . . . . . . . . . . 11,958 9,825
Cash and cash equivalents, beginning of year. . . . . . . . . . . . 9,115 8,736
-------- --------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . $ 21,073 18,561
======== ========

Supplemental disclosure of cash flow information:
Cash paid for interest (net of amount capitalized). . . . . . . . . . . . $ 15,512 14,229
======== ========
Schedule of non-cash investing and financing activities:
Transfer of property actively held for sale to real estate
inventories and accrued costs relating to real estate sales . . . . . $ 21,251 6,894
======== ========

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

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements

September 30, 1998 and 1997

(Dollars in Thousands)

Readers of this quarterly report should refer to the Company's audited
financial statements for the fiscal year ended December 31, 1997, which are
included in the Company's 1997 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.

(1) BASIS OF ACCOUNTING

Amfac/JMB Hawaii, L.L.C. (the "Company") is a Hawaii limited liability
company. The Company is wholly-owned by Northbrook Corporation
("Northbrook"). The primary business activities of the Company are land
development and sales, golf course management and agriculture. The Company
owns approximately 36,000 acres of land located on the islands of Oahu,
Maui, Kauai and Hawaii in the State of Hawaii. All of this land is held by
the Company's wholly-owned subsidiaries. In addition to its owned lands,
the Company leases approximately 55,000 acres of land used primarily in
conjunction with its agricultural operations. The Company's operations are
subject to significant government regulation.

The Company is the successor to Amfac/JMB Hawaii, Inc. ("A/J Hawaii").

On March 3, 1998, A/J Hawaii was merged (the "Merger") with and into the
Company pursuant to an Agreement and Plan of Merger dated February 27, 1998
by and between A/J Hawaii and the Company (which was then named Amfac/JMB
Mergerco, L.L.C.). The Merger was consummated to change the Company's form
of entity from a corporation to a limited liability company. The Company
was a nominally capitalized limited liability company which was formed on
December 24, 1997, solely for the purpose of effecting the Merger. The
Company succeeded to all the assets and liabilities of A/J Hawaii in
accordance with the Hawaii Business Corporation Act and the Hawaii Uniform
Limited Liability Company Act. In addition, A/J Hawaii, the Company, The
First National Bank of Chicago (the "Trustee") and various guarantors
entered into a Second Supplemental Indenture dated as of March 1, 1998,
pursuant to which the Company expressly assumed all obligations of A/J
Hawaii under the Indenture dated as of March 14, 1989, as amended (the
"Indenture") by and among A/J Hawaii, the Trustee and the guarantors named
therein and the Certificates of Land Appreciation Notes due 2008 Class A
(the "Class A COLAs") and the Certificates of Land Appreciation Notes Class
B (the "Class B COLAs" and, collectively, with the Class A COLAs the
"COLAs"). The Merger did not require the consent of the holders of the
COLAs under the terms of the Indenture. The Company has succeeded to A/J
Hawaii's reporting obligations under the Securities Exchange Act of 1934,
as amended. Unless otherwise indicated, references to the Company prior to
March 3, 1998 shall mean A/J Hawaii and A/J Hawaii's subsidiaries.

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

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

The Company's policy is to consider all amounts held with original
maturities of three months or less in U.S. Government obligations,
certificates of deposit and money market funds (approximately $18,526 and
$5,400 at September 30, 1998 and December 31, 1997, respectively) as cash
equivalents, which approximates market. These amounts include $2,415 and
$2,067 at September 30, 1998 and December 31, 1997, respectively, which
were restricted primarily to fund debt service on long-term debt related to
the acquisition of power generation equipment (see note 4).

As part of the Company's agriculture operations, the Company enters
into commodities futures contracts and options in sugar as deemed
appropriate to reduce the risk of future price fluctuations in sugar. The
sugar futures contracts obligate the Company to make or receive a payment
equal to the net change in value of the contracts at its maturity. The
sugar option contracts permit, but do not require, the Company to purchase
specified numbers of futures contracts at specified prices until the
expiration dates of the contracts. The sugar futures and options contracts
are designated as hedges of the Company's firm sales commitments, are
short-term in nature to correspond to the commitment period, and are
effective in hedging the Company's exposure to changes in sugar prices
during that cycle.

Investments in certain partnerships and joint ventures, if any, over
which the Company exercises significant influence are accounted for by the
equity method. To the extent the Company engages in such activities as a
general partner, the Company is contingently liable for the obligations of
its partnership and joint venture investments.

Project costs associated with the acquisition, development and
construction of real estate projects are capitalized and classified as
construction in progress. Such capitalized costs are not in excess of the
project's estimated fair value, as reviewed periodically or as considered
necessary.

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

For financial reporting purposes, the Company uses the effective
interest rate method and accrued interest on the Certificate of Land
Appreciation Notes due 2008 ("COLAs") at 4% per annum, which is the
"Mandatory Base Interest" (see note 3).

Interest is capitalized to qualifying assets (principally real estate
under development) during the period that such assets are undergoing
activities necessary to prepare them for their intended use. Such
capitalized interest is charged to cost of sales as revenue from the real
estate development is recognized. Interest costs of $538 and $1,235 have
been capitalized for the nine months ended September 30, 1998 and 1997,
respectively.

Net interest received (paid) on contracts that qualify as hedges is
recognized over the life of the contract as an adjustment to interest
income (expense) of the hedged financial instrument.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

The Company and its subsidiaries report their taxes as part of the
consolidated tax return of the Company's parent, Northbrook. The Company
and its subsidiaries have entered into a tax indemnification agreement with
Northbrook that indemnifies the Company and its subsidiaries for
responsibility for all past, present and future federal and state income
tax liabilities (other than income taxes which are directly attributable to
cancellation of indebtedness income caused by the repurchase or redemption
of securities as provided for in or contemplated by the Repurchase
Agreement).

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.

Certain amounts in the 1997 financial statements have been
reclassified to conform to the 1998 presentation.

YEAR 2000

The year 2000 issue is the result of computer programs being written
using two digits rather than four to define a year. Consequently, any
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations
including, among other things, a temporary inability to process
transactions or engage in other normal business activities.

The Company is reviewing its computer systems for year 2000
compliancy. The Company has completed an internal assessment of its
information system technology and currently does not anticipate any
hardware upgrade; however, it had determined a need to upgrade portions of
the Company's software so that its computer systems would function properly
with respect to dates in the year 2000 and thereafter.

The Company has completed an internal review of its accounting, human
resources and payroll applications which are supported by approximately six
different major software vendors. Except for the golf course and water
company division, the Company has received software upgrades for the
financial, human resources and payroll applications and expects to complete
testing and implementation of the new software upgrades by the end of 1998.

The Company has not incurred and does not expect to incur any costs with
respect to the testing and implementation of the software upgrades. The

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

accounting systems at the golf courses and the water company are not yet
year 2000 compliant. The Company currently expects new accounting system
software to be tested and implemented by the end of June 1999 at a cost of
approximately $60 to $80. However, in the event the Company's system
reveals that, contrary to software vendors claims, the system upgrades or
new software are not year 2000 compliant, the Company believes it has the
ability to make the necessary changes through the use of third party
consultants as well as the utilization of internal resources. The Company
does not have an estimate of the length of time which could potentially be
required to make these changes, nor an estimate of the costs involved to
make such changes.

The Company's agriculture operations are testing and reviewing its
operational systems at certain of its plantations. At those locations
where a review has not been performed and/or completed, reviews are
expected to be completed by the end of the first quarter of 1999. The
agriculture operations have also begun identifying and contacting key third
party vendors with whom these operations have a material relationship to
determine their year 2000 readiness and expect to have completed contacting
its key vendors by the end of 1998. If these vendors are not year 2000
compliant or are unsuccessful in their efforts to become year 2000
compliant, a disruption in service and supplies may result in the inability
of the Company to process and deliver its agricultural products to market.
The subsequent loss in revenues might have a material adverse effect on the
financial position of the Company.

The Company's Property operations (which includes the development and
sales activities of the Company's land and the Company's golf course
operations as well as the Company's water operations) are anticipated to
begin testing and review of their operational systems in the fourth quarter
of 1998. Reviews are expected to be completed by the second quarter of
1999. It is intended that key third party vendors with whom these
operations have a material relationship will be contacted by the second
quarter of 1999 to determine their year 2000 readiness. If these vendors
are not year 2000 compliant or are unsuccessful in their efforts to become
year 2000 compliant, a disruption in service and/or supplies may disrupt
the Company's conduct of its real estate activities, golf course operations
and/or its water deliveries. A resulting loss in revenues might have a
material adverse effect on the financial position of the Company.

The Company's transfer agent has been upgrading its computer systems
so that its computer systems will function properly with respect to dates
in the years 2000 and thereafter. The Company's transfer agent anticipates
testing its computer systems in primarily the fourth quarter of 1998. The
Company has no contingency plans in place in the event that the Company's
transfer agent systems upgrades are not year 2000 compliant.

The Company is in the preliminary stages of making an assessment of
its non-information technology systems (such as its telephone, sprinkler
and alarm systems). Efforts will be made to contact the appropriate third
party vendors to determine their year 2000 compliancy. This assessment is
expected to be completed by the end of June 1999. The Company does not
have an estimate of the cost, if any, that may be required to make its non-
information systems year 2000 compliant. In addition, the Company will be
contacting the various banks, insurance companies and state regulatory
agencies with whom the Company has material relationships to determine
their year 2000 readiness. The Company will make efforts to receive
responses from these entities by June 1999.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

If the steps taken by the Company and its vendors to be year 2000
compliant are not successful, the Company could experience various
operational difficulties. These could include, among other things, an
inability to process transactions to the correct accounting period,
difficulties in posting general ledger interfaces, an inability to process
computer-generated checks, bank transactions posted to the wrong periods,
and the failure of scheduling applications which are date sensitive.

The Company currently has no contingency plans in place in the event
it does not complete all phases of the year 2000 compliance program. The
Company plans to continue to monitor the on-going results of the review and
testing phases as well as the status of completion to determine whether
such a plan is necessary.

The foregoing discussion of year 2000 issues and the Company's
responses thereto is based upon information presently known and certain
assumptions and estimates (including those relating to costs and timing of
remediation) currently made by the Company, as well as statements and
representations made to the Company by its third party vendors. There are
various risks that assumptions and estimates made by the Company will not
prove to be correct, that delays in testing or remediation may occur and/or
that significant additional remediation efforts may be required. In
addition, the Company is also relying on the efforts and statements and
representations of third parties, in particular its third party software
vendors. Accordingly, the information concerning the year 2000 issues and
the Company's responses thereto, including the nature, extent, timing and
cost of the Company's remediation efforts, are subject to change and such
changes could be material. In addition, there is no assurance that the
software applications and packages currently believed to be year 2000
compliant will prove to be so after testing.

