<PAGE>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10 - Q

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

                  For the quarterly period ended June 30, 1999

                                       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 1-7585


                      THE NEWHALL LAND AND FARMING COMPANY
                       (A CALIFORNIA LIMITED PARTNERSHIP)
             (Exact name of Registrant as specified in its charter)

                California                                95-3931727
          (State or other jurisdiction of               (I.R.S. Employer
          incorporation or organization)                Identification No.)

        23823 Valencia Boulevard, Valencia, CA                91355
       (Address of principal executive offices)             (Zip Code)

                                 (661) 255-4000
              (Registrant's telephone number, including area code)


         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 __





<PAGE>


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Income
(in thousands except per unit)

<TABLE>
<CAPTION>

                                                                     THREE MONTHS ENDED                 SIX MONTHS ENDED
                                                                          JUNE 30                            JUNE 30
                                                               ------------------------------    -------------------------------
                                                                   1999             1998             1999             1998
                                                               -------------    -------------    -------------    --------------
<S>                                                               <C>              <C>              <C>               <C>
REVENUES

Real estate
   Residential home and land sales                                 $20,254          $35,482          $24,554           $44,116
   Industrial and commercial sales                                  26,679          100,249           46,665           102,922
   Commercial operations
     Income-producing properties                                    11,714            9,798           23,021            19,476
     Valencia Water Company                                          2,699            2,210            4,937             3,935
                                                              -------------    -------------    -------------    --------------
                                                                    61,346          147,739           99,177           170,449
                                                              -------------    -------------    -------------    --------------
Agriculture
   Operations                                                        1,692            1,560            2,177             2,289
   Ranch sales                                                           -                -            3,957               323
                                                              -------------    -------------    -------------    --------------
                                                                     1,692            1,560            6,134             2,612
                                                              -------------    -------------    -------------    --------------

  Total revenues                                                   $63,038         $149,299         $105,311          $173,061
                                                              =============    =============    =============    ==============

CONTRIBUTION TO INCOME

Real estate
   Residential home and land sales                                  $3,779          $17,665           $3,572           $18,745
   Industrial and commercial sales                                  13,410           31,032           21,817            30,473
   Community development                                           (3,819)          (2,577)          (5,840)           (4,231)
   Commercial operations
     Income-producing properties                                     4,203            5,135            7,951            10,561
     Valencia Water Company                                            676              413            1,077               731
                                                              -------------    -------------    -------------    --------------
                                                                    18,249           51,668           28,577            56,279
                                                              -------------    -------------    -------------    --------------
Agriculture
   Operations                                                          411              186              591               855
   Ranch sales                                                           -                -            2,847               323
                                                              -------------    -------------    -------------    --------------
                                                                       411              186            3,438             1,178
                                                              -------------    -------------    -------------    --------------

Operating income                                                     18,660           51,854           32,015            57,457

General and administrative expense                                  (3,404)          (3,684)          (6,056)           (6,403)
Expense from unit ownership plans                                        -                -                -             (400)
Interest and other, net                                             (2,533)          (2,429)          (4,953)           (4,656)
                                                               -------------    -------------    -------------    --------------

Net income                                                          $12,723          $45,741          $21,006           $45,998
                                                               =============    =============    =============    ==============

Net income per unit                                                   $0.40            $1.32            $0.66             $1.33
                                                               =============    =============    =============    ==============

Net income per unit - diluted                                         $0.40            $1.31            $0.65             $1.31
                                                               =============    =============    =============    ==============

Number of units used in computing per unit amounts:
 Net income per unit                                                 31,688           34,546           32,066            34,540
 Net income per unit - diluted                                       31,998           35,005           32,369            34,995

Cash distributions per unit:
 Regular                                                              $0.10            $0.10            $0.20             $0.20
 Special                                                                                                 0.22

</TABLE>

                                      2

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


Consolidated Balance Sheets
(in thousands)

<TABLE>
<CAPTION>
                                                               June 30,                    December 31,
                                                                 1999                          1998
                                                           ------------------            -----------------
<S>                                                            <C>                         <C>
ASSETS

 Cash and cash equivalents                                            $2,350                       $2,188

 Accounts and notes receivable                                        67,629                       30,255

 Land under development                                               57,240                       47,667

 Land held for future development                                     30,170                       30,553

 Income-producing properties, net                                    270,693                      248,712

 Property and equipment, net                                          60,708                       58,836

 Other assets and deferred charges                                    16,671                       13,996
                                                           ------------------            -----------------

                                                                    $505,461                     $432,207
                                                           ==================            =================


LIABILITIES AND PARTNERS' CAPITAL

 Accounts payable                                                    $30,651                      $28,716

 Accrued expenses                                                     42,736                       43,196

 Deferred revenues                                                    27,419                       10,041

 Mortgage and other debt                                             236,587                      157,609

 Advances and contributions from developers for
   utility construction                                               24,402                       26,466

 Other liabilities                                                    22,884                       22,366
                                                            ------------------            -----------------

        Total liabilities                                            384,679                      288,394

 Partners' capital

 31,456 units outstanding, excluding 5,317 units in
  treasury (cost-$113,020), at June 30, 1999 and
 32,676 units outstanding, excluding 4,096 units in
  treasury (cost-$83,530), at December 31, 1998                      120,782                      143,813
                                                             ------------------            -----------------

                                                                    $505,461                     $432,207
                                                             ==================            =================

</TABLE>

                                      3

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


Consolidated Statements of Cash Flow
(in thousands)

<TABLE>
<CAPTION>

                                                                                      Six Months Ended
                                                                                           June 30
                                                                          ------------------------------------------
                                                                                1999                    1998
                                                                          ------------------      ------------------
<S>                                                                           <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

 Net income                                                                    $  21,006            $   45,998

 Adjustments to reconcile net income to net cash
  provided by operating activities:

  Depreciation and amortization                                                    6,878                 4,758
  Increase in land under development                                             (47,614)              (28,333)
  Cost of sales and other inventory changes                                       38,041                28,512
  (Increase) decrease in accounts and notes receivable                           (37,374)                3,752
  Increase in accounts payable, accrued expenses
     and deferred revenues                                                        18,853                29,950
  Cost of property sold                                                            5,045                60,299
  Other adjustments, net                                                              40                   494
                                                                         ------------------      ------------------

 Net cash provided by operating activities                                         4,875               145,430
                                                                         ------------------      ------------------


CASH FLOWS FROM INVESTING ACTIVITIES:

  Development of income-producing properties                                     (32,681)              (44,796)
  Purchase of property and equipment                                              (4,919)               (3,850)
  Distribution from (investment in) joint venture                                     10                  (126)
                                                                          ------------------      ------------------

