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

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FORM 10-Q

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

For the quarterly period ended June 30, 2002

or

|o | 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, CA 91355(Address of principal executive offices) (Zip Code)

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

Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý        No  o

At
July 31, 2002, 24,006,963 partnership units were outstanding

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Part I. Financial Information
Item 1. Financial Statements

Consolidated Statements of Income
(Unaudited)

|In thousands except per unit                        |                             | Three Months Ended
June 30,     |                             | Six Months Ended
June 30, |       
|--------------------------------------------------- | --------------------------- | ------------------------------- | --------------------------- | ------------------------- | ------
|
|Revenues                                            |                             |                                 |                             |                           |       
|                                                    | Real estate                 |                                 |                             |                           |       
|                                                    |                             | Residential land sales          |                             | $                         | 27,878
|                                                    |                             | Industrial and commercial sales |                             |                           | 9,802 
|                                                    |                             | Commercial operations           |                             |                           |       
|                                                    |                             |                                 | Income-producing properties |                           |       
|                                                    |                             |                                 | Valencia Water Company      |                           |       
|                                                    |                             |                                 |                             |                           |       
|                                                    |                             |                                 | 50,902                      |                           |       
|                                                    |                             |                                 |                             |                           |       
|Agriculture operations                              |                             |                                 | 1,308                       |                           |       
|                                                    |                             |                                 |                             |                           |       
|Total revenues                                      |                             | $                               | 52,210                      |                           | $     
|                                                    |                             |                                 |                             |                           |       
|Contribution to income                              |                             |                                 |                             |                           |       
|                                                    | Real estate                 |                                 |                             |                           |       
|                                                    |                             | Residential land sales          |                             | $                         | 9,532 
|                                                    |                             | Industrial and commercial sales |                             |                           | 5,049 
|                                                    |                             | Community development           |                             |                           | (4,829
|                                                    |                             | Commercial operations           |                             |                           |       
|                                                    |                             |                                 | Income-producing properties |                           |       
|                                                    |                             |                                 | Valencia Water Company      |                           |       
|                                                    |                             |                                 |                             |                           |       
|                                                    |                             |                                 | 13,625                      |                           |       
|                                                    |                             |                                 |                             |                           |       
|Agriculture operations                              |                             |                                 | (7                          | )                         |       
|General and administrative expense                  |                             |                                 | (3,529                      | )                         |       
|                                                    |                             |                                 |                             |                           |       
|Operating income                                    |                             |                                 | 10,089                      |                           |       
|Interest and other, net                             |                             |                                 | (714                        | )                         |       
|                                                    |                             |                                 |                             |                           |       
|Net income                                          |                             | $                               | 9,375                       |                           | $     
|                                                    |                             |                                 |                             |                           |       
|Net income per unit                                 |                             | $                               | 0.39                        |                           | $     
|                                                    |                             |                                 |                             |                           |       
|Net income per unitdiluted                         |                             | $                               | 0.38                        |                           | $     
|                                                    |                             |                                 |                             |                           |       
|Number of units used in computing per unit amounts: |                             |                                 |                             |                           |       
|                                                    | Net income per unit         |                                 |                             | 24,064                    |       
|                                                    | Net income per unitdiluted |                                 |                             | 24,560                    |       
|Cash distributions per unit:                        |                             |                                 |                             |                           |       
|                                                    | Regular                     |                                 | $                           | 0.10                      |       
|                                                    | Special                     |                                 |                             |                          |       

See
notes to consolidated financial statements

2

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Consolidated Balance Sheets

|In thousands                      |                                                                                                                                                                                                       | June 30,
2002     |         | December 31,
2001
|--------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------- | -----------------
|
|ASSETS                            |                                                                                                                                                                                                       |                   |         |                  
|                                  | Cash and cash equivalents                                                                                                                                                                             |                   | $       | 2,065            
|                                  | Accounts and notes receivable                                                                                                                                                                         |                   |         | 27,840           
|                                  | Land under development                                                                                                                                                                                |                   |         | 80,704           
|                                  | Land held for future development                                                                                                                                                                      |                   |         | 21,938           
|                                  | Income-producing properties held for sale, net                                                                                                                                                        |                   |         | 2,322            
|                                  | Income-producing properties, net                                                                                                                                                                      |                   |         | 150,549          
|                                  | Property and equipment, net                                                                                                                                                                           |                   |         | 74,934           
|                                  | Investment in joint venture                                                                                                                                                                           |                   |         | 1,058            
|                                  | Other assets and deferred charges                                                                                                                                                                     |                   |         | 15,106           
|                                  |                                                                                                                                                                                                       |                   |         |                  
|                                  |                                                                                                                                                                                                       | $                 | 376,516 |                  
|                                  |                                                                                                                                                                                                       |                   |         |                  
|LIABILITIES AND PARTNERS' CAPITAL |                                                                                                                                                                                                       |                   |         |                  
|                                  | Accounts payable                                                                                                                                                                                      |                   | $       | 24,372           
|                                  | Accrued expenses                                                                                                                                                                                      |                   |         | 41,678           
|                                  | Deferred revenues                                                                                                                                                                                     |                   |         | 30,699           
|                                  | Mortgage and other debt                                                                                                                                                                               |                   |         | 82,288           
|                                  | Advances and contributions from developers for utility construction                                                                                                                                   |                   |         | 37,553           
|                                  | Other liabilities                                                                                                                                                                                     |                   |         | 22,797           
|                                  |                                                                                                                                                                                                       |                   |         |                  
|                                  |                                                                                                                                                                                                       | Total liabilities |         |                  
|                                  | Partners' capital                                                                                                                                                                                     |                   |         |                  
|                                  | 24,073 units outstanding, excluding 12,699 units in treasury (cost-$314,916), at June 30, 2002 and
24,374 units outstanding, excluding 12,398 units in treasury (cost-$304,335), at December 31, 2001 |                   |         | 137,129          
|                                  |                                                                                                                                                                                                       |                   |         |                  
|                                  |                                                                                                                                                                                                       | $                 | 376,516 |                  
|                                  |                                                                                                                                                                                                       |                   |         |                  

