<PAGE>

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

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                        Commission file number: 333-42201

                        BEAR ISLAND PAPER COMPANY, L.L.C.
             (Exact name of registrant as specified in its charter)

             Virginia                                 06-0980835
   (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                 Identification Number)

                              10026 Old Ridge Road
                                   Ashland, VA
                    (Address of Principal Executive Offices)

                                      23005
                                   (Zip Code)

                                 (804) 227-3394
              (Registrant's telephone number, including area code)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statement incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [ ]

                       Documents Incorporated by Reference

Certain exhibits required for Part IV of this report are incorporated herein by
reference from Bear Island Paper Company, L.L.C.'s registration statement on
Form S-4, Registration No. 333-42201, as amended.
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                      ----
                                                 PART I
<S>   <C>
ITEM 1. BUSINESS.................................................................................................       3

ITEM 2. PROPERTIES...............................................................................................       6

ITEM 3. LEGAL PROCEEDINGS. ......................................................................................       7

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ....................................................       7

                                                 PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.  ............................       7

ITEM 6. SELECTED FINANCIAL DATA. ................................................................................       7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS. .........................................................................................       8

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...............................................      13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................................................      14

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.................................................................................      14

                                                 PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................................      14

ITEM 11. EXECUTIVE COMPENSATION..................................................................................      16

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................................      16

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................................      16

                                                 PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K........................................      18
</TABLE>
                                        2
<PAGE>

                                     PART I

ITEM 1. BUSINESS.

GENERAL

Bear Island Paper Company, L.L.C. (the "Company"), a wholly owned subsidiary of
Brant-Allen Industries, Inc. a subchapter S corporation, ("Brant-Allen")
produces newsprint paper at its mill, located near Richmond, Virginia (the
"Mill"). The Mill has an annual capacity of 229,700 metric tons ("tonnes") of
high quality newsprint suitable for four-color printing, which publishers are
increasingly using for general circulation. In 2000, the Mill produced
approximately 219,200 tonnes of newsprint, and had an estimated operating
efficiency rate of 91.50%.

The Company's customers include leading newspaper publishers in the United
States, such as Dow Jones & Company, Inc. (publisher of The Wall Street Journal)
("Dow Jones"), The Washington Post Company ("The Washington Post"), Advance
Publications ("Newhouse Group"), Gannett Co., Inc. (publisher of USA Today)
("Gannett"), MediaNews Group Inc., Knight-Ridder Inc. ("Knight-Ridder"), Media
General, Inc., Times Mirror Co. and New York Times Co. Approximately 93% of the
Company's newsprint production in 2000 was purchased by its top ten customers.

A combination of pulp material is used to feed the Company's newsprint machine.
In its manufacturing process, the Mill currently uses thermomechanical pulp
("TMP"), de-inked pulp and kraft pulp. The use of TMP provides high wood fiber
yields and higher quality newsprint than that produced by the traditional
mechanical groundwood process. The de-inked pulp is produced at the Company's
recycling facility, which is located adjacent to the Mill. The recycling
facility commenced operations in 1994 and features technology for de-inking,
cleaning and screening of old newspapers ("ONP") and old magazines ("OMG").

The Company purchases all of its logs and pulp chips from outside suppliers at
market prices. ONP and OMG used in the Company's recycling facility are provided
by a combination of individual processors, municipal recovery facilities and
brokers. All fiber is currently supplied from sources within a 300-mile radius
of the Mill.

THE MILL AND THE PRODUCTION PROCESS

The Mill, which began operations in 1979, is located in Hanover County,
Virginia, on an approximately 700-acre site, which is approximately 80 miles
south of Washington, D.C., and 25 miles north of Richmond, Virginia. The Mill's
operations consist of a woodyard, a pulping system, a paper machine and related
utility, recycling, storage and transportation facilities.

Currently, approximately 60% of the Company's fiber requirements are derived
from the Company's TMP process using wood and woodchips, approximately 37% of
the Company's fiber requirements are de-inked pulp from the Mill's recycling
facility and approximately 3% is purchased kraft pulp.

The Mill has a wood requirement of approximately 144,000 cords per year. All
wood is currently supplied from sources within a 200-mile radius of the Mill. In
2000, the Company's wood needs were supplied 46% from wood harvested by local
independent wood contractors and 54% in chip form, by independent sawmills.

The Mill's newsprint machine produces newsprint at an average speed of
approximately 3,990 feet per minute over a machine trim width of 301.5 inches.
The Mill produces approximately 600 tonnes per day of newsprint.

                                        3
<PAGE>

The Company's recycling plant features advanced technologies for the re-pulping,
de-inking, cleaning and screening of ONP and OMG. The recycling facility turns
ONP and OMG into de-inked pulp. ONP and OMG are procured from a combination of
individual processors, municipal recovery facilities and brokers. After delivery
to the plant, the ONP and OMG are mixed by operators into a blend with a ratio
of ONP to OMG of 83:17, which is then fed into a pulper which mixes in additives
and prepares the stock for ink separation. During 1998, the Company undertook a
capital expansion of the recycling facility resulting in a capacity increase of
20,200 tonnes per year. At full capacity, the recycling facility processes
approximately 107,000 tonnes per year of ONP and OMG. The recycling facility has
the capacity to produce 246 tonnes of recycled fiber per day. The recycling mill
enables the Company to produce up to approximately 625 tonnes per day of
newsprint containing a minimum of 20% and a maximum of 40% recycled fiber. The
recycling facility also includes a 50,000 square foot warehouse that can hold a
10-day supply of ONP and OMG.

MARKETS AND CUSTOMERS

The Company's marketing objective is to become a preferred supplier to each of
its newsprint customers. To achieve this goal, the Company focuses on service,
product quality and long term relationships. Eight of the Company's top ten
customers have been customers for over 15 years. In 2000, approximately 39% of
the production of the Mill was sold to Dow Jones and The Washington Post under
purchase agreements (the "Purchase Agreements") that obligate each of those
customers to purchase a minimum of approximately 45,000 tonnes of newsprint per
year at prices based on prevailing market prices paid by those customers to
their non-affiliated East Coast suppliers. The term of the Purchase Agreements
has been extended through December 31, 2004 and is subject to the parties
agreeing to pricing, which approximate market prices, on an annual basis. The
Company has sold newsprint to Dow Jones since 1980 and The Washington Post since
1979. Other than the agreements with Dow Jones and The Washington Post,
customers purchase a minimum volume amount for short periods of up to one year
based on market prices at the time of purchase.

In 2000 and 1999, the Company's ten largest customers represented an aggregate
of 93% and 89%, respectively, of the Company's total sales. The Company has had
five customers whose sales represent a significant portion of sales. Sales to
Dow Jones approximated 20%, 20% and 22% for the years ended December 31, 2000,
1999 and 1998, respectively. Sales to The Washington Post approximated 19%, 19%,
and 22% for the years ended December 31, 2000, 1999 and 1998, respectively.
Sales to Newhouse Group approximated 14%, 15, and 11% for the years ended
December 31, 2000, 1999 and 1998, respectively. Sales to Gannett approximated
17%, 12%, and 11% for the years ended December 31, 2000, 1999 and 1998,
respectively. Sales to Knight-Ridder approximated 10% during the year ended
December 31, 1998.

Brant-Allen markets all of the Company's production and is able to offer its
customers newsprint from either the Mill or from F.F. Soucy Inc.'s ("Soucy
Inc.") mill or from F.F. Soucy, Inc. & Partners, Limited Partnership's ("Soucy
Partners" and, together with Soucy Inc., "Soucy") mill in order to satisfy
customer demand, which enables Brant-Allen to optimize shipping costs from each
of these mills. Brant-Allen employs three full-time salesmen and three customer
service representatives. Brant-Allen also performs all sales, invoicing,
accounts receivable maintenance, cash management and treasury functions for the
Company pursuant to the Management Services Agreement (as defined below). Other
than the management fee paid by the Company to Brant-Allen under the Management
Services Agreement, the Company does not pay Brant-Allen any additional fees for
its marketing services.

ENERGY AND WATER REQUIREMENTS

The Mill utilizes two forms of energy: steam, which is primarily used within the
paper machine's dryer section to dry the newsprint sheet as it is being
produced, and electricity, which is used to power the remaining processes,
particularly the refining of the woodchips.

All of the Mill's process steam (on average, 165,000 pounds per hour) is
generated by an on-site boiler rated at 243.0 million Btu per hour heat input.
The boiler is fired using pulverized coal, as a primary fuel, and bark

                                        4
<PAGE>

and wood wastes as secondary fuels. In addition, a natural gas fired package
boiler, with a capacity of 190,000 pounds per hour, is used as a backup if the
main boiler malfunctions or is down for maintenance.

Through Rappahannock Electrical Cooperative, which is the Company's local
utility, the Company purchases 100% of its electrical power indirectly from
Virginia Power and Old Dominion Electric Cooperative. The Company believes it
is, indirectly, Virginia Power's third largest customer.

Because the Company's electricity usage has an impact on both electricity
generation requirements and costs of Virginia Power and Old Dominion Electric
Cooperative, especially in periods of high demand (i.e., periods of high air
conditioning or heating loads), the Company has been able to negotiate favorable
electricity rates by demonstrating an ability to reduce demand during peak
times.

The Mill was designed and is operated with one of the most stringent water use
and wastewater flow requirements of any paper mill in the U.S. At full
production of 625 tonnes of newsprint per day, water usage is approximately 3.8
million gallons per day. Mill effluent is approximately 3.6 million gallons per
day. The Mill's water is currently supplied by the Hanover County public utility
system and by the Mill's own river intake structure and pumping system on the
North Anna River. The Mill operates a wastewater treatment facility which
connects to the Hanover County wastewater treatment plant. The Mill has its own
on-site industrial landfill for solid waste.

ENVIRONMENTAL MATTERS

The Company's operations are subject to extensive and changing environmental
regulation by federal, state, and local authorities in the United States,
including those requirements that regulate discharges into the environment,
waste management, and remediation of environmental contamination. Environmental
permits are required for the operation of the Company's businesses, and are
subject to revocation, modification and renewal. Governmental authorities have
the power to enforce compliance with environmental requirements and violators
are subject to injunctions, civil penalties and criminal fines. Third parties
may also have the right to sue to enforce compliance with such regulations.

The Company has in the past incurred significant capital expenditures to comply
with current federal, state and local environmental laws and regulations. The
Company believes that it is in substantial compliance with such laws and
regulations, although no assurance can be given that it will not incur material
liabilities and costs with respect to such laws and regulations in the future.
Although the Company does not currently believe that it will be required to make
significant expenditures for pollution control in the near future, no assurances
can be given that future developments, such as the potential for more stringent
environmental standards or stricter enforcement of environmental laws, will not
cause the Company to incur such expenditures.

