<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              -----------

                                    FORM 10-Q


 (Mark One)
[X]Quarterly  Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
   Act of 1934 for the quarterly period ended JUNE 30, 1998; or

[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For the transition period from ____________ to ____________ .


Commission file number 1-8383


                             MISSION WEST PROPERTIES
             (Exact name of registrant as specified in its charter)

            CALIFORNIA                             95-2635431
 (STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER IDENTIFICATION
  INCORPORATION OR ORGANIZATION)                    NUMBER)

                               10050 BANDLEY DRIVE
                        CUPERTINO, CALIFORNIA 95014-2188
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

      Registrant's telephone number, including area code is (408) 725-0700
                                   -----------

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

       TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH
       Common, no par value                        REGISTERED
                                            American Stock Exchange
                                         Pacific Exchange, Incorporated

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

                                      None

                                   -----------

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.

         (1) Yes  X     No              (2) Yes  X     No
                -----     -----                -----     -----


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

      Common Stock no par value                 1,698,536 shares
    -------------------------------     --------------------------------
               (Class)                  (Outstanding at August 10, 1998)

                                     - 1 -
<PAGE>

                             MISSION WEST PROPERTIES

                                    FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1998




<TABLE>
                                      INDEX
<CAPTION>

                                                                      PAGE
<S>       <C>                                                         <C>
PART I    FINANCIAL INFORMATION

  Item 1  Financial Statements:

          Consolidated Balance Sheets as of June 30, 1998
          and December 31, 1997........................................3

          Consolidated Statements of Operations for the three
          and six months ended June 30, 1998 and 1997..................4

          Consolidated Statements of Cash Flows for the
          six months ended June 30, 1998 and 1997......................5

          Notes to Consolidated Financial Statements...................6

  Item 2  Management's Discussion and Analysis of Financial
          Condition and Results of Operations..........................7


PART II   OTHER INFORMATION

  Item 5  Other Information............................................9

  Item 6  Exhibits and Reports on Form 8-K.............................9


SIGNATURES............................................................10
</TABLE>
                                     - 2 -
<PAGE>

================================================================================
Part I - Financial Information

ITEM 1
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
                             MISSION WEST PROPERTIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                      -----
<CAPTION>
                                           June 30, 1998  December 31,
                                                              1997
                                           -------------- --------------
                                             (Unaudited)
                  ASSETS
<S>                                        <C>            <C>       
Cash and cash equivalents                  $      4,224   $    5,569
Other assets                                      1,068          194
                                           -------------- --------------

  Total assets                                   5,292    $    5,763
                                           ============== ==============

   LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Accounts payable and accrued expenses            225    $      552
                                           -------------- --------------
   Total liabilities                               225           552
                                           -------------- --------------

Stockholders' equity:
  Common stock, no par value, 200,000,000
    shares authorized 1,698,536 and
    1,501,104 shares issued and outstanding
    at June 30, 1998 and December 31, 1997,
    respectively                                27,596        26,707
  Less, amounts receivable on private      
    placement                                     (941)         (334)
                                           -------------- --------------
                                                26,655        26,373
  Accumulated deficit                          (21,588)      (21,162)
                                           -------------- --------------
   Total shareholders' equity                    5,067         5,211
                                           -------------- --------------
   Total liabilities and shareholders'                  
     equity                                $     5,292    $    5,763
                                           ============== ==============
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                     - 3 -
<PAGE>
<TABLE>
                             MISSION WEST PROPERTIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (unaudited)
                                    ---------
<CAPTION>
                                         Three months ended    Six months ended
                                              June 30,             June 30,
                                        -------------------- -------------------
                                           1998       1997      1998      1997
                                       ---------- ---------- --------- ---------
Revenue:
<S>                                    <C>          <C>     <C>         <C>    
  Rental revenues from real estate             -    $    99         -   $   741
  Other income, including interest        $   64        128   $   141       259
                                       ---------- ---------- --------- ---------
                                              64        227       141     1,000
                                       ---------- ---------- --------- ---------
Expenses:
  Operating expenses of real estate            -          6         -       101
  Depreciation of real estate                  -         16         -       131
  General and administrative                 337        178       567       426
  Interest                                     -          -         -       178
                                       ---------- ---------- --------- ---------
   Total expenses                            337        200       567       836
                                       ---------- ---------- --------- ---------
(Loss)/income before gain on sale of 
  real estate and income taxes              (273)        27      (426)      164
(Loss)/gain on sale of real estate             -       (173)        -     4,676
                                       ---------- ---------- --------- ---------
(Loss)/income before income taxes           (273)      (146)     (426)    4,840
Provision for income taxes                     -        266         -    (1,385)
                                       ---------- ---------- --------- ---------
Net (loss)/income                         $ (273)   $   120   $  (426)   3,455
                                       ========== ========== ========= =========
Basic net (loss)/income per share         $(0.16)   $  2.35   $ (0.27)   $69.35
Diluted net (loss)/income per             $(0.16)   $  2.35   $ (0.27)   $69.35
                                       ========== ========== ========= =========
Weighted average number of common
shares outstanding (basic and diluted) 1,698,536     51,104 1,601,770    49,821
                                       ========== ========== ========= =========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                     - 4 -
<PAGE>