(2) AMOUNTS DUE TO AFFILIATES - FINANCING

The approximately $15,097 of remaining acquisition-related financing
owed to affiliates had a maturity date of June 1, 1998 and bore interest at
a rate per annum based upon the prime interest rate (8.5% at September 30,
1998), plus 1%.

On June 1, 1995, the Company borrowed $52,000 from Northbrook to
redeem Class A COLAs pursuant to the Redemption Offer (see note 3). The
Company has also borrowed approximately $18,746 and $9,814 during 1996 and
1995, respectively, to fund COLA Mandatory Base Interest payments and other
operational needs. The loans from Northbrook were payable interest only,
matured on June 1, 1998 and carried an interest rate per annum equal to the
prime interest rate plus 2%.

In February 1997 the above noted affiliate loans, along with certain
other amounts due Northbrook, were converted into a new $104,759 ten-year
note payable. The new note is payable interest only and accrues interest at
the prime rate plus 2%. The Company borrowed an additional $16,628 during
1997 and $24,828 during the nine months ended September 30, 1998 to fund
COLA Mandatory Base Interest payments and other operational needs from a
subsidiary of Northbrook under a separate note which is payable interest
only and accrues at the prime rate plus 2%. The total amount due Northbrook
and its subsidiary as of September 30, 1998 was $161,392, which includes
accrued interest of $2,056. Pursuant to the Indenture relating to the
COLAs, the amounts borrowed from Northbrook are considered "Senior
Indebtedness" to the COLAs.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(3) CERTIFICATE OF LAND APPRECIATION NOTES

The COLAs are unsecured debt obligations of the Company. Interest on
the COLAs is payable semi-annually on February 28 and August 31 of each
year. The COLAs mature on December 31, 2008, and bear interest after the
Final Issuance Date (August 31, 1989) at a rate of 10% per annum ("Base
Interest") of the outstanding principal balance of the COLAs on a
cumulative, non-compounded basis, of which 6% per annum is contingent
("Contingent Base Interest") and payable only to the extent of Net Cash
Flow (Net Cash Flow for any period is generally an amount equal to 90% of
the Company's net cash revenues, proceeds and receipts after payment of
cash expenditures, including the Qualified Allowance (as defined) other
than federal and state income taxes and after the establishment by the
Company of reserves) or Maturity Market Value (as defined below). The
Company has not generated a sufficient level of Net Cash Flow to pay
Contingent Base Interest on the COLAs from 1990 through the current date.
Approximately $109,717 of the $117,341 cumulative deficiency of Contingent
Base Interest related to the period from August 31, 1989 (Final Issuance
Date) through September 30, 1998 has not been accrued in the accompanying
consolidated financial statements as the Company believes that it is not
probable at this time that a sufficient level of Net Cash Flow will be
generated in the future or that there will be sufficient Maturity Market
Value (as defined below) as of December 31, 2008 (the COLA maturity date)
to pay such unaccrued Contingent Base Interest. The following table is a
summary of Mandatory Base Interest and Contingent Base Interest for the
nine months ended September 30, 1998 and the year ended December 31, 1997:

1998 1997
-------- --------
Mandatory Base Interest paid. . . . . $ 8,828 8,828
Contingent Base Interest paid . . . . -- --
Cumulative deficiency of Contingent
Base Interest at end of period. . . $117,341 107,411

Net Cash Flow was $0 for 1997 and is expected to be $0 for 1998.

In each calendar year, principal reductions may be made from remaining
Net Cash Flow, if any, in excess of all current and unpaid deferred
Contingent Base Interest and will be made at the election of the Company
(subject to certain restrictions). The COLAs will bear additional
contingent interest in any year, after any principal reduction, equal to
55% of remaining Net Cash Flow. Upon maturity, holders of COLAs will be
entitled to receive the remaining outstanding principal balance of the
COLAs plus unpaid Mandatory Base Interest (4%) plus additional interest
equal to the unpaid Contingent Base Interest, to the extent of the Maturity
Market Value (Maturity Market Value generally means 90% of the excess of
the Fair Market Value (as defined) of the Company's assets at maturity over
its liabilities (including Qualified Allowance, but only to the extent
earned and payable from Net Cash Flow generated through maturity) at
maturity, which liabilities have been incurred in connection with its
operations), plus 55% of the remaining Maturity Market Value.

On March 14, 1989, Amfac/JMB Finance, Inc. ("AJF"), a wholly-owned
subsidiary of Northbrook, and the Company entered into an agreement (the
"Repurchase Agreement") concerning AJF's obligations to repurchase, on
June 1, 1995 and 1999, the COLAs upon request of the holders thereof. The
COLAs were issued in two units consisting of one Class A and one Class B
COLA. As specified in the Repurchase Agreement, the repurchase of the
Class A COLAs may have been requested by the holders of such COLAs on
June 1, 1995 at a price equal to the original principal amount of such
COLAs ($.5) minus all payments of principal and interest allocated to such

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

COLAs. The cumulative interest paid per Class A COLA through June 1, 1995
was $.135. The repurchase of the Class B COLAs may be requested of AJF by
the holders of such COLAs on June 1, 1999 at a price equal to 125% of the
original principal amount of such COLAs ($.5) minus all payments of
principal and interest allocated to such COLAs. Northbrook Corporation,
the parent of the Company, is currently working to generate sufficient
funds to meet the maximum potential repurchase obligation. Although there
can be no assurance that these efforts will be successfully completed, the
Company is hopeful that the funds necessary to meet the repurchase
obligations will be raised. Failure to meet the repurchase obligations
could lead to a claim against AJF and, in turn, Northbrook. As of
September 30, 1998, the cumulative interest paid per Class A and Class B
COLA was approximately $.205 and $.205, respectively.

On March 14, 1989, Northbrook entered into a keep-well agreement with
AJF, whereby it agreed to contribute sufficient capital or make loans to
AJF to enable AJF to meet its COLA repurchase obligations described above.
Notwithstanding AJF's repurchase obligations, the Company may elect to
redeem any COLAs requested to be repurchased at the specified price.

On March 15, 1995, pursuant to the indenture that governs the terms of
the COLAs (the "Indenture"), the Company elected to offer to redeem (the
"Redemption Offer") all Class A COLAs from the registered holders at the
same price as would be required of Finance under the Repurchase Agreement,
thereby eliminating Finance's obligation to satisfy the Class A COLA
repurchase options requested by such holders as of June 1, 1995. Pursuant
to the Redemption Offer, and in accordance with the terms of the Indenture,
the Company was therefore obligated to purchase any and all Class A COLAs
submitted pursuant to the Redemption Offer at a price of $.365 per Class A
COLA. In conjunction with the Company's Redemption Offer, the Company made
a tender offer (the "Tender Offer") to purchase up to approximately $68,000
principal value of the Class B COLAs at a price of $.220 per Class B COLA
from COLA holders electing to have their Class A COLAs repurchased.
Approximately 229,000 Class A COLAs were submitted for repurchase
pursuant to the Redemption Offer and approximately 99,000 Class B COLAs
were submitted for repurchase pursuant to the Tender Offer, requiring an
aggregate payment by the Company of approximately $105,450 on June 1, 1995.

The Company used its available cash to purchase Class B COLAs pursuant to
the Tender Offer and borrowed $52,000 from Northbrook to purchase Class A
COLAs pursuant to the Redemption Offer. As of September 30, 1998, the
Company had approximately 156,000 Class A COLAs and approximately 286,000
Class B COLAs outstanding, with a principal balance of approximately
$78,000 and $143,000, respectively.

As a result of the COLA repurchases in 1995, the Company retired
approximately $164,045 in face value of COLA debt and recognized a
financial statement gain in 1995 of approximately $32,544 (net of income
taxes of $20,807, the write-off of deferred financing costs of $10,015, the
write-off of accrued Contingent Base Interest of $5,667 and expenses of
$894). Such gain was treated as cancellation of indebtedness income for tax
purposes and, accordingly, the income taxes related to the Class A
Redemption Offer (approximately $9,106) were not indemnified by the tax
agreement with Northbrook (see note 1).

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

On January 30, 1998, Amfac Finance Limited Partnership ("Amfac
Finance"), an Illinois limited partnership and an affiliate of the Company
extended a Tender Offer to Purchase (the "Class B Tender Offer") up to
approximately $65,421 Principal amount of Separately Certificated Class B
COLAs ("Separate Class B COLAs") for cash at a unit price of $.375 to be
paid by Amfac Finance on each Separate Class B COLA on or about March 24,
1998. The maximum cash to be paid under the Class B Tender Offer was
approximately $49,066 (130,842 Separate Class B COLAs at a unit price of
$.375 for each separate Class B COLA). Approximately 62,857 Separate Class
B COLAs were submitted to Amfac Finance for repurchase pursuant to the
Class B Tender Offer requiring an aggregate payment by Amfac Finance of
approximately $23,571 on March 31, 1998. The Class B Tender Offer did not
reduce the outstanding indebtedness of the Company. The Separate Class B
COLAs purchased by Amfac Finance pursuant to Class B Tender Offer remain
outstanding pursuant to the terms of the Indenture that governs the terms
of the COLAs (the "Indenture"). Except as provided in the last sentence of
this paragraph, Amfac Finance will be entitled to the same rights and
benefits of any other holder of Separate Class B COLAs, including having
the ability to have AJF to repurchase on June 1, 1999, the Separate Class B
COLAs that it owns. Amfac Finance has not yet determined whether it will
require AJF to so repurchase the Separate Class B COLAs which it will own
on such date. Since Amfac Finance is an affiliate of the Company, Amfac
Finance will not be able to participate in determining whether the holders
of the required principal amount of debt under the Indenture have concurred
in any direction, waiver or consent under the terms of the Indenture.

As a result of the Class B Tender Offer, the Company recognized $7,850
of taxable gain in accordance with income tax regulations for certain
transactions with affiliates. Such gain is treated as cancellation of
indebtedness income for income tax purposes only, and accordingly, the
income taxes related to the Class B Tender Offer (approximately $3,062)
will be indemnified by Northbrook through the tax agreement (note 1).

On October 23, 1998, Amfac Finance extended a Tender Offer to Purchase
(the "Tender Offer") up to approximately $22,500 Principal amount of
Jointly Certified Class A and B COLAs (together "COLA Units") for cash at a
unit price of $.460 to be paid by Amfac Finance on each COLA Unit on or
about December 23, 1998. The maximum cash to be paid under the Tender
Offer is approximately $10,350 (22,500 COLA Units at a unit price of $.460
for each COLA Unit). (The Tender Offer will not reduce the outstanding
indebtedness of the Company.) The COLA Units purchased by Amfac Finance
pursuant to Tender Offer will remain outstanding pursuant to the terms of
the Indenture. Except as provided in the last sentence of this paragraph,
Amfac Finance will be entitled to the same rights and benefits of any
holder of COLA Units, including having the ability to have AJF to
repurchase on June 1, 1999, the COLA Units that it owns. Amfac Finance has
not yet determined whether it will require AJF to so repurchase the COLA
Units which it will own on such date. Since Amfac Finance is an affiliate
of the Company, Amfac Finance will not be able to participate in
determining whether holders of the required principal amount of debt under
the Indenture have concurred in any direction, waiver or consent under the
terms of the Indenture.

