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


                                    Form 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                   For the fiscal year ended November 30, 1998

                          Commission file number 1-6833



                                 MGI PROPERTIES
             (Exact name of Registrant as specified in its charter)


             Massachusetts                                    04-6268740
   (State or other jurisdiction of                         (I.R.S. Employer
    incorporation or organization)                       Identification No.)

                One Winthrop Square, Boston, Massachusetts 02110
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (617) 422-6000
           Securities registered pursuant to Section 12(b) of the Act:

                                                        Name of each exchange
      Title of each class                               on which registered

        Common Shares                                  New York Stock Exchange
  (par value $l per share)


        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes [X]    No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

As of January 28, 1999, the aggregate market value of the voting shares of the
Registrant held by non-affiliates of the Registrant was $378,873,000.

Common Shares Outstanding as of January 28, 1999: 13,774,221

The information required by Part III of Form 10-K will be incorporated by
reference to a definitive proxy statement involving the election of Trustees
which is expected to be filed by the Registrant pursuant to Regulation 14A
within 120 days after the close of its fiscal year ended November 30, 1998.
<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                       Page
<S>                                                                      <C>
    PART I .............................................................. 1
       Item 1.  Business................................................. 1
       Item 2.  Properties...............................................10
       Item 3.  Legal Proceedings........................................12
       Item 4.  Submission of Matters to a Vote of Security Holders......12

    PART II .............................................................13
       Item 5.  Market for Registrant's Common Equity
                and Related Stockholder Matters..........................13
       Item 6.  Selected Financial Data..................................14
       Item 7.  Management's Discussion and Analysis of
                Financial Condition and Results of Operations............15
       Item 8.  Financial Statements and Supplementary Data..............22
       Item 9.  Changes in and Disagreements with Accountants
                on Accounting and Financial Disclosure...................22

    PART III ............................................................23

    PART IV .............................................................24
       Item 14. Exhibits, Financial Statement Schedules
                and Reports on Form 8-K .................................24

    POWER OF ATTORNEY ...................................................27

    SIGNATURES ..........................................................27
</TABLE>
<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

MGI Properties[RegTM] (the "Trust" or "MGI") is an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts. MGI[RegTM]
commenced operations in 1971 as a real estate investment trust (a "REIT").
Since that time, the Trust has elected to be treated as a REIT under Sections
856-860 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), and expects to continue to operate in a manner which will entitle the
Trust to be so treated. For each taxable year in which the Trust qualifies as a
REIT under the Internal Revenue Code, taxable income distributed to the holders
of its Common Shares will not be taxable to the Trust (other than certain items
of tax preference which are subject to minimum tax in the hands of the Trust).
See "Adoption of Liquidation Plan," "Investment and Operating Policies" and
"Portfolio" below and the description of dividend policy included under Item 5
of this Annual Report on Form 10-K for the year ended November 30, 1998 (the
"Report").

     References herein to the Trust include its wholly-owned subsidiaries.


NARRATIVE DESCRIPTION OF BUSINESS

MGI is a self-administered equity REIT that owns and operates a diversified
portfolio of income producing real estate, which as of November 30, 1998,
consisted of 66 commercial properties and three multi-family residential
properties. The commercial portfolio consists of 5.6 million square feet, 87% of
which is comprised of office, office/research and development and industrial
properties. The multi-family properties consist of three residential communities
aggregating 959 units. At November 30, 1998, the commercial and residential
properties were 97.9% and 94.5% leased, respectively. Since 1992, the Trust has
focused on the commercial segment of the real estate market, specifically
office, office/research and development and industrial properties located in New
England. At November 30, 1998, 66%, based upon cost, of the Trust's real estate
assets were located in New England. During the fiscal year ended November 30,
1997, the Trust began the internalization of the property management function of
its New England properties. As of November 30, 1998, the Trust had 4.1 million
square feet of space under management.

     The Trust, formerly known as Mortgage Growth Investors[RegTM], initially
operated as a hybrid REIT with a significant portion of its assets invested in
mortgage loans. In 1985, the Trust began the conversion to an equity REIT,
which has direct ownership of income producing properties. The conversion was
completed by January 1993.

     The Trust currently employs 39 persons.


ADOPTION OF LIQUIDATION PLAN

On June 18, 1998, the Trust publicly announced that its Board of Trustees had
decided to undertake a review of strategic alternatives available to the Trust
to maximize shareholder value, including a possible liquidation of the Trust's
properties. The Trustees ultimately determined that the appropriate course for
the Trust to maximize shareholder value was to pursue the sale of its assets
pursuant to a plan of complete liquidation of the Trust. Accordingly, on August
12, 1998, the Trustees unanimously approved a Plan of Complete Liquidation and
Termination of the Trust (the "Plan") and directed that the Plan be submitted
to the Trust's shareholders for approval. The shareholders of the Trust
approved the Plan at a special meeting held on October 14, 1998.

     The Trust's primary business objective is to sell its assets pursuant to
the Plan. Based upon management's current estimates, the Trustees expect that
sales of the Trust's assets pursuant to the Plan will be made at prices that
will yield aggregate net cash liquidation proceeds at approximately the lower
end of the originally announced range of between $30 and $33 per share;
however, no assurance can be given that per share net cash proceeds will be
within this range or will reach this range. The current revised estimate of
liquidation proceeds takes into consideration the lingering effects of the fall
1998 credit crisis which adversely impacted the national credit and real estate
markets, but which now seems to be receding to some degree. Such estimate does
not anticipate renewal of such adverse or other unstable economic conditions.
The timing of any distributions of such net cash proceeds will be affected by,
among other things, the timing of sales of assets, income tax considerations
and the establishment of reserves. Accordingly, no assurances can be made as to
the timing of such distributions, which could be made over a substantial period
of time; provided, however,

                                       1
<PAGE>

that in accordance with the Plan, the final distribution shall be made no later
than October 14, 2000 (albeit such distribution could be made to a liquidating
trust for the benefit of shareholders).

     To date, no definitive agreements have been entered into with any
prospective buyers with respect to the terms of any liquidating sales of Trust
properties, although the Trust has received indications of interest. It is not
expected that properties would be sold to any persons deemed to be affiliates
of the Trust, though it is possible that one or more shareholders of the Trust
who could be deemed "affiliates" of the Trust could purchase properties by
virtue of submitting the highest bids in respect of such properties. Each offer
to purchase the Trust's assets must be acted upon by the Board of Trustees.

     As part of the Plan, existing debts and obligations of the Trust will be
satisfied from existing cash balances and the proceeds of the sale of the
Trust's assets. In addition, reserves may be established, as the Board of
Trustees deems necessary, for liabilities or expenses, contingent or otherwise,
that may arise. The remaining proceeds will be distributed on a schedule
established by the Board of Trustees, on a pro rata basis, to the Trust's
shareholders, as full payment for the Common Shares held by each shareholder.

     Although it is expected that the Trust will continue to qualify under the
Internal Revenue Code as a REIT for the period prior to the distribution of the
Trust's assets to shareholders (including the possible transfer of assets to a
liquidating trust if the liquidation is not completed within two years), no
assurance can be given that the Trust will not lose or terminate its status as
a REIT as a result of unforeseen circumstances.

     In the event that the Trust is unable to dispose of all of its assets
within the 24 months after adoption of the Plan or if it is otherwise
advantageous or appropriate to do so, the Trustees may establish a liquidating
trust to which the Trust could distribute in kind its unsold assets. The
Trustees would not expect to transfer assets to a liquidating trust except (i)
when such a transfer is required to avoid the imposition of federal income
taxes on the Trust or (ii) to establish reserves for liabilities and
obligations of the Trust (contingent or otherwise) out of amounts that would
otherwise be distributed to shareholders.

     The Plan gives the Trust's Board of Trustees the power to sell any and all
of the assets of the Trust without further approval by the shareholders. The
Trustees intend to conduct the sale of the Trust's assets in an orderly manner,
and are seeking offers for specific pools of assets, although individual sales
of assets may be effected and offers for the entire portfolio of investments
may be sought. It is currently estimated that substantially all of the
properties will be sold within 9-12 months, however, no assurances can be made
as to the actual timing of such sales and subsequent distributions, which could
be made over a substantial period of time.

     It is impossible to determine at this time with any precision the
aggregate net proceeds that may ultimately be available for distribution to the
Trust's shareholders upon liquidation. That amount will depend upon a variety
of factors, including national and/or local economic conditions, including the
availability of financing upon reasonable terms, the timing of and the net
proceeds realized from the sale of the Trust's assets, as well as the ultimate
amounts of liquidation-related expenses and other obligations and liabilities
that must be satisfied out of the Trust's assets.

     The assets could be sold to one or more purchasers, in one or more
transactions over a period of time, in which case the Trust would continue to
operate until all investments are sold or transferred to a liquidating trust.
It is the current objective of the Trustees to sell the Trust's assets at
aggregate sales prices that will yield net cash proceeds within or as close to
the originally announced range of between $30 and $33 per share as possible,
however, no assurance can be given that this will be the case. Moreover, in
view of the fact that assets may be sold in multiple transactions, the
possibility exists that there could be unforeseen events that adversely impact
the price of the remaining (unsold) assets, and no assurance can be given that
the net proceeds per share will therefore equal such amount. The Trustees also
reserve the right to abandon the Plan at any time, due to adverse or unstable
real estate or financial market conditions.

     Reference is made to the Trust's definitive Proxy Statement, dated
September 10, 1998, in respect of the Special Meeting of Shareholders held on
October 14, 1998, which is incorporated herein by reference and filed as an
exhibit hereto, for a discussion of the Trust's Plan of Liquidation, including
the risk factors and certain other considerations

                                       2
<PAGE>

associated therewith, as well as the income tax consequences of the Plan to
shareholders and to the Trust. See also "Risk Factors" below.

INVESTMENT AND OPERATING POLICIES

The Trust's primary business objective, prior to the adoption of the Plan, had
been to increase funds from operations ("FFO"), while building additional value
of its real estate investments through income growth and capital appreciation.
The Trust's policies have been subject to ongoing review by the Board of
Trustees and may be modified from time to time to take into consideration
changes in business or economic conditions or otherwise as circumstances
warrant.

     Prior to the adoption of the Plan, the cornerstones of the Trust's
operating policies were (1) the active management of its real estate, (2) a
focus on maintaining the quality of its properties and the demand for its
properties at a level that will support high occupancy rates, leasing
attractiveness to quality tenants and increasing rental rates and (3) the
acquisition of high quality properties. During the last several years, the
Trust's investment focus with respect to type of property has been directed
primarily toward the commercial segment of the New England real estate market,
particularly industrial, office/research and development and office properties.

     MGI's philosophy has been to seek what management believes to be
value-creating opportunities by frequently acquiring quality properties that
have not met their full potential, at a cost believed to be below replacement
value. Management believes that its investments can be actively managed to
create a total return which includes current income and capital appreciation.

     MGI's commercial portfolio is generally comprised of general purpose,
functional buildings rather than properties characterized by demand limited to
a specific type and size of tenant. Many of the Trust's properties are easily
divisible so as to accommodate users of various amounts of space. A significant
number of MGI's properties are located in recognized business parks or at nodes
with easy access to highways and commercial areas and sufficient residential
support.

