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

                                    Form 10-Q


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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                          COMMISSION FILE NUMBER 1-8383


                          Mission West Properties, Inc.
             (Exact name of registrant as specified in its charter)

                 Maryland                              95-2635431
    (State or other jurisdiction of      (I.R.S. Employer Identification Number)
     incorporation or organization)

                               10050 Bandley Drive
                        Cupertino, California 95014-2188
                    (Address of principal executive offices)

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


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


                      APPLICABLE ONLY TO CORPORATE ISSUERS

  Indicate the number of shares outstanding of each of the issuer's classes of
                 Common stock as of the latest practicable date:

               16,935,732 shares outstanding as of August 3, 1999

                                     - 1 -
<PAGE>



                          Mission West Properties, Inc.

                                    FORM 10-Q
                       FOR THE QUARTER ENDED June 30, 1999



                                      INDEX
<TABLE>
<CAPTION>

                                                                            Page
PART 1        FINANCIAL INFORMATION                                         ----
<S>          <C>                                                            <C>

   ITEM 1     Financial Statements:

              Consolidated Balance Sheets as of June 30, 1999
              and December 31, 1998..........................................3

              Consolidated Statements of Operations for the three
              and six months ended June 30, 1999 and 1998....................4

              Consolidated Statements of Cash Flows for the
              six months ended June 30, 1999 and 1998........................5

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

   ITEM 2     Management's Discussion and Analysis of Financial
              Condition and Results of Operations............................10

   ITEM 3     Quanitative and Qualitative Disclosures About Market Risk......18


PART II       OTHER INFORMATION

   ITEM 5     Other Information..............................................19

   ITEM 6     Exhibits and Reports on Form 8-K...............................19


Signatures...................................................................20
</TABLE>

                                     - 2 -
<PAGE>


Part I - Financial Information
ITEM 1   CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                          MISSION WEST PROPERTIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except share amounts)
                                      -----
                                                                         June 30, 1999        December 31, 1998
                                                                      --------------------  -----------------------
                                                                          (Unaudited)
                                     ASSETS
<S>                                                                  <C>                   <C>

Real estate assets, at cost
   Land                                                                         $140,328             $90,929
   Buildings and improvements                                                    546,017             430,510
                                                                      --------------------  -----------------------
                                                                                 686,345             521,439
   Less accumulated depreciation                                                 (11,512)             (5,410)
                                                                      --------------------  -----------------------
     Net real estate assets                                                      674,833             516,029
Cash and cash equivalents                                                          2,886                 246
Deferred rent                                                                      3,279               1,624
Other assets                                                                       1,636               1,967
                                                                      --------------------  -----------------------
   Total assets                                                                 $682,634            $519,866
                                                                      ====================  =======================

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Line of credit                                                                $41,871             $27,201
   Mortgage notes payable                                                        156,114             157,188
   Mortgage notes payable (related parties)                                       20,681              20,752
   Interest payable                                                                  916                 632
   Interest payable (related parties)                                                591                   -
   Security deposits                                                               2,120               2,061
   Prepaid rental income                                                           5,176               3,246
   Dividends/distributions payable                                                11,485                   -
   Due to Microsoft Corporation                                                   32,057                   -
   Accounts payable and accrued expenses                                           1,449               2,154
                                                                      --------------------  -----------------------
     Total liabilities                                                           272,460             213,234

Commitments and contingencies (Note 7)

Minority interest                                                                376,055             273,379

Stockholders' equity:
   Preferred stock, $.001 par value, 20,000,000 shares
      authorized, none issued and outstanding                                          -                   -
   Common stock, $.001 par value, 200,000,000 shares
      authorized, 8,255,732 and 8,218,594 shares issued and
      outstanding at June 30, 1999 and December 31, 1998, respectively                 8                   8
   Paid-in-capital                                                                55,691              55,528
   Less, amounts receivable on private placement                                       -                (900)
   Accumulated (deficit) in excess of dividends paid                             (21,580)            (21,383)
                                                                      --------------------  -----------------------
     Total stockholders' equity                                                   34,119              33,253
                                                                      --------------------  -----------------------
     Total liabilities and stockholders' equity                                 $682,634            $519,866
                                                                      ====================  =======================
</TABLE>

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

                                     - 3 -
<PAGE>
<TABLE>
<CAPTION>


                          MISSION WEST PROPERTIES, INC
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
                                   (unaudited)
                                    ---------

                                                  Three months ended June 30,               Six months ended June 30,
                                            ---------------------------------------- ----------------------------------------
                                                   1999                1998                 1999                 1998
                                           ------------------- -------------------- -------------------- --------------------
<S>                                        <C>                 <C>                  <C>                  <C>

Revenues:
   Rental revenues from real estate                 $18,376                                   $32,403
   Tenant reimbursements                              2,159                                     4,395
   Other income, including interest                     293              $    64                  442            $   141
                                            ------------------- -------------------- -------------------- -------------------
                                                     20,828                   64               37,240                141
                                            ------------------- -------------------- -------------------- -------------------

Expenses:
   Operating expenses                                   937                    -                1,719                  -
   Real estate taxes                                  1,300                    -                2,829                  -
   Depreciation of real estate                        3,399                    -                6,102                  -
   General and administrative                           346                  337                  752                567
   Interest                                           3,721                    -                6,692                  -
   Interest (related parties)                           573                    -                  989                  -
                                            ------------------- -------------------- -------------------- -------------------
     Total expenses                                  10,276                  337               19,083                567
                                            ------------------- -------------------- -------------------- -------------------

Income (loss) before minority interest               10,552                 (273)              18,157               (426)
Minority interest                                     9,487                    -               16,211                  -
                                            ------------------- -------------------- -------------------- -------------------
   Net income (loss)                                $ 1,065              $  (273)             $ 1,946            $  (426)
                                            =================== ==================== ==================== ===================
Basic net income (loss) per share                   $  0.13              $ (0.16)             $  0.24            $ (0.27)
                                            =================== ==================== ==================== ===================
Diluted net income (loss) per share                 $  0.13              $ (0.16)             $  0.23            $ (0.27)
                                            =================== ==================== ==================== ===================
Weighted average number of
  common shares outstanding (basic)               8,166,977            1,698,536            8,196,952          1,601,770
                                            =================== ==================== ==================== ===================
Weighted average number of
  common shares outstanding (diluted)             8,305,603            1,698,536            8,314,757          1,601,770
                                            =================== ==================== ==================== ===================
</TABLE>











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

                                     - 4 -
<PAGE>
<TABLE>
<CAPTION>


                          MISSION WEST PROPERTIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                (Dollars in thousands, except per share amounts)
                                   (unaudited)
                                                                                         Six months ended June 30,
                                                                                      ---------------------------------
                                                                                           1999             1998
                                                                                      --------------- -----------------
<S>                                                                                  <C>             <C>

Cash flows from operating activities:
   Net income (loss)                                                                    $   1,946        $    (426)
   Adjustments to reconcile net income (loss)  to net cash provided by (used in)
   operating activities:
       Minority interest                                                                   16,211                -
       Depreciation                                                                         6,102                -
     Changes in assets and liabilities:
       Deferred rent                                                                       (1,656)               -
       Other assets                                                                           331             (874)
       Interest payable                                                                       284                -
       Interest payable (related parties)                                                     591                -
       Security deposits                                                                      (29)               -
       Prepaid rental income                                                                1,930                -
       Accounts payable and accrued expenses                                                 (704)            (327)
                                                                                      --------------- -----------------
     Net cash provided by (used in) operating activities                                   25,006           (1,627)
                                                                                      --------------- -----------------