<TABLE>
                             MISSION WEST PROPERTIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    (in thousands, except per share amounts)
                                   (unaudited)
                                      -----

<CAPTION>
                                                              Six months ended
                                                                   June 30,
                                                          ----------------------
                                                              1998       1997
                                                          ----------- ----------
Cash flows from operating activities:
<S>                                                       <C>         <C>     
  Net (loss)/income                                       $    (426)  $  3,455
  Adjustments to reconcile net income to net cash
   Used in operating activities:
    Net gain on sale of real estate assets                        -     (4,676)
    Depreciation                                                  -        131
    Tax effect of cancelled stock options                         -        (33)
    Changes in assets and liabilities: 
      Net real estate investments                                 -          2
      Other assets                                             (874)     1,228
      Accounts payable and accrued expenses                    (327)    (1,047)
                                                          ----------- ----------
       Net cash used in operating activities                 (1,627)      (940)
                                                          ----------- ----------

Cash flows from investing activities:
  Net proceeds from sales of real estate                          -     46,443
                                                          ----------- ----------
   Net cash provided by investing activities                      -     46,443
                                                          ----------- ----------
Cash flows from financing activities:
  Principal payments on mortgage notes payable                    -    (30,753)
  Proceeds from issuance of common stock                        293          -
  Proceeds from stock options exercised                           -        759
  Repurchase of common stock                                    (11)         -
  Dividends paid                                                  -    (13,798)
                                                          ----------- ----------
   Net cash used in financing activities                        282    (43,792)
                                                          ----------- ----------
   Net decrease in cash and cash equivalents                 (1,345)     1,711
Cash and cash equivalents, beginning                          5,569      3,164
                                                          ----------- ----------

Cash and cash equivalents, ending                         $   4,224   $  4,875
                                                          =========== ==========
Supplemental information:
  Cash paid for interest                                  $       -   $    178
                                                          =========== ==========
  Cash paid for income taxes                              $     115   $    848
                                                          =========== ==========

Supplemental schedule of non-cash investing and
  financing activities:
  Note receivable in connection with the                  $     900   $      -
     issuance of Common Stock                             =========== ==========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.

                                     - 5 -
<PAGE>


                             MISSION WEST PROPERTIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (in thousands, except per share amounts)
                                   (unaudited)
                                      -----
1.    BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with generally accepted accounting  principles  applicable to interim
financial  information  and  pursuant  to  the  rules  and  regulations  of  the
Securities  and  Exchange  Commission.   Accordingly,  certain  information  and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant  to such rules and  regulations.  However,  in the  opinion of
management,  all adjustments,  consisting only of normal recurring  adjustments,
necessary for a fair presentation have been included.  The Company presumes that
users of the interim  financial  information  herein have read or have access to
the audited  financial  statements  for the  preceding  fiscal year and that the
adequacy  of  additional  disclosure  needed  for a  fair  presentation  may  be
determined  in  that  context.  Accordingly,  footnote  disclosure  which  would
substantially  duplicate the  disclosure  contained in the Company's 1997 Annual
Report on Form 10-K has been omitted.

2.    ISSUANCE OF COMMON STOCK

On March 30, 1998,  the Company  issued  200,000 shares of common stock at $4.50
per share to an executive officer of the Company in exchange for a $900,000 note
receivable payable to the Company.  The note is a full recourse  promissory note
bearing interest at 5.59% and is secured by a pledge of the shares.  Interest is
payable annually and principal is due March 30, 2003.

During the second  quarter of 1998,  the  Company  received  total  payments  of
$293,000 relating to amounts receivable on private placement.

3.    NET INCOME PER SHARE

The computation of net income per share is based on the weighted  average number
of common shares  outstanding  during the period.  Common stock options have not
been included in the  computation  since their inclusion would have no effect on
net income per share.

4.    INCOME TAXES

The Company intends to qualify and elect to be taxed as a real estate investment
trust under the Internal  Revenue Code of 1986, as amended,  commencing with the
taxable year ending December 31, 1998.  Accordingly,  no provision has been made
for  federal  income  taxes for the three and six month  periods  ended June 30,
1998.

