ARVIDA JMB PARTNERS L P - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year
Ended December 31, 2002 Commission file no. 0-16976

ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)

Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

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

Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------

None None

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

LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)

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 (the "Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter. Not applicable.

Documents Incorporated by Reference

Certain portions of the Prospectus of the registrant dated September 16,
1987, and filed with the Commission pursuant to Rules 424(b) and 424(c)
under the Securities Act of 1933 are incorporated by reference in Part III
of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Page
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PART I

Item 1. Business . . . . . . . . . . . . . . . . . . 1

Item 2. Properties . . . . . . . . . . . . . . . . . 7

Item 3. Legal Proceedings. . . . . . . . . . . . . . 9

Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 11

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . 12

Item 6. Selected Financial Data. . . . . . . . . . . 13

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 16

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 25

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 26

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 57

PART III

Item 10. Director and Executive Officers of
the Registrant . . . . . . . . . . . . . . . 57

Item 11. Executive Compensation . . . . . . . . . . . 59

Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Security
Holder Matters . . . . . . . . . . . . . . . 59

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 61

Item 14. Controls and Procedures. . . . . . . . . . . 62

PART IV

Item 15. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . 63

SIGNATURES and CERTIFICATIONS . . . . . . . . . . . . . . 66

i

PART I

ITEM 1. BUSINESS

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.

The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership
was formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of
up to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933 (No. 33-14091). A total of 400,000
Interests were sold to the public (at an offering price of $1,000 per
Interest before discounts) and the holders of 400,000 Interests were
admitted to the Partnership in October 1987. The offering terminated
October 31, 1987. In addition, a holder (an affiliate of the dealer-
manager of the public offering) of 4,000 Interests was admitted to the
Partnership in October 1987. Subsequent to admittance to the Partnership,
no holder of Interests (a "Holder" or "Holder of Interests") has made any
additional capital contribution. The Holders of Interests of the
Partnership generally share in their portion of the benefits of ownership
of the Partnership's real property investments and other assets according
to the number of Interests held.

Pursuant to the Partnership's Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), the General Partner was
to elect to pursue one of the following courses of action on or before
October 31, 1997: (i) to cause the Interests to be listed on a national
exchange or to be reported by the National Association of Securities
Dealers Automated Quotation System; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase, all of the Interests at their
then appraised fair market value (as determined by an independent
nationally recognized investment banking firm or real estate advisory
company); or (iii) to commence a liquidation phase in which all of the
Partnership's remaining assets were to be sold or disposed of by the end of
the fifteenth year from the termination of the offering. On October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option to commence an orderly liquidation of the
Partnership's remaining assets that was to be completed by October 2002.

Since October 1997, the Partnership (including various of its joint
ventures and subsidiaries) has sold a substantial amount of assets in an
effort to liquidate the Partnership. For example, during the last three
months of 1997, the Partnership sold Parkway Center, a mixed-use center
containing approximately 258,000 square feet of office and retail space and
a Radisson Suite Hotel; the Cabana Club located in the Sawgrass Community;
and two retail shopping centers located in the Weston Community. In 1998,
the Partnership sold its cable operation in the Weston Community and the
remaining memberships in the Sawgrass Country Club. In 1999, the
Partnership completed the sale of the River Hills Country Club as well as
its residential resale brokerage operations in Weston, Sawgrass and Boca
Raton, Florida. During 2000 and 2001, the Partnership completed a bulk
sale of its remaining lot inventory (approximately 103 developed and
undeveloped lots and the sales center) at its Waters Edge Community, closed

on the sale of the remaining lots at its Cullasaja Community and the
remaining equity memberships in the Cullasaja Club and sold the Weston
Athletic Club. In October 2002, the Partnership sold the Weston Hills
Country Club, a golf and country club operation located in Weston, Florida.

In November and December 2002, the Partnership completed the sale of (i) an
approximate 4.6 acre parcel in Weston (the "Waterways II Parcel") on which
the Partnership was constructing a shopping center to contain approximately
31,300 square feet of rentable space, and (ii) an approximate 46 acre
parcel (the "Ocala Parcel") near Ocala, Florida, respectively. In February
2003, the Partnership closed on the sale of The Shoppes of Town Center in
Weston, a mixed-use retail/office plaza consisting of approximately 158,000
net leaseable square feet. In addition, since the beginning of 1998
through February 28, 2003, the Partnership has closed on the sale of
approximately 6,180 housing units, more than 360 homesites and in excess of
135 acres of developed and undeveloped land tracts, as well as interests in
a number of office buildings. These sales have resulted from the close out
of the River Hills Community, Arvida's Grand Bay condominium project on
Longboat Key, Florida, the Cullasaja and Water's Edge Communities as well
as the near sell-out of all housing units and homesites at the
Partnership's largest Community, Weston, in Broward County, Florida. For
more information concerning the Partnership's sale of assets during the
past three years, reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in this report.

In October 2002, the Partnership commenced a solicitation for consents
to an amendment (the "Amendment") to the Partnership Agreement providing
for an extension of the term of the Partnership's liquidation period to not
later than October 31, 2005. In addition, under the terms of the
Amendment, Arvida/JMB Managers, Inc., the General Partner of the
Partnership, is authorized, in its sole discretion, to complete the
liquidation of the Partnership by forming a liquidating trust (the
"Liquidating Trust") and contributing any remaining Partnership assets to
the Liquidating Trust subject to all outstanding obligations and
liabilities of the Partnership. In November 2002, a majority of the
Holders of Interests gave their consent to the Amendment, which became
effective October 29, 2002, and, accordingly, the term of the Partnership's
liquidation period has been extended. For further information concerning
the consent solicitation and the votes granting consent, withholding
consent and abstaining with respect to the Amendment, reference is made to
Item 4. Submission of Matters to a Vote of Security Holders in this
report.

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Partnership's Weston Community. The
Partnership expects to complete construction and close on the sale of these
townhomes, which are the last units to be built by the Partnership in
Weston, by the end of the second quarter of 2003. The Partnership's other
remaining assets include various small land parcels to be sold in their
respective current stages of development, an additional housing unit,
tangible personal property, including vehicles and furniture, fixtures and
equipment used in the Partnership's operations, receivables and certain
contract rights.

Outstanding contracts ("backlog"), at March 1, 2003 were for 97
townhomes with an aggregate sale price of approximately $17,735,000. These
contracts are all expected to be closed by the end of the second quarter of
2003. This compares with a backlog for housing units at March 1, 2002 of
592 housing units with an aggregate sale price of approximately
$164,066,000.

As noted above, under the terms of the Amendment, the General Partner
is authorized in its sole discretion, to complete the termination of the
Partnership by forming a Liquidating Trust. The trustee or trustees of the
Liquidating Trust are expected to be an officer or officers of the General
Partner. The remaining Partnership assets would be contributed to the
Liquidating Trust subject to all outstanding obligations and liabilities of
the Partnership. The General Partner, Associate Limited Partners and
Holders of Interests would receive beneficial interests in the Liquidating
Trust in proportion to their respective interests in the Partnership.
Subsequently, after liquidating any remaining non-cash assets and providing
for the payment or satisfaction of all such obligations and liabilities,
the trustee(s) of the Liquidating Trust would distribute any remaining
proceeds to the General Partner, Associate Limited Partners and Holders of
Interests in proportion to their respective interests in the Liquidating
Trust. The Partnership believes that the use of the Liquidating Trust
would permit the realization of administrative cost-savings while allowing
for the management and satisfaction of residual obligations and liabilities
arising out of the Partnership's operations.

Pending the completion of the liquidation, winding up and termination
of the Partnership (or if applicable, the Liquidating Trust), it is
anticipated that the Partnership (or the Liquidating Trust, as the case may
be) will retain a substantial amount of funds in reserve to provide for the
payment of, the defense against, or other satisfaction or resolution of
obligations, liabilities (including contingent liabilities) and current and
possible future claims, including those for indemnities and other matters
under various agreements made in connection with the sales of the Weston
Hills Country Club, The Shoppes of Town Center and other assets, possible
construction repairs, homeowner warranty claims, completion of work for
certain homeowner associations and master associations and pending and
possible future litigation and environmental matters. The amount of funds
to be retained in reserve for these purposes has not yet been determined.
The Partnership currently expects that those available funds in excess of
the amount determined to be held in reserve would be distributed during
2003 and 2004 to the partners and Holders of Interests. That portion, if
any, of the funds held in reserve that are not ultimately used to pay,
defend or otherwise resolve or satisfy obligations, liabilities or claims
would subsequently be distributed to the partners and Holders of Interests
as a final liquidating distribution at a later date.

The Partnership is not able to determine the amount of time and money
that it will take to effect its (or, if applicable, the Liquidating
Trust's) liquidation, winding up and termination. Various factors may
affect the timing of completing the liquidation, winding up and termination
of the Partnership (and, if applicable, the Liquidating Trust) and the
amount of a final liquidating distribution of funds, if any, out of those
retained in reserve. These factors include the amount of time it takes to
complete construction of the last townhomes in Weston, to sell or otherwise
dispose of the Partnership's other remaining assets and the time and
expense to resolve all obligations, liabilities and claims, including
contingent liabilities and claims that are not yet asserted but may be made
in the future. Among the important factors involved in liquidating the
Partnership's assets are the retention of an adequate workforce and
maintaining existing relationships with vendors and tradesmen through
completion of construction of the remaining townhomes in Weston. In
addition, as noted above, additional or unanticipated remedial construction
or development costs, delays in resolving pending or threatened litigation
or potential claims, currently unasserted claims that arise in the future
and other factors could extend the time required, and significantly
increase the cost, to complete the liquidation, winding up and termination.

The assets of the Partnership have consisted principally of interests
in land in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial
properties; accounts receivable; construction, brokerage and other support
businesses; real estate assets held for investment and certain club and
recreational facilities. The Partnership has been principally engaged in
the development of comprehensively planned resort and primary home
Communities containing a diversified product mix designed for the middle
and upper income segments of the various markets in which the Partnership
operates. In addition, the Partnership, directly or through certain
subsidiaries, has provided development and management services to the
homeowners associations within the Communities.

Within the Communities, the Partnership has constructed, or caused to
be constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the state of Florida, with Communities also located
near Atlanta, Georgia and Highlands, North Carolina. Additional
undeveloped properties owned by the Partnership in or near its Communities
have been developed as retail and/or office properties. The Partnership has
also owned or managed certain club and recreational facilities within
certain of its Communities. Certain assets located in Florida were
acquired by the Partnership by purchasing a 99.9% interest in a joint
venture partnership in which the General Partner acquired the remaining
joint venture partnership interest. In addition, other assets were owned
by various partnerships, the interests of which have been held by certain
indirect subsidiaries of the Partnership and by the Partnership. The
Partnership has also sold individual residential lots and parcels of
partially developed and undeveloped land. The third-party builders and
developers to whom the Partnership has sold homesites and land parcels were
generally smaller local builders who required project specific financing
for their developments and whose operations were more susceptible to
fluctuations in the availability and terms of financing.

Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services and the personnel therefor to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. In November 1997, The
St. Joe Company, an unaffiliated third party, completed its acquisition of
a majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"),
which acquired the major assets of Arvida. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would have otherwise provided pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employed most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to the sub-
management agreement generally have been provided by the same personnel.
Affiliates of JMB Realty Corporation own a minority interest in St.
Joe/Arvida. The transaction did not involve the sale of any assets of the
Partnership, nor the sale of the General Partner's interest in the
Partnership.

The business of the Partnership is cyclical in nature and certain
aspects of the development of Community projects are to some degree
seasonal. Such seasonality has not had a material impact on its business.
A presentation of information about industry segments, geographic regions
or raw materials is not applicable and would not be material to an
understanding of the Partnership's business taken as a whole.

The Partnership generally has followed the practice with respect to
its Communities of (i) developing an overall master plan for the Community,
(ii) creating a unifying architectural theme that is consistent with the
Community's master plan, (iii) offering a variety of recreational
facilities, (iv) imposing architectural standards and other property
restrictions on residents and third-party developers, in order to enhance
the long-term value of the Community, (v) establishing property owners'
associations to maintain compliance with architectural, landscaping and
other requirements and to provide for ownership and maintenance of certain
facilities, and/or (vi) operating and controlling access to golf, tennis
and other recreational facilities.

The Partnership's development approach, individually or by joint
venture, has been intended to enhance the value of real estate in
successive phases. The first step in the development of a property has
been to design a Community master plan that addresses the appropriate land
uses and product mix, including residential, recreational and, where
appropriate, commercial and industrial uses. The Partnership then sought
to obtain the necessary regulatory and environmental approvals for the
development of the Community in accordance with the master plan. This
approval process has been a major factor in determining the viability and
prospects for profitability of the Partnership's development projects.

In addition, prior to or contemporaneously with zoning approval, the
Partnership, if subject to the applicable filing requirements, has been
required to obtain "Development of Regional Impact" ("DRI") approval from
the applicable local governmental agency after review and recommendations
from the appropriate regional planning agency, with oversight by the
Florida State Department of Community Affairs. Receipt of DRI approval was
a prerequisite to obtaining zoning, platting, building permits or other
approvals required to begin development or construction. Obtaining such
approvals can involve substantial periods of time and expense and may
result in the loss of desired densities, and approvals may need to be
resubmitted if there is any subsequent deviation in current approved plans.

The process may also require committing land for public use and payment of
substantial impact fees. In addition, state laws generally have provided
further that a parcel of land cannot be subdivided into distinct segments
without having a plat filed and finalized with the local or municipal
authority, which, in general, has required the approval of various local
agencies, such as environmental and public works departments. In addition,
the Partnership has been required to secure the actual permits for
development from applicable Federal (e.g., the Army Corps of Engineers
and/or the Environmental Protection Agency with respect to coastal and
wetlands developments, including dredging of waterways) and state or local
agencies, including construction, dredging, grading, tree removal and water
management and drainage district permits. The Partnership has been
subject, in the process of obtaining such permits or approvals for platting
or construction activities, to delays or additional expenses; however, such
permits and approvals were customarily obtained in conjunction with the
development process. Failure to obtain or maintain necessary approvals, or
rejection of submitted plans, would result in an inability to develop the
Community as originally planned and would cause the Partnership to
reformulate development plans for resubmission, which might result in a
failure to increase, or a loss of, market value of the property or delays
in developing the property. The foregoing discussion and the discussion
which follows also have been generally applicable to the Partnership's
commercial and industrial developments.

Upon receipt of all approvals and permits required to be obtained by
the Partnership for a specific Community, other than actual approvals or
permits for final platting and/or construction activities, the Partnership
has applied for the permits and other approvals necessary to undertake the
construction of infrastructure, including roads, water and sewer lines and
amenities such as lakes, clubhouses, golf courses, tennis courts and
swimming pools. These expenditures for infrastructure and amenities have
been generally significant and were usually required early in the
development of a Community project, although the Partnership has attempted,
to the extent feasible, to develop Communities in a phased manner. See
Note 10 for further discussion regarding Tax Increment Financing Entities
and their involvement with infrastructure improvements.

Certain of the Florida Communities have applied for and have been
designated as Planned Unit Development ("PUD") by the local zoning
authority (usually the governing body of the municipality or the county in
which the Community is located). Designation as a PUD generally
establishes permitted densities (i.e., the number of residential units
which may be constructed) with respect to the land covered thereby and,
upon receipt, enables the developer to proceed in an orderly, planned
fashion. Generally, such PUD approvals permit flexibility between single-
unit and multi-unit products since the developer can plan Communities in
either fashion as long as permitted densities are not exceeded. As a
consequence, developments with PUD status are able to meet changing demand
patterns in housing through such flexibility. It should be noted that some
of the Communities, while not having received PUD approval, have obtained
the necessary zoning approvals to create a planned community development
with many of the benefits of PUD approval such as density shifting.

In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership has functioned as a
general contractor although it has also from time to time hired firms for
general contracting work. The Partnership generally has followed the
practice of hiring subcontractors, architects, engineers and other
professionals on a project-by-project basis rather than maintaining in-
house capabilities, principally to be able to select the subcontractors and
consultants it believed were most suitable for a particular development
project and to control fixed overhead costs. The Partnership has not been
faced with any significant material or labor shortages and does not expect
any such shortages in connection with its construction of the remaining
townhomes in the Weston Community.

The Partnership's strategy has included the ownership and development
of certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contained
acreage zoned for commercial use, although, except for the Weston
Community, such acreage was generally not substantial. On both of such
types of properties, the Partnership, individually or with a joint venture
partner, has built shopping centers, office buildings and other commercial
buildings or sold land to be so developed.

Certain of the Communities and operations have been owned by the
Partnership jointly with third parties. Such investments by the
Partnership were generally in partnerships or ventures which owned and
operated a particular property in which the Partnership or an affiliate
(either alone or with an affiliate of the General Partner) had an interest.

Certain assets in which interests have been acquired by the
Partnership are described in more detail under Item 2. Properties below to
which reference is hereby made for a description of such assets.

The Partnership's real properties are subject to competition from
similar types of properties in the vicinities in which they are located,
including properties owned, advised or managed by affiliates of the General
Partner. The Partnership's principal markets have been in Florida,
particularly in or near Jacksonville, Tampa, Longboat Key, Boca Raton and
Broward County, Florida and, to a lesser extent, in or near Atlanta,
Georgia and the Highlands, North Carolina. In general, the Partnership has
competed with other real estate projects primarily on the basis of the
location and quality of its real estate developments and, in the case of
its Community developments, the type and quality of its amenities. The
Partnership has no real estate assets located outside of the United States.

In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 2002 are adequately insured.

The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the
names of certain of its Communities. The Arvida name and the service marks
with respect to the Arvida name were owned by Arvida, subject to the
Partnership's non-exclusive right to use the Arvida name and service marks
under a license agreement with Arvida (and subject to the non-exclusive
rights of certain third parties to the use of the name). As previously
discussed, St. Joe/Arvida acquired the major assets of Arvida, including
the Arvida name and service marks with respect to the Arvida name. In
connection with the acquisition of Arvida's assets, St. Joe/Arvida was
assigned Arvida's rights and obligations under the license agreement with
the Partnership.

At March 1, 2003, the Partnership had approximately 80 employees as
compared to 580 employees at March 1, 2002. The reduction in employees is
consistent with the orderly liquidation of the Partnership's remaining
assets which is currently in process.

The terms of transactions between the Partnership and the General
Partner and its affiliates are set forth in Items 11 and 13 filed with this
annual report to which reference is hereby made for a description of such
terms and transactions.

ITEM 2. PROPERTIES

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Weston Community. The Partnership's other
remaining real properties include various small land parcels to be sold in
their respective current stages of development and one additional housing
unit.