See
notes to consolidated financial statements

3

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Consolidated Statements of Cash Flow
(Unaudited)

|                                                                     |                                                                                   | Six Months Ended
June 30,                                                       |      
|-------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -----
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                |                                                                                   |                                                                                 |      
|                                                                     | Net income                                                                        |                                                                                 | $    
|                                                                     | Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                 |      
|                                                                     |                                                                                   | Depreciation and amortization                                                   |      
|                                                                     |                                                                                   | Increase in land under development                                              |      
|                                                                     |                                                                                   | Cost of sales and other inventory changes                                       |      
|                                                                     |                                                                                   | (Increase) decrease in accounts and notes receivable                            |      
|                                                                     |                                                                                   | Increase (decrease) 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 joint venture                                                       |                                                                                 |      
|                                                                     |                                                                                   |                                                                                 |      
|                                                                     | Net cash used in investing activities                                             |                                                                                 |      
|                                                                     |                                                                                   |                                                                                 |      
|CASH FLOWS FROM FINANCING ACTIVITIES:                                |                                                                                   |                                                                                 |      
|                                                                     | Distributions paid                                                                |                                                                                 |      
|                                                                     | Decrease in mortgage and other debt, net                                          |                                                                                 |      
|                                                                     | Increase in advances and contributions from developers for utility construction   |                                                                                 |      
|                                                                     | Purchase of partnership units                                                     |                                                                                 |      
|                                                                     | Issuance of partnership units                                                     |                                                                                 |      
|                                                                     |                                                                                   |                                                                                 |      
|                                                                     | Net cash used in financing activities                                             |                                                                                 |      
|                                                                     |                                                                                   |                                                                                 |      
|Net (decrease) increase in cash and cash equivalents                 |                                                                                   |                                                                                 | (985 
|Cash and cash equivalents, beginning of period                       |                                                                                   |                                                                                 | 3,050
|                                                                     |                                                                                   |                                                                                 |      
|Cash and cash equivalents, end of period                             |                                                                                   | $                                                                               | 2,065
|                                                                     |                                                                                   |                                                                                 |      
|Supplemental schedule of non-cash investing and financing activites: |                                                                                   |                                                                                 |      
|                                                                     | Payable for unit repurchases                                                      |                                                                                 |      
|                                                                     |                                                                                   |                                                                                 |      

See
notes to consolidated financial statements

4

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Notes to Consolidated Financial Statements

Note 1. Accounting Policies

The consolidated financial statements include the accounts of The Newhall Land and Farming Company and its subsidiaries, all of which are wholly-owned
(collectively, "the Company"). All significant intercompany balances and transactions are eliminated.

The
Company's unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles used in the preparation of the Company's annual
financial statements. In the opinion of the Company, all adjustments, consisting of normal and recurring items, necessary for a fair presentation of the results of operations for the three and six
months ended June 30, 2002 and 2001 have been made. The interim statements are condensed and do not include some of the information necessary for a more complete understanding of the financial
data. Accordingly, your attention is directed to the footnote disclosures found on pages 28 through 40 of the Company's 2001 Annual Report on Form 10-K. In addition, a summary of
the accounting policies that management considers significant in the preparation of the Company's consolidated financial statements is included inItem 2: Management's
Discussion and Analysis of Financial Condition and Results of Operations. Certain reclassifications have been made to prior period's amounts to conform to the current period
presentation.

Interim
financial information for the Company has substantial limitations as an indicator for the calendar year because:



Note 2. Details of Land Under Development

(In $000)

June 30, 2002

December 31, 2001ValenciaResidential development

$
45,154

$
44,911Industrial and commercial land development


34,206


32,687Agriculture


1,344


287Total land under development

$
80,704

$
77,885


5

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Note 3. Details for Earnings per Unit Calculation

(In 000's except per unit)

Income
(numerator)

Units
(denominator)

Per UnitFor three months ended June 30, 2002Net income per unitNet income available to unitholders

$
9,375

24,064

$
.39Effect of dilutive securitiesUnit options




496


(.01
)Net income per unitdiluted

$
9,375

24,560

$
.38For three months ended June 30, 2001Net income per unitNet income available to unitholders

$
75,337

25,588

$
2.94Effect of dilutive securitiesUnit options




287


(.03
)Net income per unitdiluted

$
75,337

25,875

$
2.91For six months ended June 30, 2002Net income per unitNet income available to unitholders

$
20,498

24,144

$
.85Effect of dilutive securitiesUnit options




445


(.02
)Net income per unitdiluted

$
20,498

24,589

$
.83For six months ended June 30, 2001Net income per unitNet income available to unitholders

$
76,376

25,990

$
2.94Effect of dilutive securitiesUnit options




266


(.03
)Net income per unitdiluted

$
76,376

26,256

$
2.91


6

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Note 4. Details of Income-Producing Properties, Income-Producing Properties Held for Sale and Property and Equipment

(In $000s)

June 30, 2002

December 31, 2001Income-producing propertiesLand

$
36,600

$
36,600Buildings


133,173


132,432Other


9,443


8,754Properties under development


11,748


7,614190,964


185,400Accumulated depreciation


(40,415
)

(36,790
)$
150,549

$
148,610Income-producing properties held for saleOffice

$
2,720

$
2,720Accumulated depreciation


(398
)

(398
)$
2,322

$
2,322Property and equipmentLand

$
3,759

$
3,760Buildings


6,034


6,022Equipment


10,294


9,770Water supply systems, orchards and other


92,020


87,462Construction in progress


3,948


5,115116,055


112,129Accumulated depreciation


(41,121
)

(39,366
)$
74,934

$
72,763


Note 5. Disclosure about Certain Financial Statement Captions

Accounts and notes receivableThe $10.5 million increase in accounts and notes receivable at
June 30, 2002 compared to the prior year end was primarily due to the Company's acceptance in the 2002 first quarter of $18.7 million in promissory notes in conjunction with the terms of
certain commercial land and residential lot sales. The term of each of these notes is less than one year and they are expected to be collected prior to December 31, 2002. One of these notes in
the amount of $3 million was collected in the 2002 second quarter. In addition, $5.5 million of notes receivable outstanding at December 31, 2001 were collected in the 2002 second
quarter.

Deferred revenuesThe $17.0 million net increase in deferred revenues for the six months ended June 30, 2002 was
primarily attributable to $23.5 million in deferred revenues for certain commercial land and
residential lot sales recorded under percentage of completion accounting in 2002, including $12.4 million recorded in the 2002 second quarter. (See definition of percentage of completion in the
"Significant Accounting Policies and Estimates" section ofItem 2: Management's Discussion and Analysis of Financial Condition and Results of
Operations.) This increase was partially offset by recognizing $6.8 million of deferred revenues earned in 2002 to date, including $4.7 million of deferred
revenues recognized in the 2002 second quarter.