     MGI's leasing, maintenance and tenant and capital improvement activities
have been designed to attract and retain quality tenants and maintain high
occupancy rates. Management believes that the internalization of the property
management function with respect to its New England properties has improved
service, reduced operating costs and provided a strategic competitive
advantage. With regard to certain properties outside of New England, MGI
believes that using local property management companies currently provides cost
effective management and has resulted in improved access to significant market
information and improved tenant satisfaction as a result of the personnel
dedicated solely to MGI's properties. MGI's officers typically work with local
property managers to actively manage these properties. Generally, MGI is
directly involved in establishing the strategic direction for each property,
identifying new tenants, negotiating leases, budgeting and monitoring operating
performance and implementing and directing significant renovations and
rehabilitations.

     MGI has sought to maintain a well-balanced, conservative and flexible
capital structure by: (i) maintaining a conservative dividend pay-out ratio
that enables MGI to both reinvest in capital and tenant improvements for
existing properties and increase cash available for investment; (ii) borrowing
primarily at fixed rates; (iii) extending and sequencing the maturity dates of
its debt; and (iv) maintaining conservative debt service coverage ratios.
Management believes that these strategies have enabled the Trust to access debt
and/or equity capital markets for its long-term investment requirements, upon
satisfactory terms.

     The Trust's business has been limited to investments in real estate,
direct or indirect, including investments in real estate companies. To the
extent that the Trust has assets not otherwise invested in real estate, the
Trust may invest such assets in other securities, including United States
government obligations and commercial paper, so long as, in the opinion of the
Trustees, such securities may be held without jeopardizing the Trust's
qualification as a REIT under the Internal Revenue Code.

     Funds necessary to conduct operations have been provided from rental and
interest income, mortgaging of equity investments, lines of credit, corporate
borrowings, the sale of marketable securities, loan repayments and
amortization. Such operations include the Trust's continuous incurrence of
costs, reimbursed and unreimbursed, for improvements and renovations of its
existing properties in order to maintain and enhance their value. The Trust has
operated on a

                                       3
<PAGE>

leveraged basis by incurring indebtedness in order to increase its capital
available for investment when, in the Board of Trustees' judgment, the Trust
would benefit thereby (see "Risk Factors--Leverage"). The Trust has employed
short-term or long-term borrowings to fund some of its investments. The Trust's
Debt to Total Assets ratio was 33% at November 30, 1998. Reference is made to
Note 5 of the Notes to Consolidated Financial Statements included in Item 14
below.

PORTFOLIO

The Trust's portfolio at November 30, 1998 consisted of investments in 66
commercial properties and three multi-family residential properties.

     The Trust's real estate investments can be classified by type of
properties and geographic location. As of November 30, 1998, the Trust's real
estate investments were diversified by property type as follows:

<TABLE>
<CAPTION>
                                                                         % of Portfolio
                                                           % of             Based on
                       Number of     Square Feet/       Portfolio         1998 Property          %
                      Properties         Units        Based on Cost     Operating Income      Leased
-----------------------------------------------------------------------------------------------------
<S>                       <C>          <C>                 <C>                 <C>             <C>
Office                    24           1,813,900           39.9%               37.7%            97.6%
Office/R&D                17           1,394,000           17.0%               19.2%           100.0%
Industrial                16           1,684,800           16.4%               20.0%            97.6%
Retail                     5             755,400           14.7%               11.0%            95.4%
Land and Other             4                   -             .7%                1.0%           100.0%
-----------------------------------------------------------------------------------------------------
Total Commercial          66           5,648,100           88.7%               88.9%            97.9%
=====================================================================================================
Multi-family               3                 959           11.3%               11.1%            94.5%
-----------------------------------------------------------------------------------------------------
Total Portfolio           69                              100.0%              100.0%            97.3%
=====================================================================================================
</TABLE>

     As of November 30, 1998, the Trust's real estate investments were
diversified by geographic region as follows:

<TABLE>
<CAPTION>
                                                                              % of Portfolio
                                Square Feet of                   % of            Based on
                    Number of     Commercial     Apartment     Portfolio       1998 Property      %
Location           Properties      Property        Units     Based on Cost   Operating Income    Leased
-------------------------------------------------------------------------------------------------------
<S>                    <C>         <C>              <C>          <C>               <C>            <C>
New England            55          4,521,300          -           65.8%             71.1%         98.5%
Mid-West                5            442,500        722           17.7%             14.1%         93.4%
Southeast               5            318,800          -            6.8%              5.7%         92.8%
Mid-Atlantic            4            365,500        237            9.7%              9.1%         99.0%
-------------------------------------------------------------------------------------------------------
Total Portfolio        69          5,648,100        959          100.0%            100.0%         97.3%
=======================================================================================================
</TABLE>

     Lease terms relating to the Trust's properties range from
tenancies-at-will up to 17 years. The Trust leases commercial space to 375
commercial tenants, including 233 office tenants, 63 retail tenants, 49
industrial tenants and 30 office/research and development tenants.

     Additional information concerning the Trust's real estate investments is
set forth under Item 2 and in Notes 1, 2, 3, 4 and 5 in the Notes to
Consolidated Financial Statements and Schedule III of the Financial Statement
Schedule included in Item 14 below.


COMPETITION, REGULATION AND OTHER FACTORS

The success of the Trust's operations has been dependent, among other factors,
upon general economic conditions and trends, including interest rates,
availability of credit, real estate trends, construction costs, income tax
laws, governmental regulations and legislation, increases or decreases in
operating expenses, zoning laws, population trends and the abil-

                                       4
<PAGE>

ity of the Trust to attract tenants and keep its properties leased at
profitable levels. The Trust does not consider its real estate business to be
seasonal in nature.

     In the areas of investment permitted to the Trust, there have been a wide
variety of competing investors and lenders. The Trust has competed with life
insurance companies, REITs, pension funds, other financial institutions,
partnerships, corporations, individuals and other business entities, both
domestic and foreign. With respect to properties presently owned by the Trust,
or in which the Trust has an investment, the Trust competes with other owners
of properties for tenants. The Trust's properties compete for tenants primarily
on the basis of location, rent and the condition and design of improvements.
Its properties compete with similar properties located in their geographic
area, and such properties may be newer and larger than those in which the Trust
has an interest. There are no statistics readily available which would enable
the Trust to determine its position with respect to its competitors in the real
estate investment industry.

     The Trust has been able to compete effectively despite recessionary
conditions in certain regions from time to time and management believes that
this will continue principally by reason of the diverse make-up of the Trust's
income producing properties and the diversity of its tenant base. However,
recessionary economic conditions in certain regions (particularly New England,
where 80% of the Trust's commercial properties, based on square footage, are
located) or any adverse changes in local, national or international economic
conditions could result in the inability of some existing tenants of the Trust
to meet their lease or other obligations and could otherwise adversely affect
the Trust's ability to attract or retain tenants. Management believes, however,
that by reason of the factors stated above and the Trust's financial strength
and operating practices, particularly its ability to implement renovations and
improvements, it will be able to maintain occupancies and, over time, increase
rental income from its properties, although there can be no assurance thereof.


RISK FACTORS

Factors Pertaining to Plan of Liquidation

No Assurances of Distributions. There can be no assurance that the Trust will
be successful in disposing of properties for values approximating those
currently estimated by the Trust or that related liquidating distributions will
occur within the original timetable. If values of the Trust's assets decline or
the costs and expenses related to such sales and to the liquidation process
exceed those which are currently estimated by the Trust, the liquidation may
not yield distributions as great as or greater than the recent market prices of
the Common Shares. No assurances can be made as to the actual amount and timing
of distributions, which could be made over a substantial period of time.

     The implementation of the Plan, including the actual amount and timing of
distributions, could be affected by negative or unstable global, national or
local economic conditions, including the lingering effects of the fall 1998
credit crisis which has adversely impacted the national credit and real estate
markets.

     Decreasing Liquidity. As assets of the Trust are sold and proceeds are
distributed, the market capitalization and "float" will diminish further and
market interest in the Common Shares by the investment community may diminish,
thereby reducing or effectively eliminating the market demand and liquidity for
the Common Shares, which would adversely affect the market price for the Common
Shares. At a later stage of the liquidation process, the New York Stock
Exchange will cause the common shares to be delisted.

     Sales of Assets Not Subject to Shareholder Approval. The Trustees have the
authority to sell any and all of the Trust's assets on such terms as the Board
of Trustees determines appropriate. Notably, the shareholders will have no
subsequent opportunity to vote on such matters and will, therefore, have no
right to approve or disapprove the terms of such sales.

     Qualification as a REIT. The calculation of the estimated liquidation
price per share set forth herein, assumes that the Trust will continue to
qualify as a REIT under the Code during the entire liquidation process and,
therefore, no provision has been made for federal income taxes. Although the
Trust expects to maintain such REIT qualification, there can be no assurance
thereof. See "Adverse Consequences of Failure to Qualify as a REIT and Other
Tax Risks" below.

                                       5
<PAGE>

     Risks of Abandonment of Plan. In the event the Plan is abandoned by the
Trustees (at any time during the liquidation process) due to unstable or
unfavorable real estate or financial market conditions and at a time when the
Trust is significantly reduced in size, certain operating risks will increase,
as will the risk that the Trust's share price will trade at a greater discount
to the perceived underlying value of its real estate holdings.


Leverage

The Trust's obligations for borrowed money totaled $130.5 million at November
30, 1998, representing 33% of its total assets. The formation documents of the
Trust do not contain any limitation on the amount or percentage of indebtedness
the Trust might incur. The Trustees reserve the right to increase such leverage
in the event (not now anticipated) investment activities are resumed. Increases
in the Trust's leverage could increase the risk of default under its
outstanding indebtedness. The Trust's failure to pay its debt obligations when
due could result in the Trust's loss of the properties collateralizing such
indebtedness or otherwise adversely affect the Trust.

     The Trust's debt obligations subject to floating interest rates at
November 30, 1998 aggregated approximately $35 million at a weighted average
interest rate of approximately 6.5% and represented 26.8% of the Trust's
outstanding debt. Significant increases in interest rates on floating rate debt
would adversely affect the net income, funds from operations and cash available
for distribution to shareholders. These risks may inhibit the Trust's ability
to raise capital, a situation no longer anticipated.


Geographic Concentration

The Trust's operating income and the value of its properties may be affected by
a number of factors, including the local economic climate (which may be
adversely impacted by business layoffs or downsizing, industry slowdowns,
changing demographics and other factors) and local real estate conditions (such
as oversupply of or reduced demand for commercial or other properties). At
November 30, 1998, approximately 80% of MGI's commercial real estate assets,
based on square footage (66% based upon cost), were located in New England,
primarily in the suburban Boston area. The Trust's performance and its ability
to make distributions to shareholders have been largely dependent on the
economic conditions in the markets where the Trust's properties are located.
There can be no assurance as to the continued growth of the economy in these
markets or other markets upon which the Trust's tenants depend. Negative
economic changes in these markets may, therefore, adversely affect the Trust.


