<PAGE>   1

                                  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, 1998

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

                        For the transition period from to

          For Quarter Ended June 30, 1998 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)

                                 (805) 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>   2

Part I. Financial Information                                                 2.
Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME
Unaudited
<TABLE>
<CAPTION>
                                                         Three Months Ended        Six Months Ended
In thousands, except per unit                                  June 30                  June 30
-----------------------------------------------        ---------------------     ---------------------
                                                         1998         1997         1998         1997
                                                       --------     --------     --------     --------
<S>                                                    <C>          <C>          <C>          <C>      
REVENUES
 Real estate
    Residential home and land sales                    $ 35,482     $ 12,979     $ 44,116     $ 18,389
    Industrial and commercial sales                     100,249        5,246      102,922       25,011
    Commercial operations
      Income-producing properties                         9,798        7,810       19,476       15,832
      Valencia Water Company                              2,210        2,995        3,935        4,827
                                                       --------     --------     --------     --------
                                                        147,739       29,030      170,449       64,059
                                                       --------     --------     --------     --------
Agriculture
    Operations                                            1,560        1,799        2,289        2,771
    Ranch sales                                              --       17,900          323       17,900
                                                       --------     --------     --------     --------
                                                          1,560       19,699        2,612       20,671
                                                       --------     --------     --------     --------
   Total revenues                                      $149,299     $ 48,729     $173,061     $ 84,730
                                                       ========     ========     ========     ========

CONTRIBUTION TO INCOME
 Real estate
    Residential home and land sales                    $ 17,665     $  1,519     $ 18,745     $    748
    Industrial and commercial sales                      31,032        1,060       30,473       13,903
    Community development                                (2,577)      (2,852)      (4,231)      (4,971)
    Commercial operations
      Income-producing properties                         5,135        3,803       10,561        7,931
      Valencia Water Company                                413          868          731        1,250
                                                       --------     --------     --------     --------
                                                         51,668        4,398       56,279       18,861
                                                       --------     --------     --------     --------
 Agriculture
    Operations                                              186          588          855        1,129
    Ranch sales                                              --       16,950          323       16,950
                                                       --------     --------     --------     --------
                                                            186       17,538        1,178       18,079
                                                       --------     --------     --------     --------

Operating income                                         51,854       21,936       57,457       36,940

General and administrative expense                       (3,684)      (2,131)      (6,403)      (4,131)
Expense from unit ownership plans                            --         (230)        (400)        (230)
Interest and other, net                                  (2,429)      (2,424)      (4,656)      (4,875)
                                                       --------     --------     --------     --------

Net income                                             $ 45,741     $ 17,151     $ 45,998     $ 27,704
                                                       ========     ========     ========     ========

Net income per unit                                    $   1.32     $   0.50     $   1.33     $   0.80
                                                       ========     ========     ========     ========

Net income per unit - diluted                          $   1.31     $   0.49     $   1.31     $   0.80
                                                       ========     ========     ========     ========

Number of units used in computing per unit amounts:
 Net income per unit                                     34,546       34,412       34,540       34,552
 Net income per unit - diluted                           35,005       34,689       34,995       34,751

Cash distributions per unit:
 Regular                                               $   0.10     $   0.10     $   0.20     $   0.20
 Special                                                                             0.12         0.08
</TABLE>


<PAGE>   3

Part I. Financial Information                                                 3.
Item 1. Financial Statements

CONSOLIDATED  BALANCE  SHEETS
<TABLE>
<CAPTION>
                                                                      June 30,             December 31,
In thousands                                                            1998                   1997
---------------------------------------------------                  ----------            ------------
                                                                     Unaudited
ASSETS

                                                                           
<S>                                                                  <C>                    <C>     
 Cash and cash equivalents                                           $ 39,321               $  2,770

 Accounts and notes receivable                                         15,275                 19,027

 Land under development                                                53,696                 53,875

 Land held for future development                                      30,792                 32,551

 Income-producing properties, net                                     209,329                227,203

 Property and equipment, net                                           57,058                 54,876

 Other assets and deferred charges                                     14,674                 13,630
                                                                     --------               -------- 
                                                                     $420,145               $403,932
                                                                     ========               ======== 


LIABILITIES AND PARTNERS' CAPITAL

 Accounts payable                                                    $ 28,451               $ 18,529

