1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 Commission file number 1-7585 The Newhall Land and Farming Company Employee Savings Plan The Newhall Land and Farming Company (A California Limited Partnership) 23823 Valencia Boulevard Valencia, CA 91355 2 REQUIRED INFORMATION Statements of Net Assets Available for Plan Benefits as of December 31, 1997 and 1996, Statements of Changes in Net Assets Available for Plan Benefits for each of the years in the two-year period ended December 31, 1997, Notes to Financial Statements, Schedule of Assets Held for Investment as of December 31, 1997, Schedule of Reportable Transactions for the year ended December 31, 1997, together with the Report and Consent of Independent Auditors, are attached and filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Newhall Management Corporation has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. The Newhall Land and Farming Company Employee Savings Plan June 29, 1998 /s/ Thomas H. Almas --------------------------------------- Newhall Management Corporation, Trustee By: Thomas H. Almas, Vice President - Administration and Secretary 3 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Financial Statements and Schedules December 31, 1997 and 1996 (With Independent Auditors' Report Thereon) 4 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Index to Financial Statements and Schedules Page ---- Independent Auditors' Report 1 Statement of Net Assets Available for Plan Benefits with Fund Information - December 31, 1997 2 Statement of Net Assets Available for Plan Benefits with Fund Information - December 31, 1996 3 Statement of Changes in Net Assets Available for Plan Benefits with Fund Information - Year ended December 31, 1997 4 Statement of Changes in Net Assets Available for Plan Benefits with Fund Information - Year ended December 31, 1996 5 Notes to Financial Statements 6 Schedule -------- Line 27a - Schedule of Assets Held for Investment Purposes - December 31, 1997 1 Line 27d - Schedule of Reportable Transactions - Year ended December 31, 1997 2 Other schedules are omitted as they are not applicable or not required by Department of Labor Regulations. 5 INDEPENDENT AUDITORS' REPORT The Compensation Committee of the Board of Directors of Newhall Management Corporation: We have audited the accompanying statements of net assets available for Plan benefits with fund information of The Newhall Land and Farming Company Employee Savings Plan as of December 31, 1997 and 1996 and the related statements of changes in net assets available for Plan benefits with fund information for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for Plan benefits of The Newhall Land and Farming Company Employee Savings Plan as of December 31, 1997 and 1996 and the changes in those net assets for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Schedules 1 and 2 is presented for purposes of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplementary schedules are the responsibility of the Plan's management. The fund information in the statements of net assets available for Plan benefits and the statements of changes in net assets available for Plan benefits is presented for purposes of additional analysis rather than to present the net assets available for Plan benefits and changes in net assets available for Plan benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. May 29, 1998 /s/ KPMG Peat Marwick LLP 1 6 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Plan Benefits with Fund Information December 31, 1997 PARTNERSHIP BALANCED FIXED INCOME DEPOSITARY INVESTMENT EQUITY INDEX PARTICIPANT ASSETS FUND UNIT FUND FUND FUND LOANS TOTAL ------------ ----------- ----------- ------------ ----------- ----------- Cash $ -- 535 -- 5,257 -- 5,792 Investments 2,881,960 500,027 1,229,572 6,960,686 -- 11,572,245 Loans to participants -- -- -- -- 665,173 665,173 ----------- ----------- ----------- ----------- ----------- ----------- Total assets 2,881,960 500,562 1,229,572 6,965,943 665,173 12,243,210 LIABILITIES Reimbursements due to Plan sponsor (11,936) -- -- -- -- (11,936) ----------- ----------- ----------- ----------- ----------- ----------- Net assets available for Plan benefits $ 2,870,024 500,562 1,229,572 6,965,943 665,173 12,231,274 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 2 7 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Plan Benefits with Fund Information December 31, 1996 PARTNERSHIP BALANCED FIXED INCOME DEPOSITARY INVESTMENT EQUITY INDEX PARTICIPANT ASSETS