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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2000

OR

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

For the transition period from  to

Commission File Number 1-8885

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THE NEWHALL LAND AND FARMING COMPANY(a California Limited Partnership)(Exact name of Registrant as specified in its charter)

CALIFORNIA(State or other jurisdiction of
incorporation or organization)

95-3931727(I.R.S. Employer
Identification No.)23823 Valencia Boulevard, Valencia, California(Address of principal executive offices)

91355(Zip Code)


Registrant's telephone number, including area code(661) 255-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of each class

Name of each exchange
on which registeredDepositary Receipts

New York Stock Exchange
Pacific Stock Exchange


SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:None

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

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

The
aggregate market value of depositary receipts held by non-affiliates based upon the closing price of such depositary receipts on the New York Stock Exchange on
February 28, 2001 was $585,437,073

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THE NEWHALL LAND AND FARMING COMPANY
2000
FORM 10-K

TABLE OF CONTENTS

|                  |  |                                                                                       |  | Page
Number
|----------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|PART I            |  |                                                                                       |  |            
|Item 1.           |  | Business                                                                              |  | 1          
|Item 2.           |  | Properties                                                                            |  | 6          
|Item 3.           |  | Legal Proceedings                                                                     |  | 8          
|Item 4.           |  | Submission of Matters to a Vote of Security Holders                                   |  | 8          
|PART II           |  |                                                                                       |  |            
|Item 5.           |  | Market for the Registrant's Depositary Units and Related Security Holder Matters      |  | 8          
|Item 6.           |  | Selected Financial Data                                                               |  | 9          
|Item 7.           |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 11         
|Item 7A.          |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 22         
|Item 8.           |  | Financial Statements and Supplementary Data                                           |  | 23         
|Item 9.           |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 44         
|PART III          |  |                                                                                       |  |            
|Item 10.          |  | Directors and Executive Officers of the Registrant                                    |  | 45         
|Item 11.          |  | Executive Compensation                                                                |  | 52         
|Item 12.          |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 62         
|Item 13.          |  | Certain Relationships and Related Transactions                                        |  | 64         
|Part IV           |  |                                                                                       |  |            
|Item 14.          |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 65         
|SIGNATURES        |  | 69                                                                                   
|SCHEDULE III      |  | Real Estate and Accumulated Depreciation                                              |  | 71         
|INDEX TO EXHIBITS |  | 74                                                                                   

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PART I

Item 1. Business

INTRODUCTION

The Newhall Land and Farming Company (a California Limited Partnership) (the "Company" or the "Partnership") is engaged in the development of residential,
industrial and commercial real estate and in agriculture, on its approximately 50,000 acres in California. The interests in the Company (other than those held by the general partners) are represented
by transferable Depositary Units listed on the New York and Pacific Stock Exchanges under the ticker symbol NHL (also referred to in this Annual Report as "partnership units"). The Company was
reorganized from a corporation to a limited partnership on January 8, 1985. The predecessor corporation was established in 1883 by the family of Henry Mayo Newhall; the shares of the
corporation were listed on the New York Stock Exchange in 1970.

The
Company's primary business is developing master-planned communities. Since 1965, the Company has been developing the town of Valencia on a portion of the Company's landholdings in
Los Angeles County which now is home to approximately 42,000 residents and over 1,400 companies that provide 42,000 jobs. With approximately 6,700 acres remaining to be developed, and residential
buildout expected by 2005, Valencia is the regional center for north Los Angeles County and the northern gateway to the entire Los Angeles metropolitan area.

In
1994, the Company started the entitlement process on Newhall Ranch, a new master-planned community located on 12,000 acres adjacent to Valencia and west of Interstate 5. In
March 1999, the Los Angeles County Board of Supervisors gave final approval for the project. The Newhall Ranch Specific Plan permits 21,600 homes in five villages and 325 net acres of
commercial and business park uses. Planning and design work has started on the infrastructure for the project and detailed planning is proceeding on two of the five villages planned for the community.
In June 2000, six issues in the project's Environmental Impact Report were identified by a Kern County Superior Court judge as
needing additional environmental review. For additional information on these issues, please refer to the "Community Development" section underPart II. Item
7.Management's Discussion and Analysis of Financial Condition and Results of Operations.

Valencia
and Newhall Ranch are located on the Company's prime landholding consisting of over 19,000 contiguous acres in north Los Angeles County, the fastest growing region in
California. The development potential of these properties is unmatched in the entire County and is directly in the path of growth along the Interstate 5 corridor, just 30 miles north of
downtown Los Angeles. Four major freeways intersect Interstate 5 within ten minutes of Valencia providing businesses and residents easy access to the Los Angeles metropolitan area, major
airports and the ports of Los Angeles and Long Beach.

In
the late 1980s, the Company adopted the strategy of selling farm properties with little or no potential for development and re-deploying the proceeds into real estate
operations. As of December 31, 2000, more than 70,000 acres of non-strategic farmland have been sold. The Company's remaining agricultural properties are the New Columbia Ranch in
the San Joaquin Valley and the Newhall Orchard in Ventura County.

In
September 1999, the Company initiated a strategy to repurchase up to 20%, or 6,384,446 units, of its outstanding partnership units. This represented a significant shift in business
strategy and afforded the Company a major arbitrage opportunity to capitalize on the gap in its underlying asset value relative to the market price of the Company's units.

The
Company's strategy to accomplish the unit repurchases involved the sale of approximately one-half of the Company's income portfolio and the suspension of capital
spending for new income

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portfolio additions. In 2000, two retail properties, four apartment complexes and four office buildings were sold and, as of December 31, 2000, a total of 4,899,502 units had been repurchased
of which 3,175,550 units were repurchased in 2000. For additional information about income properties sold and unit repurchases, please refer to the sections titled "Results of Operations," "Income
Property Sales" and "Liquidity and Capital Resources" underPart II. Item 7.Management's Discussion and Analysis of Financial Condition and Results of
Operations.

Financial
information concerning the Company's business segments appears in Note 10 of the Notes to Consolidated Financial Statements in this Annual Report. Information
regarding competition and compliance with governmental and environmental regulations appears in the Inflation, Risks and
Related Factors section ofManagement's Discussion and Analysis of Financial Condition and Results of Operationsin this Annual Report. At
December 31, 2000, the Company had 195 employees.

Competition

The sale and leasing of residential, industrial and commercial real estate is highly competitive, with competition coming from numerous and varied sources. The
degree of competition is affected by such factors as the supply of real estate available which is comparable to that sold and leased by the Company and the level of demand for such real estate.
Valencia experienced a slight decrease in its new home sale market share at both the local and the county level in 2000, due to the temporary decline in new home inventory. There is no assurance that
this new home sales decline will reverse in the future even with an increasing supply of new homes in Valencia given competing projects in the region. This could impact the pace at which the Company
is able to sell additional residential land.

Appraisal of Real Property Assets

The independent appraisal firm of Buss-Shelger Associates appraised the market value of the Company's real property assets to be
$991 million at December 31, 2000. The appraised properties did not include oil and gas assets, water supply systems, cash and cash equivalents and certain other assets. The net
appraised value of the Company's total assets, including assets not independently appraised, was $922 million, after reduction for debt and certain other liabilities as shown in the table
below.

For
the purpose of the appraisals, market value was defined as the most probable price in a competitive and open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. A significant portion of the appraised real property assets is located on the Company's 19,000
acres, 30 miles north of downtown Los Angeles and currently is undeveloped.

Entitlements
and the continuing development of Valencia enhance the appraised value of the Company's land assets. Although raw land increases in value as development opportunities
arise, the most significant increases occur when necessary land use entitlements, including zoning and mapping approvals, are obtained from city and county governments. The appraised values of the
Company's land and income-producing properties in the Valencia master-planned community have increased from $222 million in 1984, the first year independent property appraisals were obtained,
to $740 million in 2000. On a per unit basis, the Company's net appraised value has increased from $11.74 to $34.66 over the same 17-year period.

In
1999, Newhall Land initiated an aggressive unit repurchase program to capitalize on the investment opportunity to create unitholder value based upon the difference in the
record-high underlying asset values relative to Newhall Land's unit price. Consequently, the 2000 results reflect the removal of $86.5 million in asset value for repurchases and
$21.2 million in distributions. To fund these unit repurchases in 2000, the Company sold $78 million in Valencia land and $220 million of income-producing properties. A portion of
sales proceeds was used to reduce mortgage and other debt. This activity was more than offset by a 10% reduction in units outstanding, resulting in a 6% increase in net

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appraised value on a per unit basis for 2000. Declines in Valencia area properties presented below for 2000 are the result of this significant sales activity. Absent these sales, remaining Valencia
land values and income-producing properties increased in value by 12% and 4%, respectively.

A
summary of year-end appraised values follows (the appraisals were performed by independent appraisers except as noted):

Appraised Values

|                                                 |                                                                                          | 2000   |        | 1999 |        | 1998 |     | 1997 |   | 1996   |    
|------------------------------------------------ | ---------------------------------------------------------------------------------------- | ------ | ------ | ---- | ------ | ---- | --- | ---- | - | ------ | ---
|
|Valencia and nearby properties                   |                                                                                          | 6,670  |        | $    | 418    |      | (2  | )%   | $ | 428    |    
|Income-producing real estate                     |                                                                                          | 735    |        |      | 322    |      | (31 | )    |   | 465    |    
|                                                 |                                                                                          |        |        |      |        |      |     |      |   |        |    
|Total Valencia area properties                   |                                                                                          | 7,405  |        |      | 740    |      | (17 | )    |   | 893    |    
|Community development properties:                |                                                                                          |        |        |      |        |      |     |      |   |        |    
|                                                 | Newhall Ranch, City Ranch (50.1% interest)*, McDowell Mountain Ranch* and Broomfield, CO |        | 11,965 |      |        | 187  |     | 3    |   |        | 181
|Agricultural properties                          |                                                                                          | 30,110 |        |      | 59     |      |    |      |   | 59     |    
|Mortgage and other debt at book carrying value   |                                                                                          |        |        |      | (75    | )    | (66 | )    |   | (223   | )  
|All other, net, not independently appraised      |                                                                                          |        |        |      | 11     |      | (83 | )    |   | 64     |    
|                                                 |                                                                                          |        |        |      |        |      |     |      |   |        |    
|Net appraised value                              |                                                                                          | 49,480 |        | $    | 922    |      | (5  | )%   | $ | 974    |    
|                                                 |                                                                                          |        |        |      |        |      |     |      |   |        |    
|Number of partnership units outstanding (000's ) |                                                                                          |        |        |      | 26,590 |      | (10 | )%   |   | 29,668 |    
|                                                 |                                                                                          |        |        |      |        |      |     |      |   |        |    
|Net appraised value per partnership unit         |                                                                                          |        |        | $    | 34.66  |      | 6   | %    | $ | 32.85  |    
|                                                 |                                                                                          |        |        |      |        |      |     |      |   |        |    

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Appraised values are judgments. Land and property appraisals are an estimated value based on the sale of comparably located and zoned real
estate or on the present value of income anticipated from commercial properties. There is no assurance that the appraised value of property would be received if any of the assets were sold. No
assumptions have been made with respect to the bulk sale of the Company's total real estate assets. Certain reclassifications within categories have been made to conform to the current year
presentation; however, prior period amounts have not been restated to reflect land sale activity, unit repurchases or distributions to unitholders. For the five-year period ended 2000, the
Company has invested $237.4 million in unit repurchases and paid out $89.5 million in distributions.

REAL ESTATE

The Company's primary business is developing new towns and master-planned communities in north Los Angeles County. This includes the town of Valencia,
30 miles north of Los Angeles and Newhall Ranch, a new community planned for over 21,000 homes on 12,000 acres adjacent to Valencia, just west of Interstate 5.

Valencia,
the first master-planned community developed by the Company, has experienced tremendous success and set the standard for the Company's other planned communities. Today,
Valencia is a balanced community, providing residential, commercial and retail properties, along with

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industrial and recreational facilities and is the regional center for north Los Angeles County. Residents are attracted to the quality of life offered in Valencia's safe, clean environment, combined
with award-winning schools. Major business such as Princess Cruises and Explorer Insurance, have relocated to Valencia for these same reasons plus the added benefit of a strong local labor pool and
proximity to the Los Angeles metropolitan area. Approximately 6,700 acres including over 7,300 homes and apartments remain to be developed in Valencia. The Company's goal is to complete the sellout of
Valencia residential land by 2005.

Newhall
Ranch, the next major master-planned community planned for the Company's 12,000 acres west of Interstate 5 and adjacent to Valencia, is based on a master plan that
incorporates the natural beauty of the Santa Clara River and preserves over 6,000 acres of open space. Approval of this 21,600 home project was received in 1999 from the Los Angeles County Board of
Supervisors. The first two villages, Riverwood and The Mesas, are in the planning stages, along with design work on the major infrastructure to open the project.

For
information regarding lawsuits pertaining to the Company's residential projects, please refer to the section entitled "Community Development" under Part II. Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations.

In
2000, the Company divested its 50.1% interest in a joint venture with Kaufman and Broad of Southern California, Inc. to develop a 1,900-acre parcel in Palmdale,
30 miles northeast of Valencia in the Antelope Valley. The Company is in discussions with potential buyers interested in acquiring the Company's option on 1,800 acres for a new community in
Broomfield, Colorado, located between Denver and Boulder.

The
Company sells residential lots to merchant builders, operates a portfolio of commercial properties, provides building-ready sites for sale to industrial and commercial
developers/users and owns a public water utility. For additional information regarding the Company's business refer to"Item 7.Management's Discussion and
Analysis of Financial Condition and Results of Operations"in this Annual Report.

Residential Development and Land Sales

In 2000, merchant builders in Valencia sold 419 new homes on land previously sold by the Company, an increase of 18%, compared to the 355 new homes sold in the
prior year by merchant builders and the Company's joint ventures. Despite the increase, home sales were well below the level expected in 2000 due to builders being slow to bring product to market, an
over abundance of higher priced product on the market and general softening in market conditions. At December 31, 2000, there were 186 new homes in escrow, well above the 99 homes in escrow at
the end of 1999. Merchant builders had an inventory of 931 lots remaining on which to build new homes at December 31, 2000. While the Company does not participate directly in profits generated
from escrow closings by merchant builders, the absorption of these previously sold lots is key to the Company's future success in selling additional lots.

A
total of 208 residential lots closed escrow by the Company in 2000. Lot sales in 2000 were impacted by the Public Utilities Commission's (PUC) decision to combine its review of
Valencia Water Company's request to expand its service area together with the water company's water management plan. The PUC requested environmental studies be submitted on water availability for the
projects included in the service expansion area. The water company is in the process of providing the PUC the necessary information. Valencia Water Company expects the PUC will render its decision in
the 2001 third quarter. A total of 4,445 residential lots and apartment units are affected. The total number includes 1,900 lots and apartments that the City of Santa Clarita annexed in
December 2000, and 2,545 lots and apartments in the Company's West Creek community approved in December by the Los Angeles County Board of Supervisors.

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The Company's goal is to double the historical pace of development and achieve new home sales of approximately 1,200 annually by capturing a greater share of the Santa Clarita Valley
housing market. The continued fundamentals of low housing supply and high demand, as predicted by economists, will fuel an estimated annual demand for 25,000 new homes in Los Angeles County, compared
to an annual average of about 12,000 homes over the past decade.

Industrial/Commercial Development and Land Sales

The Company develops the infrastructure and provides sites for sale to industrial/commercial developers and users. Valencia's location just 30 miles from
downtown Los Angeles on Interstate 5, California's major north-south freeway, provides an attractive environment for industrial, commercial, service, distribution and entertainment businesses.
Valencia now is the regional center for north Los
Angeles County and boasts a 1:1 jobs-to-housing ratio. Businesses continue to be attracted to the advantages Valencia has to offer including easy freeway access, a safe and
clean work environment and a highly skilled local workforce.

The
Company markets industrial and commercial land as Valencia Gateway which encompasses 4,500 acres and has 15 million square feet of building space today, making it the
largest master-planned center for business, technology and industry in Los Angeles County. The Company plans to aggressively market Valencia Gateway and targets an annual absorption of 50 to 75 acres
per year, which accommodates about one million square feet of new development. The Company also plans to explore opportunities to create strategic partnerships with large-scale developers to
accelerate cash flow and minimize capital requirements within its business parks. In 2000, the Company sold 59 acres of industrial land and 50 acres of commercial land.

Community Development

The Company continues to invest heavily in land use entitlements to support accelerated growth and to maximize the value of its landholdings. The Company's
community development activities are focused on securing the necessary governmental land use approvals as well as community planning and marketing to complete the projected sellout of Valencia
residential land by 2005 and begin development of Newhall Ranch in 2003. Planning and design work has started on the infrastructure for the 21,600-home Newhall Ranch project and detailed
planning is proceeding on two of the five villages planned for the community.

Commercial Real Estate Development

As previously discussed, in 2000, the Company sold several income properties to finance the repurchase of up to 6.3 million partnership units. For
additional information about the properties sold and the repurchase plan, see the sections entitled "Income Producing Properties" and "Liquidity and Capital Resources" under Part II. Item 7."Management's
Discussion and Analysis of Financial Condition and Results of Operations".

For
additional information about the Company's remaining commercial properties at December 31, 2000, seePart I.
Item 2"Properties" and Schedule IIIReal Estate and Accumulated Depreciation.To conserve capital and accelerate the cash flow, the
Company does not plan to develop new income properties in 2001 and instead is marketing retail sites to third-party developers.

Valencia Water Company

Valencia Water Company, a wholly-owned subsidiary that supplies water to Valencia and other adjacent developments, is a regulated public utility serving over
22,000 metered customers. The water supply for the service area is obtained from wells owned by Valencia Water Company and by purchases

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from the California State Water Project. In 2000, 52% of Valencia Water Company's water was supplied through ground sources.

AGRICULTURE

The Company's agricultural division consists of farming and energy operations. The principal remaining agricultural properties are New Columbia Ranch in the
San Joaquin Valley and the Newhall Orchard in Ventura County on which the Company and its tenants raised over 20 different crops during the calendar year 2000. Of the Company's land devoted to
farming, over 67% was leased to others in 2000. Approximately 21,000 acres of land at the Newhall Ranch and Newhall Orchard not suitable for cultivation or ready for development are leased to third
parties for cattle grazing.

The
Company's agricultural operations supply most of their water through underground sources and are not dependent on state or federal water projects. The Company continues to improve
conservation practices to minimize the cost of irrigation and the amount of water used.

Energy
operations consist of royalty interests in oil and gas assets on the Newhall Ranch. The Company's 50% mineral interest at the Meridian Ranch, which was sold in 1994, ended on
June 30, 2000. In total, the Company has royalty interests in approximately 150 oil wells and 16 gas wells. Energy operations do not represent a material source of revenues and income for the
Company.

Item 2. Properties

Land

Listed below are the location and acreage of properties owned by the Company at December 31, 2000:

Property

State

County

AcreageValencia area

California

Los Angeles

7,405Newhall Ranch

California

Los Angeles

11,965Newhall Orchard

California

Ventura

16,110New Columbia

California

Madera

14,00049,480


Plants and buildings

AgricultureVarious buildings located at two farming operations in California.

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Commercial Real EstateListed below are square footage, occupancy, net operating income by group and anchor tenants of major commercial properties owned by the Company at
December 31, 2000. The
Company also has numerous land leases including 541 acres for a landfill. The commercial properties are leased to 225 tenants.

|                                                            |  | Year
Opened |  | Approximate
GLA(1) in
Square Feet |  | 2000 Net
Operating
Income |        | 12/31/00
Occupancy(2) |      | Major Tenants
|----------------------------------------------------------- |  | ----------- |  | --------------------------------- |  | ------------------------- | ------ | --------------------- | ---- | -------------
|
|
|Valencia Town Center                                        |  | 1992        |  | 675,000                           |  |                           |        |                       | 99%  |              
|Valencia Town Center Drive                                  |  | 1998        |  | 54,000                            |  |                           |        |                       | 97%  |              
|Valencia Entertainment Center                               |  | 1999        |  | 130,000                           |  |                           |        |                       |      |              
|River Oaks                                                  |  | 1987        |  | 272,000                           |  |                           |        |                       | 100% |              
|NorthPark Village Square                                    |  | 1996        |  | 81,800                            |  |                           |        |                       | 100% |              
|Other                                                       |  | various     |  | 37,600                            |  |                           |        |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|                                                            |  |             |  | 1,257,805                         |  | $                         | 15,393 |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|
|City Center                                                 |  | 1991        |  | 44,800                            |  |                           | 668    |                       | 100% |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|
|Spectrum Health Club                                        |  | 1997        |  | 53,500                            |  |                           |        |                       | 100% |              
|Town Center Plaza                                           |  | 1999        |  | 26,000                            |  |                           |        |                       | 100% |              
|Other Income Properties                                     |  | various     |  | 95,600                            |  |                           |        |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|                                                            |  |             |  | 175,100                           |  |                           | 5,766  |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|
|Valencia Hilton Garden Inn (75% joint venture interest)     |  | 1991        |  | 152                               |  |                           |        |                       |      |              
|Hyatt Valencia Hotel and Santa Clarita Conference Center(3) |  | 1998        |  | 244                               |  |                           |        |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|                                                            |  |             |  | 396                               |  |                           | 2,981  |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              
|Total                                                       |  |             |  |                                   |  | $                         | 24,808 |                       |      |              
|                                                            |  |             |  |                                   |  |                           |        |                       |      |              

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All
of the commercial real estate properties and the properties of Valencia Water Company are located in and around Valencia, California. At December 31, 2000, two of the
shopping centers secured loans with a $24.5 million principal balance and borrowings totaling $12 million were outstanding against a $50 million revolving mortgage facility
secured by Valencia Town Center. An $11 million

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financing is secured by the water utility plant of Valencia Water Company. For additional information concerning encumbrances against Company properties, refer to Note 7 of the Notes to
Consolidated Financial Statements section.

For
additional information on the Company's properties, refer to the summary of appraised values on page 3 andSchedule IIIReal Estate and
Accumulated Depreciationon pages 71 and 72.

Item 3. Legal Proceedings

The Company, including its subsidiary, are named defendants in many lawsuits arising from the ordinary course of its business. While the outcome of these
lawsuits cannot be predicted, management does not expect these matters to have a material adverse effect on the Company's business, financial condition or results of operations.