5.    RECENT ACCOUNTING PRONOUNCEMENTS

On June 15, 1998,  the Financial  Accounting  Standards  Board issued  Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  ("SFAS No. 133"),  SFAS 133 is effective for fiscal years beginning
after June 15, 1999, but earlier application is permitted as of the beginning of
any  fiscal  quarter  subsequent  to  June  15,  1998.  SFAS  133  requires  all
derivatives  to be recognized  in the statement of financial  position as either
assets or liabilities  and measured at fair value.  The Company does not believe
the  application  of SFAS 133 will have a  material  effect on its  consolidated
financial statements.

                                     - 6 -
<PAGE>


ITEM 2
MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  should  be read  in  conjunction  with  the  accompanying  condensed
consolidated  financial  statements and notes thereto  contained  herein and the
Company's  consolidated  financial statements and notes thereto contained in the
Company's  Annual Report on Form 10-K as of and for the year ended  December 31,
1997.  The results for the three and six month  periods  ended June 30, 1998 are
not  necessarily  indicative of the results to be expected for the entire fiscal
year ending December 31, 1998.

OVERVIEW

Mission West  Properties  (the  "Company"),  with corporate  offices  located in
Cupertino,  California,  is a California  corporation that historically has been
engaged  in  developing,   owning,   operating,   and  selling  income-producing
commercial real estate.

RESULTS OF OPERATIONS

COMPARISON  OF THE THREE AND SIX MONTH  PERIODS ENDED JUNE 30, 1998 TO THE THREE
AND SIX MONTH PERIODS ENDED JUNE 30, 1997.

During the three and six month  periods  ended June 30,  1998,  the Company held
minimal assets,  primarily cash and cash equivalents  obtained from recent sales
of common stock.  Therefore,  there was minimal operating  activity during these
periods.  For the three month period ended June 30, 1998, the Company recognized
interest income in the amount of $64,000 and general and administrative costs of
$337,000,  resulting in a net loss of  $273,000.  For the six month period ended
June 30, 1998, the Company recognized  interest income in the amount of $141,000
and general and  administrative  costs of  $567,000,  resulting in a net loss of
$426,000.

During the six month  period  ended June 30,  1997,  the Company sold its entire
real estate  portfolio of 11 properties.  Nine of the 11 real estate  properties
("the nine  properties")  were sold during the first  quarter of 1997.  The nine
properties  consisted of occupied office,  light industrial buildings and vacant
land in Chandler,  Arizona. The remaining two properties were sold in the second
quarter of 1997 and  consisted of  leaseholds,  together  with hangar and office
buildings,   thereon,  comprising  approximately  25  percent  of  the  land  at
Palomar-McClellan Airport in San Diego, California.

Upon  completion  of the  sale of the  nine  properties,  the  Company  received
$47,200,000 in cash,  from which it repaid all debt  encumbering  the properties
(thus the elimination of all future interest expense) and paid a majority of the
related transaction and closing costs,  including  $3,000,000 in "break-up" fees
from previously  terminated sales transactions.  Upon completing the sale of the
remaining two  properties in the second  quarter of 1997,  the Company  received
$3,000,000 cash, from which related transaction and closing costs were paid. The
Company  recognized  a net  gain  on  the  sale  of  the  eleven  properties  of
$4,676,000.

The  Company  declared  a special  dividend  of $9.00 per share to  shareholders
during  February 1997. That dividend  represented  the available  portion of the
proceeds from the sale of the nine properties.

Following the sale of the 11 properties, coupled with the cash dividends paid to
shareholders, only cash and receivables were left in the Company and, therefore,
the  resulting  corporate  entity  had  insignificant   revenue-generating   and
cash-generating  capabilities and minimal operations, aside from interest income
and general and administrative expenses.

CHANGES IN FINANCIAL CONDITION

There were no significant  changes in financial  condition  during the six month
period  ended June 30,  1998,  except  for the sale of 200,000  shares of common
stock at $4.50 per share to an executive officer in exchange for a $900,000 note
receivable  payable  to the  Company,  as well as the  receipt  of  $293,000  in
connection with amounts receivable on private placement.

                                     - 7 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1998, the Company's assets consisted principally of cash and cash
equivalents obtained from sales of common stock in September and November 1997.

The Company's Form S-4 Registration  Statement No.  333-52835,  filed on May 15,
1998,  as  amended  (the  "S-4  Registration  Statement"),  is  incorporated  by
reference into this Form 10-Q.

