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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 _______________________________

FORM 10-Q _______________________________

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 OR

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

Commission file number 0-23259

U.S. TIMBERLANDS KLAMATH FALLS, LLC

U.S. TIMBERLANDS FINANCE CORP.

(Exact name of registrant as
  specified in its charter)



|DelawareDelaware                                                         | 93-1217136
          91-1851612               
|------------------------------------------------------------------------ | ----------------------------------------------
|(State or other jurisdiction
          of incorporation or organization) | (I.R.S. Employer Identification
          No.)



|625 Madison Avenue, Suite 10-B,
          New York, NY(Address of principal executive offices) | 10022
          (Zip Code)
|---------------------------------------------------------------------------------------------- | --------------------------





Registrants telephone number, including
  area code: 212-755-1100 
  ________

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





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|         |    |   | Form 10-Q                                                  |      | 
|-------- | -- | - | ---------------------------------------------------------- | ---- | 
|         |    |   |                                                            |      | 
|         |    |   | Table of Contents                                          |      | 
|         |    |   |                                                            |      | 
|Part I.  |    |   | Financial Information                                      | Page | 
|         |    |   |                                                            |      | 
|Item     | 1  | . | Condensed Consolidated
      Statements of Operations      |      | 
|         |    |   | for the three months
      ended June 30, 2003 and 2002    | 3    | 
|         |    |   |                                                            |      | 
|Item     | 1  | . | Condensed Consolidated
      Statements of Operations      |      | 
|         |    |   | for the six months ended
      June 30, 2003 and 2002      | 4    | 
|         |    |   |                                                            |      | 
|Item     | 1  | . | Condensed Consolidated
      Balance Sheets                |      | 
|         |    |   | at June 30, 2003 and
      December 31, 2002               | 5    | 
|         |    |   |                                                            |      | 
|Item     | 1  | . | Condensed Consolidated
      Statements of Cash Flows      |      | 
|         |    |   | for the six months ended
      June 30, 2003 and 2002      | 6    | 
|         |    |   |                                                            |      | 
|Item     | 1  | . | Notes to Condensed Consolidated
      Financial Statements | 7    | 
|         |    |   |                                                            |      | 
|Item     | 2  | . | Managements Discussion
      and Analysis of Financial    |      | 
|         |    |   | Condition and Results
      of Operations                  | 12   | 
|         |    |   |                                                            |      | 
|Item     | 4  | . | Controls and Disclosures                                   | 17   | 
|         |    |   |                                                            |      | 
|Part II. |    |   | Other Information                                          |      | 
|         |    |   |                                                            |      | 
|Item     | 1. |   | Legal Proceedings                                          | 19   | 
|         |    |   |                                                            |      | 
|Item     | 2  | . | Changes in Securities
      and Use of Proceeds            | 19   | 
|         |    |   |                                                            |      | 
|Item     | 3  | . | Defaults Upon Senior
      Securities                      | 19   | 
|         |    |   |                                                            |      | 
|Item     | 4  | . | Submission of Matters
      to a Vote of Security Holders  | 19   | 
|         |    |   |                                                            |      | 
|Item     | 5  | . | Other Information                                          | 19   | 
|         |    |   |                                                            |      | 
|Item     | 6  | . | Exhibits and Reports
      on Form 8-K                     | 20   | 

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PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

U.S. TIMBERLANDS KLAMATH FALLS,
  LLC

CONDENSED CONSOLIDATED STATEMENTS OF
  OPERATIONS

(IN THOUSANDS)

(UNAUDITED)

|                                                                   |  |  |                             |         |  
|------------------------------------------------------------------ |  |  | --------------------------- | ------- | -
|                                                                   |  |  |                             |         |  
|                                                                   |  |  |                             |         |  
|                                                                   |  |  | Three Months Ended June 30, |        
|                                                                   |  |  |                             |         |  
|                                                                   |  |  |                             | 2003    |  
|                                                                   |  |  |                             |         |  
|Revenues (including $8,300 (2003) and $9,900 (2002) to affiliates) |  |  | $                           | 14,727  |  
|Cost of timber harvested                                           |  |  |                             | (3,104  | )
|Depletion, depreciation and road amortization                      |  |  |                             | (3,438  | )
|Cost of timber and property sales                                  |  |  |                             | (8,640  | )
|                                                                   |  |  |                             |         |  
|Gross profit (loss)                                                |  |  |                             | (455    | )
|                                                                   |  |  |                             |         |  
|Selling, general and administrative expenses                       |  |  |                             | (1,382  | )
|Equity in net loss of affiliate                                    |  |  |                             | (2,760  | )
|                                                                   |  |  |                             |         |  
|Operating loss                                                     |  |  |                             | (4,597  | )
|                                                                   |  |  |                             |         |  
|Interest expense                                                   |  |  |                             | (5,399  | )
|Interest income                                                    |  |  |                             | 4       |  
|Amortization of deferred financing fees                            |  |  |                             | (169    | )
|Other income, net                                                  |  |  |                             | 33      |  
|                                                                   |  |  |                             |         |  
|                                                                   |  |  |                             |         |  
|Net loss                                                           |  |  | $                           | (10,128 | )
|                                                                   |  |  |                             |         |  

See notes to the condensed consolidated financial statements

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U.S. TIMBERLANDS KLAMATH FALLS,
  LLC

