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                                  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 333-63825


                           SCOTIA PACIFIC COMPANY LLC
             (Exact name of Registrant as Specified in its Charter)



                 DELAWARE                                68-0414690
       (State or other jurisdiction                   (I.R.S. Employer
     of incorporation or organization)             Identification Number)

              P. O. BOX 712                                 95565
        125 MAIN STREET, 2ND FLOOR                       (Zip Code)
            SCOTIA, CALIFORNIA
 (Address of Principal Executive Offices)


       Registrant's telephone number, including area code: (707) 764-2330

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


           Securities registered pursuant to Section 12(b) of the Act:

                                      None.

           Securities registered pursuant to Section 12(g) of the Act:

                                      None.

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


      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 / /

      The Registrant is a limited liability company wholly owned by an
affiliate of the Registrant.

      REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION (I)(1)(A)
AND (B) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                 Not applicable.

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                                TABLE OF CONTENTS


                                     PART I

   Item 1.    Business

   Item 2.    Properties

   Item 3.    Legal Proceedings

   Item 4.    Submission of Matters to a Vote of Security Holders

                                     PART II

   Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

   Item 6.    Selected Financial Data

   Item 7.    Management's Discussion and Analysis of Financial Condition and Results
                      of Operations

   Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

   Item 8.    Financial Statements and Supplementary Data
                      Report of Independent Public Accountants
                      Balance Sheet
                      Statement of Income
                      Statement of Cash Flows
                      Notes to Financial Statements

   Item 9.    Changes in and Disagreements with Accountants on Accounting and
                      Financial Disclosure

                                    PART III

   Items
      10-13.  Not applicable.

                                     PART IV

   Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K



ITEM 1.         BUSINESS

GENERAL

      Scotia Pacific Company LLC (the "COMPANY"), a special purpose Delaware
limited liability company wholly owned by The Pacific Lumber Company ("PACIFIC
LUMBER"), was organized by Pacific Lumber in May 1998 to facilitate the sale of
$160.7 million of the Company's 6.55% Series B Class A-1 Timber Collateralized
Notes due 2028, (the "CLASS A-1 NOTES"), $243.2 million of the Company's 7.11%
Series B Class A-2 Timber Collateralized Notes due 2028 (the "CLASS A-2 NOTES")
and $463.3 million of the Company's 7.71% Series B Class A-3 Timber
Collateralized Notes due 2028 (the "CLASS A-3 NOTES," together with the Class
A-1 Timber Notes and the Class A-2 Timber Notes, the "TIMBER NOTES"). The
Indenture governing the Timber Notes is referred to herein as the " INDENTURE."
Pacific Lumber is a wholly owned subsidiary of MAXXAM Group Inc. ("MGI"), and
Pacific Lumber also wholly owns Salmon Creek LLC ("SALMON CREEK"). MGI is a
wholly owned subsidiary of MAXXAM Group Holdings Inc. ("MGHI"), which in turn is
a wholly owned subsidiary of MAXXAM Inc. ("MAXXAM"). As used herein, the terms
"MGHI," "MGI," "Pacific Lumber," or "MAXXAM" refer to the respective companies
and their subsidiaries, unless otherwise noted or the context indicates
otherwise.

      This Annual Report on Form 10-K contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in a number of places
(see Item 1. "Business--Harvesting Practices" and "--Regulatory and
Environmental Factors," Item 3. "Legal Proceedings" and Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations--Log Sales to Pacific Lumber," "--Financial
Condition and Investing and Financing Activities" and "--Trends"). Such
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "estimates," "will," "should," "plans" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from the forward-looking statements as a result of various factors. These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new or
modified statutory or regulatory requirements and changing prices and market
conditions. This Report identifies other factors that could cause such
differences between such forward-looking statements and actual results. No
assurance can be given that these are all of the factors that could cause actual
results to vary materially from the forward-looking statements.

TIMBER AND TIMBERLANDS

      The Company owns, and the obligations of the Company under the Timber
Notes are secured by, (i) approximately 205,000 acres of timberlands, (ii) the
timber and related harvesting rights (the "COMPANY TIMBER RIGHTS") with respect
to an additional approximately 12,200 acres of timberlands that are owned by
Pacific Lumber, Salmon Creek and an unaffiliated third party, (iii)
approximately 1,100 acres of timberlands with respect to which Pacific Lumber
owns the Timber Rights (the "PACIFIC LUMBER TIMBER RIGHTS"), (iv) certain
computer hardware and software, including a geographic information system
("GIS") containing information on numerous aspects of the Company's timberlands
(subject to certain rights of concurrent use by Pacific Lumber) and (v) certain
other assets. Substantially all of the Company's assets serve as security for
the Timber Notes. The timberlands owned by the Company (including the
timberlands which are subject to the Pacific Lumber Timber Rights) and the
timberlands subject to the Company Timber Rights are hereinafter collectively
referred to as the "COMPANY TIMBERLANDS." The timber located on the Company
Timberlands which is not subject to the Pacific Lumber Timber Rights is
hereinafter referred to as the "COMPANY TIMBER."

      On March 1, 1999, Pacific Lumber, the Company and Salmon Creek
(collectively, the "PALCO COMPANIES") consummated the Headwaters Agreement (the
"HEADWATERS AGREEMENT") with the United States and California, pursuant to which
approximately 5,600 acres of timberlands owned by the Palco Companies known as
the Headwaters Forest and the Elk Head Springs Forest (the "HEADWATERS
TIMBERLANDS") were transferred to the United States. A substantial portion of
the Headwaters Timberlands consists of virgin old growth timberlands. In
consideration for the transfer of the Headwaters Timberlands, Salmon Creek was
paid $299.9 million, the Company was paid $150,000 and approximately 7,700 acres
of timberlands known as the Elk River Timberlands (the "ELK RIVER TIMBERLANDS")
were transferred to Pacific Lumber and subsequently transferred to the Company.
In addition, upon consummation of the Headwaters Agreement (i) habitat
conservation and sustained yield plans were approved covering the Company's
timberlands, (ii) the Palco Companies dismissed takings litigation pending
against the United States and California and (iii) California agreed to purchase
a portion of Pacific Lumber's Grizzly Creek grove as well as all of the
Company's Owl Creek grove. Salmon Creek placed $169.0 million of the proceeds
from the sale of the Headwaters Timberlands into a Scheduled Amortization
Reserve Account ("SAR ACCOUNT") in order to support principal payments on the
Timber Notes. See "--Regulatory and Environmental Factors" below and Note 2 to
the Financial Statements. In connection with the consummation of the Headwaters
Agreement, California entered into an agreement with respect to the future
purchase of the Company's Owl Creek grove (the "OWL CREEK AGREEMENT"). On
December 29, 2000, the state of California purchased the Owl Creek grove for
$67.0 million in cash pursuant to the terms of the Owl Creek Agreement.

      Timber generally is categorized by species and the age of a tree when it
is harvested. "OLD GROWTH" trees are often defined as trees which have been
growing for approximately 200 years or longer, and "YOUNG GROWTH" trees are
those which have been growing for less than 200 years. The forest products
industry grades lumber into various classifications according to quality. The
two broad categories into which all grades fall based on the absence or presence
of knots are called "upper" and "common" grades, respectively. Old growth trees
have a higher percentage of upper grade lumber than young growth trees.

      The Company estimates that the amount of Company Timber consists of
approximately 3.1 million Mbfe (as described below) of timber by volume, and is
comprised of primarily young growth and old growth redwood and Douglas-fir
timber. In addition, substantial quantities of sub-merchantable trees exist on
the Company Timberlands which are not yet mature and have not been included in
the inventory of the Company Timber. The estimates of the volume of timber
comprising the Company Timber are based on a timber cruise performed in 1986 of
all of Pacific Lumber's properties at that time, as adjusted to reflect
acquisitions, dispositions, and actual harvest levels since the cruise and
estimated growth rates of the Company Timber.

      Under the Mbfe concept, one thousand board feet, net Scribner scale, of
old growth redwood timber equals one Mbfe. One thousand board feet, net Scribner
scale, of each other species and category of timber included in the Company
Timber was assigned a value equal to a fraction of an Mbfe. This fraction was
generally determined by dividing the June 1998 SBE Price applicable to such
species and category by the June 1998 SBE Price applicable to old growth
redwood. "SBE PRICE" is the applicable stumpage price for each species of timber
and category thereof pursuant to a schedule published periodically by the
California State Board of Equalization. See "--Operation of Company Timberlands"
and "--Harvesting Practices" below.

      During the past few years, legal challenges have severely restricted
Pacific Lumber's ability to harvest the virgin old growth timber on its
property, and to a lesser extent, residual old growth timber. In addition, the
Company's ability to harvest old growth timber has also been and is expected to
continue to be subject to restrictions under federal and state environmental
laws, and also be subject to the prescriptions contained in the Environmental
Plans (as defined below) agreed to in connection with the consummation of the
Headwaters Agreement. See "--Regulatory and Environmental Factors" below.

      Redwood lumber is a premium, high value-added product which has different
supply and demand characteristics from the general lumber market. Redwood is
known for its natural beauty, superior ability to retain paints and finishes,
dimensional stability and its innate resistance to decay, insects and chemicals.
As a result, redwood lumber is generally not used for commodity applications
such as structural frames for construction, but is used instead for specialty
applications such as exterior siding, trim and fascia for both residential and
commercial construction, outdoor furniture, decks, planters and retaining walls.
Redwood also has a variety of industrial applications because of its resistance
to chemicals and because it does not impart any taste or odor to liquids or
solids. Redwood prices have exhibited stability compared to most other softwood
timber types, and redwood lumber has historically commanded a substantial price
premium to other softwood timber types. Redwood is grown commercially only in
North America in a region that extends for approximately 375 miles along the
coast of the Pacific Northwest. The combination of excellent soil conditions and
climate makes this region one of the most productive timber regions in North
America.

      Douglas-fir is used primarily for new construction and some decorative
purposes and is widely recognized for its strength, hard surface and attractive
appearance. Douglas-fir is grown commercially along the west coast of North
America and in Chile and New Zealand.

      Pacific Lumber engages in extensive efforts to supplement the natural
regeneration of the Company Timber and increase the amount of timber on the
Company Timberlands. The Company is required to comply with California forestry
regulations regarding reforestation, which generally require that an area be
reforested to specified standards within an established period of time. Pursuant
to the Services Agreement described below (see "--Operation of Company
Timberlands"), Pacific Lumber conducts regeneration activities on the Company
Timberlands for the Company. Regeneration of redwood timber generally is
accomplished through the natural growth of new redwood sprouts from the stump
remaining after a redwood tree is harvested. Such new redwood sprouts grow
quickly, thriving on existing mature root systems. In addition, Pacific Lumber
supplements natural redwood regeneration by planting redwood seedlings.
Douglas-fir timber is regenerated almost entirely by planting seedlings. During
2000, Pacific Lumber planted an estimated 586,000 redwood and Douglas-fir
seedlings on the Company Timberlands.

      California law requires timber owners such as the Company to demonstrate
that their operations will not decrease the sustainable productivity of their
timberlands. A timber company may comply with this requirement by submitting a
sustained yield plan to the California Department of Forestry and Fire
Protection ("CDF") for review and approval. A sustained yield plan contains a
timber growth and yield assessment, which evaluates and calculates the amount of
timber and long-term production outlook for a company's timberlands, a fish and
wildlife assessment, which addresses the condition and management of fisheries
and wildlife in the area, and a watershed assessment, which addresses the
protection of aquatic resources. The relevant regulations require determination
of a long-term sustained yield ("LTSY") harvest level, which is the average
annual harvest level that the management area is capable of sustaining in the
last decade of a 100-year planning horizon. The LTSY is determined based upon
timber inventory, projected growth and harvesting methodologies, as well as
soil, water, air, wildlife and other relevant considerations. A sustained yield
plan must demonstrate that the average annual harvest over any rolling ten-year
period within the planning horizon does not exceed the LTSY.