  Net cash used in investing activities                                          (37,590)              (48,772)
                                                                          ------------------      ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions paid                                                             (13,677)              (11,053)
  Increase (decrease) in mortgage and other debt                                  78,978               (51,891)
  (Decrease) increase in advances and contributions from
     developers for utility construction                                          (2,064)                2,295
  Purchase of partnership units                                                  (30,323)
  Other, net                                                                         (37)                  542
                                                                          ------------------      ------------------

  Net cash provided by (used in) financing activities                              32,877              (60,107)
                                                                          ------------------      ------------------


NET INCREASE IN CASH AND CASH EQUIVALENTS                                             162               36,551

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      2,188                2,770
                                                                          ------------------      ------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                       $    2,350           $   39,321
                                                                          ==================      ==================

</TABLE>

                                      4

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES

The consolidated financial statements include the accounts of The Newhall
Land and Farming Company and its subsidiaries, all of which are wholly-owned
(collectively, "the Company"). All significant intercompany balances and
transactions are eliminated.

The Company's unaudited interim financial statements have been prepared in
conformity with generally accepted accounting principles used in the
preparation of the Company's annual financial statements. In the opinion of
the Company, all adjustments necessary for a fair statement of the results of
operations for the three and six months ended June 30, 1999 and 1998 have
been made. The interim statements are condensed and do not include some of
the information necessary for a more complete understanding of the financial
data. Accordingly, your attention is directed to the footnote disclosures
found on pages 30 through 38 of the December 31, 1998 Annual Report to
Partners and particularly to Note 2 therein which includes a summary of
significant accounting policies. Certain reclassifications have been made to
prior periods' amounts to conform to the current period presentation.

Interim financial information for the Company has substantial limitations as
an indicator for the calendar year because:

-        Land sales occur irregularly and are recognized at the close of escrow
         or on the percentage of completion basis if the Company has an
         obligation to complete certain future improvements and provided profit
         recognition criteria are met.

-        Agricultural crops are on an annual cycle and income is recognized
         upon harvest. Most major crops are harvested during the fall and
         winter.

-        Sales of non-developable farmland occur irregularly and are recognized
         upon close of escrow provided profit recognition criteria are met.

-------------------------------------------------------------------------------
NOTE 2. DETAILS OF LAND UNDER DEVELOPMENT

<TABLE>
<CAPTION>
                                                      June 30,      December 31,
(In $000)                                               1999            1998
----------------------------------------------------------------------------------------
Valencia                                            (Unaudited)
    <S>                                             <C>              <C>
    Residential land development                     $   5,720       $  1,166
    Industrial and commercial land development          40,956          32,686
    Homes completed or under construction
         with venture partners                           8,478          13,525
Agriculture                                              2,086             290
                                                    ----------       ---------
         Total land under development                 $ 57,240         $47,667

=========================================================================================
NOTE 3. DETAILS FOR EARNINGS PER UNIT CALCULATION
(UNAUDITED)                                           Income          Units       Per Unit
(in 000's except per unit)                          (numerator)   (denominator)
-----------------------------------------------------------------------------------------
For three months ended June 30, 1999
Net income per unit
  Net income available to unitholders                 $12,723         31,688         $0.40
Effect of dilutive securities
  Unit options                                              -            310             -
-----------------------------------------------------------------------------------------
Net income per unit - diluted                         $12,723         31,998         $0.40

                                                     ====================================
                                      5

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

Note 3 (continued)
                                                     Income          Units       Per Unit
(in 000's except per unit)                         (numerator)   (denominator)
----------------------------------------------------------------------------------------
For three months ended June 30, 1998
Net income per unit
  Net income available to unitholders               $45,741         34,546         $1.32
Effect of dilutive securities
  Unit options                                            -            459          (.01)
-----------------------------------------------------------------------------------------
Net income per unit - diluted                       $45,741         35,005         $1.31
                                                    =====================================

For six months ended June 30, 1999
Net income per unit
  Net income available to unitholders               $21,006         32,066         $0.66
Effect of dilutive securities
  Unit options                                            -            303          (.01)
-----------------------------------------------------------------------------------------
Net income per unit - diluted                       $21,006         32,369         $0.65
                                                    =====================================

For six months ended June 30, 1998
Net income per unit
  Net income available to unitholders               $45,998          34,540        $1.33
Effect of dilutive securities
  Unit options                                            -             455         (.02)
-----------------------------------------------------------------------------------------
Net income per unit - diluted                       $45,998          34,995        $1.31
                                                    =====================================

----------------------------------------------------------------------------------------
NOTE 4. DETAILS OF INCOME-PRODUCING PROPERTIES AND PROPERTY AND EQUIPMENT
-------------------------------------------------------------------------

                                                     June 30,                December 31,
(In $000s)                                            1999                      1998
-----------------------------------------------------------------------------------------
Income-producing properties                        (Unaudited)
  Land                                               $ 50,509                   $ 48,319
  Buildings                                           154,775                    119,453
  Other                                                14,966                     14,611
  Properties under development                         91,799                    105,772
-----------------------------------------------------------------------------------------
                                                      312,049                    288,155
  Accumulated depreciation                            (41,356)                   (39,443)
-----------------------------------------------------------------------------------------
                                                     $270,693                   $248,712
                                                    =====================================
Property and equipment
    Land                                              $ 3,664                   $  4,819
    Buildings                                           5,469                      5,600
    Equipment                                           9,842                      8,993
    Water supply systems, orchards and other           73,505                     68,688
    Construction in progress                            5,102                      7,172
-----------------------------------------------------------------------------------------
                                                       97,582                     95,272
    Accumulated depreciation                          (36,874)                   (36,436)
-----------------------------------------------------------------------------------------
                                                      $60,708                    $58,836
                                                    =====================================
</TABLE>

                                      6

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

-------------------------------------------------------------------------------

NOTE 5.  BUSINESS SEGMENT REPORTING (UNAUDITED)
The following table provides financial information regarding revenues from
external customers, income and total assets for the Company's business
segments and also provides a reconciliation to the Company's consolidated
totals:

<TABLE>
<CAPTION>

                                             SIX MONTHS ENDED JUNE 30, 1999
                                             ------------------------------
                                                       Contribution
(In $000s)                            Revenues          to Income          Assets
----------------------------------------------------------------------------------
<S>                                   <C>              <C>              <C>
Real Estate
  Residential                          $ 24,554        $   3,704         $  17,023
  Industrial and commercial              46,665           21,971           106,432
  Community development                    -              (5,719)           18,537
  Income-producing properties            23,021            7,984           276,354
  Valencia Water Company                  4,937            1,132            58,030
Agriculture                               6,134            3,482            19,563
Central administration                     -              (5,495)            9,522
                                   ------------         --------        ----------
                                        105,311           27,059           505,461
Interest and other, net                    -              (4,953)             -
All other                                  -              (1,100)             -
                                   ------------      -----------    --------------
                                       $105,311          $21,006          $505,461
                                   ===============================================



                                             SIX MONTHS ENDED JUNE 30, 1998
                                             ------------------------------
                                                       Contribution
(In $000s)                             Revenues          to Income          Assets
----------------------------------------------------------------------------------
Real Estate
  Residential                          $ 44,116       $   18,955         $  24,825
  Industrial and commercial             102,922           30,788            47,980
  Community development                    -              (3,874)           17,194
  Income-producing properties            19,476           10,624           212,449
  Valencia Water Company                  3,935              836            54,325
Agriculture                               2,612            1,283            20,518
Central administration                     -              (5,458)           42,854
                                 --------------        ---------        ----------
                                        173,061           53,154           420,145
Interest and other, net                    -              (4,656)             -
All other                                  -              (2,500)             -
                                 --------------      -----------    --------------

                                       $173,061        $  45,998          $420,145
                                 =================================================

----------------------------------------------------------------------------------
</TABLE>

                                      7


<PAGE>



PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS.


                            RESULTS OF OPERATIONS

     Comparison of Second Quarter and Six Months of 1999 to Second Quarter
                        and Six Months of 1998
-------------------------------------------------------------------------------
                               UNAUDITED

The amounts of increase or decrease in revenues and income from the prior
year second quarter and six months are as follows (in 000s except per unit):

<TABLE>
<CAPTION>

                                                        Second Quarter                            Six Months
                                                -------------------------------        ----------------------------------
                                                      Increase (Decrease)                 Increase (Decrease)
                                                -------------------------------        ----------------------------------
                                                    Amount              %                 Amount               %
                                                ---------------     -----------        --------------     -------------
 <S>                                               <C>                 <C>               <C>                  <C>

REVENUES
 Real Estate
   Residential home and land sales                $  (15,228)           -43%           $  (19,562)           -44%
   Industrial and commercial sales                   (73,570)           -73%              (56,257)           -55%
   Commercial operations
       Income-producing properties                     1,916             20%                3,545             18%
       Valencia Water Company                            489             22%                1,002             25%
                                               -------------------------------        ------------------------------
                                                     (86,393)           -58%              (71,272)           -42%
 Agriculture
    Operations                                           132              8%                 (112)            -5%
    Ranch sales                                            -              -                 3,634           1125%
                                               ---------------     -----------        --------------   -------------

Total revenues                                    $  (86,261)           -58%            $ (67,750)           -39%
                                                ===============     ===========        ==============  =============

CONTRIBUTION TO INCOME
 Real Estate
   Residential home and land sales                $  (13,886)           -79%           $  (15,173)           -81%
   Industrial and commercial sales                   (17,622)           -57%               (8,656)           -28%
   Community development                              (1,242)           -48%               (1,609)           -38%
   Commercial operations
       Income-producing properties                      (932)           -18%               (2,610)           -25%
       Valencia Water Company                            263             64%                  346             47%
                                               -------------------------------        ------------------------------
                                                     (33,419)           -65%              (27,702)           -49%
 Agriculture
   Operations                                            225            121%                 (264)           -31%
   Ranch sales                                             -              -                 2,524            781%
                                               ---------------     -----------        --------------   -------------

 Operating income                                    (33,194)           -64%              (25,442)           -44%

   General and administrative expense                    280              8%                  347              5%
   Expense from unit ownership plans                                      -                   400            100%
                                                           -
   Interest and other, net                              (104)            -4%                 (297)            -6%
                                               ---------------     -----------        --------------   -------------

 Net income                                       $  (33,018)           -72%            $ (24,992)           -54%
                                                ===============     ===========        ==============   =============

Net income per unit                               $    (0.92)           -70%            $   (0.67)           -50%
                                                ===============     ===========        ==============   =============
Net income per unit - diluted                     $    (0.91)           -69%            $   (0.66)           -50%
                                                ===============     ===========        ==============   =============

Number of units used in computing per unit amounts:
Net income per unit                                   (2,858)            -8%               (2,474)            -7%
                                                ===============     ===========        ==============   =============
Net income per unit - diluted                         (3,007)            -9%               (2,626)            -8%
                                                ===============     ===========        ==============   =============

</TABLE>

                                      8

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

The increases and decreases in revenues and income for the three and six months
are attributable to the following:

For the 1999 second quarter, revenues totaled $63.0 million and net income
totaled $12.7 million compared to revenues for the 1998 second quarter of
$149.3 million and income of $45.7 million. For the six months ended June 30,
1999, revenues totaled $105.3 million and income totaled $21.0 million. This
compares to revenues of $173.1 million and income of $46.0 million for the
six months ended June 30, 1998. Results for the second quarter and six months
of 1998 included the sale of Valencia Marketplace, a retail power center,
which contributed $85.3 million to revenues and $30.4 million to income under
percentage of completion accounting.

The major contributors to the 1999 second quarter results are escrow closings
on 40.8 acres of industrial and commercial land as well as 193 residential
lots. The escrow closing on a 32.8-acre apartment site was the most
significant, adding $18.7 million to revenues and $10.9 million to income
under percentage of completion accounting. Results for the six months ended
June 30, 1999 also include sale of the Company's remaining 85 acres in
northern California and the last three parcels totaling 3,077 acres at the
Merced Ranch. These two transactions combined added $13.9 million to revenues
and $11.1 million to income.

RESIDENTIAL HOME AND LAND SALES

Revenues and income are recorded by the Company on residential lot sales
when title is transferred to the merchant builder who, in turn, builds homes for
sale. The Company also participates, on a limited basis, in home construction on
lots it owns by establishing joint ventures with builders who have created
innovative home designs, targeting niche markets not met by merchant builders.
Through the joint venture program, the Company recognizes its portion of
revenues and income upon close of escrow to the homebuyer.

Demand for homes continues to increase throughout Los Angeles County,
particularly in Valencia, where employment is rising with more companies
relocating to the master-planned community. Current supply constraints in
Valencia's new home inventory continue to hamper sales as four residential
housing projects sold out during the first half of 1999. During the second
quarter of 1999, merchant builders and the Company's joint ventures sold 87
homes, compared with 160 homes sold in the year earlier quarter. This brings
the total of homes sold during the first six months of 1999 to 209 compared
with 330 for the year earlier first half, primarily due to supply
constraints.