For
information on lawsuits pertaining to Newhall Ranch, Valencia Westridge and the West Creek community, please refer to the section entitled "Community Development" under Part II. Item 7."Management's Discussion and
Analysis of Financial Condition and Results of Operations".

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

None.

Part II

Item 5. Market for the Registrant's Depositary Units and Related Security Holder Matters

Market Price and Distribution Data

Years ended December 31

|                           |  | Market Price |       |  |   |       |  |  
|-------------------------- |  | ------------ | ----- |  | - | ----- |  | -
|
|
|First quarter              |  | $            | 28.50 |  | $ | 26.75 |  | $
|Second quarter             |  |              | 28.88 |  |   | 26.38 |  |  
|Third quarter              |  |              | 28.88 |  |   | 23.25 |  |  
|Fourth quarter             |  |              | 24.50 |  |   | 20.20 |  |  
|                           |  |              |       |  |   |       |  |  
|Year's high and low        |  | $            | 28.88 |  | $ | 20.20 |  | $
|                           |  |              |       |  |   |       |  |  
|
|December 31, closing price |  | $            | 23.25 |  | $ | 27    |  |  
|                           |  |              |       |  |   |       |  |  

The
Company's Depositary Units are traded on the New York and Pacific Stock Exchanges under the ticker symbol NHL and, at December 31, 2000, the Company had 1,144 unitholders
of record. The Company has paid uninterrupted quarterly cash distributions since 1936. The declaration of any distribution and the amount declared is determined by the Board of Directors taking into
account the Company's earnings, cash requirements, financial condition and prospects.

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Item 6. Selected Financial Data

|                                                                 |                                                        | 2000 |       | 1999                      |     | 1998   |         | 1997 |      
|---------------------------------------------------------------- | ------------------------------------------------------ | ---- | ----- | ------------------------- | --- | ------ | ------- | ---- | -----
|In thousands, except per unit, percentages and sales information |                                                        |      |       |                           |     |        |         |      |      
|Operating Results                                                |                                                        |      |       |                           |     |        |         |      |      
|                                                                 | Revenues                                               |      | $     | 400,968                   |     | $      | 322,506 |      | $    
|                                                                 | Operating income                                       |      |       | 117,973                   |     |        | 115,213 |      |      
|                                                                 | General and administrative expense                     |      |       | (14,642                   | )   |        | (14,431 | )    |      
|                                                                 | Interest and other, net                                |      |       | (17,935                   | )   |        | (10,390 | )    |      
|                                                                 | Net income                                             |      |       | 85,396                    |     |        | 90,392  |      |      
|                                                                 | Depreciation and amortization (included in net income) |      |       | (13,800                   | )   |        | (15,296 | )    |      
|Per Unit Information                                             |                                                        |      |       |                           |     |        |         |      |      
|                                                                 | Net income                                             |      | $     | 3.09                      |     | $      | 2.88    |      | $    
|                                                                 | Net incomeassuming dilution                           |      |       | 3.05                      |     |        | 2.85    |      |      
|                                                                 | Distributions (including special)                      |      |       | .75                       |     |        | .62     |      |      
|                                                                 | Partners' capital                                      |      |       | 4.48                      |     |        | 4.71    |      |      
|                                                                 | Appraised value                                        |      |       | 34.66                     |     |        | 32.85   |      |      
|                                                                 | Market pricehigh                                      |      |       | 28.88                     |     |        | 28      |      |      
|low                                                              |                                                        |      | 20.20 |                           |     | 223/16 |         |      | 201/4
|year-end closing                                                 |                                                        |      | 23.25 |                           |     | 27     |         |      | 26   
|Financial Position                                               |                                                        |      |       |                           |     |        |         |      |      
|                                                                 | Land under development                                 |      | $     | 63,155                    |     | $      | 39,401  |      | $    
|                                                                 | Income-producing properties, net                       |      |       | 160,505                   | (2) |        | 281,060 | (2)  |      
|                                                                 | Total assets                                           |      |       | 351,708                   |     |        | 504,824 |      |      
|                                                                 | Mortgage and other debt (total debt)                   |      |       | 74,557                    |     |        | 222,825 |      |      
|                                                                 | Other long-term obligations                            |      |       | 57,611                    |     |        | 50,474  |      |      
|                                                                 | Total liabilities                                      |      |       | 232,504                   |     |        | 365,099 |      |      
|                                                                 | Partners' capital (capital)                            |      |       | 119,204                   |     |        | 139,725 |      |      
|                                                                 | Market capitalization at year end                      |      |       | 618,218                   |     |        | 801,036 |      |      
|Statistics                                                       |                                                        |      |       |                           |     |        |         |      |      
|                                                                 | Return on total debt and capital                       |      |       | 44                        | %   |        | 25      | %    |      
|                                                                 | Total debt as a percent of total debt and capital      |      |       | 38                        | %   |        | 61      | %    |      
|                                                                 | Total debt as a percent of total market capitalization |      |       | 11                        | %   |        | 22      | %    |      
|                                                                 | Units outstandingweighted average                     |      |       | 27,658                    |     |        | 31,388  |      |      
|                                                                 |                                                        |      |       | weighted averagediluted |     |        | 27,969  |      |      
|                                                                 |                                                        |      |       | year end                 |     |        | 26,590  |      |      
|Sales Information                                                |                                                        |      |       |                           |     |        |         |      |      
|                                                                 | Residential lots and homes sold                        |      |       | 208                       |     |        | 1,060   |      |      
|                                                                 | Industrial and commercial acres sold                   |      |       | 108.5                     |     |        | 120.6   |      |      
|                                                                 | Farm acres sold                                        |      |       |                          |     |        | 39,142  |      |      

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9

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|                                                                 |                                                        | 1996 |   | 1995    |     | 1994 |         | 1993 |   | 1992    |     | 1991 |         | 1990 |  
|---------------------------------------------------------------- | ------------------------------------------------------ | ---- | - | ------- | --- | ---- | ------- | ---- | - | ------- | --- | ---- | ------- | ---- | -
|In thousands, except per unit, percentages and sales information |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|Operating Results                                                |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|                                                                 | Revenues                                               |      | $ | 220,186 |     | $    | 175,597 |      | $ | 134,268 |     | $    | 105,452 |      | $
|                                                                 | Operating income                                       |      |   | 60,584  |     |      | 46,482  |      |   | 34,607  |     |      | 28,538  |      |  
|                                                                 | General and administrative expense                     |      |   | (9,133  | )   |      | (8,547  | )    |   | (8,578  | )   |      | (7,710  | )    |  
|                                                                 | Interest and other, net                                |      |   | (9,562  | )   |      | (10,618 | )    |   | (10,455 | )   |      | (8,031  | )    |  
|                                                                 | Net income                                             |      |   | 41,889  |     |      | 27,317  |      |   | 15,574  |     |      | 12,797  |      |  
|                                                                 | Depreciation and amortization (included in net income) |      |   | (8,857  | )   |      | (7,698  | )    |   | (7,690  | )   |      | (7,329  | )    |  
|Per Unit Information                                             |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|                                                                 | Net income                                             |      | $ | 1.19    |     | $    | .75     |      | $ | .42     |     | $    | .35     |      | $
|                                                                 | Net incomeassuming dilution                           |      |   | 1.18    |     |      | .75     |      |   | .42     |     |      | .35     |      |  
|                                                                 | Distributions (including special)                      |      |   | .40     |     |      | .40     |      |   | .40     |     |      | .40     |      |  
|                                                                 | Partners' capital                                      |      |   | 3.48    |     |      | 3.14    |      |   | 3.06    |     |      | 3.03    |      |  
|                                                                 | Appraised value                                        |      |   | 23.35   |     |      | 23.32   |      |   | 21.86   |     |      | 21.04   |      |  
|                                                                 | Market pricehigh                                      |      |   | 183/4   |     |      | 17      |      |   | 171/4   |     |      | 171/2   |      |  
|                                                                 | low                                                    |      |   | 15      |     |      | 121/8   |      |   | 12      |     |      | 131/2   |      |  
|                                                                 | year-end closing                                       |      |   | 167/8   |     |      | 17      |      |   | 121/8   |     |      | 16      |      |  
|Financial Position                                               |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|                                                                 | Land under development                                 |      | $ | 63,266  |     | $    | 88,457  |      | $ | 87,423  |     | $    | 73,078  |      | $
|                                                                 | Income-producing properties, net                       |      |   | 182,641 |     |      | 134,504 |      |   | 135,858 |     |      | 134,384 |      |  
|                                                                 | Total assets                                           |      |   | 373,488 |     |      | 349,753 |      |   | 343,792 |     |      | 359,898 |      |  
|                                                                 | Mortgage and other debt (total debt)                   |      |   | 163,256 |     |      | 152,302 |      |   | 145,991 |     |      | 174,157 |      |  
|                                                                 | Other long-term obligations                            |      |   | 37,544  |     |      | 36,270  |      |   | 30,922  |     |      | 33,414  |      |  
|                                                                 | Total liabilities                                      |      |   | 252,835 |     |      | 236,897 |      |   | 231,435 |     |      | 248,619 |      |  
|                                                                 | Partners' capital (capital)                            |      |   | 120,653 |     |      | 112,856 |      |   | 112,357 |     |      | 111,279 |      |  
|                                                                 | Market capitalization at year end                      |      |   | 585,575 |     |      | 610,470 |      |   | 445,727 |     |      | 588,112 |      |  
|Statistics                                                       |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|                                                                 | Return on total debt and capital                       |      |   | 15      | %   |      | 10      | %    |   | 6       | %   |      | 4       | %    |  
|                                                                 | Total debt as a percent of total debt and capital      |      |   | 58      | %   |      | 57      | %    |   | 57      | %   |      | 61      | %    |  
|                                                                 | Total debt as a percent of total market capitalization |      |   | 22      | %   |      | 20      | %    |   | 25      | %   |      | 23      | %    |  
|                                                                 | Units outstandingweighted average                     |      |   | 35,292  |     |      | 36,241  |      |   | 36,757  |     |      | 36,757  |      |  
|                                                                 | weighted averagediluted                              |      |   | 35,411  |     |      | 36,272  |      |   | 36,789  |     |      | 36,790  |      |  
|                                                                 | year end                                              |      |   | 34,701  |     |      | 35,910  |      |   | 36,761  |     |      | 36,757  |      |  
|Sales Information                                                |                                                        |      |   |         |     |      |         |      |   |         |     |      |         |      |  
|                                                                 | Residential lots and homes sold                        |      |   | 1,284   | (1) |      | 1,233   | (1)  |   | 1,026   | (1) |      | 113     |      |  
|                                                                 | Industrial and commercial acres sold                   |      |   | 36.9    |     |      | 38.5    |      |   | 12.0    |     |      | 28.9    |      |  
|                                                                 | Farm acres sold                                        |      |   | 544     |     |      | 5,501   |      |   | 5,370   |     |      | 3,900   |      |  

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

Years ended December 31, 2000, 1999 and 1998

RESULTS OF OPERATIONS

For 2000, the Company achieved record revenues of $401.0 million primarily as a result of the sale of income properties which included two shopping
centers, four apartment complexes and four office buildings. These sales were part of the Company's business strategy, announced in 1999, to sell approximately one-half of its income
portfolio to finance the repurchase of 6,384,446 million of its partnership units. In addition to the income properties, 208 residential lots and over 108 acres of commercial and industrial
land were sold during the year. These sales, combined with the sale of income properties, added $298.0 million to revenues and $106.0 million to income. Net income for 2000 was
$85.4 million, or $3.05 per unit, representing a record high on a per unit basis.

In
1999, the Company recorded revenues of $322.5 million and net income of $90.4 million as a result of accelerated residential, commercial and industrial land sales in
Valencia. Altogether, 1,060 residential lots and joint-venture homes, 63 acres of commercial land and 58 acres of industrial land, including two build-to-suits, were sold. In
addition, the Company closed escrow on the sale of the 36,000-acre Suey Ranch as well as its remaining property at the Merced and Cowell ranches.

The
Company's business plan for 2001 anticipates revenues being generated from 1) residential, commercial and industrial land sales; 2) the remaining portfolio of
income-producing properties; and 3) sale of two properties identified in the asset sale program that did not close escrow in 2000. Net income from these core operations (before any asset sales)
is expected to be approximately 50 cents to 60 cents per unit, compared to 45 cents per unit in 2000. Potential additions to income are expected to be generated from sales of the Bank of America and
Spectrum Club buildings and the option on the Broomfield, Colorado property. Anticipated sales will be dependent upon a variety of factors including, but not limited to, identification of a suitable
buyer, availability of financing to the buyer, regulatory
and legal issues, market conditions, agreement with the buyer on definitive terms and successful completion of the buyer's due diligence.

The
2001 plan also includes completion of the current unit repurchase program of approximately 1.5 million units in the first half of 2001. If current strong business
conditions continue, additional repurchases may be authorized in 2001 depending primarily on the level of land sales that close escrow. Numerous factors could affect the Company's ability to complete
the current repurchase program and start a new program including, but not limited to, changing market and economic conditions, rising interest rates, challenges to governmental approvals, and finding
suitable buyers for certain properties.

Residential Home and Land Sales

The Company primarily sells lots to merchant builders who, in turn, build homes for sale. Revenues and income are recorded when title is transferred to the
merchant builder. Generally, residential lot sale agreements contain a provision whereby the Company will receive from the merchant builder a portion of the home sales prices above an agreed upon base
price ("price participation") and/or in the overall profitability of the home building project after the merchant builder has received an agreed upon return ("profit participation"). If home prices
and/or project profitability fall short of the participation thresholds, the Company receives no additional revenues or income and has no financial obligation to the builder. Prior to 2000, the
Company participated, on a limited basis, in home construction on lots it owned through joint ventures with certain builders.

A
total of 208 residential lots were sold in 2000 for $12.7 million contributing $5.7 million to income. These lot sales were the last remaining lots in the Bridgeport
lake community. Results for 2000 also include $14.4 million in revenues and $5.9 million in income recognized under percentage of

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completion accounting from lot sales in the prior year and $309,000 received from price and profit participation agreements relating to Valencia lot sales in prior years.

Lot
sales in 2000 were below expectations and the1999 level of 891 residential lots sold because of the Public Utilities Commission's (PUC) decision to combine its review of Valencia
Water Company's request to expand its service area together with the water company's water management plan. The PUC requested environmental studies to be submitted on water availability for the
projects included in the service area expansion. The water company is in the process of providing the PUC the necessary information. Valencia Water Company expects the PUC to render its decision in
the 2001 third quarter. A total of 4,445 residential lots is affected. This includes 1,900 lots that the City of Santa Clarita
annexed in December 2000, and 2,545 lots in the Company's West Creek community approved in December 2000 by the Los Angeles County Board of Supervisors. At December 31, 2000, no
residential lots were in escrow.

In
September 2000, the Company divested its 50.1% interest in City Ranch, a joint venture project with Kaufman and Broad of Southern California. Results for 2000 include a
$5.2 million loss as a result of the divestiture and expenses incurred in 2000 prior to the divestiture. The divestiture eliminates significant future cash requirements relating to development
costs for the 4,500-home project in Palmdale, California and allows the Company to focus its resources on its unit repurchase program and the strong real estate market in Valencia.

The
Company sold a total of 891 residential lots in 1999 which included 597 in the Bridgeport lake community, where finished lots were sold at the highest residential per acre prices
in Valencia's history. These combined lot sales added $54.1 million to revenues and $26.6 million to income under percentage of completion accounting. Revenues exceeded $1 million
per acre on prime parcels and profit per net acre is expected to average approximately $394,000 when all revenues and income have been realized as remaining land development and amenities are
completed. In 1999, the Company also completed the sale of 294 lots in Hasley Hills, just north of Valencia, to Kaufman and Broad. This sale contributed $15.9 million to revenues and
$10.7 million to income. At December 31, 1999, no residential lots were in escrow.

In
addition, results for 1999 included $1.5 million received from price and profit participation agreements relating to Valencia lot sales in prior years. This represented the
first price and profit participation income received since 1993. Escrow closings from the Company's two remaining joint ventures totaled 169 homes in 1999, contributing $38.0 million to
revenues and $3.9 million to income. These closings represented the last homes in the Company's joint-venture program.

In
1998, the Company sold a total of 1,108 residential lots which added $40.8 million to revenues and $24.2 million to income. Deferred revenues of $2.3 million
and income of $766,000 were recognized in 1998 from prior residential lot sales under percentage of completion accounting. Results for 1998 also included escrow closings on 124 joint-venture homes in
three projects which contributed $27.7 million to revenues and $2.9 million to income.

For
2001, the Company plans to market approximately 650 entitled, improved residential lots on 91 net acres in the 1,700-home Westridge Golf Course Community. An
additional 300 lots on 40 net acres in Altavista also may be marketed for sale in 2001, depending on results and timing of the PUC decision. The Altavista lots may be marketed for sale as entitled,
unimproved lots.

Industrial and Commercial Sales

Industrial Land Sales

In 2000, escrows closed on 58.8 industrial acres contributing $28.4 million to revenues and $8.5 million to income. No industrial land sales were
in escrow at December 31, 2000. In September 2000, the Company agreed to accept a reduced note pay-off in return for accelerating the

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due date on a 1998 industrial land sale note with scheduled maturities through September 2002. This resulted in the Company recording a $2.1 million charge to income to reduce the note
receivable and accrued interest to the negotiated $14.4 million pay-off amount. The note was collected in December 2000.

In
1999, the Company sold 57.7 industrial acres, including two build-to-suit facilities totaling 280,000 square feet on 13.7 acres for $13.7 million.
These closings contributed $40.1 million to revenues and $8.7 million to income. At December 31, 1999, two industrial parcels totaling 4.1 acres were in escrow for
$2.7 million. In 1998, the Company closed escrow on 111 acres of industrial land, including four buildings constructed as part of its build-to-suit/lease program. These
escrow closings contributed $62.6 million to revenues and $16.1 million to income.

As
of December 31, 2000, there are approximately 390 net acres of entitled industrial land remaining in Valencia. With few large land parcels available in Los Angeles County,
the Company anticipates sales in the range of 50 to 75 acres per year to build-out. Additionally, consideration of marketing concepts for the prime acreage west of Interstate 5 surrounding
the Six Flags Magic Mountain amusement park has started.

Commercial Land Sales

In 2000, a total of 49.7 commercial acres closed escrow contributing $36.9 million to revenues and $18.9 million to income. The sales included a
16.5-acre parcel for a retail center for $12.9 million adding $6.3 million to income. Results for 2000 also include revenues of $3.2 million and income of
$1.9 million
recognized under percentage of completion accounting from the prior year sale of an apartment site. At December 31, 2000, seven commercial parcels totaling 37.9 acres were in escrow for
$24.9 million with closings expected in 2001. The Company's ability to complete sales in escrow and generate future land sales is subject to market and other conditions beyond the control of
the Company.

Commercial
escrow closings in 1999 totaled 62.8 acres which contributed $51.4 million to revenues and $30.1 million to income. Two apartment sites totaling 49.9 acres
for approximately 1,100 units were the major commercial land sales during the year. At December 31, 1999, three commercial parcels totaling 13.2 acres were in escrow for $7.9 million.

In
1998, commercial escrow closings included a 12.6-acre, restricted use site for a senior apartment project and two small commercial parcels totaling 2.0 acres. These
sales combined contributed $2.5 million to revenues and $608,000 to income.

Income Property Sales

Sales of income-producing properties in 2000 included Castaic Village Shopping Center, Plaza del Rancho, four office buildings and four apartment complexes.
These sales combined added $220 million to revenues and $72.9 million to income. The primary contributor to the results was the sale of the apartment complexes for $129.0 million,
contributing $74.0 million to income.

The
sale of the four office buildings for $72.3 million exceeded the construction costs by approximately $7.8 million. A condition of the sale includes a monthly rental
payment by the Company to the buyer for 161,000 square feet of building space (principally to be occupied by Princess Cruises) until Princess' rent commencement date in the first quarter of 2001. In
addition, the Company has agreed to lease back approximately 49,000 square feet of retail space for 121/2 years. With regard to the retail leaseback, accounting guidelines do not allow
the consideration of any future new or renewal leasing activity to reduce the calculation of the net lease obligation. As a result, the Company recorded an accounting loss on the sale of the buildings
of $4.9 million. This amount includes a loss of $2.2 million for a restaurant tenant which closed in late December 2000. Management believes that

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sub-leasing of the retail space will more than offset this accounting loss over the life of the leaseback and ultimately will result in additional revenues and income. As of
December 31, 2000, approximately 25,000 square feet of the retail space was leased.

In
2001, the Company is marketing for sale its Bank of America and Spectrum Club buildings. These sales are expected to generate $15 million to $16 million in revenues
based upon 2000 year-end values. The ability to complete these sales in 2001 will be dependent upon a variety of factors including, but not limited to, identification of a suitable
buyer, availability of financing to the buyer, market conditions, agreement with the buyer on definitive terms and successful completion of the buyer's due diligence.

No
income-producing properties were sold in 1999; however, the Company recognized $6.3 million in deferred revenues and a loss of $400,000 on the prior year sale of Valencia
Marketplace, a 705,000-square-foot high-volume retail center.

In
1998, the Company sold Valencia Marketplace for $111 million cash and recognized $98 million in revenues and $35 million in income under percentage of
completion accounting. Also in 1998, results included the sale of Valley Business Center, a 56,800-square-foot mixed-use center on approximately 15 acres, and the
remaining building in Valencia Industrial Center which combined added $8.8 million to revenues and $2.4 million to income.

Community Development

Community development expenses in 2000 decreased 6% from the prior year primarily due to expenses in the prior year relating to Newhall Ranch entitlements and
certain initial costs relating to commercial properties under development. Community development expenses are expected to increase about 20% in 2001 with the continued focus on entitlements, planning
and community marketing to complete the projected sellout of Valencia residential land by 2005 and begin the development of Newhall Ranch.

Community
development expenses in 1999 increased to $12.3 million, or 14%, from 1998 due to entitlements work for Newhall Ranch, certain initial costs relating to commercial
properties under development and a strategic marketing program. Certain costs for developing Newhall Ranch subsequent to the approval of the Specific Plan in 1999 are being capitalized to the project.

