10-K 1 mlp10k2001.txt DECEMBER 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-13174 THE MARINA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) INDIANA 35-1689935 (State or other jurisdiction ---------------------------- of (I.R.S. Employer incorporation or organization) Identification No.) 11691 Fall Creek Road, Indianapolis, IN 46256 ------------------------------------------------ ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (317) 845-0270 -------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partner Units and Depositary Receipts (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 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 (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.( ) The aggregate market value of the Limited Partner Units held by non-affiliates of the registrant, based upon the average bid prices of such units during the 60 day period ended March 22, 2002, and assuming solely for urposes of this calculation that all executive officers and Directors of the registrant are affiliates, was approximately $12,586,000. The source of the bid quotation is the matching service made available by the Registrant. DOCUMENTS INCORPORATED BY REFERENCE NONE 1 FORM 10-K TABLE OF CONTENTS Page PART I Item 1 - Business 1 Item 2 - Properties 7 Item 3 - Legal Proceedings 7 Item 4 - Submission of Matters to a Vote of Security Holders 7 PART II Item 5 - Market for Partnership's Common Equity and Related Security Holder Matters 7 Item 6 - Selected Financial Data 9 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 7A - Quantitative and Qualitative Disclosures About Market Risk 13 Item 8 - Financial Statements and Supplementary Data 13 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 32 PART III Item 10 - Directors and Executive Officers 32 Item 11 - Executive Compensation 33 Item 12 - Security Ownership of Certain Beneficial Owners and Management 35 Item 13 - Certain Relationships and Related Transactions 37 PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 38 SIGNATURES 40 2 PART I ITEM 1. BUSINESS. ------ -------- General The Marina Limited Partnership (the "Partnership") was organized as an Indiana limited partnership under the laws of the State of Indiana on October 7, 1986 for the purpose of reorganizing the business of The Marina Corporation (the "Company"). The Company was reorganized into a publicly traded limited partnership in order to eliminate the "double" federal income tax on its future earnings and distributions. The Partnership is the successor-issuer to the Company. On December 29, 1986, the shareholders of the Company approved the plan to reorganize the Company into the Partnership. On December 30, 1986, pursuant to the plan of reorganization, all of the assets and liabilities of the Company were transferred to the Partnership in exchange for a number of units of interest ("Units") in the Partnership equal to the number of outstanding shares of the Company's Common Stock, and the Company distributed the Units to or for the benefit of its shareholders. Units represent either general partner interests ("General Partner Units") or limited partner interests ("Limited Partner Units"). See Item 5, "Market for Partnership's Common Equity and Related Security Holder Matters." Following the distribution of the Units, the Company was dissolved. Effective as of the close of business on December 19, 1997, the Partnership requested that the Limited Partner Units cease being listed on The NASDAQ SmallCap tier of The NASDAQ Stock Market. After that date, transfers of Limited Partner Units are recognized by the Partnership only if they are made through the matching service that has been established by the Partnership. The Partnership determined that these actions were necessary to ensure it would continue to be treated as a partnership for federal income tax purposes. See "Taxation of Interests in Publicly Traded Partnerships" below. Effective September 7, 2001, the holders of Limited Partner Units (the "Limited Partners") approved a proposal to amend the Agreement of Limited Partnership of The Marina Limited Partnership (the "Partnership Agreement") to reduce the number of authorized Units to effect a reverse unit split in which one new Unit was exchanged for every 300 old Units issued and outstanding. Limited Partners who owned less than 300 old Units received from the Partnership $40.00 for each old Unit, unless a Limited Partner elected to round up by purchasing a fractional new Unit at $40.00 per 1/300 fractional new Unit sufficiently to receive a whole new Unit. The effect of the reverse unit split was to reduce the number of Limited Partners below 300, thereby enabling the Partnership to terminate registration of the Limited Partner Units under, and be relieved of, the periodic reporting, proxy solicitation and other informational requirements of, the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Following the approval of the reverse unit split, and giving effect to the Limited Partners who elected to round up by purchasing a fractional new Unit sufficiently to receive a whole new Unit, the number of Limited Partners was reduced to 189. As a result, the Partnership filed the appropriate certification with the Securities and Exchange Commission ("SEC") to terminate registration of the Limited Partner Units under the Exchange Act, effective November 15, 2001. After the filing and dissemination of this annual report on Form 10-K for the fiscal year ended December 31, 2001, the Partnership will no longer file Form 10-K, Form 10-Q or other reports with the SEC. Limited Partners will no longer receive informational material such as this annual report in its present format; however, pursuant to the Partnership Agreement, the Partnership will continue to send audited annual financial statements to the Limited Partners. The Partnership's principal executive offices are located at 11691 Fall Creek Road, Indianapolis, Indiana 46256, and its telephone number is 317/845-0270. The affairs of the Partnership are managed by its general partner, The Marina II Corporation (the "General Partner"), an Indiana corporation. The General Partner's principal executive offices and telephone number are the same as those of the Partnership. 3 Investment Real Estate On December 31, 2001, the Partnership owned approximately 306 acres of investment real estate. Approximately 259 acres of this investment real estate are adjacent to Geist Lake, and approximately 52 acres are adjacent to Morse Lake. Substantially all of the properties consist of partially wooded, gently rolling land adjacent to the lakes. Homes and homesite sales revenue accounted for 33 percent of the Partnership's revenues for 2001, 38 percent for 2000, and 41 percent for 1999. There were $530,000 in sales of investment land in 2001 and no sales of investment land in 2000. Geist Lake. Geist Lake is an artificially created reservoir located within 15 to 20 miles driving distance of the downtown business district of Indianapolis, Indiana. On December 31, 2001, the Partnership's investment real estate at Geist Lake consisted of approximately 259 acres, which are zoned either for single-family residential use, multi-family residential use, commercial use, recreational use, or agricultural use. Approximately 23 acres of the land at Geist Lake is being used for Geist Marina and Marina Village and approximately 10 acres is being used for the Geist Harbor Club facilities. See "Marine Operations" and "Investment Real Estate -- Commercial Development" below. Morse Lake. Morse Lake is an artificially created reservoir located within 25 to 30 miles driving distance of the downtown business district of Indianapolis, Indiana. On December 31, 2001, the Partnership's investment properties at Morse Lake consisted of approximately 47 acres zoned for single-family residential, commercial, and agricultural use. Approximately 18 acres of the land at Morse Lake is being used for the Morse Marina. See "Marine Operations" below. Residential Development. Bridgewater, located near Geist Marina, was the Partnership's first single-family project, which includes 81 homesites. The Partnership sold no homesites from Bridgewater in 2001. There were two homesites in inventory at December 31, 2001. The Marina I L.P., a joint venture, sold 35 homesites in Cambridge in 2001. See "Marina I" below. Marina I had 13 homesites remaining to be sold in Cambridge, of which nine are waterfront. When complete, Cambridge will include more than 450 homesites of which 339 have been developed. All of the homesites owned by the Partnership have been sold so that future homesite sales in Cambridge will be from Marina I. The Partnership has developed Morse Overlook, an upscale single-family homesite project located at Morse Lake. Morse Overlook is comprised of 50 homesites including 27 waterfront. In 2001, the Partnership sold six homesites from Morse Overlook, all of which were waterfront homesites. These sales generated homesite revenue of $1,250,000. At December 31, 2001, the Partnership had 16 homesites in inventory of which four were waterfront. The Partnership has developed Sail Place, a residential community at Geist Lake, which includes 30 homesites. The Partnership will build specially designed homes with smaller homesites and a unique package of services to appeal to a more mature customer. The Partnership will build all of the homes in Sail Place to better control placement and the design of each home. The Partnership sold one homesite with a home in 2001 for total revenue of $669,000. There are 20 homesites remaining in inventory. The Partnership has developed Canal Place, a new residential community in the Geist Lake area containing 81 homesites in the first section, including 17 owned by Marina I. Canal Place is a combination of waterfront, water access and off-water lots with an estimated total of 250 homesites. Homesites in the first section became available in the fall of 2000. The Partnership sold nine homesites in 2001 for total revenue of $689,000. Marina I sold two homesites from Canal Place in 2001. 