FUND UNIT FUND FUND FUND LOANS TOTAL ------------ ----------- ----------- ------------ ----------- ----------- Cash $ -- 819 -- -- -- 819 Investments 3,423,621 182,892 1,039,224 5,300,616 -- 9,946,353 Loans to participants -- -- -- -- 617,021 617,021 ----------- ----------- ----------- ----------- ----------- ----------- Total assets 3,423,621 183,711 1,039,224 5,300,616 617,021 10,564,193 LIABILITIES Reimbursements due to Plan sponsor (34,008) -- -- (15,700) -- (49,708) ----------- ----------- ----------- ----------- ----------- ----------- Net assets available for Plan benefits $ 3,389,613 183,711 1,039,224 5,284,916 617,021 10,514,485 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 3 8 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits with Fund Information Year ended December 31, 1997 PARTNERSHIP BALANCED FIXED INCOME DEPOSITARY INVESTMENT EQUITY INDEX PARTICIPANT FUND UNIT FUND FUND FUND LOANS TOTAL ------------ ----------- ----------- ------------ ----------- ----------- Dividend and interest income $ 176,802 3,310 1,145 428 46,190 227,875 Realized gains -- -- 23,177 66,234 -- 89,411 Unrealized gains 883 199,160 211,959 1,541,042 -- 1,953,044 ----------- ----------- ----------- ----------- ----------- ----------- 177,685 202,470 236,281 1,607,704 46,190 2,270,330 ----------- ----------- ----------- ----------- ----------- ----------- Contributions: From participants 146,787 36,354 275,973 151,492 -- 610,606 From the Company 73,525 13,534 29,972 158,569 -- 275,600 ----------- ----------- ----------- ----------- ----------- ----------- 220,312 49,888 305,945 310,061 -- 886,206 ----------- ----------- ----------- ----------- ----------- ----------- Interfund transfers (509,803) 65,663 (315,156) 757,334 1,962 -- Participant withdrawals (407,783) (1,170) (36,722) (994,072) -- (1,439,747) ----------- ----------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets (519,589) 316,851 190,348 1,681,027 48,152 1,716,789 Net assets available for Plan benefits: Beginning of year 3,389,613 183,711 1,039,224 5,284,916 617,021 10,514,485 ----------- ----------- ----------- ----------- ----------- ----------- End of year $ 2,870,024 500,562 1,229,572 6,965,943 665,173 12,231,274 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 4 9 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Plan Benefits with Fund Information Year ended December 31, 1996 PARTNERSHIP BALANCED FIXED INCOME DEPOSITARY INVESTMENT EQUITY INDEX PARTICIPANT FUND UNIT FUND FUND FUND LOANS TOTAL ------------ ----------- ----------- ------------ ----------- ----------- Dividend and interest income $ 256,285 2,748 33 96 45,131 304,293 Realized gains -- -- 8,516 34,513 -- 43,029 Unrealized gains -- 22,259 95,108 883,855 -- 1,001,222 ----------- ----------- ----------- ----------- ----------- ----------- 256,285 25,007 103,657 918,464 45,131 1,348,544 ----------- ----------- ----------- ----------- ----------- ----------- Contributions: From participants 185,694 28,600 71,204 275,274 -- 560,772 From the Company 92,842 10,253 30,989 126,215 -- 260,299 ----------- ----------- ----------- ----------- ----------- ----------- 278,536 38,853 102,193 401,489 -- 821,071 ----------- ----------- ----------- ----------- ----------- ----------- Interfund transfers (208,617) (11,677) 117,869 133,371 (30,946) -- Participant withdrawals (858,106) (3,300) (29,148) (207,362) -- (1,097,916) ----------- ----------- ----------- ----------- ----------- ----------- Increase (decrease) in net assets (531,902) 48,883 294,571 1,245,962 14,185 1,071,699 Net assets available for Plan benefits: Beginning of year 3,921,515 134,828 744,653 4,038,954 602,836 9,442,786 ----------- ----------- ----------- ----------- ----------- ----------- End of year $ 3,389,613 183,711 1,039,224 5,284,916 617,021 10,514,485 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 5 10 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Notes to Financial Statements December 31, 1997 and 1996 (1) DESCRIPTION OF THE PLAN The Newhall Land and Farming Company Employee Savings Plan (the Plan) is a defined contribution plan under the Internal Revenue Code of 1986 (the Code) Section 401(k) and is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan permits eligible employees of The Newhall Land and Farming Company and subsidiaries (the Company) to contribute up to $9,500 in 1997 and 1996. Employee contributions reduce an employee's currently taxable compensation and, therefore, are not subject to income taxes until the amounts are withdrawn