The
Company has started planning and design work on the infrastructure for the 21,600-home Newhall Ranch project. Detailed planning is proceeding on two of the five
villages planned in the community. Riverwood, a village planned along Highway 126 overlooking the Santa Clara River, is expected to contain approximately 3,200 homes, 122 acres of commercial property,
256 acres for a business park and 130 acres of mixed-use development. Development of The Mesas, a second village south of the
river, is also in the planning process. Current plans are for approximately 8,000 homes and 1.5 million square feet of commercial development.

Additional
research and analyses is proceeding on six issues in the project's Environmental Impact Report, which were identified in June 2000 by a Kern County Superior Court
Judge as requiring further environmental review. As previously reported, the six issues include the impact of the 21,600-home Newhall Ranch development on the Salt Creek wildlife corridor
and traffic in Ventura County; biological impacts on the Santa Clara River corridor; consistency with the General Plan and impacts in Significant Ecological Areas (SEAs); adequacy and reliability of
the water supply; and a further alternative site analysis for the water reclamation plant location. The court ruled in the Company's favor on all other issues raised by the opponents. The "affordable
housing" opponent has appealed the Superior Court's decision.

The
Company believes the six issues in question can be resolved to the satisfaction of the Court in 2001, in which case the development is expected to start in 2003. However, the
length of time the

14

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public hearings and judicial process will take is difficult to predict, and circumstances beyond the Company's control could further delay resolution of the issues. The additional environmental
analyses of the six issues will be circulated for public review and comments. Following the public review period, both the Los Angeles County Regional Planning Commission and Board of Supervisors must
review the issues, hold public hearings and certify the additional environmental analyses before the case can be referred back to the Court. The Company anticipates being before the Regional Planning
Commission in the spring of 2001, through the Board of Supervisors by the fall and back before the Superior Court judge by the end of 2001. An adverse decision by the County or Court and/or additional
legal action will likely delay the start of the development of Newhall Ranch beyond 2003.

The
Company has begun land development work on Valencia Westridge, which will feature 1,700 homes surrounding a Tournament Players Club (TPC) golf course, a joint venture with PGA
TOUR Golf Course Properties. The Los Angeles County Board of Supervisors approved the community in May 1999. Opponents to the project subsequently filed a lawsuit under the California
Environmental Quality Act (CEQA) challenging the Board of Supervisors' approval. In May 2000, a Los Angeles County Superior Court Judge dismissed the lawsuit. This dismissal is being appealed.
The Company expects to deliver lots for sale in the second half of 2001, subject to the results of the pending appeal.

In
December 2000, the West Creek community in the North River planning area consisting of 2,545 homes received final approval from the Los Angeles County Board of Supervisors.
Opponents to the community have filed a CEQA lawsuit challenging the Board of Supervisors' approval. As with prior CEQA lawsuits, the results of these types of legal challenges are difficult to
predict. An adverse
decision will likely delay the development of the community beyond the delay created by the PUC process previously mentioned.

The
Company is in discussion with potential buyers interested in acquiring the Company's option to develop the 1,800-acre project in Broomfield, Colorado, located between
Denver and Boulder. The plan calls for approximately 3,000 homes and 215 acres of office and other commercial development. As of December 31, 2000, the Company has expended $2.4 million
on the project and, if the option is sold, would expect the sale to generate a profit.

Income-Producing Properties

In December 1999, the Company announced its intention to sell approximately half of its income portfolio to accommodate the repurchase of more than
6.3 million of the Company's partnership units authorized for repurchase in September 1999. Accordingly, in 2000, four apartment complexes, four office buildings, a neighborhood shopping
center and a mixed-use retail property were sold.

Revenues
in 2000 increased 15% from the prior year while income increased 32% primarily due to suspension of depreciation on income properties while they were held for sale which
accounted for approximately 56% of the increase in income compared to 1999. Improved results from hotel operations, continued high retail occupancy and favorable rents also contributed to increases in
revenues and income for 2000.

In
December 2000, the Company announced it was no longer marketing for sale the Valencia Town Center regional shopping mall and entertainment center. In August 2000, a
potential buyer terminated its due diligence work due to Edwards Theaters' bankruptcy filing. Edwards has not completed its reorganization; however, it remained current on rent due as of
December 31, 2000. In December 2000, a charge of $4 million was recorded for depreciation that had been suspended when the assets were held for sale. The Company also announced
that it terminated discussions with a potential buyer for its landfill and is proceeding with its contractual right to terminate the lease with the current operator. The operator recently filed a
lawsuit against the Company in connection with the termination. The Company is currently engaged in the discovery phase of the lawsuit.

15

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In 1999, revenues from the income portfolio increased 31% and income declined 3% compared to 1998. The income decline resulted primarily from depreciation associated with new
properties and
operating expenses in connection with the Hyatt Valencia Hotel. In 1998, revenues and income from the portfolio increased 16% and 13%, respectively, over 1997 benefiting from the continued development
of new income-producing properties as well as excellent retail and apartment occupancies and favorable rents throughout the portfolio.

The
Company's shopping centers continue to have high occupancy rates with Valencia Town Center 99% leased and adjacent Town Center Drive retail 81% leased. NorthPark Village Square
and River Oaks retail centers are both 100% leased including spaces with signed leases but not yet occupied. A 26,000-square-foot mixed-use building next to the
Hyatt Valencia hotel is 100% leased.

Valencia Water Company

Valencia Water Company is a regulated public utility and a wholly-owned subsidiary of the Company, serving over 22,000 metered customers in the Valencia area.
In 2000, revenues increased 8% and income increased 18% compared to 1999 due to the continuing expansion of the utility's customer base. Revenues in 1999 increased 20% and income increased 8% compared
to 1998 primarily due to an 11% increase in the customer base. Revenues in 1999 also benefited from drier weather while income gains were impacted by increased maintenance and operating costs.

Agricultural Operations

Agriculture revenues and income, including the Company's energy operations, decreased in 2000 primarily due to the sale of over 39,000 acres of farm land in
1999 and lower prices for oranges. The decreases were partially offset by higher revenues and income from energy operations due to higher oil and gas prices. Revenues and income increased in 1999
primarily due to excellent citrus yields and prices. The income comparison to 1998 is impacted by a non-cash write-off of $1.9 million relating to mineral rights
associated with previously sold ranch land.

Ranch Sales

No farm land was sold in 2000. In 1999, the Company completed the sale of the 36,000-acre Suey Ranch and the three remaining parcels at the Merced
Ranch as part of the Company's strategy of selling farm land not suitable for development. These sales combined contributed $29.0 million to revenues and $25.0 million to income.

A
970-acre parcel of the Merced Ranch closed escrow in 1998 for $1.1 million, contributing $775,000 to income. Also included in 1998 results is $323,000 recognized
from the 1996 sale of 539 acres of crop land at the Suey Ranch. The sale of 1,674 acres of vineyards and undeveloped land at the Suey Ranch in 1997 for $17.9 million added $17.0 million
to income.

The
Company's remaining agricultural properties include the 14,000-acre New Columbia Ranch in Madera County and the 1,000-acre Newhall Orchard in Ventura
County. Most of the remaining 15,000 acres owned by the Company in Ventura County are leased for cattle grazing.

General and Administrative Expenses

A net increase of 4% in general and administrative expenses in 2000 is primarily due to a reduction of $2.2 million in land acquisition activities
compared to the prior year being more than offset by an increase of $3.1 million in compensation expense. A 14% increase in expenses in 1999 over 1998 was primarily for land acquisition
activities. General and administrative expenses are expected to decrease by about 30% in 2001 compared to 2000.

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Interest and Other Expense, net

Net interest expense for 2000 increased 73% compared to the prior year due to increased borrowings under credit facilities to fund partnership unit repurchases
prior to the sale of income properties, most of which occurred in December 2000. Interest expense in 2001 is expected to decrease substantially due to lower debt levels against credit
facilities and the assumption of mortgages totaling $49.0 million by the buyer of the Company's four apartment complexes.

An
increase of 45% in net interest expense in 1999 compared to 1998 was due to higher debt levels against lines of credit, a new $25 million mortgage financing secured by two
shopping centers completed in the 1999 third quarter and a reduction in capitalized interest due to the completion of several income portfolio projects. The increase was partially offset by higher
interest income from land sales notes.

In
1998, reduction of debt due to the receipt of $111 million cash upon the sale of Valencia Marketplace in June 1998 and an increase in interest capitalized to
portfolio projects contributed to a decrease in net interest expense of 39% from 1997 expense. In 1998, interest income from increased cash available for investment was offset by a reduction in
interest income due to collection of notes from prior land sales.

FINANCIAL CONDITION

Liquidity and Capital Resources

At December 31, 2000, the Company had cash and cash equivalents of $3.7 million and $158.8 million in available lines of credit, net of
$21.2 in letters of credit. Borrowings outstanding totaled $2 million against unsecured lines of credit and $12 million against a revolving mortgage loan. In addition, the Company had
fixed rate debt totaling $60.6 million. The Company believes it has adequate sources of cash from operations and debt capacity, including lines of credit, to finance future operations on both a
short- and long-term basis and, combined with anticipated land and income property sales, to fund its approved partnership unit repurchases. Debt levels are targeted to remain at or below
60% of the appraised value of remaining income-producing properties. The Company ended 2000 with a debt to income portfolio ratio of 23% providing adequate debt capacity in 2001 to fund ongoing
operations and continue unit repurchases. Furthermore, at December 31, 2000, there was no debt against raw land or land under development inventories in Valencia.

In
November 2000, three matured debt facilities totaling $219 million were replaced. An existing $159 million unsecured line of credit was replaced with a
$130 million three-year, unsecured revolving line of credit; a $20 million unsecured line of credit was replaced by a one-year, $40 million unsecured line
of credit (which was reduced to $10 million after the sale of the four office buildings); and a $40 million mortgage secured by Valencia Town Center was replaced by a
one-year, $50 million secured mortgage.

In
September 1999, the Board of Directors approved a plan to repurchase over 6.3 million partnership units, or approximately 20% of the Company's outstanding units at
the time of the authorization, which included 884,446 units remaining for repurchase from a previous authorization. As of December 31, 2000, a total of 4,899,502 units has been repurchased of
which 3,175,550 units were repurchased in 2000 for $86.5 million, or an average price of $27.25 per unit, and 1,484,944 units remained to be repurchased in 2001.

The
Company repurchases units from time to time in the open market or through block transactions. Numerous factor factors which may affect the Company's ability to complete its unit
repurchase program include, but are not limited to, governmental approvals, changing market conditions, rising interest rates and the ability to find suitable buyers for certain properties.

17

---

As of December 31, 2000, there were no material commitments for capital expenditures other than approximately $23 million for the completion of two office buildings
which were sold in December 2000 and the expected landfill lease termination. In 2001, the Company expects to invest over $40 million in major roads and freeway improvements to enable
the Company to continue its sales program in Valencia.

The following discussion relates to principal items in the Consolidated Statements of Cash Flows.

Operating Activities

Net cash provided by operating activities in 2000 totaled $226.0 million and included sales of 208 residential lots, over 108 acres of industrial and
commercial land and sales of income properties which included four apartment complexes, four office buildings, a neighborhood shopping center and a mixed-use center. These sales combined
provided $239.8 million in cash and $10.5 million in notes. In addition, notes totaling $49.7 million from land sales in prior years were collected and $5.1 million was
received from a right-of-way purchase by Cal Trans. The notes collected included $14.4 million from a 1998 land sale note on which the Company recorded a
$2.1 million charge to income in 2000 to reduce the note principal and accrued interest to a negotiated $14.4 million payoff amount in return for accelerating the due date to
December 2000.

Expenditures
for land under development inventories in 2000 totaled $76.1 million and were partially offset by $52.4 million in cost of sales relief. The expenditures
included $69.7 million for land preparation and infrastructure to ready land for development or sale with the remainder primarily for agricultural crop costs.

Net
cash provided by operating activities in 1999 totaled $122.4 million and included sales of 1,060 residential lots and homes; 121 acres of industrial and commercial land
including two build-to-suit
buildings; sale of the Suey Ranch and the remaining property at the Merced and Cowell Ranches. These sales combined provided $222.8 million in cash and $30.2 million in notes.
Expenditures for land under development inventories in 1999 totaled $103.9 million and were more than offset by $112.2 million in cost of sales relief. The expenditures primarily were
for land preparation and infrastructure to ready land for development or sale, home construction and agricultural crop costs.

Net
cash provided by operating activities in 1998 totaled $167.6 million and included sales of 1,232 residential lots and homes in the Valencia area plus 125 acres of
industrial and commercial land including four build-to-suit/lease buildings; sale of Valencia Marketplace, a high-volume retail center; and 970 acres of farm land.
These sales combined provided $227.5 million in cash and $15.3 million in notes. In addition, $4.0 million was collected on notes from land sales in prior years. Expenditures for
land under development inventories and home construction totaled $79.7 million in 1998 and were more than offset by $85.9 million in cost of sales relief. Expenditures in Valencia were
related to land preparation and infrastructure to ready land for development or sale and home construction advances for the Company's homebuilding partnerships. The Company's net investment in
homebuilding partnerships totaled $13.5 million at the end of 1998.

Investing Activities

Expenditures for development of income-producing properties totaled $27.4 million in 2000 and primarily were for two office buildings under construction
to be occupied by Princess Cruises and the Valencia Entertainment Center expansion. The office buildings were sold in December 2000, however, the Company is obligated to complete construction
of the buildings which is anticipated in the first quarter of 2001.

Development
of income-producing properties in 1999 primarily were related to Montecito apartments and various retail/office/entertainment projects in Valencia Town Center and
expenditures totaled $68.0 million.

18

---

In 1998, expenditures for development of income-producing properties in Valencia totaled $101.8 million. Major expenditures included $27.5 million for the Hyatt Valencia
Hotel and Santa Clarita Conference Center; $32.8 million for various retail/office/entertainment projects in Valencia Town Center including parking structures; $11.6 million for a
six-story office building occupied by Princess Cruises; and $6.6 million for the 210-unit Montecito apartment complex in Valencia Town Center. Also included was
$14.1 million for Valencia Marketplace which was sold in June 1998. The Company was
obligated to complete the construction and leasing of the center and the sale was recognized under percentage of completion accounting.

Purchase
of property and equipment expenditures in 2000, 1999 and 1998 primarily were for water utility construction.

Financing Activities

In 2000, distributions totaling $21.2 million were paid which consisted of four quarterly distributions of $.10 per unit and a $.35 per unit special
distribution. Distributions totaling $19.7 million were paid in 1999 and consisted of four quarterly distributions of $.10 per unit and a $.22 per unit special distribution. In 1998,
distributions totaling $17.8 million were paid consisting of four quarterly distributions of $.10 per unit and a special distribution of $.12 per unit. The Company's policy is to provide
sufficient distributions, including special distributions, to pay the taxes associated with Company earnings. The declaration of distributions, and the amount declared, are determined by the Board of
Directors on a quarterly basis taking into account the Company's earnings, financial condition and prospects.

A
decrease in mortgage and other debt of $87.2 million in 2000 included an $85 million reduction in lines of credit and the remainder for scheduled debt service on
fixed-rate, secured debt. As planned, the Company utilized available debt capacity during the year to fund the repurchase program until major asset and land sales were completed. Mortgages
totaling $49.0 million were assumed by the buyer of the apartment complexes in December 2000 and a $12.0 million note payable was cancelled upon divestiture of the Company's
interest in the City Ranch joint-venture with Kaufman and Broad of Southern California, Inc. in September 2000.

In
1999, increases in mortgage and other debt included a $44.7 million portfolio mortgage financing which was replaced with three financings totaling $50 million secured
by three apartment complexes and a new $25 million financing secured by two neighborhood shopping centers. Also, in August 1999, a $12.0 million note was recorded in connection
with the Company's acquisition of a 50.1% interest in City Ranch, a joint-venture project with Kaufman and Broad of Southern California, Inc. Borrowings outstanding against lines of credit
increased by $36.2 million to $99.4 million at December 31, 1999. In addition to scheduled debt service on fixed rate debt, decreases in mortgage and other debt in 1999 included
the refinanced portfolio mortgage and repayment of a $12 million unsecured financing.

Upon
the sale of Valencia Marketplace in June 1998, for $111 million cash, the Company paid off all outstanding debt against lines of credit and a revolving mortgage
facility. At December 31, 1998,
$23.2 million was outstanding against lines of credit and $40 million against the revolving mortgage facility. In 1998, a $6 million scheduled principal payment was paid on an
unsecured financing and a $3.3 million commercial mortgage was paid in full. Also, a construction financing for a homebuilding joint venture was paid upon completion of the project in 1998.

Unit Repurchases

In 2000, 1999 and 1998, the Company repurchased 3,175,550 partnership units for $86.5 million, 3,111,278 partnership units for $75.8 million and
1,909,613 partnership units for $49.0 million, respectively. For the three year period ended 2000, the Company has repurchased approximately 24% of its total partnership units outstanding at
the end of 1997.

19

---

New Accounting Pronouncements

The Company has reviewed the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, effective October 1, 2000, as amended by SAB 101A and SAB 101B. This pronouncement did
not have a material impact on the Company's financial position or results of operations.

The
Company has reviewed the provisions of Statement of Financial Accounting Standards No. 133 (SFAS No. 133),Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS Nos. 137 and 138. This pronouncement is not expected to have a material impact on the Company's financial position or
results of operations.

INFLATION, RISKS AND RELATED FACTORS AFFECTING FORWARD-LOOKING INFORMATION

Except for historical matters, the matters discussed in this report are forward-looking statements that involve risks and uncertainties. We have tried,
wherever practical, to identify these forward-looking statements by using words like "anticipate," believe," "estimate," "project," "expect," and similar expressions. Forward-looking statements
include, but are not limited to, statements about plans; opportunities; negotiations; market and economic conditions; development, construction, and sales activities; and availability of financing.

We
caution you not to place undue reliance on these forward-looking statements, which reflect our current beliefs and are based on information currently available to us. We do not
undertake any obligation to publicly revise these forward-looking statements to reflect future events or changes in circumstances.

These
forward-looking statements are subject to risks and uncertainties that could cause our actual results, performance, or achievements to differ from those expressed in or implied
by these statements. In particular, among the factors that could cause actual results to differ materially are:

Sales of Real Estate:The majority of the Company's revenues is generated by its real estate operations. The ability of
the Company to consummate sales of real estate is dependent on various factors including, but not limited to, availability of financing to the buyer, agreement with buyers on definitive terms
regulatory and legal issues and successful completion of the buyer's due diligence. The fact that a real estate transaction has entered escrow does not necessarily mean that the transaction ultimately
will close. Therefore, the timing of sales may differ from that anticipated by the Company. The inability to close sales as anticipated could adversely impact the recognition of revenue in any
specific period.

Economic Conditions:Real estate development is significantly impacted by general and local economic conditions which
are beyond the control of the Company. The Company's real estate operations are concentrated in Southern California. The regional economy is profoundly affected by the entertainment, technology,
defense and certain other segments. Consequently, all sectors of real estate development for the Company tend to be cyclical. While the economy of Southern California continues to be strong, there can
be no assurances that present trends will continue.

Inflation:The Company believes it is well positioned against the effects of inflation. Historically, during periods of
inflation, the Company has been able to increase selling prices of properties to offset rising costs of land development and construction. Recently, land values have been increasing at a faster rate
than costs. However, there are no assurances that this trend will continue. A portion of the commercial income portfolio is protected from inflation since percentage rent clauses and Consumer Price
Index increases in the Company's leases tend to adjust rental receipts for inflation, while the underlying value of commercial properties has tended to rise over the long term.

20

---

Interest Rates and Financing:Fluctuations in interest rates and the availability of financing have an important impact
on the Company's performance. Sales of the Company's properties could be adversely
impacted by the inability of buyers to obtain adequate financing. Further, the Company's real estate development activities are dependent on the availability of adequate sources of capital. Certain of
the Company's credit facilities bear interest at variable rates and would be negatively impacted by increasing interest rates.

Competition:The sale and leasing of residential, industrial and commercial real estate is highly competitive, with
competition coming from numerous and varied sources. The degree of competition is affected by such factors as the supply of real estate available which is comparable to that sold and leased by the
Company and the level of demand for such real estate. Valencia experienced a slight decrease in its new home sale market share at both the local and the county level in 2000, due to the temporary
decline in new home inventory. There is no assurance that this new home sales decline will reverse in the future even with an increasing supply of new homes in Valencia given competing projects in the
region. This could impact the Company's ability to sell residential land.

Geographic Concentration:The Company's real estate development activities are focused on the 19,400 acres that it owns
in Los Angeles County. The Company's entire commercial income portfolio is located in the Valencia area. Therefore, any factors affecting that concentrated area, such as changes in the housing market,
economic conditions and environmental factors, which cannot be predicted with certainty, could affect future results.

Exposure to Natural Occurrences:The Company's real estate development and sales activities may be affected by natural
occurrences such as earthquakes and weather conditions that may impact progress of infrastructure construction and land development, and the pace of sales.

Government Regulation and Entitlement Risks:In developing its projects, the Company must obtain the approval of
numerous governmental authorities regulating such matters as permitted land uses, density and traffic, and the provision of utility services such as electricity, water and waste disposal. In addition,
the Company is subject to a variety of federal, state and local laws and regulations concerning protection of health and the environment. This government regulation affects the types of projects which
can be pursued by the Company and increases the cost of development and ownership. The Company devotes substantial financial and managerial resources to comply with these requirements. To varying
degrees, certain permits and approvals will be required to complete the developments currently being undertaken or planned by the Company. Furthermore, the timing, cost and scope of planned projects
may be subject to legal challenges, particularly large projects with regional impacts. (See following "Litigation" discussion.) In addition, the continued effectiveness of permits already granted is
subject to factors such as changes in policies, rules and regulations and their interpretation and application. The ability to obtain necessary approvals and permits for its projects can be beyond the
Company's control and could restrict or prevent development of otherwise desirable new properties. The Company's results of operations in any period will be affected by the amount of entitled
properties the Company has in inventory.

Litigation:The land use approval processes the Company must follow to ultimately develop its projects have become
increasingly complex. Moreover, the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge the proposed plans and approvals. As a
result, the prospect of, and actual, third-party challenges to planned real estate developments have provided additional uncertainties in real estate development planning and entitlements. Third-party
challenges in the form of litigation will, by its nature, adversely affect the length of time required to obtain the necessary approvals. In addition, adverse decisions arising from any litigation
increase the costs and may adversely affect the design, scope, plans and profitability of a project.