Miscellaneous Real Estate Investment Considerations

Real property investments are subject to varying degrees of risk. The returns
available from equity investments in real estate depend in large part on the
amount of income generated and expenses incurred. If the Trust's properties do
not generate revenues sufficient to meet operating expenses, including debt
service, tenant improvements, leasing commissions and other capital
expenditures, the Trust may have to borrow additional amounts to cover costs,
and the Trust's cash flow and ability to make distributions to its shareholders
will be adversely affected.

     The Trust's operating income and the value of its properties may be
adversely affected by a number of factors, including the national economic
climate (including the availability of financing upon reasonable terms); the
local economic climate; local real estate conditions; the perceptions of
prospective tenants of the attractiveness of the property; the ability of the
Trust to provide adequate management, maintenance and insurance; and increased
operating costs (including real estate taxes and utilities). In addition, real
estate values and income from properties are also affected by such factors as
applicable laws, including tax laws, interest rate levels and the availability
of financing.

     Numerous office and industrial properties compete with the Trust's
properties in attracting tenants to lease space. Some of these competing
properties are newer or are in more desirable locations than some of the
Trust's properties. Significant development of office or industrial properties
in a particular area could have an adverse effect, material or otherwise, on
the Trust's ability to lease space in its properties and on the rents charged.

     The Trust is subject to the risks that upon expiration of leases for space
located in its properties, the leases may not be renewed, the space may not be
re-let or the terms of renewal or re-letting (including the cost of required
renovations) may be less favorable than current lease terms. In addition,
certain leases provide for early cancellation in certain



                                       6
<PAGE>

events. If the Trust were unable to promptly re-let or renew the leases for all
or a substantial portion of this space or if the rental rates upon such renewal
or re-letting were significantly lower than expected, the Trust's cash flow and
ability to make distributions to shareholders may be adversely affected.

     Although the Trust believes its properties are generally multi-purpose and
could be re-let to other tenants, some properties could require reconfiguration
or remodeling before the property could be re-let to other tenants. Any such
required activity could delay immediate occupancy by the re-letting tenant.

     Equity real estate investments are relatively illiquid. Such illiquidity
will tend to limit the ability of the Trust to vary its portfolio promptly in
response to changes in economic or other conditions. Furthermore, the tax laws
impose a 100% tax on net gain from "prohibited transactions," i.e., sales of
property held primarily for sale to customers in the ordinary course of a trade
or business. The 100% tax is not imposed on net gain from sales of property
held for at least four years, if certain other conditions are met, including a
limitation as to the number of such sales per year. Generally, the potential
application of the 100% tax limits the Trust's ability to sell properties
without adversely affecting returns to the holders of Common Shares. Although
the Trust believes that the sale of the Trust's assets pursuant to the Plan of
Liquidation should not be subject to the 100% tax, the Trust will nevertheless
attempt to structure the sale or other disposition of the Trust's assets in a
manner that will prevent such sales or dispositions from being taxed as
prohibited transactions.

     Because increases in certain taxes and expenses are not always passed
through to tenants under leases, such increases may adversely affect the
Trust's cash flow and its ability to make distributions to shareholders. The
Trust's properties are also subject to various federal, state and local
regulatory requirements, such as the Americans with Disabilities Act and state
and local fire and life safety requirements. Failure to comply with these
requirements could result in the imposition of fines by governmental
authorities or awards of damages to private litigants. The Trust believes that
the properties are currently in compliance with all such regulatory
requirements. However, there can be no assurance that these requirements will
not be changed or that new requirements will not be imposed that would require
significant unanticipated expenditures by the Trust and could have an adverse
effect on the Trust's cash flow and distributions.


Financial Condition (and Bankruptcy) of Tenants

The Trust's net income, funds from operations and cash available for
distribution would be adversely affected if a significant tenant or a
significant number of tenants becomes unable to meet their obligations. In the
event of a default by a tenant, the Trust could experience delays and incur
substantial costs in enforcing its rights as lessor. Upon such a default, the
Trust's cash flow could also be reduced if the Trust was unable to re-lease,
upon satisfactory terms, any significant portion of its properties.

     At any time, a tenant of the Trust's properties may seek the protection of
the bankruptcy laws, which could result in the rejection and termination of
such tenant's lease and thereby cause a reduction in the Trust's net income,
funds from operations and cash available for distribution. No assurance can be
given that tenants will not file for bankruptcy protection in the future or, if
any tenants file, that they will affirm their leases and continue to make
rental payments in a timely manner. Furthermore, protection of the Trust's
investments may require foreclosure or other action leading to acquisition of
title to properties underlying its mortgage loans or similar investments. As of
November 30, 1998, one significant tenant, Bradlees, Inc., is operating under
Chapter 11 of the Federal Bankruptcy Code and its plan of reorganization has
been confirmed. Although its lease with the Trust has been affirmed, there can
be no assurance that future operating performance will not be adversely
affected by developments with respect to Bradlees, Inc., which is expected to
emerge from bankruptcy as early as February 1999.

Potential Environmental Liabilities

Under various Federal, state and local laws, ordinances and regulations, such
as the Comprehensive Environmental Response Compensation and Liability Act or
"CERCLA," and common laws, an owner or operator of real estate is liable for
the costs of removal or remediation of certain hazardous or toxic substances on
or in such property as well as certain other costs, including governmental
fines and injuries to persons and property. Such laws often impose such

                                       7
<PAGE>

liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
presence of such substances, or the failure to remediate such substances
properly, may adversely affect the owner's or operator's ability to sell or
rent such property or to borrow using such property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances may also
be liable for the costs of removal or remediation of such substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by such person. Certain environmental laws impose liability for
release of asbestos-containing materials into the air and third parties may
seek recovery from owners or operators of real property for personal injuries
associated with asbestos-containing materials.

     Substantially all of the Trust's properties have been subjected to Phase I
or similar environmental audits by independent environmental consultants. These
environmental audit reports have not revealed any potential significant
environmental liability, nor is the Trust aware of any environmental liability
with respect to its properties that it believes would have a material adverse
effect on the Trust's business, properties or results of operations. This
evaluation however, could prove to be incorrect depending on certain factors.
For example, the Trust's assessments may not reveal all environmental
liabilities or there may be material environmental liabilities of which the
Trust is unaware. In addition, assumptions regarding groundwater flow and the
existence of contamination are based on available sampling data, and there are
no assurances that the data is reliable in all cases. Moreover, there can be no
assurance that (i) future laws, ordinances or regulations will not impose any
material environmental liability on the Trust or (ii) the current environmental
condition of the Trust's properties will not be affected by tenants, by the
condition of land or operations in the vicinity of the Trust's properties (such
as the presence of underground storage tanks), or by third parties unrelated to
the Trust.

     Some tenants use or generate hazardous substances in the ordinary course
of their respective businesses. These tenants are required under their leases
to comply with all applicable laws and have agreed to indemnify the Trust for
any claims resulting from noncompliance, and the Trust is not aware of any
environmental problems resulting from the tenants' use or generation of
hazardous substances. There are no assurances that all tenants will comply with
the terms of their leases or remain solvent and that the Trust may not at some
point be responsible for contamination caused by such tenants.


Insurance

Although there can be no assurance thereof, MGI carries comprehensive general
liability coverage and umbrella liability coverage on all of its properties
with limits of liability deemed adequate to insure against liability claims and
provide for cost of defense. The Trust is also insured against the risk of
physical loss in amounts estimated to be adequate to reimburse it on a
replacement cost basis for costs incurred to repair or rebuild each property,
including loss of rental income during the reconstruction period. However,
there can be no assurance that this coverage will be adequate or that it will
insure all of the risks to which the Trust's properties are subject. By reason
of the high cost of earthquake and flood insurance and the fluctuations in the
price and availability, management has determined that the risk of loss due to
earthquake and flood does not currently justify the cost of such coverage,
however, management may periodically reconsider its position. In the event of
an uninsured loss or a loss in excess of uninsured limits, the Trust could lose
its equity in the subject property, as well as the anticipated future revenue
from such property.


Adverse Consequences of Failure to Qualify as a REIT and Other Tax Risks

The Trust believes that it has operated in a manner that permits it to qualify
as a REIT under the Internal Revenue Code for each taxable year since its
formation. No assurance can be given that the Trust will be able to continue to
operate in a manner so as to qualify or remain so qualified. Qualification as a
REIT involves the application of highly technical Internal Revenue Code
provisions for which there are only limited judicial or administrative
interpretations and the determination of various factual matters and
circumstances not entirely within the Trust's control. For example, in order to
qualify as a REIT, at least 95% of the Trust's gross income in any year must be
derived from qualifying sources and the Trust must make dividend distributions
to shareholders equal to 95% of its REIT taxable income (excluding net capital
gains). Distributions pursuant to the Plan made within 24 months after adoption
of the Plan will

                                       8
<PAGE>

satisfy this requirement. No assurance can be given that new legislation,
regulations or administrative decisions will not change the tax laws with
respect to REIT qualification or the Federal income tax consequences of such
qualification.

     If the Trust fails to qualify as a REIT, it will be subject to Federal
income tax (including any applicable alternative minimum tax) on its taxable
income (including gains recognized in connection with liquidating sales of the
Trust's assets) at corporate rates. Unless entitled to relief under certain
statutory provisions, the Trust could also be disqualified from treatment as a
REIT for the four taxable years following the year during which qualification
is lost. This treatment would reduce the net earnings available for investment
or distribution to shareholders because of the additional tax liability for the
year or years involved. In addition, distributions would no longer be required
to be made. To the extent that distributions to shareholders have already been
made in anticipation of its assumed qualification as a REIT, the Trust could be
required to borrow funds or to liquidate certain of its investments to pay the
applicable tax. The failure to qualify as a REIT may also constitute a default
under certain Trust indebtedness.

     The Plan contemplates a sale of the Trust's assets for cash. So long as
the Trust continues to qualify as a REIT, any net gain from "prohibited
transactions" (i.e., sales of property held primarily for sale to customers in
the ordinary course of a trade or business) would be subject to a 100% tax.
Whether a real estate asset is property held primarily for sale to customers in
the ordinary course of a trade or business, the sale of which would be a
prohibited transaction for a REIT, is a highly factual determination. The Trust
does not believe that any of its property should be so characterized but rather
that all its properties are all held for investment and the production of
rental income. Nevertheless, the Trust will attempt to structure the
dispositions of the Trust's assets in furtherance of the Plan in a manner that
will prevent such dispositions from being treated as prohibited transactions.

                                       9
<PAGE>

ITEM 2. PROPERTIES

The following table sets forth certain information concerning the Trust's
properties at November 30, 1998.