      The Company is also subject to federal and state laws providing for the
protection and conservation of wildlife species which have been designated as
endangered or threatened, certain of which are found on the Company Timberlands.
These laws generally prohibit certain adverse impacts on such species (referred
to as a "TAKE"), except for incidental takes which do not jeopardize the
continued existence of the affected species and which are made in accordance
with an approved habitat conservation plan and related incidental take permit. A
habitat conservation plan analyzes the impact of the incidental take and
specifies measures to monitor, minimize and mitigate such impact. As part of the
Headwaters Agreement, the Company and Pacific Lumber reached agreement with
various federal and state regulatory agencies with respect to a sustained yield
plan (the "SYP") and a multi-species habitat conservation plan (the "HCP,"
together with the SYP, the "ENVIRONMENTAL PLANS"). See "--Regulatory and
Environmental Factors" below.

OPERATION OF COMPANY TIMBERLANDS

      The Company's foresters, wildlife and fisheries biologists, geologists and
other personnel are responsible for providing a number of forest stewardship
techniques, including protecting the Company Timber from forest fires, erosion,
insects and other damage, overseeing reforestation activities and monitoring
environmental and regulatory compliance. The Company's personnel are also
responsible for preparing timber harvesting plans ("THPS") and updating the GIS
that contains information on numerous aspects of the Company Timberlands, such
as timber type, tree class, wildlife data, roads, rivers and streams. See
"--Harvesting Practices" below for a description of the Company's GIS updating
process and the THP preparation process.

      The Company is a party with Pacific Lumber to a master purchase agreement
(the "MASTER PURCHASE AGREEMENT") which governs the sale to Pacific Lumber of
logs harvested from the Company Timberlands. As Pacific Lumber purchases logs
from the Company pursuant to the Master Purchase Agreement, Pacific Lumber is
responsible, at its own expense, for harvesting and removing the standing
Company Timber covered by approved THPs, with the purchase price being based
upon "stumpage prices." Title to, and the obligation to pay for, harvested logs
passes to Pacific Lumber once the logs are transported to Pacific Lumber's log
decks and measured. The Master Purchase Agreement generally contemplates that
all sales of logs by the Company to Pacific Lumber will be at a price which
equals or exceeds the applicable SBE Price, which is the stumpage price for each
species and category of timber as set forth in the most recent "HARVEST VALUE
SCHEDULE" (or any successor publication) published by the California State Board
of Equalization (or any successor agency) applicable to the timber sold during
the applicable period. Harvest Value Schedules are published twice a year for
purposes of computing a yield tax imposed on timber harvested between January 1
through June 30 and July 1 through December 31. SBE Prices are not necessarily
representative of actual prices that would be realized from unrelated parties at
subsequent dates.

      After obtaining an approved THP, the Company offers for sale the logs to
be harvested pursuant to such THP. While the Company may sell logs to third
parties, it derives substantially all of its revenue from the sale of logs to
Pacific Lumber pursuant to the Master Purchase Agreement. Each sale of logs by
the Company to Pacific Lumber is made pursuant to a separate log purchase
agreement that relates to the Company Timber covered by an approved THP and
incorporates the provisions of the Master Purchase Agreement. Each such log
purchase agreement provides for the sale to Pacific Lumber of the logs harvested
from the Company Timber covered by such THP and generally constitutes an
exclusive agreement with respect to the timber covered thereby, subject to
certain limited exceptions. However, the timing and amount of log purchases by
Pacific Lumber is affected by factors outside the control of the Company,
including regulatory and environmental factors, the financial condition of
Pacific Lumber, and the supply and demand for lumber products (which, in turn,
will be influenced by demand in the housing, construction and remodeling
industries).

      The Company continues to rely on Pacific Lumber to provide operational,
management and related services not performed by its own employees with respect
to the Company Timberlands pursuant to a services agreement (the "SERVICES
AGREEMENT"). The services include the furnishing of all equipment, personnel and
expertise not within the Company's possession and reasonably necessary for the
operation and maintenance of the Company Timberlands and the Company Timber as
well as timber management techniques designed to supplement the natural
regeneration of, and increase the amount of, Company Timber. Pacific Lumber is
required to provide all services under the Services Agreement in a manner
consistent in all material respects with prudent business practices which are
consistent with then current applicable industry standards and are in compliance
in all material respects with all applicable timber laws. The Company pays
Pacific Lumber a services fee ("SERVICES FEE") which is adjusted annually based
on a specified government index relating to wood products and reimburses Pacific
Lumber for the cost of constructing, rehabilitating and maintaining roads, and
performing reforestation services, on the Company Timberlands. Certain of such
reimbursable expenses are expected to vary in relation to the amount of timber
to be harvested in any given period.

      The Company provides further services to Pacific Lumber pursuant to an
additional services agreement (the "ADDITIONAL SERVICES AGREEMENT"). These
services include (a) assisting Pacific Lumber to operate, maintain and harvest
its own timber properties, (b) updating and providing access to the GIS with
respect to information concerning Pacific Lumber's own timber properties and (c)
assisting Pacific Lumber with its statutory and regulatory compliance. Pacific
Lumber pays the Company a fee for such services equal to the actual cost of
providing such services, as determined in accordance with generally accepted
accounting principles.

      The Company, Pacific Lumber and Salmon Creek are also parties to a
reciprocal rights agreement (the "RECIPROCAL RIGHTS AGREEMENT") whereby, among
other things, the parties granted to each other certain reciprocal rights of
egress and ingress through their respective properties in connection with the
operation and maintenance of such properties and their respective businesses. In
addition, Pacific Lumber and the Company are parties to an environmental
indemnification agreement (the "ENVIRONMENTAL INDEMNIFICATION AGREEMENT"),
pursuant to which Pacific Lumber has agreed to indemnify the Company from and
against certain present and future liabilities arising with respect to hazardous
materials, hazardous materials contamination or disposal sites, or under
environmental laws with respect to the Company Timberlands. In particular,
Pacific Lumber is liable with respect to any contamination which occurred on the
Company Timberlands prior to the date of their transfer to the Company.

HARVESTING PRACTICES

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" in this section for cautionary
information with respect to such forward-looking statements.

      The GIS contains information regarding numerous aspects of the Company
Timberlands, including timber type, tree class, wildlife data, roads, rivers and
streams. Subject to the terms of the Services Agreement, Pacific Lumber, to the
extent necessary, provides the Company with personnel and technical assistance
to assist the Company in updating, upgrading and improving the GIS and the other
computer systems owned by the Company. By carefully monitoring and updating this
data base and conducting field studies, the Company's foresters, with the
assistance (if required) of Pacific Lumber pursuant to the Services Agreement,
are better able to develop detailed THPs addressing the various regulatory
requirements. The Company also utilizes a Global Positioning System ("GPS")
which allows precise location of geographic features through satellite
positioning. Use of the GPS greatly enhances the quality and efficiency of the
GIS data.

      The ability of the Company to harvest timber will depend, in part, upon
its ability to obtain regulatory approval of THPs. Prior to harvesting timber in
California, companies are required to obtain the CDF's approval of a detailed
THP for the area to be harvested. A THP must be submitted by a registered
professional forester and must include information regarding the method of
proposed timber operations for a specified area, whether the operations will
have any adverse impact on the environment and, if so, the mitigation measures
to be used to reduce any such impact. The CDF's evaluation of THPs incorporates
review and analysis of such THPs by several California and federal agencies and
public comments received with respect to such THPs. An approved THP is
applicable to specific acreage and specifies the harvesting method and other
conditions relating to the harvesting of the timber covered by such THP. The
number of the Company's approved THPs and the amount of timber covered by such
THPs varies significantly from time to time, depending upon the timing of agency
review and other factors. Timber covered by an approved THP is typically
harvested within a one year period from the date harvesting first begins. The
Indenture requires the Company to use its best efforts (consistent with prudent
business practices) to maintain a number of pending THPs which, together with
THPs previously approved, would cover rights to harvest a quantity of Company
Timber adequate to pay interest and principal amortization based on the Minimum
Principal Amortization Schedule for the Timber Notes for the next succeeding
twelve month period. Despite its best efforts, the Company has experienced an
absence of a sufficient number of THPs available for harvest to enable it to
conduct its operations at levels it had experienced prior to 1998 or at levels
which meet the Company's expectations. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--Log Sales to Pacific Lumber" and "--Trends." However, the Company
believes that the Environmental Plans should in the long-term expedite the
preparation and facilitate approval of its THPs, although the Company continues
to experience difficulties in the THP approval process as it implements the
Environmental Plans.

      The Company employs a variety of well-accepted methods of selecting trees
for harvest designed to achieve optimal regeneration. These methods, referred to
as "silvicultural systems" in the forestry profession, range from very light
thinnings aimed at enhancing the growth rate of retained trees to clear cutting
which results in the harvest of all trees in an area and replacement with a new
forest stand. In between are a number of varying levels of partial harvests
which can be employed.

EMPLOYEES

      As of March 1, 2001, the Company employed 86 persons, 82 of whom were
registered professional foresters, geologists, wildlife and fisheries biologists
or otherwise involved in the management of the Company Timberlands. None of the
Company's employees are covered by a collective bargaining agreement.

PRINCIPAL EXECUTIVE OFFICES

      The principal executive offices of the Company are located at 125 Main
Street, 2nd Floor, P.O. Box 712, Scotia, California 95565. The telephone number
of the Company is (707) 764-2330.

REGULATORY AND ENVIRONMENTAL FACTORS

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" in this section for cautionary
information with respect to such forward-looking statements.

      General
      The Company's business is subject to the Environmental Plans and a variety
of California and federal laws and regulations dealing with timber harvesting,
threatened and endangered species and habitat for such species, and air and
water quality. Compliance with such laws and regulations also plays a
significant role in Pacific Lumber's business. The California Forest Practice
Act (the "FOREST PRACTICE ACT") and related regulations adopted by the
California Board of Forestry and Fire Protection (the "BOF") set forth detailed
requirements for the conduct of timber harvesting operations in California.
These requirements include the obligation of timber companies submitting THPs to
obtain regulatory approval of detailed THPs containing information with respect
to areas proposed to be harvested (see "--Harvesting Practices" above).
California law also requires large timber companies submitting THPs to
demonstrate that their proposed timber operations will not decrease the
sustainable productivity of their timberlands (see "--Timber and Timberlands"
above). The federal Endangered Species Act (the "ESA") and California Endangered
Species Act (the "CESA") provide in general for the protection and conservation
of specifically listed wildlife and plants which have been declared to be
endangered or threatened. These laws generally prohibit the take of certain
species, except for incidental takes pursuant to otherwise lawful activities
which do not jeopardize the continued existence of the affected species and
which are made in accordance with an approved habitat conservation plan and
related incidental take permits. A habitat conservation plan, among other
things, analyzes the potential impact of the incidental take of species and
specifies measures to monitor, minimize and mitigate such impact. The operations
of the Company are also subject to the California Environmental Quality Act (the
"CEQA"), which provides for protection of the state's air and water quality and
wildlife, and the California Water Quality Act and Federal Clean Water Act,
which require that Pacific Lumber conduct its operations so as to reasonably
protect the water quality of nearby rivers and streams. Compliance with such
laws, regulations and judicial and administrative interpretations, together with
other regulatory and environmental matters, have resulted in restrictions on the
scope and timing of the Company's timber operations, increased operational costs
and engendered litigation and other challenges to its operations.

      The Environmental Plans
      The Environmental Plans, consisting of the HCP and the SYP, were approved
by the applicable federal and state regulatory agencies upon the consummation of
the Headwaters Agreement. In connection with approval of the Environmental
Plans, incidental take permits ("PERMITS") were issued with respect to certain
threatened, endangered and other species found on the Company Timberlands. The
Permits cover the 50-year term of the HCP and allow incidental takes of 17
different species covered by the HCP, including four species which are found on
the Company Timberlands and had previously been listed as endangered or
threatened under the ESA and/or the CESA. The agreements which implement the
Environmental Plans also provide for various remedies (including the issuance of
written stop orders and liquidated damages) in the event of a breach by the
Company of these agreements or the Environmental Plans.