21

---

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk primarily due to fluctuations in interest rates. The Company utilizes both fixed rate and variable rate debt. At
December 31, 2000, the Company had $14.0 million of variable debt with an average interest rate of 7.94% and $60.6 million of fixed rate debt with interest rates ranging from
7.33% to 8.45%.

The
table below presents principal cash flows and related weighted average interest rates of the Company's long-term fixed rate and variable rate debt at
December 31, 2000 by expected maturity dates:

|Dollars in thousands    |                                | 2001 |   | 2002   |  | 2003 |       | 2004 |   | 2005   |  | Thereafter |       | Total |   | Fair
Value
|----------------------- | ------------------------------ | ---- | - | ------ |  | ---- | ----- | ---- | - | ------ |  | ---------- | ----- | ----- | - | ----------
|Mortgage and Other Debt |                                |      |   |        |  |      |       |      |   |        |  |            |       |       |   |           
|                        | Fixed Rate Debt                |      | $ | 1,362  |  | $    | 1,481 |      | $ | 10,970 |  | $          | 1,509 |       | $ | 1,657     
|                        | Weighted Average Interest Rate |      |   | 7.57   |  |      | 7.55  |      |   | 8.32   |  |            | 7.35  |       |   | 7.37      
|                        | Variable Rate Debt (1)         |      | $ | 12,000 |  | $    | 2,000 |      |   |        |  |            |       |       |   |           
|                        | Weighted Average Interest Rate |      |   | 7.94   |  |      | 7.97  |      |   |        |  |            |       |       |   |           

---

There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not
quantifiable or predictable because of the variability of future interest
rates and the Company's future financing requirements. The Company manages its interest rate risk by maintaining a conservative ratio of fixed rate, long-term debt to total debt in order
to maintain variable rate exposure at an acceptable level and by taking advantage of favorable market conditions for long-term debt. In addition, the Company's guideline for total debt is
not to exceed 60% of the appraised value of the income portfolio.

22

---

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS INCLUDED IN ITEM 8:

Report of Independent AuditorsConsolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998Consolidated Balance Sheets at December 31, 2000 and 1999Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998Consolidated Statements of Changes in Partners' Capital for the years ended December 31, 2000, 1999 and 1998Notes to Consolidated Financial Statements


23

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Report of Independent Auditors

The Board of Directors of Newhall Management Corporation and Partners of The Newhall
Land and Farming Company:

We
have audited the accompanying consolidated balance sheets of The Newhall Land and Farming Company and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in partners' capital, and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Newhall Land and Farming Company and
subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2000, in conformity with accounting principles generally accepted in the United States of America.



Los
Angeles, California
January 16, 2001

24

---

Consolidated Statements of Income

|                                      |             | Years ended December 31,           |                            
|------------------------------------- | ----------- | ---------------------------------- | ---------------------------
|
|Revenues                              |             |                                    |                            
|                                      | Real estate |                                    |                            
|                                      |             | Residential home and land sales    |                            
|                                      |             | Industrial and commercial sales    |                            
|                                      |             | Commercial operations              |                            
|                                      |             |                                    | Income-producing properties
|                                      |             |                                    | Valencia Water Company     
|                                      | Agriculture |                                    |                            
|                                      |             | Operations                         |                            
|                                      |             | Ranch sales                        |                            
|                                      |             |                                    |                            
|Total Revenues                        |             |                                    | 400,968                    
|                                      |             |                                    |                            
|Costs and Operating Expenses          |             |                                    |                            
|                                      | Real estate |                                    |                            
|                                      |             | Residential home and land sales    |                            
|                                      |             | Industrial and commercial sales    |                            
|                                      |             | Community development              |                            
|                                      |             | Commercial operations              |                            
|                                      |             |                                    | Income-producing properties
|                                      |             |                                    | Valencia Water Company     
|                                      | Agriculture |                                    |                            
|                                      |             | Operations                         |                            
|                                      |             | Ranch sales                        |                            
|                                      |             |                                    |                            
|Total Costs and Operating Expenses    |             |                                    | 282,995                    
|                                      |             |                                    |                            
|Operating Income                      |             |                                    | 117,973                    
|                                      |             | General and administrative expense |                            
|                                      |             | Interest and other expense, net    |                            
|                                      |             |                                    |                            
|Net Income                            |             | $                                  | 85,396                     
|                                      |             |                                    |                            
|Net Income Per Unit                   |             | $                                  | 3.09                       
|                                      |             |                                    |                            
|Net Income Per UnitAssuming Dilution |             | $                                  | 3.05                       
|                                      |             |                                    |                            

See
notes to consolidated financial statements

25

---

Consolidated Balance Sheets

|                                  |                                                                     | December 31,                                                                                                                                                                                          
|--------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|Assets                            |                                                                     |                                                                                                                                                                                                       
|                                  | Cash and cash equivalents                                           |                                                                                                                                                                                                       
|                                  | Accounts and notes receivable                                       |                                                                                                                                                                                                       
|                                  | Land under development                                              |                                                                                                                                                                                                       
|                                  | Land held for future development                                    |                                                                                                                                                                                                       
|                                  | Income-producing properties held for sale, net                      |                                                                                                                                                                                                       
|                                  | Income-producing properties, net                                    |                                                                                                                                                                                                       
|                                  | Property and equipment, net                                         |                                                                                                                                                                                                       
|                                  | Investment in joint ventures                                        |                                                                                                                                                                                                       
|                                  | Other assets and deferred charges                                   |                                                                                                                                                                                                       
|                                  |                                                                     |                                                                                                                                                                                                       
|                                  |                                                                     | $                                                                                                                                                                                                     
|                                  |                                                                     |                                                                                                                                                                                                       
|Liabilities and Partners' Capital |                                                                     |                                                                                                                                                                                                       
|                                  | Accounts payable                                                    |                                                                                                                                                                                                       
|                                  | Accrued expenses                                                    |                                                                                                                                                                                                       
|                                  | Deferred revenues                                                   |                                                                                                                                                                                                       
|                                  | Mortgage and other debt                                             |                                                                                                                                                                                                       
|                                  | Advances and contributions from developers for utility construction |                                                                                                                                                                                                       
|                                  | Other liabilities                                                   |                                                                                                                                                                                                       
|                                  |                                                                     |                                                                                                                                                                                                       
|                                  |                                                                     |                                                                                                                                                                                                       
|                                  | Commitments and contingencies (Note 9)                              |                                                                                                                                                                                                       
|                                  | Partners' capital                                                   |                                                                                                                                                                                                       
|                                  |                                                                     | 26,590 units outstanding, excluding 10,182 units in treasury (cost$242,098) at December 31, 2000 and 29,668 units outstanding, excluding 7,104 units in treasury (cost$157,394) at December 31,
1999
|                                  |                                                                     |                                                                                                                                                                                                       
|                                  |                                                                     | $                                                                                                                                                                                                     
|                                  |                                                                     |                                                                                                                                                                                                       

See
notes to consolidated financial statements

26

---

Consolidated Statements of Cash Flows

|                                                                      |                                                                                            | Years ended December 31,                                             |      
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------------------------------------- | -----
|
|Cash Flows from Operating Activities:                                 |                                                                                            |                                                                      |      
|                                                                      | Net income                                                                                 |                                                                      | $    
|                                                                      | Adjustments to reconcile net income to net cash provided by operating activities:          |                                                                      |      
|                                                                      |                                                                                            | Depreciation and amortization                                        |      
|                                                                      |                                                                                            | Loss on sale of office buildings                                     |      
|                                                                      |                                                                                            | Loss on divesture of joint venture                                   |      
|                                                                      |                                                                                            | Write-down of note receivable                                        |      
|                                                                      |                                                                                            | (Increase) decrease in land under development                        |      
|                                                                      |                                                                                            | Decrease (increase) in accounts and notes receivable                 |      
|                                                                      |                                                                                            | Increase in accounts payable, accrued expenses and deferred revenues |      
|                                                                      |                                                                                            | Cost of property sold                                                |      
|                                                                      |                                                                                            | Other adjustments, net                                               |      
|                                                                      |                                                                                            |                                                                      |      
|                                                                      | Net cash provided by operating activities                                                  |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      
|Cash Flows from Investing Activities:                                 |                                                                                            |                                                                      |      
|                                                                      | Development of income-producing properties                                                 |                                                                      |      
|                                                                      | Purchase of property and equipment                                                         |                                                                      |      
|                                                                      | (Investment in) distribution from joint ventures                                           |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      
|                                                                      | Net cash used in investing activities                                                      |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      
|Cash Flows from Financing Activities:                                 |                                                                                            |                                                                      |      
|                                                                      | Distributions paid                                                                         |                                                                      |      
|                                                                      | Borrowings on mortgage and other debt                                                      |                                                                      |      
|                                                                      | Repayment of mortgage and other debt                                                       |                                                                      |      
|                                                                      | Increase (decrease) in advances and contributions from developers for utility construction |                                                                      |      
|                                                                      | Purchase of partnership units                                                              |                                                                      |      
|                                                                      | Other, net                                                                                 |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      
|                                                                      | Net cash used in financing activities                                                      |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      
|Net Increase (Decrease) in Cash and Cash Equivalents                  |                                                                                            |                                                                      | 2,093
|Cash and Cash Equivalents, Beginning of Year                          |                                                                                            |                                                                      | 1,624
|                                                                      |                                                                                            |                                                                      |      
|Cash and Cash Equivalents, End of Year                                |                                                                                            | $                                                                    | 3,717
|                                                                      |                                                                                            |                                                                      |      
|Supplemental Disclosure of Cash Flow Information:                     |                                                                                            |                                                                      |      
|                                                                      | Interest paid (net of amount capitalized)                                                  |                                                                      | $    
|                                                                      |                                                                                            |                                                                      |      
|Supplemental Schedule of Non-Cash Investing and Financing Activities: |                                                                                            |                                                                      |      
|                                                                      | Divesture of joint venture                                                                 |                                                                      | $    
|                                                                      | Note payable in connection with investment in joint venture                                |                                                                      |      
|                                                                      | Assumption of debt on sale of real estate                                                  |                                                                      |      
|                                                                      | Payable for unit repurchases                                                               |                                                                      |      
|                                                                      |                                                                                            |                                                                      |      

See notes to consolidated financial statements

27

---

Consolidated Statements of Changes in Partners' Capital

|In thousands                 |                               | Number
of Units |        | Partners'
Capital |        
|---------------------------- | ----------------------------- | --------------- | ------ | ----------------- | -------
|Balance at December 31, 1997 |                               | 34,527          |        | $                 | 145,277
|                             | Net income                    |                 |       |                   |        
|                             | Distributions                 |                 |       |                   |        
|                             | Purchase of partnership units |                 | (1,910 | )                 |        
|                             | Other activity, net           |                 | 59     |                   |        
|                             |                               |                 |        |                   |        
|Balance at December 31, 1998 |                               | 32,676          |        |                   | 143,813
|                             |                               |                 |        |                   |        
|                             | Net income                    |                 |       |                   |        
|                             | Distributions                 |                 |       |                   |        
|                             | Purchase of partnership units |                 | (3,111 | )                 |        
|                             | Other activity, net           |                 | 103    |                   |        
|                             |                               |                 |        |                   |        
|Balance at December 31, 1999 |                               | 29,668          |        |                   | 139,725
|                             |                               |                 |        |                   |        
|                             | Net income                    |                 |       |                   |        
|                             | Distributions                 |                 |       |                   |        
|                             | Purchase of partnership units |                 | (3,176 | )                 |        
|                             | Other activity, net           |                 | 98     |                   |        
|                             |                               |                 |        |                   |        
|Balance at December 31, 2000 |                               | 26,590          |        | $                 | 119,204
|                             |                               |                 |        |                   |        

See
notes to consolidated financial statements

28

---

Notes to Consolidated Financial Statements
December 31, 2000

Note 1. Organization

The Newhall Land and Farming Company (a California Limited Partnership) the "Company" or the "Partnership"), is organized as a publicly traded limited
partnership. The general partners of the Company are Newhall Management Limited Partnership, the Managing General Partner and Newhall General Partnership. Two executive officers and the Managing
General Partner are the general partners of Newhall General Partnership.

Note 2. Business Segments and Summary of Significant Accounting Policies

Nature of Operations and Business Segments

The Company operates in two lines of business: real estate and agriculture. The business segments of the Company's real estate operations consist of
residential; industrial and commercial; development and operation of income-producing properties; Valencia Water Company, a public water utility; and community development. Agriculture consists
primarily of farming and energy operations and sales of non-strategic farm land.

Information
as to identifiable assets, capital expenditures and depreciation for these segments is summarized and reconciled in Note 10. Significant accounting policies related
to the Company's segments are:

Residential

Land Sales

Sales are recorded at the time escrow is closed provided that: (1) there has been a minimum down payment of 20% or 25% depending upon the type and
timeframe for development of property sold, (2) the buyer has met adequate continuing investment criteria and (3) the Company, as the seller, has no material continuing involvement in
the property. Where the Company has an obligation to complete certain future development, revenue is deferred in the ratio of the cost of development to be completed to the total cost of the property
being sold under percentage of completion accounting. Land under development includes land, direct and allocated construction costs for land and infrastructure development plus project amenities. As
land is sold, estimated total costs at completion for the specific project are charged ratably to cost of sales.

Home Sales

The Company's income from home sales comes from sales of completed single- and multi-family homes to homebuyers through joint ventures. The Company records
revenues and its portion of income as the venture closes escrow on sales to homebuyers. In 2000, the Company did not have any homebuilding joint ventures.

Industrial and Commercial

Industrial and commercial land sales and respective land under development inventories are accounted for under the same criteria as described in the
Residential Land Sales section. The industrial and commercial division is also responsible for the development of the Company's income-producing properties. Upon completion of construction, the
property is reported with Income-Producing Properties.

29

---

Community Development

Preliminary planning and entitlement costs are charged to expense when incurred. After the earlier of specific plan or tentative map approval, certain
development costs are capitalized to the identified project.

Income-Producing Properties

The Company owns and leases, commercial buildings, shopping centers and land to tenants. Rents are typically based on the greater of a percentage of the
lessee's gross revenues or a minimum rent. Most lease agreements require that the lessee pay all taxes, maintenance, insurance and certain other operating expenses applicable to leased properties.

Valencia Water Company

Valencia Water Company (a California corporation), a wholly-owned subsidiary, is a public water utility subject to regulation by the California Public
Utilities Commission. Water utility revenues include amounts billed monthly to customers and an estimated amount of unbilled revenues. Income taxes are included in operating expenses. Deferred income
taxes are reflected in the consolidated financial statements.

Agriculture

Revenue is recognized as crops are delivered to farm cooperatives and other purchasers. At the time of delivery, the Company estimates the proceeds to be
received from the cooperatives and records these amounts as unbilled receivables. Costs incurred during the development stage of orchard and vineyard crops (ranging from 3 to 10 years) are
capitalized and amortized over the productive life of the trees or vines. Farming inventories include crops in process and harvested crops and are valued at the lower of cost or market, determined on
the first-in, first-out method.

Agricultural
ranch sales are accounted for under the same criteria as described for land sales in the Residential Land Sales section.

Central Administration

Central Administration includes the Company's corporate functions including executive offices, treasury, tax, employee relations, corporate accounting,
finance, information systems, headquarters facilities, secretary/legal, investor relations, market research, internal audit and in prior years, land acquisition. Except for certain costs relating to
the headquarters facilities and specific services billed to Valencia Water Company, expenses for these functions are expensed as general and administrative expenses and are not allocated to the
Company's operating business segments.

Other general accounting policies are:

Basis of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions are eliminated. Certain reclassifications have been made to prior years' amounts to conform to the current year presentation.

Joint
Ventures: The equity method is used to account for an investment a joint venture with Hilton Inns, Inc. which is not controlled by the Company. A joint venture with
Kaufman and Broad of Southern California, Inc. was divested in 2000 and a $5.2 million loss was recorded within Residential Home and Land Sales in connection with the divestiture and
expenses incurred prior to the divestiture.

30

---

Cash and Cash Equivalents: The Company considers all highly liquid investments with original maturity dates of 90 days or less to be cash equivalents.

Income-Producing
Properties; Property and Equipment: Property is stated at cost, less proceeds from sales of easements and rights of way. Depreciation is provided on the
straight-line basis over the estimated useful lives of the various assets without regard to salvage value. Lives used for calculating depreciation are as follows: buildings25
to 40 years; equipment3 to 10 years; water supply systems, orchards and other5 to 75 years.

Impairment
of Assets: Long-lived assets and assets held for sale are reviewed for impairment whenever events or changes in circumstances indicate that an impairment may
have occurred. In 2000, an impairment loss of $4.9 million was recorded within Industrial and Commercial Sales on four office buildings held for sale which subsequently were sold. No impairment
loss was recorded in 1999 or 1998.

There
is no depreciation expense recorded on assets held for sale. Income-Producing Properties Held for Sale avoided depreciation expense of $2.5 million for 2000. Revenues
from operations of Income-Producing Properties Held for Sale continue to be reported with Commercial OperationsIncome-Producing Properties in the accompanying consolidated statements of
income. For 2000, revenues from such properties totaled $6.8 million.

Environmental
Matters: Environmental clean-up costs are charged to expense or established reserves when incurred and are not capitalized. Reserves are recorded for
environmental clean-up costs when remediation efforts are probable and can be reasonably estimated. To date, environmental clean-up costs have not been material.

Management's
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and
assumptions. These affect the reported amounts of assets and liabilities, the disclosure of any contingent assets or liabilities and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from the estimates made.

Income
Taxes: The partnership is not a taxable entity; accordingly, no provision for income taxes has been made in the consolidated financial statements. Partners are taxed on their
allocable share of the Company's earnings which is reportable on their income tax returns.

The
Revenue Act of 1987 contained provisions which, in some cases, taxes publicly traded partnerships as corporations. Beginning in 1998, 90% of the Partnership's gross income, as
defined, must be derived from rent, sales of real estate, interest, and income from other "natural resources" as provided in Internal Revenue Section 7704. The Partnership's 2000, 1999 and 1998
gross income qualifies under this provision and the Company expects to continue to be taxed as a partnership for the foreseeable future.

31

---

Amounts per Partnership Unit: The following is a reconciliation of the numerators and denominators of the basic and diluted income net per unit computations:

|(in 000's except per unit)           |                                     | Income
(numerator) |        | Units
(denominator) |        | Per Unit |  
|------------------------------------ | ----------------------------------- | ------------------ | ------ | ------------------- | ------ | -------- | -
|For the year ended December 31, 2000 |                                     |                    |        |                     |        |          |  
|Net income per unit                  |                                     | $                  | 85,396 |                     | 27,658 |          | $
|                                     | Net income available to unitholders |                    |        |                     |        |          |  
|Effect of dilutive securities        |                                     |                    |       |                     |        |          |  
|                                     | Unit options                        |                    |        |                     |        | 311      |  
|                                     |                                     |                    |        |                     |        |          |  
|Net income per unitdiluted          |                                     | $                  | 85,396 |                     | 27,969 |          | $
|                                     |                                     |                    |        |                     |        |          |  
|For the year ended December 31, 1999 |                                     |                    |        |                     |        |          |  
|Net income per unit                  |                                     |                    |        |                     |        |          |  
|                                     | Net income available to unitholders |                    | $      | 90,392              |        | 31,388   |  
|Effect of dilutive securities        |                                     |                    |        |                     |        |          |  
|                                     | Unit options                        |                    |        |                    |        | 280      |  
|                                     |                                     |                    |        |                     |        |          |  
|Net income per unitdiluted          |                                     | $                  | 90,392 |                     | 31,668 |          | $
|                                     |                                     |                    |        |                     |        |          |  
|For the year ended December 31, 1998 |                                     |                    |        |                     |        |          |  
|Net income per unit                  |                                     |                    |        |                     |        |          |  
|                                     | Net income available to unitholders |                    | $      | 64,080              |        | 33,986   |  
|Effect of dilutive securities        |                                     |                    |        |                     |        |          |  
|                                     | Unit options                        |                    |        |                    |        | 390      |  
|                                     |                                     |                    |        |                     |        |          |  
|Net income per unitdiluted          |                                     | $                  | 64,080 |                     | 34,376 |          | $
|                                     |                                     |                    |        |                     |        |          |  

Note 3. Federal Income Tax Results of the Partnership

The
Partnership has elected under Section 754 of the Internal Revenue Code to adjust the basis of property upon the purchase of units by investors. For investors who purchase
units, this election provides for the reflection of the investor's price of the units in the tax basis of the Partnership's properties. The excess of the purchase price over the monetary assets and
liabilities is allocated to real estate assets and results in a new basis which is used to calculate operating expenses for tax purposes.

At
December 31, 2000, the net tax basis of the Company's assets and liabilities exceeded the Company's consolidated financial statement basis of its assets and liabilities by
$225,654,000. This excess amount does not reflect the step-up in asset basis allocated to individual partners upon purchase of units subsequent to the formation of the Partnership.

The
Partnership's tax returns for the past four years are subject to examination by federal and state taxing authorities. Because many types of transactions are susceptible to varying
interpretations under federal and state income tax laws and regulations, the tax basis amounts may be subject to change at a later date upon final determination by the taxing authorities.

32

---

Note 4. Disclosures About Fair Value of Financial Instruments

The estimated fair values of certain of the Company's financial instruments are as follows:

|                                                  |  | December 31,
|------------------------------------------------- |  | ------------
|
|
|Notes receivable from land sales                  |  | $           
|Mortgage and other debt                           |  |             
|Advances from developers for utility construction |  |             
|                                                  |  |             

The
following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash
and Cash Equivalents; Accounts Receivable and Payable: The carrying amounts approximate the fair values of these instruments due to their short-term nature.

Notes
Receivable from Land Sales: The carrying amounts of notes receivable approximate fair value. Generally, these notes are interest-bearing with maturities of less than one year
from close of escrow. If applicable, the carrying amount reflects imputed interest to reduce the note receivable to its fair value.

Mortgage
and Other Debt: The carrying amount of the Company's debt approximates its fair value based on current interest rates available to the Company for comparable debt. See
Note 7 for interest rates on outstanding debt.

Advances
from Developers for Utility Construction: Generally, advances are refundable to the developer without interest at the rate of 2.5% per year over 40 years. The fair
value is estimated as the discounted value (12%) of the future cash flows to be paid on the advances.