<TABLE>
<CAPTION>
                                      Carrying Value         Percentage     Weighted
INDUSTRIAL           Sq. Ft.       Dollars     Per Sq. Ft.     Leased     Average Rent
--------------------------------------------------------------------------------------
<S>                 <C>        <C>               <C>             <C>         <C>
Flex
Tewksbury, MA       189,200    $10,373,000       $ 54.83         100%        $ 9.00
Nashua, NH          150,400      5,028,000         33.43          81%          5.19
Wilmington, MA      109,500      4,296,000         39.23         100%          5.79
Methuen, MA         106,800      4,697,000         43.98         100%          5.28
Wilmington, MA      100,200      2,355,000         23.50         100%          4.07
Franklin, MA        100,000      4,871,000         48.71         100%          5.94
Nashua, NH           98,100      3,084,000         31.44          88%          4.09
Bedford, MA          93,200      2,352,000         25.24         100%          7.26
Franklin, MA         83,500      3,628,000         43.45         100%          5.64
Andover, MA          82,500      4,501,000         54.56         100%          6.39
Marlborough, MA      75,000      3,001,000         40.01         100%          7.22
Marlborough, MA      59,400      2,468,000         41.55         100%          6.63
Hopkinton, MA        39,000      1,924,000         49.33         100%          6.50
Methuen, MA          38,700      1,707,000         44.11         100%          6.00
Distribution and Manufacturing
Wilmington, MA      294,000      6,595,000         22.43         100%          4.26
Franklin, MA         65,300      3,071,000         47.03         100%          6.00
-----------------------------------------------------------------------------------
Total             1,684,800    $63,951,000       $ 37.96          98%        $ 5.79
===================================================================================


<CAPTION>
                   Scheduled Lease
                     Expirations       Number                                        Lease
INDUSTRIAL          1999     2000    of Tenants          Principal Tenant          Expiration
---------------------------------------------------------------------------------------------
<S>                   <C>      <C>       <C>     <C>                               <C>
Flex
Tewksbury, MA          -        -         1      Avid Technology, Inc.             06/30/10
Nashua, NH            32%       -         7      Logicraft, Inc.                   12/31/00
Wilmington, MA         -        -         3      United Shoe Machinery Corp.       12/31/01
Methuen, MA            -        -         2      Microtouch Systems, Inc.          04/30/03
Wilmington, MA        52%      48%        2      Datawatch Corporation             04/30/99
Franklin, MA           -        -         1      Thermo Instruments Systems        01/31/06
Nashua, NH            44%      40%        9      Pure Distributors, Inc.           02/14/00
Bedford, MA            -       51%        3      Imaging Technology, Inc.          07/31/01
Franklin, MA           -        -         2      Chromatic Technologies, Inc.      06/30/02
Andover, MA           24%       -         4      LANcity Corporation               04/30/01
Marlborough, MA        -        -         4      The Concorde Group                09/30/02
Marlborough, MA        -        -         4      Diebold Incorporated              08/31/03
Hopkinton, MA          -        -         1      SCP Pool Corp.                    12/31/03
Methuen, MA            -        -         2      Larson Juhl, Inc.                 10/31/03
Distribution 
Wilmington, MA        14%      36%        3      MVP Sports                        02/05/03
Franklin, MA           -        -         1      Massachusetts Electric Company    12/31/02
-------------------------------------------------------------------------------------------
Total                 12%      14%       49
===========================================================================================
</TABLE>


<TABLE>
<CAPTION>
OFFICE/RESEARCH & DEVELOPMENT
-----------------------------------------------------------------------------------
<S>                 <C>        <C>               <C>             <C>         <C>   
Tewksbury, MA       140,000    $ 8,471,000       $ 60.51         100%        $ 9.30
Andover, MA         128,400      5,900,000         45.95         100%          5.00
Billerica, MA       122,300      4,397,000         35.95         100%          4.67
Chelmsford, MA      110,100      4,485,000         40.74         100%          8.92
Andover, MA         105,500      6,534,000         61.93         100%         11.60
Billerica, MA       100,000      4,937,000         49.37         100%         12.00
Hudson, NH           76,800      3,484,000         45.36         100%          5.61
Hopkinton, MA        76,100      5,255,000         69.05         100%         10.09
Chelmsford, MA       70,900      1,905,000         26.87         100%          9.05
Bedford, MA          70,600      2,127,000         30.13         100%          3.65
Littleton, MA        66,800      2,532,000         37.90         100%         10.33
Andover, MA          60,600      3,829,000         63.18         100%          7.01
Billerica, MA        60,000      1,896,000         31.60         100%          4.75
Westford, MA         59,700      3,411,000         57.14         100%          5.50
Billerica, MA        56,300      1,871,000         33.23         100%          3.85
Raynham, MA          49,100      2,525,000         51.54         100%          7.34
Hopkinton, MA        40,800      2,817,000         69.04         100%         10.08
-----------------------------------------------------------------------------------
Total             1,394,000    $66,376,000       $ 47.62         100%        $ 7.57
===================================================================================

<CAPTION>

OFFICE/RESEARCH & DEVELOPMENT
-------------------------------------------------------------------------------------------
<S>                  <C>      <C>         <C>    <C>                               <C>
Tewksbury, MA          -        -         1      Avid Technology, Inc.             06/30/10
Andover, MA            -      100%        1      Hewlett-Packard Company           07/31/00
Billerica, MA          -        -         1      PRI Automation, Inc.              07/31/01
Chelmsford, MA         -       75%        3      ITK Telecom                       12/31/99
Andover, MA          100%       -         1      ISI Systems, Inc.                 04/30/99
Billerica, MA          -        -         1      Peritus Software Services         02/28/06
Hudson, NH             -        -         1      Atrium Medical Corp.              06/30/04
Hopkinton, MA          -        -         1      Zymark Corporation                12/31/05
Chelmsford, MA         -        -         5      Biscom, Inc.                      02/28/03
Bedford, MA            -      100%        1      Atex Media Solutions, Inc.        07/31/00
Littleton, MA          -        -         4      Inforonics                        05/31/03
Andover, MA            -        -         1      Cabletron Systems, Inc.           05/31/01
Billerica, MA          -      100%        1      Bay Networks, Inc.                03/30/00
Westford, MA           -        -         2      Hewlett-Packard Company           05/14/01
Billerica, MA          -      100%        1      Bay Networks, Inc.                12/31/99
Raynham, MA           61%      19%        4      Johnson & Johnson, Inc.           07/31/99
Hopkinton, MA          -        -         1      Zymark Corporation                12/31/05
-------------------------------------------------------------------------------------------
Total                 10%      38%       30
===========================================================================================
</TABLE>

                                       10
<PAGE>


<TABLE>
<CAPTION>
                                           Carrying Value         Percentage     Weighted
OFFICE                     Sq. Ft.      Dollars     Per Sq. Ft.     Leased     Average Rent
-------------------------------------------------------------------------------------------
<S>                       <C>         <C>             <C>            <C>           <C>
Somerset, NJ                178,600   $ 13,891,000    $ 77.78        100%          $16.86
Hopkinton, MA               159,800     12,458,000      77.96        100%            7.60
Portland, ME                149,200     16,156,000     108.28         99%           19.42
Manchester, NH              127,900     10,930,000      85.46        100%           15.73
Tampa, FL                   122,400      8,617,000      70.40         92%           12.65
Boston, MA                  114,300     10,145,000      88.76         91%           26.44
Framingham, MA              109,800      7,144,000      65.06        100%           23.15
Portland, ME                101,900     11,738,000     115.19        100%           19.08
Andover, MA                  97,700      7,555,000      77.33        100%           15.89
Ann Arbor, MI                81,500      6,005,000      73.68        100%           12.59
Farmington, CT               68,100      5,503,000      80.81        100%           15.80
Nashua, NH                   66,200      4,532,000      68.46         95%           12.17
South Portland, ME           56,100      5,072,000      90.41        100%           14.28
Greenville, SC               49,600      1,839,000      37.08         95%           10.47
Greenville, SC               46,300      1,293,000      27.93         89%           11.09
Glastonbury, CT              40,900      3,771,000      92.20         98%           19.86
Glastonbury, CT              39,900      3,607,000      90.40        100%           18.51
Peabody, MA                  37,000      4,255,000     115.00        100%           19.79
Nashua, NH                   36,000      2,404,000      66.78         99%           14.69
South Portland, ME           31,800      3,292,000     103.52        100%           15.97
Raynham, MA                  27,300      2,574,000      94.29         79%           17.40
Boston, MA                   27,100      1,595,000      58.86        100%           22.41
Nashua, NH                   26,100      1,573,000      60.27         84%           15.42
South Portland, ME           18,400      1,707,000      92.77        100%           13.26
-----------------------------------------------------------------------------------------
Total                     1,813,900   $147,656,000    $ 81.40         98%          $16.18
=========================================================================================
<CAPTION>
                          Scheduled
                            Lease
                         Expirations      Number                                          Lease
OFFICE                   1999    2000   of Tenants         Principal Tenant             Expiration
--------------------------------------------------------------------------------------------------
<S>                      <C>     <C>     <C>      <C>                                    <C>
Somerset, NJ               2%     9%      13      Merrill Lynch                          06/30/01
Hopkinton, MA              -      -        1      EMC Corporation                        04/30/04
Portland, ME               5%     -       12      UNUM Life Insurance Co.                01/31/01
Manchester, NH             -     24%      12      Fleet Bank                             04/07/02
Tampa, FL                 11%    41%      21      Olsten Kimberly Quality Care           02/28/02
Boston, MA                 3%     4%       5      Cambridge Associates, Inc.             12/31/02
Framingham, MA             9%    42%      26      Dolphin Interconnect Solutions         11/30/00
Portland, ME               5%     1%      11      People's Heritage Bank                 07/31/04
Andover, MA               15%    44%      12      Computer Associates                    12/31/02
Ann Arbor, MI             13%     -        2      Comshare, Inc.                         02/28/05
Farmington, CT             -     84%       4      McGraw-Hill Companies, Inc.            07/31/00
Nashua, NH                25%     2%      13      Hesser, Inc.                           08/31/05
South Portland, ME        45%    36%      22      American Express Financial Advisors    11/30/05
Greenville, SC            26%    23%      24      S.C. Tax Commission                    06/30/01
Greenville, SC            38%    14%       5      S.C. Voc. Rehab. Dept.                 01/07/03
Glastonbury, CT            6%     -        3      Hewlett-Packard Company                03/31/03
Glastonbury, CT            -     89%       4      Equator U.S.A., Inc.                   12/31/99
Peabody, MA                -      -        1      Oxford & Associates, Inc.              10/31/01
Nashua, NH                16%    18%      10      Puma                                   09/14/03
South Portland, ME         -     28%       7      S.D. Warren Company                    01/31/00
Raynham, MA               38%     -        7      Parent, McLaughlin & Nangle            03/31/03
Boston, MA                 -     12%      10      Pierce, Davis, Fahey & Perritano       09/30/03
Nashua, NH                 8%     -        4      Promis Systems Corp.                   05/31/01
South Portland, ME        31%    14%       4      Tufts Health Plan                      03/31/01
-------------------------------------------------------------------------------------------------
Total                      9%    19%     233   
=================================================================================================
<CAPTION>
RETAIL 
-----------------------------------------------------------------------------------------
<S>                         <C>       <C>             <C>             <C>          <C>   
Aurora, IL                  361,100   $ 26,842,000    $ 74.33         92%          $ 8.39
Baltimore, MD               146,700      6,133,000      41.81        100%            6.35
Peabody, MA                 106,900      9,876,000      92.39        100%           11.75
Temple Terrace, FL          100,500      7,550,000      75.12         95%           10.02
Hagerstown, MD               40,200      1,332,000      33.13        100%            5.22
-----------------------------------------------------------------------------------------
Total                       755,400   $ 51,733,000    $ 68.48         95%          $ 8.45
=========================================================================================