4 Marina I has developed Weatherstone, a new community in the Geist area containing 62 homesites. All homesites are off-water and are being sold to an upscale production builder who will provide homes in the upper price range for production homes, but below the price of the typical custom home. Marina I sold 18 homesites in Weatherstone in 2001. The builder acquires three homesites per month, which commenced in March 2000, until all homesites are sold. There were five homesites remaining in Weatherstone at December 31, 2001 which will be sold in 2002. The Partnership's current land ownership and the land owned by Marina I will take a number of years to develop and sell under reasonable market conditions. However, due to sand and gravel mining in Geist Lake and a stone mining operation on land by Irving Materials, Inc. ("Irving"), the availability of some of the land for residential development by Marina I may be delayed for six years or more. The Partnership may acquire additional land for development during this period to properly balance the mix of off-water homesites to waterfront homesites and to continue development until the balance of the Irving land is available. The Partnership expects to have a sufficient inventory of homesites for 2002. See "Investment Real Estate - Marina I", below. Homesite Financing Arrangements. The Partnership sells residential homesites for cash and/or mortgage. The Partnership finances homesite purchases, and requires a minimum down payment of 10% of the price of the homesite. The balance of the contract price, plus interest, is payable over seven years, although typically most contracts are paid in full within two years. When a homesite is sold to an individual purchaser on contract, a warranty deed is conveyed to the purchaser, and the purchasers execute an installment promissory note and a purchase money real estate mortgage to the Partnership. Interest rates on homesites sold on contract are 9% the first year, 10% in the second year, and 12% for the remainder. Investment Property. During 2001 the Partnership sold investment land for a total of $530,000 compared with no sales in 1999 and 2000. Marina Village. The Partnership operates a 21,000 square foot retail and office development known as Marina Village. This building includes 15,000 square feet of retail space and 6,000 square feet of office space, all of which has been leased except for 2,000 square feet which is the office of the Partnership. The Partnership realized $250,000 in rental income from Marina Village in 2001. Marina I. The Partnership is the general partner of The Marina I L.P., an Indiana limited partnership ("Marina I"), and Irving Materials, Inc. ("Irving") is the sole limited partner. Marina I has a right to receive and develop more than 150 acres of Irving land in the vicinity of Geist Lake. Irving continues to mine stone and extract sand and gravel from the remaining property, and it contributes parcels of the land to Marina I when the extraction is complete. The Partnership is responsible for developing and selling the property for residential use. The Partnership, as general partner, and Irving, as limited partner, received $2,579,000 and $2,509,000 cash, respectively, in distributions during 2001. Additionally, the Partnership recognized $2,277,000 in equity earnings from Marina I for the 55 homesites sold by Marina I and other related activities in 2001. See "Investment Real Estate -- Residential Development" above. Flatfork Creek Utility. The Partnership and Irving are each 50 percent shareholders of Flatfork Creek Utility, Inc., an Indiana corporation (the "Corporation.") The Corporation was formed to complete the construction of and operate the wastewater treatment plant and interceptor sewer lines to service land in the northeast Geist area. Construction of the interceptor sewer line and the first phase of the wastewater treatment plant was completed in 1994. The first phase of the plant will serve approximately 500 homes. The Corporation is subject to regulation by the Indiana Utility Regulatory Commission. The Corporation recorded $54,500 as income for 2001, of which the Partnership accounted for its share as an increase in its investment in the Corporation. There are ongoing discussions to sell the utility assets of Flatfork if future sewer service can be assured to the remaining Marina and Irving land. Based on current discussion, the sale if made will be for cash and future payments. There is no signed agreement to sell and any sale will be subject to regulatory approval. 5 Marine Operations The Partnership owns two marinas located at Geist and Morse Lakes. The marinas consist of approximately 1,200 boat docks, three public access boat launching ramps, and several storage and other buildings. The operating season for the marinas depends upon weather conditions, but is typically from the middle of April through the middle of October. Marine operations accounted for 42 percent of the Partnership's revenues in 2001, 41 percent in 2000, and 37 percent in 1999. The principal sources of revenues are from the rental of boat docks, boat launching fees, boat sales, service repair work and, to a lesser extent, from winter boat storage, and the sale of gasoline, boating supplies, boat docks and lifts, food items and miscellaneous services. The marine operations are affected by inclement weather, which tends to discourage boating and reduce revenues. Also, because Geist and Morse Lakes are reservoirs for the Indianapolis area water supply, the levels of the lakes may fall during drought periods, making boating hazardous and reducing recreational use. Recreational Facilities The Partnership operates recreational facilities at Geist Lake for residents of the Partnership's residential developments and residents of communities developed by The Shorewood Corporation. The recreational facilities include a clubhouse and three pools. The operating season for the pools begins on Memorial Day weekend and extends to Labor Day weekend, but the clubhouse is available for rental throughout the year. Future Operations The General Partner expects that the Partnership will continue to: (1) sell investment real estate from time to time depending on market conditions and other factors; (2) pursue development activities, including the building of homes on the Partnership's real estate; (3) seek to enhance the value of the Partnership's investment real estate by making certain improvements and by acquiring additional surrounding real estate; (4) acquire additional real estate for investment; and (5) operate the marine business. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Competition Investment Real Estate. Although there are numerous real estate properties in the Indianapolis metropolitan area available for development of homesites, there are only a limited number of water-oriented properties. The Partnership believes that, of those water-oriented properties that are or will be economically suitable for development of homesites, the Partnership's properties are among those with the greatest long-term development potential, primarily because of the character of the lakes to which the Partnership's properties are adjacent and the extent and types of development at such lakes. There are, however, water-oriented properties owned by other developers that are available for development of homesites that are equally desirable. There is a residential project, which may be developed at the north end of Geist Lake, which will include approximately 300 homesites, of which approximately 40 will be waterfront homesites. Competition in commercial development has become more significant due to the increased zoning of land for commercial use in the area of Geist Lake. 6 Marine Operations. The Geist Marina provides the only boat docks, gas pumps and launching ramps on Geist Lake available to the general public. At Morse Lake, the Town of Cicero operates boat docks and gas pumps in competition with the Morse Marina. There are numerous marine dealers in the Indianapolis market and therefore competition is significant in boat sales and service. Regulation The Partnership's real estate is subject to governmental regulations, particularly zoning regulations, restrictions on construction in flood plains, wetlands protection, and restrictions on water and waste disposal systems. To the extent applicable, any developer of the property must comply with such regulations, as well as the Federal Interstate Land Sales Full Disclosure Act, water pollution and water quality control regulations, and other miscellaneous regulatory requirements. The Partnership cannot predict the cost or effect of future regulations on the development potential of its real estate. Employees The