CONDENSED CONSOLIDATED STATEMENTS OF
  OPERATIONS

(IN THOUSANDS)

(UNAUDITED)

|                                                                  |                           |         |   |  
|----------------------------------------------------------------- | ------------------------- | ------- | - | -
|                                                                  |                           |         |   |  
|                                                                  |                           |         |   |  
|                                                                  | Six Months Ended June 30, |        
|                                                                  |                           |        
|                                                                  |                           | 2003    |   |  
|                                                                  |                           |         |   |  
|                                                                  |                           |         |   |  
|Revenues (including $8,300 (2003) and $9,900 (2002) to affiliates | $                         | 21,558  |   | $
|Cost of timber harvested                                          |                           | (6,572  | ) |  
|Depletion, depreciation and road amortization                     |                           | (6,321  | ) |  
|Cost of timber and property sales                                 |                           | (9,114  | ) |  
|                                                                  |                           |         |   |  
|Gross profit (loss)                                               |                           | (449    | ) |  
|                                                                  |                           |         |   |  
|Selling, general and administrative expenses                      |                           | (3,039  | ) |  
|Equity in net loss of affiliate                                   |                           | (4,988  | ) |  
|                                                                  |                           |         |   |  
|Operating loss                                                    |                           | (8,476  | ) |  
|                                                                  |                           |         |   |  
|Interest expense                                                  |                           | (10,784 | ) |  
|Interest income                                                   |                           | 8       |   |  
|Amortization of deferred financing fees                           |                           | (338    | ) |  
|Other income, net                                                 |                           | 66      |   |  
|                                                                  |                           |         |   |  
|                                                                  |                           |         |   |  
|Net loss                                                          | $                         | (19,524 | ) | $
|                                                                  |                           |         |   |  

See notes to the condensed consolidated financial statements

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U.S. TIMBERLANDS KLAMATH FALLS, LLC

CONDENSED CONSOLIDATED BALANCE
  SHEETS

(IN THOUSANDS)

|                                             |                                                                         |             |          |   |              |         |  
|-------------------------------------------- | ----------------------------------------------------------------------- | ----------- | -------- | - | ------------ | ------- | -
|                                             |                                                                         |             | June 30, |   | December 31, |         |  
|                                             |                                                                         |             | 2003     |   | 2002         |         |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             |                                                                         | (Unaudited) |          |   | *            |         |  
|ASSETS                                       |                                                                         |             |          |   |              |         |  
|Current assets:                              |                                                                         |             |          |   |              |         |  
|                                             | Cash and cash equivalents                                               | $           | 1,239    |   | $            | 965     |  
|                                             | Accounts receivable, net                                                |             | 919      |   |              | 1,028   |  
|                                             | Due from managing member                                                |             | 19       |   |              | 6       |  
|                                             | Other receivables                                                       |             | 404      |   |              | 211     |  
|                                             | Notes receivable                                                        |             | 707      |   |              | 1,344   |  
|                                             | Prepaid expenses and other current assets                               |             | 154      |   |              | 331     |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             | Total current assets                                                    |             | 3,442    |   |              | 3,885   |  
|                                             |                                                                         |             |          |   |              |         |  
|Timber and timberlands, net                  |                                                                         | 138,722     |          |   | 163,980      |         |  
|Investment in affiliate                      |                                                                         | 45,465      |          |   | 38,881       |         |  
|Property, plant and equipment, net           |                                                                         | 873         |          |   | 905          |         |  
|Other receivables                            |                                                                         | 10          |          |   | 10           |         |  
|Restricted cash                              |                                                                         | 153         |          |   | 82           |         |  
|Deferred financing fees, net                 |                                                                         | 2,961       |          |   | 3,298        |         |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             | Total assets                                                            | $           | 191,626  |   | $            | 211,041 |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             |                                                                         |             |          |   |              |         |  
|LIABILITIES AND MEMBERS' EQUITY/(DEFICIENCY) |                                                                         |             |          |   |              |         |  
|Current liabilities:                         |                                                                         |             |          |   |              |         |  
|                                             | Accounts payable                                                        |             | 937      |   |              | 1,454   |  
|                                             | Accrued liabilities                                                     |             | 3,378    |   |              | 3,990   |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             | Total current liabilities                                               |             | 4,315    |   |              | 5,444   |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             |                                                                         |             |          |   |              |         |  
|Long-term debt                               |                                                                         | 225,000     |          |   | 225,000      |         |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             |                                                                         |             |          |   |              |         |  
|Members' equity (deficiency)                 |                                                                         |             |          |   |              |         |  
|                                             | Managing member's interest                                              |             | (393     | ) |              | (196    | )
|                                             | Nonmanaging member's interest                                           |             | (37,296  | ) |              | (19,207 | )
|                                             |                                                                         |             |          |   |              |         |  
|                                             | Total members' equity (deficiency)                                      |             | (37,689  | ) |              | (19,403 | )
|                                             |                                                                         |             |          |   |              |         |  
|                                             | Total liabilities and members' equity (deficiency)                      | $           | 191,626  |   | $            | 211,041 |  
|                                             |                                                                         |             |          |   |              |         |  
|                                             |                                                                         |             |          |   |              |         |  
|*                                            | Derived from audited Consolidated Balance Sheet as of December 31, 2002 |             |          |   |              |         |  
|                                             | See notes to the condensed consolidated financial statements            |             |          |   |              |         |  