The principal assets developed or managed by the Partnership during
the past several years are described below. The acreage amounts set forth
herein are approximations of the gross acreage of the Communities or other
properties referred to or described and are not indicative of the net
developable acreage that was previously owned by the Partnership or its
joint ventures. The Partnership's Shoppes of Town Center in the Weston
Community, a mixed use office/retail plaza consisting of approximately
158,000 net leasable square feet, which was sold to an unaffiliated third
party on February 7, 2003, was subject to a mortgage to secure the
repayment of the Partnership's indebtedness as discussed in detail in
Note 7.

(a) Palm Beach County, Florida

The Partnership owned property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offered a wide range of residential
products built by the Partnership or third-party builders, all of which
were sold and closed as of December 31, 1995.

(b) Broward County, Florida

Weston, a 7,500-acre Community, is in its final-stage of development.
The Community offers a complete range of housing products built by the
Partnership or third-party builders, as well as tennis, swim and fitness
facilities and two-18 hole golf courses. In addition, the Partnership
owned and developed commercial land located in the Weston Community.
Reference is made to Note 10 for a discussion of the Partnership's use of
certain tax-exempt financing in connection with the development of the
Weston Community.

(c) Sarasota / Tampa, Florida

The Partnership owned property known as Arvida's Grand Bay on Longboat
Key, which is a barrier island on Florida's west coast, approximately four
miles from downtown Sarasota and seven miles from Sarasota/Bradenton
airport. The property consists of six condominium buildings, all of which
were sold and closed by January 2000. The Partnership also owned property
in a Community in the Tampa area known as River Hills Country Club. All of
the units were sold and closed as of December 31, 2001.

(d) Jacksonville, Florida

The Partnership owned property in two Communities in Ponte Vedra
Beach, Florida, twenty-five miles from downtown Jacksonville, known as
Sawgrass Country Club and The Players Club at Sawgrass. All units in these
Communities were sold and closed as of December 31, 1996. The Partnership
also owned property in a 730-acre Community known as the Jacksonville Golf
& Country Club. All of the units were sold and closed as of December 1998.

(e) Atlanta, Georgia

The Partnership owned property in the Atlanta, Georgia area known as
Water's Edge. Reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations for a discussion
of the Partnership's sale of the remaining lot inventory in Water's Edge
during 2000. The Partnership also owned property in the Atlanta area known
as Dockside. All of the units in the Dockside Community were sold and
closed as of December 31, 1996.

(f) Highlands, North Carolina

The Partnership owned a 600-acre Community near Highlands, North
Carolina known as The Cullasaja Club. The Partnership sold and closed on
all of the remaining lots at The Cullasaja Club, as well as its remaining
equity memberships in the Cullasaja Club during 2000. Reference is made to
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations for a discussion regarding the sale of the remaining
lots and equity memberships at Cullasaja Club.

(g) Other

Through a joint venture, the Partnership also owns a 2.5 acre
commercial parcel in Ocala Florida, which is not located in its residential
Communities. A visitor information center is located on the property which
is leased to an unaffiliated third party.

ITEM 3. LEGAL PROCEEDINGS

The Partnership has been named a defendant in a purported class action
entitled Lakes of the Meadow Village Homes, Condominium Nos. One, Two,
Three, Four, Five, Six, Seven, Eight and Nine Maintenance Associates, Inc.,
v. Arvida/JMB Partners, L.P. and Walt Disney World Company, Case No. 95-
23003-CA-08, filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida. The original complaint was filed on or about
November 27, 1995 and an amended complaint, which purports to be a class
action, was filed on or about February 28, 1997. In the case, plaintiffs
seek unspecified damages, attorneys' fees and costs, recission of specified
releases, and all other relief that plaintiffs may be entitled to at equity
or at law on behalf of the 460 building units they allegedly represent for,
among other things, alleged damages discovered in the course of making
Hurricane Andrew repairs. Plaintiffs have alleged that Walt Disney World
Company is responsible for liabilities that may arise in connection with
approximately 80% of the buildings at the Lakes of the Meadow Village Homes
and that the Partnership is potentially liable for the approximately 20%
remaining amount of the buildings. In the three count amended complaint,
plaintiffs allege breach of building codes and breach of implied
warranties. In addition, plaintiffs seek recission and cancellation of
various general releases obtained by the Partnership allegedly in the
course of the turnover of the Community to the residents. Plaintiffs have
indicated that they may seek to hold the Partnership responsible for the
entire amount of alleged damages owing as a result of the alleged
deficiencies existing throughout the entire development. The Partnership
has tendered this matter to The Walt Disney Company ("Disney") pursuant to
the Partnership's indemnification rights and has filed a third-party
complaint against it pursuant to the Partnership's rights of contractual
indemnity. The Partnership has also answered the amended complaint and has
filed a cross-claim against Disney's affiliate, Walt Disney World Company,
for common law indemnity and contribution. Discovery in this litigation is
proceeding with a discovery cut-off of August 15, 2003, and a trial date to
be set thereafter.

In a matter related to the Lakes of the Meadow development, the Miami-
Dade County Building Department ("Building Department") retained the
services of an engineering firm, All State Engineering, to inspect the
condominiums that are the subject of the lawsuit. On February 27, 2002,
the Building Department apparently advised condominium owners throughout
the development that it found serious life-safety building code violations
in the original construction of the structures and issued notices of
violation under the South Florida Building Code. The condominium owners
were further advised that the notices of violation would require
affirmative action on their part to respond to the notices through
administrative proceedings and/or by addressing the alleged deficiencies.

On August 8, 2002, the Partnership attended a mediation of this
matter. During the course of the mediation, plaintiffs demanded
$298,000,000 on behalf of the Association Nos. 1-7 and 9, such sums
allegedly representing the cost to address all construction defects
currently alleged to exist by plaintiffs, associated damages and such other
relief as the plaintiffs believe they are entitled, including punitive
damages. As to the claim for punitive damages, the Court subsequently
denied plaintiffs leave to amend the complaint to add a punitive damage
claim. With this demand, plaintiffs have sought to impose liability on the
Partnership for all of the units in Association Nos. 1-7 and 9. The
Partnership believes that its liability, if any, extends to the portion of
the units that the Partnership built and sold, which the Partnership
estimates to be approximately ten percent of the units in Association
Nos. 1-7 and 9. In this mediation session, a mediation conducted on
November 15-16, 2002, and in various other communications, the parties have
exchanged technical information regarding the issues raised by the notices
of violation, plaintiffs' demands, and possible ways in which to address
those issues. Further sessions and discussions are expected.

The Partnership is currently being defended by counsel paid for by
United States Fire Insurance Company ("U.S. Fire"), one of the
Partnership's insurance carriers. During 2001, the Partnership settled the
claims brought in connection with Lakes of the Meadows Village Homes
Condominium No. 8 Maintenance Association, Inc. ("Association No. 8") for a
payment of $155,000 funded by U.S. Fire. Representatives of the
Partnership have discussed with representatives of Association No. 8 issues
raised by the Building Department's notices of violations for that
Association's condominium units. Association No. 8 submitted construction
plans to address the issues raised by the Building Department notices of
violations and comments received by the plan reviewers for that
Associations' units. On February 7, 2003, Association No. 8 received
permits approving its plans and is in the process of putting the plans out
for actual bids. Based on currently known information, the Partnership
estimates that it may cost approximately $1,715,000 to fund the cost of
addressing the construction issues in accordance with the approved plans.
Association No. 8 has asked the Partnership to pay for the costs to address
these construction issues. As a result of these discussions, the
Partnership has asked U.S. Fire to pay the expense of addressing these
construction issues for Association No. 8. In the event that U.S. Fire
does not fund these costs, the Partnership expects to fund these costs
under the circumstances and seek reimbursement from U.S. Fire or the
Partnership's excess insurance carrier, The Home Insurance Company (the
"Home").

On the basis of the discussions to date, the Partnership believes that
the cost of addressing the issues raised by, and to receive a release from,
Association Nos. 1-7 and 9 can currently be estimated at $5.6 million. As
with the cost to address the issues raised by Association No. 8, the
Partnership has asked U.S. Fire to pay the expense of addressing the issues
of these plaintiffs and resolving this matter. In the event that neither
U.S. Fire nor Home funds these costs, the Partnership may fund these costs
under the circumstances and seek reimbursement from U.S. Fire and/or Home.

On August 9, 2002, the Partnership received a reservation of rights
letter from U.S. Fire, by which it purports to limit its exposure with
regard to the Lakes of the Meadow matter and to reserve its rights to deny
coverage and/or defense under the policy and/or applicable law and with
respect to defense costs incurred or to be incurred in the future, to be
reimbursed and/or obtain an allocation of attorney's fees and expenses if
it is determined there is no coverage.

As a result of this reservation of rights letter and the demands being
made by the plaintiffs in the mediation sessions, on November 20, 2002, the
Partnership filed a four count complaint, Arvida/JMB Managers, Inc. on
behalf of Arvida/JMB Partners, L.P. v. United States Fire Insurance Company
in the Circuit Court of Cook County, Illinois, Chancery Division,
02CH21001, for declaratory relief and damages ("Illinois action"). In the
complaint, the Partnership seeks, among other things, a declaration that
U.S. Fire is obligated to indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages, including full indemnification for the
Lakes of the Meadow litigation; such other direct and consequential damages
as are proven at trial; prejudgment interest as permitted by law; and any
other legal and equitable relief that the Court deems just and proper under
the circumstances. On November 20, 2002, the same day, U.S. Fire filed a
single count complaint, United States Fire Insurance Company v. Arvida/JMB
Partners, L.P. in the United States District Court for the Southern
District of Florida, Miami Division, Case No.: 02-23366-Civ-Moore
(hereafter, "Florida federal case"), seeking a declaratory judgment against
the Partnership that U.S. Fire owes the Partnership no duties of
indemnification or defense with respect to the Lakes of the Meadows
litigation. The Partnership has filed a motion to dismiss the Florida
federal case because the Partnership does not believe that the court has
diversity jurisdiction to adjudicate this matter. The parties are engaged
in discovery with respect to the jurisdictional issue. The Florida federal
case is currently set for trial commencing December 15, 2003. The
Partnership believes that this suit is without merit and intends to
vigorously defend itself.

In a December 20, 2002 letter, Home and its agent, Risk Enterprise
Management Limited ("REM"), advised the Partnership of Home's position that
the Home policy provides coverage for the Lakes of the Meadow litigation
only in the event that the U.S. Fire policy provides coverage and that U.S.
Fire pays the limits under its policy. Given Home's position, the
Partnership amended its Illinois action to add Home and REM as defendants
in order to obtain, among other things, a declaration that Home is
obligated to defend and indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages; such other direct and consequential
damages as proven at trial; prejudgment interest; and any other legal and
equitable relief that the court deems just and proper under the
circumstances.

On February 10, 2003, U.S. Fire filed in the United States District
Court for the Northern District of Illinois, Eastern Division, a notice of
removal of civil action to remove the Illinois action to federal court.
The pending federal matter is filed as Arvida/JMB Managers, Inc. v. U.S.
Fire Insurance Company, Home Insurance Company, and Risk Enterprise
Management Inc., Case No. 03 C 0988 (hereafter, "Illinois federal case").
The Partnership has filed a motion to remand the Illinois federal case to
the Illinois state court because the Partnership does not believe that the
federal court has diversity jurisdiction to adjudicate the matter.

In a separate proceeding on March 5, 2003, a superior court judge for
the state of New Hampshire entered an order placing Home under an order of
rehabilitation in order to preserve and protect the interests and assets of
Home and to stay all actions and proceedings against it for a period of
ninety days, except as may be modified by further order of the court. The
Partnership is evaluating the effect, if any, that this order may have on
the Illinois federal case and the coverage provided by Home.

The Partnership strongly disagrees with the positions taken by U.S.
Fire and Home and believes that it is covered under the terms of the
relevant policies. However, the Partnership can give no assurances as to
the ultimate portion of the expenses, fees, and damages, if any, which will
be covered by its insurance.

Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership.

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

On October 29, 2002, the Partnership commenced a solicitation for
consents to an Amendment to the Partnership Agreement that would extend the
term of the Partnership's liquidation period from October 31, 2002, to not
later than October 31, 2005. In addition, under the terms of the Amendment,
the General Partner is authorized, in its sole discretion, to complete the
liquidation of the Partnership by forming a liquidating trust and
contributing any remaining Partnership assets to the liquidating trust
subject to all outstanding obligations and liabilities of the Partnership.
At the expiration of the consent solicitation on November 29, 2002, Holders
of Interests who were entitled to consent to the Amendment had submitted
properly executed consent forms representing 236,537.229 Interests out of
the 404,000 outstanding Interests. The votes for the 236,537.229 Interests
were cast as follows: Holders owning 211,268.899 Interests (52.29% of the
404,000 outstanding Interests) gave consent to the Amendment, Holders
owning 21,004.33 Interests (5.20% of the 404,000 outstanding Interests)
withheld consent for the Amendment and Holders owning 4,264 Interests
(1.06% of the 404,000 outstanding Interests) abstained. Since Holders
owning a majority of the outstanding Interests consented to the Amendment,
the Amendment was approved. The effective date for the Amendment is
October 29, 2002.

There were no other matters submitted to a vote of security holders
during 2002.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of January 1, 2003, there were 16,253 record Holders of the 404,000
Interests outstanding in the Partnership. There is no public market for
Interests, and it is not anticipated that a public market for Interests
will develop. Consequently, a Holder may not be able to readily sell his
Interests and may not be able to obtain a price that reflects the full
value of the underlying assets. Upon request, the General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspects of the transaction, will
be subject to negotiation by the investor. However, there are restrictions
governing the transferability of these Interests set forth in the
Partnership Agreement and the Assignment Agreement. In addition, no
transfer will be effective until the first day of the next succeeding
calendar quarter after the requisite transfer form satisfactory to the
General Partner has been received by the General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses of the Partnership for a
calendar year in which a transfer occurs will, to the extent permitted by
law, be allocated between the transferor and the transferee based upon the
number of quarterly periods for which each was recognized as the Holder of
the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee. Cash
distributions to a Holder of Interests will be distributed to the person
recognized as the Holder of the Interests as of the last day of the
quarterly period preceding the quarter in which such distribution is made.

Reference is made to Item 1. Business for a discussion of the election
made on October 23, 1997 by the General Partner with respect to commencing
an orderly liquidation of all of the Partnership's assets that is currently
in process. Reference is also made to Item 4. Submission of Matters to a
Vote of Security Holders for a discussion of the extension of the term of
the Partnership's liquidation period to not later than October 31, 2005.

Reference is made to Item 6. Selected Financial Data for a discussion
of cash distributions made to the Holders of Interests. For a description
of the provisions of the Partnership Agreement relating to cash
distributions, see Note 12.

Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of
unsolicited tender offers for Interests made by third parties unaffiliated
with the Partnership or the General Partner.

ITEM 6. SELECTED FINANCIAL DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 2002, 2001, 2000, 1999 AND 1998

(NOT COVERED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT)

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

LIQUIDITY AND CAPITAL RESOURCES

This report, including this Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements. Words like "believes," "expects," "anticipates," "likely" and
similar expressions used in this report are intended to identify forward-
looking statements. These forward-looking statements give the
Partnership's current estimates or expectations of future events,
circumstances or results, including statements concerning possible future
distributions and the amount of time and money that may be involved in
completing the liquidation, winding up and termination of the Partnership
(or, if applicable, a Liquidating Trust as a successor to the Partnership).

Any forward-looking statements made in this report are based upon the
Partnership's understanding of facts and circumstances as they exist on the
date of this report, and therefore such statements speak only as of that
date. In addition, the forward-looking statements contained in this report
are subject to risks, uncertainties and other factors that may cause the
actual events or circumstances, or the results or performances of the
Partnership, to be materially different from those estimated or expected,
expressly or implicitly, in the forward-looking statements. In particular,
but without limitation, statements concerning possible future distributions
to the Holders of Interest or the timing or costs associated with
completion of a liquidation, winding up and termination may be adversely
affected by unanticipated liabilities or increases in required reserves to
meet possible claims or contingencies, additional or unanticipated remedial
construction or development costs, delays in resolving pending or
threatened litigation or potential claims, currently unasserted claims that
arise in the future and other factors affecting the timing or amount of
expenses incurred in completing a liquidation, winding up and termination.

Pursuant to Section 5.5J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5J(i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that was to be completed by October
2002. In October 2002 the Partnership commenced a solicitation for
consents to an amendment (the "Amendment") to the Partnership's Amended and
Restated Agreement of Limited Partnership providing for an extension of the
term of the Partnership's liquidation period to not later than October 31,
2005. In addition, under the terms of the Amendment, the General Partner
is authorized, in its sole discretion, to complete the liquidation of the
Partnership by forming a liquidating trust (the "Liquidating Trust") and
contributing any remaining Partnership assets to the Liquidating Trust
subject to all outstanding obligations and liabilities of the Partnership.
In November 2002 a majority of the Holders of Interests gave their consent
to the Amendment, which became effective October 29, 2002, and,
accordingly, the term of the Partnership's liquidation period has been
extended. For further information concerning the consent solicitation and
the votes granting consent, withholding consent and abstaining with respect
to the Amendment, reference is made to Item 4. Submission of Matters to a
Vote of Security Holders in this report.

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Partnership's Weston Community. The
Partnership expects to complete construction and close on the sale of these
townhomes, which are the last units to be built by the Partnership in
Weston, by the end of the second quarter of 2003. The Partnership's other
remaining assets included various small land parcels to be sold in their
respective current stages, an additional housing unit, tangible personal
property including vehicles and furniture, fixtures and equipment used in
the Partnership's operations, receivables and certain contract rights.

As noted above, under the terms of the Amendment, the General Partner
is authorized in its sole discretion, to complete the termination of the
Partnership by forming a Liquidating Trust. The trustee or trustees are
expected to be an officer or officers of the General Partner. The
remaining Partnership assets would be contributed to the Liquidating Trust
subject to all outstanding obligations and liabilities of the Partnership.
The General Partner, Associate Limited Partners and Holders of Interests
would receive beneficial interests in the Liquidating Trust in proportion
to their respective interests in the Partnership. Subsequently, after
liquidating any remaining non-cash assets and providing for the payment or
satisfaction of all such obligations and liabilities, the trustee(s) of the
Liquidating Trust would distribute any remaining proceeds to the General
Partner, Associate Limited Partners and Holders of Interests in proportion
to their respective interests in the Liquidating Trust. The Partnership
believes that the use of the Liquidating Trust would permit the realization
of administrative cost-savings while allowing for the management and
satisfaction of residual obligations and liabilities arising out of the
Partnership's operations.