7

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Note 6. Business Segment Reporting

The following table provides financial information regarding revenues from external customers, income and total assets for the Company's business segments and
also provides a reconciliation to the Company's consolidated totals:

Three months ended June 30, 2002(In $000s)

Revenues

Contribution to Income

AssetsReal EstateResidential

$
27,878

$
9,634

$
44,194Industrial and commercial


9,802


5,237


55,978Community development





(4,612
)

34,726Income-producing properties


9,742


3,171


150,354Valencia Water Company


3,480


781


75,706Agriculture


1,308


15


7,218Central administration





(3,037
)

8,340All other





(1,100
)

52,210


10,089


376,516Interest and other, net





(714
)

$
52,210

$
9,375

$
376,516


Three months ended June 30, 2001(In $000s)

Revenues

Contribution to Income

AssetsReal EstateResidential

$
73

$
(789
)
$
22,981Industrial and commercial


89,337


83,416


41,809Community development





(3,560
)

31,335Income-producing properties


11,088


3,256


167,142Valencia Water Company


3,076


697


70,086Agriculture


1,603


301


7,693Central administration





(2,416
)

14,355All other





(3,525
)

105,177


77,380


355,401Interest and other, net





(2,043
)

$
105,177

$
75,337

$
355,401


8

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Six months ended June 30, 2002(In $000s)

Revenues

Contribution to Income

AssetsReal EstateResidential

$
44,775

$
14,286

$
44,194Industrial and commercial


31,563


15,133


55,978Community development





(7,259
)

34,726Income-producing properties


19,471


6,249


150,354Valencia Water Company


6,279


1,278


75,706Agriculture


1,931


315


7,218Central administration





(5,297
)

8,340All other





(2,350
)

104,019


22,355


376,516Interest and other, net





(1,857
)

$
104,019

$
20,498

$
376,516


Six months ended June 30, 2001(In $000s)

Revenues

Contribution to Income

AssetsReal EstateResidential

$
179

$
(1,515
)
$
22,981Industrial and commercial


97,712


85,552


41,809Community development





(5,153
)

31,335Income-producing properties


21,977


7,509


167,142Valencia Water Company


5,532


1,184


70,086Agriculture


2,311


697


7,693Central administration





(4,634
)

14,355All other





(3,600
)

127,711


80,040


355,401Interest and other, net





(3,664
)

$
127,711

$
76,376

$
355,401


9

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Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Inherent in
the preparation of these financial statements are certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. The Company evaluates these estimates and assumptions on a regular basis taking into account historical experience and other relevant current factors. Therefore, actual results
may differ from reported amounts under different assumptions or conditions.

The
interim statements are condensed and do not include some of the information necessary for a more complete understanding of the financial data. Accordingly, your attention is directed
to the footnote disclosures found on pages 28 through 40 of the Company's 2001 Annual Report on Form 10-K. A summary of the accounting policies that management considers significant
in the preparation of the Company's consolidated financial statements follows.

Revenue recognitionThe majority of revenues for the Company result from land sales. The Company follows the provisions in
Statement of Financial Accounting Standards No. 66,Accounting for Sales of Real Estate("FAS 66"), to record these sales. FAS 66 provides
specific sales recognition criteria to determine when land sales revenues can be recorded. For example, FAS 66 requires a sale must be consummated with a sufficient down payment of at least 20% to 25%
of the sales price depending upon the type and timeframe for development of the property sold, and that any receivable from the sale cannot be subject to future subordination. In addition, the seller
cannot retain any material continuing involvement in the property sold.

Percentage of completionWhen the Company has an obligation to complete development on sold property it utilizes the
percentage of completion method of accounting to record revenues and income.
Under percentage of completion accounting, the Company recognizes revenues and income based upon the ratio of development cost completed to the estimated total cost of the property sold, provided
required sales recognition criteria have been met. Unearned revenues resulting from applying percentage of completion accounting are reported as deferred revenues in the liabilities section of the
balance sheet. The Company estimates total project costs associated with the parcel sold. Revisions in profit estimates and changes in percentages complete are recorded in the consolidated statement
of income in subsequent periods, as they become known and the development progresses toward completion.

Project costsCosts incurred after the earlier of specific plan or tentative map approval are capitalized as a cost of that
project and included as an asset in land under development on the balance sheet. Preliminary planning and entitlement costs, including litigation costs, are charged to expense when incurred. Indirect
costs that do not clearly relate to projects under development, including general and administrative expenses, are charged to expense when incurred.

Cost allocationsThe Company generally allocates onsite costs to individual parcels within a project on a square foot basis if
the parcels in the project are of similar value. In mixed-use projects, where there may be both a residential and a commercial component with varying fair values, onsite costs are
allocated to the respective parcels using the relative sales value method. Under the relative sales value method, each parcel in the project under development is allocated onsite costs in proportion
to the estimated overall sales prices of the project such that each parcel to be sold reflects the same gross profit margin. Since this method requires the Company to estimate the expected sales
prices for

10

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the entire project, the profit margin on subsequent parcels sold will be impacted by both changes in the estimated total revenues as well as any changes in the estimated total costs of the project.

Offsite
improvements with regional benefit, such as freeway on-ramps and off-ramps and water storage tanks, are referred to as infrastructure costs. The Company
estimates the total cost to develop the infrastructure within a defined major development area and allocates this cost to the land within the area. Changes in the estimated remaining infrastructure
costs or changes in the remaining developable acreage will impact the infrastructure cost allocation and corresponding profit margin for unsold land within a major development area.