 Accrued expenses                                                      40,333                 39,635

 Deferred revenues                                                     22,482                  3,152

 Mortgage and other debt                                              105,055                156,946

 Advances and contributions from developers for
   utility construction                                                21,140                 18,845

 Other liabilities                                                     21,920                 21,548
                                                                     --------               -------- 
        Total liabilities                                             239,381                258,655

 Partners' capital

  34,545 units outstanding, excluding 2,227 
     units in treasury, at June 30, 1998 and
  34,527 units outstanding, excluding 2,245
     units in treasury, at December 31, 1997                          180,764                145,277
                                                                     --------               -------- 
                                                                     $420,145               $403,932
                                                                     ========               ======== 
</TABLE>



<PAGE>   4

Part I. Financial Information                                                 4.
Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
                                                                             Six Months Ended
In thousands                                                                     June 30
------------------------------------------------------                     --------------------
                                                                            1998          1997
                                                                           ------        ------
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                       <C>          <C>      
  Net income                                                              $  45,998    $  27,704

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

    Depreciation and amortization                                             4,758        4,648
    Increase in land under development                                      (28,333)     (28,913)
    Cost of sales and other inventory changes                                28,512       18,050
    Decrease in accounts and notes receivable                                 3,752        5,937
    Increase in accounts payable, accrued expenses
       and deferred revenues                                                 29,950        1,248
    Cost of property sold                                                    60,299        7,390
    Other adjustments, net                                                      494          618
                                                                          ---------    ---------

  Net cash provided by operating activities                                 145,430       36,682
                                                                          ---------    ---------


CASH FLOWS FROM INVESTING ACTIVITIES:

  Development of income-producing properties                                (44,796)     (31,820)
  Purchase of property and equipment                                         (3,850)      (2,707)
  Investment in joint venture                                                  (126)        (425)
                                                                          ---------    ---------

  Net cash used in investing activities                                     (48,772)     (34,952)
                                                                          ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Distributions paid                                                        (11,053)      (9,689)
  (Decrease) increase in mortgage and other debt                            (51,891)      12,436
  Increase in advances and contributions from
     developers for utility construction                                      2,295          557
  Purchase of partnership units                                                  --       (5,746)
  Other, net                                                                    542          706
                                                                          ---------    ---------

  Net cash used in financing activities                                     (60,107)      (1,736)
                                                                          ---------    ---------


NET INCREASE (DECREASE)  IN CASH AND CASH EQUIVALENTS                        36,551           (6)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                2,770        2,412
                                                                          ---------    ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $  39,321    $   2,406
                                                                          =========    =========
</TABLE>


<PAGE>   5

Part I. Financial Information                                                 5.
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
substantially 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, 1998 and 1997 have been
made. Certain reclassifications have been made to prior periods' amounts to
conform to the current period presentation.


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 25 through
32 of the December 31, 1997 Annual Report to Partners and particularly to Note 2
which includes a summary of significant accounting policies.


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

o        Real estate 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.

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

o        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>
(In $000)                                          June 30,   December 31,
                                                     1998        1997
                                                 -----------  -----------
Valencia                                         (Unaudited)
<S>                                                <C>         <C>    
    Residential land development                   $ 1,780     $ 3,700
    Industrial and commercial land development      31,882      38,190
    Homes completed or under construction
         with venture partners                      18,022      11,799
Agriculture                                          2,012         186
                                                   -------     -------
         Total land under development              $53,696     $53,875
                                                   =======     =======
</TABLE>


--------------------------------------------------------------------------------
Note 3.  Amounts per Partnership Unit
     Unaudited
<TABLE>
<CAPTION>

                                               Income        Units      Per Unit
     (in 000's except per unit)              (numerator) (denominator)
     --------------------------              ----------- -------------  --------
<S>                                            <C>          <C>          <C>   
     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        (0.01)
                                               -------     -------       ------ 
     Net income per unit - diluted             $45,741      35,005       $ 1.31
                                               =======     =======       ====== 
</TABLE>

<PAGE>   6

<TABLE>
Part I. Financial Information                                                 6.
Item 1. Financial Statements

Note 3.  Amounts per Partnership Unit (continued)