Cash flows from investing activities:
   Improvements to real estate assets                                                        (241)               -
                                                                                      --------------- -----------------
     Net cash (used in) investing activities                                                 (241)               -
                                                                                      --------------- -----------------

Cash flows from financing activities:
   Net proceeds on line of credit                                                          14,670
   Principal payments on mortgage notes payable                                            (1,074)               -
   Principal payments on mortgage notes payable (related parties)                         (35,455)               -
   Payments on receivable from private placements                                             372              293
   Proceeds from stock options exercised                                                      699                -
   Repurchase of common stock                                                                  (8)             (11)
   Minority interest distributions                                                           (341)
   Dividends paid                                                                            (988)               -
                                                                                      --------------- -----------------
     Net cash (used in) provided by financing activities                                  (22,125)             282
                                                                                      --------------- -----------------

     Net increase (decrease) in cash and cash equivalents                                   2,640           (1,345)
Cash and cash equivalents, beginning                                                          246            5,569
                                                                                      --------------- -----------------
Cash and cash equivalents, ending                                                       $   2,886        $   4,224
                                                                                      =============== =================

Supplemental information:
   Cash paid for interest                                                               $   6,806                -
                                                                                      =============== =================
   Cash paid for income taxes                                                                   -        $     115
                                                                                      =============== =================
Supplemental schedule of non-cash investing and financing activities:
  Note receivable in connection with issuance of common stock                                   -        $     900
                                                                                      =============== =================
  Cancellation of note receivable in connection with repurchase of common stock         $     528                -
                                                                                      =============== =================
  Conversion of distributions payable to mortgage notes payable (related parties)       $   6,859                -
                                                                                      =============== =================
  Assumption of debt in connection with property acquisitions                           $  28,525                -
                                                                                      =============== =================
  Assumption of other liabilities in connection with property acquisitions              $  32,145                -
                                                                                      =============== =================
  Issuance of limited partnership units in connection with property acquisitions        $ 103,995                -
                                                                                      =============== =================
</TABLE>

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

                                     - 5 -
<PAGE>


                          MISSION WEST PROPERTIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (Amounts in thousands, except share, square footage and limited
                           partnership unit amounts)
                                   (unaudited)
                                      -----


1.       PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

         The accompanying consolidated financial statements include the accounts
         of the Company and its controlled subsidiaries, including the operating
         partnerships.   All   significant   intercompany   balances  have  been
         eliminated in consolidation.

         Minority  interest  represents  the separate  private  ownership of the
         operating  partnerships by the Berg Group (defined as Carl E. Berg, his
         brother Clyde J. Berg, members of their respective  immediate families,
         and certain entities they control) and other  non-affiliate  interests.
         In total,  these interests  account for 89.97%,  on a weighted  average
         basis, of the ownership  interests in the real estate operations of the
         Company as of June 30,  1999.  Minority  interest in earnings  has been
         calculated by taking the net income of the operating partnerships (on a
         stand-alone  basis)  multiplied  by the  respective  minority  interest
         ownership percentage.

         The  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. The results of operations for the three and six months
         ended June 30, 1999 are not necessarily indicative of the results to be
         expected for the entire year.

         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, 1999. Accordingly,
         no  provision  has been  made for  income  taxes  for the three and six
         months ended June 30, 1999.


2.       REAL ESTATE

         PENDING PROJECTS ACQUISITION AGREEMENT
         The Company has entered into a Pending Projects  Acquisition  Agreement
         under which the Company will acquire through the operating partnerships
         approximately  one million  rentable square feet of R&D properties upon
         the completion and leasing of a number of pending development  projects
         owned by  certain  members  of the Berg  Group and other  sellers.  The
         agreement  fixes the  acquisition  value to be  received by the sellers
         based upon the  capitalized  rental  value of the  property  when fully
         leased.  During the first six months of 1999, the Company completed two
         additional   acquisitions   under  the  Pending  Projects   Acquisition
         Agreement  representing  570,696  rentable  square  feet (see  Property
         Acquisitions  below). In July 1999, the Company acquired two additional
         properties  consisting of approximately 139,423 rentable square feet. -
         See Note 6  Subsequent  Events.  At June 30,  1999,  excluding  the two
         acquisitions  completed in July,  there were three  remaining  projects
         comprising approximately 255,724 rentable square feet which the Company
         expects to acquire under the Pending Projects Acquisition Agreement.

                                     - 6 -
<PAGE>



         The sellers of the pending  development  projects  may elect to receive
         cash or limited  partnership  units ("O.P.  Units") at a value of $4.50
         per unit,  which was set in May 1998 based on the $4.50 per share price
         of the Company's common stock paid in private placement transactions at
         that time. As the current market value price of a share of common stock
         exceeds  the $4.50  price,  this  valuation  represents  a  substantial
         discount from the current  market value of the common stock that may be
         issued in  exchange  for these O.P.  Units.  Under  generally  accepted
         accounting principles ("GAAP") the acquisition cost in the form of O.P.
         Units issued will be valued based upon the current  market value of the
         Company's   common   stock  on  the  date   the   acquisition   closes.
         Consequently,  the Company's  actual cost of these future  acquisitions
         will depend in large part on the  percentage  of the fixed  acquisition
         value  paid for by the  issuance  of O.P.  Units  and the  price of the
         Company's common stock on the closing of the acquisition.

         BERG LAND HOLDINGS OPTION AGREEMENT
         Through the operating partnerships,  the Company also has the option to
         acquire any future R&D property developments on approximately 145 acres
         of Silicon Valley Land owned by certain members of the Berg Group under
         the terms of the Berg Land Holdings Option Agreement. The owners of the
         future R&D property  developments  may obtain cash or, at their option,
         O.P.  Units  valued at the  average  closing  price of shares of common
         stock over the 30-trading-day period preceding the acquisition date. As
         of June 30, 1999, the Company had completed one  acquisition  under the
         Berg Land Holdings Option Agreement representing  approximately 110,000
         rentable  square  feet.  Upon the  Company's  exercise  of an option to
         purchase any of the future R&D property  developments,  the acquisition
         price  will  equal  the sum of (a) the  full  construction  cost of the
         building;  (b) 10% of the full construction  cost of the building;  (c)
         the  acquisition  value of the parcel as defined in the agreement  upon
         which the  improvements  are constructed  (ranging from $8.50 to $20.00
         per square  foot);  (d) 10% per annum of the  acquisition  value of the
         parcel for the period from January 1, 1998 to the close of escrow;  and
         e) interest at LIBOR (London Interbank Offer Rate) plus 1.65% per annum
         on the full construction  costs of the building for the period from the
         date funds were  distributed  by the  developer to the close of escrow;
         less (f) any debt encumbering the property.