11

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RESULTS OF OPERATIONS

Comparison of Second Quarter and Six Months of 2002 to Second Quarter and Six Months of 2001
Unaudited

The amounts of increase or decrease in revenues and income from the prior year second quarter and six months are as follows (in 000s, except per unit):

|                                                    |                        | Second Quarter
Increase (Decrease) |                             | Six Months
Increase (Decrease) |        
|--------------------------------------------------- | ---------------------- | ---------------------------------- | --------------------------- | ------------------------------ | -------
|
|Revenues                                            |                        |                                    |                             |                                |        
|                                                    | Real estate            |                                    |                             |                                |        
|                                                    |                        | Residential land sales             |                             | $                              | 27,805 
|                                                    |                        | Industrial and commercial sales    |                             |                                | (79,535
|                                                    |                        | Commercial operations              |                             |                                |        
|                                                    |                        |                                    | Income-producing properties |                                |        
|                                                    |                        |                                    | Valencia Water Company      |                                |        
|                                                    |                        |                                    |                             |                                |        
|                                                    |                        |                                    | (52,672                     | )                              | -51    
|                                                    |                        |                                    |                             |                                |        
|                                                    | Agriculture Operations |                                    |                             | (295                           | )      
|                                                    |                        |                                    |                             |                                |        
|Total revenues                                      |                        | $                                  | (52,967                     | )                              | -50    
|                                                    |                        |                                    |                             |                                |        
|Contribution to Income                              |                        |                                    |                             |                                |        
|                                                    | Real estate            |                                    |                             |                                |        
|                                                    |                        | Residential land sales             |                             | $                              | 10,564 
|                                                    |                        | Industrial and commercial sales    |                             |                                | (77,745
|                                                    |                        | Community development              |                             |                                | (682   
|                                                    |                        | Commercial operations              |                             |                                |        
|                                                    |                        |                                    | Income-producing properties |                                |        
|                                                    |                        |                                    | Valencia Water Company      |                                |        
|                                                    |                        |                                    |                             |                                |        
|                                                    |                        |                                    | (67,668                     | )                              | -83    
|                                                    |                        |                                    |                             |                                |        
|Agriculture Operations                              |                        |                                    | (214                        | )                              | -103   
|General and administrative expense                  |                        |                                    | 591                         |                                | 14     
|                                                    |                        |                                    |                             |                                |        
|Operating income                                    |                        |                                    | (67,291                     | )                              | -87    
|Interest and other, net                             |                        |                                    | 1,329                       |                                | 65     
|                                                    |                        |                                    |                             |                                |        
|Net income                                          |                        | $                                  | (65,962                     | )                              | -88    
|                                                    |                        |                                    |                             |                                |        
|Net income per unit                                 |                        | $                                  | (2.55                       | )                              | -87    
|                                                    |                        |                                    |                             |                                |        
|Net income per unitdiluted                         |                        | $                                  | (2.53                       | )                              | -87    
|                                                    |                        |                                    |                             |                                |        
|Number of units used in computing per unit amounts: |                        |                                    |                             |                                |        
|Net income per unit                                 |                        |                                    | (1,524                      | )                              | -6     
|                                                    |                        |                                    |                             |                                |        
|Net income per unitdiluted                         |                        |                                    | (1,315                      | )                              | -5     
|                                                    |                        |                                    |                             |                                |        

The
increases and decreases in revenues and income for the three and six months are attributable to the following:

For
the three months ended June 30, 2002, revenues totaled $52.2 million and net income totaled $9.4 million compared to revenues for the 2001 second quarter of
$105.2 million and net income of $75.3 million. Revenues for the six months ended June 30, 2002 totaled $104.0 million and net income

12

---

totaled $20.5 million compared to revenues of $127.7 million and net income of $76.4 million for the same period in 2001.

Major
contributors to both second quarter and six-month 2002 results were the sales of the entire 326 entitled, unimproved residential lots in the community of Alta Vista, 95
entitled, improved lots in the Company's Westridge golf course community and 16.7 acres of commercial land planned for an 185,000
square foot specialty retail center across from Valencia Town Center. Combined, these sales added $33.0 million to revenues and $14.3 million to income in the 2002 second quarter.

Major
contributors to both second quarter and six-month 2001 results were the sales of the Company's Chiquita Canyon Landfill, its option to purchase approximately 1,800
acres in Broomfield, Colorado and a 7.9-acre commercial parcel for 341 apartments with 10,000-square-feet of ground floor retail. Combined, these sales added
$88.1 million to revenues and $84.6 million to income in the 2001 second quarter.

The
Company has increased its earnings estimate for the full year ending December 31, 2002 to a range of approximately $1.50 to $1.60 per unit. This estimate is an increase from
the $1.10 to $1.15 net income per unit range previously reported. The new estimate includes the sale of 1,331 residential lots in the communities of Westridge (730 lots), Alta Vista (326 lots) and
Hidden Creek (275 lots); approximately 60 acres of commercial land; 14 acres of industrial land; and income from the Company's portfolio of income-producing properties of approximately
$12 million after depreciation. The estimate for 2002 does not include any income-producing asset sales. For the first six months of 2002, the Company closed escrows on 733 residential lots and
55.5 acres of commercial land. During the second half of 2002, the Company expects to close escrows on an additional 598 residential lots and about 20 acres of commercial and industrial land. The
ability to complete sales in 2002 will be dependent upon a variety of factors including, but not limited to, identification of suitable buyers, agreement with the buyers on definitive terms,
successful completion of the due diligence work by buyers, availability of financing to suitable buyers, regulatory and legal issues, market and other conditions.

Residential Land Sales

In the 2002 second quarter, 421 residential lots closed escrow. The entire inventory of 326 entitled, unimproved residential lots in the community of Alta Vista
and 95 entitled, improved lots in the Westridge golf course community contributed $25.5 million to revenues and $9.4 million to income under percentage of completion accounting. For the
six months ended June 30, 2002, the Company closed escrows on 407 residential lots in the Westridge community and the 326 lots in Alta Vista, for a total of 733 residential lots sold, which
combined contributed $41.4 million to revenues and $13.9 million to income.

No
residential lots were sold during the 2001 second quarter or the six-month period ended June 30, 2001. For the three- and six-months periods ended
June 30, 2001 revenues of $73,000 and $179,000, respectively, and net losses of $1.0 million and $1.8 million, respectively, were primarily due to amounts received from merchant
builders under price and profit participation agreements offset by administrative expenses.

At
June 30, 2002, the entire 275 residential lots in the community of Hidden Creek and 278 residential lots in Valencia Westridge were in escrow for a combined sales price of
approximately $70 million with
closings scheduled in the second half of 2002. There were no residential lots in escrow at the end of the 2001 second quarter. All escrow closings are subject to market and other conditions beyond the
control of the Company.

Home
sales by merchant builders on lots previously purchased from the Company continued at record pace with 696 homes sold for the six-month period ended June 30, 2002
compared to 448 sold

13

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during the same period last year. A record level of Valencia home sales could be achieved this year, exceeding the record home sales of 873 achieved last year, if the current sales pace continues and
merchant builders are able to close escrow on homes in the Company's Valencia Westridge community before year-end.