Pending the completion of the liquidation, winding up and termination
of the Partnership (or if applicable, the Liquidating Trust), it is
anticipated that the Partnership (or the Liquidating Trust, as the case may
be) will retain a substantial amount of funds in reserve to provide for the
payment of, the defense against, or other satisfaction or resolution of
obligations, liabilities (including contingent liabilities) and current and
possible future claims, including those for indemnities and other matters
under various agreements made in connection with the sales of the Weston
Hills Country Club, The Shoppes of Town Center and other assets, possible
construction repairs, homeowner warranty claims, completion of work for
certain homeowner associations and master associations and pending and
possible future litigation and environmental matters. The amount of funds
to be retained in reserve for these purposes has not yet been determined.
The Partnership currently expects that those available funds in excess of
the amount determined to be held in reserve would be distributed during
2003 and 2004 to the partners and Holders of Interests. That portion, if
any, of the funds held in reserve that are not ultimately used to pay,
defend or otherwise resolve or satisfy obligations, liabilities or claims
would subsequently be distributed to the partners and Holders of Interests
as a final liquidating distribution at a later date.

The Partnership is not able to determine the amount of time and money
that it will take to effect its (or, if applicable, the Liquidating
Trust's) liquidation, winding up and termination. Various factors may
affect the timing of completing the liquidation, winding up and termination
of the Partnership (and, if applicable, the Liquidating Trust) and the
amount of a final liquidating distribution of funds, if any, out of those
retained in reserve. These factors include the amount of time it takes to
complete construction of the last townhomes in Weston, to sell or otherwise
dispose of the Partnership's other remaining assets and the time and
expense to resolve all obligations, liabilities and claims, including
contingent liabilities and claims that are not yet asserted but may be made
in the future. Among the important factors involved in liquidating the
Partnership's assets are the retention of an adequate workforce and
maintaining existing relationships with vendors and tradesmen through
completion of construction of the remaining townhomes in Weston. In
addition, as noted above, additional or unanticipated remedial construction
or development costs, delays in resolving pending or threatened litigation
or potential claims, currently unasserted claims that arise in the future
and other factors could extend the time required, and significantly
increase the cost, to complete the liquidation, winding up and termination.

At December 31, 2002 and 2001, the Partnership had unrestricted cash
and cash equivalents of approximately $88,969,000 and $124,357,000,
respectively. At February 28, 2003, the Partnership had unrestricted cash
and cash equivalents of approximately $82,724,000 after taking into account
the distribution made in February 2003. Cash and cash equivalents were
available for working capital requirements and reserves and distributions
to partners and Holders of Interests. The source of both short-term and
long-term future liquidity is expected to be derived primarily from cash on

hand and, to a lesser extent, from the sale of remaining townhomes in
Weston.

The Partnership was able to generate significant cash flow before debt
service during each of the preceding five years ending in the period ended
December 31, 2002. The Partnership utilized this cash flow to pay off its
term loan and finance its operations, make distributions to its partners
and Holders of Interests, and establish certain cash reserves. During
February 2003, the Partnership made a distribution for 2002 of $20,200,000
to its Holders of Interest ($50 per Interest) and $2,244,444 to its General
Partner and Associate Limited Partners, collectively. During 2002, the
Partnership made aggregate distributions of approximately $151,500,000 to
its Holders of Interests (approximately $375 per Interest) and
approximately $16,833,000 to the General Partner and Associate Limited
Partners, collectively. During 2001, the Partnership made aggregate
distributions of approximately $80,800,000 to its Holders of Interests
(approximately $200 per Interest) and approximately $8,978,000 to its
General Partner and Associate Limited Partners, collectively. During 2000,
the Partnership made aggregate distributions of approximately $58,461,000
to its Holders of Interests (approximately $145 per Interest) and
approximately $21,669,000 to its General Partners and Associate Limited
Partners, collectively. During 1999, the Partnership made aggregate
distributions of approximately $70,700,000 to its Holders of Interests
(approximately $175 per Interest) and approximately $3,928,000 to its
General Partner and Associate Limited Partners, collectively. During 1998,
the Partnership made aggregate distributions of approximately $50,500,000
to its Holders of Interest (approximately $125 per Interest) and
approximately $2,806,000 to its General Partner and Associate Limited
Partners, collectively.

In accordance with the Partnership Agreement, until the Holders of
Interests received aggregate distributions equal to their Capital
Investments (i.e., $1,000 per Interest), the General Partner and Associate
Limited Partners deferred a portion of their distributions of net cash flow
from the Partnership totaling approximately $12,541,000 through
December 31, 1999. In addition, in connection with the settlement of
certain litigation, the General Partner and the Associate Limited Partners
deferred approximately $1,259,000 of their share of an August 1997
distribution which was otherwise distributable to them, and such deferred
distribution amount was used by the Partnership to pay a portion of the
legal fees and expenses in such litigation. The General Partner and
Associate Limited Partners were entitled to receive such deferred amounts
after the Holders of Interests received a specified amount of distributions
from the Partnership after July 1, 1996, the remaining amount of which was
received by the Holders of Interest as part of their distribution in
February 2000. With the distribution made in February 2000, Holders of
Interests had received aggregate distributions in excess of their Capital
Investments. The distribution made in February 2000 to the General Partner
and Associate Limited Partners included the $1,259,000 amount of their
August 1997 distribution that was previously deferred as well as
approximately $6,306,000 of the approximately $12,541,500 of net cash flow
distributions to the General Partner and Associate Limited Partners
previously deferred pursuant to the terms of the Partnership Agreement. In
April and May 2000, distributions of approximately $23,100 were paid or
deemed paid to the General Partner and Associate Limited Partners,
including approximately $18,900 of net cash flow distributions that had
previously been deferred pursuant to the terms of the Partnership
Agreement. An August 2000 distribution of approximately $8,030,000 made to
the General Partner and Associate Limited Partners included the remaining
amount of net cash flow distributions that had previously been deferred of
approximately $6,216,000.

Included in Accrued expenses and other liabilities on the accompanying
consolidated balance sheet at December 31, 2002, is an accrual of
approximately $7.3 million for 2002 relating to certain contingent
liabilities.

On July 31, 1997, the Partnership obtained a new credit facility from
certain banks with Barnett Bank, N.A. being the primary agent on the
facility. The credit facility which matured on July 31, 2001, consisted of
a $75 million term loan, a $20 million revolving line of credit and a $5
million letter of credit facility. The term loan, which was paid off in
December 2000, and the letter of credit facility were not renewed at the
maturity date. The $20 million revolving line of credit was extended for a
fee of $50,000 through September 30, 2002 with First Union National Bank as
the only lender. There were no borrowings on the revolving line of credit,
which expired on September 30, 2002.

The Partnership originally had interest rate swap agreements with
respect to $50 million of the term loan. The interest rate swap agreements
fixed the interest rates under the term loan and were amortized in
conjunction with the scheduled loan repayments. These agreements expired
on July 31, 2001. The Partnership has approximately $3.2 million of
letters of credit outstanding at December 31, 2002, all of which are cash
collateralized. The combined effective interest rate for the Partnership's
credit facilities for the years ended December 31, 2001 and 2000 including
the amortization of loan origination fees and the effect of the interest
rate swap agreements was approximately 9.5% per annum and 9.8% per annum,
respectively.

In May 2000, the Partnership closed on a $20 million loan with First
Union National Bank for the development and construction of The Shoppes of
Town Center (the "Shoppes") in Weston, a mixed use retail/office plaza
consisting of approximately 158,000 net leasable square feet. The loan was
made to an indirect, majority-owned subsidiary of the Partnership, and the
Partnership guaranteed the obligations of the borrower, subject to a
reduction in the guarantee upon the satisfaction of certain conditions. At
December 31, 2002, the balance outstanding on the loan was approximately
$13,800,800. This amount is included in Liabilities related to assets held
for sale on the accompanying consolidated balance sheets. Interest on the
loan (as modified effective May 31, 2001 and further modified effective
December 31, 2001) was based on the relevant LIBOR rate plus 1.8% per
annum. Monthly payments of interest only were required during the first
twenty-five months of the loan. On July 1, 2002, the maturity date for the
loan was extended for eleven months and monthly payments of principal and
interest were due based upon a 25 year loan amortization schedule and an
assumed interest rate based on the ten-year treasury bond rate plus 2.5%
per annum. The loan could be prepaid in whole or in part at anytime,
provided that the borrower pay any costs or expenses of the lender incurred
as a result of a prepayment on a date other than the last day of a LIBOR
interest period. Construction of The Shoppes commenced in March 2000 and
was completed by December 31, 2002. The outstanding principal balance and
accrued and unpaid interest of approximately $13,848,000 was paid in
February 2003 out of the proceeds from the sale of The Shoppes discussed
below.

On February 7, 2003, the Partnership through certain consolidated
entities (collectively, the "Seller"), closed on the sale of the Shoppes to
unaffiliated third parties (collectively, the "Buyer"). The gross sale
price for the Shoppes was $34,330,000. Net cash proceeds received from the
sale, after prorations, credits, closing costs, amounts escrowed and the
settlement of the Seller's outstanding loan balance totaled approximately
$18,198,000. Under the Sale and Purchase Agreement (the "Agreement"), the
Seller made certain representations, warranties and indemnities for the
benefit of the Buyer that extend beyond the closing of the sale. In
addition, pursuant to the terms of the Agreement, the Seller entered into
an agreement to indemnify the Buyer's lender from certain possible claims
related to the Shoppes. In accordance with such indemnification, the
Seller deposited $100,000 and the Buyer deposited $50,000 in escrow to
secure the obligation to indemnify the Buyer's lender for such claims.
Pursuant to the Agreement, the Seller also deposited $50,000 in escrow as
security for completion of remediation work for compliance with the
Americans with Disabilities Act. The net book value and net cash proceeds

received from the sale represented approximately 22% and 13%, respectively,
of the Partnership's total consolidated assets for financial reporting
purposes at December 31, 2002. The sale resulted in a gain of
approximately $1,990,000 for financial reporting purposes and a gain of
approximately $2,460,000 for Federal income tax purposes.

On December 27, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Ocala Parcel to an unaffiliated third
party. The gross sale price of the Ocala Parcel was $1,400,000. Net cash
proceeds received from the sale, after prorations and closing costs totaled
approximately $1,266,000. The sale resulted in a loss of approximately
$380,000 for financial reporting purposes and a loss of approximately
$2,610,000 for Federal income tax purposes.

On December 4, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Waterways II Parcel to an unaffiliated
third party. The Partnership was constructing a shopping center on the
Waterways II Parcel which was not completed on the date of the sale. Under
the terms of the agreement, the seller assigned to the buyer the seller's
rights and obligations under the construction contract and the plans and
specifications for construction, as well as an agreement for parking. The
gross sale price of the Waterways II Parcel was $5,151,000. Net cash
proceeds received from the sale, after prorations and closing costs totaled
approximately $4,588,000. The sale resulted in a gain of approximately
$1,170,000 for financial reporting and Federal income tax purposes.

On October 1, 2002, the Partnership, through certain consolidated
entities, closed on the sale of Weston Hills Country Club (the "Country
Club") to an unaffiliated third party. Under the sale and purchase
agreement, the seller made certain representations, warranties and
indemnities for the benefit of the purchaser that will survive for one year
from the date of the closing. In accordance with the sale and purchase
agreement, $1,000,000 of the sale price has been placed in escrow to pay
possible claims or demands of the purchaser arising from the sale during
the one-year period, and is therefore reflected as restricted cash on the
accompanying consolidated balance sheet at December 31, 2002. The gross
cash sale price for the Country Club was $23,500,000 plus approximately
$224,000 for existing consumable and saleable inventory. Net cash proceeds
received from the sale, after prorations, closing costs and payment of
funds into escrow, totaled approximately $19,348,000. The sale resulted in
a gain of approximately $6,980,000 for financial reporting purposes and a
loss of approximately $6,106,000 for Federal income tax purposes.

In September 2001, the Partnership recorded an asset impairment of
$2.5 million to the carrying value of the Weston Athletic Club (the "Weston
Club"). The loss was recorded based upon the difference between the
carrying value of the Weston Club and its fair value less costs to sell as
determined by an agreement to purchase signed by the Partnership and an
unaffiliated third party purchaser during September 2001. During October
2001, the Partnership closed on the sale of the Weston Club to an
unaffiliated third party for a total sale price of $4.25 million. The sale
resulted in a loss of approximately $30,000 for financial reporting
purposes and a loss of approximately $3,710,000 for Federal income tax
purposes.

On March 6, 2000, the Partnership entered into a contract with an
unaffiliated third party builder for the bulk sale of the remaining lot
inventory, consisting of approximately 103 developed and undeveloped lots,
and the sales center at its Water's Edge Community for a sale price of
approximately $3.2 million. The contract provided for the lots to be
purchased in three phases. The closing of the first phase of 29 lots was
completed in March 2000 for approximately $0.7 million. The closing of the
second phase of 51 lots and the sales center was completed in September
2000 for approximately $1.6 million. The closing of the third phase of 23
lots was completed in December 2000 for approximately $0.9 million. These

sales are reflected in Homesite revenues and cost of revenues on the
accompanying consolidated statement of operations for the year ended
December 31, 2000. The Partnership recorded a $1.0 million write-down of
its related inventory as of December 31, 1999 to reduce the carrying value
of Water's Edge to its estimated fair value less selling costs at that
date. Accordingly, these transactions resulted in no gain or loss for
financial reporting purposes in 2000 and an approximate $3.2 million loss
for Federal income tax purposes in 2000.

In March 2000, the Partnership closed on the sale of the remaining
lots at its Cullasaja Club Community, as well as its remaining equity
memberships in the Cullasaja Club, to the Cullasaja Club, Inc. and
Cullasaja Realty Development, Inc., for a total sale price of approximately
$3.0 million. In addition, indebtedness owed to unaffiliated third party
lenders, as well as related accrued interest, was extinguished in
conjunction with this sale, as the payment of principal and interest was
contingent upon net cash flows generated from the Cullasaja Community.
Such cash flows were not achieved, and as a result, the Partnership
recorded an extraordinary gain related to the extinguishment of debt and
accrued interest of approximately $6.2 million, as reflected on the
accompanying consolidated statement of operations for the year ended
December 31, 2000. The sale of the lot inventory and equity memberships
resulted in a gain of approximately $488,000 for financial reporting
purposes and a loss of approximately $1,565,000 for Federal income tax
purposes.

Except for the bulk sale of the remaining lot inventory at the Water's
Edge Community, which is reflected in Homesite revenues and cost of
revenues, and the sale of the Shoppes, which occurred in February 2003, all
of the above mentioned sales are reflected in Land and property revenues
and cost of revenues on the accompanying consolidated statements of
operations for the years ended December 31, 2000 and 2001, and in Gain on
sale of assets held for sale on the accompanying consolidated statement of
operations for the year ended December 31, 2002.

In February 2002, unsolicited tender offers for Interests were made by
(1) First Commercial Guaranty ("FCG") to purchase up to 14,682
(approximately 3.67%) of the Interests for $150 per Interest, and (2) CMG
Partners, LLC ("CMG") to purchase up to 4.9% of the Interests for $200 per
Interest. The General Partner, on behalf of the Partnership, determined
that each of the FCG offer and the CMG offer was inadequate and not in the
best interests of the Holders of Interests. Accordingly, the General
Partner recommended that Holders of Interest reject each such offer and not
tender their Interests pursuant to either offer. The FCG offer and the CMG
offer were scheduled to expire in March and May 2002, respectively.

CMG subsequently modified and extended its offer to purchase Interests
for $190 per Interest. In October 2002, the General Partner, on behalf of
the Partnership, determined that the modified CMG offer was inadequate and
not in the best interests of the Holders of Interests. Accordingly, the
General Partner recommended that Holders of Interests reject such offer and
not tender their Interests to CMG pursuant to its modified offer.

In January 2003, CMG made yet another offer to purchase up to 4.9% of
the outstanding Interests for $100 per Interest (which took into account
the Partnership's distribution of $100 per Interest to Holders of Interests
in October 2002). In addition, in February 2003, FCG made an offer to
purchase up to approximately 4.1% of the outstanding Interests for $120 per
Interest. The General Partner, on behalf of the Partnership, determined
that each of these offers was inadequate and not in the best interests of
the Holders of Interests. Accordingly, the General Partner recommended
that Holders of Interests reject each such offer and not tender their
Interests pursuant to either offer. These offers are scheduled to expire
in April and March 2003, respectively, subject to earlier termination.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 2002, 2001
and 2000 are primarily attributable to the development and sale or
operation of the Partnership's assets. See Note 1 for a discussion
regarding the recognition of profit from sales of real estate.

For the year ended December 31, 2002, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 812 housing units, two commercial
office building units, a land parcel in Ocala (the Ocala Parcel), a
commercial parcel in Weston, and the Weston Hills Country Club. This
compares with closings in 2001 of 1,356 housing units, seven homesites,
five commercial office building units, two one-story commercial office
buildings, a commercial and residential parcel in the Weston Community, a
land parcel in Dade County, and the Weston Athletic Club. Closings in 2000
were for 1,555 housing units, 97 homesites, five commercial office
buildings in Weston Town Center, several one-story commercial office
buildings in Weston, approximately five acres of developed land tracts in
Weston, the remaining lots and equity memberships at the Cullasaja Club
Community, a commercial office building in Boca Raton, Florida, the sales
office and a commercial parcel in its River Hills Community, and the bulk
sale of 103 developed and undeveloped lots and the sales center at its
Water's Edge Community. Outstanding contracts ("backlog"), as of March 1,
2003 were for 97 housing units. This compares with a backlog of housing
units as of March 1, 2002 of 592 units. The backlog of housing units as of
March 1, 2001 was for 1,040 units.

The Partnership's Communities, other than Weston, have completed
construction. The Partnership's Weston Community located in Broward
County, Florida, is in its final stage, with the construction and/or
closing on the sale of 97 townhomes remaining as of March 1, 2003. As
discussed above, in 2000, the remaining lots and equity club memberships at
the Cullasaja Club were sold and the Partnership closed the sale of the
remaining lots and the sales center at the Water's Edge Community. The
Partnership's condominium project on Longboat Key, Florida, known as
Arvida's Grand Bay was completed in 1999, and all units were sold and
closed by January 2000. All of the units in The River Hills Community were
sold and closed by July 2001. All of the units in the Jacksonville Golf &
Country Club Community in Jacksonville, Florida were closed as of December
31, 1998. All of the remaining units in the Partnership's Sawgrass Country
Club, The Players Club at Sawgrass and Dockside Communities in
Jacksonville, Florida and Atlanta, Georgia were sold and closed as of
December 31, 1996. In addition, the Broken Sound Community, located in
Boca Raton, Florida, had its final closings in 1995, and during 2000, the
Partnership assigned all of its remaining equity interests in the Broken
Sound Club back to the club and terminated its interest in this project in
connection with the settlement of certain litigation. Revenues for 2002
were impacted as a result of the lower levels of inventories available for
sale as the Partnership's remaining Weston Community completes its final
phase.