Partnership has approximately 32 full-time employees (most of whom are primarily engaged in marine operations) and a number of part-time employees who work on a seasonal basis. The General Partner is responsible for the management of the Partnership's affairs. There are four officers of the General Partner, all of whom devote full-time to activities of the General Partner and the Partnership. Taxation Of Interests In Publicly Traded Partnerships Until the close of business on December 19, 1997, the Partnership was a publicly traded partnership (PTP) under the definitions set forth in Internal Revenue Code Section 7704. Section 7704 provides that a PTP will be treated by the Internal Revenue Service as a corporation, and thus be subject to double taxation instead of the usual "pass-through taxation" of a partnership, unless the PTP meets certain income requirements, which are discussed below. The Partnership was not subject to these requirements until January 1, 1998 because it was a PTP at the time Section 7704 was adopted and, therefore, was exempted from the application of Section 7704 through 1997 as long as it did not engage in a substantial new line of business. A PTP is treated as a corporation for federal income tax purposes unless 90 percent or more of the partnership's gross income for each tax year is "passive-type income." In general, income from the Partnership's real estate activities qualifies as passive-type income, while income from the operation of the two marinas and the recreational facilities and from the Partnership's interests in Flatfork Creek Utility, Inc. does not qualify as passive-type income. The General Partner believed that, unless actions were taken during 1997 to cease being classified as a PTP, it was likely the Partnership would be taxed as a corporation commencing January 1, 1998 because it was expected that less than 90 percent of the Partnership's gross income would be passive-type income. The General Partner believed it was desirable to continue to be treated as a partnership for federal income tax purposes. As a result, the Partnership elected to de-list from NASDAQ effective as of the close of business on December 19, 1997, in order to avoid continuing to be classified as a PTP. AFTER THAT DATE, TRANSFERS OF LIMITED PARTNER UNITS ARE RECOGNIZED BY THE PARTNERSHIP ONLY IF THEY ARE MADE THROUGH THE MATCHING SERVICE ESTABLISHED BY THE PARTNERSHIP. The only exceptions to this restriction are certain transfers among family members and transfers by reason of death. 7 The Partnership continues to operate the matching service through which Limited Partners and interested buyers may buy and sell Limited Partner Units. In order to ensure the Partnership continues to be treated as a partnership for federal income tax purposes, the matching service strictly follows rules and regulations established by the Internal Revenue Service ("IRS"). To buy or sell under the matching service, a Limited Partner or potential buyer first contacts the Partnership in writing and expresses an interest to either (i) buy or sell at a certain price set by the person contacting the Partnership (a "nonfirm price quote"), or (ii) buy or sell without an accompanying price (a "nonbinding indication of interest"). Neither a nonfirm price quote nor a nonbinding indication of interest commits a person to buy or sell. The Partnership records the information on a quote sheet, including the number of units to be bought or sold if appropriate, and sends the person a copy of the quote. All information concerning quotes and indications of interest are made known to inquiring partners and by potential buyers. If a Limited Partner has expressed a desire to sell, the Partnership is required to wait at least 15 calendar days from the "contact date" (the date the Partnership receives written confirmation from the listing Limited Partner that Limited Partner Units are available for sale) before information is made available to potential buyers or to the seller. The closing of a sale may not occur less than 45 calendar days after the contact date, which is the minimum time period permitted for the closing of a sale pursuant to rules and regulations established by the IRS for partnership matching services. A seller may specify a time period after which the seller's information is removed from the list. In no event may the seller's information be made available to potential buyers after 120 days from the contact date. After the seller's information is removed from the matching service, the seller may not list with the matching service for at least 60 calendar days. A buyer may specify a time after which the buyer's information is removed from the list. The buyer's information will be deleted from the list after 120 days from the contact date, unless the buyer specifies a shorter time period. However, unlike a seller, a buyer may immediately enter another quote or indication of interest onto the list. The Partnership provides contact information and a transaction history to potential buyers and sellers. It is the responsibility of the potential buyer and seller to negotiate a sale. If a match is made between a buyer and seller, the Partnership is notified, and the Partnership sets the closing date in accordance with IRS rules and regulations. The exchange of the purchase price and the certificate representing the Limited Partner Units being sold is conducted by an escrow agent specified by the Partnership. The sum of the total number of Limited Partner Units that may be sold through the matching service in any calendar year in accordance with IRS rules and regulations is limited to ten percent of all the outstanding Limited Partner Units, or approximately 132.19 Units. If that limit is reached, the Partnership will halt sales through the matching service until the next year. Congress or the IRS may adopt new laws, rules and regulations impacting the matching service's procedures that would require the Partnership to make changes to the procedures or adversely affect its ability to offer the matching service. The Internal Revenue Code also provides that the passive-loss rule of Section 469 is to be applied separately for the tax attribute items of each PTP, and that a partner's share of net income from a PTP will generally not be treated as income from the passive activity but rather as portfolio income. In general, under these separate application rules, the income from the Partnership, while it was a PTP, may not offset losses from a partner's other passive activities. 8 ITEM 2. PROPERTIES. ------ ---------- The Partnership's properties are substantially described in Item 1 of this Part I. See "Investment Real Estate" and "Marine Operations." The Partnership has title to all of its real estate, substantially all of which has been covered by blanket title insurance commitments. All of the properties are subject to certain telephone, highway, pipeline and electric power line easements. The Morse and Geist Lake properties are also subject to the easements and restrictions of the Indianapolis Water Company ("IWC"), which owns the reservoirs for water supply purposes. In connection with the maintenance, protection and operation of its water supply reservoirs, IWC has retained a 20-foot easement around the shoreline of both reservoirs and has imposed restrictions on the adjacent land. IWC is permitted access to the lakes for all purposes reasonably necessary to their operation and maintenance as reservoirs, and certain uses of the land that could cause pollution of the lakes are prohibited. There are no mortgages on the Partnership's real estate properties. ITEM 3. LEGAL PROCEEDINGS. ------ ----------------- There is no material proceeding in which any director, officer or affiliate of the Partnership, or any associate of any such director or officer, is a party, or has a material interest, adverse to the Partnership. The Partnership is not involved in any administrative or judicial proceedings arising under any federal, state or local provisions which have been enacted or adopted to regulate the discharge of materials into the environment or otherwise relating to the protection of the environment other than those normally encountered as part of the development business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------ --------------------------------------------------- No matter was submitted to a vote of security holders of the Partnership in the fourth quarter of 2001. PART II ITEM 5. MARKET FOR PARTNERSHIP'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS. Effective as of the close of business on December 19, 1997 the Partnership requested that the Limited Partner Units cease being listed on The NASDAQ SmallCap Market tier of The NASDAQ Stock Market under the symbol MRNCZ. The following table sets forth for 2000 and 2001 the representative high and low bid quotations of the Partnership's Limited Partner Units as reported through a matching service made available by the Partnership. Such bids have been restated to reflect the reverse unit split and represent non-binding indications of interest in buying and not a firm commitment to buy. 2000 2001 ---- ---- High Low High Low Quarter Ended Bid Bid Bid Bid ------------- --- --- --- --- March 31 $10,800.00 $10,800.00 $10,800.00 $9,600.00 June 30 $9,750.00 $9,150.00 $9,600.00 $9,600.00 September 30 $10,200.00 $10,200.00 $9,750.00 $9,300.00 December 31 $10,800.00 $10,800.00 $9,750.00 $9,300.00 9 There is no established public trading market for the Limited Partner Units. During the 60-day period that ended March 22, 2002, there were two bids to purchase at $10,200 per unit. It is anticipated that such bids will be revised downward once the Partnership makes an annual distribution. The source of the bid quotation is through a matching service made available by the Partnership, and such bids represent non-binding indications of interest in buying and not a firm commitment to buy. During 2001 there were 371 units traded through the matching service prior to the reverse split. IN ORDER TO COMPLY WITH THE FEDERAL TAX RULES, THE PARTNERSHIP WILL NOT RECOGNIZE A TRANSFER CONDUCTED OUTSIDE OF THE MATCHING SERVICE UNLESS SUCH TRANSFER MEETS A SPECIFIED EXCEPTION THAT WILL NOT ENDANGER THE PARTNERSHIP'S CONTINUED TREATMENT AS A PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES (SEE ITEM 1 - TAXATION OF INTERESTS IN PUBLICLY TRADED PARTNERSHIPS). In such cases, the Partnership may at its option recognize such transfers. On March 22, 2002 there were approximately 187 record holders of Limited Partner Units of the Partnership. On each of April 5, 2001 and April 5, 2000, the Partnership made cash distributions of $1,650 respectively per unit as restated for the reverse unit split. No other cash distributions were made during 2001 and 2000. The General Partner intends to cause the Partnership to make cash distributions from its net cash flow as often as the General Partner, in its discretion, believes it to be feasible and prudent for the Partnership. Although the number, amount, and timing of cash distributions in any given year may vary substantially, it is currently anticipated that the Partnership will make cash distributions in an amount sufficient to cover the tax liability incurred by Partners from Partnership operations. The preceding discussion regarding cash distributions are forward looking statements. There can be no assurance as to the amount or timing of Partnership cash distributions, and the Partnership is not obligated to make any such distributions. Pursuant to the reorganization of the Company into the Partnership, Units in the Partnership received by the Company (and subsequently distributed to the shareholders of the Company) were divided between General Partner Units and Limited Partner Units. The economic interests in the Partnership represented by a General Partner Unit and Limited Partner Unit are identical. General Partner Units are vested with the authority to manage the affairs of the Partnership. Limited Partner Units carry no management authority. 10 ITEM 6. SELECTED FINANCIAL DATA The selected financial data presented below for each of the years in the five-year period ended December 31, 2001 are derived from the financial statements of the Partnership, which have been audited by KPMG LLP, independent certified public accountants. The financial statements for the years ended December 31, 2001, 2000 and 1999, and the auditors' report thereon, are included in Part II, Item 8.

1) Cash distribution per unit has been calculated on the following basis: General Limited Partner Partner Period Units Units ------ ----- ----- 2001 859.84 1,389.05 2000 859.84 1,389.05 1999 859.84 1,389.05 1998 859.84 1,390.61 1997 670.63 1,579.82 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis is intended to address the significant factors affecting the Partnership's results of operations and financial condition. It is designed to provide a more comprehensive review of the operating results and financial position than could be obtained from an analysis of the financial statements alone. It should, however, be read in conjunction with the financial statements and related notes, and the Selected Financial Data, included elsewhere herein. Also see Item 1 - "Business" for additional discussion of operations. General The Partnership's principal sources of revenue in 2001 were consistent with 2000, and included revenue from homes and homesite sales, marine operations, equity in earnings of investee companies, and interest and rental income. The Partnership's primary sources of revenue were as follows: 2001 2000 1999 ---- ---- ---- Homes and Homesite Sales 33% 38% 41% Marine Operations 42% 41% 37% Equity in Earnings From Investee Companies 18% 15% 15% Homesite Sales The following table presents the total homesite sales as well as dispersion by community: Year Bridgewater Cambridge Morse Overlook Canal Place Total 2001 0 0 6 9 15 2000 3 0 8 2 13 1999 3 8 6 0 17 Home Sales During 2001, the Partnership completed construction and sold four homes compared to five in 2000. 12 Marina I L.P. The Partnership is the general partner of Marina I which has also developed homesites in Cambridge. During 2001, Marina I sold 55 homesites from Cambridge and Weatherstone as compared to 52 homesite sales in 2000 and 42 in 1999 The Partnership's development or sales of investment real estate and residential homes and homesites are affected by several factors such as economic conditions, interest rates, zoning, environmental regulation, availability of utilities, population growth in the area, and competition. Marine Operations The principal sources of revenues for the marine business are the rental of boat docks, boat launching fees, boat sales, and service repair work. To a lesser extent, revenues are generated from winter boat storage, the sale of gasoline, boating accessories, boat docks, lifts, food items and miscellaneous services. Most docks at the Morse Marina and Geist Marina are rented for the April to October boating season. Annual dock rental payments are due prior to the beginning of the boating season resulting in the majority of cash being received during the first six months of the year; most expenses, however, occur during the peak boating months of the summer. Boat dock revenues are deferred when received and recognized as earned during the boating season. Winter boat storage generates revenues for the October to April storage season, and is recognized as earned during the storage season. The Partnership's marine operations are affected by weather conditions, since inclement weather tends to discourage boating and reduce revenues. Also, because Geist and Morse Lakes are reservoirs for the Indianapolis area water supply, the levels of the lakes may fall during drought periods, making boating hazardous. Marine operations are also affected by economic conditions, including inflation. During recessionary periods, recreational boating decreases and revenues from the operation of the marinas decrease accordingly. Increases in the cost of boating caused by inflation also adversely affect the Partnership. Liquidity and Capital Resources The General Partner of the Partnership believes that current funds and funds generated by homes and homesite sales, marine operations, land sales, and bank loans will be sufficient to satisfy its working capital requirements through the end of 2002. On December 31, 2001, the Partnership had cash and cash equivalents, including short-term investments, of $6,576,000. On December 31, 2001, the Partnership did not have any significant contractual commitments for capital expenditures to be made during 2002. During 2001, approximately $378,000 was spent for the Partnership's operating property and equipment. On a long-term basis, major sources of liquidity are expected to be revenues from marine operations, sales of homes and homesites and investment land, distributions from investee companies, and if necessary, bank borrowings. The Partnership currently expects that funds from current reserves and operating cash flow will be sufficient to satisfy future capital needs. Critical Accounting Policies Homesite Sales Cost of sales for homesite properties sold is determined based upon the accumulated cost of the group of homesites as a percentage of the estimated aggregate selling price. Changes in selling prices can create a deviation in recorded cost of sales. Such deviation will not be material as selling price changes during the life of the project segment are not material in the aggregate. 13 Results of Operations 2001 Compared to 2000. Net earnings increased by $216,000 in 2001 from 2000. The following table sets forth the increases and decreases by operating unit: Increase (Decrease) ----------- Home and Homesite Sales $ (409,000) Equity in Earnings of Marina I L.P. $ 356,000 Sale of Investment Land $ 223,000 -------------- Net Real Estate Increase $ 170,000 Marine Operations $ 255,000 Interest Earnings $ (126,000) Other, net $ (83,000) -------------- $ 216,000 ============== Earnings from homes and homesite sales were $1,055,000 in 2001 compared to $1,464,000 in 2000, which was substantially offset by an increase in earning from Marina I homesite sales of $356,000. The Partnership recognized $2,217,000 in 2001 compared to $1,921,000 in 2000 as its share of the earnings from Marina I. The sales by Marina I are not reflected in homesite sales in the Partnership's Statement of Earnings, rather the Partnership's share of net earnings is included as equity in earnings on the Statement of Earnings. The Partnership is a 50 percent owner in Flatfork Creek Utility, Inc. (See Item 1 "Business") As a result, the Partnership recognized a profit of $27,000 in 2001 compared to a loss of $57,000 in 2000. On April 5, 2001, the Partnership made a cash distribution to the partners of record on March 23, 2001 of $1,650 per unit of partnership interest adjusted for the 300 for 1 reverse unit split, for a total of $3,711,000. 