<S>                                       <C>          <C>        <C>
For three months ended June 30, 1997
NET INCOME PER UNIT
  Net income available to unitholders     $17,151      34,412     $   0.50
EFFECT OF DILUTIVE SECURITIES
  Unit options                                 --         277        (0.01)
                                          -------      ------     --------
Net income per unit - diluted             $17,151      34,689     $   0.49
                                          =======      ======     ========

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        (0.02)
                                          -------      ------     --------
Net income per unit - diluted             $45,998      34,995     $   1.31
                                          =======      ======     ========
For six months ended June 30, 1997
NET INCOME PER UNIT
  Net income available to unitholders     $27,704      34,552     $   0.80
EFFECT OF DILUTIVE SECURITIES
  Unit options                                 --         199        --
                                          -------      ------     --------
Net income per unit - diluted             $27,704      34,751     $   0.80
                                          =======      ======     ========
</TABLE>



<PAGE>   7

Part I. Financial Information                                                 7.
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 1998 to
                     Second Quarter and Six Months of 1997

<TABLE>
<CAPTION>
                                                          Second Quarter                Six Months
                                                      -----------------------    -----------------------
                                                                   Increase                   Increase
Unaudited                                                          (Decrease)                 (Decrease) 
                                                      -----------------------    -----------------------
                                                       Amount           %         Amount          %
                                                      ---------     ---------    ---------     ---------
<S>                                                   <C>                 <C>    <C>                 <C> 
REVENUES
  Real Estate
    Residential home and land sales                   $  22,503           173%   $  25,727           140%
    Industrial and other sales                           95,003          1811%      77,911           312%
    Commercial operations
        Income-producing properties                       1,988            25%       3,644            23%
        Valencia Water Company                             (785)          -26%        (892)          -18%
                                                      ---------     ---------    ---------     ---------
                                                        118,709           409%     106,390           166%
  Agriculture
     Operations                                            (239)          -13%        (482)          -17%
     Ranch sales                                        (17,900)         -100%     (17,577)          -98%
                                                      ---------     ---------    ---------     ---------
Total revenues                                        $ 100,570           206%   $  88,331           104%
                                                      =========     =========    =========     =========

CONTRIBUTION TO INCOME
  Real Estate
    Residential home and land sales                   $  16,146          1063%   $  17,997          2406%
    Industrial and other sales                           29,972          2828%      16,570           119%
    Community development                                   275            10%         740            15%
    Commercial operations
        Income-producing properties                       1,332            35%       2,630            33%
        Valencia Water Company                             (455)          -52%        (519)          -42%
                                                      ---------     ---------    ---------     ---------
                                                         47,270          1075%      37,418           198%
  Agriculture
    Operations                                             (402)          -68%        (274)          -24%
    Ranch sales                                         (16,950)         -100%     (16,627)          -98%
                                                      ---------     ---------    ---------     ---------

 Operating income                                        29,918           136%      20,517            56%

    General and administrative expense                   (1,553)          -73%      (2,272)          -55%
    Expense from unit ownership plans                       230           100%        (170)          -74%
    Interest and other, net                                  (5)            0%         219             4%
                                                      ---------     ---------    ---------     ---------

 Net income                                           $  28,590           167%   $  18,294            66%
                                                      =========     =========    =========     =========

Net income per unit                                   $    0.82           164%   $    0.53           66%
                                                      =========     =========    =========     =========
Net income per unit - diluted                         $    0.82           167%   $    0.51            64%
                                                      =========     =========    =========     =========

Number of units used in computing per unit amounts:
Net income per unit                                         134             0%         (12)            0%
                                                      =========     =========    =========     =========
Net income per unit - diluted                               316             1%         244             1%
                                                      =========     =========    =========     =========
</TABLE>


<PAGE>   8

Part I. Financial Information                                                 8
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 1998 second quarter, revenues totaled $149.3 million and income totaled
$45.7 million compared to revenues for the 1997 second quarter of $48.7 million
and income of $17.2 million. For the six months ended June 30, 1998, revenues
totaled $173.1 million and income totaled $46.0 million. This compares with
revenues of $84.7 million and income of $27.7 million for the six months ended
June 30, 1997. The increases in revenues and income for the three and six month
periods are attributable to the sale of Valencia Marketplace, a
720,000-square-foot, high-volume retail center, which contributed $85.3 million
to revenues and $30.4 million to income. In addition, sale of two large,
entitled, unimproved parcels totaling 903 residential lots, which combined added
$32.0 million to revenues and $18.6 million to income, also contributed to the
increases.