         No  estimate  can be given  at this  time as to the  total  cost to the
         Company to acquire projects under the Berg Land Holdings Agreement, nor
         the timing as to when the Company will acquire such projects.  However,
         the Berg Group is currently constructing two properties with a total of
         388,000  rentable square feet that the Company has the right to acquire
         under this  agreement.  As of June 30, 1999, the estimated  acquisition
         value to the operating  partnerships for these two projects is $32,226.
         The  final  acquisition  price of these  two  properties  could  differ
         significantly from this estimate.

         PROPERTY ACQUISITIONS
         Effective March 1, 1999, the Company  acquired a newly  constructed R&D
         property  located on Santa  Teresa  Boulevard  in San Jose,  California
         ("Santa Teresa").  This acquisition added  approximately  54,996 square
         feet of rentable  space and was acquired  from the Berg Group under the
         Pending Projects Acquisition Agreement. The total acquisition price for
         this property was $8,558.  In  connection  with this  acquisition,  the
         Company  assumed $3,525 of debt due Berg & Berg  Enterprises,  Inc., an
         affiliate  of Carl  E.  Berg  and  Clyde  J.  Berg,  as  well as  other
         liabilities of $88, and issued 694,030 O.P. Units to various members of
         the Berg Group.

         Effective April 1, 1999, the Company acquired an approximately  515,700
         square foot  five-building  R&D complex located on L'Avenida  Avenue in
         Mountain  View,  California  (the "Microsoft project"),  which has been
         fully leased to Microsoft Corporation under the terms of the  Company's
         Pending Projects Acquisition  Agreement with the Berg Group members and
         other  owners  of  projects   subject  to  the  agreement.   The  total
         acquisition  price for this property was $156,107,  which was funded by
         a)  assumption  by the Company of $25,000 of  mortgage  debt due Berg &
         Berg,  Enterprises,  Inc.; b) assumption of the sellers'  obligation to
         reimburse  Microsoft for shell and tenant  improvements of $32,057 and;
         c)  the issuance of  13,206,629  O.P. Units,  including 12,467,058 O.P.
         Units issued to various members of the Berg Group.

         In accordance with the terms of the lease, on April 1, 1999,  Microsoft
         began paying  monthly base rent of  approximately  $1,226 for the first
         four buildings,  which consist of approximately 415,700 rentable square
         feet.   In  June   1999,   Microsoft  began  paying   monthly  rent  of
         approximately   $295  for  the  fifth   building,   which  consists  of
         approximately  100,000  rentable  square feet.  Microsoft  controls the
         construction  of this  facility,  which is  currently  scheduled  to be
         completed  and ready for  occupancy  during  the  second  half of 1999.
         Microsoft  has  signed a  seven-year  lease that  provides  for a first
         year's  rent of $2.95 per square foot per month with  approximately  4%
         annual rent increases.

                                     - 7 -
<PAGE>
3.       STOCK TRANSACTIONS

         Michael  Anderson,  Chief  Operating  Officer  and a  director  of  the
         Company,  resigned  from the  Company  effective  April 30,  1999.  The
         Company had previously issued 200,000 shares of its common stock to Mr.
         Anderson in exchange for a note  receivable  payable to the Company for
         $900. Upon Mr. Anderson's resignation,  the Company, in accordance with
         the  terms  of  its  agreements  with  Mr.  Anderson,  repurchased  and
         subsequently  cancelled  117,361 of the 200,000 shares of common stock,
         representing  $528 of the original $900 note receivable.  The remaining
         portion of the note receivable in the amount of $372 was paid in full.

         In June 1999,  Mr.  Anderson  purchased  140,278 shares  pursuant to an
         option at $4.50 per share. Total proceeds to the Company were $631.

         In  February  1999,  a former officer  of the  Company purchased 15,000
         shares pursuant to an option at $4.50 per share.  Total proceeds to the
         Company were $68.


4.       NET INCOME PER SHARE

         Basic net income per share is computed  by  dividing  net income by the
         weighted-average  number of common shares  outstanding  for the period.
         Diluted net income per share is computed by dividing  net income by the
         sum of  weighted-average  number of common shares  outstanding  for the
         period plus the assumed exercise of all dilutive securities.

         The computation for weighted average shares is detailed below:
<TABLE>
<CAPTION>


                                                             Three Months Ended June 30,           Six Months Ended June 30,
                                                           --------------------------------    --------------------------------
                                                                1999              1998              1999              1998
                                                           --------------    --------------    --------------    --------------
<S>                                                       <C>               <C>               <C>               <C>

         Weighted average shares outstanding (basic)          8,166,977         1,698,536        8,196,952         1,601,770
         Incremental shares from assumed option exercise        138,626                -           117,805                -
                                                           --------------    --------------    --------------    --------------
         Weighted average shares outstanding (diluted)        8,305,603         1,698,536        8,314,757         1,601,770
                                                           ==============    ==============    ==============    ==============
</TABLE>

         The  outstanding  O.P.  Units, which  become  exchangeable  at the unit
         holder's  option  for shares of common  stock  on a  one-for-one  basis
         beginning on December 29, 1999, have been excluded from the diluted net
         income  per  share  calculation,  as there  would be no  effect  on the
         amounts because the minority  interests'  share of income would also be
         added back to net income.  O.P. Units outstanding at June 30, 1999 were
         74,052,356.


5.       RELATED PARTY TRANSACTIONS

         As of June 30, 1999, the Berg Group owned 69,625,711 O.P. Units, of the
         total  74,052,356  O.P.  Units issued and  outstanding.  Along with the
         Company's  common  shares  owned by the Berg  Group,  the Berg  Group's
         ownership as of June 30, 1999, represented  approximately  84.6% of the
         equity interests of the Company,  assuming conversion of the 74,052,356
         O.P. Units into the common stock of the Company.

         As of June 30, 1999,  debt in the amount of $20,681 was due Berg & Berg
         Enterprises,  Inc.  During  the first six months of 1999,  the  Company
         assumed $28,525 of debt due Berg & Berg Enterprises, Inc. in connection
         with the  acquisition  of the Santa  Teresa and the  Microsoft  project
         properties.  In addition, a distribution payable to members of the Berg
         Group of $6,859  relating to the first quarter of 1999 was converted to
         related  party debt on April 30,  1999.  Interest  expense  incurred in
         connection  with debt due Berg & Berg  Enterprises,  Inc.  was $573 and
         $989 for the three and six months ended June 30, 1999, respectively.

         Carl E. Berg has a substantial financial interest in two companies that
         lease space from the operating partnerships. These companies occupy, in
         the  aggregate,  35,862  square feet at a weighted  average of $.63 per
         square  foot  per  month.  These  leases  were in  effect  prior to the
         Company's  acquisition  of its general  partnership  interests  in July
         1998.  The leases  expire in 2001 (5,862  square feet) and 2002 (30,000
         square feet).

                                     - 8 -
<PAGE>

         The Company  currently  leases space owned by Berg & Berg  Enterprises,
         Inc.  Rental  amounts and overhead  reimbursements  paid to Berg & Berg
         Enterprises,  Inc.  were $20 and $40 for the three and six months ended
         June 30, 1999, respectively.