<CAPTION>
RETAIL                                         
-------------------------------------------------------------------------------------------------
<S>                        <C>    <C>     <C>     <C>                                    <C>
Aurora, IL                 2%     2%      29      Best Buy                               01/31/11
Baltimore, MD             11%     4%      14      Kmart Corp.                            11/30/05
Peabody, MA                -      -        1      Bradlees, Inc.                         10/31/15
Temple Terrace, FL         6%     7%      18      Publix Super Market, Inc.              11/30/06
Hagerstown, MD             -      0%       1      Giant Food Stores, Inc.                12/31/04
-------------------------------------------------------------------------------------------------
Total                      4%     3%      63  
=================================================================================================

<CAPTION>
                                             Carrying Value       Percentage
MULTI-FAMILY                Sq. Ft.       Dollars    Per Unit       Leased
----------------------------------------------------------------------------
<S>                             <C>   <C>             <C>             <C>
Harrison Township, MI           376   $  9,064,000    $24,106         92%
Bloomfield Hills, MI            346     13,201,000     38,153         96%
Laurel, MD                      237     10,587,000     44,671         97%
-------------------------------------------------------------------------
Total                           959   $ 32,852,000    $34,257         95%
=========================================================================
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                     Carrying Value
LAND AND OTHER           Dollars
--------------------------------
<S>                  <C>
Portland, ME         $ 2,321,000
Tampa, FL                427,000
Mount Clemens, MI         25,000
Hopkinton, MA            202,000
--------------------------------
Total                $ 2,975,000
================================
</TABLE>

     Reference is made to Notes 1, 2, 3, 4 and 5 in the Notes to the
Consolidated Financial Statements and Schedule III of the Financial Statement
Schedule under Item 14 of this report for descriptions of the Trust's
investments and properties.


EXECUTIVE OFFICE

The Trust's headquarters, at One Winthrop Square, Boston, Massachusetts,
includes approximately 9,320 square feet. The building is owned by the Trust
and, accordingly, no rent expense or rental income has been recorded since the
Trust commenced occupying the space in April 1996.


ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings to which the Trust or any of its
subsidiaries are a party or with respect to which any of its properties is
subject.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On October 14, 1998, the Trust held a Special Meeting of Shareholders, whereby
the shareholders (i) approved the Plan and (ii) approved an amendment to the
Trust's Declaration of Trust to permit all sales of assets in liquidation
without further shareholder approval even if the assets disposed of might be
considered substantially all of the assets of the Trust. The affirmative vote
on such matters, in each case by majority of the outstanding shares, was as
follows:


1. APPROVAL OF THE PLAN: To approve the Plan of Complete Liquidation and
   Termination of the Trust.

<TABLE>
<CAPTION>
     For        Against     Abstain
<S>             <C>          <C>   
  8,988,836     211,643      70,541
</TABLE>

2. APPROVAL OF THE AMENDMENT TO THE DECLARATION OF TRUST: To approve the
   amendment to the Trust's Declaration of Trust to permit any and all sales
   of assets without further shareholder approval.

<TABLE>
<CAPTION>
     For        Against     Abstain
<S>             <C>          <C>   
  8,723,189     471,460      76,370
</TABLE>

                                       12
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
        RELATED STOCKHOLDER MATTERS

MARKET INFORMATION AND DIVIDENDS.

The principal market on which the Trust's common shares are traded is the New
York Stock Exchange, under the symbol MGI. The table below sets forth, for the
fiscal quarters indicated, the high and low sales prices on the New York Stock
Exchange of the Trust's common shares and dividends paid per common share.



<TABLE>
<CAPTION>
-------------------------------------------------------
                         Sales Price
                   -----------------------
Fiscal 1998            High         Low       Dividends
-------------------------------------------------------
<S>                 <C>            <C>          <C>
First Quarter       $25 13/16      $23 5/8      $.29
Second Quarter      $25 7/8        $23 1/2      $.29
Third Quarter       $27 13/16      $23 1/16     $.31
Fourth Quarter      $29 1/2        $26 1/16     $.33
</TABLE>


<TABLE>
<CAPTION>
                        Sales Price
                   ---------------------
Fiscal 1997           High        Low       Dividends
-------------------------------------------------------
<S>                 <C>          <C>          <C>
First Quarter       $22 3/4      $20 1/8      $.27
Second Quarter      $22 3/8      $20 3/8      $.27
Third Quarter       $23 5/8      $20 3/4      $.28
Fourth Quarter      $25 3/8      $22 1/8      $.28
</TABLE>

On December 17, 1998, the Board of Trustees declared a dividend of $.33 per
share payable on January 19, 1999 to shareholders of record on January 8, 1999.

     Future dividends will be determined by the Trust's Board of Trustees and
will be dependent upon the results of the execution of the Plan, and in the
interim will also be dependent upon the earnings, financial position and cash
requirements of the Trust and other relevant factors existing at the time. The
Trust must distribute at least 95% of the Trust's taxable income in order to
enable it to qualify as a real estate investment trust for tax purposes. So
long as the Trust continues to qualify as a REIT, shareholders will, therefore,
receive in the form of dividends at least 95% of the taxable income of the
Trust.


APPROXIMATE NUMBER OF HOLDERS OF COMMON SHARES.

<TABLE>
<CAPTION>
------------------------------------------------------------
                                       Approximate Number
                                      of Holders of Record
Title of Class                      (as of January 27, 1999)
------------------------------------------------------------
<S>                                          <C>
Common Shares, $1.00 par value               2,054
</TABLE>

                                       13
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                     Year Ended November 30,
                                        ---------------------------------------------------------------------------------
                                             1998             1997             1996             1995             1994
-------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>              <C>              <C>              <C>
SUMMARY OF OPERATIONS
Rental income                           $  70,338,000    $  62,567,000    $  54,507,000    $  44,875,000    $  43,486,000
Property operating expenses and real
 estate taxes                             (24,482,000)     (22,827,000)     (20,589,000)     (17,423,000)     (17,392,000)
-------------------------------------------------------------------------------------------------------------------------
Property operating income                  45,856,000       39,740,000       33,918,000       27,452,000       26,094,000
Interest income                               651,000          639,000          421,000          514,000          394,000
Less expenses:
Depreciation and amortization              10,379,000       10,662,000        9,463,000        8,339,000        8,116,000
Interest                                   10,122,000        9,539,000        9,198,000        5,807,000        5,781,000
General and administrative                  3,592,000        3,206,000        2,873,000        2,651,000        2,580,000
Liquidation plan expense                      972,000                -                -                -                -
-------------------------------------------------------------------------------------------------------------------------
Income before net gains                    21,442,000       16,972,000       12,805,000       11,169,000       10,011,000
Net gains and extraordinary item            8,375,000        3,494,000       11,500,000        3,150,000        4,480,000
-------------------------------------------------------------------------------------------------------------------------
Net income                              $  29,817,000    $  20,466,000    $  24,305,000    $  14,319,000    $  14,491,000
=========================================================================================================================
Basic earnings per share                $        2.17    $        1.54    $        2.11    $        1.25    $        1.26
=========================================================================================================================
Dividends per share                     $        1.22    $        1.10    $         .98    $         .90    $         .86
=========================================================================================================================
Funds from operations                   $  32,626,000    $  27,526,000    $  22,169,000    $  19,492,000    $  18,111,000
=========================================================================================================================
Weighted average shares outstanding        13,736,729       13,289,781       11,540,972       11,487,677       11,450,451
=========================================================================================================================
SUMMARY OF FINANCIAL POSITION
Investments in real estate, at cost*    $ 415,769,000    $ 381,943,000    $ 356,024,000    $ 293,469,000    $ 267,530,000
-------------------------------------------------------------------------------------------------------------------------
Total assets                            $ 394,503,000    $ 362,044,000    $ 339,664,000    $ 274,651,000    $ 255,971,000
-------------------------------------------------------------------------------------------------------------------------
Loans payable                           $ 130,517,000    $ 113,171,000    $ 138,547,000    $  84,506,000    $  70,954,000
-------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity              $ 256,822,000    $ 242,385,000    $ 194,435,000    $ 180,540,000    $ 176,095,000
=========================================================================================================================
</TABLE>

Note: Reference is made to the Index to Consolidated Financial Statements filed
      as part of this report under Item 14. Item 6, Selected Financial Data,
      should be read in conjunction with the Consolidated Financial Statements
      and the related notes appearing elsewhere herein.

* Effective October 14, 1998 with the adoption of the Liquidation plan, the
  Trust reclassified $50.2 million of accumulated depreciation and
  amortization against the original cost of real estate assets, and captioned
  the resulting total of $365,543,000 as "Properties held for Sale" in the
  accompanying balance sheet as of November 30, 1998.

                                       14
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

MGI is a self-administered equity REIT that owns and operates a diversified
portfolio of income producing real estate consisting of 66 commercial
properties and three multi-family residential properties. The commercial
portfolio consists of 5.6 million square feet, 87% of which is comprised of
office, office/research and development and industrial properties. The
multi-family properties consist of three residential communities aggregating
959 units. At November 30, 1998, the commercial and residential properties were
97.9% and 94.5% leased, respectively.

     On August 12, 1998, the Board of Trustees, after completing a review of
the strategic alternatives available to MGI to maximize shareholder value,
unanimously approved a Plan of Complete Liquidation and Termination of the
Trust (the "Plan"). The shareholders of the Trust approved the Plan at a
special meeting held on October 14, 1998. In the Trust's definitive Proxy
Statement dated September 10, 1998, which was circulated to shareholders in
connection with the October 14, 1998 special meeting, the Plan is discussed,
including risk factors, income tax consequences and certain other
considerations. As part of that discussion, management estimated that
substantially all of the properties would be sold within 12 to 15 months of
shareholder adoption of the Plan and that it expected sales of the Trust's
assets would be made at prices that would yield net aggregate cash liquidation
proceeds of between $30 and $33 per share. Currently, management believes that
sales of the Trust's assets pursuant to the Plan will be made at prices that
will yield aggregate net liquidation proceeds at approximately the lower end of
the originally announced range of between $30 and $33 per share, taking into
consideration the effects of the recent credit crisis which adversely impacted
the national credit and real estate markets, and which now seems to be receding
to some degree; however, no assurance can be given that per share net cash
proceeds will be within this range or will reach this range.

     Since 1992, the Trust has focused on the commercial segment of the real
estate market, specifically industrial and office properties located in New
England. At November 30, 1998, 80%, based upon square feet (66% based upon
cost), of MGI's real estate assets were located in New England. The region
contributed approximately 71% of the Trust's property operating income for
fiscal 1998 up from 60% in fiscal 1997. A number of the properties in New
England have average rents in place that management believes to be lower than
the prevailing market rates. Much of the Trust's growth from its internal
operations is attributable to increased rental rates upon lease rollovers in
New England. As of year-end, the Trust had 4.1 million square feet under
management in New England, more than doubling the property management operation
which the Trust had initiated during the third quarter of 1997.