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

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(4) LONG-TERM DEBT

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

In April 1996, the Company reached an agreement to amend the loan with
the ERS, extending the maturity date for five years. In exchange for the
loan extension, the ERS received the right to participate in the "Net
Disposition Proceeds" (as defined) related to the sale or refinancing of
the golf courses or at the maturity of the loan. The ERS share of the Net
Disposition Proceeds increases from 30% through September 30, 1997, to 40%
for the period from July 1, 1997 to June 30, 1999 and to 50% thereafter.
The loan amendment effectively adjusted the interest rate as of January 1,
1995 to 9.5% until June 30, 1996. After June 30, 1996, the loan bears
interest at a rate per annum equal to 8.73%. The loan amendment requires
the Company to pay interest at the rate of 7% for the period from
January 1, 1995 to June 30, 1996, 7.5% from July 1, 1996 to June 30, 1997,
7.75% from July 1, 1997 to June 30, 1998 and 8.5% thereafter ("Minimum
Interest"). The Company made payments through September 30, 1998 and 1997
totaling $3,825 and $3,699, respectively, which represents the Minimum
Interest due. Accrued Minimum Interest as of September 30, 1998 was $1,414.

The scheduled Minimum Interest payments are paid quarterly on the principal
balance of the $66,000 loan. The difference between the accrued interest
expense and the Minimum Interest payment accrues interest and is payable on
an annual basis from excess cash flow, if any, generated from the Kaanapali
Golf Courses. The accrued interest payable from excess cash flow was
$6,988 as of September 30, 1998. Although the outstanding loan balance
remains nonrecourse, certain payments and obligations, such as the Minimum
Interest payments and the ERS's share of appreciation, if any, are recourse
to the Company. However, the Company's obligations to make future Minimum
Interest payments and to pay the ERS a share of appreciation would be
terminated if the Company tendered an executed deed to the golf course
property to the ERS in accordance with the terms of the amendment.

In January 1993, The Lihue Plantation Company, Limited ("Lihue")
obtained a ten-year $13,250 loan used to fund the acquisition of Lihue's
power generation equipment. The $13,250 loan, constituting "Senior
Indebtedness" under the COLAs' Indenture, consists of two ten-year
amortizing term loans of $10,000 and $3,250, respectively, payable in forty
consecutive installments commencing July 1, 1993 in the principal amount of
$250 and $81, respectively (plus interest). The remaining balance of the
$3,250 loan was fully repaid in January 1997. The $10,000 loan has an
outstanding balance of $3,862 as of September 30, 1998 and bears interest
at a rate equal to prime rate (8.5% at September 30, 1998) plus three and
one half percent. Lihue has purchased an interest rate agreement which
protects against fluctuations in interest rates and effectively caps the
prime rate at eight percent for the first seven years of the loan
agreement. The loan is secured by the Lihue power generation equipment,
sugar inventories and receivables, certain other assets and real property
of the Company and has limited recourse to the Company and certain other
subsidiaries.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

In October 1993, Waikele Golf Club, Inc. ("WGCI"), a wholly-owned
subsidiary of the Company that owns and operates the Waikele Golf Course,
obtained a five year $20,000 loan facility from two lenders. The loan
consisted of two $10,000 amortizing loans. Each loan bore interest only
for the first two years and interest and principal payments based upon an
assumed 20 year amortization period for the remaining three years. The
loans bore interest at prime plus 1/2% and LIBOR (5.660% at September 30,
1998) plus 3%, respectively. In February 1997, WGCI entered into an amended
and restated loan agreement with the Bank of Hawaii, whereby the
outstanding principal amount of the loan was increased to $25,000, the
maturity date was extended to February 2007, the interest rate was changed
to LIBOR plus 2% until the fifth anniversary and LIBOR plus 2.5% thereafter
and principal is to be repaid based on a 30-year amortization schedule. The
loan is secured by WGCI's assets (the golf course and related improvements
and equipment), is guaranteed by the Company, and is considered "Senior
Indebtedness" (as defined in the Indenture relating to the COLAs). As of
September 30, 1998, the outstanding principal balance was $24,607, with
scheduled remaining annual principal maturities of $60 in 1998, $248 in
1999 through 2006 and the balance of $22,563 in 2007.

In December 1996, Amfac Property Development Corp. ("APDC"), a wholly-
owned subsidiary of the Company, obtained a $10,000 loan facility from a
Hawaii bank. The loan is secured by a mortgage on property under
development at the mill-site of Oahu Sugar (the sugar plantation was closed
in 1995), and is considered "Senior Indebtedness" (as defined in the
Indenture relating to the COLAs). The loan bears interest at the bank's
base rate (8.5% at September 30, 1998) plus .5% and matures on December 1,
1998. In November 1998, APDC sold certain mill-site property which served
as collateral for the $10,000 City Bank loan for an approximate sales price
of $7,690 in cash plus 2% of the gross sales price of subsequent parcel
sales of all or any portion of the property by the purchaser. The bank
required $6,000 of the sales proceeds as a principal reduction on the loan
in order to release the collateral. APDC received a one-year extension on
the $4,000 remaining balance of the loan which is secured by another parcel
at the mill-site. The extended loan bears interest at the bank's base rate
(8.5% at September 30, 1998) plus 1.25% and matures on December 1, 1999.

In September 1998, Amfac Property Investment Corporation. ("APIC"), a
wholly-owned subsidiary of the Company, purchased Tobishima Pacific, Inc.'s
("TPI") 50% ownership interest in the 96-acre beachfront parcel commonly
referred to as Kaananpali North Beach for $12,000. APIC paid $2,400 in
cash and signed a note for $9,600. The note is secured by a mortgage on
the property in favor of TPI and is considered "Senior Indebtedness" (as
defined in the Indenture relating to the COLAs). The note is payable in
five annual installments in the principal amount of $1,920 beginning in
September 1999. The note bears interest of 8.5% and is payable quarterly
beginning in December 1998.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(5) SEGMENT INFORMATION

Agriculture and Property comprise separate industry segments of the
Company. Operating Income-Other consists primarily of unallocated overhead
expenses and Total Assets-Other consists primarily of cash and deferred
expenses. Total assets at the balance sheet dates and capital
expenditures, operating income (loss) and depreciation and amortization
during the nine months ended September 30, 1998 and 1997 are set forth
below by each industry segment:

September 30, December 31,
1998 1997
------------ ------------

Total Assets:
Agriculture . . . . . . . . . . . . . $202,964 222,693
Property. . . . . . . . . . . . . . . 240,220 222,745
Other . . . . . . . . . . . . . . . . 28,450 18,807
-------- --------

$471,634 464,245
======== ========

Nine Months Ended
September 30,
------------------------
1998 1997
-------- --------
Capital Expenditures:
Agriculture . . . . . . . . . . . . . $ 1,519 1,474
Property. . . . . . . . . . . . . . . 13,582 458
Other . . . . . . . . . . . . . . . . -- 13
-------- --------
$ 15,101 1,945
======== ========

Operating income (loss):
Agriculture . . . . . . . . . . . . . $ (4,603) (3,562)
Property. . . . . . . . . . . . . . . (2,302) (2,237)
Other . . . . . . . . . . . . . . . . (2,010) (3,147)
-------- --------
$ (8,915) (8,946)
======== ========

Depreciation and amortization:
Agriculture . . . . . . . . . . . . . $ 3,320 2,953
Property. . . . . . . . . . . . . . . 1,574 1,574
Other . . . . . . . . . . . . . . . . 4 45
-------- --------
$ 4,898 4,572
======== ========

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(6) TRANSACTIONS WITH AFFILIATES

With respect to any calendar year, JMB Realty Corporation ("JMB"), an
affiliate of the Company, or its affiliates may receive a Qualified
Allowance in an amount equal to: (i) approximately $6,200 during each of
the calendar years 1989 through 1993, and (ii) thereafter, 1-1/2% per annum
of the Fair Market Value (as defined) of the gross assets of the Company
and its subsidiaries (other than cash and cash equivalents and Excluded
Assets (as defined)) for providing certain advisory services for the
Company. The aforementioned advisory services, which are provided pursuant
to a 30-year Services Agreement entered into between the Company, certain
of its subsidiaries and JMB in November 1988, include making
recommendations in the following areas: (i) the construction and
development of real property; (ii) land use and zoning changes; (iii) the
timing and pricing of properties to be sold; (iv) the timing, type and
amount of financing to be incurred; (v) the agricultural business; and,
(vi) the uses (agricultural, residential, recreational or commercial) for
the land. However, the Qualified Allowance shall be earned and paid for
each year prior to maturity of the COLAs only if the Company generates
sufficient Net Cash Flow to pay Base Interest to the holders of the COLAs
for such year of an amount equal to 8% of the average outstanding principal
balance of the COLAs for such year; any portion of the Qualified Allowance
not paid for any year shall cumulate without interest and JMB or its
affiliates shall be paid such amount with respect to any succeeding year,
after the payment of all Contingent Base Interest for such year, to the
extent of 100% of remaining Net Cash Flow until an amount equal to 20% of
the Base Interest with respect to such year has been paid, and thereafter,
to the extent of the product of (a) remaining Net Cash Flow, multiplied by
(b) a fraction, the numerator of which is the cumulative deficiency as of
the end of such year in the Qualified Allowance and the denominator of
which is the sum of the cumulative deficiencies as of the end of such year
in the Qualified Allowance and Base Interest. A Qualified Allowance for
1989 of approximately $6,200 was paid on February 28, 1990. Approximately
$64,489 of Qualified Allowance related to the period from January 1, 1991
through December 31, 1997 has not been earned and paid, and is payable only
from future Net Cash Flow. Accordingly, because the Company does not
believe it is probable at this time that a sufficient level of Net Cash
Flow will be generated in the future to pay Qualified Allowance, the
Company has not accrued for any Qualified Allowance in the accompanying
consolidated financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to the provision
of these advisory services. The Company believes that using an incremental
cost methodology is reasonable. The following table is a summary of the
Qualified Allowance for the year ended December 31, 1997:

1997
--------
Qualified Allowance calculated. . . . . $ 10,082
Qualified Allowance paid. . . . . . . . --
Cumulative deficiency of Qualified
Allowance at end of year . . . . . . . $ 64,489

The Qualified Allowance for 1998, which will not be calculated until
the year is completed, is not expected to be paid. Net Cash Flow was $0 for
1997 and is expected to be $0 for 1998.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

After the maturity date of the COLAs, JMB will continue to provide
advisory services pursuant to the Services Agreement, the Qualified
Allowance for such years will continue to be 1-1/2% per annum of the Fair
Market Value of the gross assets of the Company and its subsidiaries and
the Qualified Allowance will continue to be payable from the Company's Net
Cash Flow. Upon the termination of the Services Agreement, if there has
not been sufficient Net Cash Flow to pay the cumulative deficiency in the
Qualified Allowance, if any, such amount would not be due or payable to
JMB.