The wastewater treatment facility for the Mill discharges effluent through the
outfall line of the Hanover County wastewater treatment plant to the North Anna
River. The effluent limits that must be maintained in accordance with the
discharge permit require continuous monitoring and extensive reporting of
numerous tests. The treatment facility consists of primary and secondary
clarification, aerated equalization and activated sludge treatment.

The Company maintains valid and current air and water permits and believes it is
currently in substantial compliance with respect to all such permits. The
Company believes that it has good relations with the federal, state and local
regulatory authorities, and management is not aware of any material problems or
costs that might jeopardize the Company's scheduled permit renewals.

The U.S. Environmental Protection Agency (the "EPA") has required that certain
pulp and paper mills meet new air emissions and revised wastewater discharge
standards for toxic and hazardous pollutants. These proposed standards are
commonly known as the "Cluster Rules". Bear Island's operations are not subject
to further control as a result of the current "Cluster Rules" and therefore, no
related capital expenditures are anticipated.

On July 12, 1996, the Company entered into a Reasonably Available Control
Technology ("RACT") Agreement with the Virginia Department of Environmental
Quality. Under the RACT Agreement, the Company is not required to incur any
significant capital expenditures for the purchase and installation of pollution
control equipment.

                                        5
<PAGE>

COMPETITION

The newsprint industry is highly competitive and is comprised of many
participants. The Company competes directly with a number of newsprint
manufacturers, many of which have longer histories, larger customer bases,
closer geographical proximity to customers and significantly greater financial
and marketing resources than the Company. The Company faces significant
competition from both large, vertically integrated companies and numerous
smaller companies. The Company competes with several other newsprint
manufacturers in Canada, as well as regional manufacturers in the Southern
United States. Competition in the newsprint market is generally based on price,
quality and customer service.

EMPLOYEES

As of December 31, 2000, the Company had 225 employees, approximately 35% of
which have been employed by the Company since its inception in 1979. The
workforce is non-unionized and has been very receptive to flexible working
conditions and requirements.

MANAGEMENT SERVICES AGREEMENT

Executive management of the Company is provided by Brant-Allen, pursuant to a
management contract (the "Management Services Agreement"). The Company's
newsprint is sold through Brant-Allen, which currently markets approximately
449,200 tonnes of newsprint (219,200 tonnes for the Company and 230,000 tonnes
for Soucy). Brant-Allen manages the Company to maximize any available synergies.
The Company benefits from the centralization of marketing, financial,
administrative and distribution functions at Brant-Allen. These services are
provided pursuant to the Management Services Agreement for which a management
fee of 3% of annual net sales of the Company less transportation costs was
payable by the Company, of which, since December 1, 1997, as a result of the
Company's debt agreements, one third was payable in cash with the remainder
contributed to the Company's capital. Effective April 1, 2000, the Management
Services Agreement was amended to reduce the management fees payable to
Brant-Allen to 1% of the Company's annual revenues of which 100% is payable in
cash. During 2000, the Company was charged $1,653,000 by Brant-Allen under the
Management Services Agreement of which $1,126,000 was paid in cash and $527,000
was contributed to capital of the Company by Brant-Allen.

Brant-Allen is a subchapter S corporation jointly owned by Mr. Peter Brant and
Mr. Joseph Allen. Brant-Allen's predecessor was formed in the early 1940s when
the fathers of Messrs. Brant and Allen founded a paper conversion and newsprint
sales business. In the early 1970s, Brant-Allen entered into the newsprint
manufacturing business. Messrs. Brant and Allen have been involved in the
management of Brant-Allen for over 30 years: Mr. Brant serves as the Chairman of
the Board, and Chief Executive Officer of Brant-Allen and Mr. Allen serves as
President and Chief Operating Officer of Brant-Allen. Mr. Brant also serves as
the Chairman of the Board, and Chief Executive Officer of the Company and Mr.
Allen also serves as President and Chief Operating Officer of the Company.

THE ACQUISITION

In December 1997, the Company purchased the 70% Limited Partnership interests of
Bear Island Paper Company, L.P. (the "Predecessor") owned equally by
subsidiaries of The Washington Post and Dow Jones (the "Acquisition"). The
Predecessor, was formed in 1978 as a limited partnership, with Brant-Allen as
its general partner. Prior to the Acquisition, Brant-Allen owned a 30%
partnership interest in the Predecessor. Funding for the Acquisition was
provided through the issuance of $100 million principal amount of 10% Senior
Secured Notes due 2007 (the "Notes") and $120 million principal amount of bank
debt (the "Bank Credit Facilities") comprised of a $70 million 8-year senior
secured term loan facility (the "Term Loan Facility") and a $50 million 6-year
senior secured reducing revolving credit facility (the "Revolving Credit
Facility"). Following the Acquisition and related transactions (the
"Transactions") 100% of the Company was owned by Brant-Allen.

ITEM 2.  PROPERTIES.

The Mill is located on approximately 700 acres of land that is owned by the
Company, which is approximately 80 miles south of Washington, D.C., and 25 miles
north of Richmond, Virginia. In addition, the Company owns approximately 1,600
acres of land and timberland in Virginia.

                                        6
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

From time to time the Company is involved in legal proceedings relating to
claims arising out of its operations in the normal course of business. The
Company believes that there are no material legal proceedings pending or
threatened against the Company or any of its properties.

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

No matters were submitted to a vote of security holders during the fourth
quarter of 2000.

                                     PART II

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

Brant-Allen beneficially owns all the equity of the Company. Brant-Allen, in
turn, is owned by Mr. Peter Brant and Mr. Joseph Allen.

ITEM 6.  SELECTED FINANCIAL DATA.

The following selected financial data are derived from the audited financial
statements of the Predecessor for the year ended December 31, 1996 and for the
eleven months ended November 30, 1997, as well as the audited financial
statements of the Company for the one month ended December 31, 1997 and the
years ended December 31, 1998, 1999 and 2000, for which the statements of
operations are included elsewhere herein for the years ended December 31, 1998,
1999 and 2000.

<TABLE>
<CAPTION>
                                                   Predecessor                                   Company
                                          --------------------------------     ----------------------------------------------
                                                             Eleven
                                            Year             Months             One Month
                                            Ended            Ended                Ended
                                           December         November             December
                                            31,               30,                  31,        Years Ended December 31,
                                          --------------------------------     ----------  ----------------------------------

                                           1996              1997               1997        1998         1999        2000
                                                                 (Dollars in Thousands, Except Tonnes Produced)
<S>  <C>
Income Statement Data:
      Sales non-affiliates               $82,600          $ 65,446            $11,363      $128,112     $110,231     $118,629
      Affiliates (1)                      53,360            46,040                 --            --           --           --
                                         -------          --------            -------      --------     --------     --------

                 Total sales             135,960           111,486             11,363       128,112      110,231      118,629
      Cost of sales                      107,731           101,302              9,625       100,570      101,621      103,961
                                         -------          --------            -------      --------     --------     --------

      Gross profit                        28,229            10,184              1,738        27,542        8,610       14,668

Selling, general & administrative:
      Management fee to Brant-Allen        3,865             3,175                325         3,666        3,110        1,653
      Other direct                           153               573                 45           536          394          182
                                         -------          --------            -------      --------     --------     --------

      Income from operations              24,211             6,436              1,368        23,340        5,106       12,833
                                         -------          --------            -------      --------     --------     --------
Other income (expense):
      Interest income                        666               591                 --           201          149          144
      Interest expense                    (5,398)           (4,332)            (1,633)      (18,892)     (17,097)     (14,192)
      Other income (expense)                 (56)              (41)                53            --          863           84
                                         -------          --------             ------      --------      -------     --------

                 Total other expense      (4,788)           (3,782)            (1,580)      (18,691)     (16,085)     (13,964)
                                         -------          --------             ------      --------      -------     --------

Income (Loss) before                     $19,423          $  2,654            $  (212)     $  4,649     $(10,979)      (1,131)
      extraordinary item
      Extraordinary item                      --            (4,367)                --            --       (1,006)          --
                                         -------          --------            -------      --------     --------     --------



      Net income (loss)                  $19,423          $ (1,713)           $  (212)     $  4,649     $(11,985)    $ (1,131)
                                         =======          ========             =======     ========     ========     ========


Other Data:
      Operational EBITDA (2)             $34,245          $ 16,184            $ 2,190      $ 33,407     $ 15,752     $ 23,719
      Adjusted operational EBITDA(3)                                            2,406        36,068       17,825       24,246

</TABLE>
                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                   Predecessor                                  Company
                                          --------------------------------    -----------------------------------------------
                                                             Eleven
                                            Year             Months             One Month
                                            Ended            Ended                Ended
                                           December         November             December
                                            31,               30,                  31,        Years Ended December 31,
                                          ---------------------------------    ----------  ----------------------------------

                                           1996              1997               1997        1998         1999          2000
                                                                 (Dollars in Thousands, Except Tonnes Produced)
<S>  <C>


Summary cash flow information:
       Net cash provided by (used in)
        operating activities            $ 30,368          $ 12,546          $  (4,024)     $ 20,623     $  2,547     $  9,609
       Net cash used in investing
        activities                        (7,413)           (4,702)          (140,169)       (7,394)        (265)      (2,704)
       Net cash provided by (used in)
        financing activities             (21,801)          (12,467)           145,545       (12,451)      (3,431)      (7,203)
       Depreciation                        9,976             9,735                822        10,033       10,615       10,886
       Depletion                              58                13                 --            34           31           --
       Capital expenditures                7,483             4,836                239         7,544        3,009        2,750
       Saleable tonnes produced          218,642           206,058             18,802       222,668      226,249      219,161
       Noncash portion of management fee                                          216         2,661        2,073          527

                                                                     As of December 31,

                                                  1996         1997         1998        1999           2000
Balance Sheet Data:
     Cash and short-term investments            $ 13,625    $  1,353     $  2,131     $    981      $    682
     Working capital                              22,037      18,176       17,375       15,449        17,386
     Property, plant and equipment, net          116,953     194,262      190,777      181,059       172,718
     Total indebtedness (4)                       52,171     196,435      184,946      138,291       133,102
     Total assets                                160,460     232,485      229,251      214,587       206,801
     Total partners' equity/member's interest     95,789      25,258       32,567       65,879        63,262
</TABLE>

     (1) Prior to November 30, 1997 Dow Jones and The Washington Post were
     affiliates of the Company.

     (2) EBITDA is defined as income (loss) from operations plus depreciation,
     depletion and amortization, if any. EBITDA is generally accepted as
     providing useful information regarding a company's ability to service
     and/or incur debt. EBITDA should not be considered in isolation or as a
     substitute for net income, cash flows from operations, or other income or
     cash flow data prepared in accordance with generally accepted accounting
     principles or as a measure of a company's profitability or liquidity.