     The following table sets forth certain information concerning the Trust's
properties at November 30, 1998:

<TABLE>
<CAPTION>
                                  New England                           Other Regions             
                   ---------------------------------------  ------------------------------------- 
Property Type       Number       Total Cost        Sq. Ft.  Number      Total Cost      Sq. Ft. 
----------------------------------------------------------  ------------------------------------- 
<S>                   <C>      <C>               <C>          <C>      <C>            <C>       
Office                19       $121,707,000      1,335,000     5       $ 43,950,000     479,000 
Office/R&D            17         70,770,000      1,394,000     -                  -           - 
Industrial            16         68,231,000      1,685,000     -                  -           - 
Retail                 1         10,329,000        107,000     4         50,754,000     648,000 
Multi-family           -                  -              -     3         47,052,000           - 
Land and Other         2          2,523,000              -     2            453,000           - 
----------------------------------------------------------------------------------------------- 
Total                 55       $273,560,000      4,521,000    14       $142,209,000   1,126,000 
=============================================================================================== 
</TABLE>

During 1998 the Trust acquired 12 properties totaling 740,200 square feet, and
a parcel of land, all of which were located in New England, for an aggregate
cost of $57.1 million. In addition, the Trust sold seven properties, five of
which were located outside of New England and recognized gains of $8.4 million
with net proceeds aggregating $22.3 million.


                                       15
<PAGE>

RESULTS OF OPERATIONS


1998 Compared to 1997

Net income for 1998 of $29.8 million, or $2.17 per share, included net gains of
$8.4 million, which resulted from the sale of seven properties. Net income for
1997 was $20.5 million, or $1.54 per share, which included gains of $3.8
million which was partially offset by an extraordinary item of $0.3 million
incurred in connection with a loan refinancing prepayment fee. Income before
net gains increased 25.9% from $17.0 million in 1997 to $21.4 million in 1998.

     Funds from operations ("FFO") totaled $32.6 million for fiscal 1998
compared to $27.5 million in 1997, an 18.5% increase. MGI calculates FFO in
conformity with the NAREIT definition which is net income (computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for both unconsolidated partnerships and
joint ventures, and for significant non-recurring events (such as Liquidation
plan expenses). MGI believes FFO is an appropriate supplemental measure of
operating performance.

     The following is a reconciliation of net income to FFO:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
                                                            Year Ended November 30,
                                                        ------------------------------
                                                             1998             1997
--------------------------------------------------------------------------------------
<S>                                                     <C>              <C>
Net income                                               $ 29,817,000     $ 20,466,000
Less net gains and extraordinary item                      (8,375,000)      (3,494,000)
Plus building depreciation                                  7,801,000        8,385,000
Plus tenant improvement and commission amortization         2,411,000        2,169,000
Liquidation plan expenses                                     972,000                -
--------------------------------------------------------------------------------------
Funds from operations                                    $ 32,626,000     $ 27,526,000
======================================================================================
</TABLE>

The $4.5 million increase in income before net gains, when 1998 is compared to
1997, resulted principally from a $6.1 million increase ($45.8 million versus
$39.7 million, respectively) in property operating income (which is defined as
rental income less property operating expenses and real estate taxes), offset
by increases in interest, general and administrative expenses and liquidation
plan expenses. The increase in interest expense of $0.6 million was due
primarily to debt incurred in connection with the acquisition of properties.
Additionally, general and administrative costs increased by $0.4 million,
reflecting higher personnel costs as well as increased legal expenses and the
costs associated with shareholder relations. Liquidation plan expenses of $1.0
million reflect those costs, principally professional fees associated with
developing the Plan, including the consideration of strategic alternatives, and
presenting the proposal to the Trust's shareholders. In addition, included in
the amount is the recognition of related employee severance costs which are
being recognized over a 15-month period beginning with the approval of the
Plan. Depreciation and amortization decreased by $.3 million, as the Trust
stopped depreciating its real estate assets on October 14, 1998, the date
shareholders approved the Plan. The change in 1998 FFO when compared to 1997 is
attributable to the same factors that affected income before net gains in such
periods, excluding the effect of changes in depreciation and amortization and
liquidation plan expenses.

     The change in property operating income from 1997 to 1998 reflects
improved results from comparable properties (which is defined as properties
owned throughout both 1997 and 1998), as well as the effect of the sale and
acquisition of properties, is detailed below:

                                       16
<PAGE>

<TABLE>
<CAPTION>
                                                                            Net Change in
                                                                              Property
                    Properties Held     1998 and 1997     1998 and 1997       Operating
  Property Type        Both Years        Acquisitions         Sales            Income
---------------------------------------------------------------------------------------
<S>                    <C>                <C>             <C>                <C>       
Office                 $1,069,000         $4,550,000      $   (837,000)      $4,782,000
Office/R&D                704,000          1,362,000                 -        2,066,000
Industrial                244,000          1,262,000        (1,855,000)        (349,000)
Retail                    251,000                  -          (373,000)        (122,000)
Multi-family              280,000                  -          (961,000)        (681,000)
Land and Other            439,000                  -           (16,000)         423,000
---------------------------------------------------------------------------------------
Total                  $2,987,000         $7,174,000      $ (4,042,000)      $6,119,000
=======================================================================================
</TABLE>

The increase in property operating income from the 43 comparable properties
reflects leasing completed during the last two fiscal years, particularly in
New England where leases were executed at substantially higher rents. Rental
rates for leases signed during 1998 and 1997 increased by 32.6% and 30.6%,
respectively, compared to the previous rents in place. Base rents on leases
signed or renewed in 1998 are expected to generate approximately $1.5 million
of additional revenues in fiscal 1999 as such leases become effective. Rental
revenue has also been positively impacted by the portfolio's overall leased
rate which increased from 95.4% at the end of fiscal 1997 to 97.3% at November
30, 1998. For the comparable office properties, rents from leases executed in
1998 are, in the aggregate, 15% higher than rents previously in place, with
increases of approximately 20% in New England. The office properties also
experienced lower operating expenses and lower management costs due to the
internalization of property management. The retail operating results benefited
from leases executed at the Aurora, Illinois property, which increased the
overall retail leased level to 95.4%. The multi-family properties experienced
revenue growth of 5.6%, which reflected higher rents and stable occupancy
rates. The comparable office/research and development properties experienced
the largest growth in rental rates with 324,900 square feet of leases signed at
an average rate increase of 77%. Industrial properties benefited from the
combined impact of higher overall occupancy and rental rates that increased by
18%.

     Commercial leases signed in 1998, the percentage of the commercial
properties leased and scheduled commercial lease expirations in 1999 and 2000
(in square feet) are as follows:

<TABLE>
<CAPTION>
                     1998          Leased at         Scheduled Expirations
Property Type      Leasing     November 30, 1998       1999         2000
--------------------------------------------------------------------------
<S>               <C>         <C>                   <C>         <C>
Office            244,300             97.6%          166,100       345,700
Office/R&D        358,200            100.0%          135,500       407,000
Industrial        242,600             97.6%          204,700       242,100
Retail            121,400             95.4%           27,500        19,200
--------------------------------------------------------------------------
Total             966,500             97.9%          533,800     1,014,000
==========================================================================
</TABLE>

With regard to the 1998 leasing, lease renewals totaled 471,100 square feet,
leases signed with new tenants totaled 426,000 square feet of space that was
previously leased, and leases executed that were related to space that was
vacant as of December 1, 1997 totaled 69,400 square feet. Scheduled expirations
in 1999 represent 9.5% of the Trust's total commercial square feet at November
30, 1998, compared to scheduled expirations in 1998 of 769,700 square feet,
which represented 14.3% of the Trust's total commercial square feet at November
30, 1997.

     The fiscal 1999 expirations are scheduled as follows: 125,300 square feet
in the first quarter, 220,200 square feet in the second quarter, 136,100 square
feet in the third quarter and 52,200 square feet in the fourth quarter. In the
Trust's New England portfolio, leases relating to 455,500 and 965,300 square
feet are scheduled to expire in 1999 and 2000,

                                       17
<PAGE>

respectively, which management believes are subject to rents that are generally
below the current market. Included in the 1999 expirations is a 105,500 square
foot lease scheduled to expire on April 1, 1999 at an Andover, Massachusetts
office building. Management has been in discussions with the existing tenant,
as well as other potential tenants, with the resolution uncertain at this time.


1997 Compared to 1996

Net income for 1997 was $20.5 million, or $1.54 per share, which included gains
of $3.8 million which were partially offset by an extraordinary item of $0.3
million incurred in connection with a loan refinancing prepayment fee. Net
income for 1996 of $24.3 million, or $2.11 per share, included net gains of
$11.5 million, which resulted from the sale of three industrial buildings as
well as the sale of a partnership interest. Income before net gains increased
from $12.8 million in 1996 to $17.0 million in 1997.

     Funds from operations ("FFO") totaled $27.5 million for fiscal 1997,
compared to $22.2 million in 1996. MGI calculates FFO in conformity with the
NAREIT definition as previously described.

     The following is a reconciliation of net income to FFO:

<TABLE>
<CAPTION>
                                                             Year Ended November 30,
                                                         ----------------------------
                                                             1997              1996
-------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
Net income                                               $20,466,000     $ 24,305,000
Less net gains and extraordinary item                     (3,494,000)     (11,500,000)
Plus building depreciation                                 8,385,000        7,337,000
Plus tenant improvement and commission amortization        2,169,000        2,027,000
-------------------------------------------------------------------------------------
Funds from operations                                    $27,526,000     $ 22,169,000
=====================================================================================
</TABLE>

The $4.2 million increase in income before net gains from 1996 to 1997 resulted
principally from a $5.8 million increase ($33.9 million versus $39.7 million,
respectively) in property operating income (which is defined as rental income
less property operating expenses and real estate taxes), offset by increases in
interest and depreciation and amortization expense. The increase in interest
expense of $0.3 million was due primarily to debt incurred in connection with
the acquisition of properties. Depreciation and amortization increased by $1.2
million, reflecting the greater number of properties owned. Additionally,
general and administrative costs increased by $0.3 million, primarily
reflecting higher personnel costs. Interest income increased by $0.2 million,
reflecting higher average cash balances. The change in 1997 FFO, when compared
to 1996, is attributable to the same factors that affected income before net
gains in such periods, excluding the effect of changes in depreciation and
amortization expense.