      Under the Environmental Plans, harvesting activities are prohibited or
restricted on certain areas of the Company Timberlands. For a 50-year period,
harvesting activities are severely restricted in several areas (consisting of
substantial quantities of old growth redwood and Douglas-fir timber) to serve as
habitat conservation areas for the marbled murrelet, a coastal seabird, and
certain other species. Harvesting in certain other areas of the Company
Timberlands is currently prohibited while these areas are evaluated for the
potential risk of landslide and the degree to which harvesting activities will
be prohibited or restricted in the future. Further, additional areas alongside
streamsides have been designated as buffers, in which harvesting is prohibited
or restricted, to protect aquatic and riparian habitat. These streamside buffers
may be adjusted up or down, subject to certain minimum and maximum buffers,
based upon an ongoing watershed analysis process, which the HCP requires be
completed within five years of its effective date. Pacific Lumber's analysis of
the Freshwater watershed has recently been released, and is subject to review
and approval by the applicable regulatory agencies. The analysis for two
additional watersheds is nearing completion, while the analyses for additional
watersheds are in various stages of completion.

      The HCP also imposes certain restrictions on the use of roads on the
timberlands covered by the HCP during several months of the year and during
periods of wet weather, except for certain limited situations. These
restrictions may restrict operations so that certain harvesting activities can
generally only be carried out from June through October of any particular
harvest year, and then only if wet weather conditions do not exist. However, the
Company anticipates that some harvesting will be able to be conducted during the
other months. The HCP also requires that 75 miles of roads be stormproofed on an
annual basis. Certain other roads must be built or repaired. The HCP requires
the stormproofing to be done between May 2 and October 14 of each year, while
the road building and repair is to be accomplished between June 2 and October 14
of each year. The road stormproofing and building and repair is also required to
be suspended if certain wet weather conditions exist.

      The HCP contains an adaptive management provision, which various
regulatory agencies have clarified will be implemented on a timely and efficient
basis, and in a manner which will be both biologically and economically sound.
This provision allows the Palco Companies to propose changes to any of the HCP
prescriptions based on, among other things, certain economic considerations. The
regulatory agencies have also clarified that in applying this adaptive
management provision, to the extent the changes proposed do not result in the
jeopardy of a particular species, the regulatory agencies will consider the
practicality of the suggested changes, including the cost and economic
feasibility and viability.

      Water Quality
      Under the Federal Clean Water Act, the Environmental Protection Agency
(the "EPA") is required to establish total maximum daily load limits ("TMDLS")
in water courses that have been declared to be "water quality impaired." The EPA
and the North Coast Regional Water Quality Control Board (the "WATER BOARD") are
in the process of establishing TMDLs for 17 northern California rivers and
certain of their tributaries, including certain water courses that flow within
the Company Timberlands. The Company expects this process to continue into 2010.
In the December 1999 EPA report dealing with TMDLs on two of the nine water
courses, the agency indicated that the requirements under the HCP would
significantly address the sediment issues that resulted in TMDL requirements for
these water courses. However, the September 2000 report by the staff of the
Water Board proposed various actions including restrictions on harvesting beyond
those required under the HCP. Dates for hearings concerning these matters have
not been scheduled. Establishment of the final TMDL requirements applicable to
the Company Timberlands will be a lengthy process, and the final TMDL
requirements applicable to the Company's Timberlands may require aquatic
protection measures that are different from or in addition to the prescriptions
to be developed pursuant to the watershed analysis process provided for in the
HCP.

      Impact of Future Legislation
      Laws, regulations and related judicial decisions and administrative
interpretations dealing with the Company's business are subject to change and
new laws and regulations are frequently introduced concerning the California
timber industry. From time to time, bills are introduced in the California
legislature and the U.S. Congress which relate to the business of the Company,
including the protection and acquisition of old growth and other timberlands,
threatened and endangered species, environmental protection, air and water
quality and the restriction, regulation and administration of timber harvesting
practices. In addition to existing and possible new or modified statutory
enactments, regulatory requirements and administrative and legal actions, the
California timber industry remains subject to potential California or local
ballot initiatives and evolving federal and California case law which could
affect timber harvesting practices. It is not possible to assess the effect of
such future legislative, judicial and administrative events on the Company or
its business.

      Timber Operator's License
      Historically, Pacific Lumber has conducted logging operations on the
Company Timberlands with its own staff of logging personnel as well as through
contract loggers. In order to conduct logging operations in California, a
logging company must obtain from the CDF a Timber Operator's License. In January
2000, Pacific Lumber was granted a Timber Operator's License for the years
2000-2001.

ITEM 2.         PROPERTIES

      A description of the Company's properties is included under Item 1. above.


ITEM 3.         LEGAL PROCEEDINGS

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.

TIMBER HARVESTING LITIGATION

      On March 5, 2001, the parties reached an agreement to settle the lawsuit
entitled Jennie Rollins, et al. v. Charles Hurwitz, John Campbell, Pacific
Lumber, MAXXAM Group Holdings Inc., Scotia Pacific Holding Company, MAXXAM Group
Inc., MAXXAM Inc., Barnum Timber Company, et al. (No. 9700400) (the "ROLLINS
LAWSUIT") filed in the Superior Court of Humboldt County. Substantially all of
the amounts to be paid to the plaintiffs will be paid by the Company's insurers.
Still pending is a similar action entitled Kristi Wrigley, et al. v. Charles
Hurwitz, John Campbell, Pacific Lumber, MAXXAM Group Holdings Inc., Scotia
Pacific Holding Company, MAXXAM Group Inc., MAXXAM Inc., Scotia Pacific Company
LLC, et al. (No. 9700399) (the "WRIGLEY LAWSUIT") filed on December 2, 1997 in
the Superior Court of Humboldt County. This action alleges, among other things,
that defendants' logging practices have contributed to an increase in flooding
and damage to domestic water systems in a portion of the Elk River watershed.
Plaintiffs further allege that in order to have THPs approved in connection with
these areas, the defendants submitted false information to the CDF in violation
of California's business and professions code and the Racketeering Influence and
Corrupt Practices Act. The Company believes that it has strong factual and legal
defenses with respect to the Wrigley lawsuit; however, there can be no assurance
that it will not have a material adverse effect on its financial position,
results of operations or liquidity.

      On March 31, 1999, an action entitled Environmental Protection Information
Association, Sierra Club v. California Department of Forestry and Fire
Protection, California Department of Fish and Game, The Pacific Lumber Company,
Scotia Pacific Company LLC, Salmon Creek Corporation, et al. (No. 99CS00639)
(the "EPIC-SYP /PERMITS LAWSUIT") was filed alleging, among other things, that
the CDF and the CDFG violated the CEQA and the CESA with respect to the SYP and
the Permits issued by California. This action is now pending in Humboldt County,
California (No. CV-990445). The plaintiffs seek, among other things, injunctive
relief to set aside the CDF's and the CDFG's decisions approving the SYP and the
Permits issued by California. On March 31, 1999, an action entitled United
Steelworkers of America, AFL-CIO, CLC, and Donald Kegley v. California
Department of Forestry and Fire Protection, The Pacific Lumber Company, Scotia
Pacific Company LLC and Salmon Creek Corporation (No. 99CS00626) (the "USWA
LAWSUIT") was filed alleging, among other things, violations of the Forest
Practice Act in connection with the CDF's approval of the SYP. This action is
now pending in Humboldt County, California (No. CV- 990452). The plaintiffs seek
to prohibit the CDF from approving any THPs relying on the SYP. The EPIC-
SYP/Permits lawsuit and the USWA lawsuit have been set for trial in November
2001. The Company believes that appropriate procedures were followed throughout
the public review and approval process concerning the Environmental Plans, and
the Company is working with the relevant government agencies to defend the USWA
lawsuit and the EPIC- SYP/Permits lawsuit.

      On March 10, 2000, a lawsuit entitled Environmental Protection Information
Center, Sierra Club v. California Department of Fish and Game, The Pacific
Lumber Company and Does XI-XX (THP 520) (No. CV-00170) (the "EPIC/THP 97-520
LAWSUIT") was filed in the Superior Court of Humboldt County. Plaintiffs allege,
among other things, that the CDF violated the Forest Practice Act and the
California Public Resources Code by approving an amendment to THP 97-520 (which
covers approximately 700 acres of timberlands adjoining the Headwaters
Timberlands) as a "minor" amendment. The plaintiffs seek an order requiring the
CDF to withdraw its approval of the minor amendment to THP 97-520, and enjoining
Pacific Lumber from harvesting under THP 97-520. In July 2000, the Court issued
a preliminary injunction enjoining Pacific Lumber from harvesting under THP
97-520. The EPIC/THP 97-520 lawsuit was supposed to begin on March 5, 2001, but
was postponed and a new trial date has not been set. On March 6, 2001, the CDF
approved a "major" amendment of THP 97-520 which allows for winter operations
and restates the changes in the minor amendment. As a result of this approval,
the Company believes that it should be able to obtain relief from the injunction
and begin harvesting. Therefore, although the EPIC/THP 97-520 lawsuit has yet to
conclude, the Company believes that it will not have a material adverse effect
on its financial position, results of operations or liquidity.

      In February 2001, the Company and Pacific Lumber received a letter from
the Environmental Protection Information Association of its 60-day notice of
intent to sue the Company and Pacific Lumber under the federal Clean Water Act
("CWA"). The letter alleges a number of violations of the CWA by the Company and
Pacific Lumber in certain watersheds since 1990. If filed, the lawsuit will
purportedly seek declarative and injunction relief for past violations and to
prevent future violations, as well as civil penalties. Such civil penalties
could be up to $25,000 per day for each continuing violation. The Company does
not know when or if a lawsuit will be filed regarding this matter, or if a
lawsuit is filed, the ultimate impact of such lawsuit on its financial condition
or results of operations.

OTHER LITIGATION

      The Company is involved in other claims, lawsuits and proceedings,
including certain pending or threatened actions seeking to prevent Pacific
Lumber and the Company from conducting harvesting and certain other operations.
While uncertainties are inherent in the final outcome of such matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred or their effect on the Company, management believes that the resolution
of such uncertainties and the incurrence of such costs should not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.


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

      Not applicable.

                                     PART II

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

      Pacific Lumber holds a 100% member interest in the Company. Accordingly,
there is no established public trading market for the Company's equity
securities. Except for a dividend paid to the parent in connection with issuance
of the Timber Notes (see Note 1 to the Financial Statements appearing in Item
8), and a $73.1 million distribution to Pacific Lumber in January 2001 as a
result of the Owl Creek sale, the Company has not declared or paid any cash
distributions on its equity securities for the period since its formation in May
1998.


ITEM 6.         SELECTED FINANCIAL DATA

      Not applicable.


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

      The following should be read in conjunction with the Company's Financial
Statements and the Notes thereto appearing in Item 8.

BACKGROUND

      The Company is a single member Delaware limited liability company owned by
Pacific Lumber and did not conduct any significant operations prior to the
issuance of the Timber Notes in May 1998. The historical financial data reflects
(a) the historical assets, liabilities and results of operations of Scotia
Pacific Holding Company ("SCOTIA PACIFIC"), the Company's predecessor, after
giving effect to the transfer to Pacific Lumber of the timber harvesting rights
with respect to 1,400 acres of timberlands and (b) Pacific Lumber's and Salmon
Creek's historical assets, liabilities and results of operations attributable to
approximately 13,500 acres of timberlands and the timber and related timber
harvesting rights on an additional approximately 19,700 acres of timberlands
transferred to the Company, in each case as if such transactions occurred on
January 1, 1998 (the beginning of the earliest period presented). The retirement
of the 7.95% Timber Collateralized Notes due 2015 of Scotia Pacific (the "OLD
TIMBER NOTES"), the issuance of the Timber Notes and the payment of a $526.1
million cash dividend to Pacific Lumber are reflected in the financial
statements for the year ended December 31, 1998, the period in which these
transactions occurred.

RESULTS OF OPERATIONS

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.

      General
      Mbfe Concept. The Mbfe concept was used in structuring the Timber Notes in
order to take account of the relative values of the species and categories of
timber included in the Company Timber. Under the Mbfe concept, one thousand
board feet, net Scribner scale, of old growth redwood timber equates to one
Mbfe. One thousand board feet, net Scribner scale, of each other species and
category of timber included in the Company Timber was assigned a value in Mbfe
equal to a fraction of an Mbfe. This fraction was generally determined by
dividing the SBE Price applicable to such species and category for the first
half of 1998 by the SBE Price applicable to old growth redwood for the first
half of 1998. Historical harvest volumes reflected in this report are stated on
an Mbfe basis.