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U.S. TIMBERLANDS KLAMATH FALLS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|(IN
      THOUSANDS)                                          |                                 |        |   |   |        |  
|------------------------------------------------------------- | ------------------------------- | ------ | - | - | ------ | -
|(UNAUDITED)                                                   |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|                                                              | Six Months Ended
      June 30, |       
|                                                              | 2003                            | 2002   |  
|                                                              |                                 |        |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                         |                                 |        |   |   |        |  
|Net cash provided by (used in) operating
      activities     | $                               | 647    |   | $ | (915   | )
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                         |                                 |        |   |   |        |  
|Timber, timberlands
      and road additions                  |                                 | (1,619 | ) |   | (969   | )
|Sale (purchase)
      of property, plant and equipment - net  |                                 | 8      |   |   | (9     | )
|                                                              |                                 |        |   |   |        |  
|Net cash provided by (used in) investing
      activities     |                                 | (1,611 | ) |   | (978   | )
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                         |                                 |        |   |   |        |  
|Net borrowings
      under affiliate credit facility          |                                 | -      |   |   | 1,225  |  
|Capital contributions                                         |                                 | 1,238  |   |   | -      |  
|                                                              |                                 |        |   |   |        |  
|Net cash provided by financing activities                     |                                 | 1,238  |   |   | 1,225  |  
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|Increase (decrease) in cash and
      cash equivalents        |                                 | 274    |   |   | (668   | )
|Cash and cash equivalents - beginning
      of period         |                                 | 965    |   |   | 1,070  |  
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|Cash and cash equivalents - end
      of period               | $                               | 1,239  |   | $ | 402    |  
|                                                              |                                 |        |   |   |        |  
|                                                              |                                 |        |   |   |        |  
|Noncash activities:                                           |                                 |        |   |   |        |  
|Contribution of
      timberlands for investment in affiliate | $                               | 11,572 |   | $ | -      |  
|                                                              |                                 |        |   |   |        |  
|Supplemental cash flow information:                           |                                 |        |   |   |        |  
|Cash paid for
      interest expense                          | $                               | 10,829 |   | $ | 10,828 |  

See notes to the condensed consolidated financial statements

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U.S. TIMBERLANDS KLAMATH FALLS, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
  STATEMENTS

(In thousands, except as otherwise indicated)
  (Unaudited)

1. Business and Basis of Presentation

Business

The accompanying consolidated financial statements include the accounts of U.S. Timberlands Klamath Falls, LLC (USTK), a Delaware limited liability company, and its wholly owned subsidiary, U.S. Timberlands Finance
Corp. (Finance Corp), collectively referred to hereafter as the Company. Finance Corp. serves as the co-obligor for USTKs 9 5/8% Senior Notes due 2007 (the Notes). It has nominal assets and does not conduct operations.
All intercompany transactions have been eliminated in consolidation.

U.S. Timberlands Company, LP (the MLP) owned a 99% common membership interest in USTK. The MLP was formed in 1997 to acquire and own substantially all of the equity interests in USTK and to acquire and own the business
and assets of U.S. Timberlands Management Company, LLC.  U.S. Timberlands Services Company, LLC (the Manager) manages the business of the Company and owns a 1% common membership interest in USTK.

On October 17, 2002, the MLP announced that it had signed a definitive agreement to be acquired by an acquisition company formed by a group led by senior management (the privatization transaction). The definitive agreement
contemplated a cash tender offer for 100% of the outstanding common limited partnership units not already owned by the acquiring entity or its affiliates for $3.00 per unit in cash, followed by a merger of the acquisition company with and into the
MLP, pursuant to which each common limited partnership unit not already owned by the acquiring entity or its affiliates would be converted into the right to receive $3.00 per unit in cash.  The tender offer commenced on November 19, 2002 and was
completed on March 6, 2003. Pursuant to the tender offer, approximately 71% of the Companys common units were tendered. The acquisition group therefore controlled approximately 87% of the outstanding common units. The remaining common units
not purchased in the tender offer were acquired by the acquisition group in a merger that was completed on June 26, 2003.  As a result of this privatization transaction, the 99% non-managing membership interest in the Company is owned indirectly by
U.S. Timberlands Holding Group, LLC.

The primary activity of the Company is the growing of trees and the sale of logs and standing timber to third party wood processors and related party purchasers. The Companys timber is primarily located in Oregon, east of
the Cascade Range. Logs harvested from the timberlands are sold to unaffiliated domestic conversion facilities.  These logs are processed for sale as lumber, plywood and other wood products, primarily for use in new residential home construction,
home remodeling and repair and general industrial applications.

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Basis of Presentation

These condensed consolidated financial statements have been prepared by the Company, without audit by independent public accountants, pursuant to the rules and regulations of the United States Securities and Exchange Commission.
In the opinion of management, the accompanying unaudited financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally
included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly these
condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Companys 2002 Annual Report on Form 10-K. Operating results for the quarter and the six month period ended
June 30, 2003 are not necessarily indicative of the results that may be expected for the full year or any other period.

There have been no significant changes in the accounting policies of the Company.