FORWARD LOOKING STATEMENTS

Forward-looking statements involve a number of risks and uncertainties.  Some of
the important  factors that could cause actual results to differ materially from
those in the forward-looking statements include the following:

Future transactions  intended to raise capital for the Company and result in the
Company's  conduct of a new real  estate  business  are  subject  to  applicable
California and federal laws, the regulations of stock exchanges or other markets
on  which  the  common  stock of the  Company  is  traded,  real  estate  market
conditions, stock market conditions, or other factors.

In October 1997,  the American  Stock  Exchange  ("AMEX")  halted trading of the
Company's  common  stock.  Trading  has  not  yet  resumed.  In the  absence  of
appropriate  actions  by the  Company,  there  is a risk,  therefore,  that  the
Company's  common stock will be de-listed  from such  exchanges and there may no
longer exist a trading market for the common stock.

If the  Company  does  raise  sufficient  capital to  maintain  the AMEX and the
Pacific Stock Exchange  ("PSE") listings of the Company's common stock, but does
not re-enter the real estate  business  during fiscal year 1998, the Company may
become  subject to the Investment  Company Act of 1940, as amended,  which would
entail  substantially  more regulation of the Company at significant  additional
expense.

At present,  approximately  64.6 percent of the outstanding  common stock of the
Company  is owned by  members  of the Berg  Voting  Group.  All such  shares are
subject to Voting Rights Agreements  obligating those shareholders to vote their
shares in the manner recommended by Berg and Berg Enterprises,  Inc. and Carl E.
Berg, who as a result,  should be viewed as possessing  effective control of the
Company.  There can be no assurance that such control will be exercised to cause
the occurrence of any transaction described in the forward-looking statements.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The Company does not believe recently issued accounting standards have a current
impact on the Company's financial statements.

YEAR 2000 CONSIDERATIONS

The Company  utilizes  computer  software for its  corporate  and real  property
accounting  records and to prepare its financial  statements.  The vendor of the
Company's current principal  software  accounting system has advised the Company
that it will provide a Year 2000 compliance  software  upgrade to the Company in
early 1999.  If necessary,  the Company  could  prepare all required  accounting
entries manually without incurring material additional operating expenses.

Conceivably,  tenants of the Properties  could  experience  delays in processing
their accounting  records and making required lease payments,  if they encounter
Year 2000 compliance problems. The Company does not believe that any such delays
would have a material adverse effect on the Company.

                                     - 8 -
<PAGE>
================================================================================
Part II - Other Information

ITEM 5
OTHER INFORMATION

RECENT DEVELOPMENTS

The Company's Form S-4 Registration  Statement No.  333-52835,  filed on May 15,
1998,  as  amended  (the  "S-4  Registration  Statement"),  is  incorporated  by
reference into this Form 10-Q.

On  August  6,  1998,   Berg  &  Berg   Developers  and  Microsoft   Corporation
("Microsoft")  announced  that  Microsoft  had signed a lease with respect to an
approximate  515,000  square foot R&D Property to be constructed by Microsoft on
the site at L'Avenida in Mountain View, California,  which is one of the Pending
Development Projects described in the S-4 Registration Statement.  Microsoft has
announced its intention to use this facility as its Silicon Valley campus.

Under  the  Pending  Projects  Acquisition   Agreement,   which  is  subject  to
shareholder  approval at the Special Meeting  described in the S-4  Registration
Statement,  the Company would have the right to acquire this Pending Development
Project through the Operating  Partnerships  (described in the S-4  Registration
Statement) when the building  proposed by Microsoft has been completed and fully
leased. The terms of the lease signed on August 6, 1998 provide for a triple net
monthly  rental rate of  approximately  $2.95 per square foot, and include other
material  terms and  conditions.  Microsoft  controls the  construction  of this
facility  which is scheduled to be  completed  in phases  between  March and May
1999, and subject to certain  conditions,  the lease requires rental payments to
commence  in  phases  in March and May  1999.  There  can be no  assurance  that
Microsoft will complete this  facility,  no assurance that the Company will hold
the Special Meeting,  and no assurance that the shareholders of the Company will
approve the Pending Projects Acquisition Agreement.  Unless all of the foregoing
events occur,  the Company will have no right to acquire the  L'Avenida  Pending
Development Project, or any interest therein.

ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K

      a.   EXHIBITS

           Exhibit 27    Article 5 Financial Data Schedule for 2nd Quarter.

      b.   REPORTS ON FORM 8-K

           During the quarter ended June 30, 1998,  the Company filed no reports
           on Form 8-K.

                                     - 9 -
<PAGE>
================================================================================
Signatures

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


                               MISSION WEST PROPERTIES
                                  (Registrant)


Date: August 14, 1998           By: /s/ Marianne K. Aguiar
                                    ----------------------------------------
                                    Marianne K. Aguiar
                                    Vice President of Finance and Controller
                                    (Principal Accounting Officer)

                                     - 10 -