6.       SUBSEQUENT EVENTS

         In July 1999,  the  Company  completed a public  offering of  8,680,000
         shares of its common  stock at $8.25 per  share.  The net  proceeds  of
         approximately $67,000 after deducting  underwriting discounts and other
         offering  costs,  were used to reduce  the  outstanding  balance on the
         Wells Fargo  line of credit  by approximately $41,000, and to reimburse
         Microsoft  approximately  $25,000 for shell and tenant  improvements on
         the Microsoft project. The  remaining  net  proceeds  of  approximately
         $1,000  are intended for general corporate purposes.

         Also in July 1999,  the  Company  acquired  two newly  constructed  R&D
         properties  located in San Jose,  California.  The  acquisitions  added
         139,423  square feet of  rentable  space  acquired  from the Berg Group
         under the Pending Projects Acquisition Agreement. The total acquisition
         price for these two properties was $21,719.  The acquisition  price was
         funded by the assumption of $4,558 of debt due Berg & Berg Enterprises,
         Inc. and the issuance of 2,004,215 O.P. Units to various members of the
         Berg Group.

         On June 14, 1999,  the Company  declared a $0.14 per share  dividend on
         its common  stock.  The dividend was paid on July 2, 1999 to all common
         stockholders  of  record as of June 21,  1999.  At the same  time,  the
         operating  partnerships  paid a distribution  of $0.14 per O.P. Unit on
         July 2,  1999,  as well.  The  amount of this  distribution  payable to
         members  of the Berg  Group,  $9,784,  was  retained  by the  operating
         partnerships and converted to related party debt as of July 2, 1999.


7.       COMMITMENTS AND CONTINGENCIES

         The  Company and the  operating  partnerships,  from time to time,  are
         parties to  litigation  arising out of the normal  course of  business.
         Management  does not  expect  that such  matters  would have a material
         adverse  effect on the  consolidated  financial  position or results of
         operations of the Company.

         Insurance  policies  currently  maintained  by the Company do not cover
         seismic  activity,  although  they do cover  losses from fires after an
         earthquake.

                                     - 9 -
<PAGE>



               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  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, 1998.  The
results  for the three and six months  ended June 30,  1999 are not  necessarily
indicative  of the  results to be  expected  for the entire  fiscal  year ending
December 31, 1999. The following discussion includes forward-looking statements,
including  but not limited to statements  with respect to the  Company's  future
financial performance,  operating results, plans and objectives.  Actual results
may differ materially from those currently  anticipated depending upon a variety
of  factors,   including   those   described   below   under  the   sub-heading,
"Forward-Looking Information."

OVERVIEW

In May 1998, Mission West Properties,  Inc. (the "Company"),  the members of the
Berg  Group,  John  Kontrabecki  and  certain  other  persons  entered  into  an
acquisition   agreement  providing,   among  other  things,  for  the  Company's
acquisition  of  interests  as  the  sole  general   partner  of  four  separate
partnerships  (the  "operating  partnerships").   At  the  time,  the  operating
partnerships held approximately 4.3 million rentable square feet of R&D property
located in the Silicon  Valley.  The agreement  also provided for the parties to
enter into the pending projects acquisition agreement and the Berg land holdings
option  agreement with the Berg Group and the exchange rights agreement with all
limited partners in the operating partnerships,  following stockholder approval.
Effective July 1, 1998, the Company  consummated  its acquisition of the general
partnership  interests in the operating  partnerships.  The Company effected its
purchase  of the  general  partnership  interests  by  issuing  to  each  of the
operating  partnerships  a demand  note  bearing  interest  at 7.25% per  annum,
aggregating  approximately $35.2 million of principal payable no later than July
1, 2000.  Effective  July 1, 1998,  all  limited  partnership  interests  in the
operating  partnerships were converted into 59,479,633 O.P. Units,  representing
ownership  of  approximately   87.89%  of  the  operating   partnerships,   upon
consummation  of  the  acquisition.  Under  the  terms  of the  exchange  rights
agreement, each O.P. Unit may be exchanged  for one share of common stock.  Each
O.P.  Unit is treated as a share of common  stock on a fully  diluted  basis and
also represents the minority ownership interests.  At June 30, 1999, the Company
owned a 10% general  partnership interest in the operating  partnerships,  taken
as a whole,  on a weighted  average basis. As a result of the public offering of
8,680,000  shares  of the  Company's  common  stock in July  1999,  the  Company
currently  owns  an  18.2%  general   partnership   interest  in  the  operating
partnerships, taken as a whole, on a weighted average basis.

On December 29, 1998,  the Company  sold  6,495,058  shares of common stock at a
price of $4.50 per share to a number of accredited investors to complete its May
1998 private placements. The aggregate proceeds, net of fees and offering costs,
of approximately  $27.8 million were used to pay down amounts  outstanding under
the demand notes due to the  operating  partnerships.  Also,  as of December 29,
1998, the Company and the limited partners in the operating partnerships entered
into the exchange  rights  agreement,  and the Company  entered into the pending
projects acquisition  agreement and the Berg land holdings option agreement with
the Berg Group and other sellers.

At June 30,  1999,  the  outstanding  balance  under the  demand  notes that the
Company owes to the operating  partnerships was approximately $1.1 million.  The
principal  of the  demand  notes,  along  with the  interest  expense,  which is
interest income to the operating  partnerships,  is eliminated in  consolidation
and is not  included  in the  corresponding  line items  within the consolidated
financial  statements.  However,  the interest income earned on this debt by the
operating partnerships, which is interest expense to the Company, is included in
the calculation of minority interest as reported on the consolidated  statements
of operations,  thereby reducing our net income by this same amount. At present,
the  Company's  only means for  repayment  of this  debt,  be it in this form or
refinanced  with another  lender,  is through  distributions  received  from the
operating  partnerships  in excess of the amount of  dividends to be paid to the
Company's stockholders.

In April  1999,  the  Company  acquired  an  approximately  515,700  square foot
five-building  R&D  complex  located  on  L'Avenida  Avenue  in  Mountain  View,
California  (the  "Microsoft  project") by  purchasing  all of the  interests of
Baccarat  Shoreline  LLC,  which the Company has renamed  Mission West Shoreline
LLC, a wholly owned limited liability company.  In the transaction,  the Company
assumed debt totaling  approximately  $57.1 million on a consolidated basis, and
the former members of Baccarat Shoreline LLC received  13,206,629 O.P. Units, of
which various members of the Berg Group received 12,467,058 O.P. Units.

The Company  intends to elect and qualify to be taxed as a REIT  commencing with
the taxable year ending December 31, 1999.

                                     - 10 -
<PAGE>

As of June 30, 1999, the Company  managed 77 properties  totaling  approximately
5.1 million  square feet  through its  controlling  interests  in the  operating
partnerships.

RESULTS OF OPERATIONS

Comparison  of the three and six months ended June 30, 1999 to the three and six
months ended June 30, 1998.

The Company's  acquisition of the general partnership interests in the operating
partnerships  during  the  third  quarter  of  1998  substantially  altered  the
Company's operations. As a consequence,  operating results for the three and six
months ended June 30, 1999 are not meaningfully  comparable to operating results
for the same periods of 1998.

For the three months ended June 30, 1999,  rental revenues from real estate were
$18.4 million which  included an increase of  approximately  $903,000 to reflect
rents on a straight-line  basis. Tenant  reimbursements  were $2.2 million,  and
other income,  including  interest,  was $293,000.  Total expenses for the three
months ended June 30, 1999,  were $10.3 million,  of which $9.9 million  related
directly  to  real  estate  operations.   General  and  administrative  expenses
accounted for the remainder of the expenses.