33

---

Note 5. Composition of Certain Financial Statement Captions

|                                          |                                                                                          | December 31,                               |        
|----------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------ | -------
|
|Accounts and notes receivable             |                                                                                          |                                            |        
|                                          | Trade receivables, less allowance for doubtful accounts of $1,297 and $863, respectively |                                            | $      
|                                          | Notes receivable from land sales                                                         |                                            |        
|                                          | Unbilled accounts receivable                                                             |                                            |        
|                                          |                                                                                          | Agriculture                                |        
|                                          |                                                                                          | Other                                      |        
|                                          | Other                                                                                    |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          | $                                          | 17,154 
|                                          |                                                                                          |                                            |        
|Land under development                    |                                                                                          |                                            |        
|                                          | Valencia                                                                                 |                                            |        
|                                          |                                                                                          | Residential development                    |        
|                                          |                                                                                          | Industrial and commercial land development |        
|                                          | Agriculture                                                                              |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          | $                                          | 63,155 
|                                          |                                                                                          |                                            |        
|Income-producing properties held for sale |                                                                                          |                                            |        
|                                          | Retail                                                                                   |                                            | $      
|                                          | Office                                                                                   |                                            |        
|                                          | Other                                                                                    |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          |                                            | 15,814 
|                                          | Accumulated depreciation                                                                 |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          | $                                          | 12,720 
|                                          |                                                                                          |                                            |        
|Income-producing properties               |                                                                                          |                                            |        
|                                          | Land                                                                                     |                                            | $      
|                                          | Buildings                                                                                |                                            |        
|                                          | Other                                                                                    |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          |                                            | 152,206
|                                          | Accumulated depreciation                                                                 |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          |                                            | 122,005
|                                          | Properties under development                                                             |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          | $                                          | 147,785
|                                          |                                                                                          |                                            |        
|Property and equipment                    |                                                                                          |                                            |        
|                                          | Land                                                                                     |                                            | $      
|                                          | Buildings                                                                                |                                            |        
|                                          | Equipment                                                                                |                                            |        
|                                          | Water supply systems, orchards and other                                                 |                                            |        
|                                          | Construction in progress                                                                 |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          |                                            | 106,368
|                                          | Accumulated depreciation                                                                 |                                            |        
|                                          |                                                                                          |                                            |        
|                                          |                                                                                          | $                                          | 67,631 
|                                          |                                                                                          |                                            |        

34

---

|                                  |                                                       | December 31,
|--------------------------------- | ----------------------------------------------------- | ------------
|
|Other assets and deferred charges |                                                       |             
|                                  | Prepaid expenses                                      |             
|                                  | Unamortized loan fees                                 |             
|                                  | Deferred charges and assets of Valencia Water Company |             
|                                  | Other                                                 |             
|                                  |                                                       |             
|                                  |                                                       | $           
|                                  |                                                       |             
|Accrued expenses                  |                                                       |             
|                                  | Deferred compensation                                 |             
|                                  | Operating and other accruals                          |             
|                                  | Project accruals                                      |             
|                                  | Lease obligation, net                                 |             
|                                  | Other                                                 |             
|                                  |                                                       |             
|                                  |                                                       | $           
|                                  |                                                       |             
|Other liabilities                 |                                                       |             
|                                  | Warranty and other reserves                           |             
|                                  | Deferred taxes of Valencia Water Company              |             
|                                  | Other                                                 |             
|                                  |                                                       |             
|                                  |                                                       | $           
|                                  |                                                       |             

Note 6. Commercial Leases

As
of December 31, 2000, minimum lease payments to be received under non-cancelable operating leases and a lease obligation to be paid in conjunction with the sale
of four office buildings are as follows:

In thousands

Lease
Obligation

Lease
Receipts2001

$
1,597

$
16,7972002


1,645


16,0772003


1,694


13,2192004


1,745


12,4012005


1,797


10,196Thereafter


15,322


73,788$
23,800

$
142,478
*


---

35

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Note 7. Mortgage and Other Debt

|                                                  |  |          |    | December 31,
|------------------------------------------------- |  | -------- | -- | ------------
|
|
|Unsecured lines of credit                         |  | Variable |    | $           
|Prudential (shopping center loans)                |  | 7.44     | %  |             
|Prudential (ranch mortgage)                       |  | 8.45     | %  |             
|Pacific Life (Valencia Water Company)             |  | 8.00     | %  |             
|Wells Fargo (Valencia Town Center)                |  | 7.94     | %  |             
|Community facilities bonds (Valencia Town Center) |  | 7.33     | %* |             
|Kaufman and Broad (City Ranch)                    |  | 8.00     | %  |             
|FHLMC (apartment mortgages)                       |  | 6.51     | %* |             
|                                                  |  |          |    |             
|                                                  |  |          |    | $           
|                                                  |  |          |    |             

---

In
November 2000, the Company replaced its existing bank lines, totaling $159 million, with a $130 million three-year, unsecured line of credit from
Wells Fargo and Bank of America. The interest rate is LIBOR plus 1.25%-1.45% and the commitment fee is .25% per annum of the unused portion. In addition, the Company has a $2 million line of
credit with Valencia Bank & Trust on which the rate is LIBOR plus 1.35% and a $10 million line with Wells Fargo at LIBOR plus 1.25%-1.45%. Letters of credit outstanding against available
lines of credit totaled $21.2 million and $21.0 million, respectively, at December 31, 2000 and 1999.

In
September 1999, the Company completed two financings totaling $25 million with Prudential Insurance Company of America. Each loan is secured by a retail shopping
center and is due in seven years. Principal and interest are paid monthly and based on a 7.44% interest rate and 25-year amortization.

The
Prudential ranch mortgage is a non-recourse mortgage financing secured by the 14,000-acre New Columbia Ranch property. The terms of the note call for
interest payments on each May 1 and November 1 and annual principal payments of $240,000 until maturity on November 1, 2003.

Valencia
Water Company has an $11 million financing with Pacific Life secured by the utility's property and equipment. The terms of the financing call for
semi-annual interest payments with the principal payable in full at maturity on June 1, 2009. The loan is not guaranteed by the Company. Valencia Water Company also has a
$2 million line of credit with Wells Fargo which is not guaranteed by the Company.

In
November 2000, a $50 million revolving mortgage facility secured by Valencia Town Center replaced a $40 million facility. The new facility bears interest at
LIBOR plus 1.25% and matures in November 2001.

In
October 1992, tax-exempt community facilities bonds were issued to finance a portion of the costs of certain public infrastructure improvements located within or
in the vicinity of Valencia Town Center, the Company's regional shopping mall. The bonds will be repaid over 20 years from special taxes levied on the mall property.

In
August 1999, a $12.0 million note was recorded in connection with the Company's City Ranch joint venture with Kaufman and Broad of Southern California, Inc.
The Company divested its interests in the joint venture in September 2000 and the note was cancelled.

36

---

In March 1999, the Company replaced a $44.7 million portfolio mortgage secured by five commercial properties with three financings totaling $50 million secured by
three apartment complexes. The loans were assumed by the buyer upon sale of the apartment complexes in December 2000.

Annual
maturities of existing long-term debt are approximately (in thousands) $13,362 in 2001, $3,481 in 2002, $10,970 in 2003, $1,509 in 2004, $1,657 in 2005 and $43,578
thereafter. The unsecured lines of credit have no scheduled repayment terms.

Capitalized
Interest and Interest Income: During 2000, 1999, and 1998, total interest expense incurred amounted to (in thousands) $20,622, $13,910 and $8,067, net of $329, $1,563 and
$3,354, which was capitalized, respectively. Interest income from investments and notes receivable totaled (in thousands) $3,000 in 2000, $3,949 in 1999 and $1,451 in 1998.

Note 8. Employee Benefit Plans

Incentive Compensation Plan: Under the terms of the Company's Executive Incentive Plan, the Board of Directors may authorize incentive compensation awards to
key management personnel of up to 7% of income for 1999 and 2000 and 5% of income for 1998. The Board of Directors authorized awards of $4,728,000 (5.5%), $5,164,000 (5.7%) and $3,237,000 (5.0%) for
the years ended December 31, 2000, 1999 and 1998, respectively.

Unit
Compensation Plans: The Company has two unit-based compensation plans which are described below. The Company applies the provisions of APB Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, compensation expense is only recognized for market price fluctuations in connection with option appreciation rights under the unit
option plan. Had compensation costs been determined consistent with SFAS No. 123, the Company's net income and net income per unit would have been reduced to the pro forma amounts indicated on
the following page:

|                |                               | Years ended December 31,
|--------------- | ----------------------------- | ------------------------
|
|Net Income      |                               |                         
|                | As reported                   |                         
|                | Pro forma                     |                         
|Income Per Unit |                               |                         
|                | As reportedassuming dilution |                         
|                | Pro forma                     |                         
|                |                               |                         

Unit
Option Plan: In January 1995, the Board of Directors approved the 1995 Option/Award Plan, which superseded the Option, Appreciation Rights and Restricted Units Plan. Under
the terms of the Plan, an additional 600,000 units may be granted as options, restricted units, unit rights or appreciation rights to key employees. In November 1997, the Plan was amended to
increase the number of units which may be granted by 3,050,000 units.

Options,
restricted units or appreciation rights may not be granted at a price below the market price on date of grant. Non-qualified options and appreciation rights are
exercisable 25% after the end of each of the first four years and terminate in ten years. The following non-qualified, market price options, all without appreciation rights, were granted:
2000316,707; 1999270,784; 1998215,419. A recovery of $400,000 was recorded in 2000 and no expense or recovery was recorded in 1999 or 1998 for market price
fluctuations in connection with option appreciation rights granted prior to 1992. Restricted unit rights granted as part of the Company's Management Unit Ownership Program vest 20% at the end of each
of the first five years. The following restricted unit rights were granted: 20006,205; 19994,342; 19982,936.

37

---

In November 1997, the Board of Directors approved a premium price option program for key executives tied to the performance of the Company's partnership units. Options totaling
2.45 million units were granted to key executives. The number of options granted was larger than the Company's typical market-price option program due to the increased risks associated with the
premium price and forfeiture provisions and the fact that it was in lieu of market price options for the executives over the three-year period ended November 2000. Under the terms
of the program, participants were granted options in two tranches, each of which had a five-year option life and was exercisable in three years but was subject to forfeiture if certain
performance criteria were not met. The second tranche was cancelled in November 2000 because price objectives were not met. At December 31, 2000, 891,200 units from the first tranche of
the 1997 grant with an exercise price of $31.30, were outstanding. In November 2000, a total of 490,000 premium price options with an exercise price of $28.00 were granted to key executives.

The
per unit weighted-average fair value of non-qualified, market price options granted in 2000, 1999 and 1998 was $9.35, $8.12 and $10.02, respectively, on the date of
grant using the Black-Scholes option pricing model with the following weighted-average assumptions: 2000distribution yield of 2.85%, expected volatility of 29.5%, risk-free
interest rate of 6.06% and expected life of 10 years. 1999distribution yield of 3.0%, expected volatility of 29.7%, risk-free interest rate of 6.0% and expected life of
10 years; 1998distribution yield of 2.8%, expected volatility 29.4%, risk-free interest rate of 5.5% and an expected life of 10 years.

The
per unit weighted-average fair value of premium price options granted in 1997 was $3.53 for the first tranche and $3.82 for options granted in 2000 using the Black-Scholes option
pricing model with the following weighted-average assumptions: 1997 grantdistribution yield of 1.6%, expected volatility of 21.0%, risk-free interest rate of 6.4% expected
life of five years; 2000 grantdistribution yield of 2.4% expected volatility of 23.3% risk-free interest rate of 6.1%, expected life of five years.

38

---

At December 31, 2000, 1,132,201 units were available for future grants. A summary of the status of the Company's Option/Award Plan is presented below:

|                                 |           | Units     |            | Weighted Average
Exercise Price
|-------------------------------- | --------- | --------- | ---------- | -------------------------------
|Outstanding at December 31, 1997 |           | 3,739,683 |            | $                              
|                                 | Granted   |           | 218,355    |                                
|                                 | Exercised |           | (54,479    | )                              
|                                 | Cancelled |           | (27,507    | )                              
|                                 |           |           |            |                                
|Outstanding at December 31, 1998 |           | 3,876,052 |            |                                
|                                 | Granted   |           | 275,126    |                                
|                                 | Exercised |           | (76,087    | )                              
|                                 | Cancelled |           | (608,448   | )                              
|                                 |           |           |            |                                
|Outstanding at December 31, 1999 |           | 3,466,643 |            |                                
|                                 | Granted   |           | 812,912    |                                
|                                 | Exercised |           | (80,414    | )                              
|                                 | Cancelled |           | (1,225,853 | )                              
|                                 |           |           |            |                                
|Outstanding at December 31, 2000 |           | 2,973,288 |            | $                              
|                                 |           |           |            |                                

At
December 31, 2000 and 1999, the number of options exercisable was 1,863,610 and 950,340, respectively, and the weighted-average exercise price of those options was $24.70
and $18.70, respectively.

The
following summarizes information about outstanding options at December 31, 2000:

|Range of
Exercise Prices |  | Number
Outstanding* |  | Weighted-Average
Exercise Price |       | Weighted-Average
Remaining Life
|------------------------ |  | ------------------- |  | ------------------------------- | ----- | -------------------------------
|$13.00-$16.75            |  | 562,675             |  | $                               | 14.92 |                                
|$19.75-$26.94            |  | 840,685             |  | $                               | 24.15 |                                
|$28.00-$33.39            |  | 1,555,550           |  | $                               | 30.12 |                                

---

*Excludes 14,378 restricted units granted as part of the Company's Management Unit Ownership Program

The
following summarizes information about exercisable options at December 31, 2000:

|Range of
Exercise Prices |  | Number
Exercisable |  | Weighted-Average
Exercise Price |       | 
|------------------------ |  | ------------------ |  | ------------------------------- | ----- | 
|$13.00-$16.75            |  | 562,675            |  | $                               | 14.92 | 
|$19.75-$26.94            |  | 318,635            |  | $                               | 21.97 | 
|$28.00-$33.39            |  | 982,300            |  | $                               | 31.19 | 

Employee
Unit Purchase Plan: Under the terms of the Employee Unit Purchase Plan, employees may have up to 15% of their base salary withheld to purchase the Company's partnership
units. The purchase price is a specified percentage (no less than 85% and no more than 100%, as determined by the Plan Administrator for each purchase period) of the lower of the market price on the
first day of the purchase period or the last day of the purchase period. At December 31, 2000, a total of 210,033 units is available for future issuance under the plan.

Under
the plan, the Company sold 8,922, 9,996 and 6,965 units to employees in 2000, 1999 and 1998, respectively. The weighted-average fair value of the purchase discount was $1.63 for
2000, $2.33 for 1999 and $3.64 for 1998, using the Black-Scholes model with the following assumptions: expected life of seven months due to salary withholdings throughout the year; distribution yield
of 2.3% and

39

---

expected volatility of 24.1% for 2000, distribution yield of 2.2% and expected volatility of 29.4% for 1999 and distribution yield of 3.0% and expected volatility of 20.6% for 1998;
risk-free interest rate of 4.39% for 2000, 4.54% for 1999 and 5.45% for 1998; and an exercise price equal to 85% of the lower of the market price on the first day of the purchase period
and the market price on the last day of the purchase period.

Retirement
Plans: The Retirement Plan is a defined benefit plan that is Company funded and qualified under ERISA. Generally, all employees of the Company and subsidiaries of the
Company are eligible to participate in the Retirement Plan after one year of employment and attainment of age 21. Participants' benefits accumulated through December 31, 1996 are calculated as
40.5% of the highest
average annual earnings up to Social Security covered compensation, plus 60% of average annual earnings in excess of covered compensation, reduced pro rata for years of service less than 30. Benefits
which accumulate after January 1, 1997 are calculated as 32.4% of the Social Security wage base and 48% of the excess over covered compensation.

The
Company's contribution to the Retirement Plan is determined by consulting actuaries on the basis of customary actuarial considerations, including total covered payroll of
participants, benefits paid, earnings and appreciation in the Retirement Plan funds.

The
Board of Directors has adopted a Pension Restoration Plan, pursuant to which the Company will pay any difference between the maximum amount payable under ERISA and the amount
otherwise payable under the Plan.

The
Company's funding policy is to contribute no more than the maximum tax-deductible amount. Plan assets are invested primarily in equity and fixed income funds.

The
cost of the Company's Supplemental Executive Retirement Plan and a Retirement Plan for Directors who were retired prior to the termination of the plan in 1997 was $109,000 in
2000, $105,000 in 1999 and $106,000 in 1998.

The
following table sets forth the plans' funded status and amounts recognized in the Company's consolidated financial statements for the Retirement and the Pension Restoration Plans:

|                                                 |                              | December 31, |       
|------------------------------------------------ | ---------------------------- | ------------ | ------
|
|Change in Benefit Obligation                     |                              |              |       
|Projected benefit obligation, beginning of year: |                              | $            | 23,809
|                                                 | Service cost                 |              |       
|                                                 | Interest cost                |              |       
|                                                 | Benefits paid                |              |       
|                                                 | Actuarial loss               |              |       
|                                                 |                              |              |       
|Projected benefit obligation, end of year        |                              | $            | 28,826
|                                                 |                              |              |       
|Change in Plan Assets                            |                              |              |       
|Plan assets, beginning of year:                  |                              | $            | 19,502
|                                                 | Actual return on plan assets |              |       
|                                                 | Employer contribution        |              |       
|                                                 | Benefits paid                |              |       
|                                                 |                              |              |       
|Plan assets, end of year                         |                              | $            | 20,901
|                                                 |                              |              |       
|Funded status                                    |                              | $            | (7,925
|Unrecognized transition obligation               |                              |              |      
|Unrecognized prior service cost                  |                              |              | 686   
|Unrecognized loss (gain)                         |                              |              | 2,300 
|                                                 |                              |              |       
|Net amount recognizedaccrued benefit cost       |                              | $            | (4,939
|                                                 |                              |              |       

40

---

|                                        |                                                    | December 31, |  
|--------------------------------------- | -------------------------------------------------- | ------------ | -
|
|Components of Net Periodic Benefit Cost |                                                    |              |  
|                                        | Service cost                                       |              | $
|                                        | Interest cost                                      |              |  
|                                        | Expected return on plan assets                     |              |  
|                                        | Amortization of unrecognized transition obligation |              |  
|                                        | Amortization of unrecognized prior service cost    |              |  
|                                        | Amortization of unrecognized loss (gain)           |              |  
|                                        |                                                    |              |  
|                                        | Pension expense                                    |              | $
|                                        |                                                    |              |  

The
projected benefit obligation, accumulated benefit obligation (ABO) and fair value of assets for the plan with assets less than ABO (Pension Restoration Plan) were $11,101,624,
$3,668,964 and $0 at December 31, 2000 and $6,757,549, $2,175,646, and $0, respectively at December 31, 1999.

December 31,2000

1999The assumptions used in the accounting were:Discount rate

7.75
%
7.50
%Rate of increase in compensation levels

5.00
%
5.00
%Expected long-term return of assets

9.00
%
9.00
%


Employee
Savings Plan: The Company has an Employee Savings Plan which is available to all eligible employees. Certain employee contributions may be supplemented by Company
contributions. Company contributions approximated $451,000 in 2000, $438,000 in 1999 and $371,000 in 1998.

Deferred
Cash Bonus Plan: In February 1991, the Compensation Committee of the Board of Directors awarded deferred bonuses payable January 15, 1999. The amount paid was
based upon the relative percentage return on the market value of the Company's depositary units compared to the percentage return on the Standard and Poor's 500 Index over a nine-year
period. A total of $176,500 was earned and paid in 1999 under this program.

Other
Benefits: The Company does not provide postretirement or postemployment benefits other than those plans described above and, as such, there is no obligation to be recognized
under SFAS Nos. 106 and 112.

Note 9. Commitments and Contingencies

The Company is involved in litigation and various claims, including those arising from its ordinary conduct of business. Management is of the opinion that the
ultimate liability from this litigation will not materially affect the Company's consolidated financial condition. The Company believes it has adequate insurance to protect itself against any future
material property and casualty losses in excess of established reserves.

In
the ordinary course of business, and as part of the entitlement and development process, the Company is required to provide performance bonds to the County of Los Angeles and the
City of Santa Clarita to assure completion of certain public facilities. At December 31, 2000, the Company had performance bonds outstanding totaling approximately $155 million.

As
a significant landowner, developer and holder of commercial properties, there exists the possibility that environmental contamination conditions may exist that would require the
Company to take corrective action. The Company believes such costs will not materially affect the Company's consolidated financial condition.

41

---

Note 10. Business Segment Reporting

In accordance with the requirements of SFAS No. 131Disclosures about Segments of an Enterprise and Related
Information, the Company's reportable business segments and respective accounting policies of the segments are the same as those described in
Note 2Business Segments and Summary of Significant Accounting Policies.Management evaluates segment performance based primarily on
revenues before property sales and contribution to income before property sales and allocation of incentive compensation. Interest income and expenses are evaluated and reported on a consolidated net
basis and are not allocated to the Company's business segments.

The
following table provides financial information regarding management's measures of the Company's business segments and other significant items and also provides a reconciliation to
the Company's consolidated totals:

|                                |                             | Year Ended December 31, 2000
|------------------------------- | --------------------------- | ----------------------------
|
|Real Estate                     |                             |                             
|                                | Residential                 |                             
|                                | Industrial and commercial   |                             
|                                | Community development       |                             
|                                | Income-producing properties |                             
|                                | Valencia Water Company      |                             
|Agriculture                     |                             |                             
|Central administration          |                             |                             
|                                |                             |                             
|                                |                             |                             
|Interest and other expense, net |                             |                             
|All other                       |                             |                             
|                                |                             |                             
|Total                           |                             | $                           
|                                |                             |                             

42

---

|                                |                             | Year Ended December 31, 1999
|------------------------------- | --------------------------- | ----------------------------
|
|Real Estate                     |                             |                             
|                                | Residential                 |                             
|                                | Industrial and commercial   |                             
|                                | Community development       |                             
|                                | Income-producing properties |                             
|                                | Valencia Water Company      |                             
|Agriculture                     |                             |                             
|Central administration          |                             |                             
|                                |                             |                             
|                                |                             |                             
|Interest and other expense, net |                             |                             
|All other                       |                             |                             
|                                |                             |                             
|Total                           |                             | $                           
|                                |                             |                             

|                                |                             | Year Ended December 31, 1998
|------------------------------- | --------------------------- | ----------------------------
|
|Real Estate                     |                             |                             
|                                | Residential                 |                             
|                                | Industrial and commercial   |                             
|                                | Community development       |                             
|                                | Income-producing properties |                             
|                                | Valencia Water Company      |                             
|Agriculture                     |                             |                             
|Central administration          |                             |                             
|                                |                             |                             
|                                |                             |                             
|Interest and other expense, net |                             |                             
|All other                       |                             |                             
|                                |                             |                             
|Total                           |                             | $                           
|                                |                             |                             

All
of the Company's real estate operations are conducted on the Company's properties in north Los Angeles County. Agricultural operations are conducted on the Company's properties in
Southern and Central California. Accordingly, financial information based on geographic area is not presented.