2. Timber and Timberlands

Timber and Timberlands consisted of the following:

|                                                 | June 30, |         | December 31, |  
|------------------------------------------------ | -------- | ------- | ------------ | -
|                                                 | 2003     |         | 2002         |  
|                                                 |          |         |              |  
|Timber and logging roads                         | $        | 282,470 |              | $
|Timberlands                                      |          | 18,912  |              |  
|Seed orchard and nursery stock                   |          | 1,231   |              |  
|                                                 |          |         |              |  
|                                                 |          | 302,613 |              |  
|Less accumulated depletion and road amortization |          | 163,891 |              |  
|                                                 |          |         |              |  
|                                                 | $        | 138,722 |              | $
|                                                 |          |         |              |  

3. Investment In Affiliate

The following is summarized financial information for U.S. Timberlands Yakima, LLC (USTY), an affiliate of the Company accounted for under the equity method:

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|                    | Quarter
      Ended |        | Quarter
      Ended |   | Six
      Months Ended |   | Six
      Months Ended |       
|------------------- | ------------------- | ------ | ------------------- | - | ---------------------- | - | ---------------------- | ------
|                    | June 30             |        | June 30             |   | June 30                |   | June 30                |       
|                    | 2003                |        | 2002                |   | 2003                   |   | 2002                   |       
|                    |                     |        |                     |   |                        |   |                        |       
|Net sales           | $                   | 1,540  |                     | $ | 5,041                  |   | $                      | 4,116 
|Gross profit (loss) |                     | (266   | )                   |   | (628                   | ) |                        | (230  
|Net income (loss)   |                     | (2,760 | )                   |   | (3,438                 | ) |                        | (4,988

During the first half of 2003, the Company contributed timberlands located in Central Oregon to USTY. The contributions have an aggregate agreed upon value of $12.9 million and were added to the Companys Preferred Interest
in USTY. Terms of the additional senior preferred interest acquired are the same terms as the senior preferred interest previously issued to the Company. The Company recorded its additional preferred interests at its aggregate costs for the
timberlands of approximately $11.6 million.

4. Short-Term Debt

The Company had a credit facility with an affiliate of the General Partner (the Affiliate Credit Facility) consisting of a revolving line of credit of up to $12.0 million. Borrowings under the Affiliate Credit Facility
bore interest at the prime lending rate as published in the Wall Street Journal plus applicable margin, which was based on the Companys leverage ratio. The Affiliate Credit Facility expired, by its terms, at the end of April 2002.  The Company
is seeking to replace the Affiliate Credit Facility with a working capital facility from an unaffiliated third party. However, there can be no assurance that the Company will be able to obtain a working capital credit facility in amounts sufficient
to fund its working capital needs from a traditional commercial lender. While the Company continues to seek a credit facility from an unaffiliated source, affiliated lenders have made short term advances to the Company, payable on demand to the
affiliates, at an annual interest rate of 10%.  The affiliate has made no commitment to continue lending funds to the Company, and each request is reviewed on a case by case basis.

5. Long-Term Debt and Distributions

As of June 30, 2003, the Company was not permitted to make any distributions as it had not exceeded the requisite Consolidated Fixed Charge Coverage Ratio within the Restricted Payments provisions of the 9 5/8% Senior Notes issued
by the Company.

6. Unit-based Compensation Plans

The MLP had a Unit Option Plan which permits the grant
  of unit options to employees and directors of the Company who perform services
  for the Company covering 857,749 Common Units. As permitted under SFAS No. 148,
  Accounting for Stock-Based Compensation-Transition and Disclosure, which was
  issued in December 2002 and amended SFAS No. 123, Accounting for Stock-Based
  Compensation, the Company has elected to continue to follow the intrinsic value
  method in accounting for its stock-based employee compensation arrangements
  as defined by Accounting Principles Board Opinion (APB) No. 25,
  Accounting for Stock Issued to Employees,
  and related interpretations. The following table illustrates the effect on net
  loss if the Company had applied the fair value recognition provisions of SFAS
  No. 123 to stock-based employee compensation.

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|                                            |                   | **Three Months
        Ended** |                  
|------------------------------------------- | ----------------- | ------------------------------ | -----------------
|                                            | **June 30, 2003** |                                | **June 30, 2002**
|                                            |                   |                                |                  
|Net (loss) as reported                      | $                 | (10,128                        | )                
|Unit-based employee compensation determined |                   |                                |                  
|under the intrinsic value
      method      |                   | --                             |                  
|                                            |                   |                                |                  
|Unit-based employee compensation determined |                   |                                |                  
|under the fair value
      method           |                   | --                             |                  
|                                            |                   |                                |                  
|Net income (loss) pro forma                 | $                 | (10,128                        | )                
|                                            |                   |                                |                  
|                                            |                   |                                |                  
|                                            |                   |                                |                  
|                                            |                   | **Six Months Ended**           |                  
|                                            | **June 30, 2003** |                                | **June 30, 2002**
|                                            |                   |                                |                  
|Net (loss) as reported                      | $                 | (19,524                        | )                
|Unit-based employee compensation determined |                   |                                |                  
|under the intrinsic value
      method      |                   | --                             |                  
|                                            |                   |                                |                  
|Unit-based employee compensation determined |                   |                                |                  
|under the fair value
      method           |                   | --                             |                  
|                                            |                   |                                |                  
|Net income (loss) pro forma                 | $                 | (19,524                        | )                
|                                            |                   |                                |                  

In connection with the privatization transaction described in Note 1, each outstanding unit option granted under the Unit Option Plan was converted into an option to receive, upon exercise, including payment of the exercise price,
the merger consideration as defined. Because the exercise price for each option is greater than the merger consideration, the Company does not expect any options to be exercised.