For the six months ended June 30, 1999,  rental  revenues  from real estate were
$32.4  million,  which included an increase of $1.7 million to reflect rent on a
straight-line basis. Tenant  reimbursements were $4.4 million, and other income,
including interest,  was $442,000.  Total expenses for the six months ended June
30, 1999, were $19.1 million,  of which $18.3 million  related  directly to real
estate  operations.  General  and  administrative  expenses  accounted  for  the
remainder of the expenses.

The  minority  interest  portion of income was $9.5  million and $16.2  million,
resulting  in net income of $1.1  million and $1.9 million for the three and six
months ended June 30,  1999,  respectively.  Minority  interest  represents  the
limited partners'  ownership interest of 89.97%, on a weighted average basis (as
of June 30, 1999), in the operating partnerships.

During the three and six months ended June 30, 1998,  the Company's  only assets
were  cash  and  receivables,  and  therefore,  the  Company  had  insignificant
revenue-generating  and  cash-generating  capabilities  and minimal  operations,
aside from interest income and general and administrative expenses.


CHANGES IN FINANCIAL CONDITION

During the first six  months of 1999,  the  Company  acquired  570,696  rentable
square feet of newly  constructed R&D properties  located in the Silicon Valley.
These  acquisitions were acquired from the Berg Group under the pending projects
acquisition agreement.  The aggregate acquisition price for these properties was
$164.7 million.  The Company financed these acquisitions by a) assumption by the
Company  of  $28.5  million  of  debt  due  Berg & Berg  Enterprises,  Inc.;  b)
assumption by the Company of other  liabilities of $32.2 million (which includes
the assumption of the sellers'  obligation to reimburse  Microsoft for shell and
tenant  improvements  of $32.1 million) and; c) the issuance of 13,900,659  O.P.
Units, of which 13,161,088 O.P. Units were issued to various members of the Berg
Group.

Michael  Anderson,  Chief  Operating  Officer  and a  director  of the  Company,
resigned from the Company  effective  April 30, 1999. The Company had previously
issued 200,000 shares of its common stock to Mr. Anderson in exchange for a note
receivable payable to the Company for $900,000. Upon Mr. Anderson's resignation,
the Company,  in accordance with the terms of its agreements with Mr.  Anderson,
repurchased and subsequently  cancelled  117,361 of the 200,000 shares of common
stock, representing approximately $528,000 of the original $900 note receivable.
The  remaining  portion of the note  receivable  in the amount of  approximately
$372,000 was paid in full.

During the six months  ended June 30, 1999,  a total of 155,278  employee  stock
options were exercised at an option price of $4.50 per share, for total proceeds
to the Company of approximately $699,000.

LIQUIDITY AND CAPITAL RESOURCES

The Company  expects its  principal  sources of liquidity for  distributions  to
stockholders,   debt  service,   leasing   commissions  and  recurring   capital
expenditures  to be Funds from  Operations  ("FFO"),  the  borrowings  under its
credit  facility debt with

                                     - 11 -
<PAGE>

Wells Fargo Bank,  N.A., (the "Wells Fargo line") or replacement line of credit.
The Company  expects these sources of liquidity to be adequate to meet projected
distributions  to  stockholders  and  other  presently   anticipated   liquidity
requirements  in 1999,  assuming the renewal or  replacement  of the Wells Fargo
line of credit.  The Company  believes it will be able to renew or replace  this
line of credit on acceptable  terms,  although the Company can give no assurance
that it will succeed doing so.

The  Wells  Fargo  line is  currently  collateralized  by 14  properties  and is
guaranteed by Mr. Berg and certain  other  members of the Berg Group.  The Wells
Fargo Line expires in October 1, 1999 and will need to be replaced.  The Company
is currently evaluating alternative sources of credit. There can be no assurance
that the Company  will be able to obtain a line of credit with terms  similar to
the Wells Fargo line, and its cost of borrowing could increase substantially.

At June 30, 1999, the Company had total indebtedness of $218.7 million including
$153.0  million of fixed rate  mortgage  debt,  $23.8  million of variable  rate
mortgage debt (including $20.7 million of related party debt), and $41.9 million
outstanding under its Wells Fargo line.  Additionally,  as of June 30, 1999, the
Company had  available  borrowing  capacity  under the credit  facility of $58.1
million.

As of June  30,  1999,  Debt to  Total  Market  Capitalization  ratio,  which is
computed as the  Company's  total debt  outstanding  divided by the sum of total
debt outstanding plus the market value of common stock (based upon the $8.25 per
share closing price on June 30, 1999) on a fully  diluted  basis,  including the
conversion of all O.P. Units into common stock,  was  approximately  24.5% based
upon an estimated Total Market Capitalization of approximately $898.0 million.

In July 1999, the Company completed a public offering of 8,680,000 shares of its
common stock at $8.25 per share. The net proceeds of approximately $67.0 million
after  deducting  underwriting  discounts and other  offering costs were used to
reduce  the   outstanding   balance  on  the  Wells  Fargo  line  of  credit  by
approximately $41.0 million, reimburse Microsoft approximately $25.0 million for
shell and  tenant  improvements  on the  Microsoft  Project  property,  with the
remaining amount of approximately  $1.0 million maintained for general corporate
purposes.


                                     - 12 -

<PAGE>
MORTGAGE DEBT

The debt owed to the Berg Group  carries a variable  interest  rate equal to the
rate  applicable to the Wells Fargo line,  which was 6.49%  annually at June 30,
1999 and is payable in full upon demand.

The following table sets forth certain information regarding debt outstanding as
of June 30, 1999:

<TABLE>
<CAPTION>

                                                                                                                Maturity   Interest
    Debt Description                                     Collateral Properties                    Balance         Date       Rate
-----------------------------------------------  ------------------------------------------  ----------------  ---------- ----------
                                                                                             ($ in thousands)
<S>                                             <C>                                            <C>               <C>        <C>

LINE OF CREDIT:
Wells Fargo Bank, N.A.                           1810 McCandless Drive, Milpitas, CA            $ 41,871          10/99      (1)
                                                 1740 McCandless Drive, Milpitas, CA
                                                 1680 McCandless Drive, Milpitas, CA
                                                 1600 McCandless Drive, Milpitas, CA
                                                 1500 McCandless Drive, Milpitas, CA
                                                 1450 McCandless Drive, Milpitas, CA
                                                 1350 McCandless Drive, Milpitas, CA
                                                 1325 McCandless Drive, Milpitas, CA
                                                 1425 McCandless Drive, Milpitas, CA
                                                 1526 McCandless Drive, Milpitas, CA
                                                 1575 McCandless Drive, Milpitas, CA
                                                 1625 McCandless Drive, Milpitas  CA
                                                 1745 McCandless Drive, Milpitas, CA
                                                 1765 McCandless Drive, Milpitas, CA