The Company, its subsidiaries, and their joint ventures reimburse
Northbrook, JMB and their affiliates for direct expenses incurred on their
behalf, including salaries and salary-related expenses incurred in
connection with the management of the Company's or its subsidiaries' and
the joint ventures' operations. The total of such costs was approximately
$495 for the nine months ended September 30, 1998 and approximately $600
for the nine months ended September 30, 1997. As of September 30, 1998,
the amount due Northbrook totaled $1,102 related to these costs. In
addition, as of September 30, 1998, the current portion of amounts due to
affiliates includes $9,106 of income tax payable related to the Class A
COLA Redemption Offer (see note 3). Also, the Company pays a non-
accountable reimbursement of approximately $30 per month to JMB or its
affiliates in respect of general overhead expense, all of which was paid as
of September 30, 1998.

JMB Insurance Agency, Inc. earns insurance brokerage commissions in
connection with providing the placement of insurance coverage for certain
of the properties and operations of the Company. Such commissions are
comparable to those available to the Company in similar dealings with
unaffiliated third parties. The total of such commissions for the nine
months ended September 30, 1997 was approximately $657 and approximately
$605 for the nine months ended September 30, 1998, all of which was paid as
of September 30, 1998.

Northbrook and its affiliates allocate certain charges for services to
the Company based upon the estimated level of services. Such charges
totaled $658 and $733 for the nine months ended September 30, 1998 and
September 30, 1997, respectively. The affiliated charges for the nine
months ended September 30, 1998 were offset by $6 of charges for services
provided by the Company for Northbrook. As of September 30, 1998, on a net
basis, the amount due Northbrook totaled approximately $1,616 related to
these services. These services and costs are intended to reflect the
Company's separate costs of doing business and are principally related to
the inclusion of the Company's employees in the Northbrook pension plan,
payment of severance and termination benefits and reimbursement for
insurance claims paid on behalf of the Company. All amounts described
above, deferred or currently payable, do not bear interest and are expected
to be paid in future periods.

In February 1997 the affiliate loans (see Note 2), along with certain
other amounts due Northbrook, were converted into a new $104,759 ten-year
note payable. The new note is payable interest only and accrues interest at
the prime rate plus 2%. The Company borrowed an additional $16,628 during
1997 and $24,828 during the nine months ended September 30, 1998 to fund
COLA Mandatory Base Interest payments and other operational needs from a
subsidiary of Northbrook under a separate note which is payable interest
only and accrues at the prime rate plus 2%. In October 1997, the Company

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

repaid $7,000 of the amount due the affiliate. In connection with such
affiliated loans, the Company incurred interest expense of approximately
$8,629 for the nine months ended September 30, 1997 and approximately
$11,275 for the nine months ended September 30, 1998. The total amount due
Northbrook and its subsidiary as of September 30, 1998 was $161,392, which
includes accrued interest of $2,056. Pursuant to the Indenture relating to
the COLAs, the amounts borrowed from Northbrook are considered "Senior
Indebtedness" to the COLAs.

(7) EMPLOYEE BENEFIT PLANS

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

(8) COMMITMENTS AND CONTINGENCIES

The Company is involved in various matters of litigation and other
claims. Management, after consultation with legal counsel, is of the
opinion that the Company's liability (if any), when ultimately determined,
will not have a material adverse effect on the Company's financial
position.

The Company's Property segment had contractual commitments (related to
project costs) of approximately $3,203 as of September 30, 1998.
Additional development expenditures are dependent upon the Company's
ability to obtain financing for such costs and on the timing and extent of
property development and sales.

As of September 30, 1998, certain portions of the Company's land not
currently under development or used in sugar operations are mortgaged as
security for approximately $6,235 of performance bonds related to property
development.

AMFAC/JMB HAWAII, L.L.C.

Notes to Consolidated Financial Statements - Continued

(Dollars in Thousands)

(9) INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1997 are as follows:

Deferred tax (assets):
Postretirement benefits . . . . . . . . . . . . . $ (21,206)
Interest accruals . . . . . . . . . . . . . . . . (3,021)
Other accruals. . . . . . . . . . . . . . . . . . (3,274)
---------

Total gross deferred tax assets . . . . (27,501)
---------

Deferred tax liabilities:
Accounts receivable, related to profit on
sales of sugar. . . . . . . . . . . . . . . . . 3,960
Inventories, principally due to sugar production
costs, capitalized costs, capitalized interest
and purchase accounting adjustments. . . . . . (1,422)
Plant and equipment, principally due to
depreciation and purchase accounting
adjustments . . . . . . . . . . . . . . . . . . 8,759
Land and land improvements, principally
due to purchase accounting adjustments. . . . . 84,004
Deferred gains, due to installment sales
for income tax purposes . . . . . . . . . . . . 7,456
Investments in unconsolidated entities,
principally due to purchase accounting
adjustments . . . . . . . . . . . . . . . . . . 13,220
---------
Total deferred tax liabilities. . . . . 115,977
---------

Net deferred tax liability. . . . . . . $ 88,476
=========

(10) ADJUSTMENTS

In the opinion of the Company, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation have been
made to the accompanying figures as of September 30, 1998 and for the nine
months ended September 30, 1998 and 1997.

AMFAC/JMB FINANCE, INC.

Balance Sheets

September 30, 1998 and December 31, 1997

(Dollars in thousands, except per share information)

(Unaudited)

A s s e t s
-----------

September 30, December 31,
1998 1997
------------- ------------

Cash. . . . . . . . . . . . . . . . $ 1 1
======== ========

L i a b i l i t y a n d S t o c k h o l d e r ' s E q u i t y
-------------------------------------------------------------------

Repurchase obligation (note 2)

Common stock, $1 par value;
authorized, issued and
outstanding - 1,000 shares. . . . $ 1 1
========= ========

The accompanying notes are an integral part of these balance sheets.

AMFAC/JMB FINANCE, INC.

Notes to the Balance Sheets

(Unaudited)

(Dollars in Thousands)

(1) ORGANIZATION AND ACCOUNTING POLICY

Amfac/JMB Finance, Inc. ("AJF") was incorporated November 7, 1988 in
the State of Illinois. AJF has had no financial operations. All of the
outstanding shares of AJF are owned by Northbrook Corporation
("Northbrook").

(2) KEEP-WELL AGREEMENT

On March 14, 1989, Northbrook entered into a keep-well agreement with
AJF, whereby it agreed to contribute sufficient capital or make loans to
AJF to enable AJF to meet the COLA repurchase obligations described below
in note 3.

On March 15, 1995, pursuant to the indenture that governs the terms of
the COLAs (the "Indenture"), Amfac/JMB Hawaii, L.L.C. elected to exercise
its right to redeem, and therefore was obligated to purchase, any and all
Class A COLAs submitted pursuant to the June 1, 1995 Redemption Offer at a
price of $.365 per Class A COLA. Pursuant to Amfac/JMB Hawaii, L.L.C.'s
election to redeem the Class A COLAs for repurchase, Amfac/JMB Hawaii,
L.L.C. assumed AJF's maximum amount of its liability from the June 1, 1995
COLA repurchase obligation of $140,425.

(3) REPURCHASE OBLIGATION

On March 14, 1989, AJF and a subsidiary of Northbrook (Amfac/JMB
Hawaii, L.L.C.) entered into an agreement (the "Repurchase Agreement")
concerning AJF's obligation (on June 1, 1995 and 1999) to repurchase, upon
request of the holders thereof, the Certificate of Land Appreciation Notes
due 2008 ("COLAs"), to be issued by Amfac/JMB Hawaii, L.L.C. in conjunction
with the acquisition of Amfac/JMB Hawaii, L.L.C. A total aggregate
principal amount of $384,737 of COLAs were issued during the offering,
which terminated on August 31, 1989. The COLAs were issued in two units
consisting of one Class A and one Class B COLA. As specified in the
Repurchase Agreement, the repurchase of the Class A COLAs may have been
requested of AJF by the holders of such COLAs on June 1, 1995 at a price
equal to the original principal amount of such COLAs ($.500) minus all
payments of principal and interest allocated to such COLAs. The cumulative
interest paid per Class A COLA through June 1, 1995 was $.135. The
repurchase of the Class B COLAs may be requested of AJF by the holders of
such COLAs on June 1, 1999 at a price equal to 125% of the original
principal amount of such COLAs ($.500) minus all payments of principal and
interest allocated to such COLAs. Northbrook Corporation, the parent of the
Company, is currently working to generate sufficient funds to meet the
maximum potential repurchase obligation. Although there can be no
assurance that these efforts will be successful, the Company is hopeful
that the funds necessary to meet the repurchase obligations will be raised.

Failure to meet the repurchase obligation could lead to a claim against
Finance and, in turn, Northbrook. To date, the cumulative interest paid per
Class A and Class B COLA is approximately $.205 and $.205, respectively.

PART I. FINANCIAL INFORMATION

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

General

A significant portion of the Company's cash needs result from the
nature of the real estate development business, which requires a
substantial investment in preparing development plans, seeking land
urbanization and other governmental approvals and completing infrastructure
improvements prior to sale. Additionally, the Company's sugar operations
incur a large cash deficit during the first half of the year ranging from
$10 to $20 million. This seasonal cash need is due to the sugar
plantation's operating costs being incurred fairly ratably during the year,
while most of the revenues are received between May and December concurrent
with raw sugar deliveries to C&H. In addition to seasonal cash needs, in
many years cash flow from sugar operations has been negative requiring a
net cash investment to fund the operating deficits and any capital costs.
Other significant cash needs include overhead expenses, debt service and
the obligation to repurchase Class B COLAs on June 1, 1999.

The Company believes that additional borrowings from Northbrook
Corporation ("Northbrook") will be necessary to meet its short-term and
long-term liquidity needs. Northbrook has made such borrowings available to
the Company in the past and intends to make such borrowings available, at
least in the short-term. However, there is no assurance that Northbrook
will have sufficient funds, or that Northbrook will continue to make such
funds available to the Company.