7. Recent Accounting Standards

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure as an amendment to SFAS No. 123 by introducing two additional conversion methods when converting
to the fair value based method from the intrinsic value method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS No. 123 to require prominent disclosure about the effects on reported net income
(loss) of an entitys accounting policy decisions with respect to stock-based employee compensation and amends APB Opinion No. 28 to require disclosure about those effects in interim financial information. The disclosure provisions are
effective for fiscal years ending after December 15, 2002 and for interim periods beginning after December 15, 2002. The Company follows the intrinsic value method of accounting for stock-based employee

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compensation, but will continue to evaluate the benefits of a voluntary change to the fair value based method.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46) "Consolidation of Variable Interest Entities" which is an interpretation of Accounting Research Bulletin No. 51 "Consolidated Financial Statements". FIN 46 requires
the consolidation of entities in which an enterprise absorbs a majority of the entity's expected losses, receives a majority of the entity's expected residual returns, or both, as a result of ownership, contractual or other financial interests in
the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity.

The provisions of FIN 46 are required to be applied by
  the Company no later than July 1, 2003, and would require the Company to consolidate
  the financial statements of U.S. Timberlands Yakima, LLC (USTY)
  its unconsolidated affiliate which is presently being accounted for on the equity
  method. If the Company had consolidated USTY beginning January 1, 2003, there
  would have been no effect on the Company's net loss for the six months ended
  June 30, 2003, however revenues would have increased by $4,116, expenses would
  have increased by $9,104 and the $4,988 equity in net loss of affiliate would
  be eliminated. In addition, although there would be no change in members
  equity/(deficiency), total assets would increase by approximately $140,000,
  principally representing timber and timberlands, and total liabilities would
  increase by approximately $140,000 including $129,000 of long-term debt at June
  30, 2003. Such long-term debt is collateralized by all of the USTY assets and
  the debt holder does not have recourse to the Company. The Companys maximum
  exposure to loss as a result of its involvement with USTY is limited to its
  preferred ownership investment in USTY, which amounts to $45,465 at June 30,
  2003.

8. Contribution to Capital of the Company

In May of 2003, U.S. Timberlands Acquisition Co., LLC reimbursed the Company for certain expenses aggregating $1,238 incurred by the Company in connection with the privatization transaction described in Note 1. These expenses
consisted principally of legal expenses of the Company and the Special Committee and a fairness opinion fee to an investment banking firm retained by the Committee, which previously had been allocated to and paid by the Company. The reimbursement
has been recorded as a contribution to the capital of the Company.

9. Litigation

On April 25, 2002, the Company announced that several purported class action lawsuits were filed in the Court of Chancery of the State of Delaware for the County of New Castle against the Manager and the board of directors of the
General Partner alleging, among other things, breach of fiduciary duty and self-dealing by the Manager and the board in connection with the going private transaction. The lawsuits sought to enjoin the going private transaction, to rescind the going
private transaction if it is consummated, and to recover damages and attorneys fees. The lawsuits also named the Company as a defendant. On July 12, 2002, the Company was notified that all of the purported class action lawsuits were
consolidated into one class action lawsuit by the Court of Chancery of the State of Delaware. On October 17, 2002, the Company announced that it had reached a tentative settlement of the purported class action lawsuits, subject to court

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approval and other customary conditions. The settlement provided, among other things, for an increase in the consideration provided in the offer to purchase the common units to $3.00 per unit. On December 12, 2002 the parties
executed a Stipulation of Settlement which the Court of Chancery approved at a settlement hearing on January 30, 2003.

On June 21, 2002, the Company was notified that it was named in a lawsuit filed in State Court in Oregon as a codefendant seeking medical expenses and up to $12.0 million in damages for injuries sustained by the minor child of an
employee of the Manager while riding on equipment owned by the Manager.  At the time, liability insurance was in place, however, the insurance underwriter has since gone bankrupt and coverage is limited and is being administered by the Oregon
Guarantee Insurance Association.

Management and its counsel are still reviewing the facts of the injury claims and it is too early to assess their effect on the Company.

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

Forward-Looking Statements

Certain information contained in this report may constitute forward-looking statements within the meaning of the federal securities laws.  Although the Company believes that expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to differ materially
from those projected.  Such risks, trends and uncertainties include the highly cyclical nature of the forest products industry, general economic conditions, competition, price conditions or trends for the Companys products, the possibility
that timber supply could increase if governmental, environmental or endangered species policies change, and limitations on the Companys ability to harvest its timber due to adverse natural conditions or increased governmental restrictions.
These and other risks are described in the Companys other reports and registration statements, which are available from the United States Securities and Exchange Commission.

In June 2003, a major customer and competitor of the Company,
  Crown Pacific filed for relief under Chapter 11 of the Bankruptcy Code. There
  was no direct financial impact to the Company. It is not known at this time
  how this bankruptcy will impact the forest products industry in which the Company
  operates, although it may lead to increased timber supply in the market.

Application of Critical Accounting Policies

The Company's condensed consolidated financial statements
  have been prepared in accordance with accounting principles generally accepted
  in the United States of America. Certain accounting policies have a significant
  impact on amounts reported in the financial statements. A summary of those significant
  accounting policies can be found in Note 1 to the Company's financial statements
  included in the Company's 2002 Annual Report on Form 10-K. The Company
  has not adopted any significant new accounting policies during the six months
  ended June 30, 2003.