     The change in property operating income from 1996 to 1997 reflects
improved results from comparable properties (which is defined as properties
owned throughout both 1996 and 1997), as well as the effect of the sale and
acquisition of properties, as detailed below:


<TABLE>
<CAPTION>
                                                                            Net Change in
                                                                              Property
                    Properties Held     1997 and 1996     1997 and 1996       Operating
Property Type          Both Years        Acquisitions         Sales            Income
---------------------------------------------------------------------------------------
<S>                     <C>               <C>                <C>             <C>       
Office                 $ 491,000          $2,912,000        $  28,000        $3,431,000
Industrial                64,000           2,115,000         (647,000)        1,532,000
Office/R&D               (78,000)            881,000                -           803,000
Multi-family             286,000                   -                -           286,000
Retail                    34,000                   -                -            34,000
Land and Other          (122,000)            218,000         (360,000)         (264,000)
---------------------------------------------------------------------------------------
Total                  $ 675,000          $6,126,000        $(979,000)       $5,822,000
=======================================================================================
</TABLE>

                                       18
<PAGE>

The increase in property operating income from the 40 comparable properties
largely reflects leasing completed during 1997, particularly at properties
located in Massachusetts where leases totaling 469,000 square feet were
executed at substantially higher rents. For the comparable office properties,
rents from leases executed in 1997 are, in the aggregate, 27% higher than rents
previously in place. Retail operating results were relatively unchanged from
1996. Nevertheless, retail leases executed at the Aurora, Illinois property
should positively impact in 1998 the retail properties based upon scheduled
expirations. Bradlees, Inc., which, pursuant to Chapter 11 of the Federal
Bankruptcy Code, affirmed its lease at the Peabody, Massachusetts store owned
by MGI, has obtained an extension to submit a reorganization plan until
February 1999. The multi-family properties experienced revenue growth of 4%,
which reflected higher rental rates offset by a slight decline in occupancy at
two Michigan apartment properties. Property operating income from the
office/research and development and industrial properties combined did not
change significantly from fiscal 1996 but should benefit in fiscal 1998 from
recently executed leases.

LIQUIDITY

Shareholders' equity at November 30, 1998 was $256.8 million, compared to
$242.4 million at November 30, 1997. The increase primarily reflects net income
in excess of distributions paid. At November 30, 1998, financial liquidity was
provided by $12.3 million in cash and cash equivalents and by $40.0 million
available under a line of credit of $75.0 million. The principal sources and
uses of cash in fiscal 1998 and 1997 are summarized as follows:



<TABLE>
<CAPTION>
Sources of Cash                                        1998             1997
------------------------------------------------------------------------------
<S>                                              <C>              <C>
Trust operations                                 $ 30,791,000     $ 29,100,000
Sales of real estate, net                          22,274,000       15,600,000
Proceeds from the issuance of common shares         1,137,000       41,600,000
New borrowings, net of fees                        46,550,000       26,500,000
------------------------------------------------------------------------------
Total                                            $100,752,000     $112,800,000
==============================================================================

<CAPTION>

Uses of Cash                                           1998             1997
------------------------------------------------------------------------------
<S>                                              <C>              <C>        
Real estate acquisitions                         $ 57,140,000     $ 48,000,000
Dividends                                          16,766,000       14,400,000
Additions to real estate                            7,482,000        5,800,000
Deferred tenant charges and other                   2,665,000        2,600,000
Repayment of mortgage loans payable                18,398,000       43,200,000
------------------------------------------------------------------------------
Total                                            $102,451,000     $114,000,000
==============================================================================
</TABLE>

During 1998, the Trust acquired 12 properties totaling 740,200 square feet and
a parcel of land for an aggregate cost of $57.1 million. Nine of these
properties are located in three separate business parks giving the Trust a more
significant presence in their respective markets. In addition, the Trust sold
seven properties, five of which were located outside of New England and
recognized gains of $8.4 million with net cash proceeds aggregating $22.3
million. The sale of non-New England properties reflects the Trust's strategy
of positioning its core portfolio in New England with a focus on office,
office/research and development, and industrial properties. Subsequent to the
end of fiscal 1998, the Trust completed the sale of a 40,200 square foot retail
property located in Hagerstown, Maryland for $1.2 million, which, on an
individual sale basis, is a price that falls into the estimated range of net
liquidation sales proceeds with respect to such property. A summary of 1998
real estate acquisitions follows:

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                    Square
Property Type               Location             Date Acquired       Feet           Cost
-------------------------------------------------------------------------------------------
<S>               <C>                               <C>            <C>          <C>
Office            South Portland, Maine             02/98           56,100      $ 5,147,000
                  South Portland, Maine             02/98           31,800        3,340,000
                  South Portland, Maine             02/98           18,400        1,732,000
                  Hopkinton, Massachusetts          03/98          159,800       12,627,000
                  Raynham, Massachusetts            03/98           27,300        2,605,000
                  Manchester, New Hampshire         04/98          127,900       10,978,000
                  Peabody, Massachusetts            04/98           37,000        4,296,000
Office/R&D        Hudson, New Hampshire             03/98           76,800        3,535,000
                  Hopkinton, Massachusetts          03/98           76,100        5,326,000
                  Hopkinton, Massachusetts          03/98           40,800        2,850,000
                  Raynham, Massachusetts            03/98           49,200        2,552,000
Industrial        Hopkinton, Massachusetts          03/98           39,000        1,950,000
Land              Hopkinton, Massachusetts          03/98                -          202,000
-------------------------------------------------------------------------------------------
Total                                                              740,200      $57,140,000
===========================================================================================
</TABLE>

Loans payable totaled $130.5 million at November 30, 1998, a net increase of
$17.3 million, compared to the $113.2 million outstanding at November 30, 1997.
During the second quarter of fiscal 1998, MGI entered into a $75 million
unsecured credit facility which replaced two secured lines of credit that
totaled $45 million. At year-end, the Trust had $35.0 million outstanding under
the line of credit whereas at November 30, 1997, there was $15.5 million
outstanding under the then existing lines. In addition, in 1998 the Trust
closed on an $11.6 million mortgage loan secured by a Michigan apartment
complex and loans totaling $10.8 million were assumed by the purchaser in
conjunction with the sale of properties. The balance of $3.0 million represents
scheduled principal payments. Scheduled loan principal payments due within 12
months of November 30, 1998 total $3.2 million. Subsequent to year-end, the
Trust repaid a $12.3 million loan which had a stated rate of 8.5% and which was
secured by an Aurora, Illinois retail center and subsequently drew an
additional $13.5 million from its line primarily to fund the Yorkshire loan
repayment and capital improvements. MGI believes it will continue to be able to
extend or refinance maturing mortgage loans upon satisfactory terms.

     Cash requirements in 1999 will include liquidating distributions to
shareholders, capital and tenant improvements and leasing expenditures. Under
the provisions of the Code, distributions made within 24 months of the adoption
of the Plan are considered liquidating distributions and will not be dividend
income when received by shareholders. Distributions in liquidation should first
be used to reduce a shareholder's basis in his or her shares of MGI with any
excess constituting a capital gain if the shares were held as a capital asset.
If the sum of all liquidating distributions is less than a shareholder's basis,
the difference will constitute a capital loss.

     During 1998, expenditures for capital and tenant improvements totaled $3.8
million and $3.7 million, respectively. Included in the amount for capital
improvements were $2.0 million of costs associated with building renovations.
The Trust is committed to approximately $3 million for capital and tenant
improvements relating to leasing activity completed in 1998 and through fiscal
1999 to date. Of this amount, approximately $2.0 million is for a 60,000 square
foot expansion of an office/research and development building located in
Hudson, New Hampshire.

     In connection with the Plan, MGI anticipates incurring a variety of costs
and fees including costs related to sales, fees to advisors and other
professionals, severance compensation, payments to holders of stock options,
and other expenses related to liquidation. Among the costs is an estimated $4.2
million of employee severance compensation, which includes a base and incentive
component. Payment of employee severance compensation is contingent upon the

                                       20
<PAGE>

employee's continuing employment and is being recognized as an expense over a
15-month period beginning October 14, 1998. The Trust has entered into
agreements with a financial advisor and with an exclusive property sales agent.
Each agreement provides for a fee of $1.5 million to be paid in the event of a
complete liquidation or merger, with a minimum of $400,000 to be paid to each.
In addition, the Trust has agreed to reimburse their out-of-pocket expenses up
to $650,000 in the aggregate, of which $132,000 has been paid to date.

     Sources of funds in the future are expected to be derived from property
operations, sales of properties, mortgaging or refinancing of existing
mortgages on properties, borrowing under MGI's lines of credit and MGI's
portfolio of investment securities. MGI believes the combination of available
cash and cash equivalents, the value of MGI's unencumbered properties and other
resources are sufficient to meet its liquidity requirements while implementing
the Plan.


OTHER

Inflation

During the past three years, the impact of inflation on MGI's operations and
investment activity has not been significant.

Real Estate Considerations

Real estate investments and operations are subject to a number of factors,
including changes in general economic climate, local conditions (such as an
oversupply of space, a decline in effective rents or a reduction in the demand
for real estate), competition from other available space, the ability of the
owner to provide adequate maintenance or to fund capital and tenant
improvements required to maintain market position and control of operating
costs. In certain markets in which the Trust owns real estate, overbuilding and
local or national economic conditions have, in the past, combined to produce
lower effective rents and/or longer absorption periods for vacant space. As the
Trust re-leases space, certain effective rents may be less than those earned
previously. Management believes its modest diversification by property type and
its diverse tenant base somewhat reduce the risks associated with these factors
and enhances opportunities for cash flow growth and capital gains potential,
although there can be no assurance thereof.

Year 2000 Compliance

The Year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after 1999.
This could result in computer system failures or miscalculations causing
disruptions of operations. The Year 2000 issue affects almost all companies and
organizations.

     MGI has conducted an assessment of its core internal computer information
systems and believes that its internal financial and information systems are
presently substantially Year 2000 compliant. Also, MGI is currently evaluating
those computer systems that do not relate to financial and other information
needs such as systems designed to operate buildings, its telecommunications
systems, security systems, energy management systems and elevator systems. In
certain circumstances, MGI may be required to upgrade, modify or replace some
of its internal or operational systems. Additionally, no estimates can be made
as to any potential adverse impact resulting from the failure of tenants or
vendors, or third-party service providers, such as its banks, payroll processor
and telecommunications providers, to prepare for the Year 2000 although MGI is
attempting to identify the risks.

     Because MGI's assessment is ongoing, the total cost of bringing all
internal systems, equipment and operations into Year 2000 compliance has not
yet been fully quantified. To date, MGI has not expended significant funds to
assess its Year 2000 issues, since its evaluation of the Year 2000 issue has
been conducted by its own personnel or its third-party vendors in connection
with their servicing operations. MGI's evaluation has not been subject to any
independent verification or review process. While MGI's evaluation efforts may
involve additional costs, it believes, based on available information, that
these costs will not have a material adverse impact on the business, financial
condition or results of operations, although there can be no assurance thereof.
MGI believes it will be Year 2000 compliant by December 31, 1999, but if the
efforts by MGI or any of its material third-party vendors and service providers
are not completed on time, the Year 2000 issue could have an adverse effect on
its business. MGI is currently evaluating the consequences of a potential
failure to remediate these matters and is in the process of developing
contingency plans.