In recent years, the Company has funded its cash requirements
primarily through the use of long-term financings, borrowings from
Northbrook and revenues generated from the development and sale of its
properties. Significant short-term cash requirements relate to the funding
of agricultural deficits, interest expenses, costs to process the SMA
permit for North Beach, development costs on Oahu and Maui and overhead
expenses. At September 30, 1998, the Company had cash and cash equivalents
of approximately $21.1 million. The Company intends to use its cash
reserves, land sales proceeds and proceeds from new financings or joint
venture arrangements to meet its short-term liquidity requirements.
However, there can be no assurance that new financings can be obtained or
property sales consummated. The Company's land holdings on Maui and Kauai
are its primary sources of future land sale revenues. However, due to
current market conditions, the difficulty in obtaining land use approvals
and the high development costs of required infrastructure, the Company does
not believe that it will be able to generate significant amounts of cash in
the short-term from the development of these lands. As a result, the
Company is marketing for sale certain unentitled agricultural and
conservation parcels.

The Company has placed a relatively large portion of its land holdings
on the market to generate cash to finance the Company's operations, to meet
debt service requirements and to raise cash should the holders exercise
their right to sell back to the Company their Class B COLAs on June 1,
1999. The Company has approximately 2,000 acres on Kauai of land currently
listed for sale. Additionally, the Company expects to list another 300 to
400 acres on Maui and another 400 to 500 acres on Kauai before year end.
These lands consist primarily of unentitled, agricultural and conservation
parcels. Significant interest has been expressed in many of these parcels
and some are under contract for sale for aggregate sales prices exceeding
$6 million. However, these contracts often have due diligence investigation
periods which allow the purchasers to terminate the agreements. It is
difficult to predict how successful the Company will be in selling these
lands at acceptable prices.

During the first nine months of 1998, the Company generated
approximately $31.3 million of land sales of which $16 million came from
the sale of the 6,700 acre Kealia parcel in June 1998. The Company has
received $5.5 million in cash at closing from the sale of the Kealia
parcel; the remaining $10.5 million is payable (pursuant to the terms of a
first mortgage note) in three equal installments due in late 1998 and early
1999. The 740-acre Olowalu parcel on Maui closed in September 1998 for a
sales price of $9.6 million, paid in cash at closing. The Company was able
to lease back approximately 600 acres of the mauka ("towards the
mountains") portion of Olowalu for its agricultural operations. While the
Company is pursuing other bulk parcel sales, there can be no assurances
that any such sales will be consummated. Additionally, the Company
generated $3.8 million of land sales related to Kaanapali Golf Estates and
$1.9 million primarily from the sale of unentitled agricultural and
conservation land parcels on Kauai and Hawaii.

During all of 1997, the Company generated approximately $21.2 million
of land sales, of which $4.8 million came from land related to Kaanapali
Golf Estates on Maui, $5.2 million from the four remaining oceanfront
residential lots at Kai Ala Place on Maui and $7.4 million was from the
sale of unentitled, agricultural and conservation land parcels on Kauai and
the Big Island of Hawaii.

The Company continues to implement certain cost savings measures and
to defer certain development costs and capital expenditures for longer-term
projects. The Company's Property segment expended approximately $10.1
million in project costs during 1997 and anticipates expending
approximately $10.3 million in project costs during 1998. As of
September 30, 1998, contractual commitments related to project costs
totaled approximately $3.2 million.

In early March 1997, the Company restructured its operations into the
following six separate operating divisions: Sugar, Golf, Coffee, Water,
Land Management and Real Estate Development. The Company also formed a
corporate services division to provide accounting, MIS, human resources,
tax and other administrative services for the six operating groups. The
Company believes it will operate more effectively as several smaller
entrepreneurial-minded divisions. Approximately four percent(4%) of the
Company's total employees were released as part of the restructuring, which
has resulted in annual payroll savings of approximately $1.1 million. The
Company incurred termination costs of approximately $0.6 million related to
the restructuring during the first quarter of 1997. At December 31, 1997,
the Company and its subsidiaries employed 845 persons.

In February 1998, the Company announced the relocation of the
headquarters for its real estate development division from Honolulu to
Kaanapali, Maui. Due to poor market conditions on Kauai and a shortage of
land inventory on Oahu, the focus of the Company's land development
operations is expected to be on Maui. In connection with the office re-
location, four executives and one administrative person resigned their
positions with the Company. These changes are expected to result in one-
time termination and relocation costs of $.5 million during 1998. Annual
recurring cost savings are expected to be approximately $.7 million from
lower compensation, rent and other employee-related costs. The Company has
recently hired a new president, a Maui resident, for the land development
operations. The Company is currently organizing a local management team
for the Maui development office which the Company believes will be more
effective in coordinating its planning and entitlement efforts, and in
dealing with and responding to community concerns.

The sugar industry in Hawaii has experienced significant difficulties
for a number of years. Growers in Hawaii have long struggled with high
costs of production, which have led to the closure of many plantations,
including Oahu Sugar Company. Transportation costs of raw sugar to the C&H
refinery are also significant. Over the years, the Company has implemented
numerous cost reduction and consolidation plans.

After lengthy negotiations with the union, the union membership at the
Kauai plantation ratified a two year contract which included a 10%
reduction in wages for one year as well as other concessions. The union
membership at Pioneer Mill ratified a three year contract which included a
9% reduction in wages for one year as well as other concessions. Although
the concessions will have a meaningful, positive impact on current
operations, they do not provide the type of structural changes necessary to
provide for long-term profitability and a secure future for the Company's
sugar operations.

The Company is currently completing the 1998 harvest campaign.
Decisions regarding the future of the Company's sugar operation will be
made this fall during the Company's normal planning and budgeting process
after taking into account the actual 1998 operating results and forecasts
for the upcoming year. There can be no assurances that the Company will
continue with sugar production in the future.

Changes in the price of raw sugar impact the level of agricultural
deficits, and as a result the annual cash needs of the Company. Although
government legislation is currently in place (through 2002) that sets a
target price range for raw sugar, it is possible that such legislation
could be amended or repealed resulting in a reduction in the price of raw
sugar. Such a reduction could cause the Company to evaluate the shutdown
of its sugar plantations.

Company management cannot accurately predict the actual cost of a
potential shutdown as there are a significant number of factors that would
impact the actual cost including the exact timing of the shutdown,
potential environmental issues, the market and pricing for the sale of the
plantation's field and mill equipment and employee termination costs which
are subject to negotiation with the union. Other significant unknowns
relate to the costs associated with terminating the power sale agreements
with the local utility companies.

If the Company's sugar production decreases, the Company's water needs
will also decrease. Subject to significant regulatory restrictions, excess
water may be used for other purposes and the Company is exploring
alternative uses for such water. Waiahole Irrigation Company, Limited
("WIC") is a wholly-owned subsidiary of the Company and owns and operates a
water collection and transmission system commonly referred to as the
"Waiahole Ditch" (a series of tunnels and ditches constructed in the early
1900's). The Waiahole Ditch has the capacity to transport approximately 27
million gallons of water per day from the windward part of Oahu to the
central Oahu plain leeward of the Ko'olau mountain range. This water was
used by the Company's Oahu Sugar operations from the early 1900s until
1995, when the plantation was closed.

After the closure of Oahu Sugar, WIC negotiated a collective agreement
with several farms and golf courses (the "Users") to deliver irrigation
water to them for a fee. However, to consummate these agreements, water
permits (the "Water Permits") were applied for from the State of Hawaii
Water Commission (the "Water Commission"). The Water Commission issued a
final decision in December 1997 relating to the Water Permits which allowed
only about one-half of the capacity of the Waiahole Ditch to be transported
through the system. The continued operation of the Waiahole Ditch and
receipt of the delivery fees (from the agreement with the Users) were
predicated upon an allocation (from the Water Commission) at or near the
capacity of the Waiahole Ditch. When the lower allocation was received,
WIC terminated the agreement with the Users. Currently, water is delivered
to the Users on a month-to-month basis at the fees originally included in
the agreement.

After several months of discussions with prospective purchasers, the
Company reached an agreement with the State of Hawaii pursuant to which the
State will purchase the stock or substantially all of the assets of WIC for
$8.5 million (which includes 450 acres of conservation land). The purchase
was subject to state legislative approval which was obtained in May 1998.
Closing remains conditional upon other factors. The purchase agreement has
been further extended after an initial expiration on October 3, 1998. If
the sale is not consummated, WIC will then decide whether to re-negotiate
the fee for delivery of water through the system. Finally, if improvements
cannot be made in either the pricing or volume of Waiahole Ditch water, WIC
will consider reducing or terminating the operations of the Waiahole Ditch.

Such a closure or limitation of the Waiahole Ditch would not have a
material adverse effect on the Company's financial condition or on its
results of operations.

The Company is currently negotiating with a potential buyer for the
sale of its water utility business on West Maui, the Kaanapali Water
Corporation.

The Company has received a commitment of $1.5 million in federal
funding under the Rural Economic Transition Assistance - Hawaii program.
The Company has identified various new agricultural crops in which these
"matching funds" are to be used by the Company.

During the first nine months of 1998, cash increased by approximately
$12 million from December 31, 1997. Net cash used in operating activities
of $3.8 million and in investing activities of $17.6 million was primarily
provided by $24.8 million of long-term financing proceeds from Northbrook
and $9.6 million of additional debt related to the acquisition of Tobishima
Pacific, Inc.'s (TPI's) 50% ownership interest in the 96 acre parcel at
North Beach (as discussed below) partially offset by principal loan
repayments on other long-term debt of approximately $1.1 million.

During the first nine months of 1998, net cash flow used in operating
activities was $3.8 million, as compared to net cash used in operating
activities of $3.4 during the first nine months of 1997. The $.4 million
increase in cash flow used in operating activities during the first nine
months of 1998 as compared to the first nine months of 1997 was due
primarily to a $10 million increase in receivables related to the sale of
land parcels of Kealia of approximately $10.5 million offset in part by (i)
the $8.5 million decrease in inventory primarily due to increased land
sales for the first nine months of 1998 as compared to the first nine
months of 1997 and (ii) a $1.5 decrease in cash used in operating
activities for accrued expenses for the first nine months of 1998 compared
to the first nine months of 1997.

During the first nine months of 1998, net cash flow used in investing
activities was $17.6 million as compared to $7.4 million during the first
nine months of 1997. The $10.2 million increase in net cash used in
investing activities was principally due to (i) an increase in property
additions of $13.2 million primarily due to the acquisition of TPI's 50%
ownership interest in North Beach (as discussed below) and (ii) a decrease
of $4.1 million in other assets during the first nine months of 1998
primarily due to the reclassification of a note receivable recorded in
connection with a prior year land sale from noncurrent to current. The
note which is due in 1999, has an outstanding balance of approximately $1.1
million and is classified in current receivables at September 30, 1998.