Sales
by business segment to individual customers representing more than 10% of the Company's consolidated revenues are as follows:

|In thousands              |  | 2000 |         | 1999 |   | 1998
|------------------------- |  | ---- | ------- | ---- | - | ----
|Industrial and Commercial |  | $    | 201,251 |      |  |     

---

43

---

Note 11. Selected Quarterly Financial Data (Unaudited)

Quarterly financial information for the Company fluctuates due to the uneven nature of real estate closing activity and the skewing of results by individual
large sales. The following is a summary of selected quarterly financial data for 2000 and 1999:

|                                              |      | Quarter
|--------------------------------------------- | ---- | -------
|
|Revenues                                      |      |        
|                                              | 2000 |        
|                                              | 1999 |        
|                                              |      |        
|Operating income                              |      |        
|                                              | 2000 |        
|                                              | 1999 |        
|                                              |      |        
|Net income (loss)                             |      |        
|                                              | 2000 |        
|                                              | 1999 |        
|Net income (loss) per unit*                   |      |        
|                                              | 2000 |        
|                                              | 1999 |        
|                                              |      |        
|Net income (loss) per unitassuming dilution* |      |        
|                                              | 2000 |        
|                                              | 1999 |        
|                                              |      |        

---

*Due to unit repurchases during the year, quarterly per unit amounts do not add up to the total per unit for the year.

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

None

44

---

PART III

Item 10. Directors and Executive Officers of the Company

The Partnership was reorganized from a corporation to a California limited partnership on January 8, 1985. The general partners of the Partnership are
Newhall Management Limited Partnership and Newhall General Partnership. Two executive officers and Newhall Management Limited Partnership are the general partners of Newhall General Partnership.
Newhall Management Corporation and Newhall General Partnership are the general partners of the Newhall Management Limited Partnership.

Newhall
Management Limited Partnership has exclusive management and control of the affairs of the Partnership and shares in Partnership income and losses on the basis of the number of
Partnership units owned by it. Newhall Management Corporation is the managing general partner of Newhall Management Limited Partnership, and makes all decisions and takes all action deemed by it
necessary or appropriate to conduct the business and affairs of Newhall Management Limited Partnership and, therefore, of the Partnership.

The
duties and responsibilities of directors are carried out by the Board of Directors of Newhall Management Corporation. Each voting shareholder of Newhall Management Corporation
also is a director of Newhall Management Corporation ("Corporation") and only voting shareholders may be directors of the Corporation. Every voting shareholder and director has a number of votes in
all matters equal to the number of votes of every other voting shareholder and director. Upon ceasing to be a director, a shareholder may be a nonvoting shareholder for a period of time prior to the
repurchase of his or her shares by the Corporation. See further discussion of the shareholders' agreement and voting trust agreement below.

The
shareholder-directors of Newhall Management Corporation are as follows:

Thomas
L. Lee, age 58, was appointed Chairman and Chief Executive Officer of the Corporation upon its formation in November 1990 and of the former managing general partner in
1989. He joined the predecessor corporation in 1970 and has served in various executive capacities. Mr. Lee was elected as a director in 1985. In January 2001, Mr. Lee announced
his retirement as Chief Executive Officer of the Corporation effective March 21, 2001, as Chairman effective March 31, 2001 and that he will not stand for re-election as a
director in July 2001. He is a director of Blue Shield of California and a trustee of California Institute of the Arts.

George
L. Argyros, age 64, was elected a director of the Corporation in September 1995. He has been Chairman and Chief Executive Officer of Arnel & Affiliates, an
investment company, since 1968. He is a director of DST Systems, Tecstar, The First American Corporation, Doskocil, Inc., and Rockwell International. He is a trustee of the California Institute
of Technology and Chairman of the Horatio Alger Association.

Gary
M. Cusumano, age 57, was appointed President and Chief Executive Officer of the Corporation on March 21, 2001, and has previously served as President and Chief Operating
Officer of the Corporation and the former managing general partner since 1989. Mr. Cusumano was elected a director of the Corporation in July 1995. Mr. Cusumano is a director of
Henry Mayo Newhall Memorial Hospital and the California Chamber of Commerce.

Thomas
V. McKernan, Jr., age 56, has been a director of the Corporation since September 1994. Mr. McKernan has been President and Chief Executive Officer of the
Automobile Club of Southern California since 1991. He is a director of Blue Shield of California, the American Automobile Association, Payden & Rygel Investment Group, Forest Lawn Memorial
Park, California Chamber of

45

---

Commerce, Los Angeles Area Chamber of Commerce, Orthopaedic Hospital, California Business Roundtable, Los Angeles Police Foundation and Education Foundation of Los Angeles Archdiocese.

Henry
K. Newhall, age 62, has served as a director of the Corporation, the former managing general partner and the predecessor corporation, respectively, since 1982.
Dr. Newhall retired in August 1998 as General Manager, Technology, Oronite Additives Division of Chevron Chemical Company. He has served in various managerial and consulting positions
with Chevron since 1971.

Jane
Newhall, age 87, has served as a director of the Corporation, the former managing general partner and the predecessor corporation, respectively, since 1960. Ms. Newhall, a
private investor, is a director of the Henry Mayo Newhall Foundation. She is a life trustee of Mills College, the San Francisco Theological Seminary, and the Graduate Theological Union.

Peter
T. Pope, age 66, was elected a director of the Corporation in 1992. Mr. Pope served as Chairman of Pope & Talbot, Inc. from 1990 to August 2000 and
as Chief Executive Officer from 1990 until his retirement in August 1999. He is a director and general partner of Pope Resources, and a director of Pope & Talbot, Inc.

Carl
E. Reichardt, age 69, has served as a director of the Corporation, the former managing general partner and the predecessor corporation, respectively, since 1980.
Mr. Reichardt was Chairman of the Board of Directors of Wells Fargo & Company and Wells Fargo Bank, N.A., from 1983 until December 1994 and a director until April 1998. He
is a director of Ford Motor Company, HCAThe Healthcare Company, PG&E Corporation, ConAgra, Inc., McKesson HBOC, Inc. and HSBC Holdings PLC.

Thomas
C. Sutton, age 58, was elected a director of the Corporation in November 1991. He has been Chairman of the Board and Chief Executive Officer of Pacific Life Insurance
Company since 1990. Mr. Sutton is a director of Southern California Edison, The Irvine Company, Association of California Life Insurance Companies and American Council of Life Insurance. He is
a trustee of the Committee for Economic Development.

Barry
Lawson Williams, age 56, was elected a director of the Corporation in July 1996. Mr. Williams has served as President and Chief Executive Officer of The American
Management Association International since November 2000. Mr. Williams also has been President of Williams Pacific Ventures, Inc., a venture capital consulting and business
mediation firm that he founded, and a general partner of WDG Ventures Ltd., a real estate development fund, since 1987. Mr. Williams is a director of PG&E Corporation, CH2M
Hill, Ltd., Simpson Manufacturing Company, R.H. Donnelly & Co., USA Education, Inc., Synavant Inc. and Kaiser Permanente. He is a trustee of Northwestern Mutual Life
Insurance Company.

Ezra
K. Zilkha, age 75, has served as a director of the Corporation, the former managing general partner and the predecessor corporation, respectively, since 1977. Since 1956,
Mr. Zilkha has been President of Zilkha & Sons, Inc., a private investment company. From 1991 to 1993 he was Chairman of Union Holdings, Inc., an industrial holding
company. He is a director of the International Center for the Disabled and Heartland Technology, Inc. Mr. Zilkha is a trustee of The American Society of the
French Legion of Honor, trustee emeritus of Wesleyan University and an honorary trustee of the Brookings Institution.

Each
of the shareholder-directors may be contacted at the principal executive offices of the Partnership and is a citizen of the United States.

The
Board of Directors manages and controls the overall business and affairs of the Corporation, of Newhall Management Limited Partnership, and of the Partnership. The members of the
Board of

46

---

Directors are elected by the shareholder-directors of the Corporation, unless there is a vacancy on the Board in which case the remaining board members may fill the vacancy, without the approval of
the limited partners and with each shareholder-director of the Corporation having an equal number of votes. Because the shareholders and directors are the same persons, it is expected that the
shareholders will re-elect themselves to serve as directors.

It
is the current policy of the Corporation that all directors of the Corporation, except for the initial directors of the former managing general partner, will retire at age 70. If a
new director is elected, he or she is required to become a shareholder by purchasing the number of shares determined by the Board of Directors.

The
limited partnership agreement (the "Partnership Agreement") of the Partnership requires the general partners to own at least one percent (1%) of the total number of Partnership
units outstanding at all times. In order to meet this 1% requirement, the shareholder-directors had originally contributed Partnership units as capital to the former managing general partner. The
determination as to how many Partnership units each shareholder-director would contribute was based upon the shareholdings of the shareholder-director in the predecessor corporation and his or her
ability to contribute such Partnership units in order that the general partners would own at least 1% of the total number of Partnership units outstanding at all times.

Messrs. Henry
Newhall and Zilkha each effectively have contributed to Newhall Management Limited Partnership a total of 72,000 Partnership units. Ms. Newhall effectively
has contributed to Newhall Management Limited Partnership a total of 71,650 Partnership units. Messrs. Lee and Cusumano each effectively has contributed 66,020 Partnership units.
Messrs. Argyros, Reichardt, Pope, Sutton, McKernan and Williams each effectively has contributed to Newhall Management Limited Partnership a total of 2,000 Partnership units. The Partnership
units contributed to Newhall Management Limited
Partnership total 359,690 or 1.35% of the total number of Partnership units outstanding at December 31, 2000.

A
unitholder will receive the same distributions from the Partnership with regard to his or her Partnership units regardless of whether such Partnership units are represented by
limited partner interests in Newhall Management Limited Partnership or by general partner interests in Newhall Management Limited Partnership (which in turn are represented by common stock in the
Corporation). All Partnership distributions and allocations to Newhall Management Limited Partnership with respect to the Partnership units held by such partner will be passed on to each limited
partner of Newhall Management Limited Partnership or shareholder of the Corporation as distributions in proportion to the actual number of units or shares beneficially owned by such limited partner or
shareholder, as the case may be.

The
shareholder-directors of the Corporation and the Corporation are parties to a shareholders' agreement and a voting trust agreement. These agreements provided for the transfer of
all the shares of Newhall Management Corporation to a voting trust, held in the name of the Trustee. The Secretary of Newhall Management Corporation serves as Trustee. In all matters the Trustee will
vote all the shares in accordance with the direction of a majority of the shareholder-directors, with each shareholder-director having one vote on each matter (irrespective of the actual number of
shares beneficially owned by such person).

The
shareholders' agreement and the bylaws of the Corporation restrict the ability of a shareholder-director to transfer ownership of shares of the Corporation. Certain events, such
as failure to own at least one limited partner unit in Newhall Management Limited Partnership, failure to consent to a Subchapter S election under the Internal Revenue Code, failure to
re-execute the trust

47

---

agreement, ceasing to serve as a director, failure of a shareholder-director's spouse to sign any required consent, a material breach by a shareholder-director of the shareholders' agreement or voting
trust agreement, a levy upon the shares of a shareholder, or a purported transfer of shares to someone other than a new or existing director upon approval of the Board of Directors, are considered to
be repurchase events. Upon such a repurchase event, the shareholder must immediately resign as a director and the shareholder will lose voting rights under the voting trust agreement. Upon the
occurrence of a repurchase event, a shareholder's shares will be repurchased by the Corporation or the Corporation may direct their purchase by a successor director. The Corporation has agreed to
repurchase for cash equal to the market value of the Partnership units representing such shares (or provide for the purchase of) all shares of a shareholder-director subject to a repurchase event
within one year of the repurchase event and to use its best efforts to effect such repurchase (purchase) as soon as possible after the repurchase event. There can be no assurance that the Corporation
will be able to find a replacement for a departing shareholder-director who will purchase shares.

The
shareholders' agreement expires if Newhall Management Corporation ceases to serve as the managing general partner of the managing general partner of the Partnership, or Newhall
Management Limited Partnership ceases to be the managing general partner of the Partnership, if all parties to the shareholders' agreement consent to its termination, or with respect to any individual
shareholder, upon the repurchase of all the shareholder's shares.

The
term of the voting trust is limited by law to 10 years, but a party to the voting trust will be deemed to have resigned as a director of the Corporation and will have to
sell his shares, subject to repurchase by the Corporation, unless, at the times provided in the voting trust agreement, the party re-executes and renews the voting trust for the purpose of
keeping it continually in effect. In July 2000, the shareholder-directors renewed the voting trust agreement for an additional 10 years. The voting trust agreement terminates if Newhall
Management Corporation ceases to serve as a general partner of the managing general partner of the Partnership, or Newhall Management Limited Partnership ceases to be the managing general partner of
the Partnership, or with respect to any individual shareholder if a shareholder no longer owns any shares.

The
shareholder-directors, as limited partners, are also parties to the limited partnership agreement of Newhall Management Limited Partnership. The limited partnership agreement has
restrictions on transfer similar to the shareholders' agreement and provides for repurchase of the limited partnership units of a limited partner upon the occurrence of repurchase events which are
similar to those of the shareholders' agreement, including the cessation of being a director by a limited partner in the case of a limited partner who is a director.

Upon
the occurrence of a repurchase event, Newhall Management Limited Partnership would have one full year to transfer Partnership units representing the limited partner's interest to
the limited partner. A limited partner could not compel the return of Partnership units for at least one year from the date a limited partner chooses to obtain return of Partnership units. Even then,
Newhall Management Limited Partnership cannot, and cannot be compelled to, distribute Partnership units to the limited partner if Newhall Management Limited Partnership would thereafter own less than
1% of the Partnership's Partnership units.

The
limited partners, as limited partners, have no voting rights except as expressly set forth in the limited partnership agreement or granted pursuant to law. Such voting privileges
include matters such as (i) electing general partners in specified instances, (ii) amending the limited partnership agreement, (iii) dissolving the limited partnership,
(iv) electing a general partner to serve as the managing general partner, and (v) removing a general partner. Items (ii) and (iii) require the separate concurrence of the
Corporation.

48

---

Persons other than directors of Newhall Management Corporation may serve as limited partners of Newhall Management Limited Partnership and Newhall Management Corporation has the
authority pursuant to the limited partnership agreement to cause additional units to be issued. The limited partnership agreement provides limited instances in which a general partner shall cease to
be a general partner.

Newhall
Management Limited Partnership will dissolve (i) when a general partner ceases to be a general partner (other than by removal) unless there is at least one other
general partner or all partners agree in writing to continue the business of the partnership and to admit one or more general partners, (ii) if Newhall Management Limited Partnership becomes
insolvent, (iii) upon the disposition of substantially all assets of Newhall Management Limited Partnership, (iv) 90 days after an affirmative vote of the limited partners to
dissolve pursuant to the partnership agreement, or (v) upon the occurrence of any event which makes it unlawful for the business of Newhall Management Limited Partnership to be continued.

Newhall
General Partnership, a California general partnership, is a general partner for the purposes of continuing the business of the Partnership and serving as an interim managing
general partner if Newhall Management Limited Partnership or its successor ceases to serve as managing general partner. So long as Newhall Management Limited Partnership or its successor remains as
managing general partner, Newhall General Partnership will have no right to take part in the management and control of the affairs of the Partnership.

The
general partners of Newhall General Partnership are Newhall Management Limited Partnership, the chief executive officer of Newhall Management Corporation and another officer or
director of Newhall Management Corporation selected from time to time by the board of directors of Newhall Management Corporation. Thomas L. Lee and Gary Cusumano are general partners of Newhall
General Partnership. For as long as Newhall Management Limited Partnership serves as a general partner of the Partnership, Newhall Management Limited Partnership shall serve as a general partner of
Newhall General Partnership and the individual general partners of Newhall General Partnership shall be the chief executive officer of Newhall Management Corporation and another officer or director
selected by the board of directors of Newhall Management Corporation.

The
managing partner of Newhall General Partnership is the chief executive officer of Newhall Management Corporation and shall have management and control of the ordinary course of
day-to-day business of Newhall General Partnership. Matters outside the ordinary course of the day to day business of Newhall General Partnership shall be decided by a majority
vote of the partners except that
a unanimous vote will be required to, among other things, admit a new partner (other than the chief executive officer or other officer or director of Newhall Management Corporation).

After
giving effect to 2-for-1 unit splits on December 20, 1985 and January 29, 1990, each of the partners of Newhall General Partnership have
contributed twenty Partnership units to Newhall General Partnership. No additional capital contributions are required. The income, losses and distributions allocated to Newhall General Partnership
with respect to the units will be allocated among the partners of Newhall General Partnership in the ratio of the units contributed by each of them.

The
ability of a partner to withdraw from Newhall General Partnership or to transfer an interest in Newhall General Partnership is limited by the partnership agreement of Newhall
General Partnership. Individual partners of Newhall General Partnership may not withdraw except upon appointment of a successor by the board of directors of Newhall Management Corporation. In
addition, an individual general partner may not transfer his interest in Newhall General Partnership except with the written consent of Newhall Management Limited Partnership. Newhall Management
Limited Partnership, as a

49

---

general partner of Newhall General Partnership, may not withdraw unless: (i) it no longer serves as a general partner of the Partnership; (ii) Newhall General Partnership no longer
serves as a general partner of the Partnership; or (iii) Newhall General Partnership dissolves and its business is not continued.

If
Newhall Management Limited Partnership no longer serves as a general partner of the Partnership, simultaneously, it will stop serving as a general partner of Newhall General
Partnership. Any individual general partner of Newhall General Partnership who is serving as a general partner by virtue of holding an office or position with Newhall Management Corporation, will stop
serving as a general partner of Newhall General Partnership if either (i) Newhall Management Limited Partnership is replaced as a general partner of the Partnership, or (ii) Newhall
Management Limited Partnership is no longer a general partner of Newhall General Partnership and individual partners are designated pursuant to the partnership agreement.

Newhall
General Partnership will dissolve when the Partnership is dissolved, liquidated and wound up and any trust or other entity formed for the purpose of liquidating or winding up
the Partnership is liquidated and wound up. Newhall General Partnership will dissolve earlier upon: (i) the distribution of substantially all of its property; (ii) the unanimous
agreement of its partners; (iii) ceasing to serve as a general partner of the Partnership; or (iv) the occurrence of an event which would make it unlawful to conduct its business.

The
Partnership Agreement requires the Partnership to pay all of the costs and expenses incurred or accrued by the general partners in connection with the business and affairs of the
Partnership as the managing general partner in its sole discretion authorizes or approves from time to time. These costs and expenses include overhead and operating expenses, officer, employee,
director and general partner compensation and other employee benefits paid by the general partners. Such compensation and benefits may be determined and changed from time to time without the approval
of the limited partners.

50

---

|Executive Officers of the Corporation                                                                                                                                                                                   |  | Age |  | Date of
Office               
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | -----------------------------
|Thomas L. LeeChairman and Chief Executive Officer                                                                                                                                                                       |  | 58  |  | 07/89-03/01                  
|Gary M. CusumanoPresident and Chief Executive Officer
President and Chief Operating Officer                                                                                                                             |  | 57  |  | 03/01
07/89                  
|Thomas E. DierckmanSenior Vice PresidentValencia Division
Senior Vice PresidentCommercial and Industrial, Valencia Division                                                                                           |  | 52  |  | 03/01
09/94                  
|Stuart R. MorkSenior Vice President and Chief Financial Officer
Vice President and Chief Financial Officer                                                                                                              |  | 48  |  | 01/96
01/95                  
|Stephen C. SchmidtSenior Vice PresidentResidential Community Development
Self-Employed Investor                                                                                                                        |  | 52  |  | 09/99
1992-9/99              
|Daniel N. BryantVice PresidentAsset Management
DirectorAsset Management
DirectorProperty Management and Leasing                                                                                                      |  | 41  |  | 01/98
07/96
12/94            
|Kevin C. FarrVice PresidentResidential, Valencia Division
Executive Vice PresidentValencia Company
Sr. Vice PresidentValencia Company
Sr. Vice President/ControllerValencia Company
ControllerResidential Division |  | 40  |  | 01/01
09/99
03/98
12/96
12/95
|Donald L. KimballVice PresidentFinance and Controller
Vice PresidentController                                                                                                                                        |  | 43  |  | 01/97
07/94                  
|Margaret M. LaufferVice PresidentMarketing and Communications
Vice PresidentCorporate Communications                                                                                                                  |  | 41  |  | 12/00
12/94                  
|Ross J. PistoneVice PresidentOperations
Sr. Vice PresidentValencia Company                                                                                                                                            |  | 45  |  | 01/98
12/95                  
|Steven D. ZimmerVice PresidentNewhall Ranch Division
PartnerRupp, Holmberg & Zimmer                                                                                                                                   |  | 56  |  | 07/99
1992-07/99             

The
officers serve at the pleasure of the Board of Directors.

51

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Corporation's executive officers and directors, the general partners, and
persons who own more than ten percent of the Company's Partnership units, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The Company assists its
executive officers, directors and general partners to file their Section 16(a) reports and retains a copy of the forms filed. Based upon our review of copies of
the reports and on written statements from our executive officers, directors and general partners, the Company believes that all such forms were filed on a timely basis by the executive officers,
directors and general partners during 2000, except that 1) an amended Form 5 for Ms. Jane Newhall was filed in May 2000 to report a gift of Partnership units made in
December 1999; and 2) automatic conversions during 2000 of "phantom" unit rights into Partnership units under the Company's management unit ownership program were reported late on a
Form 5 filed in February 2001 for Messrs. Thomas E. Dierckman and Stuart R. Mork.