Revenues from housing and homesite activities generally are recognized
upon the closing of homes built by the Partnership and developed lots,
respectively, within the Partnership's Communities. Historically, a
substantial portion of the Partnership's housing revenues during the first
six months of a given year are generated from the closing of units
contracted in the prior year. Land and property revenues are generated
from the closing of developed and undeveloped residential and/or commercial
land tracts, the sale of operating properties, as well as gross revenues
earned from the sale of equity memberships in the clubs within the
Partnership's Communities.

Cost of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest,
real estate taxes and marketing, as well as disposition costs. The costs
related to the Partnership's homesite sales reflect the cost of the
acquired assets, related development expenditures, certain capitalized
overhead costs, capitalized interest and real estate taxes, as well as
disposition costs. Land and property costs reflect the cost of the
acquired assets, certain development and construction costs and related
disposition costs, as well as the cost associated with the sale of equity
memberships.

Housing revenues and gross operating profit margins from housing
operations decreased for 2002 as compared to 2001 due to a decrease in the
number of units closed in the Partnership's Weston Community and an
aggregate accrual of approximately $7.3 million relating to certain
contingent liabilities, which is included in cost of revenues for 2002.
Housing revenues and gross operating profit margin increased for 2001 as
compared to 2000 due primarily to a change in the mix of units closed and
an increase in the average prices from approximately $224,000 per unit
closed in 2000 to approximately $307,000 per unit closed in 2001. Revenues
generated from the closings of units in Weston account for approximately
100%, 99% and 96% of the housing revenues recognized for the years ended
December 31, 2002, 2001 and 2000, respectively.

Sales of all the Partnership's remaining lot inventory had closed in
2001 resulting in no homesite revenues generated during 2002, and the
decrease in homesite revenues in 2001 as compared to 2000. The
Partnership's plan for the Weston Community included an increase in its
home building operations, which resulted in a reduced number of lots
available for sale to third-party builders. In March 2000, the Partnership
entered into a contract with an unaffiliated third party builder for the
bulk sale of the remaining lot inventory, consisting of approximately 103
developed and undeveloped lots, and the sales center at its Water's Edge
Community, for a sale price of approximately $3.2 million. The contract
provided for the lots to be sold in three phases. The closing of the first
phase of 29 lots was completed in March 2000 for approximately $0.7
million. The closing of the second phase of 51 lots and the sales center
was completed in September 2000 for approximately $1.6 million. The
closing of the final phase of 23 lots was completed in December 2000 for
approximately $0.9 million.

Effective January 1, 2002, the Partnership adopted SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets.
Accordingly, operations and gain on sales of The Shoppes of Town Center,
the Weston Hills Country Club, the Ocala Parcel, the Waterways II Parcel,
and certain commercial office building units in Weston which meet the
criteria for Assets held for sale have been accounted for as Income from
operations of assets held for sale and Gain on sale of assets held for
sale. The results of operations for those assets have been excluded from
continuing operations in the consolidated statements of operations for all
periods presented. Land and property revenues for 2001 were generated
primarily from the sale of five commercial office building units, two one-
story commercial office buildings, a commercial and residential parcel in
the Weston Community, a land parcel in Dade County, the sale of the Weston
Athletic Club and the recognition of profits from land sales closed in
prior years which had been deferred until the accounting criteria for
profit recognition had been met. Land and property revenues for 2000 were
generated primarily from the sale of five commercial office buildings in
Weston Town Center, several one-story commercial office buildings in
Weston, approximately five acres of developed land tracts in Weston, the
remaining lots and equity memberships at the Cullasaja Club Community, a
commercial office building in Boca Raton, Florida, and the sales office and
a commercial parcel in the Partnership's River Hills Community.

Operating properties represents activity from the Partnership's club
operations, commercial properties and certain other operating assets.
Operating property revenues and related cost of revenues for 2002, 2001 and
2000 were generated primarily from the Weston Athletic Club, which was sold
prior to the adoption of SFAS No. 144, the effects of which are discussed
in the previous paragraph.

Net income from assets held for sale increased for 2002 as compared to
2001 and 2000 primarily due to revenues from The Shoppes of Town Center,
which began generating rental income during May of 2001.

Brokerage and other operations represents activity from the sale of
unaffiliated third-party builders' homes within the Partnership's
communities, fees earned from the Partnership's mortgage brokerage
operations within the Weston Community, proceeds from the Partnership's
property management activities, and fees earned from various management
agreements with joint ventures. Revenues from brokerage and other
operations decreased in 2002 as compared to 2001 and in 2001 as compared to
2000 due primarily to a decrease in brokerage commissions earned in Weston
resulting from a reduced number of units closed by third party builders
within the Community, a decrease in fees earned from the Partnership's
mortgage brokerage operations due to a decrease in the number of housing
units closed and a decrease in revenues from the Partnership's property
management activities.

Selling, general and administrative expenses include all marketing
costs, with the exception of those costs capitalized in conjunction with
the construction of housing units, as well as project and general
administrative costs. These expenses are net of the marketing fees
received from third party builders. Selling, general and administrative
expenses decreased for 2002 as compared with 2001 and 2000 due primarily to
decreased marketing, project administration and support service costs
resulting from the close out of several of the Partnership's Communities
and the final stage of development of its Weston Community. Reimbursements
to St. Joe/Arvida for employee costs for the year ended December 31, 2002
as compared to 2001 and 2000 have decreased due to the orderly liquidation
of the Partnership's remaining assets which is currently in process. A
greater decline over the periods presented would have resulted had it not
been critical to the Partnership's operations to retain employees of the
Partnership and St. Joe/Arvida through incentive compensation and retention
awards as the Partnership completes the liquidation of its assets.

In September 2001, the Partnership recorded an asset impairment of
$2.5 million to the carrying value of the Weston Athletic Club. The loss
was recorded based upon the difference between the carrying value of the
Weston Athletic Club and its fair value less costs to sell as determined by
an agreement to purchase signed by the Partnership and an unaffiliated
third party purchaser during September 2001. During October 2001, the
Partnership closed on the sale of the Weston Athletic Club for a total sale
price of $4.25 million. The sale resulted in a loss of approximately
$30,000 for financial reporting purposes and a loss of approximately
$3,710,000 for Federal income tax purposes.

As the Partnership undertook development of the final phases of its
remaining Communities, a larger portion of real estate taxes and interest
expense incurred have become eligible for capitalization, and there has
been a reduction of the overall amount of real estate taxes assessed and
interest expense incurred. These are the causes for the decrease in
interest and real estate taxes, net of amounts capitalized, on the
accompanying consolidated statements of operations for 2002 as compared to
2001 and for 2001 as compared to 2000.

INFLATION

The relatively low rates of inflation in recent years generally have
not had a material effect on the Community development business and
inflation in future periods is not likely to adversely affect the
Partnership's operations since Weston, the Partnership's last remaining
community, is in its final stage of development.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Partnership's financial condition
and results of operations are based upon the Partnership's consolidated
financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make
estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities. These estimates are based on historical experience
and on various other assumptions that management believes are reasonable
under the circumstances; additionally management evaluates these results on
an on-going basis. Management's estimates form the basis for making
judgements about the carrying values of assets and liabilities that are not
readily apparent from other sources. Different estimates could be made
under different assumptions or conditions, and in any event, actual results
may differ from the estimates.

The Partnership relies on certain estimates to determine the
construction and land costs and resulting gross margins. The Partnership's
land and construction costs are comprised of direct and allocated costs,
including estimated costs for future warranties. Land, land development
and other common costs are assigned to individual components based on
specific identification or other allocation methods. Land and land
development costs generally include interest incurred until development is
substantially completed.

The Partnership also reviews its land and other inventories and
property, plant and equipment for impairment of value. This includes
considering certain indications of impairment such as significant changes
in asset usage, significant deterioration in the surrounding economy or
environmental problems. If such indications are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying value, the Partnership will adjust the carrying
value down to its estimated fair value. Fair value is based on
management's estimate of the property's fair value based on discounted
projected cash flows.

There are various judgments and uncertainties affecting the
application of these and other accounting policies, and materially
different amounts may be reported under different circumstances or if
different assumptions were used.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership does not believe that it has a material exposure to
market rate risk. The Partnership had entered into a construction and
short-term mortgage loan in the principal amount of up to $20,000,000
(approximately $13,800,000 outstanding at December 31, 2002) with a
variable rate of interest to finance construction of The Shoppes of Town
Center in Weston in 2000. The loan was paid off in full on February 7,
2003 in conjunction with the sale of the Shoppes to an unaffiliated third
party.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

INDEX

Report of Independent Certified Public Accountants

Consolidated Balance Sheets, December 31, 2002 and 2001

Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

SCHEDULES NOT FILED:

All schedules have been omitted as the required information is
inapplicable or immaterial, or the information is presented in the
consolidated financial statements or related notes.

REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Partners
ARVIDA/JMB PARTNERS, L.P.

We have audited the accompanying consolidated balance sheets of
Arvida/JMB Partners, L.P. and Consolidated Ventures (the "Partnership"), as
of December 31, 2002 and 2001, and the related consolidated statements of
operations, changes in partners' capital accounts, and cash flows for each
of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Arvida/JMB Partners, L.P. and Consolidated Ventures at
December 31, 2002 and 2001, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States.

Ernst & Young LLP
Miami, Florida
February 21, 2003, except for note 8
as to which is March 1, 2003, and
note 9 as to which is March 5, 2003

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

ASSETS
------

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) OPERATIONS AND BASIS OF ACCOUNTING

Operations

The assets of Arvida/JMB Partners, L.P. (the "Partnership") have
consisted principally of interests in land in the process of being
developed into master-planned residential communities (the "Communities")
and, to a lesser extent, commercial properties; accounts receivable;
construction, brokerage and other support businesses; real estate assets
held for investment and certain club and recreational facilities. The
Partnership's Communities have contained a diversified product mix with
both resort and primary homes designed for the middle and upper income
segments of the various markets in which the Partnership has operated.

Within the Communities, the Partnership has constructed, or caused to
be constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the State of Florida, with Communities also located
near Atlanta, Georgia; and Highlands, North Carolina. Additional
properties owned by the Partnership in or near its Communities have been
developed as retail and/or office properties. The Partnership has also
owned or managed certain club and recreational facilities within certain of
its Communities. In addition, the Partnership has sold individual
residential lots and parcels of partially developed and undeveloped land.
The third-party builders and developers to whom the Partnership sold
homesites and land parcels were generally smaller local builders who
required project specific financing for their developments and whose
operations were more susceptible to fluctuations in the availability and
terms of financing.

Pursuant to Section 5.5J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5J(i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that was to be completed by October
2002. In October 2002 the Partnership commenced a solicitation for
consents to an amendment (the "Amendment") to the Partnership's Amended and
Restated Agreement of Limited Partnership providing for an extension of the
term of the Partnership's liquidation period to not later than October 31,
2005. In addition, under the terms of the Amendment, the General Partner
is authorized, in its sole discretion to complete the liquidation of the
Partnership by forming a liquidating trust (the "Liquidating Trust") and
contributing any remaining Partnership assets to the Liquidating Trust
subject to all outstanding obligations and liabilities of the Partnership.
In November 2002 a majority of the Holders of Interests gave their consent
to the Amendment, which became effective October 29, 2002, and,
accordingly, the term of the Partnership's liquidation period has been
extended.

Principles of Consolidation

The consolidated financial statements include the accounts of the
Partnership and its consolidated ventures. All material intercompany
balances and transactions have been eliminated in consolidation. The
equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to those investments where
the Partnership's ownership interest is 50% or less.

Recognition of Profit from Sales of Real Estate

For sales of real estate, profit is recognized in full when the
collectability of the sales price is reasonably assured and the earnings
process is virtually complete. When the sale does not meet the require-
ments for recognition of income, profit is deferred until such requirements
are met. In certain circumstances, contracts for sales of real estate
contain provisions which allow the Partnership to repurchase the real
estate in the event certain conditions are not met. Profits generated from
sales subject to these provisions are generally deferred until the
Partnership no longer has any repurchase rights. For sales of residential
units, profit is recognized at the time of closing or if certain criteria
are met, on the percentage-of-completion method.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported or
disclosed in the financial statements and accompanying notes. Actual
results could differ from those estimates.

Real Estate Inventories and Cost of Real Estate Revenues

Real estate inventories are carried at cost, including capitalized
interest and property taxes. The total cost of land, land development and
common costs are apportioned among the projects on the relative sales value
method. Costs pertaining to the Partnership's housing, homesite, and land
and property revenues reflect the cost of the acquired assets as well as
development costs, construction costs, capitalized interest, capitalized
real estate taxes and capitalized overhead. Certain marketing costs
relating to housing projects, including exhibits and displays, and certain
planning and other pre-development activities, excluding normal period
expenses, are capitalized and charged to housing cost of revenues as
related units are closed. Provisions for value impairment are recorded
whenever the estimated future undiscounted cash flows from operations and
projected net sales proceeds are less than the net carrying value plus
estimated costs to complete development. If such indications are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying value, the Partnership will adjust the
carrying value down to its estimated fair value. A warranty reserve is
provided as residential units are closed. This reserve is reduced by the
cost of subsequent work performed.

Capitalized Interest and Real Estate Taxes

Interest and real estate taxes are capitalized to qualifying assets,
principally real estate inventories. Such capitalized interest and real
estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $582,281, $1,196,539 and $2,092,739 was incurred for the years
ended December 31, 2002, 2001 and 2000, respectively, all of which was
capitalized. The decrease in interest incurred for the year ended
December 31, 2002 as compared to 2001 is due primarily to the continued
decline in interest rates through the period, and the decrease in interest
incurred for the years 2002 and 2001 as compared to 2000 is due primarily
to the repayment of remaining amounts outstanding on the Partnership's term
loan in December 2000, and, to a lesser extent, a decline in interest
rates. Interest payments, including amounts capitalized, of $630,775,
$939,725 and $1,970,443 were made for the years ended December 31, 2002,
2001 and 2000, respectively.

Real estate taxes of $1,604,389, $2,728,091 and $3,886,365 were
incurred for the years ended December 31, 2002, 2001 and 2000,
respectively, of which $1,498,463, $2,553,320 and $2,881,709 were
capitalized for the years ended December 31, 2002, 2001 and 2000,
respectively. Real estate tax payments of $1,623,615, $2,992,032 and
$3,908,090 were made for the years ended December 31, 2002, 2001 and 2000,
respectively. In addition, real estate tax reimbursements totaling
$20,214, $269,864 and $111,858 were received from the Partnership's escrow
agent during 2002, 2001 and 2000, respectively. The preceding analysis of
real estate taxes does not include real estate taxes incurred or paid with
respect to the Partnership's club facilities and other operating
properties, as these taxes are included in cost of revenues for operating
properties, or in Net income from operations of assets held for sale.

Property and Equipment and Other Assets

Property and equipment are carried at cost less accumulated
depreciation and are depreciated on the straight-line method over the
estimated useful lives of the assets, which range from two to twenty-five
years. Expenditures for maintenance and repairs are charged to expense as
incurred. Costs of major renewals and improvements which extend useful
lives are capitalized.

Other assets are amortized on the straight-line method, which
approximates the interest method, over the useful lives of the assets,
which range from one to five years. Amortization of other assets,
excluding loan origination fees, of approximately $0, $230,000 and $394,000
was recorded for the years ended December 31, 2002, 2001 and 2000,
respectively. Amortization of loan origination fees, which is included in
interest expense, of approximately $50,000, $146,000 and $250,000 was
recorded for the years ended December 31, 2002, 2001 and 2000,
respectively.

Discontinued Operations

Effective January 1, 2002, the Partnership adopted SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS
No. 144 requires that long-lived assets that are to be disposed of by sale
be measured at the lower of book value or fair value less cost to sell.
Additionally SFAS No. 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from
the ongoing operations of the entity in a disposal transaction.
Accordingly, operations of The Shoppes of Town Center, the Weston Hills
Country Club, the AOK Group, which owned an approximate 46 acre parcel (the
"Ocala Parcel") near Ocala, Florida, Waterways II, an approximate 4.6 acre
parcel in Weston (the "Waterways II Parcel") on which a shopping center
containing approximately 31,300 square feet of rentable space was being
constructed, and certain commercial office units in Weston, which meet the
criteria for assets held for sale, have been accounted for as net income
from operations of assets held for sale, and the results of operations for
those assets have been excluded from continuing operations in the
consolidated statements of operations for all periods presented.

Condensed financial information relating to Assets held for sale is as
follows:

December 31, December 31,
2002 2001
------------ ------------
Assets held for sale:
Property and equipment, net. . $30,776,784 40,279,546
Other assets . . . . . . . . . 2,024,248 6,637,499
----------- -----------

Total assets. . . . . . . . 32,801,032 46,917,045
----------- -----------

December 31, December 31,
2002 2001
------------ ------------
Liabilities related to assets
held for sale:
Notes and Mortgages payable. . 13,800,753 13,775,577
Other liabilities. . . . . . . 515,923 6,170,029
----------- -----------
Total liabilities . . . . . 14,316,676 19,945,606
----------- -----------
Net Assets held for sale . . . . $18,484,356 26,971,439
=========== ===========

Investments in and Advances to Joint Ventures, Net

In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those joint
venture investments for which the Partnership does not have majority
control and where the Partnership's ownership interest is 50% or less.

Investments in the remaining joint ventures are carried at the
Partnership's proportionate share of the ventures' assets, net of their
related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ
from the recorded cost of the Partnership's proportionate share of the
joint ventures' net assets.

Interest Rate Swaps

The Partnership had entered into interest rate swap agreements to
manage its exposure to market risks related to changes in interest rates
associated with its variable rate debt under its credit facility. As of
July 31, 2001, all interest rate swap agreements had expired. The
interest-rate swap agreements were in effect with respect to the term loan
which was paid off in December 2000. The swap agreements were amortized
annually through the scheduled maturity of the term loan. These agreements
involved the exchange of amounts based on fixed interest rates for amounts
based on variable interest rates over the life of the loan without an
exchange of the notional amount upon which the payments are based. The
differential was paid or received as interest rate changes were calculated
and paid monthly by the appropriate party. Prior to 2001, such payments or
receipts were recorded as adjustments to interest expense in the periods in
which they were incurred. Subsequent to December 31, 2000, and upon the
adoption of SFAS 133, the Partnership recognized a net loss of $127,101
related to the ineffectiveness of the hedging instrument. This amount is
included in interest expense in the accompanying consolidated statement of
operations for 2001.