      Master Purchase Agreement Governing Log Sales to Pacific Lumber. The
Master Purchase Agreement generally contemplates that all sales of logs by the
Company to Pacific Lumber will be at the SBE Price. Harvest Value Schedules
setting forth the SBE Prices are published by the California State Board of
Equalization twice a year for the purpose of computing a yield tax imposed on
timber harvested between January 1 and June 30 and July 1 and December 31.
Harvest Value Schedules are based on twenty-four months of actual log and timber
sales that occur within nine specified timber value areas. These sales are arms
length transactions adjusted for time by indexing (using log and, in the case of
old growth redwood, lumber price trends) to a specific date, which is
approximately sixty days prior to the effective date of the Harvest Value
Schedules. However, SBE prices may not necessarily be representative of actual
prices that would be realized from unrelated parties at subsequent dates.

      Seasonality. Logging operations on the Company's timberlands are highly
seasonal and have historically been significantly higher in the months of April
through November than in the months of December through March. Management
expects that the Company's revenues and cash flows will continue to be markedly
seasonal because of the harvesting, road use, wet weather and other restrictions
imposed by the HCP. As a result, a substantial majority of the future harvesting
on the Company Timberlands can be expected to be concentrated during the period
from June through October of each year. Some of these restrictions may be
modified under the adaptive management provision contained in the HCP, and as a
result of the watershed analysis process to be performed over the five-year
period beginning March 1, 1999. See Item 1. "Business--Regulatory and
Environmental Factors--The Environmental Plans." The following should be read in
conjunction with the Company's Financial Statements and Notes thereto appearing
in Item 8.

      Log Sales to Pacific Lumber
      Net sales from logs were $128.0 million and $51.4 million for the years
ended December 31, 2000 and 1999, respectively. This represents a log volume of
109,400 Mbfe and 69,100 Mbfe, respectively. The increase in net sales between
periods was due to a substantial increase in SBE prices for redwood logs as well
as an increase in log delivery volumes. The favorable variance in log volumes is
the result of an increase in available-to-log THPs; however, the supply of
approved THPs remains well below that available prior to 1998 and that required
to meet the Company's operating objectives. See "--Trends" for further
discussion of the factors affecting the supply of approved THPs.

      The Company's net sales from log sales declined from $80.3 million for the
year ended December 31, 1998 to $51.4 million for the year ended December 31,
1999 as a result of the decrease in the volume of log deliveries for such
periods from 115,700 Mbfe to 69,100 Mbfe, respectively. Substantially all of the
decrease in net sales between periods was due to the decline in the volume of
log deliveries, which was due largely to the absence of a sufficient number of
approved THPs throughout 1999.

      Operating Income and Income (Loss) Before Income Taxes
      Operating income was $93.1 million and $31.2 million for the years ended
December 31, 2000 and 1999, respectively. The increase in operating income is
principally due to the increase in log sales discussed above. This was slightly
offset by an increase in general and administrative expenses due to the addition
of personnel, increased professional services for THP preparation and watershed
analysis, higher road maintenance costs, and additional yield taxes which are
based on harvest volume. Depletion and depreciation increased as a result of
increased harvest levels.

      The increase in net income is principally due to the increase in operating
income discussed previously and the $59.5 million gain on the sale of the Owl
Creek grove in December 2000 as well as an increase in interest income resulting
from investment of the funds held in the SAR Account and, for the year ended
December 31, 2000, from an extraordinary gain of $6.0 million on the
reacquisition of Timber Notes (which are being held in the SAR Account).

      Operating income was $31.2 million and $59.9 million for the years ended
December 31, 1999 and 1998, respectively. Income (loss) before income taxes and
extraordinary item was $(32.4) million and $18.5 million for the years ended
December 31, 1999 and 1998, respectively. The decline in operating income and
the loss before income taxes and extraordinary item in 1999 is principally due
to the decrease in log sales discussed above, offset by a decline in depletion
expense attributed to the decrease in harvest volumes between periods. General
and administrative expenses were higher for the year ended December 31, 1999
compared to 1998 primarily due to a full year of higher road maintenance costs
provided for under the HCP and higher professional and consulting services fees.
In addition to the impact from lower operating income, the loss before income
taxes also was due to the higher interest expense resulting from the increase in
debt from the Timber Notes. Interest expense on the Timber Notes for 1999 was
$63.1 million compared to interest expense of $41.9 million for 1998 including
$28.2 million of interest on the Timber Notes and $13.7 million of interest on
the Old Timber Notes.

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" and below for cautionary information
with respect to such forward-looking statements.

      Note 5 to the Financial Statements contains additional information
concerning the Company's indebtedness and certain restrictive debt covenants.

      The December 2000 sale of the Owl Creek grove generated net proceeds of
$67.0 million.

      The Company issued the $867.2 million aggregate principal amount of Timber
Notes on July 20, 1998. Proceeds from the offering of the Timber Notes were used
primarily to prepay the Old Timber Notes and to pay a cash dividend of $526.1
million to Pacific Lumber.

      On November 18, 1999, $169.0 million of funds from the sale of the
Headwaters Timberlands were contributed to the Company and set aside in the SAR
Account.

      During the year ended December 31, 2000, $52.5 million in funds from the
SAR Account were used to reacquire the Timber Notes, representing $60.0 million
in principal, as permitted under the Indenture. As of December 31, 2000, the
fair value of cash, marketable securities and other investments held in the SAR
Account, including the reacquired Timber Notes, was $166.3 million.

      The Indenture contains various covenants which, among other things, limit
the ability of the Company to incur additional indebtedness and liens, to engage
in transactions with affiliates, to pay dividends and to make investments. Under
the terms of the Indenture, the Company will generally have available cash for
distribution to Pacific Lumber when the Company's cash flows from operations
exceed the amounts required by the Indenture to be reserved for the payment of
current debt service (including interest, principal and premiums) on the Timber
Notes, capital expenditures, certain other operating expenses and replenishment
of the SAR Account.

      The Company has an agreement with a group of banks which allows it to
borrow up to one year's interest on the Timber Notes (the "LINE OF CREDIT").
This facility expires on July 15, 2001, but it is expected to be renewed
annually, subject to approval of the bank group. At December 31, 2000, the
Company could have borrowed a maximum of $62.0 million under the Line of Credit,
and there were no borrowings outstanding under the Line of Credit.

      The Company made principal payments on the Timber Notes of $15.9 million
and $8.2 million during the years ended December 31, 2000 and 1999,
respectively. On the January 22, 2001, note payment date for the Timber Notes,
the Company had $40.8 million set aside in the note payment account to pay the
$31.0 million of interest due as well as $9.8 million of principal. The Company
repaid an additional $3.3 million of principal on the Timber Notes using funds
held in the SAR Account, resulting in a total principal payment of $13.1
million, an amount equal to Scheduled Amortization. In addition, the Company
made a distribution in the amount of $73.1 million to its parent, Pacific
Lumber, $63.9 million of which was made using funds from the sale of the Owl
Creek grove and $9.2 million of which was made using excess funds released from
the SAR Account.

      With respect to short-term liquidity, the Company believes that it will
generate sufficient cash from operations to pay all of the interest and
principal on the Timber Notes on the July 20, 2001 payment date; however, given
the uncertainties concerning the ability of the Company to obtain THP approvals,
restrictions on winter harvesting operations and other matters, there can be no
assurance that this will be the case. Any shortfall in funds available to pay
interest would be borrowed under the Line of Credit. The Company also expects
that all or a portion of the funds used to pay the Scheduled Amortization amount
will be provided from the SAR Account.

      Pacific Lumber's financial condition will affect its ability to purchase
logs from the Company and to meet its obligations under the Services Agreement.
Pacific Lumber's financial condition improved significantly as a result of the
$73.1 million distribution paid January 22, 2001. Nevertheless, Pacific Lumber
expects that near-term cash flows from operations will be adversely affected by
an inadequate supply of logs and a related slowdown in lumber production.
Pacific Lumber may require funds available under Pacific Lumber's revolving
credit agreement, repayments by MGI of an intercompany loan and/or capital
contributions from MGI to enable it to meet its working capital and capital
expenditure requirements for 2001. With respect to long-term liquidity, although
Pacific Lumber expects that its existing cash and cash equivalents should
provide sufficient funds to meet its working capital and capital expenditure
requirements, until such time as Pacific Lumber has adequate cash flows from
operations and/or dividends from the Company, there can be no assurance that
this will be the case.

      The Company's capital expenditures, excluding timberland acquisitions,
relate primarily to reforestation of timberlands and to construction and
rehabilitation of logging roads. The Company's capital expenditures for 2000,
1999 and 1998, excluding contributions by Pacific Lumber and timberland
acquisitions, were approximately $7.0 million, $6.5 million and $7.4 million,
respectively. The Company's capital expenditures, excluding expenditures for
timberlands, for the next several years are expected to approximate $8.0 million
per year.

      With respect to long-term liquidity, the Company believes that its
existing cash, including cash available for principal payments from the SAR
Account, and funds available under the Line of Credit, together with its ability
to generate sufficient levels of cash flows from operations over the long term,
should provide sufficient funds to meet its long-term working capital, capital
expenditures and required debt service obligations. If the Company generates
excess funds after the payment of operating expenses, capital expenditures,
interest, premiums, required principal payments and replenishment of the SAR
Account, it may at its option either pay dividends, retain these funds for
internal purposes or make voluntary principal payments. Cash flows from
operations may continue to be adversely affected if the Company does not
experience improvements in the THP submission and approval process, or if
inclement weather conditions or seasonal operating restrictions under the HCP
hamper harvesting operations. Cash flows from operations would also be adversely
affected if additional judicial or regulatory restrictions are imposed on the
Company's harvesting activities, or if the Environmental Plans are not
implemented in accordance with the Company's expectations.

TRENDS

      This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.

      Regulatory and environmental matters play a significant role in the
Company's operations. See Item 1. "Business--Regulatory and Environmental
Matters" and Note 8 to the Financial Statements for a discussion of these
matters. Regulatory compliance and related litigation have increased the cost of
logging operations, and the Company has also been adversely affected by a lack
of available logs as a result of a severely diminished supply of available THPs,
resulting in delayed or reduced harvest and lower net sales.

      With the consummation of the Headwaters Agreement, Pacific Lumber has
completed its work in connection with preparation of the Environmental Plans;
however, significant additional work continues to be required in connection with
their implementation. As a result of the implementation process, 1999 was a
transition period for the Company with respect to the filing and approval of its
THPs. The transition period continued into 2000 and is expected to continue into
2001. Although the rate of submissions and approvals of THPs during 2000 is
higher than that for 1999, monthly submissions and approvals continue to be
slower than the Company's expectations and slower than the Company had
experienced prior to 1998, principally because government agencies have failed
to approve THPs in a timely manner. Nevertheless, the Company anticipates that
after a transition period, the implementation of the Environmental Plans will
streamline the process of preparing THPs and potentially shorten the time to
obtain approval of THPs.

      There can be no assurance that the Company will not continue to experience
difficulties in receiving approvals of its THPs similar to those it has been
experiencing. Furthermore, there can be no assurance that certain pending legal,
regulatory and environmental matters or future governmental regulations,
legislation or judicial or administrative decisions, or adverse weather
conditions, would not have a material adverse effect on the Company's financial
position, results of operations or liquidity. See Item 3. "Legal Proceedings"
and Note 8 to the Financial Statements for further information regarding
regulatory and legal proceedings affecting the Company.


ITEM 7A.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Not applicable.

ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Managers and Member of
Scotia Pacific Company LLC:

      We have audited the accompanying balance sheets of Scotia Pacific Company
LLC (a Delaware limited liability company and a wholly owned subsidiary of The
Pacific Lumber Company) as of December 31, 2000 and 1999, and the related
statements of income and cash flows for each of the three years in the period
ended December 31, 2000. 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 in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Scotia Pacific Company LLC
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.


