<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 September 30, 1996

                                       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 September 30, 1996         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           Nine Months Ended
                                                September 30                September 30       
                                        --------------------------   --------------------------
In thousands except per unit                1996          1995           1996          1995    
-----------------------------------------------------------------------------------------------
<S>                                         <C>           <C>           <C>           <C>
REVENUES

Real estate
    Residential home and land sales
      Valencia                              $23,120        $9,086        $49,750       $27,017
      McDowell Mountain Ranch                               3,169         49,101         6,552
    Industrial and other sales                2,049        10,459          4,455        35,602
    Commercial operations                    10,365        10,103         27,835        28,446 
                                        ------------  ------------   ------------  ------------
                                             35,534        32,817        131,141        97,617 
                                        ------------  ------------   ------------  ------------
Agriculture
    Operations                                3,030         2,999          5,475         5,720
    Ranch sales                                 600         7,428          6,745         7,428 
                                        ------------  ------------   ------------  ------------
                                              3,630        10,427         12,220        13,148 
                                        ------------  ------------   ------------  ------------

   Total revenues                           $39,164       $43,244       $143,361      $110,765 
                                        ============ =============   ============  ============

CONTRIBUTION TO INCOME

Real estate
    Residential home and land sales
      Valencia                               $6,332          $354         $8,922        $1,497
      McDowell Mountain Ranch                                 400         25,954           461
    Industrial and other sales                 (616)        2,131         (1,234)       15,782
    Community development                    (2,625)       (1,773)        (7,996)       (3,981)
    Commercial operations                     4,740         4,465         12,796        13,427 
                                        ------------  ------------   ------------  ------------
                                              7,831         5,577         38,442        27,186 
                                        ------------  ------------   ------------  ------------
Agriculture
    Operations                                  285           538          1,332         1,285
    Ranch sales                                 472         4,629          6,344         4,629 
                                        ------------  ------------   ------------  ------------
                                                757         5,167          7,676         5,914 
                                        ------------  ------------   ------------  ------------

Operating income                              8,588        10,744         46,118        33,100

General and administrative expense           (1,911)       (1,905)        (6,339)       (6,220)
Interest and other, net                      (2,509)       (2,586)        (6,908)       (8,093)
                                        ------------  ------------   ------------  ------------

Net income                                   $4,168        $6,253        $32,871       $18,787 
                                        ============ =============   ============  ============

Net income per unit                           $0.12         $0.18          $0.93         $0.52 
                                        ============ =============   ============  ============

Number of units used in computing per
 unit amounts                                35,269        36,176         35,507        36,281

Cash distributions per unit                    $.10          $.10           $.30          $.30
</TABLE>
<PAGE>   3
Part I. Financial Information                                                 3.
Item 1 - Financial Statements


CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                       September 30,       December 31,
In thousands, except units                                 1996                1995     
----------------------------------------------------------------------------------------
                                                         Unaudited
<S>                                                        <C>                 <C>
ASSETS

 Cash and cash equivalents                                   $4,222              $4,285

 Accounts and notes receivable                               16,222              25,156


 Land under development                                      75,542              88,457

 Land held for future development                            32,371              32,459


 Property and equipment, net                                237,456             186,697

 Other assets and deferred charges                           13,913              12,699 
                                                       -------------       -------------

                                                           $379,726            $349,753 
                                                       =============       =============


LIABILITIES AND PARTNERS' CAPITAL

 Accounts payable                                           $14,830             $11,285

 Accrued expenses                                            35,962              32,999

 Deferred revenues                                            1,482               4,041

 Mortgage and other debt                                    166,171             152,302

 Advances and contributions from developers for
   utility construction                                      18,603              17,811

 Other liabilities                                           20,311              18,459 
                                                       -------------       -------------

        Total liabilities                                   257,359             236,897

 Partners' capital
  35,165,426 units outstanding, excluding 1,606,717
     units in treasury, at September 30, 1996 and
  35,910,243 units outstanding, excluding 861,900
     units in treasury, at December 31, 1995                122,367             112,856 
                                                       -------------       -------------
                                                           $379,726            $349,753 
                                                       =============       =============
</TABLE>
<PAGE>   4
Part I. Financial Information                                                 4.
Item 1 - Financial Statements


CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited

<TABLE>
<CAPTION>
                                                               Nine Months Ended
                                                                  September 30       
                                                           --------------------------
In thousands                                                  1996            1995   
-------------------------------------------------------------------------------------
<S>                                                          <C>             <C>
Cash flows from operating activities

Net income                                                   $32,871         $18,787

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

    Depreciation and amortization                              5,799           5,674
    Decrease (increase) in land development inventories       12,915         (20,460)
    Decrease in accounts and notes receivable                  8,934           1,809
    Increase (decrease) in accounts payable,
       accrued expenses and deferred revenues                  3,949          (5,114)
    Cost of property sold                                        409          12,657
    Other adjustments, net                                       943             829 
                                                           ----------      ----------

  Net cash provided by operating activities                   65,820          14,182 
                                                           ----------      ----------


Cash flows from investing activities

  Purchase of property and equipment                         (56,879)        (10,644)
                                                           ----------      ----------


Cash flows from financing activities

  Distributions paid                                         (10,622)        (10,910)
  Increase in mortgage and other debt                         31,000          26,243
  Decrease in mortgage and other debt                        (17,131)        (14,910)
  Increase in advances and contributions from
     developers for utility construction                         792           2,349
  Purchase of partnership units                              (13,043)         (8,547)
                                                           ----------      ----------

  Net cash used by financing activities                       (9,004)         (5,775)
                                                           ----------      ----------

Net decrease in cash and cash equivalents                        (63)         (2,237)

Cash and cash equivalents, beginning of period                 4,285           7,656 
                                                           ----------      ----------

Cash and cash equivalents, end of period                      $4,222          $5,419 
                                                           ==========      ==========
</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 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 nine months ended September 30, 1996 and 1995
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 31 of the December 31, 1995 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       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.

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 farm land 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)                                                      September 30,         December 31,
                                                                   1996                 1995     
                                                               ------------          ------------
                                                               (Unaudited)
<S>                                                            <C>                     <C>
Valencia                                                       
   Residential land development                                  $   8,305             $  1,848
   Industrial and commercial land development                       47,388               43,256
   Homes completed or under construction                                                       
   with venture partners                                            16,903               25,302
McDowell Mountain Ranch land development                                --               17,824
Agriculture                                                          2,946                  227
                                                                 ---------             --------
   Total land under development                                  $  75,542             $ 88,457
                                                                 =========             ========
</TABLE>

--------------------------------------------------------------------------------
Note 3. Details for Earnings per Unit Calculation

<TABLE>
<CAPTION>
                                                         Three months ended                 Nine months ended
                                                           September 30,                      September 30,          
                                                  ------------------------------       ------------------------------
 (Unaudited)                                           1996             1995                1996              1995   
 -----------                                      --------------  ---------------      --------------   -------------
<S>                                                 <C>               <C>                <C>               <C>
Average number of units
   outstanding during the period                    35,164,797        36,170,831         35,384,490        36,278,706
Net units issuable in connection with
   dilutive options based upon use
   of the treasury stock method                        104,233             4,702            122,852             2,495
                                                    ----------        ----------         ----------        ----------
Average number of primary units                     35,269,030        36,175,533         35,507,342        36,281,201
                                                    ==========        ==========         ==========        ==========
</TABLE>
<PAGE>   6
Part I. Financial Information                                                 6.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


                             RESULTS OF OPERATIONS

                           (in $000, except per unit)

Comparison of Third Quarter and Nine Months 1996 to Third Quarter and Nine
Months 1995 (unaudited)

The amounts of increase or decrease in revenues and income from the prior year
periods are as follows:

<TABLE>
<CAPTION>
                                                 Increase / (Decrease)       Increase / (Decrease)  
                                              --------------------------  --------------------------
                                                      Three Months                Nine Months       
                                              --------------------------  --------------------------
                                                 Amount          %           Amount          %      
                                              ------------  ------------  ------------  ------------
<S>                                               <C>              <C>       <C>               <C>
REVENUES
  Real estate
    Residential home and land sales
        Valencia                                  $14,034           154%      $22,733            84%
         McDowell Mountain Ranch                   (3,169)         -100%       42,549           649%
    Industrial and other sales                     (8,410)          -80%      (31,147)          -87%
    Commercial operations                             262             3%         (611)           -2%
  Agriculture
     Operations                                        31             1%         (245)           -4%
     Ranch sales                                   (6,828)          -92%         (683)           -9%
                                              ------------  ------------  ------------  ------------