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Among the significant judgments made by management in the preparation of the Company's financial statements are the determination of the allowance for doubtful accounts and the rates of depletion applicable to the Company's
merchantable timber.  These determinations are made periodically in the ordinary course of accounting.

Overview

The Companys principal operations consist of growing
  and harvesting timber and selling logs, standing timber and related by-products
  to third party wood processors and related purchasers. These logs and byproducts
  are processed for sale as lumber, molding products, doors, mill work, commodity,
  specialty and overlaid plywood products, laminated veneer lumber, engineered
  wood I-beams, particleboard, hardboard, paper and other wood products. These
  products are used in residential, commercial and industrial construction, home
  remodeling and repair, general industrial applications and a variety of paper
  products. The results of the Companys operations and its ability to pay
  distributions to its members depend upon a number of factors, many of which
  are beyond its control. These factors include general economic and industry
  conditions, domestic and export prices, supply and demand for timber logs, seasonality,
  government regulations affecting the manner in which timber may be harvested,
  and competition from other supplying regions and substitute products. The Company
  is currently not permitted to make any distributions to members (see Financial
  Condition and Liquidity).

Seasonality

The Companys log and standing timber sales volumes are generally at their lowest levels in the first and second quarters of each year. In the first quarter, heavy snowfalls in higher elevations prevent access to many areas
of the Companys timberlands.  This limited access, along with spring break-up conditions (when warming weather thaws and softens roadbeds) in March or April, restricts logging operations to lower elevations and areas with rockier soil types.
As a result of these constraints, the Companys sales volumes are typically at their lowest in the first quarter, improving in the second quarter and at their highest during the third and fourth quarters. Most customers in the region react to
this seasonality by carrying sufficiently high log inventories at the end of the calendar year to carry them to the second quarter of the following year.

Current Market Conditions

Second quarter 2003 prices for finished wood products (e.g. lumber, plywood and engineered wood products) were lower than the first quarter 2003 and lower than the same period in 2002. Ponderosa Pine prices continued to lead the
decline. Veneer prices were also down in the second quarter 2003.

Delivered log prices declined in White Fir and Ponderosa
  Pine respectively at 10% and 2% in the second quarter of 2003 compared to the
  comparable quarter of the prior year. Douglas Fir and Incense Cedar prices did
  not decline during the quarter.

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|Results of Operations                                |                          |          |                               |  |      |     |          |        |   |  |     | 
|---------------------------------------------------- | ------------------------ | -------- | ----------------------------- |  | ---- | --- | -------- | ------ | - |  | --- | 
|                                                     |                          |          |                               |  |      |     |          |        |   |  |     | 
|Selected operating statistics
      for the Company: |                          |          |                               |  |      |     |          |        |   | 
|                                                     |                          |          |                               |  |      |     |          |        |   |  |     | 
|                                                     | Sales Volume
      (MBF) |          | Price Realization
      (MBF) | 
|                                                     |                          |          |                               | 
|                                                     |                          |          |                               |  |      |     |          |        |  
|                                                     |                          |          | Timber                        |  |      |     |          | Timber |  
|Period                                               | Logs                     | Stumpage | Deeds                         |  | Logs |     | Stumpage | Deeds  |  
|                                                     |                          |          |                               |  |      |     |          |        |  
|                                                     |                          |          |                               |  |      |     |          |        |  
|2003                                                 |                          |          |                               |  |      |     |          |        |   |  |     | 
|Three Months Ended June 30                           | 14,314                   | -        | 10,869                        |  | $    | 320 | $        | -      | $ |  | 136 | 
|Three Months Ended March 31                          | 17,098                   | -        | 2,886                         |  | $    | 313 | $        | -      | $ |  | 236 | 
|                                                     |                          |          |                               |  |      |     |          |        |   |  |     | 
|                                                     |                          |          |                               |  |      |     |          |        |   |  |     | 
|2002                                                 |                          |          |                               |  |      |     |          |        |   |  |     | 
|Three Months Ended
      June 30                     | 14,575                   | -        | 88,480                        |  | $    | 341 | $        | -      | $ |  | 114 | 
|Three Months Ended March 31                          | 5,024                    | -        | 2,333                         |  | $    | 349 | $        | -      | $ |  | 169 | 

Quarter Ended June 30, 2003 Compared to Quarter Ended June 30, 2002

Revenues

Revenues for the quarter ended June 30, 2003 were $14.7 million, a decrease of $0.8 million or 5% from revenues of $15.5 million for the same period in 2002.  The decrease in revenues during the second quarter of 2003 was caused
by lower log sales volume and lower timber deed sales, offset in part by higher timberland sales.

Timber deed sales for the second quarter of 2003 were $1.5 million on volume of 10.9 million board feet (MMBF), as compared to the same period in 2002, when timber deed sales were $10.1 million on 88.5 MMBF. The
average timber deed price was $136 per thousand board feet (MBF) during the second quarter of 2003, as compared to $114 per MBF for the same period in 2002.