                                                          ARTHUR ANDERSEN LLP


San Francisco, California
February 2, 2001



                           SCOTIA PACIFIC COMPANY LLC

                                  BALANCE SHEET
                            (IN MILLIONS OF DOLLARS)



                                                                                                 DECEMBER 31,
                                                                                            ----------------------
                                                                                               2000        1999
                                                                                            ----------  ----------
ASSETS
Current assets:
   Cash and cash equivalents..............................................................  $    98.1   $     1.3
   Marketable securities, restricted......................................................       16.3        15.9
   Receivables from Pacific Lumber........................................................       11.2         4.5
   Prepaid timber harvesting costs........................................................        5.7         4.4
   Other prepaid expenses and other current assets........................................        0.5         0.4
                                                                                            ----------  ----------
      Total current assets................................................................      131.8        26.5
Timber and timberlands, net of accumulated depletion of $251.8 and
   $249.0, respectively...................................................................      255.0       267.8
, net of accumulated depreciation of $11.3 and
   $9.5, respectively.....................................................................       19.0        16.5
Deferred financing costs, net.............................................................       17.8        20.7
Restricted cash, marketable securities and other investments..............................       94.6       156.9
Other assets..............................................................................        7.4         2.7
                                                                                            ----------  ----------
                                                                                            $   525.6   $   491.1
                                                                                            ==========  ==========

LIABILITIES AND MEMBER DEFICIT
Current liabilities:
   Due to Pacific Lumber..................................................................  $     0.3   $     0.9
   Accrued interest.......................................................................       26.3        28.1
   Other accrued liabilities..............................................................        3.4         2.0
   Current maturities of long-term debt...................................................       16.4        16.0
                                                                                            ----------  ----------
      Total current liabilities...........................................................       46.4        47.0
Long-term debt, less current maturities and excluding $59.9 of Timber Notes
   held in the SAR Account................................................................      767.2       843.5
                                                                                            ----------  ----------
      Total liabilities...................................................................      813.6       890.5
                                                                                            ----------  ----------

Contingencies

Member deficit............................................................................     (288.0)     (399.4)
                                                                                            ----------  ----------
                                                                                            $   525.6   $   491.1
                                                                                            ==========  ==========



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

                           SCOTIA PACIFIC COMPANY LLC

                               STATEMENT OF INCOME
                            (IN MILLIONS OF DOLLARS)



                                                                                     YEARS ENDED DECEMBER 31,
                                                                                ----------------------------------
                                                                                   2000        1999        1998
                                                                                ----------  ----------  ----------

Log sales to Pacific Lumber...................................................  $   128.0   $    51.4   $    80.3
                                                                                ----------  ----------  ----------

Operating expenses:
   General and administrative.................................................       22.5        12.7         9.1
   Depletion and depreciation and amortization................................       12.4         7.5        11.3
                                                                                ----------  ----------  ----------
                                                                                     34.9        20.2        20.4
                                                                                ----------  ----------  ----------

Operating income..............................................................       93.1        31.2        59.9

Other income (expense):
   Gains on sales of timberlands..............................................       59.5         0.2           -
   Interest and other income..................................................        8.6         1.7         2.5
   Interest expense...........................................................      (62.6)      (65.5)      (43.9)
                                                                                ----------  ----------  ----------
Income (loss) before income taxes.............................................       98.6       (32.4)       18.5
Provision in lieu of income taxes.............................................          -           -        (7.6)
                                                                                ----------  ----------  ----------
Income (loss) before extraordinary items......................................       98.6       (32.4)       10.9
Extraordinary items:
   Gains on repurchases of debt...............................................        6.0           -           -
     Loss on early extinguishment of debt.....................................          -           -       (35.4)
                                                                                ----------  ----------  ----------
Net income (loss).............................................................  $   104.6   $   (32.4)  $   (24.5)
                                                                                ==========  ==========  ==========



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


                           SCOTIA PACIFIC COMPANY LLC

                             STATEMENT OF CASH FLOWS
                            (IN MILLIONS OF DOLLARS)



                                                                                     YEARS ENDED DECEMBER 31,
                                                                                ----------------------------------
                                                                                   2000        1999        1998
                                                                                ----------  ----------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss) .........................................................  $   104.6   $   (32.4)   $  (24.5)
   Adjustments to reconcile net income (loss) to net cash provided by
      (used for) operating activities:
      Extraordinary loss (gains) on early extinguishments (repurchases)
        of debt...............................................................       (6.0)          -        35.4
      Provision in lieu of income taxes.......................................          -           -         7.6
      Depletion, depreciation and amortization................................       12.4         7.5        11.3
      Amortization of deferred financing costs................................        1.4         1.5         1.4
      Gains on sales of timberlands...........................................      (59.5)       (0.2)          -
      Increase (decrease) in cash resulting from changes in:
        Receivables from Pacific Lumber.......................................       (6.7)       (1.6)       (3.8)
        Prepaid timber harvesting costs.......................................       (1.4)       (2.1)       (1.0)
        Due to Pacific Lumber.................................................       (0.2)       (0.2)        0.3
        Accrued interest......................................................       (1.8)       (0.2)       17.0
        Other accrued liabilities.............................................        0.7         1.3        (0.2)
      Other...................................................................       (0.2)          -           -
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) operating activities..................       43.3       (26.4)       43.5
                                                                                ----------  ----------  ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures.......................................................       (8.2)      (19.2)      (16.6)
   Restricted cash withdrawals used to acquire timberlands ...................        0.8        12.9         8.9
   Net proceeds from sale of assets...........................................       67.0         0.3           -
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) investing activities..................       59.6        (6.0)       (7.7)
                                                                                ----------  ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of Timber Notes.....................................          -           -       867.2
   Principal payments on Timber Notes and other timber related debt...........      (16.0)       (8.3)     (327.0)
   Premium for early retirement of debt.......................................          -           -       (29.2)
   Dividends paid.............................................................          -           -      (532.8)
   Incurrence of deferred financing costs.....................................          -        (0.7)      (22.1)
   Other changes in restricted cash...........................................        9.9      (169.0)        9.5
   Member contributions.......................................................          -       179.8         9.6
                                                                                ----------  ----------  ----------
        Net cash provided by (used for) financing activities..................       (6.1)        1.8       (24.8)
                                                                                ----------  ----------  ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..........................       96.8       (30.6)       11.0
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..............................        1.3        31.9        20.9
                                                                                ----------  ----------  ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....................................  $    98.1   $     1.3   $    31.9
                                                                                ==========  ==========  ==========



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

                           SCOTIA PACIFIC COMPANY LLC

                          NOTES TO FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION

      Scotia Pacific Company LLC (the "COMPANY") is a Delaware limited liability
company wholly owned by The Pacific Lumber Company ("PACIFIC LUMBER"), which is
a wholly owned subsidiary of MAXXAM Group Inc. ("MGI"). MGI is a wholly owned
subsidiary of MAXXAM Group Holdings Inc., which is a wholly owned subsidiary of
MAXXAM Inc. ("MAXXAM"). The Company is a special purpose limited liability
company organized in May 1998 to facilitate the offering (the "OFFERING") of
$160.7 million 6.55% Class A-1, $243.2 million 7.11% Class A-2 and $463.3
million 7.71% Class A-3 Timber Collateralized Notes due 2028 (the "TIMBER
NOTES"). Concurrent with the closing of the Offering on July 20, 1998, Scotia
Pacific Holding Company ("SCOTIA PACIFIC") was merged into the Company and
Pacific Lumber and Salmon Creek LLC, a wholly owned subsidiary of Pacific Lumber
("SALMON CREEK"), transferred to the Company approximately 13,500 acres of
timberlands and the timber and related timber harvesting rights (but not the
underlying land) with respect to an additional approximately 19,700 acres of
timberlands. The Company in turn transferred to Pacific Lumber the timber and
related timber harvesting rights (but not the underlying land) with respect to
approximately 1,400 acres of timberlands. On July 20, 1998, the 7.95% Scotia
Pacific Timber Collateralized Notes due July 20, 2015 (the "OLD TIMBER NOTES")
were retired, and the Company paid a cash dividend of $526.1 million. The merger
and the transfers have been accounted for as a reorganization of entities under
common control which requires the Company to record the assets, liabilities and
results of operations of Scotia Pacific after giving effect to the transfers as
well as the assets, liabilities and results of operations acquired from Pacific
Lumber and Salmon Creek at their respective historical cost. Accordingly, the
Company is the successor entity to all of Scotia Pacific's historical operations
(exclusive of the assets transferred to Pacific Lumber) and to the historical
operations attributable to the timberlands and timber and related timber
harvesting rights acquired from Pacific Lumber and Salmon Creek. The merger and
the transfers have been reflected in the financial statements of the Company as
if such transactions had occurred as of the beginning of the earliest period
presented. The retirement of the Old Timber Notes, the issuance of the Timber
Notes and the payment of the $526.1 million cash dividend are reflected in the
financial statements for the year ended December 31, 1998, the period in which
these transactions occurred.

      Consistent with the Company's purpose and pursuant to the terms of the
indenture governing the Timber Notes (the "INDENTURE"), the Company is obligated
to set aside each month a portion of the funds it receives from the sale of logs
to Pacific Lumber sufficient to make the specified payments of principal and
interest on the Timber Notes computed in accordance with the Indenture and to
have a sufficient amount to pay operating expenses and capital improvements.

   USE OF ESTIMATES AND ASSUMPTIONS

      The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates and assumptions
that affect (i) the reported amounts of assets and liabilities, (ii) the
disclosure of contingent assets and liabilities known to exist as of the date
the financial statements are published and (iii) the reported amount of revenues
and expenses recognized during each period presented. The Company reviews all
significant estimates affecting its financial statements on a recurring basis
and records the effect of any necessary adjustments prior to filing the
financial statements with the Securities and Exchange Commission. Adjustments
made using estimates often relate to improved information not previously
available. Uncertainties regarding such estimates and assumptions are inherent
in the preparation of the Company's financial statements; accordingly, actual
results could differ from estimates, and it is possible that the subsequent
resolution of any one of the contingent matters described in Note 8 could differ
materially from current estimates. The results of an adverse resolution of such
uncertainties could have a material effect on the Company's financial position,
results of operations or liquidity.

   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Prepaid Timber Harvesting Costs and Other Long-term Assets
      Direct costs associated with the preparation of timber harvesting plans
("THPS") are capitalized and reflected in prepaid timber harvesting costs on the
balance sheet. These costs are expensed as the timber covered by the related THP
is harvested. Costs associated with the preparation of a sustained yield plan
("SYP") and a multi-species habitat conservation plan ("HCP") are capitalized
and reflected in other long-term assets. These costs are being amortized over 10
years.

      Timber and Timberlands
      Timber and timberlands were recorded at the historical cost of Scotia
Pacific, Pacific Lumber and Salmon Creek, at the beginning of the earliest
period presented, net of accumulated depletion. Depletion is computed utilizing
the unit- of-production method based upon estimates of timber values and
quantities.

      Deferred Financing Costs
      Costs incurred to obtain financing are deferred and amortized over the
estimated term of the related borrowing. The amortization of deferred financing
costs expense is included in interest expense on the income statement. In July
1998, an extraordinary loss of $35.4 million was recorded in connection with the
retirement of the Old Timber Notes. Such loss is comprised of $12.8 million of
unamortized deferred financing costs and $29.2 million of prepayment premiums
offset by the benefit from $6.6 million of unearned premiums and make whole
amounts under the investment rate agreement associated with the liquidity
account under the indenture governing the Old Timber Notes.

      Concentrations of Credit Risk
      Cash equivalents and marketable securities are invested primarily in
commercial paper as well as other types of corporate and government debt
obligations. The Company has mitigated its concentration of credit risk with
respect to these investments by purchasing high grade investments (ratings of
A1/P1 short-term or at least AA/aa long-term debt). No more than 10% is invested
in the same issue.

2.    SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

      Headwaters Transactions
      On March 1, 1999, the United States and California acquired the Headwaters
Timberlands, approximately 5,600 acres of timberlands containing a significant
amount of virgin old growth timber, from Salmon Creek and Pacific Lumber. Salmon
Creek received $299.9 million for its 4,900 acres, and for its 700 acres Pacific
Lumber received the 7,700 acre Elk River Timberlands, which Pacific Lumber
contributed to the Company in June 1999. See Note 8 below for a discussion of
additional agreements entered into on March 1, 1999.