                                                  $(4,080)           -9%      $32,596            29%
                                              ============  ===========   ============  ============

CONTRIBUTION TO INCOME
  Real estate
    Residential home and land sales
        Valencia                                   $5,978          1689%       $7,425           496%
         McDowell Mountain Ranch                     (400)         -100%       25,493          5530%
    Industrial and other sales                     (2,747)         -129%      (17,016)         -108%
    Community development                            (852)          -48%       (4,015)         -101%
    Commercial operations                             275             6%         (631)           -5%
  Agriculture
    Operations                                       (253)          -47%           47             4%
    Ranch sales                                    (4,157)          -90%        1,715            37%
                                              ------------  ------------  ------------  ------------

 Operating income                                  (2,156)          -20%       13,018            39%

    General & Administrative expense                   (6)            0%         (119)           -2%
    Interest and other, net                            77             3%        1,185            15%
                                              ------------  ------------  ------------  ------------

 Net income                                       $(2,085)          -33%      $14,084            75%
                                              ============  ===========   ============  ============

 Net income per unit                               $(0.06)          -33%        $0.41            79% 
                                              ============  ===========   ============  ============

  Number of units used in computing
  per unit amounts                                  (907)           (3)%       (774)            (2)%
                                              ============  ===========   ============  ============
</TABLE>
<PAGE>   7
Part I. Financial Information                                                 7.

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 nine
months are attributable to the following:

For the quarter ended September 30, 1996, revenues totaled $39.2 million and
net income totaled $4.2 million, compared to revenues for the 1995 third
quarter of $43.2 million and net income of $6.3 million.  The sale of 491
entitled, unimproved residential lots in Castaic, a community north of
Valencia, was completed in the 1996 third quarter adding approximately $4.5
million to revenues and $4.3 million to operating income.  Included in the 1995
third quarter results was the sale of 5,501 acres of the Merced Ranch which
added $7.4 million to revenues and $4.6 million to operating income.

Nine month results for 1996 benefited from the second quarter sale of McDowell
Mountain Ranch in Scottsdale, Arizona, which contributed $43.6 million in
revenues and $24.4 million to operating income.  The improved earnings in 1996
were partially offset by increased expenditures for obtaining government
approvals for new projects.

RESIDENTIAL HOME AND LAND SALES

VALENCIA

The Company generates revenues and income from Valencia residential projects in
two ways.  Through the merchant builder program, residential lots are sold to
builders to construct homes.  Generally, revenues and income are recorded upon
sale of the lots to the builder.  Through the joint venture program, the
Company participates in home construction on lots owned by the Company by
establishing homebuilding joint ventures and partnerships with builders who
have created innovative new home designs.  Here, the Company recognizes its
portion of revenues and income upon close of escrow to the homebuyer and
generally enjoys increased income as it receives a portion of the homebuilding
profits in return for participating in the risk of homebuilding and financing
the construction costs.

New home sales in Valencia by merchant builders and joint ventures totaled 148
homes in the 1996 third quarter, up from 133 homes sold in the year earlier
quarter.  For the nine months ended September 30, 1996, new home sales by
merchant builders and joint ventures totaled 457 homes, a 42% increase from the
1995 nine-month period when 321 new homes were sold. In addition, Valencia
captured a 49% market share of new home sales in the Santa Clarita Valley
through the 1996 third quarter and nearly a 12% market share for all of Los
Angeles County through the 1996 second quarter, the last reported period. While
the Company does not participate in the revenues and income from home sales by
merchant builders, the absorption of these previously sold lots is key to the
Company's future success in selling additional lots to merchant builders.

Merchant Builder Program

Results for the 1996 third quarter include the sale of 48 lots in NorthPark to
Presley Homes for $3.7 million which contributed $1.0 million to income and the
sale of 491 unimproved residential lots in Castaic, a community north of
Valencia, for $4.5 million which contributed $4.3 million to income. The 1996
nine month period also includes the sale of 58 residential lots contributing
$4.1 million to revenues and $1.1 million to income, plus recognition of $1.3
million of deferred revenues and $266,000 of income from lot sales to merchant
builders in prior years.  No deferred revenues or income were recognized in the
1996 third quarter.