2000 Compared to 1999. Net earnings decreased by $205,500 in 2000 from 1999. This decrease was primarily due to a decrease in Marine Operations of $355,000 which is after a reclassification of $130,000 to marine operations expenses from general and administrative expenses in 2000. Such decrease was partially offset by a modest increase in real estate earnings including equity in Marina I. Marine operations were adversely affected by approximately $90,000 at Morse Marina by low water in the spring of 2000, which reduced slip rentals for the year. In addition, reduced boat use at Morse decreased service revenue by approximately $50,000 as compared to 1999. Earnings from homes and homesite sales were $1,464,000 in 2000 compared to $1,281,000 in 1999. The Partnership recognized $1,921,000 in 2000 compared to $2,040,000 in 1999 as its share of the earnings from Marina I. Such decrease results from 27 homesite sales in Weatherstone with a lower gross margin than other communities. The sales by Marina I are not reflected in homesite sales in the Partnership's Statement of Earnings, rather the Partnership's share of net earnings is included as equity in earnings on the Statement of Earnings. The Partnership is a 50 percent owner in Flatfork Creek Utility, Inc. (See Item 1 "Business") As a result, the Partnership recognized a loss in 2000 of $57,000 compared with a loss of $35,000 in 1999. On April 5, 2000, the Partnership made a cash distribution to the partners of record on March 27, 2000 of $1,650 per unit of partnership interest adjusted for the 300 for 1 reverse unit split, for a total of $3,711,000. 14 From time to time, the Partnership may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Partnership notes that a variety of factors could cause the Partnership's actual results and experiences to differ materially from the anticipated results or other expectations expressed in the Partnership's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Partnership's business include the following: (i) the risk of adverse changes in the future level of demand for real estate by the Partnership's customers and prospective customers caused by regional or real estate-specific economic downturns, (ii) the potential for adverse changes in federal income tax laws or regulations that might prevent the Partnership from continuing to be taxed as a partnership for income tax purposes, and (iii) other risks detailed from time to time in the Partnership's filings with the Securities and Exchange Commission. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to Item 305(e) of Regulation S-K, the Partnership is not required to provide information in response to this Item 7A because it satisfies the requirements for a "Small Business Issuer". ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ------ ------------------------------------------- The following are the financial statements of the Partnership and The Marina I L.P. for the years ended December 31, 2001, 2000, and 1999 and the independent auditors' reports thereon. A list of the reports and financial statements appears in response to Item 14 of this report. 15 Independent Auditors' Report The Partners The Marina Limited Partnership: We have audited the accompanying balance sheets of The Marina Limited Partnership as of December 31, 2001 and 2000, and the related statements of earnings, partners' equity and cash flows for each of the years in the three-year period ended December 31, 2001. 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Marina Limited Partnership as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Indianapolis, Indiana February 8, 2002 16 The Marina Limited Partnership Balance Sheets December 31, 2001 and 2000

See accompanying notes to financial statements. 17 The Marina Limited Partnership Statements of Earnings Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 18 The Marina Limited Partnership Statements of Partners' Equity Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 19 The Marina Limited Partnership Statements of Cash Flows Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 20 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 (1) Summary of Significant Accounting Policies (a) General The Marina Limited Partnership units of interest, which had been registered securities, became non-registered on November 15, 2001 following a 300 for 1 reverse unit split completed during October 2001. The Partnership purchased 20,114 limited partner units net of 4,309 units purchased by the limited partners to round up to the minimum 300 old units. The Partnership paid a $6.66 premium over book value per unit, which was allocated between the general and limited partner accounts based upon their respective ownership. Subsequent to the completion of this transaction, limited partner units outstanding were reduced to 1,321.94 units held by 189 limited partners. All units and per unit amounts have been adjusted to reflect the 300 for 1 reverse unit split. Marina II Corporation, the general partner, owns general partner units representing 39% of the Partnership and has the authority to manage the affairs of the Partnership. The economic interests in the Partnership represented by general partner units and limited partner units are identical. The general partner receives management fees equal to 3% of the Partnership's gross margin on marine operations, rental income and recreational facilities. As a partnership, the allocated share of the Partnership's taxable income is includable in the income tax returns of the partners; accordingly, income taxes are not reflected in the Partnership's financial statements. The tax basis of assets and liabilities exceeds the book basis by $1,020,000 at December 31, 2001. The majority of the Partnership's activities and operations are located in the Geist Lake area northeast of Indianapolis, Indiana and in the Morse Lake area north of Indianapolis. Its primary activities are the development and sale of homes and homesites and the operation of marine facilities at Geist and Morse Lakes. (b) Cash and Cash Equivalents Cash and cash equivalents include money market investments with maturities of less than three months and U.S. Treasury bills with maturities of less than twelve months. (c) Properties Held for Sale Properties held for sale are carried at the lower of cost or estimated fair value less costs to sell. Costs include construction, excavation, engineering and other direct costs incurred to bring land to a fully-improved saleable condition. Costs of properties sold are determined by the relative sales value of the property to the total project. Properties are classified as available for sale when marketing of the homesites begin. (Continued) 21 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 Sales of homesites are for cash or with purchase money mortgages. Sales that satisfy a down-payment requirement of 10% of the purchase price are recorded as revenue at the time of closing. Receivables from homesite sales are payable over seven years with interest at 9% the first year, 10% the second year and 12% thereafter. At the time a homesite is sold, the Partnership allocates a portion of the prepaid developer contribution fee to Flatfork Creek Utility, Inc. for the cost of certain utility hook-up charges to cost of homesites sold. Revenues from home sales are recognized upon the closing of each residential unit when title is transferred to the homeowner. (d) Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. The recreational facilities are adjacent to homesite developments at Geist Lake, for which residents of the developments pay a fee for the use of the facilities. Commercial properties represent developed restaurant and other retail properties which are generally leased under short-term arrangements. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. Maintenance and repairs are expensed as incurred while major additions and improvements are capitalized. Since the recreational facilities and retail properties are only incidental minor operations, the results are shown on a net basis in the statements of earnings. (e) Other Investments The equity method is used to account for the Partnership's 50% general partner investment in The Marina I L.P., and its 50% corporate investment in Flatfork Creek Utility, Inc. The Partnership's share of the net earnings and losses of these businesses is included in equity in earnings. (f) Rental Income All leases are classified as operating leases, and minimum annual rents are recognized based on the terms of the lease. Percentage rents related to restaurant leases are recognized based on reported sales after annual thresholds have been met. (g) Marine Revenues Revenues from marine operations are recognized at the point of sale except for revenues for dock rental and winter storage from the marine operations which are recognized on a straight-line basis over the term of the agreement. (h) Financial Instruments The carrying amounts of the receivables approximate their fair value as the interest rates are consistent with market rates. The carrying amounts of all other financial instruments approximate fair value because of the short-term maturity of these items. (Continued) 22 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 (i) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Partnership routinely evaluates all of its investments to assess whether any impairment is present, including recurring operating losses and significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any investment is considered impaired, a loss would be provided to reduce the carrying value of the property to its estimated fair value. (2) Property and Equipment Property and equipment principally consisting of operating land and improvements, buildings and equipment used in the partnership operations are summarized at December 31 as follows: 2001 2000 ------------------- ------------------- Operating land and improvements $ 1,258,892 1,258,892 Buildings and equipment 9,083,458 8,705,737 ------------------- ------------------- 10,342,350 9,964,629 Accumulated depreciation 5,494,083 4,960,306 ------------------- ------------------- $ 4,848,267 5,004,323 =================== =================== (3) Other Investments (a) Marina I The Partnership is a general partner with Irving Materials, Inc. as limited partner in Marina I which develops homesites near Geist Lake. The Partnership's equity in the earnings of Marina I amounted to $2,277,126 in 2001, $1,921,460 in 2000 and $2,040,456 in 1999. (Continued) 23 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 The following is a summary of balance sheet and operating information (in thousands) of Marina I as of December 31, 2001 and 2000 and for the years then ended: 2001 2000 ------------- --------------- Cash and cash equivalents $ 1,808 988 Homes and homesites available for sale and land and land improvements 2,226 3,856 Receivables from homesite sales 1,961 1,488 Other assets 290 585 Liabilities (127) (131) ------------- ------------ Partners' equity $ 6,158 6,786 ============= ============ Homesite sales and other revenues 6,810 6,156 Cost of homesites sold and expenses 2,350 2,563 ------------- ------------ Net earnings $ 4,460 3,593 ============= ============ The Partnership pays various operational costs incurred for Marina I, which are reimbursed at actual or allocated amounts. (b) Flatfork Creek Utility, Inc. The Partnership has a 50% investment along with Irving Materials, Inc. in Flatfork Creek Utility, Inc. (the Corporation), which owns and operates a wastewater treatment plant serving homesites developed in the Geist Lake area by the Partnership, Marina I and other developers. Periodically the Partnership and Marina I make advance payments for future utility hook-ups. The Partnership recognized a gain of $27,254 in 2001, and a loss of $56,528 and $35,482 in 2000 and 1999, respectively, as its share of the Corporation's results of operations. (4) Rental Income The restaurant facilities at Geist and Morse Lakes are leased to an operator under operating leases with annual minimum rentals of $90,000 and $60,000, respectively, plus a percentage of sales above the minimum. There were no overage rents in 2001 with $36,400 and $52,800 for 2000 and 1999, respectively. The Partnership operates and leases a retail and office development. Rental income was $237,900, $248,132 and $289,400 for 2000, 1999 and 1998, respectively. At December 31, 2001, occupancy was 100% including space utilized as the office of the Partnership. In addition to minimum rent, the leases require reimbursements of specified operating expenses. (Continued) 24 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 The minimum rent payments due under operating leases in effect at December 31, 2001 are summarized as follows: 2002 $ 405,230 2003 368,626 2004 371,724 2005 227,055 2006 30,029 ------------------- $ 1,402,664 =================== (5) Segment Information The Partnership is engaged in two primary business segments, the development and sale of homes and homesites and marine operations at Geist and Morse Lakes. Summarized financial information by business segment for 2001, 2000 and 1999 is as follows (in thousands):

(Continued) 25 The Marina Limited Partnership Notes to Financial Statements December 31, 2001, 2000 and 1999 (6) Interim Quarterly Results (Unaudited)

26 Independent Auditors' Report The Partners The Marina I L. P.: We have audited the accompanying balance sheets of The Marina I L. P. as of December 31, 2001 and 2000, and the related statements of earnings, partners' equity and cash flows for each of the years in the three-year period ended December 31, 2001. 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Marina I L. P. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Indianapolis, Indiana February 8, 2002 27 The Marina I L.P. Balance Sheets December 31, 2001 and 2000

See accompanying notes to financial statements. 28 The Marina I L.P. Statements of Earnings Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 29 The Marina I L.P. Statements of Partners' Equity Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 30 The Marina I L.P. Statements of Cash Flows Years ended December 31, 2001, 2000 and 1999

See accompanying notes to financial statements. 31 The Marina I L.P. Notes to Financial Statements December 31, 2001, 2000 and 1999 Summary of Significant Accounting Policies (a) General The Marina I L. P. (Marina I or the Partnership) was formed by The Marina Limited Partnership (TMLP), the general partner, and Irving Materials, Inc. (Irving), the limited partner, to develop homesites near Geist Lake, northeast of Indianapolis, Indiana. Marina I is managed by Marina II Corporation, the general partner of TMLP. Certain expenses and costs incurred by Marina I are paid by TMLP and then reimbursed by Marina I based on actual or allocated amounts. Contributions of land by Irving are valued at amounts agreed upon by the partners which approximate Irving's tax basis. Earnings and distributions are allocated as follows: o For earnings from homesite sales of land contributed by Irving, Irving is first allocated an amount equal to 20% of the gross sales price less its tax basis of the land contributed, and TMLP is allocated 5% of the gross sales price. Any remaining earnings are allocated 40% to Irving and 60% to TMLP. o For earnings from all other homesite sales, TMLP is first allocated a management fee based on profits from the homesite sales, with the remainder allocated 50% to each partner. (b) Cash and Cash Equivalents Cash and cash equivalents include money market investments with maturities of less than three months. (c) Properties Held for Sale Properties held for sale are carried at the lower of cost or estimated fair value less costs to sell. Costs include construction, excavation, engineering and other direct costs incurred to bring land to a fully-improved saleable condition. Costs of homesites sold are determined by the relative sales value of the homesite to the total project. Properties are classified as available for sale when marketing of the homesites begins. Sales of homesites are for cash or with purchase money mortgages. Sales that satisfy a down-payment requirement of 10% of the purchase price are recorded as revenue at the time of closing. Receivables from homesite sales are payable over seven years with interest at 9% the first year, 10% the second and 12% thereafter. At the time a lot is sold, the Partnership allocates a portion of the prepaid developer contribution fee to Flatfork Creek Utility, Inc. (whose partners are TMLP and Irving) for the cost of certain utility hook-up charges to cost of homesites sold. In 2000, Marina I paid $306,000 to Flatfork Creek Utility, Inc. as advance payments for future utility hook-ups. The Partnership routinely evaluates all of its investments to assess whether any impairment indications are present, including significant adverse changes in legal factors or business climate that affect the recovery of recorded value. If any investment is considered impaired, a loss is provided to reduce the carrying value of the property to its estimated fair value. (Continued) 32 The Marina I L.P. Notes to Financial Statements December 31, 2001, 2000 and 1999 (d) Financial Instruments The carrying amounts of the receivables approximate their fair value because the interest rates are consistent with market rates. The carrying amounts of all other financial instruments approximate fair value because of the short-term maturity of these items. (e) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (f) Income Taxes As a partnership, the allocated share of the taxable income of Marina I is includable in the income tax returns of the partners; accordingly, income taxes are not reflected in these financial statements. 33 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There has been no change in the Partnership's independent certified public accountants within 24 months prior to, or subsequent to, the date of the most recent financial statements, nor has there been any disagreements with the accountants. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS. ------- -------------------------------- The following table presents certain information regarding the Directors and executive officers of the General Partner. Each person listed is a Director of the General Partner except for Mr. Bussell and Mr. Calabria. Messrs. Rosenberg, Rosenberg II, Bussell and Calabria are the executive officers of the General Partner. Unless otherwise indicated in a footnote, the principal occupation of each Director or executive officer has been the same for the last five years.