During the first nine months of 1998, net cash flow provided by
financing activities increased to $33.3 million from $20.6 million during
the first nine months of 1997. The $12.7 million increase is due primarily
to (i) an increase in net advances by affiliates totaling $24.8 million
during the first nine months of 1998 as compared to $16.6 million during
the first nine months of 1997 (see Note 4) and (ii) $9.6 million of
additional debt related to the acquisition of TPI's 50% ownership interest
in the 96 acre parcel of North Beach compared to $5.0 million of additional

long-term financing primarily related to the loan secured by the golf
course owned by WGCI in the first nine months of 1997. These amounts were
also partially offset by $1.1 million and $.8 million of principal loan
repayment on long-term debt in the first nine months of 1998 and 1997,
respectively.

COLA RELATED OBLIGATIONS. AJF and the Company are parties to the
Repurchase Agreement pursuant to which AJF is obligated to repurchase the
Class B COLAs tendered by the holders thereof on June 1, 1999. Northbrook
agreed pursuant to the Keep-Well Agreement to contribute sufficient
capital or make loans to AJF to enable AJF to meet the COLA repurchase
obligations, if any, described above. Notwithstanding AJF's repurchase
obligations, the Company may elect to redeem any COLAs requested to be
repurchased at the specified price.

The Company and its parent, Northbrook, are currently working to
generate sufficient funds to meet the maximum potential repurchase
obligation. Although there can be no assurances that these efforts will be
successful, the Company is hopeful that the funds necessary to meet the
repurchase obligations will be raised. Failure to meet the repurchase
obligations could lead to a claim against AJF and, in turn, Northbrook.

The COLAs were issued in units consisting of one Class A COLA and one
Class B COLA. The repurchase of the Class B COLAs on June 1, 1999 may be
required of AJF by the holders of such COLAs at a price equal to 125% of
the original principal amount of such COLAs ($500) minus all payments of
principal and interest allocated to such COLAs. As of December 31, 1997,
the Company had approximately 156,000 Class A COLAs units and approximately
286,000 Class B COLAs units outstanding, with a principal balance of
approximately $78 million and $143 million, respectively. The Company
estimates that assuming only 4% per annum interest payments ("Mandatory
Base Interest") is paid that the redemption price for the Class B COLAs at
June 1, 1999 would be approximately $410 per unit. Therefore, the maximum
potential repurchase obligation would be $117.3 million. At March 31,
1998, the cumulative interest paid per Class A COLA unit and Class B COLA
unit was approximately $205 and $205, respectively.

On January 30, 1998, Amfac Finance Limited Partnership ("Amfac
Finance"), an Illinois limited partnership and an affiliate of the Company
extended a tender offer to purchase (the "Class B Tender Offer") up to
$65.4 million principal amount of separately Certificated Class B COLAs
("Separate Class B COLAs") for cash at a unit price of $375 to be paid by
Amfac Finance on each Separate Class B COLA on or about March 24, 1998.
The maximum cash to be paid under the Class B Tender Offer is $49.0 million
(130,842 Separate Class B COLAs at a unit price of $375 each).
Approximately 62,857 Separate Class B COLAs were submitted to Amfac Finance
for repurchase pursuant to the Class B Tender Offer requiring an aggregate
payment by Amfac Finance of approximately $23.6 million on March 31, 1998.
The Class B Tender Offer will not reduce the outstanding indebtedness of
the Company. The Separate Class B COLAs to be purchased by Amfac Finance
pursuant to the Class B Tender Offer will remain outstanding pursuant to
the terms of the Indenture. Except as provided in the last sentence of
this paragraph, Amfac Finance will be entitled to the same rights and
benefits of any other holder of Class B COLAs, including having the right
to have AJF repurchase on June 1, 1999, the separate Class B COLAs that it
owns. Amfac Finance has not yet determined whether it will require AJF to
repurchase its separate Class B COLAs. Because Amfac Finance is an
affiliate of the Company, Amfac Finance will not be able to participate in
determining whether the holders of the required principal amount of debt
under the Indenture have concurred in any direction, waiver or consent
under the terms of the Indenture.

As a result of the Class B Tender Offer, the Company recognized $7.9
million of taxable gain in accordance with income tax regulations for
certain transactions with affiliates. Such gain is treated as cancellation
of indebtedness income for income tax purposes only, and accordingly, the
income taxes related to the Class B Tender Offer (approximately $3.1
million) will be indemnified by Northbrook through the tax agreement
(note 1).

On October 23, 1998, Amfac Finance extended a Tender Offer to Purchase
(the "Tender Offer") up to approximately $22.5 million Principal amount of
Jointly Certified Class A and B COLAs (together "COLA Units") for cash at a
unit price of $460 to be paid by Amfac Finance on each COLA Unit on or
about December 23, 1998. The maximum cash to be paid under the Tender
Offer is approximately $10.4 million (22,500 COLA Units at a unit price of
$460 for each COLA Unit). (The Tender Offer will not reduce the
outstanding indebtedness of the Company.) The COLA Units purchased by
Amfac Finance pursuant to Tender Offer will remain outstanding pursuant to
the terms of the Indenture that governs the terms of the COLAs (the
"Indenture"). Except as provided in the last sentence of this paragraph,
Amfac Finance will be entitled to the same rights and benefits of any
holder of COLA Units, including having the ability to have AJF to
repurchase on June 1, 1999, the COLA Units that it owns. Amfac Finance has
not yet determined whether it will require AJF to so repurchase the COLA
Units which it will own on such date. Since Amfac Finance is an affiliate
of the Company, Amfac Finance will not be able to participate in
determining whether holders of the required principal amount of debt under
the Indenture have concurred in any direction, waiver or consent under the
terms of the Indenture.

Pursuant to the terms of the Indenture relating to the COLAs, the
Company is required to maintain a Value Maintenance Ratio (defined in the
Indenture) of 1.05 to 1.00. Such ratio is equal to the relationship of the
Company's Net Asset Value to the sum of: (i) the outstanding principal
amount of the COLAs, (ii) any unpaid Base Interest, and (iii) the
outstanding principal balance of any Indebtedness incurred to redeem COLAs
(the "COLA Obligation"). Net Asset value represents the excess of the Fair
Market Value (as defined in the Indenture) of the gross assets of the
Company over the liabilities of the Company other than the COLA obligations
and certain other liabilities. The COLA Indenture requires the Company to
obtain independent appraisals of the fair market value of the gross assets
used to calculate the Value Maintenance Ratio as of December 31 in each
even-numbered calendar year.

The Company has received independent appraisals indicating that the
appraised value of substantially all of its gross assets as of December 31,
1996, was approximately $653 million. Based upon the appraisals, the
Company was able to meet the Value Maintenance Ratio as of December 31,
1996. As of December 31, 1997, the Fair Market Value of the gross assets
of the Company was determined by Company management. It should be noted
that pursuant to the Indenture the concept of Fair Market Value is intended
to represent the value that an independent arm's-length purchaser, seeking
to utilize such asset for its highest and best use would pay, taking into
consideration the risks and benefits associated with such use or
development, current restrictions on development (including zoning
limitations, permitted densities, environmental restrictions, restrictive
covenants, etc.) and the likelihood of changes to such restrictions;
provided, however, that with respect to any Fair Market Value determination
of all of the assets of the Company, such assets shall not be valued as if
sold in bulk to a single purchaser. Although the Company believes the value
of certain of its assets as of December 31, 1997, may be lower than their
value one year earlier, the Company believes that the values were
sufficient to be in compliance with the Value Maintenance Ratio. The
Company is currently appraising the value of its gross assets and
anticipates that such value may be lower than

in previous years. Although the Company expects that the values will be
sufficient to be in compliance with the Value Maintenance Ratio on
December 31, 1998, there can be no assurance that such ratio will be met.
There can be no assurance that the Company will be able to sell its real
estate assets for their aggregate appraised value. Because of the size and
diversity of the real estate holdings of the Company and the uncertainty of
the Hawaii real estate market, it is likely that it would take a
considerable period of time for the Company to sell its assets. In recent
years, the Company has sold some of its real estate for less than their
appraised value to meet cash needs. In addition, the aggregate value of the
Company's assets could be negatively affected by the recent financial
difficulties in Southeast Asia and Japan.

The Company uses the effective interest method and as such interest on
the COLAs is accrued at the Mandatory Base Interest rate (4% per annum).
The Company has not generated a sufficient level of Net Cash Flow to pay
Contingent Base Interest (interest in excess of 4%) on the COLAs (see
Note 3) from 1990 through 1997. Contingent Base Interest through 2008 is
payable only to the extent of Net Cash Flow. Net Cash Flow for any period
is generally an amount equal to 90% of the Company's net cash revenues,
proceeds and receipts after payment of cash expenditures, excluding federal
and state income taxes and after the establishment by the Company of
reserves. At December 31, 2008, Contingent Base Interest may also be
payable to the extent of Maturity Market Value. Maturity Market Value
generally means 90% of the excess of the Fair Market Value of the Company's
assets at maturity over its liabilities (including Qualified Allowance
(described in the next paragraph), but only to the extent earned and
payable from Net Cash Flow generated through maturity) at maturity.
Approximately $109.7 million of the $117.3 million cumulative deficiency of
Contingent Base Interest related to the period from August 31, 1989 (Final
Issuance Date) through September 30, 1998 has not been accrued in the
accompanying consolidated financial statements as the Company believes
that it is not probable at this time that a sufficient level of Net Cash
Flow will be generated in the future or that there will be sufficient
Maturity Market Value as of December 31, 2008 (the COLA maturity date) to
pay any such unaccrued Contingent Base Interest. The following table is a
summary of Mandatory Base Interest and Contingent Base Interest for the
nine months ended and the year ended December 31, 1997 (dollars are in
millions):

1998 1997
-------- --------

Mandatory Base Interest paid. . . . . . . . . $ 8.8 8.8
Contingent Base Interest paid . . . . . . . . --
Cumulative deficiency of Contingent
Base Interest at end of year. . . . . . . . $ 117.3 107.4

Net Cash Flow was $0 for 1997 is expected to be $0 for 1998.