Log sales for the quarter ended June 30, 2003 were $4.6 million on volume of 14.3 MMBF, as compared to the same period in 2002 when log sales were $5.0 million on 14.6 MMBF. The average sales price was $320 per MBF for the second
quarter of 2003, as compared to an average of $341 per MBF for the same period in 2002.  The decrease in log prices reflects a general decrease in the market.

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In addition, property sales for the second quarter were $8.3 million, as compared to $0.0 million for the same period in 2002.

Gross Profit

The Company had a gross loss of $0.5 million in the second
  quarter of 2003 as compared to a gross loss of $1.7 million for the same period
  in 2002. As a percentage of sales, the gross loss was 3% as compared to a gross
  loss percentage of 11% in the second quarter of 2002. The gross profit (loss)
  percentage was adversely impacted in the 2002 period by the sale of the Ochoco
  timberlands at a loss.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $0.1 million from $1.5 million in the second quarter of 2002 to $1.4 million in the second quarter of 2003.  The decrease was principally attributable to lower wage and
wage related expenses of $0.2 million and lower professional service expenses of $0.2 million, offset by higher expenses of $0.3 million related to the privatization transaction.

Equity in Net Loss of Affiliate

Equity in net loss of affiliate was $2.8 million for the
  second quarter of 2003. This amount reflects the Companys share of the
  net loss of an affiliate (USTY) accounted for under the equity method. This
  compares to equity in net loss of affiliate of $3.4 million in the second quarter
  of 2002.

Six Months Ended June 30, 2003 Compared to Six months Ended June 30, 2002

Revenues

Revenues for the six months ended June 30, 2003 were $21.6 million, an increase of $4.0 million or 23% from revenues of $17.6 million for the same period in 2002. The increase in revenues during the first half of 2003 was caused
by higher log sales volumes and timber and property sales, offset by lower timber deed sales.

Timber deed sales for the first half of 2003 were $2.2 million on volume of 13.8 million board feet (MMBF), as compared to the same period in 2002, when timber deed sales were $10.5 million on 90.8 MMBF.  The average
timber deed price was $157 per thousand board feet (MBF) during the first half of 2003, as compared to $116 per MBF for the same period in 2002.

Log sales for the six months ended June 30, 2003 were $9.9 million on volume of 31.4 MMBF, as compared to the same period in 2002 when log sales were $6.7 million on 19.6 MMBF. The average sales price was $316 per MBF for the
first half of 2003, as compared to an average of $343 per MBF for the same period in 2002.  The decrease in log prices reflects a general decrease in the market.

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In addition, property sales for the first half of 2003 were $8.9 million, as compared to $0.0 million for the same period in 2002.

Gross Profit

The Company had a gross loss of $0.4 million in the first
  half of 2003 as compared to a gross loss of $1.7 million for the same period
  in 2002. As a percentage of sales, the gross loss was 2% as compared to a gross
  loss percentage of 10% in the first half of 2002. The gross profit (loss) percentage
  was adversely impacted in the 2002 period by the sale of the Ochoco timberlands
  at a loss.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $0.1 million from $2.9 million in the first half of 2002 to $3.0 million in the first half of 2003.  The increase was principally attributable to lower wage and wage
related expenses of $0.1 million and lower professional services expenses of $0.2 million, offset by higher expenses of $0.4 million related to the privatization transaction.

Equity in Net Loss of Affiliate

Equity in net loss of affiliate was approximately $5.0 million for the first half of 2003.  This amount reflects the Companys share of the net loss of an affiliate (USTY) accounted for under the equity method. This compares
to equity in net loss of affiliate of $5.7 million in the first half of 2002.

Financial Condition and Liquidity

Operating Activities

Cashflows provided by operating activities during the six months ended June 30, 2003 were $0.6 million, as compared to cash used in operating activities of $0.9 million
during the same period in 2002. The $1.6 million increase is due primarily to the Companys increase in sales revenue in comparison to the same period in 2002.

Investing Activities

Cashflows used in investing activities were $1.6 million during the first six months of 2003, as compared to $1.0 million used in investing activities during the same
period in 2002.

Financing Activities

Cashflows provided by financing activities for the first six months of 2003 and 2002 were $1.2 million for each period.  In the 2003 period, these cash flows were
provided by a capital contribution by U.S. Timberlands Acquisition Co., LLC. In the 2002 period, these cash flows

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represented borrowings under our affiliate credit facility.  There were no distributions to members in the 2003 and 2002 periods respectively.

The Company had a credit agreement with an affiliate of the General Partner (the Affiliate Credit Facility), which allowed the Company to borrow up to $12.0 million.  The Affiliate Credit Facility expired on April 30,
2002. While the Company continues to seek a credit facility from an unaffiliated source, affiliated lenders have made short term advances to the Company, payable on demand to the affiliates, at an annual interest rate of 10%. The affiliate has made
no commitment to continue lending funds to the Company, and each request is reviewed on a case by case basis.

The agreement governing the Companys 9-5/8% Senior
  Notes (the Notes) contains restrictive covenants, including limitations
  on harvest levels, land sales, cash distributions and the amount of future indebtedness.
  Under the Notes, the Companys average annual adjusted harvest volume over
  any period of four consecutive years cannot exceed a volume of approximately
  147 MMBF as adjusted for timberland sales and purchases. The Notes also limit
  one-year harvest levels and average annual harvest levels for consecutive two-and-three
  year periods. In 2002, because of the accelerated harvesting, during the fourth
  quarter of salvage timber resulting from the Toolbox Fire, the Company exceeded
  the allowable four year harvest by 6.9 MMBF and, as required under the Indenture
  has purchased timber deeds and otherwise utilized $662,000 in ways prescribed
  in the Indenture. As of June 30, 2003, the Company was in compliance with the
  covenants contained in the Notes. As of June 30, 2003, the Company was not permitted
  to make any distributions as it had not exceeded the requisite Consolidated
  Fixed Charge Coverage Ratio within the Restricted Payments provisions of the
  Notes.