In the 1995 third quarter, revenues and income from the merchant builder
program consisted of recognition of deferred revenues and income totaling
$566,000 and $66,000, respectively, from lot sales in prior years.  No
residential lot sales to merchant builders closed escrow in the 1995 third
quarter.  Results for the 1995 nine-month period included the sale of 19 lots
in NorthPark to Beazer Homes which contributed $1.5 million to revenues and
$568,000 to income plus $1.7 million of deferred revenues adding $204,000 to
income.

At September 30, 1996, a total of 212 single- and multi-family lots were in
escrow to four merchant builders with closings anticipated in the fourth
quarter.  All escrow closings are subject to market and other conditions.  At
September 30, 1995, the Company had approximately 300 single and multi-family
residential lots in escrow, including an escrow for the sale of 62 lots which
was subsequently cancelled.
<PAGE>   8
Part I. Financial Information                                                8.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


Joint Venture Program

In the 1996 third quarter, 71 homes closed escrow in seven projects
contributing $14.9 million to revenues and $1.5 million to income. This
represents a 69% increase in home closings from the prior year third quarter
when 42 closings in three projects contributed $8.5 million to revenues and
$1.0 million to income. For the 1996 nine-month period, 187 escrow closings
contributed $36.2 million to revenues and $3.9 million to income which
represents a 46% increase in closings from the 1995 comparable period when 128
closings contributed $23.8 million to revenues and $2.9 million to income.
Overall gross profit margins decreased slightly for the three- and nine-month
periods of 1996 primarily as a result of closing a greater number of
multi-family homes.

At September 30, 1996, the Company's three joint-venture partners, EPAC
Communities, RGC and Braemar Homes, had six projects underway. A seventh
project, Traditions, closed out during the quarter and two of the remaining
projects, Montana and The CourtHome Collection, are expected to be completed
during the fourth quarter of 1996 or first quarter of 1997. At the end of the
1996 third quarter, these joint ventures had a total of 50 homes in escrow,
compared with 63 escrows at the end of the same period last year.

With the completion of Montana, the Company is entering another joint venture
project, Montana II, with EPAC for approximately 60 townhomes.  Models are
expected to be ready by mid-1997. In addition, a new project with a fourth
joint venture partner, Warmington Homes, is starting for 72 homes with models
scheduled to open in January, 1997.

McDOWELL MOUNTAIN RANCH

On April 17, 1996, the Company completed the sale of the McDowell Mountain
Ranch project in Scottsdale, Arizona.  The sale contributed $43.6 million to
revenues and $24.4 million to income.  Results for the nine-month period also
include 219 lots sold in the first quarter of 1996 for $5.5 million adding $2.1
million to income.

The sale of 106 lots in the third quarter of 1995 contributed $3.2 million to
revenues and $1.1 million to income.  In addition, the sale 40 lots in the 1995
first quarter, finalization of builder lot premiums with a merchant builder and
recognition of deferred revenues combined contributed $3.4 million to revenues
and $1.5 million to income for the 1995 nine-month period.

INDUSTRIAL AND OTHER SALES

Decreases in revenues and income from the comparable 1995 third quarter and
nine-month period are primarily due to the 1995 sale of the ITT build-to-suit
on 10 acres in Valencia Commerce Center for $8.5 million contributing $1.6
million to income and sale of the Bouquet Shopping Center for $17.9 million
adding $11.0 million to income.  The Company expects revenues and income from
industrial and other sales for all of 1996 to be below the prior year due to
the absence of any significant commercial land sales.

Two industrial parcels totaling 6.2 acres closed escrow in the 1996 third
quarter contributing $2.0 million to revenues and $434,000 to income.  Results
for the 1996 nine-month period also include sale of a 2.7-acre commercial
parcel for $1.7 million adding $861,000 to income plus recognition of deferred
revenues of $713,000 adding $273,000 to income.

During the 1995 third quarter, the Company completed the sale of the ITT
build-to-suit on 10 acres in Valencia Commerce Center and two small commercial
parcels. These sales, combined with deferred income recognition from sales in
prior quarters, added $10.5 million to revenues and $2.7 million to income.
Results for the 1995 nine-month period also include the sale of Bouquet
Shopping Center for $17.9 million adding $11.0 million to income and escrow
closings on 15.9 commercial acres and a 1.1-acre industrial parcel which
combined generated $7.2 million in revenues and $3.7 million in income.