RESIDENTIAL HOME AND LAND SALES

The Company generates revenues and income from Valencia residential projects by
selling residential lots to merchant builders and home sales through joint
ventures. 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 in home construction on lots it
owns by establishing joint ventures with builders who have created innovative
new home designs, targeting niche markets unmet by merchant builders. Through
the joint-venture program, the Company records its portion of revenues and
income upon close of escrow to the homebuyer. The Company's participation in
joint ventures enables it to generate increased income as it receives a portion
of the homebuilding profits in return for sharing in the risk of homebuilding,
and in some cases, financing the construction costs.

Second quarter new home sales in Valencia by merchant builders and the Company's
joint ventures totaled 160, slightly below the 166 recorded in the 1997 second
quarter and the 170 homes sold during the 1998 first quarter. The decline was
due to the timing of new inventory coming on line to replace sold-out projects.
When combining homes sold and reserved during the second quarter, the total was
11% above the year earlier quarter. The 1998 second quarter sales represents a
57% share of new home sales in the Santa Clarita Valley, compared with 45% in
the 1997 second quarter.

In a strong real estate market, the Company's strategy is to increase
residential absorption by concentrating on lot sales to merchant builders with
less emphasis on homebuilding joint ventures. As a result, joint venture home
sales will be lower compared to prior periods.

Merchant Builder Program

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.

Results for the second quarter and six months of 1997 included the sale of 94
residential lots in Valencia NorthPark which added $4.0 million to revenues and
$1.2 million to income. Results also included revenues of $1.1 million and
income of $343,000 from prior residential lot sales under percentage of
completion accounting.

At June 30, 1998, 168 improved lots for higher density housing were in escrow
for $6.2 million with escrow expected to close in the third quarter. All escrow
closings are subject to market and other conditions. At June 30, 1997, a total
of 660 residential lots were in escrow for approximately $35 million.

Joint Venture Program

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. At June 30, 1998,
there were 39 joint-venture homes in escrow. An additional 76 homes are
reserved, 69 of which are Cheyenne townhomes, the Company's 166-home joint
venture with EPAC Development, where escrow closings are expected to begin in
the third quarter. The remainder is at Avignon, a joint venture with EPAC for 76
luxury townhomes, where, in addition, 24 homes are in escrow. With the Company's

<PAGE>   9

Part I. Financial Information                                                 9.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


emphasis on lot sales to merchant builders, joint-venture home sales in 1998
will represent a smaller portion of total home sales.

INDUSTRIAL AND COMMERCIAL SALES

On June 5, 1998, the Company announced that escrow closed on Valencia
Marketplace, a 720,000-square-foot high volume retail center, for $111 million
cash. The Company recognized $85.3 million in revenues and $30.4 million in
income under percentage of completion accounting. The sale is expected to
generate additional revenues of approximately $22 million and earnings of
approximately $8 million. Factors which may impact estimates of revenues and
earnings relate primarily to the timing and cost of completing construction and
leasing. The difference between the sales price and the revenues to be
recognized is approximately $4 million, which is the Company's estimated
obligation to complete the lease-up of the center. Construction is 85% complete
and the center is 91% leased.

Also included in 1998 second quarter results are escrow closings on an
industrial parcel totaling 4.8 acres contributing $2.2 million to revenues and
$500,000 to income; two industrial buildings, constructed as part of the
Company's build-to-suit/lease program, adding $10.6 million to revenues and
$786,000 to income; and three small commercial parcels totaling 4.6 acres for
$1.5 million adding $433,000 to income.

In the 1997 second quarter, a 5.2-acre parcel in Valencia Industrial Center and
a 1.4-acre commercial parcel closed escrow adding $3.0 million to revenues and
$1.4 million to income. Also completed during the quarter was the sale of
Orchard Plaza, a 17,400-square-foot office building, for $2.2 million
contributing $618,000 to income. Results for the 1997 six-month period also
include sale of the 208-unit StoneCreek apartment complex contributing $18.3
million to revenues and $12.9 million to income and sale of a 2.1-acre
commercial parcel adding $1.5 million to revenues and $1.0 million to income.