from the Plan. An employee must complete one year of service and reach age 19 to become eligible to participate. For employee contributions of up to 6% of compensation, the Company may contribute an amount ranging from 25% to 75% of the employee's contribution depending upon the employee's length of service with the Company. Company contributions may be suspended if Company net income is less than 5% of the capital of the Company's partners or for other reasons deemed appropriate by the Company's Board of Directors. Participants select the investment funds in which their contributions are to be invested from the four available funds of the Plan. The investment funds are the Fixed Income Fund, the Equity Index Fund, the Partnership Depositary Unit Fund, and the Balanced Investment Fund. Company contributions, when made, are invested proportionately in the same funds as the employee contributions. Total employees participating in each investment option as of December 31, 1997 and 1996 are as follows: 1997 1996 -------- -------- Fixed Income Fund 174 182 Partnership Depositary Unit Fund 49 38 Equity Index Fund 159 144 Balanced Investment Fund 68 61 ======== ======== Participants are fully vested in the Plan upon enrollment; accordingly, there are no forfeitures resulting from participant withdrawals. Normal distributions are made in full upon (1) retirement, (2) total and permanent disability, (3) death or (4) termination of employment. Participants showing hardship may withdraw part or all of their contributions and accumulated earnings or losses, limited to earnings and losses incurred prior to January 1, 1990, at the end of a calendar quarter. An employee who withdraws any amount of his contribution account is not permitted to resume participation for six months. Employer contributions and the related accumulated earnings may be withdrawn only upon one of the four above-listed occurrences. Distributions and withdrawals are made in cash. 6 11 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Notes to Financial Statements, Continued The Plan permits loans to Plan participants, secured by the borrowing participant's interest in the Plan, on such nondiscriminatory terms and conditions as the Plan's administrative committee shall determine, provided, however, that such loans comply with applicable requirements of ERISA and the Code (including such restrictions as are necessary to prevent loans from being treated as distributions under Section 72(p) of the Code). The loans are treated as earmarked investments of the participants with interest repayments credited proportionately to the investment funds originally liquidated to provide the principal. Contributions by employees are voluntary and are determined as a specified percentage of base compensation plus overtime, excluding that portion of compensation imputed for tax purposes as a result of fringe benefits and other similar forms of compensation. The Plan permits qualified rollover contributions from other qualified plans. In the event of Plan termination, all payments will be made as soon as practicable from the assets of the Plan based on the amount in each participant's individual and employer contribution accounts. Newhall Management Corporation is the sole trustee for the Plan. Participants should refer to the Plan document or summary Plan description for a more complete description of the Plan's provisions. (2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES BASIS OF ACCOUNTING The financial statements for the Plan are prepared on an accrual basis, primarily from data submitted to the Plan administrator by the companies that function as investment managers: Connecticut General Life Insurance Company (CIGNA), Newhall Depositary Company and Wells Fargo Bank. INVESTMENTS All investment income is allocated to individual participant accounts. The Fixed Income Fund, held by CIGNA, represents a deposit with an insurance company and is stated at contract value, which represents contributions and income earned, less distributions and expenses charged. The Partnership Depositary Unit Fund is invested in partnership units in the Company. The Equity Index Fund, held by Wells Fargo Bank, is a collective trust invested primarily in the common stocks that comprise the Standard & Poor's 500 Index. The Balanced Investment Fund, held by Wells Fargo Bank, is a collective trust invested primarily in common stocks that comprise the Standard & Poor's 500 Index and in U.S. Treasury Bonds. The Plan shares in the investment gains and losses of the securities underlying the Equity Index Fund, the Partnership Depositary Unit Fund and the Balanced Investment Fund, which are stated at fair value based on quoted market prices. Purchases and sales of securities are recorded on a trade-date basis. Loans to participants are stated at cost, which approximates fair value. 