     (3) Adjusted EBITDA is defined as EBITDA (as shown in note (2) above) plus
     the noncash portion, or two-thirds, of the management fee to Brant-Allen
     after November 30, 1997. Pursuant to the limitation on restricted payments
     covenant of the Notes, payments by the Company for management fees were
     limited to Brant-Allen (or any of its Subsidiaries or Affiliates) to an
     amount per annum not in excess of 3% of net sales of the Company, of which
     no more than one third may be in cash. In April 2000, the management fee
     limitation was reduced to 1% of net sales, all of which may be paid in
     cash.

     (4) Total indebtedness is defined as long-term debt and long-term purchase
     obligations and current portions thereof.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with "Item 6. Selected Financial Data"
and the financial statements of the Company and related notes thereto included
elsewhere in this report. Historically, the Predecessor's cost of manufacturing
had also included an up-charge (a margin in excess of the market price of the
fiber) paid to Bear Island Timberlands Company, L.P., an affiliate of the
Company ("BITCO") with respect to wood, and a procurement fee per tonne of ONP
and OMG, supplied or provided by BITCO to the Predecessor. This up charge and
procurement fee was eliminated on December 1, 1997.

                                        8
<PAGE>

The Company manufactures and is dependent on one product, newsprint, which is
used in general printing and the newspaper publishing industry and for
advertising circulars. Accordingly, demand for newsprint fluctuates with the
economy, newspaper circulation and purchases of advertising lineage and
significantly impacts the Company's selling price of newsprint and, therefore,
its revenues and profitability. In addition, variation in the balance between
supply and demand as a result of global capacity additions have an increasing
impact on both selling prices and inventory levels in the North American
markets. Capacity is typically added in large blocks because of the scale of new
newsprint machines.

As a result, the newsprint market is highly cyclical, depending on changes in
global supply, demand and inventory levels. These factors significantly impact
the Company's sales volume and newsprint prices and, therefore, the Company's
revenues and profitability. Given the commodity nature of newsprint, the
Company, like other suppliers to this market, has little influence over the
timing and extent of price changes. Sales are recognized at the time title and
risk of loss transfers to the customer, which generally occurs at the point of
shipment from the Mill. However, significant fluctuations in revenue can and do
occur as a result of the timing of shipments caused by increases and decreases
in Mill inventory levels.

Newsprint prices have been extremely volatile over the past five years. After
hitting a high of $743 per tonne in the first quarter of 1996, newsprint prices
decreased to a low of $466 per tonne in the third quarter of 1999. Newsprint
prices in 1997 recovered from a level of $510 per tonne in the first quarter of
1997 to $560 per tonne in the fourth quarter. During 1998, newsprint prices
decreased from $582 per tonne in the first quarter to $573 per tonne in the
fourth quarter. During 1999, newsprint prices averaged $495 per tonne and ranged
from high of $545 per tonne in the first quarter to low of $485 per tonne in the
fourth quarter. During 2000, newsprint prices averaged $538 per tonne and ranged
from a low of $492 per tonne in January 2000 to $585 per tonne in December 2000.
In February 2001 newsprint prices averaged $583 per tonne.

The table below summarizes the annual volumes and selling prices of the
Predecessor and the Company's newsprint during the periods indicated below:
<TABLE>
<CAPTION>

                                  Predecessor                                   Company

                               Year      Eleven Months    One Month
                               Ended        Ended           Ended
                           December 31,  November 30,     December 31            Years Ended December 31,
                           --------------------------     -----------     ------------------------------------
<S> <C>
                             1996           1997           1997           1998            1999            2000
                             ----           ----           ----           ----            ----            ----

TONNES SOLD                  217,200       206,400         19,900         221,700         222,574        220,389

AVERAGE SELLING PRICE           $626          $540           $571            $578            $495           $538

</TABLE>

The Company's primary cost components consist of raw materials (wood, ONP, OMG,
kraft pulp and chemicals), electrical energy, direct labor and certain fixed
costs. Fixed costs consist of indirect labor and other plant related costs
including maintenance expenses and mill overhead.

For the year ended December 31, 2000, raw materials, which are subject to
significant price fluctuations based on supply and demand, represented 35.3% of
the total cost of manufacturing. Electrical energy represented 16.3% and direct
and indirect labor represented 20.6% of total cost of manufacturing. On an
average per tonne basis electricity costs increased 15.4% from 1999 to 2000. The
Company currently uses a raw material mix of 60% TMP, 37% recycled fiber and 3%
kraft pulp in its production process.

                                        9
<PAGE>

RESULTS OF OPERATIONS

2000 COMPARED TO 1999

Net sales increased by $8.4 million, or 7.6%, to $118.6 million in 2000 from
$110.2 million in 1999. The increase was attributable to an 8.7% increase in
average net selling prices for the Company's products, offset by a 1.0% decrease
in sales volumes to approximately 220,400 tonnes in 2000, from approximately
222,600 tonnes in 1999. The Company's net selling price for newsprint increased
to an average of $538 per tonne in 2000 from an average net selling price of
$495 per tonne in 1999.

Cost of sales increased by $2.3 million, or 2.3%, to $104.0 in 2000 from $101.6
million in 1999. This increase was attributable primarily to a 3.3% increase in
unit manufacturing costs per tonne, offset in part by the 1.0% decrease in sales
volume, as mentioned above. The increase in unit manufacturing cost per tonne
was a result of 3.9% increase in fiber costs primarily due to increased prices
for ONP, a 15.4% increase in electrical costs and an increase in major
maintenance expenditures of $0.6 million during the year. Cost of sales as a
percentage of net sales decreased to 87.6% in 2000 from 92.2% in 1999, due to
net increase in newsprint selling prices and partially offset by the increase in
unit costs of manufacturing as noted above.

The Company's selling, general and administrative expenses decreased by $1.7
million, or 48.6%, to $1.8 million in 2000 from $3.5 million in 1999. This
decrease was attributable to the reduction in the management fee to Brant-Allen
for the period April 1, 2000 through December 31, 2000. Effective April 1, 2000
the management fee to Brant-Allen for administrative services was reduced from
3% to 1%.

As a result of the above factors, income from operations increased by $7.7
million to $12.8 million in 2000 from $5.1 million in 1999.

The Company's interest expense decreased by $2.9 million, or 17.0%, to $14.2
million in 2000 from $17.1 million in 1999, due to scheduled amortization of the
Company's outstanding indebtedness, accelerated repayments on the Company's Term
Loan Facility as result of the liquidation of timberlands and lower outstanding
balances on the Company's Revolving Credit Facility.

The Company's other income including interest income decreased by $0.8 million,
to $0.2 million from $1.0 million in 1999 as a result of a gain on the sale of a
portion of the Company's timberlands in 1999.

The extraordinary loss of $1.0 million incurred in the fourth quarter of 1999
was a result of a write off of a portion of the Company's deferred financing
costs due to the early extinguishment of $49.6 million of debt on the Term Loan
Facility.

As a result of the above factors, the Company reported a net loss of $1.1
million in 2000 compared to a net loss of $12.0 million in 1999.

1999 COMPARED TO 1998

Net sales decreased by $17.9 million, or 14.0%, to $110.2 million in 1999 from
$128.1 million in 1998. The decrease was attributable to a 14.4% decrease in
average net selling prices for the Company's product, offset by a 0.4% increase
in sales volume to approximately 222,600 tonnes in 1999 from approximately
221,700 tonnes in 1998. The Company's net selling price for newsprint decreased
to an average of $495 per tonne in 1999 from an average net selling price of
$578 per tonne in 1998.

Cost of sales increased by $1.0 million, or 1.0%, to $101.6 million in 1999 from
$100.6 million in 1998. This increase was attributable primarily to the 0.4%
increase in sales volume, as mentioned above. Cost of sales as a percentage of
net sales increased to 92.2% in 1999 from 78.5% in 1998, due to the net decrease
in newsprint selling prices.

The Company's selling, general and administrative expenses decreased by $0.7
million, or 16.7%, to $3.5 million in 1999 from $4.2 million in 1998. This
decrease was attributable to lower management fees incurred by the Company to
Brant-Allen in 1999, which resulted directly from decreased net sales.

As a result of the above factors, income from operations decreased by $18.2
million or 78.1% to $5.1 million in 1999 from $23.3 million in 1998.

                                       10
<PAGE>

The Company's interest expense decreased by $1.8 million, or 9.5%, to $17.1
million in 1999 from $18.9 million in 1998, due to scheduled payments of the
Company's outstanding indebtedness and repayment on the Company's outstanding
Term Loan Facility of $50.2 million offset by an increase the outstanding
revolving line of credit, which increased by $4.0 million during 1999.

The Company's other income including interest income increased by $0.8 million,
to $1.0 million in 1999 from $0.2 million in 1998 as a result of the sale of a
portion of the Company's timberlands.

The extraordinary loss of $1.0 million incurred in the fourth quarter of 1999
was a result of a write off of a portion of the Company's deferred financing
costs due to the early extinguishment of $49.6 million of debt on the Term Loan
Facility.

As a result of the above factors, the Company incurred a net loss in 1999 of
$12.0 million compared to net income of $4.6 million in 1998.


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal liquidity requirements have been for working capital,
capital expenditures and debt service under the Company's loan agreements. These
requirements have been met through cash flows from operations and/or loans under
the Company's Revolving Credit Facility. In addition, the Company received a
capital contribution from Brant-Allen during the year ended December 31, 2000 of
$1.5 million as a result of further Timberland liquidations.

The Company's cash and short-term investments at December 31, 2000 were
approximately $0.7 million, representing a decrease of approximately $0.3
million from $1.0 million at December 31, 1999. Net cash provided by operating
activities was $9.6 million for the year ended December 31, 2000. Net cash used
in financing activities was $7.2 million and cash used in investing activities
was $2.7 million for the year ended December 31, 2000. In total, $18.4 million,
was used to cover: capital expenditures of $2.7 million; a tax distribution of
$3.5 million; and a reduction in long-term debt including purchase obligations
of $12.2 million. The Company anticipates that cash provided from operations in
the future, combined with borrowings under the Revolving Credit Facility will be
sufficient to pay its operating expenses, satisfy debt-service obligations and
fund capital expenditures.

For the year ended December 31, 2000, the Company's cash provided by operating
activities increased by 284.0% to $9.6 million from $2.5 million for the year
ended December 31, 1999, primarily due to increased selling prices and offset by
higher cost of sales resulting in a net loss for the year ended December 31,
2000 of $1.1 million compared to net loss of $12.0 million for the year ended
December 31, 1999.

The Company incurred capital expenditures of $2.7 million and $3.0 million
during the years ended December 31, 2000 and 1999, respectively, in connection
with upgrading and maintaining its manufacturing facility. Management
anticipates that the Company's total capital expenditures will increase for the
years 2001 and 2002 and will primarily relate to maintenance of its newsprint
facilities and cost reduction projects as well as the installation of a new
headbox on the Company's paper machine, allowing the Company to improve quality
and increase capacity, and therefore, enhance its competitive position.