1) Mr. Byers became a Director in 2001. He has received legal fees from the Partnership and its affiliates for work on real estate development matters totaling $103,272 for the year 2001. 2) Mr. Rosenberg II became Assistant Treasurer of the General Partner in 1987 and Vice President and a Director in 1997. 3) Mr. Calabria became Vice President & CFO, Treasurer and Secretary of the General Partner in 1997. He had been Vice President and CFO of Natare Corp from 1992 to 1995 and Treasurer and CFO of The Beta Group from 1995 to 1996. 4) Mr. Bussell became Director of Sales and Marketing in 1994 and was elected as Vice President of the General Partner in 1999. 34 All Directors serve annual terms until their successors are elected and have qualified. The Directors are elected by the shareholders of the General Partner. Mr. Rosenberg has served as a Director of the Company or General Partner since 1982. Mr. Rosenberg II was elected as a Director in 1997 and Mr. Byers was elected as a Director in 2001. All other Directors were elected in 1984. All officers serve at the pleasure of the Board of Directors. Mr. Rosenberg is the father of Mr. Rosenberg II. There are no other family relationship between any of the executive officers and Directors of the General Partner. SECTION 16(a): BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the General Partner's Directors, executive officers and persons who beneficially own more than 10 percent of the Partnership's Limited Partner Units to file with the Securities and Exchange Commission reports showing ownership of and changes in ownership of the Partnership's Limited Partner Units and other equity securities. On the basis of reports and representations submitted by the General Partner's Directors, executive officers, and greater-than-ten-percent owners, the Partnership believes that all required Section 16(a) filings for 2001 were timely made. ITEM 11. EXECUTIVE COMPENSATION. ------- ---------------------- Compensation of Executive Officers The following table sets forth aggregate compensation for each of the Partnership's executive officers whose total annual salary and bonus exceed $100,000, for services rendered to the Partnership in all capacities during the years ended December 31, 2001, 2000 and 1999. SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary Bonus Allen E. Rosenberg 2001 $250,000 $181,583 President, Director of 2000 250,000 171,772 the General Partner 1999 234,884 154,026 Allen E. Rosenberg II 2001 $110,000 $ 53,859 Vice President, Assistant Treasurer 2000 110,000 89,450 and Director of the General Partner 1999 114,231 80,000 Robert K. Bussell 2001 $ 60,000 $110,932 Vice President of 2000 60,000 105,070 the General Partner 1999 62,308 116,925 Donald J. Calabria 2001 $104,616 $ 27,000 Vice President, Chief Financial Officer, 2000 98,846 24,000 Treasurer and Secretary of the 1999 95,423 17,000 General Partner 35 Each Director except Messrs. Rosenberg and Rosenberg II receives an annual fee plus $750 for each Board of Directors or Committee meeting attended. If, however, more than one meeting is held on the same day, a fee of $150 is paid for the subsequent meetings. The annual fee was $7,500 in 2001. Bonus Plans Allen E. Rosenberg is compensated under a plan whereby three percent of the proceeds or other revenues from sales of the Partnership's investment property have been paid to him for his stewardship of such property. The following payments were made pursuant to that plan: Year Amount ---- ------ 2001 $ 15,900 2000 -0- 1999 -0- In addition, five percent of the gross profit (net of development and selling costs) on the Partnership's individual homesite sales and five percent of the Partnership's share of the income from The Marina I L.P. are paid to Mr. Rosenberg. The following payments were made pursuant to that plan: Year Amount ---- ------ 2001 $165,683 2000 171,772 1999 154,026 Allen E. Rosenberg II is compensated under a plan whereby 12 percent of the profit (before general and administrative expenses) will be paid to him for each residence built and sold at Sail Place. In addition, Mr. Rosenberg II will receive 50% of the net profit (before general and administrative expenses) on each custom home sold. Under this plan $53,859, $89,450 and $80,000 were paid in 2001, 2000 and 1999 respectively. Robert K. Bussell is compensated under a plan whereby 1.5% of the sales value of homesites is paid for his role in promoting and completing those sales. In the case of the Weatherstone Sub-division .75% of sales value is paid. Such payments are reflected in the "Summary Compensation Table" as bonus. Management Fees Paid to the General Partner In addition to bonuses that may be paid from the proceeds of sales of the Partnership's land or other revenues (see " Bonus Plans" above), the General Partner is permitted to receive management fees from the Partnership. The General Partner received management fees of $99,500 in 2001, which is equal to three percent of the Partnership's gross margin on marine operations, recreational facilities, and rental income. The management fee is not paid on revenues from land sales and investment income. 36 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ------- --------------------------------------------------- ---------- Security Ownership The following table sets forth the number of Limited Partner Units of the Partnership beneficially owned by all Directors of the General Partner and by all Directors and officers of the General Partner as a group as of March 22, 2002. Such units have been restated to reflect the 300:1 reverse unit split. Number of Percent Limited Partner Units Of Name Beneficially Owned Class Patrick J. Bruggeman 52.0 3.9% Allen E. Rosenberg 34.4 1) 2.6% Allen E. Rosenberg II 9.9 2) 0.7% All Directors and Officers of the General Partner as a Group (7 Persons) 96.3 3) 7.3% 1) Includes 32.9 Units owned by Mr. Rosenberg's wife and 1.5 owned by his daughter. 2) Includes 9.9 Units owned by Mr. Rosenberg II's spouse and minor children. 3) Includes 44.3 Units owned by spouses or others as described in the above notes. The Partnership has concluded that Limited Partner Units do not constitute voting securities. Therefore, the Partnership does not report information on the number of Limited Partner Units beneficially owned by persons owning more than five percent of the Limited Partner Units. Upon the reorganization of the Company into the Partnership in 1986, five of the seven members of the Board of Directors of the Company (the "Continuing Directors") received all the General Partner Units in the Partnership. See "General" under Item 1. The Partnership disclaims that the General Partner Units are securities. General Partner Units are vested with authority to manage the affairs of the Partnership. In exchange for the General Partner Units that they received in the reorganization, the Continuing Directors became the sole shareholders of the General Partner. As of March 22, 2002 the General Partner owns a 39.4 percent interest in the profits, losses, capital, and distributions of the Partnership. 37 Three of the Continuing Directors, in addition to Mr. Rosenberg II and Mr. Byers, are the current members of Board of Directors of the General Partner. The Directors of the General Partner manage and control the overall business and affairs of the General Partner and, consequently, those of the Partnership. The Directors of the General Partner are elected by the shareholders of the General Partner (unless there is a vacancy on the Board, in which case the remaining Board members may fill the vacancy) without the approval of the Limited Partners. Ownership of the shares of the General Partner on March 22, 2002 is as set forth in the following table: Percentage Shareholder Ownership Allen E. Rosenberg 38.6% Patrick J. Bruggeman 17.2% Allen E. Rosenberg II 8.2% Nancy Hunt 1) 2.6% Lawrence Buell .8% The Callaway Limited Partnership 2) 32.6% Upon the withdrawal or removal of a shareholder of the General Partner, his or her participation in the General Partner Units will cease. Thereafter, the General Partner Units owned by the withdrawn or removed shareholder will change to Limited Partner Units. 