Partnership Records

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect
the Partnership's accounts in accordance with GAAP and to consolidate the
accounts of the ventures as described above. Such GAAP and consolidation
adjustments are not reflected on the records of the Partnership. The net
effect of these items is summarized as follows:

2002 2001
------------------------- ------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ----------- -----------

Total assets. . . $138,074,785 139,543,607 272,939,543 285,960,265

Partners' capital
accounts:
General Partner
and Associate
Limited
Partners. . . 10,846,920 10,028,270 10,324,698 9,506,239
Holders of
Interests . . 85,213,686 132,123,537 200,325,814 252,862,794

Net income:
General Partner
and Associate
Limited
Partners. . . 17,355,556 17,355,363 13,472,256 13,471,872
Holders of
Interests . . 36,387,872 30,795,265 88,017,173 77,532,795

Net income per
Interest. . . . 90.07 76.23 217.86 191.91

Reference is made to note 12 for further discussion of the allocation
of profits and losses to the General Partner, Associate Limited Partners
and Holders of Interests.

Reclassifications

Certain reclassifications have been made to the 2001 and 2000
financial statements to conform to the 2002 presentation.

Income Taxes

No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable state law to remit directly to the state tax
authorities amounts representing withholding on applicable taxable income
allocated to the General Partner, Associate Limited Partners and Holders of
Interests. Such payments on behalf of the General Partner, Associate
Limited Partners and Holders of Interests are deemed distributions to them.

The cash distributions per Interest made during the years ended
December 31, 2002, 2001 and 2000 include $0, $.06 and $.05, respectively,
which represent each Holder's share of a North Carolina non-resident
withholding tax paid directly to the state tax authorities on behalf of the
Holders of Interests for the 2002, 2001 and 2000 tax years, respectively.

Recent Accounting Pronouncements

On July 30, 2002, the Financial Accounting Standards Board ("FASB")
issued Statement No. 146 ("SFAS 146"), Accounting for Costs Associated with
Exit or Disposal Activities. The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs
and certain employee severance costs that are associated with a
restructuring, discontinued operations, plant closing, or other exit or
disposal activities. Previous accounting guidance was provided by the
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition

for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." Statement
146 replaces Issue 94-3. Statement 146 is to be applied prospectively to
exit or disposal activities initiated after December 31, 2002. The
adoption of SFAS 146 is not expected to have a material impact on the
Partnership's consolidated balance sheets, results of operations or cash
flows.

In May 2002, FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections ("SFAS 145"). SFAS 145 rescinds the automatic treatment of
gains or losses from extinguishment of debt as extraordinary unless they
meet the criteria for extraordinary items as outlined in APB Opinion No.
30, Reporting the Results of Operation, Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. SFAS 145 also requires sale-leaseback
accounting for certain lease modifications that have economic effects that
are similar to sale-leaseback transactions and makes various technical
corrections to existing pronouncements. The provisions of SFAS 145 related
to the rescission of FASB Statement 4 are effective for fiscal years
beginning after May 15, 2002, with early adoption encouraged. All other
provisions of SFAS 145 are effective for transactions occurring after
May 15, 2002, with early adoption encouraged. The Partnership adopted
SFAS 145 for all transactions beginning May 16, 2002. The adoption of
SFAS 145 did not have a material impact on the Partnership's consolidated
balance sheets, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," (the Interpretation) which expands
on the guidance for the accounting and disclosure of guarantees. Each
guarantee meeting the characteristics described in the Interpretation is to
be recognized and initially measured at fair value. In addition,
guarantors will be required to make significant new disclosures, even if
the likelihood of the guarantor making payments under the guarantee is
remote, which represents another change from general current practice. The
Interpretation's disclosure requirements are effective for financial
statements ending after December 15, 2002, while the initial recognition
and initial measurement provisions are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The impact of the
Interpretation is described below.

WARRANTY RESERVES

In the normal course of business, the Partnership will incur warranty
related costs associated with homes which have previously closed. Warranty
reserves are established by charging cost of sales and recognizing a
liability for the estimated warranty costs for each home that is closed.
The Partnership monitors this reserve on a quarterly basis by evaluating
the historical warranty experience and the reserve is adjusted as
appropriate for current quantitative and qualitative factors. Actual
future warranty costs could differ from the currently estimated amounts.

For the year ended December 31, 2002 and 2001, changes in the warranty
accrual consisted of the following:

2002 2001
----------- ----------
Accrued warranty costs,
beginning of year . . . . . . . $ 3,042,000 2,589,000
Estimated liability recorded. . . 3,201,000 4,638,000
Payments made . . . . . . . . . . (4,081,000) (4,185,000)
----------- ----------
Accrued warranty costs,
end of year . . . . . . . . . . $ 2,162,000 3,042,000
=========== ==========

(2) INVESTMENT PROPERTIES

The Partnership's Communities, other than Weston, have completed
construction. The Partnership's Weston Community, located in Broward
County and the Partnership's largest community, is in its final stage, with
the construction of 128 townhomes remaining at December 31, 2002. All of
these townhomes are under contracts for sale. The Water's Edge Community
in Atlanta, Georgia and the Cullasaja Club near Highlands, North Carolina
were sold out and closed during 2000. The Partnership assigned its
remaining interest in the equity club memberships for the Broken Sound Club
back to the club in 2000, and terminated its interest in this project in
connection with the settlement of certain litigation. The Partnership's
condominium project on Longboat Key, Florida known as Arvida's Grand Bay
was completed in 1999, and all units were sold and closed by January 2000.
All of the units in the River Hills Country Club Community in Tampa,
Florida were sold and closed as of December 31, 2001. All of the units in
the Jacksonville Golf & Country Club in Jacksonville, Florida were sold and
closed as of December 31, 1998.

On October 1, 2002, the Partnership, through certain consolidated
entities (collectively the "Seller"), closed on the sale of Weston Hills
Country Club (the "Country Club") to an unaffiliated third party. Under the
sale and purchase agreement, the seller made certain representations,
warranties and indemnities for the benefit of the purchaser that will
survive for one year from the date of the closing. In accordance with the
sale and purchase agreement, $1,000,000 of the sale price has been placed
in escrow to pay possible claims or demands of the purchaser arising from
the sale during the one-year period, and is therefore reflected as
restricted cash on the accompanying consolidated balance sheet at
December 31, 2002. The gross cash sale price for the Country Club was
$23,500,000 plus approximately $224,000 for existing consumable and
saleable inventory. Net cash proceeds received from the sale, after
prorations, closing costs and payment of funds into escrow, totaled
approximately $19,348,000. The sale resulted in a gain of approximately
$6,980,000 for financial reporting purposes and a loss of approximately
$6,106,000 for Federal income tax purposes.

On December 4, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Waterways II Parcel to an unaffiliated
third party. The Partnership was constructing a shopping center on the
Waterways II Parcel which was not completed on the date of the sale. Under
the terms of the agreement, the seller assigned to the buyer the seller's
rights and obligations under the construction contract and the plans and
specifications for construction as well as an agreement for parking. The
gross sale price of the Waterways II Parcel was $5,151,000. Net cash
proceeds received from the sale, after prorations and closing costs totaled
approximately $4,588,000. The sale resulted in a gain of approximately
$1,170,000 for both financial reporting and Federal income tax purposes.

On December 27, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Ocala Parcel to an unaffiliated third
party for a gross sale price of $1,400,000. Net cash proceeds received
from the sale, after prorations and closing costs totaled approximately
$1,266,000. The sale resulted in a loss of approximately $380,000 for
financial reporting purposes and a loss of approximately $2,610,000 for
income tax purposes.

Reference is made to note 7 for a discussion regarding the sale of the
Partnership's assets in the Cullasaja Club Community and to note 13 for a
discussion regarding the sale of the Weston Athletic Club.

(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents may consist of U.S. Government obligations
with original maturities of three months or less, money market demand
accounts and repurchase agreements, the cost of which approximated market
value. Included in Restricted cash are amounts restricted under various
escrow agreements as well as cash which collateralizes letters of credit as
discussed in note 7. Credit risk associated with cash, cash equivalents
and restricted cash is considered low due to the high quality of the
financial institutions in which these assets are held.

(4) REAL ESTATE INVENTORIES

Real estate inventories at December 31, 2002 and 2001 are summarized
as follows:
2002 2001
------------ -----------
Land held for future development
or sale . . . . . . . . . . . . . . . . $ -- 395,329
Community development inventory:
Work in progress and land improvements. 8,102,696 58,733,599
Completed inventory . . . . . . . . . . -- 16,999,341
------------ -----------
Real estate inventories. . . . . . . $ 8,102,696 76,128,269
============ ===========

Reference is made to notes 1 and 13 for a discussion regarding the
impairment of long-lived assets.

(5) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2002 and 2001 are summarized as
follows:
2002 2001
----------- ----------
Land. . . . . . . . . . . . . . . . . $ -- --
Land improvements . . . . . . . . . . 109,294 272,824
Buildings . . . . . . . . . . . . . . 3,125,598 4,344,177
Equipment and furniture . . . . . . . 4,097,868 7,782,554
Construction in progress. . . . . . . 178,576 81,337
----------- ------------
Total. . . . . . . . . . . . . . 7,511,336 12,480,892
Accumulated depreciation . . . . (6,188,463) (10,086,312)
----------- ------------
Property and equipment, net. . . $ 1,322,873 2,394,580
=========== ============

Depreciation expense of approximately $1,429,000, $2,558,000 and
$2,144,000 was incurred for the years ended December 31, 2002, 2001 and
2000, respectively.

Reference is made to notes 1 and 13 for a discussion regarding the
impairment of long-lived assets.

(6) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET

The Partnership has or had investments in real estate joint ventures
with ownership interests of 50%. The Partnership's joint venture interests
accounted for under the equity method in the accompanying consolidated
financial statements are as follows:

LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------

A&D Title, L.P. 50 Florida

Arvida Pompano Associates
Joint Venture 50 Florida

Mizner Court Associates
Joint Venture 50 Florida

Mizner Tower Associates
Joint Venture 50 Florida

Ocala 202 Joint Venture 50 Florida

Tampa 301 Associates
Joint Venture 50 Florida

The following is combined unaudited summary financial information of
joint ventures accounted for under the equity method.

ASSETS
------

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------
Real estate inventories . . . . . . . $ 104,450 104,450
Other assets. . . . . . . . . . . . . 172,165 777,800
----------- -----------

Total assets. . . . . . . . $ 276,615 882,250
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Accounts payable, deposits and
other liabilities . . . . . . . . . $ 129,691 288,932
----------- -----------

Total liabilities . . . . . 129,691 288,932

Venture partners' capital . . . . . . 73,462 296,659
Partnership's capital . . . . . . . . 73,462 296,659
----------- -----------

Total liabilities and
partners' capital . . . . $ 276,615 882,250
=========== ===========

COMBINED RESULTS OF OPERATIONS
------------------------------

DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2001 2000
----------- ------------ -------------

Revenues. . . . . . . . . $ 1,731,139 2,158,997 1,585,299
=========== ============ ============

Net income. . . . . . . . $ 566,033 867,378 163,855
=========== ============ ============

Partnership's propor-
tionate share of
net income. . . . . . . $ 283,017 433,689 81,927
=========== ============ ============

Partnership's equity in
earnings of uncon-
solidated ventures. . . $ 329,509 317,607 275,580
=========== ============ ============

The following is a reconciliation of the Partnership's capital
accounts within the joint ventures to its investments in and advances to
joint ventures as reflected on the accompanying consolidated balance
sheets:

DECEMBER 31, DECEMBER 31,
2002 2001
------------ ------------

Partnership's capital, equity method. $ 73,462 296,659
Basis difference. . . . . . . . . . . 191,002 133,242
----------- ------------

Investments in joint ventures . . . . 264,464 429,901
Advances to joint ventures, net . . . -- 10,391
----------- ------------
Investments in and advances to
joint ventures, net. . . . . . $ 264,464 440,292
=========== ============

The Partnership's share of net income is based upon its ownership
interest in investments in joint ventures which are accounted for in
accordance with the equity method of accounting. Equity in earnings of
unconsolidated ventures represents the Partnership's share of each
venture's net income, and may reflect a component of purchase price
adjustments included in the Partnership's basis. Such adjustments are
generally amortized to income in relation to the cost of revenue of the
underlying real estate assets. These factors contribute to the
differential in the Partnership's proportionate share of the net income or
loss of the joint ventures and its Equity in earnings of unconsolidated
ventures as well as to the basis differential between the Partnership's
investments in joint ventures and its equity in underlying net assets, as
shown above.

There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership. In addition, under
certain circumstances, either pursuant to the joint venture agreements or
due to the Partnership's obligations as a general partner, the Partnership
may be required to make additional cash advances or contributions to
certain of the ventures.

(7) NOTES AND MORTGAGES PAYABLE

Notes and mortgages payable at December 31, 2002 and 2001 (included in
Liabilities related to assets held for sale) are summarized as follows:

2002 2001
----------- -----------
Construction loan of $20,000,000
bearing interest at approximately
3.2% at December 31, 2002) . . . . . $13,800,753 $13,775,577
=========== ===========

On July 31, 1997, the Partnership obtained a new credit facility from
certain banks with Barnett Bank, N.A. being the primary agent on the
facility. The credit facility which matured on July 31, 2001, consisted of
a $75 million term loan, a $20 million revolving line of credit and a $5
million letter of credit facility. The term loan, which was paid off in
December 2000, and the letter of credit facility were not renewed at the
maturity date. The $20 million revolving line of credit was extended for a
fee of $50,000 through September 30, 2002 with First Union National Bank as
the only lender. There were no borrowings on the revolving line of credit,
which expired on September 30, 2002.

The Partnership originally had interest rate swap agreements with
respect to $50 million of the term loan. The interest rate swap agreements
fixed the interest rates and were amortized in conjunction with the
scheduled loan repayments. These agreements expired on July 31, 2001. The
Partnership has approximately $3.2 million of letters of credit outstanding
at December 31, 2002, all of which are cash collateralized. The combined
effective interest rate for the Partnership's credit facilities for the
years ended December 31, 2001 and 2000, including the amortization of loan
origination fees, and the effect of the interest rate swap agreements was
approximately 9.5% per annum and 9.8% per annum, respectively.

In March 2000, the Partnership closed on the sale of the remaining
lots at the Cullasaja Club Community, as well as its remaining equity
memberships in the Cullasaja Club to the Cullasaja Club, Inc. and Cullasaja
Realty Development, Inc. for a total sales price of approximately $3.0
million. In addition, indebtedness owed to unaffiliated third party
lenders, as well as related accrued interest, was extinguished in
conjunction with this sale, as the payment of such principal and interest
was contingent upon net cash flows generated from the Cullasaja Community.
Such cash flows were not achieved, and as a result, the Partnership
recorded an extraordinary gain related to the extinguishment of debt of
approximately $6.2 million, as reflected on the accompanying consolidated
statements of operations. This transaction resulted in a gain for financial
reporting purposes and a loss for Federal income tax purposes.

In May 2000, the Partnership closed on a $20 million loan with First
Union National Bank for the development and construction of The Shoppes of
Town Center in Weston, a mixed use retail/office plaza consisting of
approximately 158,000 net leasable square feet. The loan was made to an
indirect, majority-owned subsidiary of the Partnership, and the Partnership
guaranteed the obligations of the borrower, subject to a reduction in the
guarantee upon the satisfaction of certain conditions. At December 31,
2002, the balance outstanding on the loan was approximately $13,800,800.
This amount is included in Liabilities related to assets held for sale on
the accompanying consolidated balance sheets. Interest on the loan (as
modified effective May 31, 2001 and further modified effective December 31,
2001) was based on the relevant LIBOR rate plus 1.8% per annum. Monthly
payments of interest only were required during the first twenty-five months

of the loan. On July 1, 2002, the maturity date for the loan was extended
for eleven months and monthly payments of principal and interest were due
based upon a 25 year loan amortization schedule and an assumed interest
rate based on the ten-year treasury bond rate plus 2.5% per annum. The
loan could be prepaid in whole or in part at anytime, provided that the
borrower pays any costs or expenses of the lender incurred as a result of a
prepayment on a date other than the last day of a LIBOR interest period.
Construction of The Shoppes of Town Center commenced in March 2000 and was
completed by December 31, 2002. Reference is made to note 16 regarding
payment of the outstanding loan balance.

(8) TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses paid or payable by the
Partnership to affiliates of the General Partner for the years ended
December 31, 2002, 2001 and 2000 are as follows:

2002 2001 2000
---------- ------- -------
Insurance commissions . . . . . . $ 312,711 284,474 306,268
Reimbursement (at cost) for
accounting services. . . . . . . 111,967 159,366 132,147
Reimbursement (at cost) for
treasury services. . . . . . . . 601,526 415,127 329,097
Reimbursement (at cost) for
legal services. . . . . . . . . 82,707 57,921 14,884
---------- ------- -------
$1,108,911 916,888 782,396
========== ======= =======

The Partnership receives reimbursements from or reimburses other
affiliates of the General Partner engaged in real estate activities for
certain general and administrative costs including, and without limitation,
salary and salary-related costs relating to work performed by employees of
the Partnership and certain out-of-pocket expenditures incurred on behalf
of such affiliates. For the year ended December 31, 2002, the amount of
such costs incurred by the Partnership on behalf of these affiliates
totaled approximately $188,400. Approximately $15,200 was outstanding at
December 31, 2002, all of which was received as of March 1, 2003. For the
years ended December 31, 2001 and 2000, the Partnership was entitled to
receive reimbursements of approximately $315,500 and $523,700,
respectively.

In November 1997, The St. Joe Company completed its acquisition of a
majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), which
acquired the major assets of Arvida Company ("Arvida"). The transaction
did not involve the sale of any assets of the Partnership, nor the sale of
the General Partner's interest in the Partnership. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would otherwise provide pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employed most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to this sub-
management agreement generally have been provided by the same personnel.
St. Joe/Arvida is reimbursed for such services and personnel on the same
basis as Arvida under the management agreement, and such reimbursements are
made directly by the Partnership. The Partnership also receives
reimbursement from St. Joe/Arvida for certain general and administrative
costs including, and without limitation, salary and salary-related costs
relating to work performed by employees of the Partnership on behalf of St.
Joe/Arvida. Charges and related reimbursements between the Partnership and

St. Joe/Arvida are determined on a consistent basis using various
methodologies depending upon the nature of the services provided. Such
charges, whether incurred directly by the Partnership or St. Joe/Arvida,
may include salaries and salary related costs, as well as burdens for
administrative and office overheads. Methodologies used to apportion costs
between entities include, but are not limited to, charges based upon
percentages of (i) time spent on each entity relative to total hours
worked; (ii) cash expenditures by entity relative to total expenditures;
and (iii) real estate sales and closings by entity relative to total sales
and closings. Affiliates of JMB Realty Corporation own a minority interest
in St. Joe/Arvida.