Mortgage Notes Payable (related parties):
                                                 2033-2043 Samaritan Drive, San Jose, CA          20,681          12/99      (1)
                                                 2133 Samaritan Drive, San Jose, CA
                                                 2233-2243 Samaritan Drive, San Jose, CA
Mortgage Notes Payable:
Great West Life & Annuity Insurance Company      6320 San Ignacio Ave, San Jose, CA                7,660          2/04       7.0%
Great West Life & Annuity Insurance Company      6540 Via del Oro, San Jose, CA                    3,654          5/04       7.0%
                                                 6385 San Ignacio Ave., San Jose, CA
Prudential Capital Group                         20400 Mariani, Cupertino, CA                      1,970          4/09       8.75%
New York Life Insurance Company                  10440 Bubb Road, Cupertino, CA                      418          1/09       9.625%
Home Savings & Loan Association                  10460 Bubb Road, Cupertino, CA                      501          12/06      9.5%
Amdahl Corporation                               3120 Scott, Santa Clara, CA                       6,845          5/14       9.42%
Citicorp U.S.A. Inc.                             2800 Bayview Drive, Fremont, CA                   3,105          4/00       (2)
Mellon Mortgage Company                          3530 Bassett, Santa Clara, CA                     2,908          6/01       8.125%
Prudential Insurance Company of America          10300 Bubb, Cupertino, CA                       129,053          10/08      6.56%
                                                 10500 N. DeAnza, Cupertino, CA
                                                 4050  Starboard, Fremont, CA
                                                 45700 Northpoint Loop, Fremont, CA
                                                 45738 Northpoint Loop, Fremont, CA
                                                 450-460 National, Mountain View, CA
                                                 4949 Hellyer, San Jose, CA
                                                 6311 San Ignacio, San Jose, CA
                                                 6321 San Ignacio, San Jose, CA
                                                 6325 San Ignacio, San Jose, CA
                                                 6331 San Ignacio, San Jose, CA
                                                 6341 San Ignacio, San Jose, CA
                                                 6351 San Ignacio, San Jose, CA
                                                 3236 Scott, Santa Clara, CA
                                                 3560 Bassett, Santa Clara, CA
                                                 3570 Bassett, Santa Clara, CA
                                                 3580 Bassett, Santa Clara, CA
                                                 1135 Kern, Sunnyvale, CA
                                                 1212 Bordeaux, Sunnyvale, CA
                                                 1230 E. Arques, Sunnyvale, CA
                                                 1250 E. Arques, Sunnyvale, CA
                                                 1170 Morse, Sunnyvale, CA
                                                 3540 Bassett, Santa Clara, CA
                                                 3542 Bassett, Santa Clara, CA
                                                 3544 Bassett, Santa Clara, CA
                                                 3550 Bassett, Santa Clara, CA
                                                                                             ---------------
Mortgage Notes Payable Subtotal                                                                  156,114
                                                                                             ===============
                    Total                                                                       $218,666
                                                                                             ===============
</TABLE>


(1)  The lesser of (a) Wells Fargo prime rate in effect on the first day of each
     calendar  month;  (b) LIBOR plus 1.65%;  or (c) the Wells  Fargo  Purchased
     Funds Rate quoted on the first day of each calendar month plus 1.65%.  Rate
     in effect as of June 30, 1999 was 6.49%.
(2)  One month LIBOR plus 1.625%  adjusted  monthly.  Rate in effect at June 30,
     1999 was 6.575%.

                                     - 13 -
<PAGE>



In April 1999, the Company acquired the Microsoft project.  Microsoft has signed
a  seven-year  lease that  provides  for a first year's rent of $2.95 per square
foot per month with  annual rent  increases  of  approximately  4%. The lease is
triple net, and the Company  receives a management fee equal to 1% of the annual
base rent. In accordance  with the lease terms,  in April 1999,  Microsoft began
paying  monthly  base rent of  approximately  $1.2  million  for the first  four
buildings,  consisting of  approximately  415,700  rentable square feet. In June
1999,  Microsoft  began paying  monthly rent of  approximately  $295,000 for the
fifth building, consisting of approximately 100,000 rentable square feet.

Under the terms of the pending projects acquisition  agreement,  the acquisition
price of the Microsoft project was approximately  $116.5 million,  determined as
follows:

     - assumption of $25.0 million of mortgage debt due the Berg Group

     - assumption  of the sellers' obligation to reimburse  Microsoft for  shell
       and tenant improvements of approximately $32.1 million and;

     - issuance of 13,206,629 O.P. Units, at the agreed value of $4.50  per unit
       for a total of $59.4 million.

Under generally accepted accounting principles,  the value of the O.P. Units was
equal to the closing price of the Company's  common stock on April 30, 1999, the
date the  acquisition  closed,  or $7.50  per  share as  reported  on the  AMEX,
resulting  in a recorded  purchase  price of $156.1  million  for the  Microsoft
project.

Additionally  in July 1999,  the  Company  acquired  two newly  constructed  R&D
properties  located in San Jose,  California.  These  acquisitions added 139,423
square feet of rentable  space and were  acquired  from the Berg Group under the
pending projects  acquisition  agreement.  The aggregate  acquisition  price for
these two properties was $21.7 million.  The acquisition price was funded by the
assumption  of $4.6  million of debt due Berg & Berg  Enterprises,  Inc. and the
issuance of 2,004,215 O.P. Units to various members of the Berg Group.

The following table presents certain  information  concerning projects for which
the Company, through its interests in the operating partnerships,  has the right
to acquire  under the pending  projects  acquisition  agreement or the Berg land
holdings  option  agreement.  The table  includes only those  projects for which
construction  has  commenced.   Excluding  the  Fontanosa  and   Branham/Hellyer
projects,  there are still 116 acres of land which is to be developed  under the
Berg Land Holdings Agreement.

<TABLE>
<CAPTION>


                                   Approximate
                                  Rentable Area                                  Total Estimated
Property                          (Square Feet)      Anticipated Acquisition    Acquisition Value
                                                              Date                     (1)
------------------------------ -------------------- -------------------------- ----------------------
                                                                               (dollars in thousands)
<S>                                <C>                   <C>                     <C>
PENDING PROJECTS
Automation (2 buildings)            141,696               4th Quarter 1999             15,789
Automation (1 building)             114,028               2nd Quarter 2000             12,706
                                    -------                                       -----------
               Subtotal             255,724                                         $  28,495

BERG LAND HOLDINGS
Fontanosa                            77,000               4th Quarter 1999          $   7,226
Hellyer/Branham                     311,000               1st Quarter 2000             25,000
                                    -------                                            ------
               Subtotal             388,000                                         $  32,226

TOTAL                               643,724                                         $  60,721
                                    =======                                         =========
</TABLE>

(1)      The  Estimated  Acquisition  Value which  represents  the economics for
         acquiring the pending  projects under the terms of the pending projects
         acquisition agreement,  will differ from the actual acquisition cost as
         determined under GAAP.

                                     - 14 -
<PAGE>
The time required to complete the leasing of developments varies from project to
project. Generally, the Company will not acquire any of the above projects until
they  are  fully  completed  and  leased.  There  can be no  assurance  that the
acquisition  date and final  cost to the  Company  as  indicated  above  will be
realized

Although the Company expects to acquire the new properties available to it under
the  terms of the  pending  projects  acquisition  agreement  and the Berg  land
holdings option  agreement,  there can be no assurance that the Company actually
will  consummate  any of  the  intended  transactions,  including  all of  those
discussed  above.  Furthermore,  the Company has not yet determined the means by
which it would  acquire and pay for any such  properties or the impact of any of
the acquisitions on its business,  results of operations,  financial  condition,
FFO or available cash for distribution.