7 12 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Notes to Financial Statements, Continued PLAN EXPENSES Expenses incurred in the administration of the Plan are borne by the Company. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities and the amount of any contingent assets or liabilities disclosed in the financial statements. Actual results could differ from estimates made. (3) INCOME TAXES The Company received a favorable determination letter from the Internal Revenue Service in September 1995 which stated that the Plan, as then designed, including certain proposed amendments, is in compliance with applicable requirements of the Internal Revenue Code. The proposed amendments were adopted by the Plan subsequent to receipt of the determination letter. (4) COMMITMENTS Included in net assets available for Plan benefits in the accompanying financial statements as of December 31, 1997 and 1996 are amounts totaling $26,404 and $326,951, respectively, allocated to accounts of persons who have requested withdrawal of their accounts from the Plan. (5) INVESTMENTS REPRESENTING 5% OR MORE OF NET ASSETS The fair value of individual investments representing 5% or more of the Plan's net assets as of December 31, 1997 and 1996 is: 1997 1996 ---------- ---------- Wells Fargo Bank Equity Index Fund $6,958,572 5,300,616 CIGNA Fixed Income Fund 2,847,952 3,423,621 Wells Fargo Balanced Investment Fund 1,229,380 1,039,224 ========== ========== 8 13 Schedule 1 THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN Line 27a - Schedule of Assets Held for Investment Purposes December 31, 1997 IDENTITY OF ISSUER, BORROWER, DESCRIPTION OF LESSOR OR SIMILAR PARTY INVESTMENT COST CURRENT VALUE - ------------------------------------ ------------------------------------ ------------------- -------------------- Wells Fargo Money Market Money market shares, $1 par $ 5,792 5,257 Connecticut General Life Insurance Company (CIGNA) Fixed Income Fund 2,836,016 2,881,960 The Newhall Land and Farming Company* Partnership Units 284,290 500,562 Wells Fargo Bank Equity Index Fund 5,417,531 6,960,686 Wells Fargo Bank Balanced Investment Fund 917,412 1,229,572 Loans to Plan participants Notes secured by vested interest (93 total loans with interest rates ranging from 6.760% to 8.96%) -- 665,173 ----------- -------------- $ 9,461,041 12,243,210 =========== ============== * Party in interest. See accompanying independent auditors' report. 14 Schedule 2 THE NEWHALL LAND AND FARMING EMPLOYEE SAVINGS PLAN Line 27d - Schedule of Reportable Transactions Year ended December 31, 1997 TOTAL CURRENT VALUE DESCRIPTION NUMBER OF PURCHASE OF ASSET ON SALES COST OF NET GAIN IDENTITY OF PARTY INVOLVED OF ASSETS TRANSACTIONS PRICE TRANSACTION DATE PRICE ASSET (LOSS) - -------------------------- ----------------- ------------ ---------- ---------------- --------- ------- -------- Wells Fargo Bank Equity Index Fund 41 $1,138,000 1,138,000 -- -- -- Wells Fargo Bank Equity Index Fund 14 -- -- 1,084,601 632,639 451,962 ============ ========== ================ ========= ======= ======= See accompanying independent auditors' report. 15 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration statement no. 33-53769 on Form S-8 of our report dated May 29, 1998 relating to the financial statements of The Newhall Land and Farming Company Employee Savings Plan as of and for the years ended December 31, 1997 and 1996, which report is included in this Annual Report on Form 11-K. Our report dated May 29, 1998 contains a paragraph which states that our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment and reportable transactions are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 and is not a required part of the basic financial statements. The fund information in the statements of net assets available for Plan benefits and the statements of changes in net assets available for Plan benefits is presented for purposes of additional analysis rather than to present the net assets available for Plan benefits and changes in net assets available for Plan benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Los Angeles, California /s/ KPMG Peat Marwick LLP June 29, 1998