Through the first six months of 2003, the Company funded its operations and met its cash requirements for debt service from cash on hand, and from a capital contribution by U.S. Timberlands Acquisition Co., LLC.

Cash required to meet the Companys debt service and any cash distributions will be significant. To meet its working capital requirements, the Company for the past several years has been selling logs and making timber sales
at a rate in excess of the Managing Members estimate of the current annual board footage growth on the Companys timberlands. The debt service and, prior to April 2001, quarterly cash distributions have been funded from operations and
borrowings.  Given projected volumes for sales of logs and timber, estimated current board footage growth on the timberlands and the harvest restrictions in the Notes, unless prices improve, costs are reduced, new markets are developed or the
Company makes accretive acquisitions, the Companys ability in the future to make distributions will be adversely affected. On May 10, 2001 the Company announced an indefinite suspension of distributions.  The Company continues to evaluate
means to improve cash flows, including the factors mentioned above. There can be no assurance that prices will improve or that the Company will be able to take any of these actions and it is unlikely prices will improve or any of these actions will
take effect within a short-term horizon. The Company will continue to look to log and timber deed sales as well as the sale of excess timberlands, and short-term advances from an affiliated lender, to meet its short term cash needs.

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ITEM4. CONTROLS AND PROCEDURES

The Companys management maintains an adequate system of internal controls to promote the timely identification and reporting of material, relevant information.  The Companys senior management team meets regularly to
discuss significant transactions and events affecting the Companys operations.  The Companys President and Chief Executive Officer, and Vice President and Chief Financial Officer, lead these meetings and consider whether topics discussed
represent information that should be disclosed under the rules of the SEC.

The Companys President and Chief Executive Officer, and Vice President and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures. They have designed such controls to
ensure that others make all material information known to them within the organization.  Management regularly evaluates ways to improve internal controls.

As of the end of the period covered by this Form 10Q, our executive officers, including our President and Chief Executive Officer and our Vice President and Chief Financial Officer, completed an evaluation of the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and determined them to be functioning properly and effectively. They did not discover any significant deficiencies or material weaknesses within the
controls and procedures that required modification. Since the completion of that evaluation, there have been no significant changes in internal controls over financial reporting that occurred during our most recent fiscal quarter that has materially
affected or is reasonably likely to materially affect our internal controls over financial reporting or in other factors that could significantly affect internal controls.

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PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

On April 25, 2002, the Company announced that several purported class action lawsuits were filed in the Court of Chancery of the State of Delaware for the County of New Castle against the Manager and the board of directors of the
General Partner alleging, among other things, breach of fiduciary duty and self-dealing by the Manager and the board in connection with the going private transaction. The lawsuits sought to enjoin the going private transaction, to rescind the going
private transaction if it is consummated, and to recover damages and attorneys fees. The lawsuits also named the Company as a defendant. On July 12, 2002, the Company was notified that all of the purported class action lawsuits were
consolidated into one class action lawsuit by the Court of Chancery of the State of Delaware. On October 17, 2002, the Company announced that it had reached a tentative settlement of the purported class action lawsuits, subject to court approval and
other customary conditions. The settlement provided, among other things, for an increase in the consideration provided in the offer to purchase the common units to $3.00 per unit. On December 12, 2002 the parties executed a Stipulation of Settlement
which the Court of Chancery approved at a settlement hearing on January 30, 2003.

On June 21, 2002, the Company was notified that it was named in a lawsuit filed in State Court in Oregon as a codefendant seeking medical expenses and up to $12.0 million in damages for injuries sustained by the minor child of an
employee of the Manager while riding on equipment owned by the Manager.  At the time, liability insurance was in place, however, the insurance underwriter has since gone bankrupt and coverage is limited and is being administered by the Oregon
Guarantee Insurance Association.

Management and its counsel are still reviewing the facts of the injury claims and it is too early to assess its effect on the Company.

ITEMS 2, 3, 4, AND 5 OF PART IIare not applicable and have been omitted.

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ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K

(a.) Exhibits

10.12
      Amended
          and Restated Operating Agreement of U.S. Timberlands Yakima,LLC, dated as of September 14, 2001.31.1
      Certification
          of CEO Pursuant to Rule 13a-14(a)/15d-14(a).31.2
      Certification
          of CFO Pursuant to Rule 13a-14(a)/15d-14(a).32.1 -
      Sarbanes-Oxley
          Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 -
      Sarbanes-Oxley
          Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.










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SIGNATURES

Pursuant to the requirements 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.

|Date: August 13, 2003 | U.S. TIMBERLANDS KLAMATH FALLS, LLC
|--------------------- | -----------------------------------





| | By:/s/ Thomas C. Ludlow                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Thomas C. Ludlow 
          Chief Financial Officer 
          (Chief Financial Officer,
          Duly Authorized Officer,
          And Principal Accounting Officer)









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