At
June 30, 2002, merchant builders had 457 homes in escrow, compared to 369 at June 30, 2001. While the Company does not participate directly in profits generated from
escrow closings by merchant builders, the sale of these previously sold lots to homebuyers is key to the Company's future success in selling additional lots.

Lot
sales in 2001 were impacted by the California Public Utilities Commission's (CPUC) decision to combine its review of Valencia Water Company's request to expand its service area
together with the Valencia Water Company's water management plan. Late in 2001, the CPUC approved the Valencia Water Company's water management plan and granted the service expansion request, which
permits Valencia Water Company to expand its service area to the Hidden Creek, Creekside, Alta Vista and West Creek communities (see the "Community Development" section below). These communities
include approximately 4,000 potential residential lots and apartments. Valencia Water Company is Newhall Land's wholly-owned public water utility company serving Valencia and nearby areas. In
April 2002, the CPUC denied opponents' request for a re-hearing regarding the CPUC's approval of Valencia Water Company's water management plan and service area expansion.
Opponents' appeal of the CPUC's decision to the California Supreme Court was denied on June 19, 2002.

Industrial and Commercial Sales

Industrial Land Sales

Demand for industrial land in the Company's business parks remains weak as evidenced by higher vacancy rates in Valencia industrial properties constructed by
third-party developers and lower sales and leasing of new industrial space by third-party developers and the Company. At June 30, 2002, the
combined vacancy rate in both Valencia Industrial Center and Valencia Commerce Center increased to 14% compared to 11% in the 2002 first quarter and 6.4% at June 30, 2001.

No
industrial land sales closed escrow in the quarter or six-month periods ended June 30, 2002. Results for the six months ended June 30, 2001 included the sale
of a 9.5-acre industrial parcel which contributed $4.7 million to revenues and $1.3 million to income. The Company continues to market for sale 14 acres of industrial land;
however, at June 30, 2002, no industrial parcels were in escrow. One industrial parcel, totaling 15.0 acres, was in escrow at June 30, 2001 but the escrow was subsequently canceled. The
ability to complete sales in 2002 will be dependent upon a variety of factors including, but not limited to, identification of suitable buyers, agreement with the buyers on definitive terms,
successful completion of the due diligence work by buyers, availability of financing to suitable buyers, regulatory and legal issues, market and other conditions. The Company has 369 net acres of
industrial land remaining in Valencia.

Commercial Land Sales

In the 2002 second quarter, the Company recorded $8.8 million in revenues and $5.8 million in income from commercial land sales under the percentage
of completion accounting method. Commercial land sales consisted primarily of a sale of a 16.7-acre parcel across from Valencia Town Center regional mall planned for an 185,000 square foot
retail center to be anchored by Kohl's department store. For the six-months ended June 30, 2002, the Company closed escrows on 55.5 acres of commercial land, contributing
$30.5 million to revenues and $17.2 million to income. In addition to the 16.7 acres sold in the 2002 second quarter, the 55.5 acres included 22.3 acres in the Westridge golf course
community for two commercial sites and an apartment site, which contributed $17.3 million to revenues and $9.3 million to income.

14

---

For
the quarter and six-months ended June 30, 2001, the Company closed escrows on 12.0 acres of commercial land, including a 7.9-acre commercial parcel in
Town Center for a 341-unit apartment community with 10,000-square-feet of ground floor retail space in Valencia Town Center which contributed $10.1 million
to revenues and $7.7 million to income.

At
June 30, 2002, one commercial parcel totaling 4.6 acres was in escrow compared to no commercial parcels in escrow at the end of the 2001 second quarter. All escrow closings are
subject to market and other conditions beyond the control of the Company.

Income Property and Other Sales

No income property sales were completed in the six-months ended June 30, 2002. The Company has only one minor income property that currently is
being marketed for sale. In the 2001 second quarter, the Company sold its Chiquita Canyon Landfill and its option to purchase approximately 1,800 acres in Broomfield, Colorado for a combined total of
$78.0 million in revenues and $76.9 million in income.

No
income properties were in escrow at June 30, 2002. The Bank of America office building and a small office building were in escrow at June 30, 2001 which escrows
subsequently closed in the 2001 third quarter.

Community Development

Community development expenses increased 16% for the three-month period and 34% for the six-month period ended June 30, 2002 compared to the
same 2001 periods primarily due to an increase in legal expense. Community development expenses for the year are expected to increase about 42% from the 2001 level due to the Company's response to
third-party legal challenges and its continued focus on entitlements, planning and community marketing to complete the projected sellout of Valencia residential land and to position Newhall Ranch to
commence development.

In
late May 2002, the California Department of Fish and Game (Fish and Game) conducted a search on certain areas of Newhall Ranch. Fish and Game claims that the search was to
determine if Newhall Land had destroyed an endangered plant called the San Fernando Valley Spineflower, even though the Company was conducting agricultural activities on the property, which are
permissible under the California Endangered Species Act. In 2000, the Company had notified Fish and Game and other agencies that it had found the plant in one small area of Newhall Ranch. During the
May 2002 search, Fish and Game found the plant in additional locations on a portion of Newhall Ranch. The Department of Fish and Game is continuing its investigation. The existence of the plant
may affect the development plans for a portion of Newhall Ranch where the plant has been located. The Company is surveying other portions of Newhall Ranch to determine other possible locations of the
plant. The Company expects that additional surveys will be conducted in subsequent years. The Company currently is planning its first neighborhood, River Village, in Newhall Ranch. As part of planning
for that project, a rare plant survey was conducted and Spineflowers were not found.

The
Company recently announced that hearings before the Los Angeles County Board of Supervisors concerning the Newhall Ranch Environmental Impact Report six issues identified by a Kern
County Superior Court as requiring additional analyses are expected to be further delayed until early 2003. Adequacy and reliability of the Newhall Ranch water supply was one of the six issues
requiring additional analyses. The delay is a result of the de-certification of an environmental impact report regarding the acquisition and importing of 41,000 acre feet per year of state
water by Castaic Lake Water Agency (CLWA), the water wholesaler serving the Santa Clarita Valley. CLWA appealed the de-certification decision to the California Supreme Court and the appeal
was denied. Of the 41,000 acre
feet of water that is the subject of the CLWA environmental impact report, about 1,600 acre feet per year was expected to be used for Newhall Ranch. Consequently, the Company is working on

15

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securing alternative water supplies for the additional annual supply of 1,600 acre feet. Based on the current schedule, the Company expects to return to the Kern County Superior Court late next year.
The target date for commencement of initial development of Newhall Ranch remains 2005. The length of time necessary to obtain completion of governmental review and approvals and the judicial process
are difficult to predict. Additional delays in these processes would adversely affect development plans.