At June 30, 1998, seven industrial parcels totaling 90.8 acres were in escrow
for $46.6 million and 14.3 commercial acres were in escrow for $4.8 million,
including a 12.6-acre, restricted use site for a senior apartment project with
low land values which has subsequently closed escrow. In addition, the Company's
remaining building on 2.1 acres in Valencia Industrial Center is in escrow for
$1.5 million. The above remaining escrows are expected to close during the
balance of the year. All escrow closings are subject to market and other
conditions. At June 30, 1997, a total of seven parcels encompassing 23.7
industrial acres and 22.4 commercial acres were in escrow.


COMMUNITY DEVELOPMENT

The Company's community development activities are focused on securing the
necessary governmental land use approvals as well as an intensified strategic
marketing program to support the build-out of Valencia by 2005 and begin the
development of Newhall Ranch, the next new town to be developed 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 or governmental approvals.

The Company has entered certain agreements in the continuing entitlement process
for Newhall Ranch. This includes an executed agreement with a school district
that will contribute toward the educational facilities for the future community.
The Los Angeles County Board of Supervisors provided specific direction on
Newhall Ranch in a motion on July 28, 1998 and requested that the project be
brought back for discussion and action on October 27, with final approval
possible before year end.

The first hearing was held in May before the Los Angeles County Regional
Planning Commission on the revised plan and the Environmental Impact Report for
the Westridge Golf Course Community. Additional hearings are scheduled for this
summer. The project is expected to go to the Los Angeles County Board of
Supervisors later this year or in early 1999. Additionally, all documents are
being finalized with the PGA for the Tournament Players Club championship golf
course, expected to be the only TPC operated course in California.

<PAGE>   10

Part I. Financial Information                                                10.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


Entitlement-related expenses decreased by 10% and 15% from the prior year three-
and six-month periods primarily due to final approvals received in 1997 for
several projects in Valencia. The Company will continue to focus on obtaining
additional residential entitlements in Valencia to meet the accelerated pace of
development to support forecasted demand. Entitlement efforts for Newhall Ranch
are expected to escalate in 1998 as the Los Angeles County Board of Supervisors
continues its review process. Community development expenses in 1998 are
expected to increase by approximately 20% over 1997.

INCOME-PRODUCING PROPERTIES

The Company's commercial portfolio is a relatively stable source of earnings and
cash flow that provides debt capacity to grow the Company and working capital
for continuing operations. For the 1998 second quarter, revenues from the
commercial portfolio increased 25% and income increased 35% and, for the
six-month period, revenues increased 23% and income increased 33%. High
occupancy rates and favorable rents throughout the portfolio and income from new
projects contributed to the increases from the corresponding prior year periods.
Also, the absence of depreciation on Valencia Marketplace, from the time it was
declared available for sale through close of escrow, contributed to higher
earnings for both the second quarter and first half of 1998.

The six-story, 250-room Hyatt Valencia Hotel with a 26,000-square-foot
conference center will open this August. Also under construction adjacent to the
hotel is a 26,000-square-foot retail building, which is expected to be completed
later this year.

Three additional projects are scheduled for completion this fall. The
124,000-square-foot, six-story office building for Princes Cruises on Town
Center Drive will open in November and accommodate 700 employees on the top five
floors with the ground floor reserved for retail space. Additionally, 62,000
square feet of retail/office expansion in two buildings adjacent to Valencia
Town Center mall is expected to be completed in time for the holiday shopping
season.

Construction has begun on the 125,000-square-foot entertainment complex which
will include an IMAX 3-D Theatre, 11 additional Edwards movie screens, a Borders
bookstore, restaurants and other retail space. The complex is scheduled to open
in mid-1999.

Valencia Town Center shopping mall and the Company's neighborhood shopping
centers continue to show strong results. A Mimi's Cafe opened in May at River
Oaks shopping center, with one of the restaurant chain's strongest openings.
Remodeling of this shopping center has started and completion is expected before
the holiday shopping season. A 16,700-square-foot Rite-Aid drug store with
another 5,600 square feet available for other new retailers is under
construction at NorthPark Village Square, the Company's newest neighborhood
shopping center.