At December 31, 2000, the Company had approximately $133.0 million of
indebtedness, consisting of borrowings of $14.5 million under the Revolving
Credit Facility, $18.5 million under the Term Loan Facility and $100.0 million
under the Notes. In addition, $10.5 million was available in unused borrowing
capacity under the Revolving Credit Facility.

As shown in the 2000 statement of operations and the December 31, 2000 balance
sheet, the Company incurred a net loss of $1,130,703 and had an accumulated
deficit of $16,319,463. Management anticipates a profit during 2001 and plans to
continue to improve cash flow through better product pricing and cost
improvements. The Company has approximately $10.5 million available under its
Revolving Credit Facility to fund cash requirements. Based on current market
conditions, management anticipates being able to meet liquidity requirements for
2001; however there exists a range of reasonably possible outcomes which could
significantly impact their ability to achieve the aforementioned.

                                       11
<PAGE>

RESTRICTIVE DEBT COVENANTS

The indenture dated December 1, 1997 between the Company, Bear Island Finance
Company II, Soucy Inc., Bear Island Timberlands Company, L.L.C. ("Timberlands"),
Brant-Allen and Crestar Bank, as trustee (the "Indenture"), restricts the
ability of the Company and its subsidiaries to, among other things, incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments or investments, consummate certain asset sales, enter into
certain transactions with affiliates, impose restrictions on the ability of a
subsidiary to pay dividends or make certain payments to the Company, merge or
consolidate with any other person or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of the assets of the Company. In
addition, the Bank Credit Facilities contain other and more restrictive
covenants and prohibit the Company from prepaying the Notes, except in certain
circumstances. The Bank Credit Facilities also require the Company to maintain
specified financial ratios and satisfy certain financial tests. The Company's
ability to comply with such covenants, including such financial ratios and
tests, may be affected by events beyond its control. There can be no assurance
that the Company will be able to comply with such requirements. A breach of any
of the covenants contained in the Indenture or the Bank Credit Facilities could
result in an event of default under such instruments which could result in the
acceleration of the related debt and the acceleration of debt under other debt
instruments that may contain cross-default or cross-acceleration provisions. If
such an event of default occurs, then the lenders under the Bank Credit
Facilities would also be able to terminate all commitments under the Bank Credit
Facilities. If the Company were unable to repay all amounts declared due and
payable, then the lenders under the Bank Credit Facilities could proceed against
the collateral granted to them to satisfy such indebtedness and other
obligations due and payable under the Bank Credit Facilities. If Indebtedness
under the Bank Credit Facilities were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay in full
such indebtedness and the other Indebtedness of the Company, including the
Notes.

FOLLOWING THE ACQUISITION AND RELATED FINANCINGS

At the Completion of the Acquisition and the related financings on December 1,
1997, the Company had approximately $201.1 million of indebtedness, consisting
of borrowings of $31 million under the Revolving Credit Facility, $70.0 million
under the Term Loan Facility, $100 million under the Notes and approximately
$130,000 in long-term purchase obligations. Immediately following the closing of
the Acquisition, the Company used $5 million of cash on hand to reduce the
outstanding balance of the Revolving Credit Facility. The Company's interest
expense and indebtedness following the consummation of the Acquisition and
related financings were significantly greater than they had been historically.
Interest expense for the years ended December 31, 2000, 1999 and 1998 was
approximately $14.2 million, $17.1 million and $18.9 million, respectively. As
of December 31, 2000, the Company had $14.5 million outstanding under its
Revolving Credit Facility, leaving a balance of $10.5 million available for
future drawdowns.

Although there can be no assurances, the Company believes that cash generated
from operations together with cash on-hand and amounts available under the
Revolving Credit Facilities will be sufficient to meet its debt service
requirements, capital expenditures needs and working capital needs for the
foreseeable future. The Company's future operating performance and ability to
service the Bank Credit Facilities and the Notes and repay other indebtedness of
the Company will be subject to future economic conditions and the financial
success of the Company's business and other factors, many of which are not in
the Company's control, including changes in market prices for newsprint, fiber
costs, electrical rates and future government requirements as to environmental
discharges and recycling content in newsprint. The Company currently anticipates
that in order to pay the principal amount of the Notes at maturity, the Company
will be required to refinance such Notes or adopt one or more alternatives,
including reducing or delaying capital expenditures or seeking additional equity
capital or other additional financing. None of the affiliates of the Company
will be required to make any capital contributions or other payments to the
Company with respect to the Issuer's obligations on the Notes. Although the
Company currently has no reason to believe that it will not be able to refinance
the Notes at maturity, there can be no assurance that such refinancing or any
alternative strategy could be effected upon satisfactory terms, if at all, or
that any of the foregoing actions would enable the Company to make such
principal payments on the Notes or that any of such actions would be permitted
by the terms of any debt instruments of the Company or of any of the Company's
affiliates then in effect.

Historically, the Company has had relatively few foreign sales, all of which
have been denominated in U.S. dollars. On December 3, 1997, the Company entered
into an interest rate swap transaction in the amount of $70,000,000, decreasing
in increments of $10,000,000 annually, whereby the Company exchanged a floating
three month London Interbank Offered Rate ("LIBOR") interest rate for a fixed
rate of 6.13%. This swap arrangement was terminated in October 1999 and a gain
of $150,000 was recognized.

                                       12
<PAGE>

ENVIRONMENTAL EXPENDITURES

The operation of the Mill is subject to extensive and changing environmental
regulation by federal, state and local authorities, including those requirements
that regulate discharges into the environment, waste management, and remediation
of environmental contamination. Environmental permits are required for the
operation of the Company's businesses, and are subject to revocation,
modification and renewal. Governmental authorities have the power to enforce
compliance with environmental requirements and violators are subject to fines,
injunctions, civil penalties and criminal fines. Third parties may also have the
right to sue to enforce compliance with such regulations.

The Company has in the past made significant capital expenditures to comply with
current federal, state and local environmental laws and regulations. The Company
believes that it is in substantial compliance with such laws and regulations,
although no assurance can be given that it will not incur material liabilities
and costs with respect to such laws and regulations in the future. Although the
Company does not currently believe that it will be required to make significant
expenditures for pollution control in the near future, no assurances can be
given that future developments, such as the potential for more stringent
environmental standards or stricter enforcement of environmental laws, will not
cause the Company to incur such expenditures. The Company anticipates incurring
approximately $200,000 for the closure of one landfill (over and above routine
operating expenditures) over the next two years.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board has issued a new standard affecting the
accounting for derivative instruments and hedging activities. It requires the
Company to recognize all derivatives as either assets or liabilities on the
balance sheet and measure those instruments at fair value. Changes in the fair
value of the derivative instruments are either recognized periodically in income
or other comprehensive income. The Company will implement this standard
effective January 1, 2001. The implementation of this new standard will not have
an effect on the Company's results of operations or financial position as the
Company has no derivatives.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company is exposed to various market risk factors such as fluctuations in
interest rates, as well as changes in the cost of raw materials. These risk
factors can impact results of operations, cash flows and financial position. The
Company manages these risks through regular operating and financing activities,
and when necessary, the use of derivative financial instruments, such as
interest rate swap contracts. These derivative instruments, when used, are with
major financial institutions and are not for speculative or trading purposes.

The following analysis presents the effect on the Company's earnings, cash flows
and financial position as if the hypothetical changes in market risk factors
occurred on December 31, 2000. Only the potential impacts of these hypothetical
assumptions are analyzed. The analysis does not consider other possible effects
that could impact the Company's business.

At year-end 2000, the Company carried $133.1 million of outstanding debt on its
books, with $33.0 million of that total held at variable interest rates. Holding
all other variables constant, if interest rates hypothetically increased by 10%,
the impact on earnings and cash flow would be an increase to interest expense of
$224,000. Conversely, if interest rates hypothetically decreased by 10%, with
all other variables held constant, the change in interest expense would be a
decrease to interest expense of $224,000.

The Company is exposed to the risk of increasing raw material prices, which
could impact profit margins. When raw material cost increases, the Company
generally is unable to increase selling prices. Therefore, the Company expects
the impact of increasing raw material cost to result in reductions in the
results of its operations or cash flows. Major raw material components include
wood, kraft, ONP, ONG and chemicals.

                                       13
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS.

Certain statements in the financial statements and elsewhere in this report may
constitute forward-looking statements. Because these forward-looking statements
include risks and uncertainties, actual results may differ materially from those
expressed in or implied by the statements. Factors that could cause actual
results to differ include, among other things: increased domestic or foreign
competition; increases in capacity through construction of new mills or
conversion of older facilities to produce competitive products; variations in
demand for our products; changes in our cost for or the availability of raw
materials, particularly market pulp, ONP, wood and electricity; the cost of
compliance with new environmental laws and regulations; the pace of
acquisitions; cost structure improvements; the success of new initiatives;
integration of systems; the success of computer-based system enhancements; and
general economic conditions.

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

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information about the Company's directors
and executive officers:

NAME                   AGE         POSITION
----                   ---         --------
Peter M. Brant         53          Co-Chairman of the Board of Directors and
                                   Chief Executive Officer of the Company and
                                   Timberlands; Co-Chairman, and Chief
                                   Executive Officer of Brant-Allen; and Chief
                                   Executive Officer of Soucy Inc.

Joseph Allen           59          President, Co-Chairman of the Board of
                                   Directors, Chief Operating Officer and
                                   Secretary of the Company and Timberlands;
                                   Co-Chairman and Chief Operating Officer of
                                   Brant-Allen; and Chief Operating Officer of
                                   Soucy Inc.

Edward D. Sherrick      55         Vice President of Finance and Director of the
                                   Company; Vice President of Finance of
                                   Timberlands; Senior Vice President and Chief
                                   Financial Officer of Brant-Allen; and Vice
                                   President of Soucy Inc.

Thomas E. Armstrong     63         Vice President of Sales and Manufacturing and
                                   Director of the Company; Vice President of
                                   Sales and Manufacturing of Timberlands;
                                   Executive Vice President of Brant-Allen; and
                                   Vice President of Soucy Inc.

Michael Conroy          61         Director

Robert Flug             53         Director

                                       14
<PAGE>

The following table sets forth certain information about the Company's key
employees:

NAME                           AGE         POSITION
----                           ---         --------
Jacques Beauchesne             56          Mill Manager
Thomas Conte                   47          Production Manager
Robert Jackson                 61          Human Resources Manager
Seth Hobart                    48          Financial Manager
Robert Ellis                   50          Manager of Engineering, Maintenance
                                           and Government Affairs of the Company

PETER M. BRANT. Mr. Brant is the Co-Chairman of the Board of Directors and Chief
Executive Officer of the Company and Timberlands, the Co-Chairman and Chief
Executive Officer of Brant-Allen and Chief Executive Officer of Soucy Inc. Mr.
Brant jointly owns Brant-Allen with Mr. Joseph Allen. Mr. Brant has served as an
executive officer of the Company since its inception and has served as executive
officer of Brant-Allen for over 30 years.