      The Company also entered into an agreement with California for the sale of
a timber property known as the Owl Creek grove. On December 29, 2000, the
Company sold the Owl Creek grove to California for $67.0 million resulting in a
pre-tax gain of $59.5 million.

3.    CASH, MARKETABLE SECURITIES AND OTHER INVESTMENTS

      Cash equivalents consist of highly liquid money market instruments with
original maturities of three months or less. As of December 31, 2000 and 1999,
the carrying amounts approximated fair value.

      Marketable securities consist primarily of investments in debt securities.
The Company determines the appropriate classification of its investments in debt
securities at the time of purchase and reevaluates such determinations at each
balance sheet date. Debt securities are classified as "held-to-maturity" when
the Company has the positive intent and ability to hold the securities to
maturity. Debt securities which the Company does not have the intent or ability
to hold to maturity are classified as "available-for-sale." "Held-to-maturity"
securities are stated at amortized cost. Debt securities classified as
"held-to-maturity" as of December 31, 2000 and 1999, totaled $18.9 million and
$169.1 million, respectively, and had a fair market value of $18.9 million and
$168.5 million, respectively. "Available-for-sale" securities are carried at
fair market value, with the unrealized gains and losses included in other
comprehensive income and reported in member's deficit. The fair value of
substantially all securities is determined by quoted market prices.

      Other investments included in long-term restricted cash, marketable
securities and other investments includes $10.1 million as of December 31, 2000,
invested in a limited partnership which invests in marketable securities. The
carrying amount for this investment reflects the market value of the underlying
securities.

      Cash, marketable securities and other investments include the following
amounts which are restricted (in millions):


                                                                                               DECEMBER 31,
                                                                                        ---------------------------
                                                                                            2000          1999
                                                                                        ------------- -------------

Current assets:
   Cash and cash equivalents, restricted............................................... $       29.2  $          -
   Marketable securities, restricted:
      Amounts held in SAR Account......................................................         16.3          15.9
                                                                                        ------------- -------------
                                                                                                45.5          15.9
Long-term restricted cash, marketable securities and other investments:
   Amounts held in SAR Account.........................................................        144.4         153.2
   Amounts held in Prefunding Account..................................................          2.5           3.3
   Other amounts restricted under the Indenture........................................          0.4           0.4

   Less:  Amounts attributable to Timber Notes held in
      SAR Account......................................................................        (52.7)            -
                                                                                        ------------- -------------
                                                                                                94.6         156.9
                                                                                        ------------- -------------
Total restricted cash, marketable securities and other investments..................... $      140.1  $      172.8
                                                                                        ============= =============

      Amounts in the Scheduled Amortization Reserve Account (the "SAR ACCOUNT")
are being held by the trustee under the Indenture to support principal payments
on the Timber Notes. See Note 5 for further discussion on the SAR Account.
Amounts held in the "PREFUNDING ACCOUNT" by the trustee are to be used by the
Company to acquire additional timberlands. The current portion of the SAR
Account is determined based on the liquidity needs of the Company which
corresponds directly with the current portion of Scheduled Amortization.
Interest and other income from restricted cash deposits for 2000, 1999 and 1998
was $8.5 million, $1.6 million and $2.4 million, respectively.

4.    PROPERTY AND EQUIPMENT

      Property and equipment were recorded at the historical cost of Scotia
Pacific, Pacific Lumber and Salmon Creek, at the beginning of the earliest
period presented, net of accumulated depreciation. Subsequent acquisitions of
property and equipment are recorded at cost. Depreciation is computed
principally utilizing the straight-line method at rates based upon the estimated
useful lives of the various classes of assets. The carrying value of property
and equipment is assessed when events and circumstances indicate that an
impairment is present. The existence of an impairment is determined by comparing
the net carrying value of the asset to its estimated undiscounted future cash
flows. If an impairment is present, the asset is reported at the lower of
carrying value or fair value. The major classes of property and equipment are as
follows (dollar amounts in millions):


                                                                                                  DECEMBER 31,
                                                                               ESTIMATED    ----------------------
                                                                              USEFUL LIVES     2000        1999
                                                                             -------------  ----------  ----------
Logging roads...............................................................      15 years  $    28.9   $    24.7
Other.......................................................................  5 - 15 years        1.4          1.3
                                                                                            ----------  ----------
                                                                                                 30.3        26.0
Less:  accumulated depreciation.............................................                    (11.3)       (9.5)
                                                                                            ----------  ----------
                                                                                            $    19.0   $    16.5
                                                                                            ==========  ===========

      Depreciation expense for the years ended December 31, 2000, 1999 and 1998
was $1.9 million, $1.6 million and $1.4 million, respectively.

5.    LONG-TERM AND SHORT-TERM DEBT

      The Company issued $867.2 million aggregate principal amount of Timber
Notes on July 20, 1998, which are due on July 20, 2028. The Timber Notes are
senior secured obligations of the Company and do not constitute obligations of,
and are not guaranteed by, Pacific Lumber or any other person. The Timber Notes
were issued in three classes: Class A-1 Timber Notes aggregating $160.7 million,
Class A-2 Timber Notes aggregating $243.2 million and Class A-3 Timber Notes
aggregating $463.3 million. Pursuant to the terms of the Indenture, the Company
is permitted to incur up to $75.0 million at any one time of non-recourse
indebtedness secured by purchase money mortgages to acquire additional
timberlands, an unspecified amount of Additional Timber Notes (as defined in the
Indenture) provided certain conditions are met, and certain other debt on a
limited basis. The Company is not permitted to incur any other indebtedness for
borrowed money. The Timber Notes and the Line of Credit (as defined below) are
secured by a lien on (i) the Company's timber, timberlands and timber rights
(subject to Pacific Lumber's ownership of the timber and related timber
harvesting rights on approximately 1,100 acres of such timberlands), (ii)
certain contract rights and certain other assets, (iii) the proceeds of the
foregoing and (iv) funds held in various accounts by the Trustee for the Timber
Notes. Amounts payable on the Timber Notes are paid semi-annually generally on
January 20 and July 20 of each year (each, a "NOTE PAYMENT DATE").

      The Timber Notes were structured to link, to the extent of cash available,
the deemed depletion of the Company's timber (through the harvest and sale of
logs) to the required amortization of the Timber Notes. The required amount of
amortization on any Note Payment Date is determined by various mathematical
formulas set forth in the Indenture. Scheduled Amortization of the Timber Notes
represents the amount of principal which the Company must pay through each Note
Payment Date in order to avoid payment of prepayment or deficiency premiums. The
Scheduled Maturity Dates for the Class A-1 and Class A-2 Timber Notes, which are
January 20, 2007 and January 20, 2014, respectively, represent the Note Payment
Dates on which the Company will pay the final installment of principal if all
payments of principal are made in accordance with Scheduled Amortization. The
Scheduled Amortization for the Class A-3 Timber Notes does not include any
principal amortization prior to their Scheduled Maturity Date of January 20,
2014 on which the aggregate principal amount of $463.3 million will be scheduled
to be paid. Minimum Principal Amortization of the Timber Notes represents the
minimum amount of principal which the Company must pay (on a cumulative basis
and subject to available cash) on such Class, to the extent of available funds
on deposit in the Payment Account, through any Note Payment Date. If the Timber
Notes were amortized in accordance with Minimum Principal Amortization, the
final installments of principal would be paid on January 20, 2010, July 20, 2017
and July 20, 2028 for the Class A-1, Class A-2 and Class A-3 Timber Notes,
respectively.

      In connection with the sale of the Headwaters Timberlands, Salmon Creek
received proceeds of $299.9 million in cash. See Note 2. On November 18, 1999,
$169.0 million of funds from the sale of the Headwaters Timberlands were
contributed to the Company and set aside in the SAR Account. Amounts in the SAR
Account are part of the collateral securing the Timber Notes and will be used to
make principal payments to the extent that other available amounts are
insufficient to pay Scheduled Amortization on the Class A-1 and Class A-2 Timber
Notes. In addition, during the six years beginning January 20, 2014, amounts in
the SAR Account will be used to amortize the Class A-3 Timber Notes as set forth
in the Indenture, as amended. Funds may from time to time be released to the
Company from the SAR Account if the amount in the account exceeds the then
Required Scheduled Amortization Reserve Balance (as defined in the Indenture).
If the balance in the SAR Account falls below the Required Scheduled
Amortization Reserve Balance, up to 50% of any Remaining Funds (funds that could
otherwise be released to the Company free of the lien securing the Timber Notes)
is required to be used on each monthly deposit date to replenish the SAR
Account. The amount attributable to Timber Notes held in the SAR Account of
$52.7 million reflected in Note 3 represents $59.9 million principal amount of
reacquired Timber Notes. Repurchases made during the year ended December 31,
2000, resulted in an extraordinary gain of $6.0 million.

      The Company has the right to cause additional prepayments of principal to
be made on any Note Payment Date. If the principal of the Timber Notes is paid
in advance of Scheduled Amortization, the Company will pay a prepayment premium
on such accelerated payment. The prepayment premium on any Note Payment Date is
equal to the excess, if any, of (a) the sum of (i) the present value of the
prepayment amount (discounted from the date(s) that the prepayment amount would
otherwise have been paid under the Scheduled Amortization to the Note Payment
Date) plus (ii) the sum of the present values of the amounts of interest that
would have accrued thereafter with respect to the prepayment amount over (b) the
amount of the prepayment. The present value is computed using a "Reinvestment
Yield" (as defined in the Indenture) which is comparable to the yield of like
term U.S. Treasury securities plus 0.50% per annum.

      If the principal of the Timber Notes is paid later than as provided for
under the Scheduled Amortization, the Company will pay a deficiency premium on
such deficient amount. The deficiency premium payable on any Note Payment Date
equals an amount of interest on the amount of the deficient principal amount
from the previous Note Payment Date to the current Note Payment Date at 1.50%
per annum. In addition, if the Class A-3 Timber Notes are not paid in full on or
before their Scheduled Maturity Date, a Cash Retention Event (as defined in the
Indenture) will occur as a result of which 75% of all Excess Funds (as defined
in the Indenture) will be deposited in the Payment Account until all classes of
Timber Notes are paid in full.

      The following table presents the amortization of the Timber Notes,
excluding $59.9 million of repurchased Timber Notes held in the SAR Account,
based on Minimum Principal Amortization and Scheduled Amortization (in
millions):


                                                      MINIMUM
                                                     PRINCIPAL      SCHEDULED
                                                   AMORTIZATION   AMORTIZATION
                                                   -------------  -------------
Years Ending December 31:
   2001..........................................  $          -  $       14.1
   2002..........................................           7.4          14.8
   2003..........................................          10.8          16.7
   2004..........................................          12.8          19.2
   2005..........................................          14.7          21.7
   Thereafter....................................         737.5         696.7
                                                   ------------- -------------
                                                   $      783.2  $      783.2
                                                   ============= =============

      As of December 31, 2000 and 1999, the estimated fair value of debt,
including current maturities, was $688.1 million and $764.1 million,
respectively. The estimated fair value of debt is determined based on the quoted
market price for the Timber Notes. The Timber Notes are thinly traded financial
instruments; accordingly, their market price at any balance sheet date may not
be representative of the price which would be derived from a more active market.

      Pursuant to certain liquidity requirements under the Indenture, the
Company has entered into an agreement (the "LINE OF CREDIT") with a group of
banks (the "LIQUIDITY PROVIDERS") pursuant to which the Company may borrow to
pay interest on the Timber Notes. The maximum amount the Company may borrow is
equal to one year's interest on the aggregate outstanding principal balance of
the Timber Notes (the "REQUIRED LIQUIDITY AMOUNT"). At December 31, 2000, the
Required Liquidity Amount was $62.0 million. The Line of Credit expires on July
15, 2001. Annually, the Company will request that the Liquidity Providers extend
the Line of Credit for a period of not less than 364 days. If not extended, the
Company may draw upon the full amount available. Borrowings under the Line of
Credit generally bear interest at the Base Rate (as defined in the Line of
Credit) plus 0.25% or at a one month or six month LIBOR rate plus 1% at any time
the borrowings have not been continually outstanding for more than six months.
As of December 31, 2000, the Company had no borrowings outstanding under the
Line of Credit.