HISTORICAL CASH FLOWS

Net cash provided by operating activities for the six months ended June 30, 1999
was $25.0  million  compared to net cash used in  operating  activities  of $1.6
million  for the same  period in 1998.  The  change  was a direct  result of the
Company's  acquisition  of the general  partnership  interests in the  operating
partnerships during the third quarter of 1998.

Net cash used in investing  activities was  approximately  $241,000 and zero for
the six  months  ended  June  30,  1999 and  1998,  respectively.  Cash  used in
investing activities during the six months ended June 30, 1999 related solely to
improvements  made  to  existing  real  estate  assets  acquired  as part of the
Company's investment in the operating partnerships.

Net cash used in financing activities was $22.1 million for the six months ended
June 30, 1999 compared to cash provided by financing activities of approximately
$282,000 for the same period in 1998. During the six months ended June 30, 1999,
the Company reduced debt  outstanding and made  distributions  to holders of its
common  stock and the O.P.  Units by utilizing  cash  generated  from  operating
activities.

CAPITAL EXPENDITURES

The  properties  require  periodic  investments  of capital  for  tenant-related
capital expenditures and for general capital  improvements.  For the years ended
December 31, 1994 through  December 31, 1998, the recurring  tenant  improvement
costs and  leasing  commissions  incurred  with  respect to new leases and lease
renewals of the properties previously owned or controlled by members of the Berg
Group  averaged  approximately  $1.5  million  annually.  The Company  will have
approximately 865,000 rentable square feet under expiring leases from January 1,
1999 through December 31, 2000. The Company expects that the average annual cost
of  recurring  tenant  improvements  and  leasing  commissions,  related  to the
properties,  will be  approximately  $1.5 million.  The Company believes that it
will recover  substantially  all of these sums from the tenants under the new or
renewed leases through  increases in rental rates.  The Company  expects to meet
its long-term  liquidity  requirements for the funding of property  development,
property  acquisitions  and other material  non-recurring  capital  improvements
through  long-term  secured  and  unsecured  indebtedness  and the  issuance  of
additional equity securities by the Company.

FUNDS FROM OPERATIONS

As  defined  by the  National  Association  of  Real  Estate  Investment  Trusts
("NAREIT"),  FFO  represents  net income  (loss)  before  minority  interest  of
unit holders (computed in accordance with GAAP), excluding gains(or losses) from
debt restructuring and sales of property,  plus real estate related depreciation
and  amortization  (excluding  amortization  of  deferred  financing  costs  and
depreciation of non-real estate assets) and after adjustments for unconsolidated
partnerships and joint ventures. Management considers FFO an appropriate measure
of performance  of an equity REIT because,  along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an  understanding  of the Company's  ability to incur and service debt, and
make capital  expenditures.  FFO should not be considered as an alternative  for
net  income as a measure of  profitability  nor is it  comparable  to cash flows
provided by operating activities  determined in accordance with GAAP, nor is FFO
necessarily  indicative  of funds  available to meet the  Company's  cash needs,
including its need to make cash distributions to satisfy REIT requirements.

                                     - 15 -
<PAGE>



Furthermore, FFO is not comparable to similarly entitled items reported by other
REITs that do not define them  exactly as the Company  defines  FFO. FFO for the
three and six months ended June 30, 1999 are summarized in the table below:
<TABLE>
<CAPTION>


                                                Three Months Ended          Six Months Ended
                                                  June 30, 1999               June 30, 1999
                                             -----------------------    -----------------------
                                                           (dollars in thousands)
<S>                                         <C>                        <C>

          Net income                                         $1,065                    $ 1,946
          Add:
              Minority interest                               9,487                     16,211
              Depreciation                                    3,399                      6,102
                                             -----------------------    -----------------------
          FFO                                               $13,951                    $24,259
                                             =======================    =======================
</TABLE>


The Company intends to pay distributions to stockholders  based upon total Funds
Available   for   Distribution   ("FAD"),   which  is  calculated  as  FFO  less
straight-lined  rents,  leasing  commissions paid and capital  expenditures made
during the  respective  period.  The  calculations  of FAD for the three and six
months ended June 30, 1999 are as follows:
<TABLE>
<CAPTION>

                                               Three Months Ended           Six Months Ended
                                                  June 30, 1999               June 30, 1999
                                             -----------------------    -----------------------
                                                            (dollars in thousands)
<S>                                         <C>                        <C>

          FFO                                               $13,951                    $24,259
          Less:
              Straight-line rents                               903                      1,656
              Leasing commissions                                 -                         78
              Capital expenditures                              133                        241
                                             =======================    =======================
          FAD                                               $12,915                    $22,284
                                             =======================    =======================
</TABLE>



The Company intends to make regular quarterly distributions to holders of common
stock based on its FAD. The Company's ability to make such distributions will be
affected  by  numerous  factors,  including,  most  importantly,  the receipt of
distributions from the operating partnerships.

FAD does not represent cash  generated  from operating  activities in accordance
with generally accepted accounting principles and is not necessarily  indicative
of cash  available to fund cash needs.  The actual  return that the Company will
realize and the amount available for  distributions to its stockholders  will be
affected  by a number of  factors,  including  the  revenues  received  from its
properties,  its operating expenses, the interest expense incurred on borrowings
and planned and unanticipated capital expenditures.

The  Company  anticipates  that cash  available  for  distribution  will  exceed
earnings and profits for federal  income tax  purposes,  as the latter figure is
reduced by non-cash  expenses,  such as depreciation and amortization,  that the
Company will incur. Distributions, other than capital gain distributions, by the
Company to the extent of its current and  accumulated  earnings  and profits for
federal income tax purposes most likely will be taxable to U.S.  stockholders as
ordinary   dividend  income  unless  a  stockholder  is  a  tax-exempt   entity.
Distributions  in excess of earnings and profits  generally will be treated as a
non-taxable reduction of the U.S. stockholder's basis in the common stock to the
extent of such basis,  and  thereafter as a taxable gain. The percentage of such
distributions in excess of earnings and profits, if any, may vary from period to
period.   The  Company   anticipates  that  a  substantial   percentage  of  the
distributions  to  stockholders  for the year  ending  December  31,  1999  will
constitute taxable income.

Distributions  will be determined  by the Company's  board of directors and will
depend on actual FAD, the Company's financial condition,  capital  requirements,
the annual  distribution  requirements under the REIT provisions of the Code and
such other factors as the board of directors deems relevant. The Company expects
to pay aggregate  distributions totaling $0.55 per share of common stock for the
fiscal year 1999.

                                     - 16 -
<PAGE>

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The  Company  does  not  believe  recently  issued  accounting   standards  will
materially impact the Company's financial statements.


YEAR 2000

Forward  Looking  Information.  The statements in the following  section include
Year 2000 readiness  disclosure  within the meaning of the Year 2000 Information
and Readiness  Disclosure Act. The Company intends such statements to be covered
by the safe harbor provisions for  forward-looking  statements  contained in the
Private  Securities  Reform Act of 1995,  and is including  this  statement  for
purposes of complying with these safe harbor  provisions.  See "Forward  Looking
Information".