West
Creek is a 2,214-home community in the Valencia North River planning area. The project received tentative approval from the Los Angeles County Board of Supervisors in
September 2000 and final approval in January 2001. Opponents to the community filed a California Environmental Quality Act (CEQA) lawsuit challenging the Board of Supervisors' approval.
In November 2001, the Superior Court dismissed opponents' claims, and the decision has been appealed by opponents. The length of time required to resolve this matter and outcome of the judicial
process are difficult to predict. An adverse decision would affect the timing and costs of the project.

Income-Producing Properties

For the three- and six-months periods ended June 30, 2002, revenues were down 12% and 11%, respectively, over the same periods in 2001. The
decreases primarily were due to the loss of revenues generated from sold income-producing properties that closed escrow in the second, third and fourth quarters of 2001, and the closing of the Edwards
movie theaters in the Valencia Town Center regional shopping mall late in the 2001 third quarter. Income for the three-month period essentially was unchanged from the same period in 2001, while income
for the six-month period ended June 30, 2002 was down 17% over the same period in 2001 primarily due to the sale of income-producing properties.

Income
for the current and prior year second quarters include the effects of the cessation of depreciation on Properties Held for Sale and Sold Properties of $17,000 and $120,000,
respectively, and for the current and prior six-month periods of $36,000 and $275,000, respectively. In the 2001 second quarter, the Spectrum Club, which had been classified as a property
held for sale, was re-classified as held for investment. Accordingly, depreciation expense was recorded covering the entire period the property was held for sale.

Retained
properties produced slightly lower net operating income (before administration, depreciation and interest expenses) in the second quarter 2002 primarily due to certain
one-time common area maintenance expenses. Net operating income for the six-month period ended June 30, 2002 was higher versus the same period in 2001 due to the strong
operating results of the hotels in the 2002 first quarter. Net operating income for 2002 from the Company's income portfolio is expected to be approximately $22 million, and income (after
administration, depreciation and interest expenses) is expected to be approximately $12 million.

16

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Income-producing Properties

Three Months Ended
June 30,

Six Months Ended
June 30,Net Operating Income (Dollars in thousands)2002

2001

2002

2001Retained Properties(1)

$
5,570

$
5,647

$
11,034

$
10,986Properties Held for Sale(2)


(6
)

(35
)

(12
)

32Sold Properties(3)


19


390


(4
)

1,691Net Operating Income(4)


5,583


6,002


11,018


12,709Admin/Depreciation


(2,444
)

(2,852
)

(4,839
)

(5,308
)Total Contribution to Income

$
3,139

$
3,150

$
6,179

$
7,401


---

Occupancy
rates at the Company's various income-producing properties were as follows at June 30, 2002 and 2001:

June 30, 2002

June 30, 2001Occupancy Rates*:Valencia Town Center Mall**

82%

94%Entertainment Center***

97%

96%Valencia Town Center Master Lease****

80%

56%NorthPark/River Oaks Shopping Centers

99%

100%Hotels

75%

77%


Valencia Water Company

Valencia Water Company is a regulated utility and a wholly-owned subsidiary of the Company serving approximately 24,000 metered connections. In
February 2002, Valencia Water Company voluntarily reduced its general rates by 4.85% in order to obtain a rate of return at or below its authorized rate of return with the California Public
Utilities Commission (CPUC). However, Valencia Water Company filed an application with the CPUC on May 3, 2002 for a proposed rate increase to cover rising costs and planned capital
expenditures to improve system reliability and water quality. The

17

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CPUC is expected to complete its review of the application and render a decision in early 2003. There is no assurance that the requested rate increase will be approved.

Despite
the 4.85% rate reduction that took effect at the end of February 2002, revenues for the three- and six-months periods ended June 30, 2002
increased 13% and 14%, respectively, from the same periods in 2001 primarily due to a 3% year to date increase in the water company's customer base and increased water usage due to drier weather
conditions. Income for the quarter and six-month period ended June 30, 2002 increased 39% and 16%, respectively. The increase was primarily due to the increase in revenue expenses
partially offset by higher legal expenses related to proceedings in which Valencia Water Company is involved.

Agricultural Operations

For the three- and six-month periods ended June 30, 2002, revenues from agriculture operations were 18% and 16% lower, respectively, than the
same periods in 2001, primarily due to a reduction in sales volume and prices on alfalfa and a decrease in oil and gas prices. Income for the three- and six-months ended June 30,
2002 decreased 103% and 56%, respectively, compared to the same periods in 2001 due to the factors mentioned above as well as costs associated with increased acreage being converted to idle farmland
as a result of low commodity prices and dryland crop losses resulting from the lack of rain.

General and Administrative Expense

General and adminstrative expenses for the 2002 second quarter decreased 14% while expenses for the six-months ended June 30, 2002 remained
comparable with the prior year. The 2002 second quarter decrease was primarily due to reduced levels of incentive-based compensation expense accrual resulting from lower earnings for the 2002 second
quarter. For the six-months ended June 30, 2002, the reduction in incentive-based compensation expense accrual was offset by an increase in expense for unit ownership plans. General
and administrative expenses for all of 2002 are expected to be comparable to 2001 levels.

Interest and Other, net

Interest and other, net decreased 65% and 49% for the 2002 second quarter and the six-months ended June 30, 2002, respectively. Lower interest
rates on the Company's bank line borrowings together with increased interest income from promissory notes accepted by the Company in conjunction with certain commercial land and residential lots sales
in the 2001 fourth quarter and 2002 first quarter were the
primary contributors to the decrease over the same 2001 periods. Interest expense in 2002 is expected to be 34% lower than 2001 due to lower interest rates on the Company's bank line borrowings,
increase in interest income from promissory notes and an increase in capitalized interest on active real estate projects.