1) Upon approval of the General Partner, Nancy Hunt, spouse of Stanley E. Hunt who was a Director of the General Partner, assumed ownership of shares previously owned by the estate of Mr. Hunt. 2) The Callaway Limited Partnership was formed in January 2002 to hold shares previously owned by the children of Mr. Rosenberg. Upon approval of the Board of Directors of the General Partner, Mr. Rosenberg transferred an additional 80 shares of the General Partner to The Callaway Limited Partnership. Mr. Rosenberg is the general Partner of The Callaway Limited Partnership but all voting control over Marina stock is retained by Mr. Rosenberg's three children. Changes in Control The Shareholders' Agreement (the "Shareholders' Agreement") dated December 2, 1986, among the shareholders of the General Partner, prescribes certain procedures for the sale or other transfer of shares of the General Partner and for the voting of certain shares, the operation of which may at a subsequent date result in a change of control of the General Partner and, consequently, a change of control of the Partnership. The Shareholders' Agreement is attached as an exhibit to the Partnership's 1993 Annual Report on Form 10-K, which is incorporated herein by this reference. The Shareholders' Agreement provides certain restrictions on transfer, rights of first refusal, and options to purchase with respect to shares of the General Partner. The Shareholders' Agreement also provides certain voting arrangements in the event of the death or disability of Allen E. Rosenberg, the majority shareholder of the General Partner. The following is a brief summary of the Shareholders' Agreement. This summary is not intended to be complete and is qualified in all respects by the more detailed provisions of the Shareholders' Agreement. 38 In general, the Shareholders' Agreement provides that a shareholder may transfer all or part of his shares of the General Partner to a party who is not a party to the Shareholders' Agreement only upon prior written approval by the General Partner and subject to any limitations that may be imposed by the General Partner. If, for any reason, a shareholder who is also a Director, ceases to be a Director of the General Partner, the shareholder and his heirs, executors, administrators, successors, or assigns, subject to the rights of first refusal described below, has the right, but not the obligation, upon surrender of all of his shares of the General Partner, to cause the General Partner to (a) convert that portion of the General Partner Units attributable to all of such shareholder's shares into Limited Partner Units on the basis of one Limited Partner Unit for one General Partner Unit, (b) distribute such Limited Partner Units to the shareholder, and (c) cause the Partnership to register such Limited Partner Units under the Securities Act of 1933, as amended. Prior to such conversion of General Partner Units into Limited Partner Units, the shares of the General Partner the shareholder proposes to surrender in exchange for Limited Partner Units must first be offered to the remaining parties to the Shareholders' Agreement and the General Partner as provided in the Shareholders' Agreement. The exercise of any such rights of first refusal is contingent upon the exercise of rights of first refusal to purchase, in the aggregate, all shares held by the selling shareholder. If a shareholder of the General Partner acquires, from time to time, Limited Partner Units, such Units shall be, at the option of the General Partner, changed to General Partner Units and contributed to the General Partner in return for additional shares of stock of the General Partner. The Shareholders' Agreement also provides that, in the event of the death or disability of Allen E. Rosenberg, the majority shareholder of the General Partner, his shares of the General Partner will be voted by a committee consisting of four members, at least one of whom shall be a Director of the General Partner. The members of the voting committee are Mary Jo Rosenberg, Amy E. Rosenberg, Rebecca J. Griffin, and Allen E. Rosenberg II. Vacancies on the voting committee will be filled by Allen E. Rosenberg, or, in the event of his death or disability, by a majority of the remaining members of the voting committee. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ------- ---------------------------------------------- The required information is inapplicable. 39 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) Financial Statements: The following financial statements of the Partnership and The Marina I L.P. appear in Part II, Item 8. Independent Auditors' Report. Balance Sheets -- December 31, 2001 and 2000. Statements of Earnings -- Years Ended December 31, 2001, 2000 and 1999. Statements of Partners' Equity -- Years Ended December 31, 2001, 2000 and 1999. Statements of Cash Flows -- Years Ended December 31, 2001, 2000 and 1999. Notes to Financial Statements. (a)(2) Financial Statement Schedules: All schedules for which provision is made in the applicable regulations of the Commission have been omitted as the schedules are not required under the related instructions, or the required information is inapplicable, or the information is set forth in the financial statements included elsewhere herein. (a)(3) Exhibits: The exhibits filed as a part of this Annual Report on Form 10-K, all of which are hereby incorporated by reference except financial statements and schedules and Exhibits 3.1, 3.2, 4.1 and 99.3, are: Exhibit Page No. or Number Exhibit Filed With 3.1 Certificate of Limited Partnership of The Marina Limited Partnership (3) 3.2 Agreement of Limited Partnership of The Marina Limited Partnership (3) Agreement of Limited Partnership of The Marina Limited Partnership (3) 4.1 Defining the rights of security holders is filed as Exhibit 3.2 10.1 License Agreement, dated October 19, 1970, between Indianapolis (2) Water Company and The Shorewood Corporation 10.2 Conveyances of Easement Rights for the purpose of Installing and (2) Maintaining Boat Docks, dated June 30, 1982, executed by The Shorewood Corporation in favor of The Creek Land Company, Inc. 40 10.3 Consent to Assignment of License Rights, dated March 11, 1983, (2) Between Indianapolis Water Company, The Shorewood Corporation And The Creek Land Company, Inc. 99.1 Restated Articles of Incorporation of The Marina II Corporation (1) 99.2 Restated Bylaws of The Marina II Corporation (1) 99.3 Shareholders' Agreement (3) -------------------------- 1. Registration Statement on Form S-4 (Reg. No. 33-9367) filed by The Marina Limited Partnership on October 8, 1986. 2. Registration Statement on Form S-14 (Reg. No. 2-03600) filed by The Marina Corporation on October 3, 1984, as amended on November 13, 1984, and November 20, 1984. 3. Annual Report on Form 10-K filed by The Marina Limited Partnership for 1993. (b) Reports on Form 8-K. No reports on Form 8-K were filed in the fourth quarter of 2001 by the Partnership. 41 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. The Marina Limited Partnership Date: March 22, 2002 By: /s/ Allen E. Rosenberg --------------------------- Allen E. Rosenberg, President of The Marina II Corporation, the General Partner of The Marina Limited Partnership Pursuant to the requirements of the Securities Exchange Act of 1934, this report had been signed below by the following persons on behalf of the Partnership and in the capacities and on the dates indicated. Capacity With Signature The General Partner Date /s/ Patrick J. Bruggeman ------------------------ Patrick J. Bruggeman Director March 22, 2002 /s/Lawrence L. Buell -------------------- Lawrence L. Buell Director March 22, 2002 /s/Gordon D. Byers ------------------ Gordon D. Byers Director March 22, 2002 /s/Allen E. Rosenberg Director and President --------------------- Allen E. Rosenberg (Principal Executive Officer) March 22, 2002 Director, /s/Allen E. Rosenberg II Vice President and ------------------------ Allen E. Rosenberg II Assistant Treasurer March 22, 2002 Vice President, /s/Donald J. Calabria Treasurer, and Secretary --------------------- Donald J. Calabria (Principal Financial Officer) March 22, 2002 42

MARINA LIMITED PARTNERSHIP 10-K