During the 1996 third quarter, a 5.7-acre parcel that had been in escrow was
canceled and the property is being re-marketed. At September 30, 1996, two
facilities in Valencia Commerce Center had opened escrows for a total of $16.5
million -- a 216,000-square-foot, build-to-suit for Remo, Inc. and a
93,000-square-foot, build-to-lease for a local manufacturer. Two other land
sales are in escrow for approximately $2.2 million. Escrows on these sales are
expected to close in the fourth quarter.  All escrow closings are subject to
market and other conditions.

COMMUNITY DEVELOPMENT
<PAGE>   9
Part I. Financial Information                                                 9.
Item 2 - Management s Discussion and Analysis of Financial Condition and
         Results of Operations


Increases in community development expenses of 48% and 44% from the prior year
three- and nine-month periods, respectively, excluding a prior year recovery
from a lawsuit settlement, are a result of the Company's emphasis on obtaining
the necessary governmental land use approvals and an intensified strategic
marketing program to continue the build-out of Valencia and future development
of Newhall Ranch. Community development expenses for the year are expected to
continue at this increased level for the balance of 1996.

The Company has entered into a joint venture with PGA TOUR Golf Course
Properties to develop a Tournament Players Club championship course in the
proposed Westridge Golf Course Community, west of Interstate 5 in Valencia. The
18-hole, public course will be designed, constructed and managed by PGA TOUR
Golf Course Properties, and will be the only TPC golf course located in Los
Angeles County. The project will undergo public hearings before the Los Angeles
County Planning Commission in mid-1997. Pending approvals, construction of the
golf course is expected to start in late 1998 or early 1999.

The environmental impact report on the proposed 12,000-acre Newhall Ranch has
been completed.  The first two public hearings have been held.  The approval
process for this new community is expected to take several years to complete.

COMMERCIAL OPERATIONS

Commercial operations include the Company's portfolio of income-producing
properties and Valencia Water Company, a wholly-owned public water utility.
Contributing to increases in revenues and income from commercial operations for
the third quarter comparison and partially offsetting decreases in the
nine-month comparison are improved operating results from Valencia Water
Company due to a general rate increase approved by the California Public
Utilities Commission effective January 1, 1996.

Third quarter 1996 revenues and income from the commercial portfolio were
approximately the same as the prior year third quarter.  For the 1996 nine-month
period, revenues and income were slightly below the year earlier results due to
the 1995 sale of the ITT build-to-suit and Bouquet Shopping Center.  At the end
of the 1996 third quarter, occupancy at Valencia Town Center shopping mall was
approximately 90%.  The center is expected to be 100% leased during the holidays
with seasonal tenants and should return to higher full-time occupancy in early
1997 due to strong current interest by potential replacement tenants. Other
properties in the commercial portfolio remain fully occupied with normal
turnover. Results for all of 1996 from the portfolio are expected to be
approximately 10% below 1995 due to the sale of Bouquet Shopping Center and the
ITT build-to- suit in 1995.  New commercial projects started in 1995 and 1996
will not contribute meaningful revenues and income until 1997.

Of the ten income-producing properties started in 1995 and 1996, five are in
various stages of development and five have been completed.  Construction
continues on the first phase of Valencia Marketplace, a 750,000-square-foot
value oriented center.  WalMart, Sport Chalet, Toys R Us and Staples are open.
The balance of the center is expected to open in 1997.  The center is currently
71% pre-leased and will ultimately contain a wide variety of national retail
shops, restaurants, a supermarket, nursery and daycare center.  Also under
construction are NorthPark Village Square, a neighborhood shopping center,
where Ralphs supermarket and a Starbucks are open; Skycrest, a 264-unit
apartment complex adjacent to NorthPark Village Square, where the first phase
of apartments will be available for move-in by mid-November; and
Spectrum/Valencia, a 50,000-square-foot sports and fitness complex with
completion scheduled for mid-1997.  Land development for a 250-room hotel and
conference center has commenced with completion scheduled for fall 1997.
Completed projects include two build-to-suit facilities and a build-to-lease
facility totaling 344,000 square feet in Valencia Commerce Center, a
57,000-square-foot office building in Valencia Town Center which is 45% leased
and an automotive service center.