The income portfolio's three apartment buildings have strong occupancy rates,
with 97% of the units leased and occupied at the end of the 1998 second quarter.
Continued demand for rental units has enabled the Company to increase rents for
new tenants. Market rents have been raised approximately 12% for new tenants
over the past year. To meet growing demand, construction is underway on the
210-unit Valencia Town Center apartment complex, adjacent to Valencia Country
Club. This project is the first of a 1,000-unit apartment program to be started
over the next several months. The 1,000 units are part of eight apartment
projects totaling over 2,500 units planned during the build-out of Valencia.

Income from the commercial portfolio for the full year is expected to increase
approximately 15% over 1997 due to the completion of several new commercial
properties in 1998, along with high occupancy rates and rents from existing
portfolio projects more than offsetting the sale of Valencia Marketplace in
June, 1998.

VALENCIA WATER COMPANY

Valencia Water Company is a regulated public utility and a wholly-owned
subsidiary of the Company serving over 18,000 metered customers in the Valencia
area. Revenues and income for the 1998 second quarter declined 26% and 52%,
respectively. For the six-month period, revenues declined 18% and income 42%.
The declines were a 

<PAGE>   11

Part I. Financial Information                                                11.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


result of heavy rains and lower demand for water. By year-end, the declines are
expected to be partially offset by increases in the water utility's customer
base.

AGRICULTURAL OPERATIONS

For the second quarter and six-months of 1998, revenues and income from
agriculture, including the Company's energy operations, were below year earlier
levels. The declines primarily were due to lower oil and gas prices, reduced
yields from certain crops to heavy rains, and expenses incurred in connection
with storm damage.

Ranch Sales

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. At
June 30, 1998, a 970-acre parcel at the Merced Ranch was in escrow for $1.1
million. The sale closed escrow in July and will contribute approximately
$720,000 to third quarter income. The Company continues to market the remaining
2,970 acres at the Merced Ranch which are being leased while awaiting sale.

During the 1997 second quarter, 1,673 acres of vineyard and undeveloped land at
the 38,000-acre Suey Ranch were sold for $17.9 million, contributing $17.0
million to income. The sale of this parcel enabled the Company to realize
historically high vineyard values.

GENERAL AND ADMINISTRATIVE EXPENSES

A $1.6 million, or 73%, increase and a $2.3 million, or 55%, increase in general
and administrative expenses from the 1997 second quarter and six-month period,
respectively, are primarily due to training expenses associated with the planned
replacement of the Company's computerized accounting system, consulting services
associated with an improving real estate market and accrued incentive
compensation based on the Company's higher earnings. The rate of increase in
general and administrative expenses for the remainder of the year is not
expected to be as high as the first six months and expenses for the year are
expected to increase by more than 30% over 1997.

Expense from Unit Ownership Plans

In the 1998 first quarter, 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 1998 second quarter or in the prior year three- and six-month
periods.

Interest and Other

An increase in interest capitalized to income portfolio projects, offset by a
reduction in interest income due to collection of notes from prior land sales,
contributed to net interest expense being approximately the same as the 1997
second quarter and decreasing by 4% compared to the prior year six-month period.
The Company expects net interest expense for 1998 to be approximately the same
as the prior year.


                               FINANCIAL CONDITION


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998, the Company had cash and cash equivalents of $39.3 million and
$229 million in available lines of credit and a revolving mortgage facility to
fund development activities. There were no borrowings outstanding against
unsecured lines of credit or a revolving mortgage facility. The Company believes
it has adequate sources of cash from operations and debt capacity, including
lines of credit, to finance future operations plus take advantage of new
development opportunities. At June 30, 1998, there was no debt against raw land
or land under development inventories.

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. The Company expects to invest over 

<PAGE>   12

Part I. Financial Information                                                12.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


$100 million in its commercial portfolio in 1998. Construction of new
income-producing properties on Company-owned land creates additional debt
capacity.

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

OPERATING ACTIVITIES

Net cash provided by operating activities for the six months ended June 30, 1998
totaled $145.4 million and included the sale of Valencia Marketplace for $111
million cash. Also, sales of 995 residential lots and homes, 19.2 acres of
industrial land, including three build-to-suit buildings, and 4.6 commercial
acres combined provided $61.2 million cash. In addition, notes totaling $2.8
million from land sales in prior years were collected during the period.