JOSEPH ALLEN. Mr. Allen is the President, and Chief Operating Officer and
Secretary of the Company and Timberlands, the President and Chief Operating
Officer of Brant-Allen and Chief Operating Officer of Soucy Inc. Mr. Allen
jointly owns Brant-Allen with Mr. Brant. Mr. Allen has served as an executive
officer of the Company since its inception and has served as executive officer
of Brant-Allen for over 30 years.

EDWARD D. SHERRICK. Mr. Sherrick is Vice President of Finance and Director of
the Company, Vice President of Finance of Timberlands, Senior Vice President and
Chief Financial Officer of Brant-Allen and Vice President of Soucy Inc. He has
been with the Company and Brant-Allen for over 20 years.

THOMAS E. ARMSTRONG. Mr. Armstrong is Vice President of Sales and Manufacturing
and Director of the Company, Vice President of Sales and Manufacturing of
Timberlands, Executive Vice President of Brant-Allen and Vice President of Soucy
Inc. He has been an executive officer of the Company and Brant-Allen for 27
years and has been involved in the sale and marketing of the Company's newsprint
as well as overseeing mill operations.

MICHAEL CONROY. Mr. Conroy was appointed a Director of the Company in November
1997. Mr. Conroy is an independent consultant. Mr. Conroy was the President of
the International Herald Tribune Company US, Inc. (the "Herald Tribune") up to
December 1998 . He had been with that company for 12 years. Before joining the
Herald Tribune, he was publisher at Newsweek Atlantic.

ROBERT FLUG. Mr. Flug was appointed a Director of the Company in November 1997.
Mr. Flug has been the President and Chief Executive Officer of S.I. Danielle,
Inc., a junior apparel manufacturer, since 1987.

JACQUES BEAUCHESNE. Mr. Beauchesne joined the Company in February 2001 as Mill
Manager. From 1993 to 2000 Mr. Beauchesne was with Weavexx Corporation as Vice
President Sales - North America.

THOMAS CONTE. Mr. Conte joined the Company in January 2000 as Production
Manager. From July 1989 to January 2000 Mr. Conte was with Alabama River
Newsprint, Inc. as Assistant Papermachine Superintendent.

ROBERT JACKSON. Mr. Jackson has been the Human Resources Manager of the Company
since 1979.

SETH HOBART. Mr. Hobart has been the Financial Manager of the Company since
January 2000. From November 1979 to January 2000 Mr. Hobart was Controller of
the Company. He has been with the Company since 1976.

ROBERT ELLIS. Mr. Ellis was named the Manager of Engineering, Maintenance and
Governmental Affairs of the Company in February 2000. Prior to his latest
promotion Mr. Ellis was Manager of Engineering Services and Governmental Affairs
of the Company and has been with the Company since 1980.

                                       15
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

No executive officer of Brant-Allen was paid any compensation by the Company
between 1998 and 2000. All officers of the Company who also serve as officers of
Brant-Allen have received and will continue to receive compensation from and,
except as noted in the following paragraph, participate in employee benefit
plans and arrangements sponsored by Brant-Allen, including, but not limited to,
Brant-Allen's defined contribution retirement plan (known as the Brant-Allen
Industries, Inc. Incentive Profit-Sharing Plan), employee insurance, long term
disabilities, medical and other plans which are maintained by Brant-Allen or
which may be established by Brant-Allen in the future except as noted in the
following paragraph, these officers are not entitled to participate in the
Company's employee benefit plans and arrangements.

Effective as of March 15, 1999, the Brant-Allen Industries, Inc. Incentive
Profit-Sharing Plan was merged with and into the Bear Island Paper Company, L.P.
Thrift Plan. Brant-Allen also adopted both the Company's Thrift Plan effective
for employee 401(k) contributions and employer matching contributions as of
April 1, 1999 and for other contributions as of January 1, 1999 and the
Company's Retirement Plan effective as of January 1, 1999. It is anticipated
that Brant-Allen will contribute the amount of employer contributions due on
behalf of its employees under such plans.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Brant-Allen beneficially owns all the equity of each of the Company, Timberlands
and Soucy Inc. Brant-Allen, in turn, is jointly owned by Mr. Peter Brant and
Mr. Joseph Allen.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

RELATIONSHIP WITH BRANT-ALLEN

Brant-Allen owns all of the equity in the Company, Timberlands and Soucy Inc.
Brant-Allen is a subchapter S corporation jointly owned by Mr. Peter Brant and
Mr. Joseph Allen. Mr. Brant serves as Brant-Allen's Chairman of the Board and
Chief Executive Officer and also as Chairman of the Board of Directors and Chief
Executive Officer of the Company and Timberlands and Chief Executive Officer of
Soucy Inc. Mr. Allen serves as Brant-Allen's President and Chief Operating
Officer and also as President and Chief Operating Officer of the Company and
Timberlands and Chief Operating Officer of Soucy Inc. The other officers of
Brant-Allen, Mr. Edward Sherrick and Mr. Thomas Armstrong, are also directors of
the Company.

Brant-Allen may engage in a variety of transactions with the Company,
Timberlands and/or Soucy. These transactions are expected to include the sale
and marketing of the newsprint produced by the Company and Soucy and the
provision of management and other services described below to the Company and
Soucy.

MANAGEMENT SERVICES AGREEMENT

Concurrently with the closing of the Acquisition, the Company entered into the
Management Services Agreement with Brant-Allen. Pursuant to the Management
Services Agreement, Brant-Allen will continue to provide the Company with senior
management treasury, financial and administrative (including marketing and
sales) services. For these services, Brant-Allen will continue to be entitled to
a monthly fee, payable in advance, calculated at the rate of 3% of the Company's
net sales less transportation costs, of which since December 1, 1997, as a
result of the Company's debt agreements, one third is payable in cash with the
remainder contributed to the Company's capital. Effective April 1, 2000 the
Management Service Agreement was amended to reduce the management fees payable
to Brant-Allen to 1% of the Company's net sales less transportation costs of
which 100% is payable in cash. This fee amounted to $1,653,000, $3,110,000 and
$3,666,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
See the accompanying financial statements of the Company. The Management
Services Agreement has a term of five years and is automatically renewable for
successive five-year terms unless earlier terminated by either party giving two
years written notice. The Management Services Agreement contains customary
indemnification provisions.

                                       16
<PAGE>

ARRANGEMENTS WITH TIMBERLANDS

The Company shares employees, facilities and recordkeeping systems with
Timberlands, and the Company charges Timberlands monthly for its share of these
costs. Accordingly, these shared employees receive benefits under the Company's
defined contribution retirement plan and are eligible to participate in the
Company's thrift plan. Costs associated with these plans are reimbursed monthly
by Timberlands. Amounts paid to the Company for shared costs, which are included
in selling, general and administrative expenses, approximated $170,000,
$1,024,000 and $782,000, during the years ended December 31, 2000, 1999 and
1998, respectively. Timberlands also managed the Company's timberlands for which
the Company paid Timberlands fees of approximately $62,500, during the year
ended December 31, 1998. See the accompanying financial statements of the
Company.

In 1988, the Predecessor and BITCO entered into an agreement for certain
marketing and consulting services with The Elebash Company ("Elebash"), a real
estate broker, whereby BITCO, in the case of sales of BITCO-owned land, or the
Predecessor, in the case of sales of Predecessor-owned land, has agreed to pay
Elebash two percent of the gross sales price of any land purchased or sold
pursuant to the terms of the agreement. In this connection, Timberlands paid
Elebash approximately $3,000, for the year ended December 31, 1998. Amounts paid
to Elebash are included in selling, general and administrative expenses in the
accompanying statements of income. This agreement was canceled effective January
6, 1998.



                                       17
<PAGE>

                                     PART IV

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

(a) Exhibits and Financial Statements

    (1)  See Index to Financial Statements and Schedule of Bear Island Paper
    Company, L.L.C. on page 21.

    (2)  Financial Statement Schedule of Bear Island Paper Company, L.L.C.

    All other schedules for which provision is made in the applicable accounting
    regulation of the Securities and Exchange Commission are not required under
    the related instructions or are inapplicable and therefore have been
    omitted.

    (3) Exhibits

         2.1   The Partnership Interest Sale Agreement, dated as of December 1,
         1997, by and among Dow Jones Virginia Company Inc., Newsprint, Inc. and
         Brant-Allen.*

         3.1   Articles of Organization of the Company.*

         3.2   Operating Agreement of the Company.*

         4.1   Indenture, dated as of December 1, 1997, among the Registrants,
         Timberlands, Soucy Inc. and Crestar Bank, as Trustee, relating to the
         Notes.*

         4.1a  Supplemental Indenture, dated as of April 1, 2000.

         4.2   Registration Rights Agreement, dated December 1, 1997, among the
         Registrants and TD Securities (USA), Inc. and Salomon Brothers Inc, as
         Initial Purchasers.*

         4.3   Intercreditor Agreement, dated as of December 1, 1997, among the
         Registrants, Brant-Allen, Toronto Dominion (Texas), Inc. and Crestar
         Bank.*

         4.4   Deed of Trust dated as of December 1, 1997, by and between the
         Company and Crestar Bank, as Trustee. *

         4.5   Company Pledge and Security Agreement, dated as of December 1,
         1997, by and between the Company and Crestar Bank, as Trustee.*

         4.6   Hypotech Agreement, dated as of December 1, 1997, by and between
         Brant-Allen and Crestar Bank, as Trustee.*

                                       18
<PAGE>

          10.1 Bank Credit Agreement, dated as of December 1, 1997, by and among
          the Company, TD Securities (USA), Inc., Toronto Dominion (Texas),
          Inc., Christiania Bank OG Kreditkass ASA, Keyport Life Insurance
          Company, Prime Income Trust, Deeprock & Company, Merrill Lynch Senior
          Floating Rate Fund, Inc. and Van Kampen American Capital Prime Rate
          Trust.*

          10.2   The Management Services Agreement, dated as of December 1,
          1997, by and among the Company and Brant-Allen.*

          10.2a  See Exhibit 4.1a, Supplemental Indenture dated as of April 1,
          2000.

          10.3   The Wood Supply Agreement, dated as of December 1, 1997, by and
          among the Company and Timberlands.*

          10.4   The Newsprint Purchase Agreement, dated as of May 19, 1978, by
          and between the Company and the Dow Jones & Co., Inc.*

          10.4a  Amendments to Newsprint Purchase Agreement, dated as of April
          1, 1987, December 10, 1991, August 10, 1993 and April 22, 1996.

          10.5   The Newsprint Purchase Agreement, dated as of May 19, 1978, by
          and between the Company and The Washington Post.*

          10.5a  Amendments to Newsprint Purchase Agreement, dated as of
          December 10, 1991, August 10, 1993 and April 22, 1996.

          21.1   Subsidiaries of the Company.*


          *      Previously filed as an exhibit to the Company's registration
                 statement on Form S-4 Registration No. 333-42201, as
                 amended, and incorporated herein by reference.