The Company plans to start several additional income-producing projects in 1997
including an entertainment-related complex in Valencia Town Center where a
letter of intent has been signed with Edwards Cinema for a 60,000-square-foot
state-of the-art theater complex.  Also, development is underway for four new
industrial buildings under the build-to-lease program which is expected to add
265,000 square feet of industrial space and approximately 500 jobs to Valencia.
As the number of commercial income properties built each year increases, sales
of mature income properties are expected to be made on a selective basis
allowing the Company to realize a greater return on its investment in the
income property portfolio.
<PAGE>   10
Part I. Financial Information                                                10.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


AGRICULTURAL OPERATIONS

For the three and nine months ended September 30, 1996, revenues and income
from agricultural operations, including the Company's energy operations, were
comparable to the 1995 periods.

RANCH SALES

During the 1996 third quarter, an eight-acre parcel in northern California
closed escrow for $600,000 contributing $472,000 to income.  The nine-month
period also includes the sale of 539 acres of row crop land on the 38,800-acre
Suey Ranch for $6.5 million which contributed $5.9 million to income.  Results
for the 1995 three- and nine-month periods include sale of 5,501 acres at the
Merced Ranch for $7.4 million which added $4.6 million to income.

GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expenses for the three- and nine-month periods were
approximately the same as the prior year periods.  The Company expects general
and administrative expenses for the year to be approximately 8% higher than in
1995 primarily due to termination of a retirement plan for outside directors
and replacement with a deferred equity compensation plan.

INTEREST AND OTHER, NET

Net interest expense for 1996 decreased by 3% and 15% from the respective prior
year three- and nine-month periods primarily as a result of the sale of the
McDowell Mountain Ranch project in April 1996 whereby the buyer assumed the
related project and bond debt.  Increases in 1996 interest expenditures for
borrowings against a revolving mortgage facility and lines of credit in
connection with completing income portfolio projects in Valencia are being
capitalized during the construction period.  Therefore, interest expense is
expected to increase in 1997 as income properties are completed.

OUTLOOK

With the economic recovery in California in its third year, the Company is
experiencing increased activity in all three of its businesses - residential,
commercial and industrial.  Emphasis continues on obtaining the necessary
residential entitlements to build out Valencia where initial government
approvals for lake and golf course oriented "lifestyle villages" are expected
to enable the Company to increase absorption when lot sales begin in late 1998
or 1999.

                                 FINANCIAL CONDITION

Liquidity and Capital Resources

For 1996, the Company is in a stage of rapid commercial portfolio development
requiring capital expenditures projected to total $67 million for the year as
more fully described below.  The Company relies upon a combination of operating
cash flow and available lines of credit to fund its development activities.  In
1996, a primary contributor to operating cash flow is the April 1996 sale of
the McDowell Mountain Ranch project in Scottsdale, Arizona which generated
$25.9 million in cash for the Company.  In addition, the Company had cash and
cash equivalents of $4.2 million and $114 million in available lines of credit
at September 30, 1996.  There is no debt against raw land under development in
Valencia.  The Company believes it has sufficient operating cash flow and
available debt capacity to continue with the planned development of Valencia.

A total of 1,025,278 of the Company's partnership units have been repurchased
for $17 million under a unit repurchase program for up to 1.5 million units
approved by the Board of Directors in December, 1995.  Of these units, 763,378
units were repurchased in 1996 for $13 million.  As previously announced, a
portion of the $25.9 million in cash generated from the sale of the McDowell
Mountain Ranch in Scottsdale,  Arizona was used for these repurchases.
Additional units may be repurchased depending on market conditions.
<PAGE>   11
Part I. Financial Information                                                11.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


There are no material commitments for capital expenditures other than the
Company's plans in the ordinary course of business to expand its portfolio of
income-producing properties. Of the ten new commercial projects started in 1995
and 1996, five were in various stages of development at September 30, 1996, and
five had been completed. Development is underway on four new industrial
buildings under the build-to-lease program and several additional commercial
projects are planned to be started in 1997.  As of September 30, 1996, $49.4
million had been invested in commercial portfolio projects in 1996 and an
additional $18 million is projected to be expended during the remainder of
1996.  In 1997, the Company expects to invest approximately $90 million to
complete projects under construction and start several new projects.  A portion
of the estimated construction costs for these projects is expected to be
provided from a combination of available lines of credit and project
financings.