The inventory of new homes is expected to increase starting in the third
quarter of 1999 when Kaufman & Broad Home Corporation is scheduled to open
the first of three model complexes on 445 residential lots purchased last
year from the Company in the Hasley Hills area just outside the
master-planned community of Valencia. Shea Homes, which purchased 458
unimproved lots in the Decoro Highlands section of Valencia last year, will
start selling homes in the fourth quarter of 1999.

MERCHANT BUILDER PROGRAM
Results for the 1999 second quarter and six months include the sale of 193
residential lots adding $8.9 million to revenues and $3.6 million to income
under percentage of completion accounting. These lots were the first sold in
Bridgeport, the Company's new lake-oriented lifestyle village. At June 30,
1999, one builder was in escrow for 85 lots and three more builders have
deposits on 232 lots in Bridgeport, with closings scheduled for the third and
fourth quarters of 1999. The Company is in serious negotiations on the
remaining lots in Bridgeport which, when fully developed, will offer a wide
range of housing and many amenities including a private beach club and park.
The Company expects to realize the highest values ever received for
residential land in this project. In addition, Kaufman & Broad has a deposit
on an additional 294 lots adjacent to its current development in Hasley
Hills, with closing scheduled later this year. These five residential parcels
in escrow or being held under deposit are expected to contribute
approximately $60 million to 1999 revenues. All escrow closings are subject
to market and other conditions.

In the 1998 second quarter, a total of 903 entitled, unimproved residential
lots closed escrow for $32 million contributing $18.6 million to income.
Included in the 1998 six-month results is the sale of 37 improved residential
lots adding $2.6 million to revenues and $749,000 to income. At June 30,
1998, 168 improved lots for higher density housing were in escrow for $6.2
million.

                                      9

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

JOINT VENTURE PROGRAM

In the three months ended June 30, 1999, a total of 50 homes closed escrow by
the Company's two joint ventures contributing $11.4 million to revenues and
$1.3 million to income. The 1999 six-month period includes a total of 76 home
closings which combined added $15.7 million to revenues and $1.6 million to
income. At June 30, 1999, 62 homes remained in the Cheyenne townhome project
of which 16 were in escrow and 46 had been reserved. In the Avignon luxury
townhome project, 31 homes remained of which 22 were in escrow and 2 had been
reserved. To increase absorption in a strong market, the Company is
concentrating its efforts on lot sales to merchant builders and no new joint
ventures are planned for 1999.

A total of 15 joint-venture homes closed escrow during the 1998 second
quarter contributing $3.1 million to revenues and $333,000 to income. The
1998 six-month period included 33 home closings adding $7.2 million to
revenues and $684,000 to income. At June 30, 1998, there were 39
joint-venture homes in escrow.

INDUSTRIAL AND COMMERCIAL SALES

In the second quarter of 1999, escrow closed on three industrial parcels
totaling 5.3 acres, contributing $2.9 million to revenues and $1.0 million to
income. These sales bring industrial escrow closings for the first six months
of 1999 to a total of 20.4 acres which combined contributed $9.9 million to
revenues and $2.0 million to income. The six-month period ended June 30, 1999
also includes the sale of the Company's last remaining large parcel at the
Cowell Ranch in northern California which added $10.0 million to revenues and
$8.2 million to income.

Industrial escrow closings in the 1998 second quarter totaled 4.8 acres which
contributed $2.2 million to revenues and $500,000 to income and two
industrial buildings on 10.0 acres, constructed as part of the Company's
build-to-suit/lease program, adding $10.6 million to revenues and $786,000 to
income. The 1998 first half also included two industrial parcels totaling 3.9
acres and an industrial build-to-suit on .5 acres which combined contributed
$2.7 million to revenues and $605,000 to income.

Three commercial escrow closings in the 1999 second quarter totaling 35.6
acres contributed $22.6 million to revenues and $13.3 million to income. The
largest was a 32.8-acre site planned for 828 apartments which added $18.7
million to revenues and $10.9 million to income under percentage of
completion accounting. The Company expects to recognize additional revenues
of approximately $13.6 million and income of approximately $7.9 million as
land development and landscaping work is completed over the next six to nine
months. In the first six months of 1999, the Company recognized $3.4 million
in revenues from the prior year sale of Valencia Marketplace, a
720,000-square-foot high-volume retail center. However, due to revised costs
to complete the construction and leasing of the center, no income was
recognized in the 1999 first half and the Company does not expect to
recognize any additional income from the sale of this property as remaining
revenues are recognized.

The second quarter of 1998 included the sale of Valencia Marketplace for $111
million and the Company recognized $85.3 million in revenues and $30.4
million in income under percentage of completion accounting. Additional
revenues of $12.5 million and income of $5.0 million were recognized in the
third and fourth quarters of 1998. The 1998 second quarter also included the
sale of three small commercial parcels totaling 4.6 acres for $1.5 million
adding $433,000 to income.

At June 30, 1999, four industrial parcels, totaling 47.5 acres, were in
escrow or were being held under deposit for $30.6 million, including a
101,000-square-foot build-to-suit on 5.2 acres. In addition, a
170,000-square-foot build-to-suit is scheduled to close escrow upon
completion on an 8.5-acre parcel which closed escrow in the 1999 first
quarter. Also in escrow or being held under deposit at June 30, 1999 were
three commercial parcels, totaling 7.0 acres for $3.6 million with closings
scheduled during the remainder of 1999. Subsequent to the end of the 1999
second quarter, a deposit on 30.9 industrial acres for $16.5 million was
withdrawn. The Company is in negotiation for the sale of other industrial
parcels to the same prospective buyer. All escrow closings are subject to
market and other conditions.

At June 30, 1998, seven industrial parcels totaling 90.8 acres were in escrow
for $46.4 million and 14.3 commercial acres were in escrow for $4.8 million.
Included in the June 30, 1998 commercial escrows was a 12.6-acre, restricted
use site for a senior apartment complex with low land values.

COMMUNITY DEVELOPMENT


The Company's community development activities are focused on securing the
necessary entitlements as well as an intensified strategic marketing program
to support the buildout of Valencia by 2005 and begin the development

                                     10

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.


of Newhall Ranch, a new town on the Company's 12,000 acres west of Valencia.
The Company's ability to achieve its goals and increase the pace of
development is contingent upon obtaining the necessary entitlements from the
County of Los Angeles and the City of Santa Clarita.