With respect to any calendar year, JMB or its affiliates may receive a
Qualified Allowance in an amount equal to 1.5% per annum of the Fair Market
Value of the gross assets of the Company (other than cash and cash
equivalents and certain other types of assets as provided for in the
Indenture) for providing certain advisory services to the Company. The
aforementioned advisory services, which are provided pursuant to a 30-year
Services Agreement entered into between the Company and JMB Realty
Corporation ("JMB"), an affiliate of the Company, in November 1988, include
making recommendations in the following areas: (i) the construction and
development of real property; (ii) land use and zoning changes; (iii) the
timing and pricing of properties to be sold; (iv) the timing, type and
amount of financing to be incurred; (v) the agricultural business; and (vi)
the uses (agricultural, residential, recreational or commercial) for the
land. However, the Qualified Allowance shall be earned and paid for each
year prior to maturity of the COLAs only if the Company generates
sufficient Net Cash Flow to pay Mandatory and Contingent Base Interest for

such year in an amount equal to 8% . Any portion of the Qualified Allowance
not paid for any year shall cumulate without interest and JMB or its
affiliates shall be paid such deferred amount in succeeding years, only
after the payment of all Contingent Base Interest for such succeeding year
and then, only to the extent that Net Cash Flow exceeds levels specified in
the Indenture.

A Qualified Allowance for 1989 of approximately $6.2 million was paid
on February 28, 1990. Approximately $64.5 million of Qualified Allowance
related to the period from January 1, 1990 through December 31, 1997 has
not been earned and paid, and is payable only to the extent that future Net
Cash Flow is sufficient. Accordingly, because the Company does not believe
it is probable at this time that a sufficient level of Net Cash Flow will
be generated in the future to pay the Qualified Allowance, the Company has
not accrued for any Qualified Allowance payments in the accompanying
consolidated financial statements. JMB has informed the Company that no
incremental costs or expenses have been incurred relating to the provision
of these advisory services. The Company believes that using an incremental
cost methodology is reasonable. The following table is a summary of the
Qualified Allowance for the year ended December 31, 1997 (dollars are in
millions):

1997
--------

Qualified Allowance calculated. . . . . . . . $ 10.1
Qualified Allowance paid. . . . . . . . . . . --
Cumulative deficiency of Qualified
Allowance at end of year. . . . . . . . . . $ 64.5

After the maturity date of the COLAs, JMB will continue to provide
advisory services pursuant to the Services Agreement, the Qualified
Allowance for such years will continue to be 1.5% per annum of the Fair
Market Value of the gross assets of the Company and its subsidiaries and
the Qualified Allowance will continue to be payable from the Company's Net
Cash Flow. Upon the termination of the Services Agreement, if there has
not been sufficient Net Cash Flow to pay the cumulative deficiency in the
Qualified Allowance, if any, such amount would not be due or payable to
JMB.

Upon maturity, holders of COLAs will be entitled to receive the
remaining outstanding principal balance of the COLAs plus unpaid Mandatory
Base Interest plus additional interest equal to the unpaid Contingent Base
Interest, to the extent of the Maturity Market Value (Maturity Market Value
generally means 90% of the excess of the Fair Market Value (as defined) of
the Company's assets at maturity over its liabilities (including Qualified
Allowance, but only to the extent earned and payable from Net Cash Flow
generated through maturity) at maturity, which liabilities have been
incurred in connection with its operations), plus 55% of the remaining
Maturity Market Value.

RESULTS OF OPERATIONS

GENERAL:

The Company and its subsidiaries report its taxes as a part of the
consolidated tax return for Northbrook. The Company and its subsidiaries
have entered into a tax indemnification agreement with Northbrook, which
indemnifies the Company and its subsidiaries for responsibility for all
past, present and future federal and state income tax liabilities (other
than income taxes which are directly attributable to cancellation of
indebtedness income caused by the repurchase or redemption of securities as
provided for in or contemplated by the Repurchase Agreement).

Current and deferred taxes have been allocated to the Company as if
the Company were a separate taxpayer in accordance with the provisions of
SFAS No. 109 - Accounting for Income Taxes. However, to the extent the tax
indemnification agreement does not require the Company to actually pay
income taxes, current taxes payable or receivable (excluding income taxes
which are directly attributable to cancellation of indebtedness income
caused by the repurchase or redemption of securities as provided for in or
contemplated by the Repurchase Agreement) have been reflected as deemed
contributions to additional paid-in capital or distributions from retained
earnings (deficit) in the accompanying consolidated financial statements.
As such, the deferred income tax liabilities reflected on the Company's
consolidated balance sheet are not expected to result in cash payments by
the Company.

YEAR 2000

The Company has not incurred and does not expect to incur any costs with
respect to the testing and implementation of the software upgrades. The
accounting systems at the golf courses and the water company are not yet
year 2000 compliant. The Company currently expects new accounting system
software to be tested and implemented by the end of June 1999 at a cost of
approximately $60,000 to $80,000. However, in the event the Company's
system reveals that, contrary to software vendors claims, the system
upgrades or new software are not year 2000 compliant, the Company believes
it has the ability to make the necessary changes through the use of third
party consultants as well as the utilization of internal resources. The
Company does not have an estimate of the length of time which could
potentially be required to make these changes, nor an estimate of the costs
involved to make such changes.

The Company's agriculture operations are testing and reviewing its
operational systems at certain of its plantations. At those locations
where a review has not been performed and/or completed, reviews are
expected to be completed by the end of the first quarter of 1999. The
agriculture operations have also begun identifying and contacting key third
party vendors with whom these operations have a material relationship to
determine their year 2000 readiness and expect to have completed contacting
its key vendors by the end of 1998. If these vendors are not year 2000
compliant or are unsuccessful in their efforts to become year 2000
compliant, a disruption in service and supplies may result in the inability
of the Company to process and deliver its agricultural products to market.
The subsequent loss in revenues may have a material adverse effect on the
financial position of the Company.

The Company is in the preliminary stages of making an assessment of
its non-information technology systems (such as its telephone, sprinkler
and alarm systems). Efforts will be made to contact the appropriate third
party vendors to determine their year 2000 compliancy. This assessment is
expected to be completed by the end of June 1999. The Company does not have
an estimate of the cost, if any, that may be required to make its non-
information systems year 2000 compliant. In addition, the Company will be
contacting the various banks, insurance companies and state regulatory
agencies with whom the Company has material relationships to determine
their year 2000 readiness. The Company will make efforts to receive
responses from these entities by June 1999.

Selling, general and administrative costs deceased for the three and
nine months ended September 30, 1998 as compared to the three and nine
months ended September 30, 1997 due primarily to payroll savings associated
with the Company's restructuring in early 1997.

Interest expense increased for the three and nine months ended
September 30, 1998 as compared to the three and nine months ended
September 30, 1997 due to additional affiliated financing.

AGRICULTURE SEGMENT:

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

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

As part of the Company's agriculture operations, the Company enters
into commodities futures contracts and options in raw sugar as deemed
appropriate to reduce the risk of future price fluctuations. These futures
contracts and options are accounted for as hedges and, accordingly, gains
and losses are deferred and recognized in cost of sales as part of the
production cost.

During the first nine months of 1998, agriculture revenues were $23.0
million as compared to $25.8 million in the first nine months of 1997.

Agricultural revenues and cost of sales increased for the three months
ended September 30, 1998 as compared to the three months September 30, 1997
while agricultural revenues and costs of sales decreased for the nine
months ended September 30, 1998 as compared to the nine months ended
September 30, 1997 due primarily to the timing of sugar production and
related sales as a result of the delay of the sugar harvest season
attributable to the timing of the sugar union negotiations and contract
ratification. The delay in the sugar harvest resulted in a higher level of
sugar sales for the three months ended September 30, 1998 as compared to
the same three month period in 1997 while the decrease in sugar sales for
the nine months ended September 30, 1998 as compared to the same period for
1997 was due to the decrease in tons produced. For the nine months ended
September 30, 1998, the Company sold approximately 57,905 tons of sugar, a
14.7% decrease over the same period in 1997. The average price of sugar
sold for the nine months ended September 30, 1998 of approximately $358
represents a .3% decrease over the average price for the nine months ended
September 30, 1997. The Company harvested approximately 6,980 and 9,201
acres for the nine months ended September 30, 1998 and 1997, respectively.

For the three months ended September 30, 1998, the Company sold
approximately 50,052 tons of sugar, a 7.3% increase over the same period in
1997. The average price of sugar sold for the three months ended September
30, 1998 of approximately $358 represents a .5% decrease over the average
price for the three months ended September 30, 1997. The Company harvested
approximately 5,316 and 5,424 acres for the three months ended
September 30, 1998 and 1997, respectively.

The operating loss of $4.6 million in the first nine months of 1998 as
compared to the $3.7 million in the first nine months of 1997 was due
primarily to higher cost of sales per ton of approximately 2%.

PROPERTY SEGMENT:

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

Revenues increased to $48.7 million during the first nine months of
1998 from $33.5 million during the first nine months of 1997. Property
revenues include revenues from land sales of approximately $31.3 million
and $16.3 million for the first nine months of 1998 and 1997, respectively,
and revenues from the operations of the three golf courses owned by the
Company of approximately $11.2 million and $11.8 million for the first nine
months of 1998 and 1997. Land sales included revenues for the nine months
ended September 30, 1998 of approximately $16 million from the sale of the
6,700 area Kealia parcel on Kauai, $9.6 million from the sale of the 740-
acre Olowalu parcel on Maui, $3.8 million of land sales related to
Kaanapali Golf Estates and $1.9 million primarily from the sale of
unentitled agricultural and conservation land parcels on Kauai and Hawaii.
The Company has received $5.5 million of the $16 million Kealia parcel
sales proceeds and the remaining $10.5 million is payable (pursuant to the
terms of a first mortgage note) in three equal installments due in late
1998 and early 1999.

During the first nine months of 1998, property cost of sales were
$44.1 million as compared to $28.3 million in the first nine months of
1997. The $15.8 million increase in costs was due primarily to an increase
in sales volume associated with land parcels sold (as discussed above).

Property sales and cost of sales increased for the three and nine
months ended September 30, 1998 as compared to the three and nine months
ended September 30, 1997 due to higher sales volume. Operating income
deteriorated slightly primarily due to slightly lower margins realized on
property sold during 1998 offset in part by lower general and
administrative expenses.

(a) Maui

In general, the development of the Company's land on Maui is expected
to be long-term in nature. As Maui is less populated than Oahu and more
dependent on the resort/tourism industry, much of the Company's land is
intended for resort and resort-related uses. Due to overall economic
conditions and trends in tourism, demand for these land uses has been weak.
The Company's homesite inventory on Maui, which is targeted to the second
home buyer, has experienced slower sales activity over the past five years
than originally expected. The Company's competitors on Maui have also
experienced slow sales activity. The Company is continuing to evaluate its
plans and the timing of development of its land holdings in light of the
current weak market demand and the capital resources needed for future
development.

The Company has determined that the focus of its development efforts
should be on its Kaanapali/Honokowai land holdings (approximately 3,200
acres) on Maui. Although additional governmental approvals are required
for most of these lands, approximately 900 acres of the Company's
Kaanapali/Honokowai land holdings already have some form of entitlements.
Due to the strong market appeal of the Kaanapali Beach Resort, the Company
believes its development efforts are best concentrated in this area where
it has certain development approvals already secured.