18

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FINANCIAL CONDITION

Liquidity and Capital Resources

At June 30, 2002, the Company had cash and cash equivalents of $2.1 million and $136.5 million available under bank lines, net of
$24.2 million in letters of credit. Borrowings outstanding on unsecured lines of credit totaled $23.3 million. In addition, the Company had fixed rate debt totaling $59.0 million.
The Company believes it has adequate sources of cash from operations and debt capacity, combined with anticipated land sales, to finance future operations on both a short- and long-term
basis and to fund unit repurchases. (See additional information on the unit repurchase program below.) The Company utilizes its available debt capacity to fund on-going operations, as well
as administration and legal costs to bring future projects online over the longer term to enable the Company to complete the development of Valencia and begin development of Newhall Ranch. As a
guideline, the Company targets to limit total debt to no more than 60% of the appraised value of the income portfolio. The Company ended the 2002 second quarter with a conservative debt to income
portfolio value ratio of 31%, which provides adequate debt capacity to fund operations. At June 30, 2002, there was no debt secured by the Company's raw land or land under development
inventories.

In
May 2001, the Board of Directors authorized a unit repurchase program of up to 2,520,000 units, or 10% of the then outstanding units. The Company repurchases units from time to
time at prevailing market prices and, depending on market conditions, either through open market, or unsolicited negotiated transactions. Repurchases are funded from cash flow generated from normal
business operations. As of June 30, 2002, a total of 1,386,085 units had been repurchased under this program for $40.3 million, or an average price of $29.10 per unit, and 1,133,915
units remained to be repurchased. Factors that could affect the Company's ability to complete its unit repurchase program include, but are not limited to, governmental approvals, changing market and
economic conditions, changing interest rates, challenges to governmental approvals and finding suitable buyers for certain properties. The Company recently announced that due to uncertainties of the
economy and various legal challenges concerning Newhall Ranch and West Creek (see the "Community Development" section above), the Company has reduced significantly the pace of repurchases and likely
will not complete the current program during 2002.

For
the six months ended June 30, 2002, the Company invested approximately $14 million in major roads and freeway improvements, which is included in land under development
on the accompanying balance sheet. In addition, the Company invested approximately $300,000 (net of a settlement received in May 2002 from Edwards Theatres, Inc. bankruptcy proceedings)
on the remodel of the former Edwards Theatres space in Valencia Town Center regional mall for relocation of the existing food court and creation of new retail space, and approximately
$3.5 million on the construction of Tournament Players Club® at Valencia championship golf course, in the Company's Westridge community, which are included in income-producing
properties on the accompanying balance sheet. For the remainder of 2002, the Company expects to invest approximately $17 million in major roads and freeway improvements to enable the Company to
continue its land sales program in Valencia. Another approximately $5.3 million is expected to be invested in 2002 in Valencia Town Center regional shopping mall for the remodel of the former
Edwards Theatres space for relocation of the existing food court and creation of new retail space with an additional $14.7 million in 2003, for a total of $20 million for the project.
Additionally, the Company expects to invest another approximately $10.5 million in 2002 and $5.5 million in 2003 on the completion of the golf course. As of June 30, 2002, there
were no other material commitments for capital expenditures.

19

---

The following discussion relates to principal items in the Consolidated Statements of Cash Flow:

Operating Activities

Net cash provided by operating activities totaled $27.7 million for the first six months of 2002 versus $66.4 million for the six months ended
June 30, 2001. For the six months ended June 30, 2002, revenues generated from operating activities included the sale of 733 residential lots, the sale of approximately 56 commercial
acres and revenue from the Company's portfolio of income-producing properties, combined for a total of $91.3 million. This was offset by the Company's acceptance in the 2002 first quarter of
$18.7 million in promissory notes in conjunction with the terms of certain commercial land and residential lot sales. The terms of these notes are less than one year and are expected to be
collected prior to December 31, 2002. One of these notes in the amount of $3 million was collected in the 2002 second quarter. In addition, $5.5 million of notes receivables
outstanding at December 31, 2001 were collected in the 2002 second quarter. Cash used in operating activities also included the use of approximately $47 million for land under
development expenditures mostly related to land preparation and infrastructure improvements to ready the land for development or sale. Additional uses of cash included the Company's general and
administrative expenses and interest expense.

For
the six months ended June 30, 2001, cash provided by operating activities included revenues from the sale of 21.5 industrial/commercial acres, the sale of the Chiquita Canyon
Landfill, the sale of an option on 1,800 acres in Broomfield, Colorado, revenues from the portfolio of income-producing properties, and the collection of a $9.4 million land sale note, which
combined generated a total of $127.1 million. Cash used in operating activities included primarily $26.6 million of expenditures for land under development inventories mostly related to
land preparation and infrastructure improvements to
ready land for sale. Additional uses of cash included the Company's general and administrative expenses and interest expense.

Investing Activities

Expenditures for the development of income-producing properties for the six-months ended June 30, 2002 totaled $5.8 million and were
primarily for the Valencia Town Center food court remodel and expansion, and construction of Tournament Players Club® at Valencia championship golf course, in the Company's Westridge
community. Expenditures for the development of income-producing properties for the six-month period ended June 30, 2001 totaled $3.2 million and were primarily for the
completion of two office buildings sold in December 2000. Purchase of property and equipment totaled $4.1 million for the six-month period ended June 30, 2002 compared
to $5.5 million for the same 2001 period and was primarily for water utility construction.

Financing Activities

Distributions of $8.0 million for the six-months ended June 20, 2002 consisted of two regular quarterly distributions of $.10 per unit
and a $.13 per unit special distribution. For the six month period ended June 30, 2001, two quarterly distributions of $.10 per unit each and a $.10 per unit special distribution were paid for
a total of $7.8 million. The Company declared a third quarter 2002 regular distribution of $.10 per unit, payable September 16, 2002 to unitholders of record on August 2, 2002.
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.

During
the six months ended June 30, 2002, 415,935 partnership units were repurchased for $12.7 million, or an average price of $30.54. For the six-month period
ended June 30, 2001, a total of 1,955,090 units were repurchased for $52.1 million, or an average price of $26.63 per unit.

20

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FORWARD-LOOKING INFORMATION

Except for historical matters, the matters discussed in this report are forward-looking statements that involve inherent risks and uncertainties. We have tried,
wherever practical, to identify these forward-looking statements by using words like "anticipate," "believe," "estimate," "target", "project," "expect," "plan," and similar expressions.
Forward-looking statements include, but are not limited to, statements
about plans; opportunities; anticipated regulatory approvals; 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 expressly
undertake no obligation to publicly revise or update 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. See our risk factors below.