During the 1999 first quarter, the Company received final approval from the
Los Angeles County Board of Supervisors for its 21,600-home Newhall Ranch. Of
the five villages planned, development is expected to begin with Riverwood,
an area located along Highway 126. The Company will begin processing
subdivision maps and applications for permits, which need approval before
development can begin. Initial development is expected to start in 2002.

As a result of Newhall Ranch's approval, four separate petitions were filed
against the County of Los Angeles and the Los Angeles County Board of
Supervisors, and name the Company as a real party in interest. The four
actions were petitions for writs of mandate and were filed in the Ventura
County (California) Superior Court. The petitions were filed by: 1) Ventura
County (California), Ventura County Flood Control District, Ventura County
Air Pollution Control District and certain municipalities located within the
County of Ventura (petition filed on April 21, 1999); 2) United Water
Conservation District (petition filed on April 21, 1999); 3) Sierra Club,
Friends of the Santa Clara River and Santa Clarita Organization for Planning
the Environment (petition filed on April 22, 1999); and 4) Maria Vega, et al.
(petition filed on April 22, 1999). In general, the petitions allege
violation of the California Subdivision Map Act for illegally subdividing
parcels that cross the county border; violations of the California
Environmental Quality Act; inconsistency between the Los Angeles County
General Plan and Specific Plan; and violation of the housing element of the
County General Plan as it relates to affordability and discrimination. A
Ventura County Superior Court judge ruled in favor of Los Angeles County's
request that the lawsuit be transferred out of Ventura County and designated
the neutral venue of Kern County.

In May, the Los Angeles County Board of Supervisors gave final approval to
the Company's 1,711-home Valencia Westridge Golf Course Community. A focal
point of the Valencia project is a Tournament Players Club (TPC) championship
golf course, a joint venture with PGA TOUR Golf Course Properties. Subsequent
to the approval, a petition for writ of mandate was filed on June 24, 1999 in
the Los Angeles County Superior Court. The petition was filed by the Santa
Clarita Organization for Planning the Environment and the Angeles Chapter of
the Sierra Club against the County of Los Angeles, the Los Angeles County
Board of Supervisors and Valencia Water Company, and names the Company as a
real party in interest. In general, the petition alleges violations of the
Los Angeles County General Plan, the California Water Code, the County
Development Monitoring System and the California Environmental Quality Act.
The petition also alleges Valencia Water Company, a subsidiary of the
Company, failed to comply with state law and the County Development
Monitoring System.

The Company prepared the Environmental Impact Reports on both projects in a
thorough manner and is confident that they can withstand legal challenges.

The Company is in the process of entitling all its remaining residential lots
in Valencia. This fall, the Company expects to entitle 1,900 lots through
annexation by the City Santa Clarita, making them available for sale next
year. An additional 2,545 lots are expected to complete the entitlement
process with Los Angeles County early next year.

The Company has intensified its focus on developing communities in other
geographic areas in the western states. Currently the Company is working with
the city of Broomfield, Colorado to develop a plan that could result in
approximately 3,000 homes on 1,700 acres. Broomfield is a growing suburb
between Denver and Boulder. The Company is also looking at development
opportunities in other locations.

Community development expenses increased by 48% and 38% from the 1998 second
quarter and six-month period, respectively, primarily due to entitlement
expenses for Newhall Ranch and certain initial costs relating to commercial
properties under development. With the continued focus on obtaining
entitlements and strategic marketing as well as litigation costs relating to
Newhall Ranch and Westridge, expenses for the year are expected to continue
at or possibly exceed this increased level over 1998.

For the 1998 three and six-month periods, entitlement expenses decreased by
10% and 15%, respectively, from the prior year periods due to final approvals
received in 1997 for several projects in Valencia.

                                     11

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.


INCOME-PRODUCING PROPERTIES

The Company's commercial portfolio is a relatively stable source of earnings
and cash flow that also provides debt capacity to grow the Company and
working capital for continuing operations. Revenues from the portfolio
increased 20% and 18% for the second quarter and six-month periods of 1999,
respectively, compared with year earlier results, as new properties in the
income portfolio more than compensated for the strategic sale of Valencia
Marketplace in June 1998. However, income decreased by 18% for the
three-month period and by 25% for the six-month period due to increased
depreciation associated with new properties and expenses in connection with
the Hyatt Valencia Hotel. While new properties continue to be added to the
portfolio, the Company expects 1999 earnings from the income portfolio to be
about 20% lower than in 1998.

Excellent retail and apartment occupancy rates and favorable rents
contributed to the portfolio's results. Retail space along Town Center Drive,
a pedestrian-oriented "Main Street", including Town Center Plaza adjacent to
the Hyatt Valencia Hotel is more than 58% leased. The entertainment complex
has opened and includes an IMAX 3-D Theatre, 11 additional movie screens, a
Borders bookstore and three restaurants. A small food court will open in the
complex in the third quarter.

In June 1999, Princess Cruises signed 15-year leases on two additional
buildings to be constructed in Valencia Town Center to consolidate all its
headquarter operations in Valencia. Construction will start on these
buildings - a 125,000-square-foot five story and an 83,000-square-foot four
story - prior to the end of 1999 with occupancy slated for early 2001.
Princess Cruises will occupy all but the ground floors in both buildings,
which will be leased for retail and office use. The total amount of office
space currently and prospectively occupied by Princess Cruises is the largest
office lease in Valencia's history. With the move, Princess Cruises will
bring another 750 employees to Valencia.

The Company's shopping centers are all performing well with occupancy rates
averaging close to 100%. Valencia Town Center regional mall is 99% leased
including short-term tenants. Occupancy at NorthPark Village Square is at 93%
with 4,400 square feet of newly added space remaining to be leased. River
Oaks shopping center is 100% leased, Castaic Shopping Center is 99% leased
and Plaza del Rancho, the mixed-use project in Valencia Industrial Center
which opened last year, is 100% leased. Construction of the next neighborhood
shopping center is planned for the South River area next year, subject to
achieving pre-leasing requirements.

Occupancy rates at the Company's three apartment complexes averaged over 92%
for the second quarter. As Princess Cruises and other large employers
relocate to Valencia, demand for apartments, as well as single-family homes,
is expected to increase substantially. Models opened in June at Montecito, a
210-unit, high-end apartment complex which includes 12 townhomes, overlooking
Valencia Country Club in Valencia Town Center. As of June 30th, approximately
50 units have been pre-leased, seven of which are for the 1,422-square-foot
townhomes at the highest rental rates achieved in Valencia. Construction on a
second apartment complex in Valencia NorthPark with 320 units is scheduled to
start before the end of 1999. These units will be larger in size, appealing
to families. Additional apartment complexes are planned for the future to
meet anticipated demand.