                                       19
<PAGE>

                                   SIGNATURES

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

                                   BEAR ISLAND PAPER COMPANY, L.L.C.

                                   By: /s/ Peter M. Brant

                                   Name: Peter M. Brant
                                   Title: Chairman of the Board of Directors
                                   and Chief Executive Officer of the Company

Date: March 30, 2001

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

<TABLE>
<CAPTION>
Signature                                       Title                                              Date

<S>  <C>
Principal Executive Officer

/s/ Peter M. Brant                              Chairman of the Board of Directors and           March 30, 2001
------------------
Peter M. Brant                                  Chief Executive Officer
Principal Financial and Accounting Officer

/s/ Joseph Allen                                President, Co-Chairman of the Board of           March 30, 2001
----------------
Joseph Allen                                    Directors, Chief Operating Officer and
                                                Secretary

/s/ Edward D. Sherrick                          Vice President of Finance and Director of        March 30, 2001
----------------------
Edward D. Sherrick                              the Board of Directors

/s/ Thomas E. Armstrong                         Vice President of Sales and Manufacturing        March 30, 2001
-----------------------
Thomas E. Armstrong                             and Director of the Board of Directors

/s/ Michael Conroy                              Director of the Board of Directors               March 30, 2001
------------------
Michael Conroy

/s/ Robert Flug                                 Director of the Board of Directors               March 30, 2001
---------------
Robert Flug
</TABLE>
                                       20
<PAGE>

            INDEX TO FINANCIAL STATEMENTS AND SCHEDULE OF BEAR ISLAND
                              PAPER COMPANY, L.L.C.

          BEAR ISLAND PAPER COMPANY, L.L.C.

          Balance Sheets--December 31, 2000 and 1999

          Statements of Operations--Years ended December 31, 2000, 1999 and 1998

          Statements of Changes in Member's Interest--Years ended December 31,
          2000, 1999 and 1998

          Statements of Cash Flows--Years ended December 31, 2000, 1999 and 1998


          Schedule II             Valuation and Qualifying Accounts

                                       21
<PAGE>

     BEAR ISLAND PAPER COMPANY, L.L.C.
     (A VIRGINIA LIMITED LIABILITY CORPORATION)

     FINANCIAL STATEMENTS

     FOR THE YEARS ENDED DECEMBER 31, 2000
     AND 1999
<PAGE>

Report of Independent Accountants


To the Board of Directors and Member of
Bear Island Paper Company, L.L.C.:

In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in equity and of cash flows present fairly, in all
material respects, the financial position of Bear Island Paper Company, L.L.C.
(a Virginia limited liability corporation) (the "Company") at December 31, 2000
and 1999, and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.  These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits.  We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The Company is a member of a group of affiliated companies, and, as discussed
in Note 4 to the financial statements, the Company had significant related-party
transactions with members of the group. Because of these related party
transactions, it is possible that the terms are not the same as those that would
result from transactions among wholly unrelated parties.



February 2, 2001


                                      F-1
<PAGE>

BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
BALANCE SHEETS
December 31, 2000 and 1999

<TABLE>
<CAPTION>

                                                           December 31,
                                                   ---------------------------
                                                         2000         1999
<S>                                                <C>           <C>
               ASSETS
Cash and short-term investments                    $    682,329   $    981,199
Accounts receivable:
 Trade, less allowance for doubtful accounts
  of $67,778 in 2000 and 1999                        13,708,199     11,442,523
 Affiliates                                             211,209        444,315
 Other                                                  172,477        473,979
Inventories                                          12,651,078     12,975,282
Other current assets                                    492,022        379,435
                                                   ------------   ------------
     Total current assets                            27,917,314     26,696,733
                                                   ------------   ------------
Property, plant and equipment, at cost              205,032,041    202,487,949
Less accumulated depreciation                       (32,314,191)   (21,428,569
                                                   ------------   ------------
     Net property, plant and equipment              172,717,850    181,059,380
                                                   ------------   ------------
Deferred financing costs, net of accumulated
 amortization of $1,852,840 and $1,187,612
 in 2000 and 1999, respectively                       6,165,666      6,830,894
                                                   ------------   ------------
                                                   $206,800,830   $214,587,007
                                                   ============   ============

             LIABILITIES
Current portion of long-term debt                             -        700,000
Current portion of long-term purchase
 obligations                                             93,494        130,566
Accounts payable and accrued expenses                 9,026,377      9,360,774
Due to affiliates                                       377,028         11,791
Interest payable                                      1,034,044      1,044,362
                                                   ------------   ------------
     Total current liabilities                       10,530,943     11,247,493
                                                   ------------   ------------
Long-term debt                                      133,008,276    137,333,276
Long-term purchase obligations                                -        127,248
                                                   ------------   ------------
                                                    133,008,276    137,460,524
                                                   ------------   ------------
              EQUITY
Member's interest                                    79,581,074     77,553,705
Accumulated deficit                                 (16,319,463)   (11,674,715)
                                                   ------------   ------------
                                                   $206,800,830   $214,587,007
                                                   ============   ============
</TABLE>

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


                                      F-2
<PAGE>

BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF OPERATIONS
for the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                         2000          1999           1998
<S>                                  <C>            <C>            <C>
Sales                                $118,628,761   $110,231,202   $128,111,569

Cost of sales                         103,960,697    101,621,263    100,570,013
                                     ------------   ------------   ------------
      Gross profit                     14,668,064      8,609,939     27,541,556

Selling, general and administrative
 expenses:
  Management fees to affiliate          1,653,218      3,110,180      3,665,934
  Other direct                            181,974        393,693        535,999
                                     ------------   ------------   ------------
      Income from operations           12,832,872      5,106,066     23,339,623
                                     ------------   ------------   ------------

Other income (expense):
  Interest income                         144,346        148,995        201,491
  Interest expense                    (14,192,258)   (17,097,180)   (18,892,445)
  Other income                             84,337        863,346              -
                                     ------------   ------------   ------------
                                      (13,963,575)   (16,084,839)   (18,690,954)
                                     ------------   ------------   ------------
      Income (loss) before
          extraordinary item           (1,130,703)   (10,978,773)     4,648,669

Extraordinary item:
  Early extinguishment of debt                  -     (1,006,000)             -
                                     ------------   ------------   ------------
      Net income (loss)              $ (1,130,703)  $(11,984,773)   $ 4,648,669
                                     ============   ============   ============
</TABLE>

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


                                      F-3




<PAGE>

BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF CHANGES IN EQUITY
for the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

<S>                                                             <C>
Equity:
 Member's interest:
  Balance, December 31, 1997                                    $ 25,469,737

  Management fee payable contributed to capital by
   parent - year ended December 31, 1998                           2,660,513
                                                                ------------
  Balance, December 31, 1998                                      28,130,250

 Management fee payable contributed to capital by
   parent - year ended December 31, 1999                           2,073,455

 Capital contributions from parent                                47,350,000
                                                                ------------
 Balance, December 31, 1999                                       77,553,705

 Management fee payable contributed to capital by
   parent - year ended December 31, 2000                             527,369

 Capital contributions from parent                                 1,500,000
                                                                ------------
 Balance, December 31, 2000                                     $ 79,581,074
                                                                ============
Retained earnings (accumulated deficit):
 Balance, December 31, 1997                                     $   (212,190)

 Net income - year ended December 31, 1998                         4,648,669
                                                                ------------
 Balance, December 31, 1998                                        4,436,479

 Net loss - year ended December 31, 1999                         (11,984,773)

 Tax distributions to parent - 1999                               (4,126,421)
                                                                ------------
 Balance, December 31, 1999                                      (11,674,715)

 Net loss - year ended December 31, 2000                          (1,130,703)

 Tax distributions to parent - 2000                               (3,514,045)
                                                                ------------
 Balance, December 31, 2000                                     $(16,319,463)
                                                                ============
</TABLE>

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

                                      F-4
<PAGE>

BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                         2000          1999           1998
<S>                                  <C>            <C>            <C>
Operating activities:
 Net income (loss)                   $ (1,130,703)  $(11,984,773)  $  4,648,669
  Adjustments to reconcile net
   income (loss) to net cash
   provided by operating
   activities:
    Depreciation                       10,885,622     10,615,303     10,033,191
    Depletion                                   -         31,022         33,605
    Amortization of deferred
     financing costs                      665,228        438,887        669,339
    Noncash portion of
     extraordinary item                         -      1,006,000              -
    Increase in allowance for
     obsolescence                         116,500         63,000        324,500
    (Gain) loss on disposal/
     writedown of property, plant
     and equipment                        160,400       (663,186)     1,204,076
    Changes in operating assets and
     liabilities:
      Accounts receivable              (1,731,068)     1,308,534        463,984
      Inventories                         207,704        789,542         60,989
      Other current assets               (112,587)       190,799       (422,323)
      Accounts payable and accrued
       expenses                           192,972      1,081,189      3,718,698
      Due to affiliate                    365,237        (66,401)       (73,738)
      Interest payable                    (10,318)      (262,668)       (37,885)
                                     ------------   ------------   ------------
      Net cash provided by
       operating activities             9,608,987      2,547,248     20,623,105
                                     ------------   ------------   ------------

Investing activities:
 Purchases of property, plant and
  equipment                            (2,749,942)    (3,009,194)    (7,544,100)
 Proceeds from disposition of
  property, plant and equipment            45,450      2,743,852        150,000
                                     ------------   ------------   ------------
      Net cash used in investing
       activities                      (2,704,492)      (265,342)    (7,394,100)
                                     ------------   ------------   ------------

Financing activities:
 Contributions from parent              1,500,000     47,350,000              -
 Tax distributions to parent           (3,514,045)    (4,126,421)             -
 Principal payments on long-term
  debt                                (12,025,000)   (70,266,724)   (11,700,000)
 Principal payments on long-term
  purchase obligations                   (164,320)      (388,349)      (181,346)
 Proceeds from issuance of
  long-term debt                        7,000,000     24,000,000              -
 Payment of deferred financing
  costs                                         -              -       (569,921)
                                     ------------   ------------   ------------
      Net cash used in financing
       activities                      (7,203,365)    (3,431,494)  (12,451,267)
                                     ------------   ------------   ------------
      Net increase (decrease) in
       cash and short-term
       investments                       (298,870)    (1,149,588)       777,738

Cash and short-term investments,
 beginning of period                      981,199      2,130,787      1,353,049
                                     ------------   ------------   ------------

        Cash and short-term
         investments, end of period  $    682,329   $    981,199   $  2,130,787
                                     ============   ============   ============
</TABLE>



                                      F-5

<PAGE>

BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF CASH FLOWS, Continued
for the years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                         2000          1999           1998
<S>                                  <C>            <C>            <C>
Supplemental disclosures of cash
 flow information:
  Cash paid for interest             $ 13,537,348   $ 16,920,961   $ 18,260,991
                                     ============   ============   ============
Noncash investing and financing
 activities:
  Increase in property, plant and
   equipment and long-term
   purchase obligations for
   equipment acquisition             $          -   $          -   $    392,205
                                     ============   ============   ============
  Management fee payable
   contributed to capital by
   parent                            $    527,369   $  2,073,455   $  2,660,513
                                     ============   ============   ============
</TABLE>



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


                                      F-6

<PAGE>

NOTES TO FINANCIAL STATEMENTS


1. Organization and Acquisition:

   Effective December 1, 1997, Bear Island Paper Company, L.L.C., a newly formed
   Virginia limited liability corporation (the "Company") completed the purchase
   of the 70% partnership interest (the "Acquisition") in Bear Island Paper
   Company, L.P. (the "Predecessor") previously owned by subsidiaries of Dow
   Jones & Company, Inc. ("Dow Jones") and The Washington Post Company ("The
   Washington Post").  The Company accounted for the Acquisition as a purchase.
   The allocation of the purchase price resulted in purchase adjustments being
   applied to certain assets and liabilities acquired.  The Company is a wholly
   owned subsidiary of Brant-Allen Industries, Inc.  ("Brant-Allen"), a Delaware
   corporation.