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

Operating Activities

Net cash provided by operating activities for the nine-month period totaled
$65.8 million and included the sale of McDowell Mountain Ranch in Scottsdale,
Arizona which generated $25.9 million in cash and the sale of 539 acres of row
crop land at the Suey Ranch for $6.5 million.  Sales in Valencia included 106
residential lots to merchant builders, 187 homes under the Company's joint
venture program, 6.2 acres of industrial land and a 2.7-acre commercial parcel
which combined generated $47.8 million in cash. The sale of 491 unimproved
residential lots in Castaic, just north of Valencia, in September 1996 for $4.5
million included a $3.4 million note receivable.

Land under development inventory expenditures totaling $57.1 million for the
1996 nine-month period were more than offset by $70.0 million in real estate
cost of sales activity.  Inventory expenditures in Valencia were related to
land development and infrastructure to support future and pending land sales
including expansion of Valencia NorthPark and home construction advances for
the Company's joint venture homebuilding program.  The Company's net
homebuilding investment decreased by $8.4 million since December 31, 1995 to a
total of $16.9 million in six joint venture projects.  At September 30, 1996,
the Company's homebuilding partnerships had 42 homes under construction and 66
completed, unsold homes for sale which were included in residential land under
development inventories.  The majority of the completed, unsold homes are in
the Rose Arbor condominium project.

Investing Activities

Expenditures for property and equipment totaled $56.9 million and were
primarily for income-producing properties under development in Valencia and
water utility construction.  Properties under development include Valencia
Marketplace, a 750,000-square-foot value-oriented retail complex, a 264-unit
apartment complex and a neighborhood shopping center in Valencia NorthPark; a
50,000-square-foot sport and fitness complex; and land development for a
250-room hotel and conference center in Valencia Town Center.  Projects
completed in 1996 include a 57,000-square-foot office building which opened in
September, a build-to-lease and two build-to-suit industrial buildings in
Valencia Commerce Center; and an automotive service center which opened in
April.

Financing Activities

Three quarterly distributions totaling $10.6 million, or .30 cents per unit,
have been paid year-to-date.  The declaration of distributions, and the amount
declared, is determined by the Board of Directors on a quarterly basis taking
into account the Company's earnings, financial condition and prospects.  The
next quarterly distribution will be considered by the Board of Directors on
November 20, 1996.

In conjunction with the sale of McDowell Mountain Ranch in April, project and
bond debt totaling $16.3 million were assumed by the buyer.  A $31 million
increase in borrowings against a revolving mortgage facility and lines of
credit were primarily for costs associated with income-producing projects
under development.

A total of 763,378 of the Company's partnership units have been repurchased for
$13 million during the nine-month period ending September 30, 1996 under a
repurchase program for up to 1.5 million units approved by the Board of
Directors in December, 1995.

                            RISKS AND RELATED FACTORS
<PAGE>   12
Part I. Financial Information                                                12.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


Included in this report are 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 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 upon 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 impacted significantly by
general and local economic conditions which are often 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 the present trend
will continue.

Interest Rates and Financings: 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
ability 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 comparable to that sold and leased by the
Company and the level of demand for such real estate.

Geographic Concentration: With the 1996 sale of McDowell Mountain Ranch, the
Company's real estate development activities currently are focused on its
37,000-acres on the Newhall Ranch, 30 miles north of Los Angeles. The Company's
entire commercial income portfolio is located in the Valencia area.

Governmental 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, levels of population, density
and traffic, and the provision 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 governmental 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 and dealing with the process. 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.
<PAGE>   13
Part I. Financial Information                                                13.
Item 2 - Management's Discussion and Analysis of Financial Condition and
         Results of Operations


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 third quarter ended
         September 30, 1996

         None
<PAGE>   14
                                                                             14.


                                   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: November 11, 1996       By       / S /  THOMAS L. LEE            
                                    -----------------------------------
                                    Thomas L. Lee, Chairman and Chief
                                    Executive Officer of
                                    Newhall Management Corporation
                                    (Principal Executive Officer)



Date: November 11, 1996       By       / S /  STUART R. MORK           
                                    -----------------------------------
                                    Stuart R. Mork, Senior Vice President
                                    and Chief Financial Officer of
                                    Newhall Management Corporation
                                    (Principal Financial Officer)



Date: November 11, 1996       By       / S /  DONALD L. KIMBALL        
                                    -----------------------------------
                                    Donald L. Kimball, Vice President -
                                    Controller of Newhall Management
                                    Corporation (Principal Accounting
                                    Officer)