The Company's Kahoma and Launiupoko properties (in total approximately
8,000 acres) are considered to be better suited in the near term for
agricultural uses and possibly for lower density, more rural developments.
To generate cash, the Company has decided to sell certain portions of these
land holdings as unentitled parcels, and may consider selling additional
portions of these lands based upon market conditions and the cash needs of
the Company. The Company expects to list another 300 to 400 acres on Maui
before the end of this year.

KAANAPALI GOLF ESTATES. The Company is marketing Kaanapali Golf
Estates ("KGE"), a residential community that is part of the Kaanapali
Beach Resort on West Maui. KGE is divided into several parcels and is
approved for 340 homesites of which the Company through individual and bulk
sales has sold approximately 90 homesites. In May 1997, the Company
obtained final subdivision approval for a 32-lot subdivision of one such
parcel, referred to as "Parcel 17B". The Company commenced on-site
construction of the subdivision improvements for Parcel 17B in August 1997
and completed these improvements in March 1998 at a cost of approximately
$1.7 million. During 1997, the Company generated approximately $2.8
million from the sale of 18 lots at Parcel 17B and approximately $2.0
million from the sale of the remaining 6 lots in a nearby parcel referred
to as Parcel 14. For the nine months ended September 30, 1998, the Company
generated $2.0 million from the sale of twelve lots at Parcel 17B. One
additional lot was sold in October 1998 and there is currently one lot
available. In May 1998, the Company sold Parcel 18, an 18-lot subdivision
in KGE, in bulk for $1.8 million.

KAI ALA PLACE. In 1995, the Company subdivided an oceanfront parcel
commonly known as Kai Ala Place into six single family homesites of
approximately one acre each. Two of the lots were sold in 1995 generating
sales proceeds of approximately $4.1 million. The remaining four lots were
sold in 1997 as a package to a local developer for a "package" price of
$5.2 million.

NORTH BEACH. The Company has received the final county approval
needed to develop the Kaanapali Ocean Resort ("KOR"), the Company's 280
unit time share project. The Company has completed the purchase of
Tobishima Pacific, Inc.'s ("TPI") 50% ownership interest in the 96-acre
beachfront parcel commonly referred to as Kaanapali North Beach. The
Company and TPI were unable to agree on key operating decisions related to
the development KOR and the future development plan for the entire North
Beach property. To break the deadlock on these issues, the Company
exercised a buy/sell option with a $12 million stated price and TPI elected
to sell its interest. The Company financed 80% of the purchase price for
TPI's interest in North Beach and signed a note and first mortgage in favor
of TPI for $9.6 million. The note is payable in five equal, annual
principal installments beginning in September 1999 and with interest at
8.5% is payable quarterly beginning in December 1998. To obtain final
approval for the planned development of the 280-unit KOR, the Company filed
an application for a special management area use permit with the County of
Maui ("SMA Permit") in March 1997. The Maui Planning Commission held
hearings in mid-October 1998 on the Company's SMA Permit application and
final action by the Commission was taken on or about October 27, 1998,
granting the Company the necessary approvals to proceed with KOR. Although
this project may provide substantial long-term benefits, the Company does
not expect significant net cash flow over the next few years from this
project.

In connection with the SMA Permit for KOR, the Company signed a
settlement agreement with certain Maui citizens who were opposing the
project in "contested case hearings". Additionally, several opposing
citizens who did not enter into the settlement agreement signed letters
agreeing to withdraw from the contested case hearings. The Company
submitted the settlement agreement to the Maui Planning Commission in
October 1998, which assisted the Company in getting a favorable vote from
the Commission on the project. Key provisions of the settlement agreement
include a new 10-acre public recreational area on North Beach, a maximum
limit of 1,950 units density on North Beach (versus the existing 3,200
units) and a requirement to implement certain drainage improvements
associated with the development of the Company's remaining Kaanapali lands.

Concurrent with construction of KOR, the Company plans to begin
construction of improvements for a 13-acre public park at Wainee, Maui.
The park land and improvements will be donated by the Company to the County
of Maui.

In February 1997, the Company formed a limited partnership with an
affiliate of an experienced time-share development and management company.
Kaanapali Ownership Resorts L.P., the new limited partnership, is owned 85%
by affiliates of the Company and 15% by Kaanapali Partners Limited
Partnership, an affiliate of the owners of The Ridge Tahoe resort in
Nevada. Construction plans for KOR are expected to be finalized late this
year, and construction is expected to start in early spring 1999. The
Company is working with various lenders to obtain construction and other
financing for KOR. Sales of time share intervals are scheduled to begin
during the summer of 1999.

In September 1997, the Company and Tobishima entered into an agreement
with Maui County providing the County with the option to purchase 33 acres
at North Beach (separate from the Site) for $15 million. In connection
with receiving the SMA permit for KOR, the Company agreed to extend the
option for a period of six to twelve months and to provide alternative park
sites for the County's consideration. Specifically, the County could
decide to purchase a smaller portion of the original 33 acre option site
for the original per acre purchase price. Alternatively, the County could
decide to purchase 17 acres located directly to the south of the original
option site again for the original per acre purchase price. The Company
will work directly with the new County administration and council on this
option.

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

PUUKOLII VILLAGE. The Company has regulatory approval to develop a
project known as "Puukolii Village", on approximately 249 acres which is
also located near Kaanapali Beach Resort. A significant portion of this
project will be affordable housing. Development of most of Puukolii Village
cannot commence until after completion of the planned Lahaina/Kaanapali
bypass highway. The proposed development of Puukolii Village is
anticipated to satisfy the Company's affordable housing requirements in
connection with its Kaanapali/Honokowai land use entitlements. For the
portion of Puukolii Village that is not dependent upon completion of the
Lahaina/Kaanapali bypass highway, the Company has unsuccessfully attempted
to sell several residential parcels to home builders and multi-family
residential developers. Until such time that an acceptable agreement can
be reached with a housing developer, limited funds will be expended on
infrastructure (including an access road) for Puukolii Village.

In connection with certain of the Company's land use approvals on
Maui, the Company has agreed to provide employee and affordable housing and
to participate in the funding of the design and construction of the planned
Lahaina/Kaanapali bypass highway. The Company has entered into an agreement
with the State of Hawaii Department of Transportation covering the
Company's participation in the design and construction of the bypass
highway. In conjunction with state urbanization of the Company's Kaanapali
Golf Estates project, the Company committed to spend up to $3.5 million,
(of which approximately $.8 million has been spent as of June 30, 1998)
toward the design of the highway. Due to lengthy delays by the State in the
planned start date for the bypass highway, the Company recently funded
approximately $1.0 million for the engineering and design of the widening
(from 2 to 4 lanes) of the existing highway through the Kaanapali Beach
Resort. The Company believes this $1.0 million can be credited against the
$3.5 million commitment discussed above. The Company's remaining commitment
of another $6.7 million for the construction of the bypass highway is
subject to the Company obtaining future entitlements on Maui and the actual
construction of the bypass highway. The development and construction of
the bypass highway is expected to be a long-term project that will not be
completed until the year 2004 or later.

(b) Oahu

In 1997, the Company began developing the 64 acres of fee simple land
it owns at the Oahu Sugar mill-site. The Company has received county zoning
for a light industrial subdivision on a 37-acre portion of the property,
which excludes property containing the actual sugar mill and adjacent
buildings. In connection with the development of this property, the Company
has received state land use urbanization for the entire 64-acre site.

In November 1998, the Company sold certain mill-site property which
served as collateral for the $10 million City Bank loan for an approximate
sales price of $7.7 million in cash plus 2% of the gross sales price of
subsequent parcel sales of all or any portion of the property by the
purchaser. The bank required $6 million of the sales proceeds as a
principal reduction on the loan in order to release the collateral. The
purchaser assumed responsibility for completion of the infrastructure
requirements for this portion of the mill-site development project. The
Company received a one-year extension on the $4 million remaining balance
of the loan which is secured by another parcel at the mill-site. The
extended loan bears interest at the bank's base rate (8.5% at September 30,
1998) plus 1.25% and matures on December 1, 1999.

The Company is currently negotiating contracts for other bulk land
sales at this development. The infrastructure for mill-site development
was expected to cost approximately $5.9 million, of which $4.0 million has
been spent through September 30, 1998. The Company does not anticipate
completing additional infrastructure.

The Waikele Golf Course has experienced a significant drop in play
from eastbound tour groups which has depressed rounds, average rate, and as
a result, net operating income. The Company has developed and implemented
a marketing plan to return the golf course to its previous levels of
profitability. It is difficult, however, to predict how effective these
efforts will be.

The Company owns approximately 21,200 acres of land on the island of
Kauai, the vast majority of which is classified and zoned by the State of
Hawaii and the County of Kauai, respectively, as agricultural and
conservation lands. There are two large contiguous parcels which comprise
the bulk of these Kauai land holdings: Kapaa and Lihue/Hanamaulu. Each of
the parcels is located along the eastern shore of Kauai. Large portions of
the agricultural lands are currently used for sugar cane cultivation, and
portions of the conservation lands are utilized by the Company's sugar
plantations to collect, store and transmit irrigation water from
mountainous areas to the sugar cane fields.

The Company has state urbanization and county zoning for a 552 acre
master-planned community known as the Lihue/Hanamaulu Town Expansion, which
includes approximately 1,800 affordable and market rate residential units,
commercial and industrial facilities and a number of community and other
public uses. The Company does not plan to pursue subdivision and building
permits for this project until the real estate market on Kauai improves.
Once construction commences, the project could span 20 years.

The Company has decided to sell large portions of its Kauai land
holdings which includes primarily 2,000 acres in Kapaa. The Company has
certain additional lands also listed for sale; however, many of these are
smaller remnant parcels. The Company may consider selling additional
portions of these lands based upon market conditions and the cash needs of
the Company. The Company expects to list another 400 to 500 acres on Kauai
before the end of this year.

(d) Hawaii

The Company owns approximately 700 acres of land on the island of
Hawaii of which almost all are classified by the State of Hawaii and zoned
by the County of Hawaii as agricultural lands. These lands are located on
the eastern (windward) side of the island, primarily in the Keaau and Pahoa
districts, south of the town of Hilo.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.1 Escrow Deposit Agreement. (1)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.24. Amended buy-sell notice dated August 27, 1998 from APIC are
filed herewith.

10.25. Assignment and assumption agreement dated September 30, 1998,
executed by TPI and APIC are filed herewith.

10.26. Purchase money promissory note secured by mortgage dated
September 30, 1998, executed by APIC are filed herewith.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SIGNATURES

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

AMFAC/JMB HAWAII, L.L.C.