Item 11. Executive Compensation

The following tables set forth information as to each of the five highest paid Executive Officers and their compensation for services rendered to the Company
and its subsidiaries:

Summary Compensation Table

|                                                                |  |                |  |   |                         |  |   |                         |  | Long Term Compensation |                      | 
|--------------------------------------------------------------- |  | -------------- |  | - | ----------------------- |  | - | ----------------------- |  | ---------------------- | -------------------- | 
|
|
|Thomas L. LeeChairman and
Chief Executive Officer               |  | 2000
1999
1998 |  | $ | 440,000
440,000
362,000 |  | $ | 727,500
930,600
430,364 |  | $                      | 63,550
61,425
64,343 | 
|Gary M. CusumanoPresident and
Chief Operating Officer           |  | 2000
1999
1998 |  |   | 336,000
336,000
274,000 |  |   | 543,200
704,880
320,078 |  |                        | 66,500
66,980
68,365 | 
|Thomas E. DierckmanSenior Vice President                        |  | 2000
1999
1998 |  |   | 271,000
226,000
226,000 |  |   | 286,650
256,396
169,197 |  |                        | 6,050
5,250
4,300    | 
|Stuart R. MorkSenior Vice President and
Chief Financial Officer |  | 2000
1999
1998 |  |   | 275,000
230,000
230,000 |  |   | 254,150
239,890
154,410 |  |                        | 600
560
425          | 
|Stephen C. SchmidtSenior Vice President(6)                      |  | 2000
1999      |  |   | 200,000
52,308          |  |   | 136,850
48,615          |  |                        | 
                  | 

---

52

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53

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Option / SAR Grants in Last Fiscal Year

|                    |  |         |     |    |   |   |       |  |          | Value of Options as
of Grant Date as
Computed by the
Modified
Black-Scholes
Options Valuation
Model (3)
|------------------- |  | ------- | --- | -- | - | - | ----- |  | -------- | -------------------------------------------------------------------------------------------------------
|
|
|Thomas L. Lee       |  | 230,000 | (1) | 29 | % | $ | 28.00 |  | 11-14-05 |                                                                                                        
|Gary M. Cusumano    |  | 100,000 | (1) | 12 | % |   | 28.00 |  | 11-14-05 |                                                                                                        
|Thomas E. Dierckman |  | 80,000  | (1) | 10 | % |   | 28.00 |  | 11-14-05 |                                                                                                        
|Stuart R. Mork      |  | 80,000  | (1) | 10 | % |   | 28.00 |  | 11-14-05 |                                                                                                        
|Stephen C. Schmidt  |  | 16,000  | (2) | 2  | % |   | 26.94 |  | 7-18-10  |                                                                                                        

---

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values

|                    |  |   |  |   |  | Number of
Securities Underlying
Unexercised Options/SARs
at Fiscal Year-End |  |         |  |  
|------------------- |  | - |  | - |  | --------------------------------------------------------------------------- |  | ------- |  | -
|
|
|
|Thomas L. Lee       |  |  |  |  |  | 495,618                                                                     |  | 237,500 |  | $
|Gary M. Cusumano    |  |  |  |  |  | 386,864                                                                     |  | 106,000 |  |  
|Thomas E. Dierckman |  |  |  |  |  | 246,709                                                                     |  | 84,250  |  |  
|Stuart R. Mork      |  |  |  |  |  | 238,709                                                                     |  | 84,250  |  |  
|Stephen C. Schmidt  |  |  |  |  |  |                                                                            |  | 16,000  |  |  
|                    |  |   |  |   |  |                                                                             |  |         |  |  
|Total               |  |  |  |  |  | 1,367,900                                                                   |  | 528,000 |  | $
|                    |  |   |  |   |  |                                                                             |  |         |  |  

---

54

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Employee Benefit Plans

The following are descriptions of the principal employee benefit plans of the Company.

Retirement Plans

Under the Retirement Plan, participants' benefits are calculated as 40.5% of the average annual compensation, including salary and bonus, of the highest five
calendar years of the preceding ten years up to Social Security covered compensation, plus 60% of the average annual compensation in excess of covered compensation, reduced pro rata for years of
service less than 30. Benefits, which accumulate after January 1, 1997, are calculated at 32.4% of the social security wage base and 48% of the excess over covered compensation. Under the
Pension Restoration Plan, the Company will pay any difference between the ERISA and Internal Revenue Code maximum amount payable under the Retirement Plan and the amount otherwise payable, including
amounts restricted by the compensation limit.

The
following table reflects the estimated annual benefits paid as a single life annuity upon retirement at age 65 under the Retirement Plan and Pension Restoration Plan at various
assumed compensation ranges and credited years of service:

Years of ServiceCompensation

10

20

30

40$

125,000

$
21,000

$
43,000

$
66,000

$
68,000200,000


34,000


72,000


109,000


113,000275,000


48,000


100,000


153,000


158,000350,000


61,000


129,000


196,000


203,000425,000


75,000


157,000


240,000


248,000450,000


79,000


167,000


254,000


263,000500,000


88,000


186,000


283,000


293,000550,000


97,000


205,000


312,000


323,000600,000


106,000


224,000


341,000


353,000750,000


133,000


281,000


428,000


443,000


Credited
years of service as of December 31, 2000 (to the nearest whole year) and average annual compensation for the highest five years of the last ten years are as follows:
30 years and $785,000 for Mr. Lee; 31 years and $600,000 for Mr. Cusumano; 13 years and $350,000 for Mr. Mork; 18 years and $360,000 for
Mr. Dierckman; and 1 year and $140,000 for Mr. Schmidt.

Change in Control Severance Program

In 1997, the Partnership entered into severance agreements with Messrs. Lee, Cusumano, Dierckman and Mork, which agreements provide benefits in the
event of a "change of control." Under the provisions of the severance agreements, a "change of control" is deemed to have occurred when (i) any "person" (other than a trustee or similar person
holding securities under an employee benefit plan of the Partnership, or an entity owned by the unitholders in substantially the same proportions as their ownership of units) becomes the beneficial
owner of 25% or more of the total voting power represented by the Partnership's then outstanding voting securities, (ii) Newhall Management Corporation is removed as managing general partner of
Newhall Management Limited Partnership, or (iii) the holders of the voting securities of the Partnership approve a merger or consolidation of the Partnership with any other entity, other than a
merger or consolidation which would result in the voting securities of the Partnership outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 75% of the total voting power represented by the voting securities of the Partnership or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) a plan of complete liquidation of

55

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the Partnership is adopted or the holders of the voting securities of the Partnership approve an agreement for the sale or disposition by the Partnership (in one transaction or a series of
transactions) of all or substantially all the Partnership's assets. Entitlement to benefits arises if, within two years following a change in control, the executive officer's employment is terminated
or if he or she elects to terminate his or her employment following action by the Partnership which results in (i) a reduction in salary or other benefits, (ii) change in location of
employment (iii) a change in position, duties,
responsibilities or status inconsistent with the executive officer's prior position or a reduction in responsibilities, duties, or offices as in effect immediately before the change in control, or
(iv) the failure of the Partnership to obtain express assumption by any successor of the Partnership's obligations under the severance agreement.

Benefits
payable under the agreements to Messrs. Lee and Cusumano consist of (i) payment in a single lump sum equal to base salary and general partners fees for three
years, (ii) payment in a single lump sum of three times the average bonus payments for the two fiscal years preceding the change in control, (iii) continuation of participation in
insurance and certain other fringe benefits for three years, (iv) immediate vesting of deferred compensation, nonqualified retirement benefits, options and other unit-based rights,
(v) a retirement benefit equivalent to the additional benefits that would have accrued under retirement plans if employment had continued for two years, and (vi) reduction of required
service for full retirement benefits from 30 years to 20 years through a non-qualified arrangement. The benefits payable to Messrs. Dierckman and Mork are the same as
for Messrs. Lee and Cusumano except that base salary, bonus and fringe benefits would be paid for two years and the retirement benefit for one year. Certain vice presidents who entered into a
severance agreement would receive base salary, bonus and fringe benefits for one year. Benefits payable under the agreements are in lieu of any severance benefits under the Partnership's general
severance policy. The agreements are not contingent upon the executive officers actively seeking other employment, but provide for offset of fringe benefits provided by a new employer.

Compensation of the Directors

The Partnership Agreement provides that the compensation of the general partners and their partners, directors, officers and employees shall be determined by
Newhall Management Limited Partnership. Both the compensation committee and the nominating committee of the Board of Directors of Newhall Management Corporation, the managing general partner of
Newhall Management Limited Partnership, have been granted authority by the Board of Directors to determine certain compensation issues. Non-employee members of the Board receive an annual
retainer fee of $24,000 for serving on the Board, $2,000 for serving on the Audit Committee and $1,000 for serving on any other committee of the Board. In addition, non-employee directors
receive a fee of $1,000 for attending each meeting of the Board or committee of which they are a member. Committee chairpersons receive a fee of $500 in addition to the regular meeting fee for each
committee meeting they conduct. Employees serving on the Board of Directors do not receive directors' fees. Directors' compensation may be deferred until separation from the Board. Deferred amounts
earn interest at the Wells Fargo Bank prime rate. Members of the Board of Directors will also receive reimbursement for travel and other expenses related to attendance at meetings of the Board of
Directors and of the committees. In addition, the Partnership Agreement requires the Partnership to reimburse the Newhall Management Limited Partnership for any federal or California income taxes
imposed upon the managing general partner or its managing general partner as a result of its activities as managing general partner. Under the terms of the 1995 Option/Award Plan adopted by the Board
of Directors on January 18, 1995, each non-employee Board member may elect to have all or any portion of the annual retainer fees paid in Partnership units or, as amended on
July 15, 1998, in options thereon instead of cash.

The
1995 Option/Award Plan also provides each non-employee director serving on the Board on January 18, 1995, and each newly elected or appointed
non-employee director, with a non-statutory

56

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option ("Automatic Option") to purchase 1,500 depositary units. On the third Wednesday of July of each year that occurs after January 18, 1995, each continuing non-employee director
will automatically receive an Automatic Option to purchase 500 Partnership units. Each Automatic Option vests immediately and has a term of 10 years. Generally, the non-employee
director may exercise his or her option for a period of 3 months after termination of service as a non-employee director for any reason other than death or "retirement,"
12 months after the date of death and 36 months after the date of "retirement." "Retirement" means the first day the non-employee director ceases to serve as a
non-employee director after serving as a non-employee director for at least five years.

In
addition, non-employee directors automatically receive 500 unit rights on the third Wednesday of July of each year pursuant to the terms of the Deferred Equity
Compensation Plan for Outside Directors which was adopted effective November 1, 1996. Unit rights entitle a director to receive an equal number of Partnership units upon separation from the
Board of Directors for any reason.

Compensation Committee Interlocks and Insider Participation

In June 1994, Valencia Water Company, a wholly-owned subsidiary of the Company, borrowed $11 million from Pacific Life Insurance Company at a
rate of 8% per annum. The terms of the loan require semi-annual interest payments with principal due at maturity. In addition, the Company has acquired two life insurance policies for its
two senior officers with face amounts of approximately $1.5 million each from Pacific Life. Thomas C. Sutton, a director of the Corporation, is Chairman of the Board and Chief Executive Officer
of Pacific Life Insurance Company.

All
of the foregoing transactions are at rates and terms comparable to those of similar transactions with unrelated parties.

Report of the Compensation Committee of the Board of Directors of Newhall Management Corporation

Compensation Committee Charter

The Compensation Committee, which is comprised entirely of independent directors, evaluates the performance of the Chief Executive Officer, determines or
approves compensation of all executive officers of the Company and reviews management development issues. It has regularly scheduled meetings two times a year, and meets at other times as appropriate.
During 2000, the Committee met three (3) times.

Senior Management Compensation Philosophy

The Company believes its success is greatly influenced by the caliber of its employees. The Company's compensation program for senior management is designed to
attract, motivate and retain a highly skilled, professional and dedicated work force. In this regard, the Company's senior management compensation program consists of:



The
Company's objective is for the base salary, annual incentive compensation and long-term incentive compensation of senior management to approximate the median levels
for an industry comparison group consisting primarily of real estate companies with which the Company competes for

57

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executive talent. From year-to-year, however, relative compensation levels may vary due largely to variances in individual and Company performance. The companies with which the
Company competes for executive talent are not the same as those in the Wilshire Real Estate Securities Index shown in the
stock performance graph. In addition, for managers other than the Chief Executive Officer and the Chief Operating Officer, there is a subjective element to incentive compensation which relates to his
or her success in meeting individual business and personal goals determined at the beginning of each year. The goals for the business segment he or she manages are based primarily on increasing
unitholder values through profitability and, most importantly, the value of the Company's landholdings.

Base Salary Compensation

The base salary for each executive officer is determined on the basis of an evaluation of the responsibilities of each position compared to other positions in
the Company and to base salary levels in effect for comparable positions at the Company's principal competitors for executive talent. In addition, the qualifications of the executive officer,
including training and experience, is considered in determining base salary. Salaries are reviewed approximately every two years and adjustments may be made, as appropriate, to each executive
officer's base salary. External salary data provided to the Committee by an independent compensation survey firm indicate that salaries for 2000 were generally below the median level.

Annual Merit and Incentive Compensation (Bonuses)

For 2000, the annual bonuses paid under the Company's Executive Incentive Plan were determined on the basis of the Company's earnings, the net cash generated
for unit repurchases and attainment of individual goals. Target earnings, target net cash flow generation and individual goals were developed at the beginning of the year. Target bonuses are
determined as percentages of base salaries for each management group based upon ability to influence the success of the Company and are generally set to produce bonuses comparable to other real estate
companies over a period of time. At the end of the year, bonuses were determined by utilizing the percentages of Company and individual goals achieved as compared to the Company and individual goals
determined at the beginning of the year. The aggregate amount of such incentive bonuses may not exceed 7% of the Company's net income after deducting the incentive awards. The target bonuses (except
for Mr. Lee's bonus) are recommended by the Company's Chief Executive Officer, Mr. Lee, and approved by the Compensation Committee and the Board of Directors.

Senior
executives are paid a portion of their current year's bonus in Partnership units until they reach their unit ownership guidelines described below. Messrs. Lee, Cusumano,
Dierckman and Mork each received a portion of their 2000 bonus in Partnership units as described in the Summary Compensation Table. Additionally, any manager may elect to receive all or any part of
his or her annual bonus in Partnership units and to defer receipt of such Partnership units for up to five (5) years.

The
total of the bonuses paid for 2000 was $4.728 million (or 5.5% of 2000 income after deducting bonuses), versus $5.164 million in 1999 (or 5.7% of income after
deducting bonuses), an 8.4% decrease from 1999 to 2000. The incentive targets for 2000 were focused on net cash generation for the Company's unit repurchase program, which was a change from the recent
historical targets that focused incentives on the Company's earnings. For purposes of the Incentive Plan, "net cash generation" included cash from all sources including operations, asset sales and
borrowings, minus all uses of cash, including operating expenses, infrastructure expenditures, debt service, Partnership distributions and capital expenditures. Approximately 97% of the targeted "net
cash generation" was achieved. Consequently, approximately 97% of the available bonus pool was awarded.

58

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Long-Term Incentive Compensation

The Committee endorses the view that equity ownership of the Company aligns management's and unitholders' interests and thereby enhances unitholders' value.
The equity component of compensation includes unit options, appreciation rights, restricted units, unit rights and bonuses paid in Partnership units (described above) under the Company's 1995
Option/Award Plan. Option awards are generally made at mid-year to key management personnel who are in positions to make substantial contributions to the long-term success of
the Company. These awards vest and are expected to grow in value over time and for that reason represent compensation which is attributable to service over a period of up to ten years. This focuses
attention on managing the Company from the perspective of an owner with an equity stake in the business.

The
size of the unit options granted to each executive officer is based on the aggregate exercise price. Generally it is set at a multiple of salary which the Committee deems
appropriate in order to create a meaningful opportunity for ownership based upon the individual's current position with the Company. The unit options granted also take into account comparable awards
to individuals in similar positions in the industry, as reflected in external surveys, and the individual's potential for future responsibility and promotion over the option term.

The
Company adopted unit ownership guidelines for senior executives. The guidelines encourage senior executives to own units having a market value of at least 50% of base salary. As
an inducement to purchase Partnership units the Company offers one unit right for every five units purchased. A unit right entitles the recipient to receive one Partnership unit for each unit right.
Historically, unit rights vested at the rate of 20% a year over a five year period. Unit rights granted after July 2000 vest at the rate of 331/3% per year over a three year
period.

In
November 1997, a special grant of premium price options was made to the top executive officers of the Company to provide additional incentive for them to deliver
near-term, substantial price growth in the outstanding Partnership units and to enhance their incentive compensation to be more comparable with that of publicly-traded real estate
companies. The options were granted in two tranches, both of which were exercisable in three years provided certain price performance objectives were met. The first tranche vesting requirements
provided that the optioned units granted in the tranche would vest if during the three year period, commencing on the date of grant: 1) the unit market price of the Partnership units increased
by 25% from the date of grant (to $31.30 per unit) and that unit market price was sustained or exceeded for at least ten of twenty consecutive trading days; or 2) total return on a Partnership
unit equaled or exceeded the 75th percentile of shares of a peer group of other publicly-traded real estate companies. The first tranche vested during 1998 because the price requirement
was met. The second tranche would have vested if: 1) the unit market price of the Partnership units increased by 331/3% from the date of grant (to $33.39 per unit) and was
sustained or exceeded for at least ten of twenty consecutive trading days; 2) or met the total return requirement previously described. Neither the unit price requirement nor the total return
requirement for the second tranche were accomplished during the requisite three year period. Consequently, the second tranche premium price options expired. The first tranche of the premium price
options that vested in 1998 expire in November 2002.

The
premium price options were intended to replace market price options for three years. Consequently, no options were granted to the senior executive officers during the subsequent
three-year period. At the end of the three-year period, the Compensation Committee requested an independent compensation consulting firm to assess senior executive
compensation, including long-term incentive compensation, as compared to other publicly-held real estate companies. The assessment determined that senior executive total
compensation generally was below the median for the Company's competitors. The Committee granted new premium price options to four senior executive officers at an exercise price of $28.00 or
approximately 21.5% above the then current unit market price. The options

59

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vest at a rate of 331/3% per year commencing on the first anniversary date of the grant and will expire five years following the grant date.

Chief Executive Officer Compensation

Mr. Lee's base salary was $440,000 in 2000, the same as in 1999. In addition, he was paid general partners fees of $60,000 for managing Newhall General
Partnership, a general partner of the Company, and a bonus for 2000 of $727,500 for total "cash" compensation of $1,227,500. (One half of Mr. Lee's bonus was paid in Partnership units in lieu
of cash.) Mr. Lee's 2000 bonus was 97% of his target bonus of 150% of his base compensation pursuant to the Company's Executive Incentive Plan (see description of Annual Merit and Incentive
Compensation (Bonus) Plan on page 53). As previously described,
targeted net cash generation was determined at the beginning of the year to incent management to generate "net cash" for the Company's unit repurchase program. Mr. Lee's targeted incentive
bonus was dependent entirely on the Company's net cash generation during the year. By the end of the year, approximately 97% of the targeted net cash generation was achieved primarily through asset
and land sales. The calculation to determine the amount of the bonus earned was based entirely on the Company's achievement of targeted net cash generation.

Mr. Lee
also received a premium price option for 230,000 units as described above. The benefits of this unit option grant, as well as previously granted premium price and
market price options, were expected to be realized over the next two to six years during which Mr. Lee's emphasis on strategic planning is expected to yield benefits to the Company's investors.

Section 162 Limit

Section 162(m) of the Internal Revenue Code limits federal income tax deductions for compensation paid to the Chief Executive Officer and other highly
compensated officers of a public company to $1 million per year, but contains an exception for performance-based compensation that satisfies certain conditions. The Company has been advised
that Section 162(m) does not apply to limited partnerships such as the Company.

Compensation
Committee of the Board of Directors of Newhall Management Corporation:



The
preceding Compensation Committee Report and the following Stock Price Performance graphs shall not be deemed incorporated by reference into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such
Acts.

60

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The Newhall Land and Farming Company
Stock Performance Analysis
Five-Year Total Return

GRAPH

Ten-Year Total Return

LOGO

Assumes
$100 invested on December 31, 1995 for the 5-year graph and December 31, 1990 for the 10-year graph. Total return includes reinvestment of dividends.

*
As of 12/29/00 the Wilshire Real Estate Securities Index consisted of the following real estate operating companies: Catellus Development Corporation, Extended Stay America,
Lodgian Inc., The Newhall Land and Farming Company, Prime Hospitality Co., Starwood Hotels & Resorts, Trizec Hahn Corp. and Wyndham International Inc.

61

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Item 12. Security Ownership of Certain Beneficial Owners and Management

Directors and Officers

The following table sets forth the number of units beneficially owned by each director of Newhall Management Corporation, each of the Company's five highest
paid executive officers, and all directors and officers as a group as of February 28, 2001.

|Name                                               |  | Amount and Nature
of Beneficial Ownership |  | Percent
of Class(%) | 
|-------------------------------------------------- |  | ----------------------------------------- |  | ------------------- | 
|George L. Argyros                                  |  | 116,140                                   |  | (1)(2)(3)           | 
|Gary M. Cusumano                                   |  | 529,515                                   |  | (1)(2)(4)           | 
|Thomas E. Dierckman                                |  | 274,730                                   |  | (2)(4)(5)           | 
|Thomas L. Lee                                      |  | 614,948                                   |  | (1)(2)(4)(5)        | 
|Thomas V. McKernan, Jr.                            |  | 18,951                                    |  | (1)(2)(3)           | 
|Stuart R. Mork                                     |  | 252,107                                   |  | (2)(4)(5)           | 
|Henry K. Newhall                                   |  | 322,059                                   |  | (1)(2)(3)(6)        | 
|Jane Newhall                                       |  | 572,887                                   |  | (1)(2)(3)           | 
|Peter T. Pope                                      |  | 26,333                                    |  | (1)(2)(3)           | 
|Carl E. Reichardt                                  |  | 96,903                                    |  | (1)(2)(3)(7)        | 
|Stephen C. Schmidt                                 |  | 1,220                                     |  | (4)(5)              | 
|Thomas C. Sutton                                   |  | 19,875                                    |  | (1)(2)(3)(8)        | 
|Barry Lawson Williams                              |  | 10,828                                    |  | (1)(2)(3)           | 
|Ezra K. Zilkha                                     |  | 1,233,320                                 |  | (1)(2)(3)(9)        | 
|All directors and officers as a group (23 persons) |  | 4,253,868                                 |  | (10)                | 

---

62

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Except
as indicated otherwise in the above notes, the specified persons possess sole voting and investment power as to the indicated number of units to the best of the Company's
knowledge.