As the number of commercial income properties built increases, sales of
mature income properties may be made on a selective basis, allowing the
Company to benefit from strong capitalization rates and to maximize the
return on its investment as a whole.

VALENCIA WATER COMPANY

Valencia Water Company is a regulated public utility and a wholly-owned
subsidiary of the Company serving over 20,000 metered customers in the
Valencia area. Continued customer growth and drier weather contributed to
increases in revenues of 22% and income of 64% from the year earlier quarter
and increases in revenues of 25% and income of 47% from the prior year six
month-period.

AGRICULTURAL OPERATIONS

For the 1999 second quarter and first six months, agriculture revenues,
including the Company's energy operations, were about the same level as last
year. Income for the second quarter of 1999 increased, primarily due to
excellent prices received for Valencia oranges, and expenses in 1998 in
connection with heavy rains. For the first six months of 1999, income
declined from the year earlier levels partly due to lower oil and gas prices
and additional income recorded in the prior year for crop price adjustments.

                                     12

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.


RANCH SALES

No sales of farm land were completed during the 1999 second quarter. The
six-month period includes the sale of the Company's three remaining parcels
at the Merced Ranch for $4.0 million contributing $2.8 million to income. The
sale is part of a strategic plan to sell land not suitable for development.
As part of that plan, the remaining 36,000 acres at the Suey Ranch in Santa
Barbara and San Luis Obispo counties are being marketed.

No sales of farm land were completed during the 1998 second quarter or
six-month period. Revenues and income of $323,000 were recognized in the 1998
first quarter from the 1996 sale of 539 acres of row crop land at the Suey
Ranch.

GENERAL AND ADMINISTRATIVE EXPENSE

Decreases of 8% for the second quarter and 5% for the six-month period are
primarily due to expenses in the prior year periods in connection with the
Company's replacement of its computerized accounting system, consulting
services associated with an improving real estate market and accrued
incentive compensation based on the Company's higher earnings. The decreases
were partially offset in the current year periods due to expenses relating to
the Company's intensified focus on development opportunities in other
geographic areas in the western states.

EXPENSE FROM UNIT OWNERSHIP PLANS

In the 1998 six-month period, an expense of $400,000 was recorded for
increases in the market price of partnership units in connection with
appreciation rights on outstanding, non-qualified options granted prior to
1992. No expense was recorded in the 1999 three- or six-month periods.

INTEREST AND OTHER

Increased debt outstanding against lines of credit in the current year,
partially offset by higher interest income from notes receivables from land
sales, contributed to increases of 4% for the three-month period and 6% for
the six-month period in net interest expense compared to the prior year
periods. For the year, higher debt levels due to the continuing planned
expansion of the Company's income portfolio and unit repurchases are expected
to increase net interest expense compared to 1998.

                              FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1999, the Company had cash and cash equivalents of $2.4 million and
$26.3 million in available lines of credit to fund operations, net of $26.7
million in letters of credit. Borrowings outstanding totaled $109 million
against unsecured lines of credit and $40 million against a revolving mortgage
loan. The Company believes it has adequate sources of cash from operations and
debt capacity, including lines of credit, to finance future operations and take
advantage of new development opportunities. At June 30, 1999, there was no debt
against raw land or land under development inventories.

On March 1, 1999, the Company completed the refinancing of a portfolio
mortgage with a remaining principal balance of $44.6 million. This portfolio
mortgage with Prudential had a rate 8.995% and was secured by five of the
Company's commercial properties. The new financings total $50 million and are
secured by three of the Company's apartment complexes. The loans were
obtained from Freddie Mac at a 6.51% weighted average interest rate and
mature in ten years. Annual interest savings on the refunded portion alone
are $1.1 million. Net of the refunding payment and transaction costs,
proceeds of $4.4 million were used to pay down lines of credit.

In 1999, the Company expects to complete approximately $175 million to $200
million in financings, including the refinancing of a portfolio mortgage
completed in the first quarter and a $40 million revolving mortgage loan
secured by Valencia Town Center which is expected to be refinanced in the
fourth quarter. Also in the 1999 second half, the Company anticipates
completing new financings consisting of $25 million in mortgage loans secured
by River Oaks and NorthPark Village Square shopping centers and $60 million
to $80 million in other secured and unsecured financings. Net proceeds will
be used to reduce bank line borrowings, finance the income portfolio
expansion, develop new inventory and continue the unit repurchase program.

There are no material commitments for capital expenditures other than the
Company's plans in the ordinary course of business to develop its portfolio
of income-producing properties. In 1999, the Company expects to

                                     13

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

invest approximately $50 million in new income-producing
properties. This follows the $100 million invested in 1998. In addition,
approximately $30 million is expected to be invested in major roads and freeway
improvements in 1999 to enable the Company to close additional land sales.

In May, the Company's Board of Directors approved an increase in the current
repurchase program to two million units, representing an additional one
million units to the previous units approved in January 1999. During the
first six months of 1999, the Company repurchased 1,257,626 of its
partnership units, including 271,772 units from the repurchase program
authorized in 1998, at an average price of $24.11 per unit. This represents
3.8% of the total units outstanding at the end of 1998. At June 30, 1999,
1,014,146 remained to be repurchased under the current authorization. The
repurchases are being made because management and the Board continue to
believe that the units are undervalued and that the current market price does
not reflect the Company's underlying value, performance and future outlook.

The following discussion relates to principal items on the Consolidated
Statement of Cash Flows:

OPERATING ACTIVITIES

Net cash provided by operating activities for the six months ended June 30,
1999 totaled $4.9 million and included sales of 40.8 acres of industrial and
commercial land, 193 residential lots, 76 joint-venture homes, and the
Company's remaining acreage at the Merced Ranch and Cowell Ranch in central
and northern California. These sales combined generated $46.1 million in cash
and $37.6 million in notes.

Expenditures for land under development inventories and home construction
totaled $47.6 million for the six-month period and were offset by $38.0
million in cost of sales relief. Expenditures for Valencia area land
preparation, infrastructure and home construction totaled $44.1 million with
the remainder primarily for agricultural crop costs.

INVESTING ACTIVITIES

Expenditures for development of income-producing properties totaled $32.7
million for the 1999 first half. Major expenditures included $8.0 million for
Montecito apartments and $13.1 million for retail/office/entertainment
projects in Valencia Town Center. Purchase of property and equipment was
primarily for water utility construction.