Expenditures for land under development inventories and home construction
totaled $28.3 million during the first six months of 1998,which was offset by
$28.5 million in real estate cost of sales relief. Inventory expenditures in
Valencia were related to land preparation and infrastructure to ready land for
development or sale and home construction advances for the Company's
homebuilding partnerships. The Company's net homebuilding investment totaled
$18.0 million at June 30, 1998.

INVESTING ACTIVITIES

Expenditures for development of income-producing properties in Valencia totaled
$44.8 million for the six months ended June 30, 1998. Major expenditures include
$7.3 million for Valencia Marketplace; $13.4 million for the 250-room Hyatt
Valencia Hotel and Conference Center; $4.6 million for a six-story office
building to be occupied by Princess Cruises; $3.6 million for industrial
buildings under the build-to-suit/lease program; and $12.6 million for various
retail/office/entertainment projects in Valencia Town Center. Property and
equipment expenditures during the period are primarily related to water utility
construction costs.

FINANCING ACTIVITIES

Distributions totaling $11.1 million have been paid year-to-date consisting of
two quarterly distributions of $.10 per unit each and a special distribution of
$.12 per unit. An additional quarterly distribution of $.10 per partnership unit
was declared on July 15, 1998, payable September 7, 1998. 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 taking into account the Company's earnings, financial
condition and prospects.

Upon sale of Valencia Marketplace on June 5, 1998 for $111 million cash, the
Company paid off all outstanding borrowings against unsecured lines of credit
and a revolving mortgage facility. By the end of 1998, the Company expects the
total debt level against these lines to be above the 1997 year-end level of
$48.1 million due to the Company's anticipated expenditures of over $100 million
in 1998 to expand its income portfolio.

YEAR 2000 ISSUE

The Company conducted a comprehensive review of its internal computer systems in
1997 to assess the Year 2000 issue. As a result of this review, and for other
strategic reasons, the Company is in the process of replacing its computerized
accounting system by the end of 1998. The cost of this new system is
approximately $1 million and is being capitalized and amortized over its useful
life. The Company is modifying other existing software to be Year 2000 compliant
and these costs are being expensed as incurred. The Company has contacted its
primary vendors to receive confirmation on their Year 2000 compliance as well.
The Company anticipates substantial completion of changes for the Year 2000
issue by December 31, 1998, allowing adequate time for testing. The Company does
not expect total expenditures for the above to have a material impact on its
results of operations, liquidity or capital resources.


<PAGE>   13

Part I. Financial Information                                                13.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


INFLATION, RISKS AND RELATED FACTORS AFFECTING FORWARD-LOOKING INFORMATION

This report and other published reports contain forward-looking statements
regarding the status of proposed or pending sales and rental activity, future
planned development, plus the long-term growth goals for the Company. These
forward-looking statements made in this report are based on present trends the
Company is experiencing in residential, industrial and commercial markets. 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 are 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.

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 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
shown improvements recently, 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. While the Company recently has
continued to increase its market share at both the local and the county level,
new competition is expected to deliver competing projects in the future that
could reverse this trend.

Geographic Concentration: The Company's real estate development activities are
focused on its 20,000 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 or 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 complying 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 

<PAGE>   14

Part I. Financial Information                                                14.
Item 2. Management's Discussion and Analysis of Financial Condition and Results 
of Operations.


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 any 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 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.

Part II.  Other Information

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):

     27       Financial Data Schedule

(b)  The following report was filed on Form 8-K in the second quarter ended June
     30, 1998 

     Date of Report          Item Reported            Financial Statements Filed
     ---------------------------------------------------------------------------
     June 5, 1998     Sale of Valencia Marketplace               None


                                   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: July 29, 1998           By    / S / THOMAS L. LEE
                                   ---------------------------------------------
                                     Thomas L. Lee, Chairman and Chief Executive
                                     Officer of Newhall Management Corporation
                                     (Principal Executive Officer)


Date: July 29, 1998           By    / S / STUART R. MORK
                                   ---------------------------------------------
                                     Stuart R. Mork, Senior Vice President and 
                                     Chief Financial Officer of Newhall 
                                     Management Corporation
                                     (Principal Financial Officer)


Date: July 29, 1998           By    / S / DONALD L. KIMBALL
                                   ---------------------------------------------
                                     Donald L. Kimball, Vice President - Finance
                                     and Controller of Newhall Management 
                                     Corporation (Principal Accounting Officer)