   On January 30, 1998, the Company completed its initial registration process
   which became effective pursuant to Section 8(A) of the Securities Act of
   1933.  Concurrent with becoming effective, the Company became subject to the
   information requirements of the Securities Exchange Act of 1934, as amended,
   and required to file reports and other information with the United States
   Securities and Exchange Commission.


2. Liquidity:

   As shown in the accompanying 2000 statement of operations and the December
   31, 2000 balance sheet, the Company incurred a net loss of $1,130,703 and had
   an accumulated deficit of $16,319,463.  Management anticipates a profit
   during 2001 and plans to continue to improve cash flow through better product
   pricing and cost improvements. The Company has approximately $10.5 million
   available under its Revolving Credit Facility (see Note 7) to fund cash
   requirements. Based on current market conditions, management anticipates
   being able to meet liquidity requirements for 2001; however, there exists a
   range of reasonably possible outcomes which could significantly impact their
   ability to achieve the aforementioned.


3. Summary of Significant Accounting Policies:

   Cash and Short-Term Investments:  Cash and short-term investments include all
   cash balances and highly liquid investments.  Short-term investments are
   stated at cost, which approximates market value.  For purposes of the
   statements of cash flows, the Company considers all highly liquid short-term
   investments purchased with an original maturity of three months or less to be
   cash equivalents.

   Inventories:  Finished goods and raw materials inventories are valued at the
   lower of cost or market, with cost determined on the first-in, first-out
   ("FIFO") basis.  Stores inventories are valued at the lower of average cost
   or market and are shown net of an allowance for obsolescence at December 31,
   2000 and 1999 of approximately $656,000 and $539,500, respectively.

                                      F-7
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued


3. Summary of Significant Accounting Policies, continued:

   Property, Plant and Equipment:  The costs of major renewals and betterments
   are capitalized while the costs of maintenance and repairs are charged to
   income as incurred.  When properties are sold or retired, their cost and the
   related accumulated depreciation or depletion are eliminated from the
   accounts and the gain or loss is reflected in income.  The Company
   capitalizes interest costs as part of the cost of constructing significant
   assets.  There were no capitalized interest costs during the years ended
   December 31, 2000 or 1999.

   The carrying value of property, plant and equipment is evaluated whenever
   significant events or changes occur that might indicate an impairment through
   comparison of the carrying value to total undiscounted cash flows.

   Depreciation and Depletion:  Depreciation of plant and equipment is computed
   principally on the straight-line basis over the estimated useful lives of the
   assets.  Lives range from 10 to 50 years for buildings and improvements, 40
   years for recycling facilities, 35 years for tanks, 30 years for specialized
   building improvements, 25 years for newsprint manufacturing equipment, and
   from three to 50 years for other machinery and equipment.  The portion of the
   cost of timberlands attributed to standing timber is charged against income
   as timber is cut and utilized in the manufacturing process at rates
   determined annually, based on the relationship of unamortized timber costs to
   the estimated volume of recoverable timber.

   Deferred Financing Costs:  Costs directly associated with the issuance of
   debt have been deferred and are being amortized using the interest method
   over the life of the related debt.  Unamortized balances written off in
   connection with early retirements of long-term debt are recognized as
   extraordinary items at the time of early retirement.

   Income Taxes:  No provision for income taxes is required in the financial
   statements since the  member is liable for any income tax that may be payable
   on the Company's taxable income.

   Revenue Recognition:  Sales are recognized by the Company at the time title
   and risk of loss transfers to the customer, which generally occurs at the
   point of shipment of the newsprint to the customer.

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

   Derivatives:  The Company sometimes enters into interest rate swap agreements
   to help manage interest rate exposure.  Amounts to be paid or received under
   the agreements are accrued as interest rates change and are recognized over
   the life of the agreement as an adjustment to interest expense.  The Company
   is exposed to credit losses in the event of counterparty nonperformance, but
   does not anticipate such losses.

                                      F-8
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued


3. Summary of Significant Accounting Policies, continued:

   Fair Value of Financial Instruments:  The fair value of the Company's long-
   term debt is estimated using discounted cash flow analyses based on the
   incremental borrowing rates currently available to companies with loans of
   similar terms and maturity.  The fair value of trade receivables and payables
   approximates the carrying amount because of the short maturity of these
   instruments.

   Risks and Uncertainties:  Financial instruments which potentially subject the
   Company to concentrations of credit risk consist principally of cash, cash
   equivalents and receivables.  The Company's cash balance is maintained at a
   major financial institution.  Cash equivalents, which consist of U.S.
   government securities, are with a high-credit-quality financial institution.
   Receivables consist principally of trade accounts receivable resulting
   primarily from sales to newspaper publishers.  Credit is extended to
   customers after an evaluation of creditworthiness.  Generally, the Company
   does not require collateral or other security from customers for trade
   accounts receivable.  Substantially all of the Company's customers operate in
   the printing sectors, consequently their ability to honor their obligations
   are dependent upon the financial strength of the printing and publishing
   sectors.  The Company's customers are primarily located in the eastern United
   States.

   The Company has had five customers whose sales represent a significant
   portion of sales.  Sales to one of these customers approximated 19%, 20% and
   22% for the years ended December 31, 2000, 1999 and 1998, respectively.
   Sales to a second customer approximated 18%, 19% and 22% for the years ended
   December 31, 2000, 1999 and 1998, respectively.  Sales to a third customer
   approximated 14%, 15% and 11% for the years ended December 31, 2000, 1999 and
   1998, respectively.  Sales to a fourth customer approximated 13%, 12% and 11%
   for the years ended December 31, 2000, 1999 and 1998, respectively.  Sales to
   a fifth customer approximated 10% during the year ended December 31, 1998.

   Newsprint Sales, the sales division of Brant-Allen, has entered into certain
   supply contracts, as amended, (the "Supply Contracts") with two customers.
   Under the terms of the Supply Contracts, as amended, Newsprint Sales is
   required to provide to these customers certain fixed volumes of newsprint at
   prices determined annually, through December 31, 2004.

   New Accounting Standards:  The Financial Accounting Standards Board has
   issued a new standard affecting the accounting for derivative instruments and
   hedging activities.  It requires the Company to recognize all derivatives as
   either assets or liabilities on the balance sheet and measure those
   instruments at fair value.  Changes in the fair value of the derivative
   instruments are either recognized periodically in income or other
   comprehensive income.  The Company will adopt this standard effective January
   1, 2001.  The adoption will have no impact on their results of operations or
   financial position.

   Reclassification:  Certain prior year amounts in the financial statements
   have been reclassified to conform to the current year presentation.

                                      F-9
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued


4. Related-Party Transactions:

   All sales and related collections are made through Newsprint Sales, a
   division of Brant-Allen.  Brant-Allen provides similar sales and collection
   activities for F.F. Soucy, Inc. ("Soucy, Inc."), an affiliated Canadian
   newsprint company 100% owned by Brant-Allen.  As part of the Term Loan and
   Revolving Loans (see Note 7), Brant-Allen entered into a cash collateral
   agreement on December 1, 1997 (the "Collateral Agreement").  The Collateral
   Agreement requires that collections of the Company's receivables by Newsprint
   Sales be remitted to the Company within two days of receipt.

   The Company received payments of approximately $186,200, $234,100 and
   $286,400 from Brant-Allen as reimbursement for expenses incurred on behalf of
   Brant-Allen during the years ended December 31, 2000, 1999 and 1998,
   respectively.  Additionally, the Company received payments of approximately
   $101,800, $137,200 and $21,800 from F. F. Soucy, Inc. for expenses incurred
   on behalf of F. F. Soucy, Inc. during the years ended December 31, 2000,
   1999 and 1998, respectively.

   A component of selling, general and administrative expenses as shown on the
   statements of operations includes aggregate management fees to Brant-Allen.
   The management fee includes senior management, treasury, financial, marketing
   and sales services.  There are restrictions on payment of the management fee
   as described in Note 7.  The level of these fees that would be incurred if
   the Company operated on a stand-alone basis are not practicably determinable.

   The Company charged Bear Island Timberlands Company L.L.C. ("Timberlands"),
   an affiliated company owned 100% by Brant-Allen, for certain administrative
   and other expenses.  These charges approximated $170,000, $1,024,000 and
   $782,000 during the years ended December 31, 2000, 1999 and 1998,
   respectively.  The Company also paid Timberlands approximately  $62,500
   during the year ended December 31, 1998 for managing the Company's
   timberlands.

   The Company's receivables and payables with their affiliates were as follows:

                                                       December 31,
                                                 ------------------------
                                                   2000            1999
   Due from Brant-Allen                          $ 36,986        $ 91,309
   Due from Newsprint Sales                       157,379         339,545
   Due from F. F. Soucy, Inc. and Partners         11,791          10,964
   Due from F. F. Soucy, Inc.                       5,053           2,497
   Due to Timberlands                             377,028          11,791

                                      F-10
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued

5. Inventories:

   Inventories consisted of:

   <TABLE>
   <CAPTION>
                                                                         December 31,
                                                              --------------------------------
                                                                  2000                  1999
   <S>                                                        <C>                 <C>
   Raw materials                                              $  2,427,336        $  2,375,910
   Stores                                                        8,148,930           8,083,267
   Finished goods                                                2,074,812           2,516,105
                                                              ------------        ------------
                                                              $ 12,651,078        $ 12,975,282
                                                              ============        ============

6. Property, Plant and Equipment:

   Property, plant and equipment is stated at cost and consists of the
   following:

                                                                         December 31,
                                                              -----------------------------------
                                                                   2000                  1999
   Land                                                       $  1,548,847           $  1,548,847
   Timberlands                                                   1,568,972              1,568,972
   Building                                                     28,412,280             28,412,280
   Machinery and equipment                                     172,055,862            169,217,500
   Construction in progress                                      1,446,080              1,740,350
                                                              ------------           ------------
                                                               205,032,041            202,487,949
   Less accumulated depreciation and depletion                 (32,314,191)           (21,428,569)
                                                              ------------           ------------
               Total                                          $172,717,850           $181,059,380
                                                              ============           ============
</TABLE>

   During the years ended December 31, 2000 and 1998, the Company recorded
   charges for net losses of $160,400 and $1,204,076, respectively, to record a
   write-down and disposal of certain operating assets in connection with
   increasing the capacity of its recycling facilities.  The charges are
   included in cost of sales in the accompanying statements of operations.