For the years ended December 31, 2002, 2001 and 2000, the Partnership
reimbursed St. Joe/Arvida or its affiliates approximately $3,399,000,
$4,446,000 and $4,666,000, respectively, for the services provided to the
Partnership by St. Joe/Arvida personnel pursuant to the sub-management
agreement discussed above. Such reimbursements included amounts owing in
connection with the Partnership's achievement of certain profit and cash
flow levels. In addition, at December 31, 2002, the Partnership owed St.
Joe/Arvida approximately $87,400 for general and administrative costs
pursuant to the sub-management agreement including, and without limitation,
salary and salary-related costs relating to work performed by employees of
St. Joe/Arvida on behalf of the Partnership, all of which was paid as of
March 1, 2003. For the years ended December 31, 2002, 2001 and 2000, the
Partnership received approximately $6,045,800, $4,244,000 and $1,086,700,
respectively, from St. Joe/Arvida or its affiliates. In addition, $380,300
was owed to the Partnership at December 31, 2002, all of which was received
as of March 1, 2003.

The Partnership pays for certain general and administrative costs on
behalf of its clubs, homeowners associations and maintenance associations
(including salary and salary-related costs and legal fees). The
Partnership receives reimbursements from these entities for such costs.
For the year ended December 31, 2002, the Partnership was entitled to
receive approximately $0 from these entities. For the years ended
December 31, 2001 and 2000, the Partnership was entitled to reimbursements
of approximately $110,600 and $1,001,000, respectively, from these
entities.

The Partnership, pursuant to certain agreements, provides management
and other personnel and services to certain of its equity clubs and
homeowners associations. Pursuant to these agreements, the Partnership is
entitled to receive management fees for the services provided to these
entities. Due to the timing of the cash flows generated from these
entities' operations, such fees are typically paid in arrears. For the
years ended December 31, 2002, 2001 and 2000, the Partnership was entitled
to receive approximately $464,943, $375,500 and $455,200, respectively. At
December 31, 2002, no amount was owed to the Partnership.

In January 2002, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$8,977,778. In April 2002, the General Partner and Associate Limited
Partners, collectively, received cash distributions in the aggregate amount
of $3,366,667. In October 2002, the General Partner and Associate Limited
Partners, collectively, received cash distributions in the aggregate amount
of $4,488,889.

In January 2001, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$4,488,889. In May 2001, the General Partner and Associate Limited
Partners, collectively, were entitled to a distribution of $2,545 on their
behalf for the 2000 North Carolina non-resident withholding tax. In July
2001, the General Partner and Associate Limited Partners, collectively,
received cash distributions in the aggregate amount of $4,488,889.

In February 2000, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$13,638,944. Such amount included approximately $1,259,000 previously
deferred by the General Partner and Associate Limited Partners,
collectively, out of their share of the August 1997 distribution in
connection with the settlement of certain litigation, as well as
approximately $6,306,000 of the total $12,541,500 that had previously been
deferred pursuant to the terms of the Partnership Agreement. In April and
May 2000, distributions of approximately $23,100 were paid or deemed paid
to the General Partner and Associate Limited Partners, including
approximately $18,900 of net cash flow distributions that had previously
been deferred pursuant to the terms of the Partnership Agreement. In August
2000, a distribution of approximately $8,030,000 was made to the General
Partner and Associate Limited Partners, which included the remaining amount
of net cash flow distributions that had previously been deferred of
approximately $6,216,600.

Amounts receivable from or payable to the General Partner, St.
Joe/Arvida or their respective affiliates do not bear interest.

(9) COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and
bonds for approximately $0 and $15,960,900, respectively, at December 31,
2002. In addition, certain joint ventures in which the Partnership holds
an interest are also contingently liable under bonds for approximately
$370,700 at December 31, 2002.

On August 29, 2002, the Partnership entered into an agreement with St.
Joe/Arvida for the prospective assignment to and assumption by St.
Joe/Arvida of the Partnership's rights and obligations under the lease for
its offices (approximately 19,100 rentable square feet of space) in Boca
Raton, Florida. The Partnership currently expects that the assignment and
assumption will be modified to be made effective January 1, 2004.

Rental expense of $1,637,360, $1,788,703 and $1,493,349 was incurred
for the years ended December 31, 2002, 2001 and 2000, respectively.

The Partnership was named a defendant in a number of homeowner
lawsuits, certain of which purported to be class actions, that allegedly in
part arose out of or related to Hurricane Andrew, which on August 24, 1992
resulted in damage to a former community development known as Country Walk.

Other than for the suits discussed below, these lawsuits have been
settled, and one of the Partnership's insurance carriers that has paid for
settlements of these lawsuits has in some, but not all, instances, provided
the Partnership with written reservation of rights letters. The aggregate
amount of the settlements funded by this carrier is approximately $10.1
million. The insurance carrier that funded these settlements pursuant to
certain reservations of rights has stated its position that it has done so
pursuant to various non-waiver agreements. This carrier's position was
that these non-waiver agreements permitted the carrier to fund the
settlements without preventing the carrier from raising insurance coverage
issues or waiving such coverage issues. On May 23, 1995, the insurance
carrier rescinded the various non-waiver agreements currently in effect
regarding certain of these lawsuits, allegedly without waiving any future
coverage defenses, conditions, limitations, or rights. For this and other
reasons, the extent to which the insurance carrier may recover any of its
settlement payments or associated fees and costs from the Partnership is
uncertain. The Partnership believes that a material loss for the
Partnership as a result of the insurance carrier's reservations of rights
and its funding of the settlement payments is remote, although there is no
assurance that the Partnership will not ultimately pay or reimburse the
insurance carrier for some portion of the settlement payments or associated
fees or costs. The accompanying consolidated financial statements do not
reflect any accrual related to this matter.

The Partnership is a defendant in an insurance subrogation matter. On
or about May 10, 1996, a subrogation claim entitled Juarez v. Arvida
Corporation et al., Case No. 96-09372 CA13 was filed in the Circuit Court
of the Eleventh Judicial Circuit in and for Dade County, Florida.
Plaintiffs filed this suit for the use and benefit of American Reliance
Insurance Company ("American Reliance"). In this suit, plaintiffs seek to
recover damages, pre-and post-judgment interest, costs and any other relief
the Court may deem just and proper in connection with $3,200,000 American
Reliance allegedly paid on specified claims at Country Walk in the wake of
Hurricane Andrew. The Walt Disney Company ("Disney") is also a defendant
in this suit. The Partnership is advised that the amount of this claim
that allegedly relates to units it sold is approximately $350,000. The
Partnership is being defended by one of its insurance carriers. The
Partnership believes that a material loss for the Partnership as a result
of this lawsuit is remote. The accompanying consolidated financial
statements do not reflect any accruals related to this matter.

The Partnership has been named a defendant in a purported class action
entitled Lakes of the Meadow Village Homes, Condominium Nos. One, Two,
Three, Four, Five, Six, Seven, Eight and Nine Maintenance Associates, Inc.,
v. Arvida/JMB Partners, L.P. and Walt Disney World Company, Case No. 95-
23003-CA-08, filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida. The original complaint was filed on or about
November 27, 1995 and an amended complaint, which purports to be a class
action, was filed on or about February 28, 1997. In the case, plaintiffs
seek unspecified damages, attorneys' fees and costs, recission of specified
releases, and all other relief that plaintiffs may be entitled to at equity
or at law on behalf of the 460 building units they allegedly represent for,
among other things, alleged damages discovered in the course of making
Hurricane Andrew repairs. Plaintiffs have alleged that Walt Disney World
Company is responsible for liabilities that may arise in connection with
approximately 80% of the buildings at the Lakes of the Meadow Village Homes
and that the Partnership is potentially liable for the approximately 20%
remaining amount of the buildings. In the three count amended complaint,
plaintiffs allege breach of building codes and breach of implied
warranties. In addition, plaintiffs seek recission and cancellation of
various general releases obtained by the Partnership allegedly in the
course of the turnover of the Community to the residents. Plaintiffs have
indicated that they may seek to hold the Partnership responsible for the
entire amount of alleged damages owing as a result of the alleged
deficiencies existing throughout the entire development. The Partnership
has tendered this matter to Disney pursuant to the Partnership's
indemnification rights and has filed a third-party complaint against it
pursuant to the Partnership's rights of contractual indemnity. The
Partnership has also answered the amended complaint and has filed a cross-
claim against Disney's affiliate, Walt Disney World Company, for common law
indemnity and contribution. Discovery in this litigation is proceeding
with a discovery cut-off of August 15, 2003, and a trial date to be set
thereafter.

In a matter related to the Lakes of the Meadow development, the Miami-
Dade County Building Department ("Building Department") retained the
services of an engineering firm, All State Engineering, to inspect the
condominiums that are the subject of the lawsuit. On February 27, 2002,
the Building Department apparently advised condominium owners throughout
the development that it found serious life-safety building code violations
in the original construction of the structures and issued notices of
violation under the South Florida Building Code. The condominium owners
were further advised that the notices of violation would require
affirmative action on their part to respond to the notices through
administrative proceedings and/or by addressing the alleged deficiencies.

On August 8, 2002, the Partnership attended a mediation of this
matter. During the course of the mediation, plaintiffs demanded
$298,000,000 on behalf of the Association Nos. 1-7 and 9, such sums
allegedly representing the cost to address all construction defects
currently alleged to exist by plaintiffs, associated damages and such other
relief as the plaintiffs believe they are entitled, including punitive
damages. As to the claim for punitive damages, the Court subsequently
denied plaintiffs leave to amend the complaint to add a punitive damage
claim. With this demand, plaintiffs have sought to impose liability on the
Partnership for all of the units in Association Nos. 1-7 and 9. The
Partnership believes that its liability, if any, extends to the portion of
the units that the Partnership built and sold, which the Partnership
estimates to be approximately ten percent of the units in Association Nos.
1-7 and 9. In this mediation session, a mediation conducted on November
15-16, 2002, and in various other communications, the parties have
exchanged technical information regarding the issues raised by the notices
of violation, plaintiffs' demands, and possible ways in which to address
those issues. Further sessions and discussions are expected.

The Partnership is currently being defended by counsel paid for by
United States Fire Insurance Company ("U.S. Fire"), one of the
Partnership's insurance carriers. During 2001, the Partnership settled the
claims brought in connection with Lakes of the Meadows Village Homes
Condominium No. 8 Maintenance Association, Inc. ("Association No. 8") for a
payment of $155,000 funded by U.S. Fire. Representatives of the
Partnership have discussed with representatives of Association No. 8 issues
raised by the Building Department's notices of violations for that
Association's condominium units. Association No. 8 submitted construction
plans to address the issues raised by the Building Department notices of
violations and comments received by the plan reviewers for that
Associations' units. On February 7, 2003, Association No. 8 received
permits approving its plans and is in the process of putting the plans out
for actual bids. Based on currently known information, the Partnership
estimates that it may cost approximately $1,715,000 to fund the cost of
addressing the construction issues in accordance with the approved plans.
Association No. 8 has asked the Partnership to pay for the costs to address
these construction issues. As a result of these discussions, the
Partnership has asked U.S. Fire to pay the expense of addressing these
construction issues for Association No. 8. In the event that U.S. Fire
does not fund these costs, the Partnership expects to fund these costs
under the circumstances and seek reimbursement from U.S. Fire or the
Partnership's excess insurance carrier, The Home Insurance Company (the
"Home").

On the basis of the discussions to date, the Partnership believes that
the cost of addressing the issues raised by, and to receive a release from,
Association Nos. 1-7 and 9 can currently be estimated at $5.6 million. As
with the cost to address the issues raised by Association No. 8, the
Partnership has asked U.S. Fire to pay the expense of addressing the issues
of these plaintiffs and resolving this matter. In the event that neither
U.S. Fire nor Home funds these costs, the Partnership may fund these costs
under the circumstances and seek reimbursement from U.S. Fire and/or Home.

The Partnership has applied the accounting rules concerning loss
contingencies in regard to the treatment of this matter for financial
reporting purposes.

On August 9, 2002, the Partnership received a reservation of rights
letter from U.S. Fire, by which it purports to limit its exposure with
regard to the Lakes of the Meadow matter and to reserve its rights to deny
coverage and/or defense under the policy and/or applicable law and with
respect to defense costs incurred or to be incurred in the future, to be
reimbursed and/or obtain an allocation of attorney's fees and expenses if
it is determined there is no coverage.

As a result of this reservation of rights letter and the demands being
made by the plaintiffs in the mediation sessions, on November 20, 2002, the
Partnership filed a four count complaint, Arvida/JMB Managers, Inc. on
behalf of Arvida/JMB Partners, L.P. v. United States Fire Insurance Company
in the Circuit Court of Cook County, Illinois, Chancery Division,
02CH21001, for declaratory relief and damages ("Illinois action"). In the
complaint, the Partnership seeks, among other things, a declaration that
U.S. Fire is obligated to indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages, including full indemnification for the
Lakes of the Meadow litigation; such other direct and consequential damages
as are proven at trial; prejudgment interest as permitted by law; and any
other legal and equitable relief that the Court deems just and proper under
the circumstances. On November 20, 2002, the same day, U.S. Fire filed a
single count complaint, United States Fire Insurance Company v. Arvida/JMB
Partners, L.P. in the United States District Court for the Southern
District of Florida, Miami Division, Case No.: 02-23366-Civ-Moore
(hereafter, "Florida federal case"), seeking a declaratory judgment against
the Partnership that U.S. Fire owes the Partnership no duties of
indemnification or defense with respect to the Lakes of the Meadows
litigation. The Partnership has filed a motion to dismiss the Florida
federal case because the Partnership does not believe that the court has
diversity jurisdiction to adjudicate this matter. The parties are engaged
in discovery with respect to the jurisdictional issue. The Florida federal
case is currently set for trial commencing December 15, 2003. The
Partnership believes that this suit is without merit and intends to
vigorously defend itself.

In a December 20, 2002 letter, Home and its agent, Risk Enterprise
Management Limited ("REM"), advised the Partnership of Home's position that
the Home policy provides coverage for the Lakes of the Meadow litigation
only in the event that the U.S. Fire policy provides coverage and that U.S.
Fire pays the limits under its policy. Given Home's position, the
Partnership amended its Illinois action to add Home and REM as defendants
in order to obtain, among other things, a declaration that Home is
obligated to defend and indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages; such other direct and consequential
damages as proven at trial; prejudgment interest; and any other legal and
equitable relief that the court deems just and proper under the
circumstances.

On February 10, 2003, U.S. Fire filed in the United States District
Court for the Northern District of Illinois, Eastern Division, a notice of
removal of civil action to remove the Illinois action to federal court.
The pending federal matter is filed as Arvida/JMB Managers, Inc. v. U.S.
Fire Insurance Company, Home Insurance Company, and Risk Enterprise
Management Inc., Case No. 03 C 0988 (hereafter, "Illinois federal case").
The Partnership has filed a motion to remand the Illinois federal case to
the Illinois state court because the Partnership does not believe that the
federal court has diversity jurisdiction to adjudicate the matter.

In a separate proceeding on March 5, 2003, a superior court judge for
the state of New Hampshire entered an order placing Home under an order of
rehabilitation in order to preserve and protect the interests and assets of
Home and to stay all actions and proceedings against it for a period of
ninety days, except as may be modified by further order of the court. The
Partnership is evaluating the effect, if any, that this order may have on
the Illinois federal case and the coverage provided by Home.

The Partnership strongly disagrees with the positions taken by U.S.
Fire and Home and believes that it is covered under the terms of the
relevant policies. However, the Partnership can give no assurances as to
the ultimate portion of the expenses, fees, and damages, if any, which will
be covered by its insurance.

In 1994, the Partnership was advised by Merrill Lynch that various
investors sought to compel Merrill Lynch to arbitrate claims brought by
certain investors of the Partnership representing approximately 5% of the
total of approximately 404,000 Interests outstanding. Merrill Lynch asked
the Partnership and its General Partner to confirm an obligation of the
Partnership and its General Partner to indemnify Merrill Lynch in these
claims against all loss, liability, claim, damage and expense, including
without limitation attorneys' fees and expenses, under the terms of a
certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests through Merrill Lynch on
behalf of the Partnership. These claimants sought to arbitrate claims
involving unspecified damages against Merrill Lynch based on Merrill
Lynch's alleged violation of applicable state and/or federal securities
laws and alleged violations of the rules of the National Association of
Securities Dealers, Inc., together with pendent state law claims. The
Partnership believes that Merrill Lynch has resolved some of these claims
through litigation and otherwise, and that Merrill Lynch may be defending
other claims. The Agency Agreement generally provides that the Partnership
and its General Partner shall indemnify Merrill Lynch against losses
occasioned by any actual or alleged misstatements or omissions of material
facts in the Partnership's offering materials used in connection with the
sale of Interests and suffered by Merrill Lynch in performing its duties
under the Agency Agreement, under certain specified conditions. The Agency
Agreement also generally provides, under certain conditions, that Merrill
Lynch shall indemnify the Partnership and its General Partner for losses
suffered by the Partnership and occasioned by certain specified conduct by
Merrill Lynch in the course of Merrill Lynch's solicitation of
subscriptions for, and sale of, Interests. The Partnership is unable to
determine at this time the ultimate investment of investors who have filed
arbitration claims as to which Merrill Lynch might seek indemnification in
the future. At this time, and based upon the information presently
available about the arbitration statements of claims filed by some of these
investors, the Partnership and its General Partner believe that they have
meritorious defenses to the demands for indemnification made by Merrill
Lynch. Although there can be no assurance regarding the outcome of the
demands for indemnification, the Partnership believes that a material loss
for the Partnership as a result of the demands for indemnification by
Merrill Lynch is remote. The accompanying consolidated financial
statements do not reflect any accruals related to this matter.

The Partnership is also a defendant in several actions brought against
it arising in the normal course of business. It is the belief of the
General Partner, based on knowledge of facts and advice of counsel, that
the claims made against the Partnership in such actions will not result in
any material adverse effect on the Partnership's consolidated financial
position or results of operations.