  INTRODUCTION

The term "Year 2000 issue" is a general term used to describe  various  problems
that may result from the improper  processing by computer systems of dates after
1999. These problems could result in a system failure or miscalculations causing
disruptions of operations.

  The Company's efforts to address its Year 2000 issues consist of reviewing the
  Company's computer information systems, evaluating other computer systems that
  do not relate to the  Company's  internal  information  systems,  but  include
  embedded technology at its properties, such as security, heating,  ventilation
  and air  conditioning,  elevator,  fire and safety systems,  and communicating
  with certain  significant  third-party  service providers to determine whether
  there will be any interruption in their systems that could affect the Company.

  THE COMPANY'S STATE OF READINESS

INFORMATION TECHNOLOGY SYSTEMS.  The  Company  has  reviewed  its  information
technology  systems and has contacted  vendors to determine whether such systems
are Year 2000  compliant.  Based upon the Company's  inquiries,  the Company has
determined that its primary network operating system, Windows NT Server 4.0, and
all of its desktop  personal  computers are Year 2000 compliant.  The vendor for
the  Company's  property  management  and  accounting  software  has advised the
Company  that it will  provide a Year 2000  compliant  software  upgrade  to the
Company during third quarter 1999.

EMBEDDED SYSTEMS.  The Company believes that in most cases under the lease terms
it is the tenants sole responsibility to ensure that the embedded systems (e.g.,
security, heating, ventilation and air conditioning,  fire and elevator systems)
are Year 2000  compliant.  The Company  has made  limited  inquiries  to various
vendors concerning  embedded systems used on some of its properties.  Based upon
responses to its inquiries, the Company is not aware of any systems that are not
Year 2000 compliant.

THIRD PARTY RELATIONSHIPS.  The Company  plans to contact third  parties,  like
utility  companies,  financial  institutions and its transfer agent that provide
important services to the Company and will ascertain whether those third parties
are  aware of Year  2000  issues  that  would  adversely  impact  the  Company's
operations.  At this time,  the  Company  does not intend to contact  all of its
third party service providers, however.

  COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES

The Company has not budgeted any amount to address Year 2000 issues. Because the
Company's Year 2000  assessment is ongoing and additional  funds may be required
as a result of future findings, the Company may need to add accrual amounts as a
result of  unanticipated  delays or  preparedness  issues.  While the  Company's
efforts to  address  its Year 2000  issues may  involve  additional  costs,  the
Company believes, based on available information, that these costs will not have
a material  adverse  effect on its business,  financial  condition or results of
operations.

Although the Company has concluded that many of its tenants are  responsible for
certain Year 2000 compliance costs,  there is a possibility that certain tenants
will not agree with such conclusions.

                                     - 17 -
<PAGE>

  RISKS PRESENTED BY YEAR 2000 ISSUES AND THE COMPANY'S CONTINGENCY PLAN

At this time,  the Company has not identified  any specific  business  functions
that are likely to suffer material  disruption as a result of Year  2000-related
events. Due to the unique and pervasive nature of the Year 2000 issue, it is not
possible  to  anticipate   each  of  the  wide  variety  of  Year  2000  events,
particularly  outside of the Company,  that might arise in a worst case scenario
which might have a material adverse impact on the Company's business,  financial
condition and results of operations.

A  reasonably  likely  worst  case  scenario  might be the  failure of an energy
management  system in a  building.  Such a failure  could  adversely  affect the
environmental  conditions of the occupied  space,  thus creating  discomfort and
inconvenience  to the tenants until the condition  could be manually  corrected.
Persistence  of this  problem  for a long  period  of time  could  result  in an
increase in operating costs for the building until the energy  management system
is restored to proper operations.

The Company  utilizes  computer  software for its  corporate  and real  property
accounting records and to prepare its financial  statements.  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.

Although  the  Company  believes  that  the   expectations   reflected  in  such
forward-looking  statements are based on reasonable  assumptions,  the Company's
actual  cost,  progress and  expenses,  with respect to its plan to address Year
2000 issues could differ  materially  as those set forth in the  forward-looking
statements.  Factors which could have a material adverse effect on the Company's
results and progress include, but are not limited to, changes in the expenses or
delays in: the  identification  and  upgrade or  replacement  by the  Company of
computer  systems  that do not relate to  information  technology,  but  include
embedded technology;  and the Year 2000 compliance of vendors (including vendors
of the Company's computer information systems) or third party-service  providers
(including the Company's primary bank). These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be placed on such statements.

FORWARD LOOKING INFORMATION

This quarterly report contains forward-looking  statements within the meaning of
the federal securities laws. The Company intends such forward-looking statements
to be covered  by the safe  harbor  provisions  for  forward-looking  statements
contained in the Private  Securities  Reform Act of 1995,  and is including this
statement  for  purposes  of  complying  with  these  safe  harbor   provisions.
Forward-looking statements,  which are based on certain assumptions and describe
future  plans,  strategies  and  expectations  of  the  Company,  are  generally
identifiable by use of the words "believe,"  "expect,"  "intend,"  "anticipate,"
"estimate,"  "project" or similar expressions.  The Company's ability to predict
results  or the  actual  effect  of future  plans or  strategies  is  inherently
uncertain.  Factors which could have a material adverse effect on the operations
and future prospects of the Company include, but are not limited to, changes in:
economic  conditions   generally  and  the  real  estate  market   specifically,
legislative or regulatory provisions affecting the Company (including changes to
laws governing the taxation of REITs),  availability of capital, interest rates,
competition,  supply of and demand for office and  industrial  properties in the
Company's current and proposed market areas, and general accounting  principles,
policies and guidelines applicable to REITs. In addition,  the acquisition costs
of projects acquired from the Berg Group under the pending projects  acquisition
agreement  will vary based upon the number of O.P.  Units issued in exchange for
the property and the price of common stock, which is issuable upon conversion of
O.P. Units under certain  circumstances,  at the time of the acquisition.  These
risks and  uncertainties,  together with the other risks  described from time to
time in the Company's  reports and other documents filed with the Securities and
Exchange  Commission,   should  be  considered  in  evaluating   forward-looking
statements and undue reliance should not be placed on such statements.


ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material  changes have occurred  since our Annual Report on Form 10-K for the
year ended December 31, 1998.

                                     - 18 -
<PAGE>



================================================================================
Part II - Other Information

ITEM 2
CHANGES IN SECURITIES AND USE OF PROCEEDS

The  information  provided in Part I,  "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operations  Overview" is  incorporated  by
reference in response to this item.

ITEM 5
OTHER INFORMATION

None

ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits

                  27.1 Financial Data Schedule

         b.       Reports on Form 8-K

                  During the quarter  ended June 30, 1999,  the Company  filed a
                  report of Form 8-K on May 14,  1999 to report the  acquisition
                  by  the  Company  of the  approximately  515,700  square  foot
                  five-building  R&D complex  located on  L'Avenida  in Mountain
                  View, California.  The pro forma financial statements for this
                  acquisition were  subsequently  filed on Form 8-KA on June 23,
                  1999.

================================================================================

                                     - 19 -
<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 5, 1999                     By:    /s/ Marianne K. Aguiar
                                           -------------------------------------
                                                  Marianne K. Aguiar
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)









                                     - 20 -