      On the January 22, 2001, note payment date for the Timber Notes, the
Company had $40.8 million set aside in the note payment account to pay the $31.0
million of interest due and $9.8 of principal. The Company repaid an additional
$3.3 million of principal on the Timber Notes using funds held in the SAR
Account resulting in a total principal payment of $13.1 million (an amount equal
to Scheduled Amortization). In addition, $10.8 million in funds representing the
excess in the SAR Account above the Required Scheduled Amortization Reserve
Balance were released from the SAR Account on January 22, 2001. The Company made
a distribution to Pacific Lumber in the amount of $73.1 million, $63.9 million
of which was made using funds from the sale of the Owl Creek grove and $9.2
million of which was made using excess funds released from the SAR Account.

6.    RELATED PARTY TRANSACTIONS

      Scotia Pacific and Pacific Lumber entered into a Master Purchase Agreement
on March 23, 1993 (the "ORIGINAL MASTER PURCHASE AGREEMENT") which governed all
log sales by Scotia Pacific to Pacific Lumber, and on July 20, 1998, the Company
and Pacific Lumber entered into a new master purchase agreement (the "MASTER
PURCHASE AGREEMENT" and together the "MASTER PURCHASE AGREEMENTS") which governs
all log sales by the Company to Pacific Lumber. Substantially all of the
Company's revenues have been and are expected to continue to be derived from the
sale of logs to Pacific Lumber. The harvested logs are purchased by Pacific
Lumber (i.e., title passes and the obligation to make payment therefor is
incurred) at the time each log is delivered to Pacific Lumber's log decks and
measured. The Master Purchase Agreements generally contemplate that all sales of
logs by the Company to Pacific Lumber will be at the applicable stumpage prices
for each species of timber and category thereof, as set forth in the most recent
Harvest Value Schedule published by the California State Board of Equalization
(the "SBE PRICE"). Harvest Value Schedules are published twice a year for
purposes of computing timber yield taxes.

      Scotia Pacific and Pacific Lumber also entered into a services agreement
on March 23, 1993 (the "ORIGINAL SERVICES AGREEMENT"), pursuant to which Pacific
Lumber provided a variety of operational, management and related services in
respect of Scotia Pacific's timber properties not provided by Scotia Pacific's
employees, including reforestation, fire protection and road maintenance,
rehabilitation and construction. Scotia Pacific paid Pacific Lumber an annual
fee, payable in equal monthly installments and subject to annual adjustment
provisions, for such services. On July 20, 1998, the Company and Pacific Lumber
entered into a services agreement (the " SERVICES AGREEMENT") under which the
Company pays a Services Fee (as defined) in an initial amount of $107,000 per
month and reimburses Pacific Lumber for the cost of constructing, rehabilitating
and maintaining roads and performing reforestation services. For the years ended
December 31, 2000, and 1999, $11.6 million and $9.9 million was recorded under
the Services Agreement, respectively. For the year ended December 31, 1998,
amounts recorded under the Original Services Agreement and the New Services
Agreement were $5.2 million.

7.    PROVISION IN LIEU OF INCOME TAXES

      These financial statements treat the Company as a taxable entity for the
periods presented up through July 20, 1998, at which time the Company, having
not made an election to be treated as an association, began being disregarded as
a separate taxable entity solely for income tax purposes. Beginning on July 21,
1998, the Company is treated as a division of Pacific Lumber. After July 20,
1998, all income taxes for the Company are shown on Pacific Lumber's financial
statements, and all deferred income tax assets and deferred income tax
liabilities for the Company at December 31, 2000 and December 31, 1999 are
reflected in Pacific Lumber's financial statements.

      Up through July 20, 1998, income taxes were determined using an asset and
liability approach which required the recognition of deferred income tax assets
and liabilities for the expected future tax consequences of events that had been
recognized in the Company's financial statements or tax returns. Under this
method, deferred income tax assets and liabilities were determined based on the
temporary differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates.

      Pursuant to the tax allocation agreement among MAXXAM, Pacific Lumber,
Salmon Creek and Scotia Pacific (the "TAX ALLOCATION AGREEMENT"), all federal
and state income tax liabilities of Scotia Pacific were paid by Pacific Lumber
and all federal and state income tax refunds of Scotia Pacific were paid to
Pacific Lumber. Accordingly, up through July 20, 1998, the Company's financial
statements reflect a charge or benefit for income taxes computed as if Scotia
Pacific had filed separate income tax returns and a corresponding adjustment to
capital (net of the applicable adjustments relating to the deferred income tax
assets).

      The provision in lieu of income taxes on income before income taxes for
the year ended December 31, 1998 consists of the following (in millions):


Current provision in lieu of income taxes:
   Federal....................................... $        5.3
   State.........................................          1.5
                                                  -------------
                                                           6.8
                                                  -------------
Deferred provision in lieu of income taxes:
   Federal........................................         0.7
   State..........................................         0.1
                                                   ------------
                                                           0.8
                                                   ------------
                                                   $       7.6
                                                   ============

      A reconciliation between the provision in lieu of income taxes and the
amount computed by applying the federal statutory income tax rate to income
before income taxes for the year ended December 31, 1998 is as follows (in
millions):


Income before income taxes...................................... $       18.5
                                                                 =============

Amount of federal income tax based upon the statutory rate...... $        6.5
State taxes, net of federal tax benefit.........................          1.0
Other...........................................................          0.1
                                                                 -------------
                                                                 $        7.6
                                                                 =============

8.    CONTINGENCIES

      Regulatory and environmental matters play a significant role in the
Company's business, which is subject to a variety of California and federal laws
and regulations, as well as the HCP and SYP and Pacific Lumber's timber
operator's license, dealing with timber harvesting practices, threatened and
endangered species and habitat for such species, and air and water quality. As
further described in Note 2, on March 1, 1999, Pacific Lumber and MAXXAM
consummated the Headwaters Agreement with the United States and California. In
addition to the transfer of the Headwaters Timberlands described in Note 2, the
SYP and the HCP were approved and incidental take permits related to the HCP
(the "PERMITS") were issued.

       The SYP complies with certain California Board of Forestry and Fire
Protection regulations requiring timber companies to project timber growth and
harvest on their timberlands over a 100-year planning period and to demonstrate
that their projected average annual harvest for any decade within a 100-year
planning period will not exceed the average annual harvest level during the last
decade of the 100-year planning period. The SYP is effective for 10 years
(subject to review after five years) and may be amended by Pacific Lumber,
subject to approval by the California Department of Forestry and Fire Protection
(the "CDF"). Revised SYPs will be prepared every decade that address the harvest
level based upon reassessment of changes in the resource base and other factors.
The HCP and the Permits allow incidental "take" of certain species located on
the Company's timberlands which have been listed as endangered or threatened
under the federal Endangered Species Act (the "ESA") and/or the California
Endangered Species Act ("CESA") so long as there is no "jeopardy" to the
continued existence of such species. The HCP identifies the measures to be
instituted in order to minimize and mitigate the anticipated level of take to
the greatest extent practicable. The SYP is also subject to certain of these
provisions. The HCP and related Permits have a term of 50 years. The Company
believes that the SYP and the HCP should in the long-term expedite the
preparation and facilitate approval of its THPs, although the Company is
experiencing difficulties in the THP approval process as it implements these
agreements.

      Under the Federal Clean Water Act, the Environmental Protection Agency
("EPA") is required to establish total maximum daily load limits ("TMDLS") in
water courses that have been declared to be "water quality impaired." The EPA
and the North Coast Regional Water Quality Control Board are in the process of
establishing TMDLs for 17 northern California rivers and certain of their
tributaries, including nine water courses that flow within the Company's
timberlands. The Company expects this process to continue into 2010. In the
December 1999 EPA report dealing with TMDLs on two of the nine water courses,
the agency indicated that the requirements under the HCP would significantly
address the sediment issues that resulted in TMDL requirements for these water
courses. However, the September 2000 report by the staff of the North Coast
Regional Water Quality Control Board proposed various actions, including
restrictions on harvesting beyond those required under the HCP. Dates for
hearings concerning these matters have not been scheduled. Establishment of the
final TMDL requirements applicable to the Company's timberlands will be a
lengthy process, and the final TMDL requirements applicable to the Company's
timberlands may require aquatic protection measures that are different from or
in addition to the prescriptions to be developed pursuant to the watershed
analysis process provided for in the HCP.

      Lawsuits are pending and threatened which seek to prevent the Company from
implementing the HCP and/or the SYP, implementing certain of the Company's
approved THPs or carrying out certain other operations. On December 2, 1997, a
lawsuit entitled Jennie Rollins, et al. v. Charles Hurwitz, John Campbell,
Pacific Lumber, MAXXAM Group Holdings Inc., Scotia Pacific Holding Company,
MAXXAM Group Inc., MAXXAM Inc., Barnum Timber Company, et al. (the "ROLLINS
LAWSUIT") was filed. On March 5, 2001, the parties in the Rollins lawsuit
reached an agreement to settle this matter. Substantially all of the amounts to
be paid to the plaintiffs will be paid by the Company's insurers. Still pending
is a similar lawsuit, also filed on December 2, 1997, entitled Kristi Wrigley,
et al. v. Charles Hurwitz, John Campbell, Pacific Lumber, MAXXAM Group Holdings
Inc., Scotia Pacific Holding Company, MAXXAM Group Inc., MAXXAM Inc., Scotia
Pacific Company LLC, et al. (the "WRIGLEY LAWSUIT"). This action alleges, among
other things, that the defendants' logging practices have contributed to an
increase in flooding and damage to domestic water systems in a portion of the
Elk River watershed. The Company believes that it has strong factual and legal
defenses with respect to the Wrigley lawsuit; however, there can be no assurance
that it will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.

      On March 31, 1999, an action entitled Environmental Protection Information
Center, Sierra Club v. California Department of Forestry and Fire Protection,
California Department of Fish and Game, The Pacific Lumber Company, Scotia
Pacific Company LLC, Salmon Creek Corporation, et al. (the "EPIC-SYP/PERMITS
LAWSUIT") was filed alleging various violations of the CESA and the California
Environmental Quality Act, and challenging, among other things, the validity and
legality of the Permits issued by California and the SYP. On March 31, 1999, an
action entitled United Steelworkers of America, AFL-CIO, CLC, and Donald Kegley
v. California Department of Forestry and Fire Protection, The Pacific Lumber
Company, Scotia Pacific Company LLC and Salmon Creek Corporation (the "USWA
LAWSUIT") was filed also challenging the validity and legality of the SYP. The
Company believes that appropriate procedures were followed throughout the public
review and approval process concerning the HCP and the SYP, and the Company is
working with the relevant government agencies to defend these challenges.
Although uncertainties are inherent in the final outcome of the EPIC-SYP/Permits
lawsuit and the USWA lawsuit, the Company believes that the resolution of these
matters should not result in a material adverse effect on its financial
condition, results of operations or the ability to harvest timber.

      On or about February 23, 2001, the Company and Pacific Lumber received a
letter from the Environmental Protection Information Association of its 60-day
notice of intent to sue the Company and Pacific Lumber under the federal Clean
Water Act ("CWA"). The letter alleges a number of violations of the CWA by the
Company and Pacific Lumber in certain watersheds since 1990. If filed, the
lawsuit will purportedly seek declarative and injunction relief for past
violations and to prevent future violations, as well as civil penalties. Such
civil penalties could be up to $25,000 per day for each continuing violation.
The Company does not know when or if a lawsuit will be filed regarding this
matter, or if a lawsuit is filed, the ultimate impact of such lawsuit on its
financial condition or results of operations.

      While the Company expects environmentally focused objections and lawsuits
to continue, it believes that the HCP, the SYP and the Permits should enhance
its position in connection with these continuing challenges and, over time,
reduce or minimize such challenges.