FINANCING ACTIVITIES

Distributions totaling $13.7 million have been paid year-to-date consisting
of two quarterly distributions of $.10 per unit each and a $.22 per unit
special distribution. An additional $.10 per unit distribution was declared
on July 21, 1999 payable September 13, 1999. The declaration of distributions
is reviewed by the Board of Directors on a quarterly basis. The declaration
of any distribution, and the amount declared, is determined by the Board of
Directors talking into account the Company's earnings, financial condition
and prospects.

As previously discussed, in March 1999, a $44.6 million portfolio mortgage
financing was replaced with three financings totaling $50 million secured by
three of the Company's apartment complexes. Borrowings against lines of
credit increased by $85.8 million to $149 million at June 30, 1999.

A total of 1,257,626 units was repurchased in the first six months of 1999
for $30.3 million. The Company's goal is to repurchase at least two million
units in 1999, depending upon market conditions.

YEAR 2000 ISSUE

The Year 2000 issue concerns the possibility that computer programs with
date-sensitive software may recognize a date using "00" as the year 1900,
rather than as the year 2000, because the programs were written using two
digits rather than four to define the applicable year. This could result in a
system failure or miscalculations causing disruptions of operations such as,
among others, a temporary inability to process transactions or engage in
normal business activities.

READINESS: The Company's Year 2000 remediation efforts are progressing
appropriately. At the end of 1997, a Year 2000 Task Force was formed to
coordinate Company-wide efforts to be Year 2000 compliant. To date, the
Company has inventoried its internal systems as well as identified systems
and applications outside of the Company that may include imbedded computer
technology that could be impacted by the Year 2000 Issue.

As a result of the Company's comprehensive review of its internal systems in
1997, and for other strategic reasons, the Company has replaced its
computerized accounting system. The Company successfully converted to the new
accounting system on January 1, 1999, and the payroll and human resources
subsystem on July 1, 1999.

                                     14

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.


The Company has completed the modification and testing of its internally
developed systems for Year 2000 compliance and compatibility with the new
accounting system. The Company is currently in the process of testing
software provided by third parties for Year 2000 compliance, all of which
have been previously confirmed by the respective vendors to be Year 2000
compliant. Completion of these tests is planned for the third quarter of
1999.

COSTS: The Company estimates the total cost of its compliance efforts in
connection with the Year 2000 Issue will be less than $400,000 and will be
expensed as incurred. As of June 30, 1999, $210,000 had been expensed for this
project, including $114,000 expensed in 1998. The majority of the expenditures
is expected to be for testing existing third party supplied software for Year
2000 compliance. In addition, the cost of the new accounting system was
approximately $1 million and has been capitalized and is being amortized over
its useful life.

The cost of the Year 2000 Issue and the estimated completion dates are based
on management's best estimates, which were derived utilizing assumptions of
future events, including the continued availability of certain resources,
third-party modification plans and other factors. There can be no guarantee
that these estimates will prove accurate and actual results could differ from
those estimated.

RISKS: The Company believes the worst-case scenario for the Year 2000 Issue
would be for the Company or a significant number of its significant vendors,
consultants, suppliers and governmental agencies (collectively, "business
partners") to fail to successfully complete their respective Year 2000
remediation efforts by December 31, 1999. Under this scenario, the Company's
operations would most likely be disrupted which would result in a material
adverse effect on its business, operating results and financial condition.

CONTINGENCY PLANS: The Company is dependent upon its business partners to
conduct its operations and, as a result, has asked these business partners
about their Year 2000 compliance efforts. As of June 30, 1999, substantially
all of the business partners contacted have stated that they are either
already Year 2000 compliant or will be Year 2000 compliant prior to December
31, 1999. The Company does not plan to independently test or verify its
business partners' Year 2000 efforts. However, the Company has compiled a
list of alternate business partners in case any significant business partners
fail to successfully complete their Year 2000 remediation efforts by December
31, 1999. There can be no assurance that any contingency plans developed by
the Company will prevent any service interruption on the part of one or more
of the Company's business partners or that such service interruption would
not have a material adverse effect upon the Company's business, operating
results or financial condition. A failure of the computer systems of a
significant number of the Company's customers or business partners, or any of
their financial institutions or lenders, would likely have a material adverse
effect on the Company's business, operating results and financial condition.

INFLATION, RISKS AND RELATED FACTORS AFFECTING FORWARD-LOOKING INFORMATION

This report and other published reports by the Company contain
forward-looking statements regarding the status of proposed or pending sales
and rental activity, future planned development, plus the long-term growth
goals of the Company. The forward-looking statements made in this report are
based, in part, on present trends the Company is experiencing in residential,
industrial and commercial markets. The forward-looking statements may also
involve unknown risks, uncertainties and other factors that may cause the
Company's actual results and performance in future periods to be materially
different from any future results or performance suggested by the
forward-looking statements in this report. Such forward-looking statements
speak only as of the date of this report. The Company expressly disclaims any
obligation to update or revise any forward-looking statements found herein to
reflect any changes in Company expectations or results or any change in
events. Also, the Company's success in obtaining entitlements, governmental
and environmental regulations, timing of escrow closings, expansion of its
income portfolio and marketplace acceptance of its business strategies are
among the factors that could affect results. The following risks and related
factors, among others, should be taken into consideration in evaluating the
future prospects for the Company. Actual results may materially differ from
those predicted.

SALES OF REAL ESTATE: The majority of the Company's revenues is
generated by its real estate operations. The ability of the Company to
consummate sales of real estate is dependent on various factors including, but
not limited to, availability of financing to the buyer, regulatory and legal
issues and successful completion of the buyer's due diligence. The fact that a
real estate transaction has entered escrow does not necessarily mean that the
transaction will ultimately close. Therefore, the timing of sales may differ
from that anticipated by the Company. The inability to close sales as
anticipated could adversely impact the recognition of revenue in any specific
period.

                                     15

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS.

ECONOMIC CONDITIONS: Real estate development is significantly impacted by
general and local economic conditions which are beyond the control of the
Company. The Company's real estate operations are concentrated in Southern
California. The regional economy is profoundly affected by the entertainment,
technology, defense and certain other segments, which have been known to
affect the region's demographics. Consequently, all sectors of real estate
development for the Company tend to be cyclical. While the economy of
Southern California has improved, there can be no assurances that present
trends will continue.

INTEREST RATES AND FINANCING: Fluctuations in interest rates and the
availability of financing have an important impact on the Company's
performance. Sales of the Company's projects could be adversely impacted by
the inability of buyers to obtain adequate financing. Further, the Company's
real estate development activities are dependent on the availability of
adequate sources of capital. Certain of the Company's credit facilities bear
interest at variable rates and would be negatively impacted by increasing
interest rates.