Certain
provisions of the Partnership's Limited Partnership Agreement require the affirmative vote of holders of at least 75% of the Partnership's voting power to approve
(i) the removal of any general partner or the election of any general partner as the Partnership's managing general partner; or (ii) certain business combinations and other specified
transactions ("Business Combinations") with, or proposed by or on behalf of, persons beneficially owning 10% or more of the Partnership's voting power, unless such Business Combination is either
approved by a majority of the present directors of Newhall Management Corporation (or by directors who are nominated by them) or certain price and procedural requirements are satisfied.

63

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Certain Unitholders

The following table sets forth information about an unitholder that beneficially owns more than 5% of outstanding Partnership units as of February 28,
2001.

Name and Address

Number of Units
Beneficially Owned

Percent
Of ClassState Farm Mutual Automobile Insurance Company, and related entities(a)
One State Farm Plaza
Bloomington, Illinois 61710-0001

3,400,758

12.9
%Highfields Capital Management LP(b)
Highfields GP LLC
Jonathon S. Jacobsen
Richard L. Grubman
Highfields Capital II LP
c/o Highfields Capital Management LP
200 Clarendon Street
Boston, Massachusetts 02117

2,534,100

9.6
%


---

Item 13. Certain Relationships and Related Transactions

For additional related party information see the section entitled "Compensation Committee Interlocks and Insider Participation" under
Item 11"Executive Compensation."

64

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PART IV

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

(a)
Documents filed with this report:

|   |  |       |  |                                                                                                                                                                                                                                                                                          
|-- |  | ----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. |  |       |  | See Index to Financial Statements on page 20 of this Annual Report on Form 10-K.                                                                                                                                                                                                         
|2. |  |       |  | Financial Statement Schedules: Schedule IIIReal Estate and Accumulated Depreciation with accountants' report thereon. Other schedules have been omitted because they are not applicable or the required information is shown in the
consolidated financial statements and notes thereto.
|3. |  |       |  | Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K):                                                                                                                                                                                           
|   |  | 3(a)  |  | The Newhall Land and Farming Company (a California Limited Partnership) Limited Partnership Agreement incorporated by reference to Exhibit 3(e) to Registrant's Registration Statement on Form S-14 filed August 24, 1984.                                                               
|   |  | (b)   |  | First Amendment to Limited Partnership Agreement of The Newhall Land and Farming Company (a California Limited Partnership) incorporated by reference to Exhibit 3(b) of the Company's Annual Report on Form 10-K for the year ended December
 31, 1993, (Commission File Number 1-8885).
|   |  | 4     |  | Depositary Receipt for Units of Interest, The Newhall Land and Farming Company (a California Limited Partnership) incorporated by reference to Exhibit 4 of the Company's Annual Report on Form 10-K for the year ended December 31, 1990,
(Commission File Number 1-8885).              
|*  |  | 10(a) |  | The Newhall Land and Farming Company 1995 Option/Award Plan incorporated by reference to the Company's Registration Statement on Form S-8 dated March 22, 1995 (Commission File Number 33-58171).                                                                                        
|*  |  | (b)   |  | Newhall Executive Incentive Plan (as amended July 11, 1990) incorporated by reference to Exhibit 10 (b) of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (Commission File Number
1-8885).                                                                
|*  |  | (c)   |  | The Newhall Land and Farming Company Employee Savings Plan incorporated by reference to the Company's Registration Statement on Form S-8 dated May 24, 1994 (Commission File Number 33-53769).                                                                                           
|*  |  | (d)   |  | The Newhall Land and Farming Company Retirement Plan Restatement, Amendments No. 1 through 5, incorporated by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, (Commission
File Number 1-8885).                              
|*  |  | (e)   |  | Form of Severance Agreements incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (Commission File Number 1-8885).                                                                                                
|*  |  | (f)   |  | The Newhall Land and Farming Company Supplemental Executive Retirement Plan (Restated effective January 15, 1992) incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December
 31, 1991, (Commission File Number 1-8885).         
|*  |  | (g)   |  | The Newhall Land and Farming Company Senior Management Survivor Income Plan incorporated by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, (Commission File Number
1-8885).                                                
|   |  |       |  |                                                                                                                                                                                                                                                                                          

65

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|  |  | (h) |  | Form of Indemnification Agreement between the Partnership and its General Partners and the general partners, partners, shareholders, officers and directors of its General Partners, or of the Managing General Partner of the Managing General Partner,
as amended, incorporated by reference to Exhibit 28(g) to the Company's report on Form 8-K filed December 11, 1990, (Commission File Number 1-8885).
|- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  | (i) |  | Tax Payment and Tax Benefit Reimbursement Agreement incorporated by reference to Exhibit 28(f) to the Company's report on Form 8-K filed December 11, 1990, (Commission File Number 1-8885).                                                                                                                                                                                                                 
|* |  | (j) |  | The Newhall Land and Farming Company Deferred Cash Bonus Plan incorporated by reference to Exhibit 10(l) of the Company's Annual Report on Form 10-K for the year ended December 31, 1990, (Commission File Number 1-8885).                                                                                                                                                                                  
|* |  | (k) |  | Form of award issued under The Newhall Land and Farming Company Deferred Cash Bonus Plan incorporated by reference to Exhibit 10(m) of the Company's Annual Report on Form 10-K for the year ended December 31, 1990, (Commission File
Number 1-8885).                                                                                                                                                       
|* |  | (l) |  | The Newhall Land and Farming Company Employee Savings Restoration Plan As Amended Effective January 1, 1999, incorporated by reference to Exhibit 10(d) of the Company's Report on Form 10-Q for the quarter ended September 30, 1998,
(Commission File Number 1-8885).                                                                                                                                      
|* |  | (m) |  | The Newhall Land and Farming Company Pension Restoration Plan (As amended through July 15, 1998) incorporated by reference to Exhibit 10(c) of the Company's Report on Form 10-Q for the quarter ended September 30, 1998, (Commission
File Number 1-8885).                                                                                                                                                  
|  |  | (n) |  | Trust Agreement dated January 15, 1992 between the Partnership and Newhall Management Corporation incorporated by reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991,
(Commission File Number 1-8885).                                                                                                                                              
|  |  | (o) |  | The Newhall Land and Farming Company Employee Unit Purchase Plan incorporated by reference to the Company's Registration Statement on Form S-8 dated May 24, 1994, (Commission File Number 33-53767).                                                                                                                                                                                                        
|* |  | (p) |  | Amendment No. 1 to The Newhall Land and Farming Company Retirement Plan incorporated by reference to Exhibit 10(r) of the Company's Annual Report on Form 10-K for the year ended December 31, 1994, (Commission File Number
1-8885).                                                                                                                                                                        
|  |  | (q) |  | The Newhall Land and Farming Company Deferred Equity and Compensation Plan for Outside Directors incorporated by reference to the Company's Registration Statement on Form S-8 dated November 1, 1996, (Commission File Number
333-15303).                                                                                                                                                                   
|* |  | (r) |  | Amendment No. 2 to The Newhall Land and Farming Company Retirement Plan dated August 1, 1996 incorporated by reference to Exhibit 10(r) the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
(Commission File Number 1-8885).                                                                                                                                                      
|* |  | (s) |  | Amendment No. 3 to The Newhall Land and Farming Company Retirement Plan dated July 15, 1998, incorporated by reference to Exhibit 10(a) of the Company's Report on Form 10-Q for the quarter ended September 30, 1998,
(Commission File Number 1-8885).                                                                                                                                                      
|* |  | (t) |  | Amendment No. 1 to The Newhall Land and Farming Supplemental Executive Retirement Plan dated January 15, 1997 incorporated by reference to Exhibit 10(t) of the Company's Annual Report on Form 10-K for the year ended December
 31, 1996, (Commission File Number 1-8885).                                                                                                                                 
|  |  |     |  |                                                                                                                                                                                                                                                                                                                                                                                                              

66

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|* |  | (u)   |  | First Amendment to The Newhall Land and Farming Company 1995 Option/Award Plan dated November 19, 1997 incorporated by reference to Exhibit 10(v) of the Company's Annual Report on Form 10-K for the year ended December 31,
1997, (Commission File Number 1-8885).              
|- |  | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* |  | (v)   |  | Form of award for premium price options granted under The Newhall Land and Farming Company 1995 Option/Award Plan incorporated by reference to Exhibit 10(w) of the Company's Annual Report on Form 10-K for the year ended December 31,
1997, (Commission File Number 1-8885).   
|* |  | (w)   |  | Amendment No. 2 to The Newhall Land and Farming Company Savings Plan dated July 15, 1998, incorporated by reference to Exhibit 10(b) the Company's Report on Form 10-Q for the quarter ended September 30, 1998, (Commission File
Number 1-8885).                                 
|  |  | (x)   |  | Valencia Marketplace Purchase and Sale Agreement dated January 7, 1998 and subsequent First, Second, Third and Fourth Amendments incorporated by reference to Exhibit 10 the Company's Report on Form 10-Q for the quarter ended March
 31, 1998, (Commission File Number 1-8885).
|  |  | (y)   |  | Fifth Amendment dated May 29, 1998 to the Valencia Marketplace Purchase and Sale Agreement incorporated by reference to the Company's Report on Form 8-K filed June 19, 1998, (File Number 1-8885).                                                                               
|* |  | (z)   |  | Amendment Number One Effective January 1, 1999 to Newhall Executive Incentive Plan (as amended July 11, 1990) incorporated by reference to Exhibit 10 of the Company's Report on Form 10-Q for the quarter ended March 31, 1999,
(Commission File Number 1-8885).                 
|* |  | (aa)  |  | Amendment No. 4 to the Newhall Land and Farming Company Retirement Plan dated July 21, 1999 incorporated by reference to Exhibit 10 of the Company's Report on Form 10-Q for the quarter ended June 30, 1999, (Commission File
Number 1-8885).                                    
|* |  | (ab)  |  | Second Amendment to The Newhall Land and Farming Company 1995 Option/Award Plan adopted as of July 15, 1998 incorporated by reference to Exhibit 10(a) of the Company's Report on Form 10-Q for the quarter ended June 30, 1999,
(Commission File Number 1-8885).                 
|* |  | (ac)  |  | Amendment No. 3 to The Newhall Land and Farming Company Employee Savings Plan, incorporated by reference to Exhibit 10 (a) of the Company's report on Form 10-Q for the quarter ended September 30, 2000, (Commission File Number
1-8885.)                                        
|* |  | (ad)  |  | The Newhall Land and Farming Company Employee Savings Restoration Plan (As Amended and Restated Effective July 19, 2000), incorporated by reference to Exhibit 10(b) of the Company's Form 10-Q for the quarter ended September 30,
2000, (Commission File Number 1-8885).        
|  |  | 11    |  | Computation of earnings per unit                                                                                                                                                                                                                                                  
|  |  | 21    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                    
|  |  | 23    |  | Independent Auditors' Consent                                                                                                                                                                                                                                                     
|  |  | 99(a) |  | Articles of Incorporation of Newhall Management Corporation, as amended, incorporated by reference to Exhibit 28(b) to the Company's report on Form 8-K filed December 11, 1990, (Commission File Number 1-8885).                                                                 
|  |  |       |  |                                                                                                                                                                                                                                                                                   

67

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| |  | (b) |  | Bylaws of Newhall Management Corporation incorporated by reference to Exhibit 99 (e) to the Company's report on Form 10-Q for the quarter ended June 30, 2000 (Commission File Number 1-8885).                                                                                                                                                                                                                                                            
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (c) |  | Amended and Restated Shareholders' Agreement between Newhall Management Corporation, its shareholders and the Newhall Management Corporation Voting Trust incorporated by reference to Exhibit 99(a) to the Company's report on Form 10-Q for
the quarter ended June 30, 2000 (Commission File Number 1-8885).                                                                                                                                            
| |  | (d) |  | Extension Agreement to Voting Trust Agreement between Newhall Management Corporation, the Trustee, and the individual shareholders of Newhall Management Corporation, incorporated by reference to Exhibit 99(b) of the Company's report on Form
 10-Q for the quarter ended June 30, 2000, (Commission File Number 1-8885).                                                                                                                              
| |  | (e) |  | Voting Trust Agreement between Newhall Management Corporation, the Trustee, and the individual shareholders of Newhall Management Corporation incorporated by reference to Exhibit 28(e) of the Company's report on Form 8-K filed December
 11, 1990, (Commission File Number 1-8885).                                                                                                                                                                   
| |  | (f) |  | Partnership Agreement of Newhall General Partnership incorporated by reference to Exhibit 28(e) to Registrant's Registration Statement on Form S-14 filed August 24, 1984, and the Certificate of Amendment of Partnership Agreement of
Newhall General Partnership, dated November 14, 1990 incorporated by reference to Exhibit 28(e) of the Company's Annual Report on Form 10-K for the year ended December 31, 1990, (Commission File Number 1-8885).
| |  | (g) |  | Limited Partnership Agreement of Newhall Management Limited Partnership, incorporated by reference to Exhibit 28(a) to the Company's report on Form 8-K filed December 11, 1990, (Commission File Number 1-8885).                                                                                                                                                                                                                                         
| |  | (h) |  | Amendment Number One to Limited Partnership Agreement of Newhall Management Limited Partnership incorporated by reference to Exhibit 99 (c) of the Company's report of Form 10-Q for the quarter ended June 30, 2000 (Commission File
Number 1-8885).                                                                                                                                                                                                     
| |  | (i) |  | Second Amendment to Partnership Agreement of Newhall General Partnership, incorporated by reference to Exhibit 99 (d) of the Company's report on Form 10-Q for the quarter ended June 30, 2000, (Commission File Number
1-8885).                                                                                                                                                                                                                          

---

(b)
No report on Form 8-K was filed in the fourth quarter ended December 31, 2000.

68

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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.

|                     |  | THE NEWHALL LAND AND FARMING COMPANY
|-------------------- |  | ------------------------------------
|                     |  |                                     
|                     |  | By                                  
|                     |  | By                                  
|Date: March 20, 2001 |  | By                                  

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 20, 2001                         |  |  | /s/THOMAS L. LEEThomas L. Lee Chairman and Chief Executive Officer Newhall
Management Corporation (Principal Executive Officer)               
|-------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Date: March 20, 2001                         |  |  | /s/STUART R. MORKStuart R. Mork Senior Vice President and Chief Financial Officer Newhall Management Corporation (Principal
Financial Officer)
|Date: March 20, 2001                         |  |  | /s/DONALD L. KIMBALLDonald L. Kimball Vice PresidentFinance and Controller Newhall Management Corporation (Principal
Accounting Officer)     
|Directors of Newhall Management Corporation: |  |  |                                                                                                                                               
|Date: March 21, 2001                         |  |  | /s/GEORGE L. ARGYROSGeorge L. Argyros                                                                                                         
|Date: March 21, 2001                         |  |  | /s/GARY M. CUSUMANOGary M. Cusumano                                                                                                           
|                                             |  |  |                                                                                                                                               

69

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|Date: March 21, 2001 |  |  | /s/THOMAS L. LEEThomas L. Lee                    
|-------------------- |  |  | -------------------------------------------------
|Date: March 21, 2001 |  |  | /s/THOMAS V. MCKERNAN, JR.Thomas V. McKernan, Jr.
|Date: March 21, 2001 |  |  | /s/HENRY K. NEWHALLHenry K. Newhall              
|Date: March 21, 2001 |  |  | /s/JANE NEWHALLJane Newhall                      
|Date: March 21, 2001 |  |  | /s/PETER T. POPEPeter T. Pope                    
|Date: March 21, 2001 |  |  | /s/CARL E. REICHARDTCarl E. Reichardt            
|Date: March 21, 2001 |  |  | /s/THOMAS C. SUTTONThomas C. Sutton              
|Date: March 21, 2001 |  |  | /s/BARRY LAWSON WILLIAMSBarry Lawson Williams    
|Date: March 21, 2001 |  |  | /s/EZRA K. ZILKHAEzra K. Zilkha                  

70

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The Newhall Land and Farming Company
Schedule IIIReal Estate and Accumulated Depreciation
December 31, 2000
(Dollars in thousands)

|                                           |  |   |        |   |  |  |   |        |  |   |         | Gross Amount at Which Carried
at December 31, 2000 (D) |   |        |   |   |        |  |  
|------------------------------------------ |  | - | ------ | - |  |  | - | ------ |  | - | ------- | ------------------------------------------------------ | - | ------ | - | - | ------ |  | -
|
|
|
|OPERATING PROPERTIES                       |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|Shopping Centers                           |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|Valencia Town Center                       |  | $ | 26,928 |   |  |  | $ | 22,136 |  | $ | 41,425  |                                                        | $ | (1,250 | ) | $ | 22,136 |  | $
|Valencia Town CenterRing Road             |  |   |        |   |  |  |   | 804    |  |   | 14,214  |                                                        |   |       |   |   | 804    |  |  
|River Oaks                                 |  |   | (A     | ) |  |  |   | 2,354  |  |   | 5,302   |                                                        |   | 831    |   |   | 2,354  |  |  
|NorthPark Village Square                   |  |   | (A     | ) |  |  |   | 2,701  |  |   | 7,398   |                                                        |   |       |   |   | 2,701  |  |  
|Hotel                                      |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|Valencia Hilton Garden Inn (C)             |  |   |        |   |  |  |   |       |  |   |        |                                                        |   |       |   |   |       |  |  
|Hyatt Valencia Hotel and Conference Center |  |   |        |   |  |  |   | 2,131  |  |   | 37,497  |                                                        |   | 138    |   |   | 2,131  |  |  
|Office and Mixed Use Projects              |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|City Center Office Building                |  |   | (B     | ) |  |  |   | 2,614  |  |   | 4,192   |                                                        |   | 1,697  |   |   | 2,614  |  |  
|Town Center Plaza                          |  |   |        |   |  |  |   | 636    |  |   | 5,399   |                                                        |   | 41     |   |   | 636    |  |  
|Valencia Entertainment Center              |  |   |        |   |  |  |   |       |  |   | 26,799  |                                                        |   |       |   |   |       |  |  
|Single Tenant Facilities                   |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|Office/Records Storage                     |  |   |        |   |  |  |   | 569    |  |   | 2,151   |                                                        |   |       |   |   | 569    |  |  
|Retail StoreTrader Joe's                  |  |   |        |   |  |  |   | 269    |  |   | 546     |                                                        |   |       |   |   | 269    |  |  
|Spectrum Health Club                       |  |   | (B     | ) |  |  |   | 1,000  |  |   | 6,156   |                                                        |   | 155    |   |   | 1,000  |  |  
|RestaurantEl Torito                       |  |   |        |   |  |  |   | 248    |  |   | 802     |                                                        |   |       |   |   | 248    |  |  
|RestaurantHamburger Hamlet                |  |   |        |   |  |  |   | 459    |  |   | 661     |                                                        |   |       |   |   | 459    |  |  
|RestaurantRed Lobster                     |  |   |        |   |  |  |   | 134    |  |   |        |                                                        |   |       |   |   | 134    |  |  
|RestaurantWendy's                         |  |   |        |   |  |  |   | 91     |  |   | 300     |                                                        |   |       |   |   | 91     |  |  
|Other Properties and Land Under Lease      |  |   |        |   |  |  |   | 2,466  |  |   | 4,891   |                                                        |   | (25    | ) |   | 2,466  |  |  
|                                           |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|TOTAL OPERATING PROPERTIES                 |  |   | 26,928 |   |  |  |   | 38,612 |  |   | 157,733 |                                                        |   | 1,587  |   |   | 38,612 |  |  
|                                           |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|TOTAL PROPERTIES UNDER DEVELOPMENT         |  |   |       |   |  |  |   |       |  |   | (4,132  | )                                                      |   |       |   |   |       |  |  
|                                           |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  
|T O T A L                                  |  | $ | 26,928 |   |  |  | $ | 38,612 |  | $ | 153,601 |                                                        | $ | 1,587  |   | $ | 38,612 |  | $
|                                           |  |   |        |   |  |  |   |        |  |   |         |                                                        |   |        |   |   |        |  |  

71

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The Newhall Land and Farming Company
Schedule III (continued)
December 31, 2000

2000

1999

1998Balance at beginning of period

$
328,969

$
288,155

$
262,634Additions:Cash expenditures


27,441


67,988


101,789Deletions:Cost of real estate sold


(161,343
)

(23,034
)

(76,268
)Other


(1,267
)

(4,140
)Balance at end of period

$
193,800

$
328,969

$
288,155


2000

1999

1998Balance at beginning of period

$
47,909

$
39,443

$
35,431Additions:Charged to expense


10,272


11,718


7,277Other








Deletions:Cost of real estate sold


(24,886
)




(3,265
)Other





(3,252
)

Balance at end of period

$
33,295

$
47,909

$
39,443


72

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INDEPENDENT AUDITORS' REPORT

The
Board of Directors of Newhall Management Corporation
and Partners of The Newhall Land and Farming Company:

Under
date of January 16, 2001, we reported on the consolidated balance sheets of The Newhall Land and Farming Company and subsidiaries as of December 31, 2000, and
1999, and the related consolidated statements of income, changes in partners' capital, and cash flows for each of the years in the three-year period ended December 31, 2000, as
contained in the annual report on Form 10-K for the year 2000. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related
schedule of real estate and accumulated depreciation as of December 31, 2000 and for each of the years in the three-year period then ended. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In
our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

|Los Angeles, California
January 16, 2001 |  | /s/KPMG LLP
|---------------------------------------- |  | -----------

73

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THE NEWHALL LAND AND FARMING COMPANY
INDEX TO EXHIBITS

Item 14 (a) 3

|Exhibits
Number |  | Description                     
|--------------- |  | --------------------------------
|11              |  | Computation of earnings per unit
|21              |  | Subsidiaries of the Registrant  
|23              |  | Independent Auditors' Consent   

74

---