9.    COMPREHENSIVE INCOME (LOSS) AND MEMBER CAPITAL (DEFICIT)

      Comprehensive income (loss) includes the following (in millions):


                                                                                   YEARS ENDED DECEMBER 31,
                                                                        -----------------------------------------------
                                                                             2000              1999            1998
                                                                        ------------    ------------    ------------
Net income (loss)....................................................   $     104.6     $     (32.4)    $     (24.5)
Other comprehensive income:
   Change in value of available-for-sale investments.................           1.1               -               -
                                                                        ------------    ------------    ------------
Total comprehensive income (loss)....................................   $     105.7     $     (32.4)    $     (24.5)
                                                                        ============    ============    ============


      A reconciliation of the activity in member capital (deficit) is as follows
(in millions):


                                                                                    YEARS ENDED DECEMBER 31,
                                                                              ----------------------------------------
                                                                                  2000          1999          1998
                                                                              ------------  ------------  ------------

Balance at beginning of period..............................................  $    (399.4)  $    (552.9)  $      17.1
Comprehensive income (loss).................................................        105.7         (32.4)        (24.5)
Transfer of deferred tax assets to Pacific Lumber...........................            -             -         (22.9)
Contribution of assets by Pacific Lumber....................................          5.7           6.1             -
Assumption of net tax liabilities by Pacific Lumber.........................            -             -           6.7
Dividends from Offering.....................................................            -             -        (526.1)
Other dividends paid........................................................            -             -          (6.7)
Other contributions  (distributions)........................................            -         179.8           3.5
                                                                              ------------  ------------  ------------

Balance at end of period....................................................  $    (288.0)  $    (399.4)  $    (552.9)
                                                                              ============  ============  ============



10.     SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION


                                                                                        YEARS ENDED DECEMBER 31,
                                                                                     ------------------------------
                                                                                       2000      1999       1998
                                                                                     --------- ---------  ---------
                                                                                              (IN MILLIONS)
Supplemental information on non-cash investing and financing activities:
   Repurchases of debt using restricted cash.......................................  $   52.5  $      -   $      -
   Purchases of marketable securities and other investments using restricted cash..       0.4      15.9          -
   Contribution (distribution) of assets by (to) Pacific Lumber....................       5.7       6.1       (6.1)
   Assumption of net tax liabilities by Pacific Lumber.............................         -         -        6.7
   Deferred financing costs payable................................................         -         -        1.0
   Acquisition of assets subject to long-term debt and other liabilities...........         -         -        0.5
   Transfers of deferred tax assets to Pacific Lumber..............................         -         -       22.9

Supplemental disclosure of cash flow information:
   Interest paid...................................................................  $   63.1  $   64.3   $   25.5

11.     QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

      Summary quarterly financial information for the years ended December 31,
2000 and 1999 is as follows (in millions):


                                                                            THREE MONTHS ENDED
                                                        -----------------------------------------------------------
                                                           MARCH 31        JUNE 30     SEPTEMBER 30    DECEMBER 31
                                                        -------------- -------------- -------------- --------------
2000:
   Log sales to Pacific Lumber......................... $        20.3  $        26.8  $        47.3  $        33.6
   Operating income....................................          14.4           19.5           37.3           21.9
   Income (loss) before extraordinary item.............          (0.2)           5.9           24.1           68.8
   Net income..........................................           2.2            5.9           24.3           72.2
1999:
   Log sales to Pacific Lumber......................... $         6.3  $         8.4  $        19.1  $        17.6
   Operating income....................................           2.5            4.7           13.2           10.8
   Net loss............................................         (13.4)         (11.5)          (3.3)          (4.2)



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

      None.


                                    PART III

      Not applicable.

                                     PART IV


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

(A)   INDEX TO FINANCIAL STATEMENTS

      1.   FINANCIAL STATEMENTS (INCLUDED UNDER ITEM 8):

           Report of Independent Public Accountants
           Balance Sheet at December 31, 2000 and 1999
           Statement of Income for the Years Ended December 31, 2000, 1999 and 1998
           Statement of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998
           Notes to Financial Statements

      2.   FINANCIAL STATEMENT SCHEDULES:

           Schedules are inapplicable or the required information is included in
           the financial statements or the notes thereto.

(B)   REPORTS ON FORM 8-K

      On December 20, 2000, the Company filed a Current Report on Form 8-K
(under Item 9), dated December 20, 2000, related to the filing of two
certificates in respect of the Company's Timber Notes.

      On January 2, 2001, the Company filed a current report on Form 8-K (under
Item 9), dated December 29, 2000, related to the sale of approximately 1,200
acres of timberlands known as the Owl Creek grove.

      On January 23, 2001, the Company filed a current report on Form 8-K (under
Item 9), dated January 22, 2001, related to the filing of two certificates in
respect of the Company's Timber Notes.

      On March 21, 2001, the Company filed a current report on Form 8-K (under
Item 9), dated March 21, 2001, related to the filing of a certificate in respect
of the Company's Timber Notes.

(C)   EXHIBITS

      Reference is made to the Index of Exhibits immediately preceding the
exhibits hereto (beginning on page 30, which index is incorporated herein by
reference.

                                   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.


                                                        SCOTIA PACIFIC COMPANY LLC

Date:   March 28, 2001             By:                     /S/ JOHN A. CAMPBELL
                                       -------------------------------------------------------------
                                                              John A. Campbell,
                                                           Chairman of the Board

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


Date:   March 28, 2001             By:                     /S/ JOHN A. CAMPBELL
                                       --------------------------------------------------------------
                                                              John A. Campbell
                                                Chairman of the Board, President and Manager
                                                       (Principal Executive Officer)

Date:   March 28, 2001             By:                     /S/ JARED G. CARTER
                                       --------------------------------------------------------------
                                                              Jared G. Carter
                                                                  Manager

Date:   March 28, 2001             By:                     /S/ J. KENT FRIEDMAN
                                       --------------------------------------------------------------
                                                              J. Kent Friedman
                                                                  Manager

Date:   March 28, 2001             By:                      /S/ JOHN T. LA DUC
                                       --------------------------------------------------------------
                                                               John T. La Duc
                                                                  Manager

Date:   March 28, 2001             By:                      /S/ EZRA G. LEVIN
                                       --------------------------------------------------------------
                                                               Ezra G. Levin
                                                                  Manager

Date:   March 28, 2001             By:                     /S/ PAUL N. SCHWARTZ
                                       --------------------------------------------------------------
                                                              Paul N. Schwartz
                                                                  Manager

Date:   March 28, 2001             By:                       /S/ JACK M. WEBB
                                       --------------------------------------------------------------
                                                                Jack M. Webb
                                                            Independent Manager

Date:   March 28, 2001             By:                      /S/ GARY L. CLARK
                                       --------------------------------------------------------------
                                                               Gary L. Clark
                                                Vice President - Finance and Administration
                                                (Principal Financial and Accounting Officer)


                                INDEX OF EXHIBITS


EXHIBIT
NUMBER                                 DESCRIPTION
-------       ------------------------------------------------------------------
 3.1           Certificate of Formation of Scotia Pacific Company LLC (the
               "Company") (incorporated herein by reference to Exhibit 3.1
               to the Company's Registration Statement on Form S-4 dated
               September 21, 1998; Registration No. 333-63825; the
               "Company's Form S-4")
 3.2           Agreement of Limited Liability Company of the Company, effective
               as of July 20, 1998 (incorporated herein by reference to
               Exhibit 3.2 to the Company's Form S-4)
 4.1           Agreement and Plan of Merger, dated as of July 20, 1998, between
               the Company and Scotia Pacific Holding Company (incorporated
               herein by reference to Exhibit 4.1 to the Company's Form S-4)
 4.2           Indenture, dated as of July 20, 1998, between the Company and
               State Street Bank and Trust Company ("State Street") regarding
               the Company's Class A-1, Class A-2 and Class A-3 Timber
               Collateralized Notes (the "Indenture") (incorporated herein by
               reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q/A of
               MAXXAM Inc. ("MAXXAM") for the quarter ended June 30, 1998; File
               No. 1-3924; the "MAXXAM June 1998 Form 10-Q")
 4.3           First Supplemental Indenture, dated as of July 16, 1999, to the
               Indenture (incorporated herein by reference to Exhibit 4.1 to the
               Company's Quarterly Report on Form 10-Q for the quarter ended
               June 30, 1999; the "Company June 1999 Form 10-Q")
 4.4           Second Supplemental Indenture, dated as of November 18, 1999, to
               the Indenture (incorporated herein by reference to Exhibit 99.3 to
               the Company's Report on Form 8-K dated November 19, 1999)
 4.5           Credit Agreement, dated as of July 20, 1998, among the Company,
               the financial institutions party thereto and Bank of America
               National Trust and Savings Association, as agent (the "Bank of
               America Credit Agreement") (incorporated herein by reference to
               Exhibit 4.3 to the MAXXAM June 1998 Form 10-Q)
 4.6           First Amendment, dated as of July 16, 1999, to the Bank of
               America Credit Agreement (incorporated herein by reference
               to the Company June 1999 Form 10-Q)
 4.7           Deed of Trust, Security Agreement, Financing Statement, Fixture
               Filing and Assignment of Proceeds, dated as of July 20, 1998,
               among the Company, Fidelity National Title Insurance Company, as
               trustee, and State Street, as collateral agent (incorporated
               herein by reference to Exhibit 4.2  to the MAXXAM June 1998
               Form 10-Q)
10.1           New Master Purchase Agreement, dated as of July 20, 1998,
               between the Company and The Pacific Lumber Company ("Pacific
               Lumber") (incorporated herein by reference to Exhibit 10.1
               to the Quarterly Report on Form 10-Q of MAXXAM Group
               Holdings Inc. for the quarter ended June 30, 1998; File No.
               333-18723; the "MGHI June 1998 Form 10-Q")
10.2           New Services Agreement, dated as of July 20, 1998, between
               Pacific Lumber and the Company (incorporated herein by
               reference to Exhibit 10.2 to the MGHI June 1998 Form 10-Q)
10.3           New Additional Services Agreement, dated as of July 20,
               1998, between the Company and Pacific Lumber (incorporated
               herein by reference to Exhibit 10.3 to the MGHI June 1998
               Form 10-Q)
10.4           New Reciprocal Rights Agreement, dated as of July 20, 1998, among
               Pacific Lumber, the Company and Salmon Creek Corporation ("Salmon
               Creek") (incorporated herein by reference to Exhibit 10.4 to the
               MGHI June 1998 Form 10-Q)
10.5           New Environmental Indemnification Agreement, dated as of July 20,
               1998, between Pacific Lumber and the Company (incorporated herein
               by reference to Exhibit 10.5 to the MGHI June 1998 Form 10-Q)
10.6           Implementation Agreement with Regard to Habitat Conservation
               Plan for the Properties of Pacific Lumber, the Company and
               Salmon Creek dated as of February 1999 by and among the
               United States Department of the Interior Fish and Wildlife
               Service ("USFWS"), the National Marine Fisheries Service,
               the California Department of Fish and Game ("CDF&G"), the
               California Department of Forestry and Fire Protection (the
               "CDF") and Pacific Lumber, Salmon Creek and the Company
               (incorporated herein by reference to Exhibit 99.3 to the
               Company's Form 8-K dated March 19, 1999; the "Company March
               19, 1999 Form 8-K")
10.7           Agreement Relating to Enforcement of AB 1986 dated as of February
               25, 1999 by and among The California Resources Agency, CDF&G,
               the CDF, The California Wildlife Conservation Board, Pacific
               Lumber, Salmon Creek and the Company (incorporated herein by
               reference to Exhibit 99.4 to the Company March 19, 1999 Form 8-K)
10.8           Habitat Conservation Plan dated as of February 1999 for the
               Properties of Pacific Lumber, Scotia Pacific Holding Company and
               Salmon Creek (incorporated herein by reference to Exhibit 99.5
               to the Company March 19, 1999 Form 8-K)
10.9           Letter dated as of February 25, 1999 from the CDF to Pacific Lumber
               (incorporated herein by reference to Exhibit 99.8 to the Company
               March 19, 1999 Form 8-K)
10.10          Letter dated as of March 1, 1999 from the CDF to Pacific
               Lumber (incorporated herein by reference to Exhibit 99.9 to
               the Company March 19, 1999 Form 8-K)
10.11          Letter dated as of March 1, 1999 from the USFWS and the U.S.
               Department of Commerce National Oceanic and Atmospheric
               Administration to Pacific Lumber, Salmon Creek and the Company
               (incorporated herein by reference to Exhibit 99.10 to the Company
               March 19, 1999 Form 8-K)`