COMPETITION: The sale and leasing of residential, industrial and commercial
real estate is highly competitive, with competition coming from numerous and
varied sources. The degree of competition is affected by such factors as the
supply of real estate available which is comparable to that sold and leased
by the Company and the level of demand for such real estate. The Company
recently has experienced a slight decrease in its new home sale market share
at both the local and the county level, due to the temporary decline in
Valencia new home inventory. New competition is expected to deliver competing
projects in the future that could impact the Company's ability to reverse
this trend.

GEOGRAPHIC CONCENTRATION: The Company's real estate development activities
are focused on its 19,000 acres in Los Angeles County, 30 miles north of Los
Angeles. The Company's entire commercial income portfolio is located in the
Valencia area. Therefore, any factors affecting that concentrated area, such
as changes in the housing market, economic changes and environmental factors,
including seismic activity, which cannot be predicted with certainty, could
affect future results.

GOVERNMENT REGULATION AND ENTITLEMENT RISKS: In developing its projects, the
Company must obtain the approval of numerous governmental authorities
regulating such matters as permitted land uses, density and traffic, and the
providing of utility services such as electricity, water and waste disposal.
In addition, the Company is subject to a variety of federal, state and local
laws and regulations concerning protection of health and the environment.
This government regulation affects the types of projects which can be pursued
by the Company and increases the cost of development and ownership. The
Company devotes substantial financial and managerial resources to comply with
these requirements. To varying degrees, certain permits and approvals will be
required to complete the developments currently being undertaken, or planned
by the Company. Furthermore, the timing, cost and scope of planned projects
may be subject to legal challenges, particularly large projects with regional
impacts. In addition, the continued effectiveness of permits already granted
is subject to factors such as changes in policies, rules and regulations and
their interpretation and application. The ability to obtain necessary
approvals and permits for its projects can be beyond the Company's control
and could restrict or prevent development of otherwise desirable new
properties. The Company's results of operations in any period will be
affected by the amount of entitled properties the Company has in inventory.

INFLATION: The Company believes it is well positioned against the effects of
inflation. Historically, during periods of inflation, the Company has been
able to increase selling prices of properties to offset rising costs of land
development and construction. Recently, land values have been increasing at a
faster rate than costs. However, there are no assurances that this trend will
continue. A portion of the commercial income portfolio is protected from
inflation since percentage rent clauses and Consumer Price Index increases in
the Company's leases tend to adjust rental receipts for inflation, while the
underlying value of commercial properties has tended to rise over the long
term.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk primarily due to fluctuations in
interest rates. The Company utilizes both fixed rate and variable rate debt.
At June 30, 1999, the Company had $149 million of variable debt with interest
rates ranging from 5.91% to 7.8% and $87.6 million of fixed rate debt with
interest rates ranging from 6.51% to 8.45%.

                                     16

<PAGE>

Part I. Financial Information
Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The table below presents principal cash flows and related weighted average
interest rates of the Company's long-term fixed rate and variable rate debt,
by expected maturity dates, as of June 30, 1999:

<TABLE>
<CAPTION>

                                                       Expected Maturity Date                                       Fair
                                 -------------------------------------------------------------------
(IN $000S)                          1999         2000       2001      2002     2003     Thereafter      Total       Value
                                 ------------------------------------------------------------------- ------------ -----------
<S>                                <C>          <C>        <C>      <C>      <C>          <C>           <C>         <C>
Mortgage and Other Debt
  Fixed Rate Debt  (1)              $  1,234     $  1,481   $ 1,596  $ 1,727  $11,226     $ 70,323    $ 87,587    $ 87,587
  Weighted Average Interest Rate       7.27%        7.19%     7.18%    7.17%     8.24%        6.89%       7.08%

  Variable Rate Debt (2)            $ 40,000    $ 109,000                                               $149,000    $149,000
  Weighted Average Interest Rate       6.63%        6.83%                                                  6.78%

</TABLE>

(1)  The carrying amount of the Company's fixed rate debt reflects its fair
     value based on current interest rates available to the Company for
     comparable debt.

(2)  The Company has a $40 million revolving mortgage facility which bears
     interest at LIBOR plus 1.0% or Wells Fargo Bank's prime rate, at the
     election of the Company. The Company also has a $159 million unsecured
     revolving line of credit on which the rate is LIBOR plus 1.2%. At June 30,
     1999, $108 million was outstanding against this line. The above assumes
     that these variable rate credit facilities are repaid at maturity.
     Management believes these lines will be renewed at maturity with similar
     terms.

There is inherent rollover risk for borrowings as they mature and are renewed
at current market rates. The extent of this risk is not quantifiable or
predictable because of the variability of future interest rates and the
Company's future financing requirements. The Company manages its interest
rate risk by maintaining conservative debt levels, spreading its scheduled
debt amortization, by periodically converting short-term variable debt to
long-term fixed rate debt, and by evaluating the merits of interest rate
derivative products. At June 30, 1999, the Company did not have any interest
rate derivative products or transactions.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

Please refer to "Community Development" under Part I, Item 2. - "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
concerning writs of mandate filed in April 1999 and June 1999.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601
     in Regulation S-K):

     10     Amendment No. 4 to The Newhall Land and Farming Company Retirement
            Plan dated July 21, 1999

     10(a)  Second Amendment to The Newhall Land and Farming Company 1995
            Option/Award Plan adopted as of July 15, 1998

     27     Financial Data Schedule

                                     17

<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 thereunto duly authorized.

                          THE NEWHALL LAND AND FARMING COMPANY
                            (a California Limited Partnership)
                                        Registrant

                       By Newhall Management Limited Partnership,
                                 Managing General Partner

                           By Newhall Management Corporation,
                                 Managing General Partner




Date: August 4, 1999     By  / S / THOMAS L. LEE
                             -------------------------------------------------
                            Thomas L. Lee, Chairman and Chief Executive
                            Officer of Newhall Management Corporation
                            (Principal Executive Officer)

Date: August 4, 1999     By  / S / STUART R. MORK
                             -------------------------------------------------
                            Stuart R. Mork, Senior Vice President and Chief
                            Financial Officer of Newhall Management Corporation
                            (Principal Financial Officer)

Date: August 4, 1999     By  / S / DONALD L. KIMBALL
                             --------------------------------------------------
                            Donald L. Kimball, Vice President - Finance
                            and Controller of Newhall Management Corporation
                            (Principal Accounting Officer)

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