   During 1999, the Company sold a portion of its timberlands for approximately
   $2.7 million and recognized a gain on the sale of $698,000 which is included
   in other income in the 1999 statement of operations.

                                      F-11
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued

7. Long-Term Debt:

   Long-term debt consisted of:
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                              -----------------------------
                                                                                                 2000             1999
<S>                                                                                           <C>              <C>
   Senior Secured Notes bearing interest at 10% (interest payable
     semi-annually commenced June 1, 1998); due 2007                                          $100,000,000     $100,000,000

   Term Loan Facility bearing interest at LIBOR plus 3% (9.62% and 9.09% at
    December 31, 2000 and 1999, respectively) (interest payable quarterly);
    quarterly principal payments of $175,000 commenced March 31, 1998;
    effective November 6, 2000, quarterly principal payments were no longer
    required; remaining balance due December 31, 2005                                           18,508,276       19,033,276

   $25 million Revolving Credit Facility bearing interest at (i) LIBOR
    plus 2.75% (weighted average rate of 9.29% and 8.00% for the
    years ended December 31, 2000 and 1999, respectively) for $13,000,000
    and $19,000,000 of borrowings at December 31, 2000 and 1999, respectively,
    with interest due monthly; and (ii) prime plus 1.75% (weighted average
    rate of 11.21% and 9.55% for the years ended December 31, 2000 and 1999,
    respectively) for $1,500,000 of borrowings at December 31, 2000, with
    interest due quarterly; due December 31, 2003                                               14,500,000       19,000,000
                                                                                              ------------     ------------
                                                                                               133,008,276      138,033,276
   Less current portion                                                                                  -          700,000
                                                                                              ------------     ------------
               Total long-term debt                                                           $133,008,276     $137,333,276
                                                                                              ============     ============
</TABLE>

   On December 1, 1997, the Company sold $100 million of Senior Secured Notes
   (the "Notes") in a private placement.  On December 1, 1997 the Company also
   entered into Indenture Agreements for a $70 million Term Loan Facility ("Term
   Loan") and a $50 million Revolving Credit Facility ("Revolving Loan").  The
   proceeds from the Notes, Term Loan and Revolving Loan were used by the
   Company to purchase the 70% interest of the Predecessor.

   During 1999, Timberlands sold the majority of its timberlands and distributed
   a portion of the proceeds of Brant-Allen.  In turn, Brant-Allen made capital
   contributions to the Company of $47,350,000 which were used towards the
   retirement of approximately $49,600,000 on the Term Loan.  In connection with
   this process, unamortized financing costs of $1,006,000 were written off and
   recorded as an extraordinary item in the 1999 statement of operations.  In
   addition, the amount available under the Revolving Loan was reduced from $50
   million to $25 million effective November 23, 1999.

                                      F-12
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued

7. Long-Term Debt, continued:

   The Notes are redeemable, together with accrued interest, at the option of
   the Company, in whole or in part, at any time on or after December 1, 2002,
   with sufficient notice at the redemption prices set forth below calculated
   beginning on December 1 of the years indicated:

<TABLE>
<CAPTION>
                                        Redemption
            Year                          Price
     <S>                                <C>
            2002                          103.333%
            2003                          101.667
     2004 and thereafter                  100.000
</TABLE>

   The Term Loan and Revolving Loan are redeemable at the option of the Company,
   in whole or in part, at any time without premium or penalty upon irrevocable
   notice delivered to the administrative agent.  Partial prepayments on the
   Term Loan or Revolving Loan shall be in an aggregate principal amount of
   $5,000,000 or a whole multiple thereof.  Prepayment of the Term Loan and
   Revolving Loan is required to the extent of any excess cash flow ("ECF"), as
   computed on the ECF date.

   The Notes are collateralized by (i) a second priority security interest in
   all real property of the Company and all personal property of the Company, to
   the extent such personal property is assignable, and (ii) a second priority
   security interest in 100% of the membership interests in Timberlands.

   The Term Loan and Revolving Loan are partly collateralized by (i) a first
   priority security interest in a substantial portion of the assets of the
   Company and (ii) a first priority security interest in 100% of Brant-Allen's
   membership interest in Timberlands.  The Term Loan and Revolving Loan are
   guaranteed by Brant-Allen.

   The most restrictive covenants of the Notes, Term Loan and Revolving Loan
   state that the Company has a limitation on incurring additional indebtedness,
   making restricted payments, creating, incurring or assuming any liens, making
   sales of capital stock of subsidiaries, transactions with affiliates, and
   sale of assets.  Furthermore under the Notes, the Company is not permitted to
   pay management fees to Brant-Allen in excess of 3% of the Company's annual
   revenues.  Only one-third of this payment may be in cash.  Effective April 1,
   2000 the Notes were amended to reduce the management fees payable to Brant-
   Allen to 1% of the Company's annual revenues of which 100% is payable in
   cash.

   The fair values of the Term Loan and Revolving Loan approximate carrying
   values at December 31, 2000 and 1999.  The fair value of the Notes was
   $89,200,000 and $97,750,000 at December 31, 2000 and 1999, respectively.

   Maturities on long-term debt for the four years after 2001 are approximately
   as follows: 2002 - $0; 2003 - $14,500,000; 2004 - $0; 2005 - $18,508,276; and
   thereafter - $100,000,000.

   As disclosed above, the Company's $100 million Senior Notes become payable in
   2007.  The Company does not anticipate being able to repay these notes from
   operating cash flows and intends to refinance these Notes prior to their
   maturity.

                                      F-13
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued

 8. Long-Term Purchase Obligations:

    Capitalized purchase obligations for purchases of machinery and equipment,
    which approximate fair value, consisted of:
<TABLE>
<CAPTION>
                                                                            December 31,
                                                                       ----------------------
                                                                       2000           1999
<S>                                                                   <C>            <C>
    Long-term purchase obligations bearing interest at various
     rates ranging from approximately 7% to 8%; with principal
     payments ending in 2001                                          $93,494        $257,814
    Less current portion                                               93,494         130,566
                                                                      -------        --------
                                                                      $     -        $127,248
                                                                      =======        ========
</TABLE>

 9. Environmental Letters of Credit:

    In accordance with requirements of the Virginia Department of Environmental
    Quality, the Company has outstanding irrevocable standby letters of credit
    of $430,000, $70,000 and $103,000 to cover potential closure and post-
    closure costs associated with the Company's landfills.


10. Derivative Financial Instruments:

    At December 31, 1998, the Company had outstanding a variable to fixed
    interest rate swap with a notional value of $60 million, with a term of five
    years maturing December 5, 2002. Under the terms of this agreement, the
    Company paid a fixed interest rate of 6.13% and received a variable rate
    based on 3-month London Interbank Offered Rates ("LIBOR") (5.25% at December
    31, 1998). In October 1999, the interest rate swap was terminated and a gain
    of $150,000 was recognized as a result of the termination which is included
    in other income in the 1999 statement of operations.


11. Employee Benefit Plans:

    The Company provides a defined contribution money purchase retirement plan
    for substantially all employees. The annual cost of the Company's
    contributions to the plan, which is currently funded, is based on a
    percentage of the compensation of participants.

    The Company provides a thrift plan for substantially all employees which
    incorporates the provisions of Internal Revenue Code Subsection 401(k),
    whereby employees can make voluntary, tax-deductible contributions within
    specified limits. The Company matched employee contributions at 60% during
    the years ended December 31, 2000, 1999 and 1998, up to a maximum of 6% of
    an employee's base pay.

    The Company's expense for both plans approximated $1,097,000, $1,242,000 and
    $1,238,000 for the years ended December 31, 2000, 1999 and 1998,
    respectively.

                                      F-14
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued

11. Employee Benefit Plans, continued:

    The Company is self-insured for employee medical, dental and disability
    claims up to $50,000 per claim per year.  The Company provided an accrual of
    approximately $313,000 for claims incurred but not reported at December 31,
    2000 and 1999.

                                      F-15
<PAGE>

<TABLE>
                                              VALUATION AND QUALIFYING ACCOUNTS
                                              BEAR ISLAND PAPER COMPANY, L.L.C.
                                                       (IN THOUSANDS)
<CAPTION>

                                                                              ADDITIONS
                                                             ----------------------------------------------

                                                BALANCE AT     CHARGED TO      CHARGED TO
                                               BEGINNING OF     COSTS AND        OTHER                          BALANCE AT
DESCRIPTION                                       PERIOD         EXPENSES       ACCOUNTS       DEDUCTIONS     END OF PERIOD
-----------                                       ------         --------       --------       ----------     -------------
<S>                                                  <C>             <C>              <C>             <C>            <C>
YEAR ENDED DECEMBER 31, 2000

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)                   $68               -              -               -              $68

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                     $540            $116              -               -             $656
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $608            $116              -               -             $724
                                                 =========       =========      =========       =========       ==========


RESERVE FOR CAPPING OF LANDFILL                      $555               -              -            ($20)b           $535

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS             $20               -              -               -              $20
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $575               -              -            ($20)            $555
                                                 =========       =========      =========       =========       ==========



YEAR ENDED DECEMBER 31, 1999

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)                   $73               -              -             ($5)a            $68

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                     $477             $63              -               -             $540
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $550             $63              -               -             $608
                                                 =========       =========      =========       =========       ==========


RESERVE FOR CAPPING OF LANDFILL                      $574            ($10)             -             ($9)b           $555

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS             $20               -              -               -              $20
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $594            ($10)             -             ($9)            $575
                                                 =========       =========      =========       =========       ==========



YEAR ENDED DECEMBER 31, 1998

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)                   $73               -              -               -              $73

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                     $152            $325              -               -             $477
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $225            $325              -               -             $550
                                                 =========       =========      =========       =========       ==========

RESERVE FOR CAPPING OF LANDFILL                      $536             $70              -            ($32)b           $574

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS            $160               -              -           ($140)c            $20
                                                 ---------       ---------      ---------       ---------       ----------

                                                     $696             $70              -           ($172)            $594
                                                 =========       =========      =========       =========       ==========


</TABLE>


a) WRITE OFF OF ACCOUNTS RECEIVABLE
b) PAYMENTS FOR CAPPING AND MAINTENANCE OF LANDFILL CELLS
c) WRITE DOWN OF RESERVE FOR LACK OF POTENTIAL CLAIMS FROM PAST YEARS