(10) TAX INCREMENT FINANCING ENTITIES

In connection with the development of the Partnership's Weston
Community, bond financing is utilized to construct certain on-site and off-
site infrastructure improvements, including major roadways, lakes, other
waterways and pump stations, which the Partnership would otherwise be
obligated to finance and construct as a condition to obtain certain
approvals for the project. This bond financing is obtained by the Indian
Trace Community Development District ("District"), a local government
district operating in accordance with Chapter 190 of the Florida Statutes.
Under this program, the Partnership is not obligated directly to repay the
bonds. Rather, the bonds are expected to be fully serviced by special
assessment taxes levied on the property, which effectively collateralizes
the obligation to pay such assessments until land parcels are sold. At
such point, the liability for the assessments related to parcels sold will
be borne by the purchasers through a tax assessment on their property.
These special assessment taxes are designed to cover debt service on the
bonds, including principal and interest payments, as well as the operating
and maintenance budgets of the District. The use of this type of bond
financing is a common practice for major land developers in South Florida.

Prior to July 1991, the District had issued variable rate bonds
totaling approximately $96 million which were to mature in various years
commencing in May 1991 through May 2011. During 1995, in order to reduce
the exposure of variable rate debt, the District pursued new bond
issuances. As a result, during March and December 1995, the District
issued approximately $99 million and $13.3 million of bonds, respectively,
at fixed rates ranging from 4.0% to 8.25% per annum with maturities
commencing in May 1995 through May 2011. The proceeds from these bond
offerings were used to refund the bonds issued prior to July 1991 described
above, as well as to fund the issuance costs incurred in connection with
the offerings and deposits to certain reserve accounts for future bond debt
service requirements. In July 1997, the District issued another
approximate $41.6 million of fixed rate bonds. These bonds bear interest
ranging from 4.0% to 5.0% (payable in May and November each year until
maturity or prior redemption), with maturities commencing in May 1999
through May 2027 (the "Series 1997 Bonds"). The Series 1997 Bonds were
issued for the purpose of paying costs of certain improvements to the
District's water management system, as well as to fund certain issuance
costs incurred in connection with the offerings, deposit funds into certain
reserve accounts, and pay capitalized interest on these bonds. At
December 31, 2002, the amount of bonds issued and outstanding totaled
approximately $108.0 million. For the years ended December 31, 2002, 2001
and 2000, the Partnership paid special assessments related to the bonds of
approximately $1.3 million, $1.4 million and $2.8 million, respectively.

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107 requires the disclosure of the fair values of all
financial assets and liabilities for which it is practicable to estimate
such values. Value is defined in SFAS No. 107 as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership
believes the carrying amounts of its Cash and cash equivalents, Restricted
cash, Trade and other accounts receivable, Investments in and advances to
joint ventures, Amounts due from affiliates, Prepaid expenses and other
assets, Assets held for sale and Liabilities related to assets held for
sale approximate their fair values at December 31, 2002 and 2001.

(12) PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2F which allocates Profits, as defined, to the General Partner
and Associate Limited Partners), profits or losses of the Partnership will
be allocated as follows: (i) profits will be allocated such that the
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such
fiscal period and the amount of cash flow anticipated to be distributed to
them in future periods, with the remainder of the profits allocated to the
Holders of Interests, except that in all events, the General Partner shall
be allocated at least 1% of profits and (ii) losses will be allocated 1% to
the General Partner, 1% to the Associate Limited Partners and 98% to the
Holders of Interests.

In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such year.

The Holders of Interests will be allocated losses such that the sum of
amounts allocated to the General Partner, Associate Limited Partners, and
Holders of Interests equals the profits for the given year.

For the years ended December 31, 2002, 2001 and 2000, the Partnership
had net income for financial reporting and Federal income tax purposes.
The amount of net income allocated, collectively, to the General and
Associate Limited Partners for financial reporting and tax purposes for the
year ended December 31, 2002 was approximately $17,355,000. The amount of
net income allocated, collectively, to the General and Associate Limited
Partners for both financial reporting and Federal income tax purposes for
the year ended December 31, 2001 was approximately $13,472,000. The amount
of net income allocated, collectively, to the General and Associated
Limited Partners for both financial reporting and Federal income tax
purposes for the year ended December 31, 2000 was approximately $12,611,000
and $12,541,000, respectively. These allocations are based on cash
distributions made and, for 2002 anticipated to be made, to the General
Partner and the Associate Limited Partners with an allocation of at least
1% of profits to the General Partner in accordance with Section 4.2A of the
Partnership Agreement.

In general, and subject to certain limitations, the distribution of
Cash Flow (as defined) after the initial admission date is allocated 90% to
the Holders of Interests and 10% to the General Partner and the Associate
Limited Partners (collectively) until the Holders of Interests have
received cumulative distributions of Cash Flow equal to a 10% per annum
return (non-compounded) on their Adjusted Capital Investments (as defined)
plus the return of their Capital Investments; provided, however, that
4.7369% of the 10% amount otherwise distributable to the General Partner
and Associate Limited Partners (collectively) is deferred, and such amount
is paid to the Holders of Interests, until the Holders of Interests have
received Cash Flow distributions equal to their Capital Investments (i.e.,
$1,000 per Interest). Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) are distributable to them out of
Cash Flow to the extent of one-half of Cash Flow otherwise distributable to
the Holders of Interests at such time as the Holders of Interests have
received total distributions of Cash Flow equal to their Capital
Investments. Thereafter, all distributions of Cash Flow will be made 85%
to the Holders of Interests and 15% to the General Partner and the
Associate Limited Partners (collectively); provided, however, that the
General Partner and the Associate Limited Partners (collectively) shall be
entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this
sentence.

With the distribution made in February 2000, the Holders of Interests
have received total distributions of Cash Flow in excess of their Capital
Investments (i.e., $1,000 per Interest). Accordingly, during 2000, the
General Partner and Associated Limited Partners (collectively) were
entitled to receive, and did receive, the amount of their deferred
distributions. However, the Holders of Interests are expected to receive
cumulative distributions of Cash Flow that are less than the sum of a 10%
per annum return (non-compounded) on their Adjusted Capital Investments
plus the return of their Capital Investments, regardless of the amount of
time that it takes for the completion of the liquidation of the
Partnership's assets and the winding up and termination of the Partnership
(or, if applicable, a Liquidating Trust as a successor to the Partnership).

Accordingly, the interests of the General Partner and Associate Limited
Partners, collectively, in distributions of Cash Flow are expected to
remain at their current 10% level and not increase during the period for
the liquidation of assets and the winding up and termination of the
Partnership (or, if applicable, a Liquidating Trust). Reference is made to
the section entitled "Operations" in Note 1 for information concerning the
liquidation, winding up and termination of the Partnership (or, if
applicable, a Liquidating Trust).

(13) IMPAIRMENT OF LONG-LIVED ASSETS

In September 2001, the Partnership recorded an asset impairment of
$2.5 million to the carrying value of the Weston Athletic Club (the "Weston
Club"). The loss was recorded based upon the difference between the
carrying value of the Weston Club and its fair value less costs to sell as
determined by an agreement to purchase signed by the Partnership and an
unaffiliated third party purchaser during September 2001. During October
2001, the Partnership closed on the sale of the Weston Club to the
unaffiliated third party for a total sale price of $4.25 million.

In March 2000, the Partnership entered into a contract with an
unaffiliated third party builder for the bulk sale of the remaining lot
inventory and the sales center at its Water's Edge Community for a sales
price of approximately $3.2 million. The contract provided for the lots to
be purchased in three phases. The closing of the first phase of 29 lots
was completed in March 2000 for approximately $0.7 million. The closing of
the second phase of 51 lots and the sales center was completed in September
2000 for approximately $1.6 million. The closing of the third phase of 23
lots was completed in December 2000 for approximately $0.9 million. These
sales are reflected in Homesite revenues and costs of revenues on the
accompanying consolidated statements of operations for the year ended
December 31, 2000. These transactions resulted in no gain or loss for
financial reporting purposes in 2000 and an approximate $3.2 million loss
for Federal income tax reporting purposes in 2000.

(14) LEGAL SETTLEMENTS

During 2000, the Partnership entered into two settlement agreements
regarding the Council of Villages and Savoy lawsuits, which related to the
Broken Sound Community. Under the terms of the settlement agreements, the
following actions took place: (1) the Council of Villages case, including
the third party complaint against Disney, and the Savoy case were dismissed
with prejudice and appropriate releases were executed; (2) the Partnership
paid approximately $2.2 million to Broken Sound Club, Inc. (the "Club"),
approximately $1.1 million to Country Club Maintenance Association, Inc.
("CCMA"), and $1.65 million to the Council of Villages, Inc.; (3) the
Partnership continued to manage the operations of the Club from January 1
through November 8, 2000 for a management fee of $175,000; (4) the Club
and CCMA limited to $500,000 the amount which they agreed to pay in legal
fees and costs for calendar year 2000 in defense of the Council of Villages
and Savoy cases and the Partnership agreed to pay any fees and costs in
excess of $500,000, which amount was not substantial; (5) the Partnership
forgave certain indebtedness in the approximate amount of $1.6 million owed
by the Club; (6) the Partnership assigned to the Club 207 unsold Club
memberships which the Partnership had held for sale; (7) Disney paid
$900,000 to the Partnership; and (8) the Partnership provided an interest-
free line of credit for the Club's working capital needs, which has been
repaid to the Partnership. Pursuant to the settlement, management of the
Club was turned over to the members at closing of the settlement
agreements.

(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
2001 2001 2001 2001
----------- ---------- ------------- ------------
Total revenues. . .$81,966,240 109,397,034 109,825,550 139,623,315
Gross operating
profit. . . . . . 19,644,818 29,337,414 32,183,576 35,700,433
Net income. . . . . 16,945,686 26,416,117 26,952,487 31,175,139
Net income per
Limited Partner-
ship Interest . . 41.53 64.73 56.04 55.56

Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
2002 2002 2002 2002
----------- ---------- ------------- ------------
Total revenues. . .$89,649,677 81,856,386 66,084,043 77,160
Gross operating
profit (loss) . . 23,749,085 18,793,760 14,588,174 (2,773,071)
Net income. . . . . 21,922,350 17,581,758 12,736,738 1,502,582
Net income (loss)
per Limited
Partnership
Interest. . . . . 53.72 35.58 31.21 (30.44)

The Gross operating profit, Net income and Net income (loss) per
Limited Partnership Interest for the fourth quarter of 2002, as compared to
the previous quarterly periods for that year, was adversely affected by (i)
a significant decline in revenues from continuing operations attributable
to the Partnership's continuing liquidation of its assets, and (ii) an
accrual of approximately $2.4 million relating to certain contingent
liabilities for Housing cost of revenues. The adverse effect of such items
on the Net income (loss) was partially offset by the recognition of
approximately $7.7 million in Gain on sale of Assets held for sale relating
to the Country Club, the Waterways II Parcel and the Ocala Parcel. The Net
income (loss) per Limited Partnership Interest was also affected by the
allocation of income to the General Partner and Associate Limited Partners
equal to the amount of cash flow distributions made and anticipated to be
made to the General Partner and Associate Limited Partners for 2002 and
future periods. Reference is made to note 12 for a discussion of the
allocations of profits and losses to the General Partner and Associate
Limited Partners, collectively, and the Holders of Interests.

(16) SUBSEQUENT EVENTS

During February 2003, the Partnership made a distribution for 2002 of
$20,200,000 to its Holders of Interests ($50 per Interest) and $2,244,444
to the General Partner and Associate Limited Partners, collectively.

On February 7, 2003, the Partnership through certain consolidated
entities (collectively, the "Seller"), closed on the sale of The Shoppes of
Town Center (the "Shoppes") to unaffiliated third parties (collectively,
the "Buyer"). The gross sale price for the Shoppes was $34,330,000. Net
cash proceeds received from the sale, after prorations, credits, closing
costs, amounts escrowed and the settlement of the Seller's outstanding
loan balance totaled approximately $18,198,000. Under the Sale and
Purchase Agreement, the Seller made certain representations, warranties and
indemnities for the benefit of the Buyer that extend beyond the closing of
the sale. In addition, pursuant to the terms of the Sale and Purchase
Agreement, the Seller entered into an agreement to indemnify the Buyer's
lender from certain possible claims related to the Shoppes. In accordance
with such indemnification, the Seller deposited $100,000 and the Buyer
deposited $50,000 in escrow to secure the obligation to indemnify the
Buyer's lender for such claims. Pursuant to the Sale and Purchase
Agreement, the Seller also deposited $50,000 in escrow as security for
completion of remediation work for compliance with the Americans with
Disabilities Act. The net book value and net cash proceeds received from
the sale represented approximately 22% and 13%, respectively, of the
Partnership's total consolidated assets for financial reporting purposes at
December 31, 2002. The sale resulted in a gain of approximately $1,990,000
for financial reporting purposes and a gain of approximately $2,460,000 for
Federal income tax purposes.

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

Not applicable.

PART III

ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT

The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, all of the outstanding shares of stock of which are
owned by JMB Investment Holdings-I, Inc., a Delaware corporation.
Substantially all of the outstanding shares of stock of JMB Investment
Holdings-I, Inc. are owned indirectly by JMB Realty Corporation, a Delaware
corporation ("JMB"). Substantially all of the outstanding shares of stock
of JMB are owned by certain of its officers, directors, members of their
families and their affiliates. The General Partner has responsibility for
all aspects of the Partnership's operations. The Associate Limited
Partners of the Partnership are Arvida/JMB Associates, an Illinois general
partnership, of which JMB and certain of its current and former officers
and directors and their affiliates are, indirectly, partners, and
Arvida/JMB Limited Partnership, an Illinois limited partnership, of which
Arvida/JMB Associates is the general partner. An affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is the limited partner of
Arvida/JMB Limited Partnership. Certain relationships of the Partnership
to the General Partner and its affiliates are described under the captions
"Determinations by the General Partner," "Relationships of Affiliates to
Partnership," "Remuneration of JMB, Arvida and Affiliates" and "Fiduciary
Responsibility of the General Partner" in the section "Conflicts of
Interest" at pages 21 and 23-24 of the Prospectus of the Partnership, dated
September 16, 1987, which descriptions are hereby incorporated herein by
reference to Exhibit 99.2 to this report.

The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners, St. Joe/Arvida and
their affiliates. Various services have been and, to some extent, will
continue to be provided to the Partnership by the General Partner, St.
Joe/Arvida and their affiliates, including development and management
supervisory and advisory services, insurance brokerage and administrative
services such as legal, accounting and treasury services. In addition, the
timing and amount of cash distributions and cash reserves and allocations
of profits and losses for tax purposes, as well as the amount of expenses
charged to the Partnership for services, are or may be affected by
determinations made by the General Partner. Because the General Partner
and/or its affiliates have interests in the cash distributions and the
profits or losses for tax purposes of the Partnership or in the amount of
payments or reimbursements made for services rendered to the Partnership,
the General Partner has a conflict of interest in making the determinations
affecting these matters.

The director and executive officers of the General Partner of the
Partnership are as follows:

SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------

H. Rigel Barber Vice President 04/08/87
Gailen J. Hull Vice President 04/09/87
Gary Nickele President 08/13/02
and Director 08/08/00
James D. Motta Vice President 04/09/87

There is no family relationship among any of the foregoing director or
officers. Mr. Nickele has been elected to serve a one-year term as
director until the annual meeting of the General Partner to be held on
August 12, 2003. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the General Partner to be held on August 12, 2003.
There are no arrangements or understandings between or among any of said
director or officers and any other person pursuant to which the director or
any officer was selected as such.

The foregoing director and most of the officers are also officers
and/or directors of JMB, which is the corporate general partner of Carlyle
Real Estate Limited Partnership-XIII ("Carlyle-XIII") and the managing
general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"). JMB is
also the sole general partner of the associate general partner of Carlyle-
XIII. Most of the foregoing director and officers are also officers and/or
directors of various affiliated companies of JMB.

The business experience during the past five years of such director and
officers of the General Partner of the Partnership includes the following:

H. Rigel Barber (age 54) is Chief Executive Officer and Executive Vice
President of JMB and an officer of various JMB affiliates. Mr. Barber has
been associated with JMB since March, 1982. He received a J.D. degree from
the Northwestern Law School and is a member of the Bar of the State of
Illinois.

Gailen J. Hull (age 54) is Senior Vice President of JMB and, since
August 2002, Chief Financial Officer of JMB and an officer of various JMB
affiliates. Mr. Hull has been associated with JMB since March, 1982. He
holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.

Gary Nickele (age 50) is Executive Vice President and General Counsel
of JMB and an officer and/or director of various JMB affiliates. Prior to
becoming President of Arvida/JMB Managers, Inc., in August 2002, Mr.
Nickele had been a Vice President of that corporation since April 1987. He
has been associated with JMB since February, 1984. He holds a J.D. degree
from the University of Michigan Law School and is a member of the Bar of
the State of Illinois.

James D. Motta (age 47) has been President and Chief Executive Officer
of St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), a joint venture among
affiliates of The St. Joe Company and of JMB for real estate development,
ownership and management, since November 1997. From April 1995 until
August 1998 Mr. Motta was President and Chief Executive Officer of Arvida
Company. Mr. Motta is also a trustee of Gables Residential Trust, an
owner, operator and developer of multifamily apartment communities, and a
director of Correctional Properties Trust, an owner and lessor of
correctional and detention facilities.

Gary Nickele is President and Manager of Amfac Hawaii, LLC. On
February 27, 2002, Amfac Hawaii, LLC and certain of its subsidiaries and
affiliates filed voluntary petitions under Chapter 11 of the United States
Bankruptcy Code. Amfac Hawaii, LLC, together with its subsidiaries,
principally owns and develops real estate in the State of Hawaii, and it
and certain subsidiaries filed the Chapter 11 proceedings in part to enable
them to achieve an orderly reorganization of their debt to serviceable
levels. In November 2002, the United States Bankruptcy Court for the
Northern District of Illinois entered an order confirming a plan of
reorganization for Amfac Hawaii, LLC and the other debtors in the
Chapter 11 proceedings.

ITEM 11. EXECUTIVE COMPENSATION

The officers and the director of the General Partner receive no direct
remuneration in such capacities from the Partnership. The General Partner
and the Associate Limited Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Holders of
Interests, and a share of profits or losses. Reference is made to notes 1
and 12 for a description of such distributions and allocations. The
General Partner and the Associate Limited Partners, collectively, received
or were deemed to have received cash distributions in 2002 totaling
$16,833,334 and in February 2003 totaling $2,244,444. Pursuant to the
Partnership Agreement, the General Partner and Associate Limited Partners
were allocated profits for Federal income tax purposes for 2002 of
approximately $17,355,000. Reference is made to note 12 for further
discussion of this allocation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED SECURITY HOLDER MATTERS

(a) The following have reported beneficial ownership of more than 5%
of the outstanding Interests of the Partnership.

NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------------- ----------------- --------

Limited Partnership The St. Joe Company 106,200.4399 26.3%
Interests and Interests
Assignee Interests (1)
therein

Limited Partnership Alfred I. duPont 106,200.4399 26.3%
Interests and Testamentary Trust Interests
Assignee Interests (2)
therein

Limited Partnership The Nemours 106,200.4399 26.3%
Interests and Foundation Interests
Assignee Interests (2)
therein

Limited Partnership Winfred L. Thornton 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership William T. 106,200.4399 26.3%
Interests and Thompson III Interests
Assignee Interests (2)
therein

Limited Partnership Hugh M. Durden 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership John F. Porter III 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership Herbert H. Peyton 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

(1) Reflects beneficial ownership of Interests held directly by The St.
Joe Company, for which it has been reported that it has shared voting
and dispositive power. The address for The St. Joe Company is 1650
Prudential Drive, Suite 400, Jacksonville, Florida 32207. Wholly
owned subsidiaries of The St. Joe Company are the managing general
partner and a limited partner, and collectively own 74% of the
partnership interests, in St. Joe/Arvida. Affiliates of JMB own the
remaining 26% of the partnership interests in St. Joe/Arvida.

(2) Reflects indirect beneficial ownership of Interests held directly by
The St. Joe Company. Messrs. Thornton, Thompson, Durden, Porter and
Peyton are trustees and directors of the Alfred I. duPont
Testamentary Trust (the "Trust") and The Nemours Foundation (the
"Foundation"), respectively. As a result of the Trust's and the
Foundation's respective direct and beneficial ownerships of
outstanding shares of common stock of The St. Joe Company, the Trust,
Foundation and Messrs. Thornton, Thompson, Durden, Porter and Peyton
are or may be deemed to be indirect beneficial owners of 106,200.4399
Interests owned directly by The St. Joe Company, for which they each
have or may be deemed to have shared voting and dispositive power.
See note (1) above. The address for each of the Trust, Foundation
and Messrs. Thornton, Thompson, Durden, Porter and Peyton is 4600
Touchton Road, East Building 200, Suite 500, Jacksonville, Florida
32246.

(b) The General Partner and its executive officers and directors
beneficially own the following Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------

Limited PartnershipGeneral Partner None --
Interests and and its executive
Assignee Interests officers and
therein director as
a group
- ---------------

No executive officer or director of the General Partner of the
Partnership possesses a right to acquire beneficial ownership of Interests
of the Partnership.

(c) There exists no arrangement, known to the Partnership, the
operation of which may at a subsequent date result in a change in control
of the Partnership.

(d) The Partnership has no compensation plans or individual
compensation arrangements under which equity securities of the Partnership
are authorized for issuance to any person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to the Partnership Agreement, the Partnership is permitted to
engage in various transactions involving the General Partner, St.
Joe/Arvida and their respective affiliates. Such transactions involve
conflicts of interest for the General Partner or its affiliates. Certain
relationships of the General Partner (and its director and executive
officers) and its affiliates to the Partnership are set forth above in
Item 10.

The Partnership and its affiliate, Arvida Company ("Arvida"), entered
into an information systems sharing agreement that sets forth (i) the
Partnership's and Arvida's mutual ownership rights with respect to certain
proprietary computer software jointly developed by the Partnership and
Arvida, and (ii) the arrangement for the sharing by Arvida of certain
computer hardware and software owned, leased or licensed by the Partnership
and its affiliates and various related information systems services
(collectively, the "Information Resources"), provided that Arvida pays its
allocable share of the costs of using such Information Resources.

In November 1997, St. Joe/Arvida Company, L.P. ("St. Joe/Arvida")
acquired the major assets of Arvida, including the Arvida name and service
marks with respect to the Arvida name. Pursuant to a license agreement
with Arvida, the Partnership has a non-exclusive right to use the Arvida
name and service marks with respect to the Arvida name. In connection with
the acquisition of Arvida's assets, St. Joe/Arvida was assigned Arvida's
rights and obligations under the license agreement with the Partnership.
In addition, St. Joe/Arvida was assigned Arvida's rights and obligations
under the information systems sharing agreement discussed above.

St. Joe/Arvida also entered into a sub-management agreement with
Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides a
substantial portion of the development and management supervisory and
advisory services (and the personnel therefor) to the Partnership that
Arvida would otherwise provide pursuant to its management agreement with
the Partnership. Effective January 1, 1998, St. Joe/Arvida employed most
of the personnel previously employed by Arvida, and the services provided
to the Partnership pursuant to the sub-management agreement generally have
been provided by the same personnel. St. Joe/Arvida is reimbursed for such
services and personnel on the same basis as Arvida under its management
agreement, and such reimbursements are made directly to St. Joe/Arvida by
the Partnership. The Partnership also receives reimbursement from St.
Joe/Arvida for certain general and administrative costs including, and
without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership on behalf of St. Joe/Arvida.
Charges and related reimbursements between the Partnership and St.
Joe/Arvida are determined on a consistent basis using various methodologies
depending upon the nature of the services provided. Such charges, whether
incurred directly by the Partnership or St. Joe/Arvida, may include
salaries and salary-related costs, as well as burdens for administrative
and office overheads. Methodologies used to apportion costs between
entities include, but are not limited to, charges based upon percentages of
(i) time spent on each entity relative to total hours worked; (ii) cash
expenditures by entity relative to total expenditures; and (iii) real
estate sales and closings by entity relative to total sales and closings.
The total reimbursements made to St. Joe/Arvida during the year ended
December 31, 2002, was approximately $3,399,000. Such reimbursement
included amounts owing in connection with the Partnership's achievement of
certain profit and cash flow levels. In addition, at December 31, 2002,
the Partnership owed St. Joe/Arvida approximately $87,400 for general and
administrative costs pursuant to the sub-management agreement, all of which
was paid as of March 1, 2003. For the year ended December 31, 2002, the
Partnership received approximately $6,045,800 from St. Joe/Arvida or its
affiliates. In addition, $366,300 was owed to the Partnership at
December 31, 2002, all of which was received as of March 1, 2003. The St.
Joe Company owns a majority interest in St. Joe/Arvida, and affiliates of
JMB own a minority interest in St. Joe/Arvida.

In August 2002, the Partnership entered into an agreement for the
prospective assignment to and assumption by St. Joe/Arvida of the
Partnership's rights and obligations under the lease for its offices
(approximately 19,100 rentable square feet of space) in Boca Raton,
Florida. The Partnership currently expects that the assignment and
assumption will be modified to be effective January 1, 2004. From and
after the effective date, St. Joe/Arvida will charge to the Partnership an
allocable portion of the monthly base rent (which ranges from approximately
$27,000 to $29,000 through January 31, 2005), operating expenses and tenant
improvement costs, if any, incurred by St. Joe/Arvida pursuant to the
lease. The allocation method for such costs is discussed in the preceding
paragraph and is similar to the allocation method currently used by the
Partnership to charge to St. Joe/Arvida a portion of the lease costs.

JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 2002 of
approximately $312,700 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which was paid as of
December 31, 2002. Such commissions are at rates set by insurance
companies for the classes of coverage provided.

The General Partner of the Partnership or its affiliates are entitled
to reimbursement for their direct expenses or out-of-pocket expenses
relating to the administration of the Partnership and the acquisition,
development, ownership, supervision, and operation of the Partnership
assets. In 2002, the General Partner and its affiliates were entitled to
reimbursements for legal, accounting and treasury services. Such costs for
2002 were approximately $796,200, all of which were paid as of December 31,
2002.

The Partnership was also entitled to receive reimbursements from
affiliates of the General Partner for certain general and administrative
expenses including, and without limitation, salary and salary-related
expenses relating to work performed by employees of the Partnership and
certain out-of-pocket expenditures incurred on behalf of such affiliates.
For the year ended December 31, 2002, the total of such costs incurred was
approximately $188,400. Approximately $15,200 was outstanding as of
December 31, 2002, all of which was received as of March 1, 2003.

Amounts payable to or by the General Partner or its affiliates do not
bear interest.

ITEM 14. CONTROLS AND PROCEDURES

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14 of
the Securities Exchange Act of 1934 (the "Exchange Act") promulgated
thereunder, the principal executive officer and the principal financial
officer of the General Partner have evaluated the effectiveness of the
Partnership's disclosure controls and procedures as of a date within 90
days prior to the date of the filing of this report (the "Evaluation Date")
with the Securities and Exchange Commission ("SEC"). Based on such
evaluation, the principal executive officer and the principal financial
officer have concluded that the Partnership's disclosure controls and
procedures were effective as of the Evaluation Date to ensure that
information required to be disclosed in this report was recorded,
processed, summarized and reported within the time period specified in the
applicable SEC rules and form for this report. Furthermore, there have
been no significant changes in the internal controls or in other factors
that could significantly affect internal controls subsequent to the date of
their most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements. (See Index to Financial
Statements filed with this annual report on Form 10-K).

2. Exhibits.

3.1 Amended and Restated Agreement of Limited
Partnership.*

3.2 Acknowledgment and Amendment of Partnership
Agreement.*

3.3 Amendment to the Amended and Restated
Agreement of Limited Partnership, effective
October 29, 2002, is filed herewith.

3.4 Assignment Agreement by and among the General
Partner, the Initial Limited Partner and the
Partnership.*

4.1 Construction Loan Documents for a $20 Million
Construction Loan made to Weston Town Center,
LLC, including: **

. Commitment Letter for $20 Million
Construction Loan;

. Construction Loan Agreement dated May 19,
2000;

. First Amendment to Construction Loan
Agreement, dated as of May 31, 2001;

. Second Amendment to Construction Loan
Agreement dated as of December 31, 2001;

. Promissory Note in the principal amount
of $20 Million, dated May 19, 2000;

. First Amendment to Promissory Note, dated
as of May 31, 2001;

. Second Amendment to Promissory Note,
dated as of December 31, 2001;

. Mortgage and Security Agreement, dated
May 19, 2000;

. Absolute Assignment of Leases and Rents,
dated May 19, 2000;

. Amendment to Mortgage and Security Agree-
ment and Absolute Assignment of Rents and
Leases, dated as of May 19, 2000;

. Guaranty Agreement, dated May 19, 2000;

. Affidavit and Indemnity;

. General Subordination and Assignment;

. Borrower's Representations, Warranties
and Affidavit;

. Assignment of Construction Contracts and
Plans;

. Assignment of Architect's Agreement and
Plans and Specifications;

. Assignment of Engineer's Agreement and
Plans and Specifications;

. Various Agreements of General
Contractors;

. Architect's Certificate and Agreement;

. Engineer's Agreement;

. Disbursement Agreement; and

. Various Letter Agreements re: Post-
Closing Obligations.

10.1 Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is filed
herewith.

10.2 Letter Agreement, dated as of September 10,
1987, between the Partnership and The Walt
Disney Company, is filed herewith.

10.3 Management, Advisory and Supervisory
Agreement, including the License Agreement for
the use of the Arvida name as exhibit A
thereto, is filed herewith.

10.4 Fourth Amended and Restated Agreement of
Partnership of Arvida/JMB Partners, together
with Amendment No. 1 thereto, is filed
herewith.

10.5 Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners,
L.P. and Arvida Company is hereby incorporated
herein by reference to Exhibit 10.15 to the
Partnership's Report for the year ended
December 31, 1997 on Form 10-K (File No. 0-
16976) dated March 25, 1998.

10.6 Sale and Purchase Agreement dated as of
August 23, 2002, by and between Weston Hills
Country Club Limited Partnership, Arvida/JMB
Partners and Hillwood Enterprises, L.P., as
amended by First Amendment to Sale and
Purchase Agreement, dated as of September 13,
2002 for the sale of the Weston Hills Country
Club located in Weston, Florida is hereby
incorporated by reference to Exhibit 10.1 to
the Partnership's Report on Form 8-K (File No.
0-16976) filed on October 16, 2002.

10.7 Sale and Purchase Agreement dated as of
September 6, 2002, by and between Weston Town
Center, LLC and Belmont Investment Corp., as
amended by the First, Second and Third
Amendments to Sale and Purchase Agreement,
dated January 17, 2003, February 7, 2003 and
February 7, 2003, respectively, for the sale
of the Weston Town Center, also known as The
Shoppes of Town Center located in Weston,
Florida is hereby incorporated by reference to
Exhibit 10.1 to the Partnership's Report on
Form 8-K (File No. 0-16976) filed on
February 24, 2003.

21 Subsidiaries of the Registrant.

99.1 Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is filed
herewith.

99.2 Certain portions of the Prospectus of the
Partnership dated September 16, 1987, from the
Section entitled "Conflicts of Interest" are
filed herewith.

* Previously filed with the Securities and Exchange Commission
as Exhibits 3.1, 3.2 and 3.3, respectively, to the Partnership's
Form 10-Q/A Report (File No. 0-16976) filed on June 6, 2002, and
incorporated herein by reference.

** Previously filed with the Securities and Exchange Commission
as Exhibit 4.7 to the Partnership's Form 10-Q/A Report (File No.
0-16976) filed on June 6, 2002, and incorporated herein by
reference.

(b) Reports on Form 8-K:

On October 16, 2002, a current report on Form 8-K was
filed with the Commission reporting under Item 2 (Disposition
of Assets) the sale of the Weston Hills Country Club to an
unrelated third party. Included in such Form 8-K report are
the following pro forma financial statements:

(i) Consolidated Pro Forma Balance Sheet of Arvida/JMB
Partners, L.P. at June 30, 2002.

(ii) Consolidated Pro Forma Statement of Operations of
Arvida/JMB Partners, L.P. for the Six Months Ended June 30,
2002.

(iii)Consolidated Pro Forma Statement of Operations of
Arvida/JMB Partners, L.P. for the Year Ended December 31,
2001.

On December 13, 2002, a current report on Form 8-K was
filed with the Commission reporting under Item 5 (Other
Events) the results of a consent solicitation for an
amendment to the Partnership's Amended and Restated Agreement
of Limited Partnership providing for the extension of the
term of the Partnership's liquidation period to not later
than October 31, 2005 and certain related matters.

No annual report or proxy material for the fiscal year 2002 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

ARVIDA/JMB PARTNERS, L.P.

BY: Arvida/JMB Managers, Inc.
(The General Partner)

GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 24, 2003

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

GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
and Principal Financial Officer
Date: March 24, 2003

GARY NICKELE
By: Gary Nickele, President and Sole Director
Principal Executive Officer
Date: March 24, 2003

CERTIFICATIONS
--------------

I, Gary Nickele, certify that:

1. I have reviewed this annual report on Form 10-K of Arvida/JMB
Partners, L.P.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date:March 24, 2003

/s/ Gary Nickele
----------------------------
Principal Executive Officer

CERTIFICATIONS
--------------

I, Gailen J. Hull, certify that:

1. I have reviewed this annual report on Form 10-K of Arvida/JMB
Partners, L.P.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation
Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date:March 24, 2003

/s/ Gailen J. Hull
----------------------------
Principal Financial Officer

ARVIDA/JMB PARTNERS, L.P.

EXHIBIT INDEX

DOCUMENT SEQUENTIALLY
EXHIBIT INCORPORATED NUMBERED
NO. EXHIBIT BY REFERENCE PAGE
- ------- ------- ------------ ------------

3.1. Amended and Restated Agreement
of Limited Partnership. Yes

3.2 Acknowledgment and Amendment of
Partnership Agreement. Yes

3.3 Amendment to the Amended and
Restated Agreement of Limited
Partnership, effective October 29,
2002. No

3.4. Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership. Yes

4.1 Construction Loan Documents for
a $20 Million Construction Loan
made to Weston Town Center, LLC,
including: Yes

. Commitment Letter for $20
Million Construction Loan;

. Construction Loan Agreement
dated May 19, 2000;

. First Amendment to Construc-
tion Loan Agreement, dated
as of May 31, 2001;

. Second Amendment to Construc-
tion Loan Agreement dated
as of December 31, 2001;

. Promissory Note in the
principal amount of $20
Million, dated May 19, 2000;

. First Amendment to Promissory
Note, dated as of May 31, 2001;

. Second Amendment to Promissory
Note, dated as of December 31,
2001;

. Mortgage and Security Agree-
ment, dated May 19, 2000;

. Absolute Assignment of Leases
and Rents, dated May 19, 2000;

. Amendment to Mortgage and
Security Agreement and Absolute
Assignment of Rents and Leases,
dated as of May 19, 2000;

. Guaranty Agreement, dated May 19,
2000;

DOCUMENT SEQUENTIALLY
EXHIBIT INCORPORATED NUMBERED
NO. EXHIBIT BY REFERENCE PAGE
- ------- ------- ------------ ------------

. Affidavit and Indemnity;

. General Subordination and
Assignment;

. Borrower's Representations,
Warranties and Affidavit;

. Assignment of Construction
Contracts and Plans;

. Assignment of Architect's
Agreement and Plans and
Specifications;

. Assignment of Engineer's
Agreement and Plans and
Specifications;

. Various Agreements of
General Contractors;

. Architect's Certificate
and Agreement;

. Engineer's Agreement;

. Disbursement Agreement; and

. Various Letter Agreements
re: Post-Closing Obligations.

10.1 Agreement between the Partnership
and The Walt Disney Company dated
January 29, 1987 No

10.2 Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company No

10.3 Management, Advisory and Supervisory
Agreement, including the License
Agreement for the use of the Arvida
name as exhibit A thereto No

10.4 Fourth Amended and Restated Agreement
of Partnership of Arvida/JMB Partners,
together with Amendment No. 1 thereto No

10.5 Information Systems Sharing Agreement
dated November 6, 1997 between
Arvida/JMB Partners, L.P. and Arvida
Company Yes

10.6 Sale and Purchase Agreement dated
as of August 23, 2002, by and between
Weston Hills Country Club Limited
Partnership, Arvida/JMB Partners
and Hillwood Enterprises, L.P.,
as amended by First Amendment to Sale
and Purchase Agreement, dated as of
September 13, 2002 for the sale of the
Weston Hills Country Club located in
Weston, Florida Yes

DOCUMENT SEQUENTIALLY
EXHIBIT INCORPORATED NUMBERED
NO. EXHIBIT BY REFERENCE PAGE
- ------- ------- ------------ ------------

10.7 Sale and Purchase Agreement dated as
of September 6, 2002, by and between
Weston Town Center, LLC and Belmont
Investment Corp., as amended by the
First, Second and Third Amendments to
Sale and Purchase Agreement, dated
January 17, 2003, February 7, 2003
and February 7, 2003, respectively,
for the sale of the Weston Town
Center, also known as The Shoppes of
Town Center located in Weston, Florida Yes

21 Subsidiaries of the Registrant. No

99.1 Certification Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002 No

99.2 Certain portions of the Prospectus
of the Partnership dated September 16,
1987, from the Section entitled
"Conflicts of Interest" No