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 and commercial income property can be 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 north Los Angeles County. The Southern California economy is profoundly
affected by the entertainment, technology, defense and certain other segments. Consequently, all sectors of the Company's real estate operations tend to be cyclical. The regional economy, like that of
the state and nationally, has slowed into a recession. There can be no assurances that the recession will not worsen or the economy will recover in the near future.

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. 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.

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 comparable to that sold and leased by the Company and
the level of demand for such real estate. Currently, the residential market in the Santa Clarita Valley, including Valencia, remains strong and has been capturing an increasing portion of Los

21

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Angeles County's new home sales. However, there is no assurance that this trend will continue. The industrial market in Valencia is experiencing declining demand and rising vacancy rates since the
national and regional economy has slowed and concerns linger over California's power crisis. In addition, local competition has intensified as local business parks have opened or are in the planning
stages.

Geographic Concentration:The Company's real estate development activities are focused on the 18,600 acres that it owns in
north 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 and Acts of Terror:The Company's assets and real estate operations may be adversely affected
by natural occurrences such as earthquakes and weather conditions, and acts of terrorism or armed conflict that may cause damage to assets, delay progress and increase the costs of infrastructure
construction and land development, and affect 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. (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 may be beyond the Company's control and could restrict or prevent
development of otherwise desirable new projects. 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 their 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.

Environmental Remediation:The Company owns or formerly owned properties with respect to which the Company may be required to
remediate environmental effects of prior releases of contamination. Future environmental costs are difficult to estimate because of factors such as, but not limited to, the unknown magnitude of
possible contamination, the unknown timing and extent of remediative actions that may be required, the determination of the Company's potential liability, and the extent to which such costs are
recoverable from third parties or from applicable insurance coverages. In addition, the length of time to perform any required remediation or the successful pursuit of responsible third parties is
difficult to predict. The ability to, or length of time required to, remediate any property could increase the costs of, and restrict, prevent or delay the development of a new project.

22

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Part I. Financial Information
Item 3. 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
June 30, 2002, the Company had $23.3 million of variable debt outstanding with a weighted average interest rate of 3.31% and $59.0 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 June 30, 2002
by expected maturity dates:

|Dollars in thousands    |                                | 2002 |   | 2003  |   | 2004 |        | 2005 |   | 2006   |   | Thereafter |       | Total |   | Fair
Value |  
|----------------------- | ------------------------------ | ---- | - | ----- | - | ---- | ------ | ---- | - | ------ | - | ---------- | ----- | ----- | - | ---------- | -
|Mortgage and Other Debt |                                |      |   |       |   |      |        |      |   |        |   |            |       |       |   |            |  
|                        | Fixed Rate Debt                |      | $ | 1,269 |   | $    | 10,970 |      | $ | 1,509  |   | $          | 1,657 |       | $ | 23,525     |  
|                        | Weighted Average Interest Rate |      |   | 7.57  | % |      | 8.32   | %    |   | 7.38   | % |            | 7.35  | %     |   | 7.43       | %
|                        | Variable Rate Debt(1)          |      | $ | 2,000 |   |      |        |      |   | 21,300 |   |            |       |       |   |            |  
|                        | Weighted Average Interest Rate |      |   | 3.09  | % |      |        |      |   | 3.33   | % |            |       |       |   |            |  

---

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 June 30, 2001
by expected maturity dates:

|Dollars in thousands    |                                | 2001 |   | 2002  |   | 2003 |        | 2004 |   | 2005   |   | Thereafter |       | Total |   | Fair
Value
|----------------------- | ------------------------------ | ---- | - | ----- | - | ---- | ------ | ---- | - | ------ | - | ---------- | ----- | ----- | - | ----------
|Mortgage and Other Debt |                                |      |   |       |   |      |        |      |   |        |   |            |       |       |   |           
|                        | Fixed Rate Debt                |      | $ | 1,167 |   | $    | 1,479  |      | $ | 10,968 |   | $          | 1,512 |       | $ | 1,655     
|                        | Weighted Average Interest Rate |      |   | 7.59  | % |      | 7.55   | %    |   | 8.32   | % |            | 7.35  | %     |   | 7.37      
|                        | Variable Rate Debt             |      |   |       |   | $    | 10,000 |      |   |        |   |            |       |       |   |           
|                        | Weighted Average Interest Rate |      |   |       |   |      | 5.25   | %    |   |        |   |            |       |       |   |           

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. As of June 30, 2002, the Company's debt to income portfolio value ratio was
31%.

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Part II. Other Information
Item 1. Legal Proceedings.

Please
refer to "Residential Land Sales" and "Community Development" underPart I, Item 2."Management's
Discussion and Analysis of Financial Condition and Results of Operations".

Item 6. Exhibits and Reports on Form 8-K





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SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE
NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
Registrant

By
Newhall Management Limited Partnership,
Managing General Partner

By
Newhall Management Corporation,
Managing General Partner

|                      |  |    |                                                                                                                                                   
|--------------------- |  | -- | --------------------------------------------------------------------------------------------------------------------------------------------------
|Date: August 12, 2002 |  | By | /s/GARY M. CUSUMANOGary M. Cusumano,
President and Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)        
|                      |  |    |                                                                                                                                                   
|Date: August 12, 2002 |  | By | /s/STUART R. MORKStuart R. Mork,
Senior Vice President and Chief Financial Officer of
Newhall Management Corporation
(Principal Financial Officer)
|                      |  |    |                                                                                                                                                   
|Date: August 12, 2002 |  | By | /s/DONALD L. KIMBALLDonald L. Kimball,
Vice PresidentFinance and Controller of
Newhall Management Corporation
(Principal Accounting Officer)     
|                      |  |    |                                                                                                                                                   

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THE NEWHALL LAND AND FARMING COMPANY

INDEX TO EXHIBITS

|Exhibit
Number |  | Description                                                                                 
|-------------- |  | --------------------------------------------------------------------------------------------
|10(a)          |  | The Newhall Land and Farming Company Retirement Plan (Restatement effective January 1, 2002)
|10(b)          |  | The Newhall Land and Farming 2002 Equity Compensation Plan and Related Form of Agreements   
|99(a)          |  | Certification of Principal Executive Officer                                                
|99(b)          |  | Certification of Principal Financial Officer                                                

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