                                       21
<PAGE>

Market Risk

The Trust is exposed to interest rate changes primarily as a result of its line
of credit and long-term debt used to maintain liquidity and fund capital
expenditures and expansion of the Trust's real estate investment portfolio and
operations. The Trust's interest rate risk management objective is to limit the
impact of interest rate changes on earnings and cash flows and to lower its
overall borrowing costs. The Trust does not enter into derivative or interest
rate transactions. The carrying values of financial instruments including cash
and cash equivalents, accounts receivable, accounts payable and notes payable,
approximate fair value because of the short maturity of these instruments. The
Trust's obligations for borrowed money totaled $130.5 million at November 30,
1998, representing 33% of its total assets. At November 30, 1998, fixed rate
mortgage loans totaled $95.5 million with an average rate of 7.9%. It is
management's belief that as of the date of the report, similar financing would
be available at rates ranging from approximately 6.75% to 7.0%, prior to the
impact of prepayment fees. The Trust's debt obligations subject to floating
interest rates at November 30, 1998 aggregated approximately $35 million at a
weighted average interest rate of approximately 6.5% and represented 26.8% of
the Trust's outstanding debt. Significant increases in interest rates on
floating rate debt would adversely affect the net income, FFO and cash
available for distribution to shareholders. The carrying value of long-term
debt approximates its fair value, as estimated by using discounted future cash
flows based on the Trust's current incremental borrowing rates for similar
types of borrowing arrangements and the estimated time to complete the Plan.


FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements, estimates or plans
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of MGI to be materially different from
results or plans expressed or implied by such forward-looking statements. Such
factors generally include, among other things, adverse changes in the real
estate markets; risk of default under the Trust's outstanding indebtedness;
financial condition and bankruptcy of tenants; environmental/safety
requirements; adequacy of insurance coverage; and general and local economic
and business conditions. With respect, in particular, to the Plan, such factors
include, among other things, the risks of future action or inaction by the
Board of Trustees (and the actual results thereof) with respect to the Plan
(including the possibility of litigation pertaining thereto), the net
realizable value of the properties in the event the Plan is implemented, the
effects of financial market conditions and general economic conditions,
maintaining the current occupancy and rent levels at the properties, as well as
those risk factors set forth in the definitive Proxy Statement relating to the
Trust's Special Shareholders' Meeting held on October 14, 1998, which is
incorporated herein by reference and filed as an exhibit hereto. Investors
should review the more detailed risks and uncertainties set forth under the
captions Risk Factors and Competition, Regulation and Other Factors in this
report. Although the Trust believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included or incorporated by reference in this
report will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Trust or any
other person that the objectives and plans of the Trust will be achieved.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data are included under Item 14 of
this Report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

                                       22
<PAGE>

                                    PART III

The information required by Items 10, 11, 12 and 13 of this Part III has been
omitted from this Report since the Registrant intends to file with the
Securities and Exchange Commission a definitive proxy statement which involves
the election of Trustees not later than 120 days after the close of the
Registrant's last fiscal year.




                                       23
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

(A) 1. Consolidated Financial Statements

INDEX

Independent Auditors' Report
Financial Statements:
     Consolidated Balance Sheets, November 30, 1998 and 1997
     Consolidated Statements of Earnings, Years ended November 30, 1998, 1997
     and 1996
     Consolidated Statements of Cash Flows, Years ended November 30, 1998, 1997
     and 1996
     Consolidated Statements of Changes in Shareholders' Equity, Years ended
     November 30, 1998, 1997 and 1996
     Notes to Consolidated Financial Statements

2. Consolidated Financial Statement Schedule

Financial Statement Schedule (as of or for the year ended November 30, 1998):
Schedule III, Real Estate and Accumulated Depreciation

Exhibit XI - Computation of Diluted Earnings per Share

Exhibit XXVII - Financial Data Schedule for year ended November 30, 1998 (EDGAR
filing only)

Other schedules are omitted for the reasons that they are not required, are not
applicable, or the required information is set forth in the financial
statements or notes thereto.

3. Exhibits

   3(a) Second Amended and Restated Declaration of Trust, incorporated by
        reference to Exhibit 3 of the Trust's Annual Report on Form 10-K for the
        fiscal year ended November 30, 1981 (the "1981 10-K").

   (b)  Certificate of First Amendment of Second Amended and Restated
        Declaration of Trust, incorporated by reference to Exhibit 3 of the 1981
        10-K.

   (c)  Certificate of Second Amendment of Second Amended and Restated
        Declaration of Trust, incorporated by reference to the Trust's Report on
        Form 8-K, filed on January 13, 1983.

   (d)  Certificate of Third Amendment of Second Amended and Restated
        Declaration of Trust, incorporated by reference to Exhibit 3(d) to
        Amendment No. 1 to the Trust's Registration Statement on Form S-2 filed
        on June 7, 1985.

   (e)  Certificate of Fourth Amendment of Second Amended and Restated
        Declaration of Trust, dated October 17, 1986, incorporated by reference
        to the Trust's Annual Report on Form 10-K for the year ended November
        30, 1986.

   (f)  Certificate of Fifth Amendment of Second Amended and Restated
        Declaration of Trust, dated March 25, 1987, incorporated by reference to
        Exhibit 3(f) of the Trust's Annual Report on Form 10-K for the fiscal
        year ended November 30, 1987.

   (g)  Certificate of Sixth Amendment of Second Amended and Restated
        Declaration of Trust, dated February 10, 1988, incorporated by reference
        to Exhibit 4(g) of the Trust's Registration Statement on Form S-8 filed
        on May 3, 1988.

   (h)  Certificate of Seventh Amendment of Second Amended and Restated
        Declaration of Trust, dated June 30, 1988, incorporated by reference to
        Exhibit 4.8 of the Trust's Registration Statement on Form S-4 filed on
        November 10, 1988 (Reg. No. 33-25495).

   (i)  Certificate of Eighth Amendment of Second Amended and Restated
        Declaration of Trust, dated March 27, 1989, incorporated by reference to
        Exhibit 3(i) of the Trust's Annual Report on Form 10-K for the fiscal
        year ended November 30, 1989 (the "1989 10-K").

                                       24
<PAGE>

   (j)   Rights Agreement, dated as of June 21, 1989 between the Trust and The
         First National Bank of Boston as Rights Agent, incorporated by
         reference to Exhibit 1 to the Trust's Registration Statement on Form
         8-A, filed on June 27, 1989.

   (k)   Certificate of Vote of the Trustees Designating a Series of Preferred
         Shares, dated June 21, 1989, incorporated by reference to Exhibit 3(m)
         of the 1989 10-K.

   (l)   Certificate of Eleventh Amendment of Second Amended and Restated
         Declaration of Trust which increased the authorized number of Common
         Shares from 15,000,000 to 17,500,000, incorporated by reference to
         Exhibit B to the Trust's Quarterly Report Form 10-Q for the ended May
         31, 1996.

   (m)   Certificate of Twelfth Amendment of Second Amended and Restated
         Declaration of Trust which increased the authorized number of Preferred
         Shares from 2,000,000 to 6,000,000 incorporated by reference to Exhibit
         B to the Trust's Quarterly Report Form 10-Q for the quarter ended May
         31, 1996.

   (n)   Certificate of Thirteenth Amendment of Second Amended and Restated
         Declaration of Trust.*

   (o)   By-Law, adopted on December 24, 1982 incorporated by reference to the
         Trust's Report on Form 8-K, filed on January 12, 1983.

   (p)   Certificate of Amendment of By-Laws, dated March 21, 1989, incorporated
         by reference to the Trust's Report on Form 8-K dated March 21, 1989.

   (q)   By-Law adopted December 18, 1997, relating to shareholder proposals and
         nominations, incorporated by reference to the Trust's Annual Report on
         Form 10-K for the year ended November 30, 1997.

   10(a) Mortgage Growth Investors Incentive Stock Option Plan for Key
         Employees, incorporated by reference to the Trust's Definitive Proxy
         Statement dated March 15, 1982

   (b)   Mortgage Growth Investors Stock 1982 Option Plan for Trustees,
         incorporated by reference to the Trust's Definitive Proxy Statement
         dated March 15, 1982

   (c)   MGI Properties 1988 Stock Option and Stock Appreciation Rights Plans
         for Key Employees and Trustees, incorporated by reference to the
         Trust's Definitive Proxy Statement, dated February 19, 1988.

   (d)   Amendment to MGI Properties' 1988 Stock Option and Stock Appreciation
         Rights Plan for Key Employees, dated as of December 19, 1989,
         incorporated by reference to Exhibit 10(f) of the 1989 10-K.

   (e)   Amendment to MGI Properties' 1988 Stock Option Plan for Trustees, dated
         as of December 19, 1989, incorporated by reference to Exhibit 10(g) of
         the 1989 10-K.

   (f)   Amended and Restated Severance Compensation Plan, dated as of December
         19, 1989, incorporated by reference to Exhibit 10(i) of the 1989 10-K.

   (g)   MGI Properties 1994 Stock Option and Stock Appreciation Rights Plan for
         Key Employees and Trustees incorporated by reference to the Trust's
         Definitive Proxy Statement, dated February 18, 1994.

   (h)   The Dividend Reinvestment and Share Purchase Plan of MGI Properties
         incorporated by reference to the Trust's Report on Form S-3, filed on
         July 1, 1994.

   (i)   MGI Properties 1997 Employee Stock Option, Stock Appreciation Rights
         and Restricted Stock Plan, incorporated by reference to the Trust's
         Definitive Proxy Statement, dated February 24, 1997

   (j)   Credit Agreement dated April 2, 1998 among MGI Properties, as Borrower,
         the Financial Institutions Party thereto and their Assignees under
         Section 13.5(a), as Lenders, Wells Fargo Bank, National Association, as
         Documentation Agent, Syndication Agent, and as Arranger and BankBoston,
         N.A., as Administrative Agent and as Co-Arranger, incorporated by
         reference to Exhibit 10.1 to the Trust's Quarterly Report on Form 10-Q
         for the quarter ended February 28, 1998.
          
   (k)   Form of Indemnity Agreement incorporated by reference to Exhibit 99 to
         the Trust's Quarterly Report on Form 10-Q for the quarter ended May 31,
         1998.

   (l)   Form of Severance Agreement for Key Employees, incorporated by
         reference to the Trust's Current Report on Form 8-K, dated August 12,
         1998.


                                       25
<PAGE>

   (m)   MGI Properties Long Term Performance Plan, incorporated by reference to
         the Trust's Current Report on Form 8-K dated August 15, 1998.

   (n)   MGI Properties Definitive Proxy Statement dated September 10, 1998 in
         respect of the Special Meeting of Shareholders held on October 14,
         1998.*

   11    Computation of Diluted Earnings per Share, included under Item 14 of
         this Report.

   24    Auditors' consent.


(B) Reports on Form 8-K:

Current Report on Form 8-K dated August 12, 1998 reporting Item 5, Other Events
filed on October 1, 1998.

     Current Report on Form 8-K dated October 14, 1998 reporting Item 5, Other
Events filed on October 15, 1998.

     *Filed herewith

     MGI Properties (the "Trust") is a Massachusetts business trust and all
persons dealing with the Trust must look solely to the property of the Trust
for the enforcement of any claims against the Trust. Neither the Trustees,
officers, agents nor shareholders of the Trust assume any personal liability in
connection with its business or assume any personal liability for obligations
entered into in its behalf.


                                       26
<PAGE>

POWER OF ATTORNEY

MGI Properties and each of the undersigned do hereby appoint W. Pearce Coues
and Phillip C. Vitali and each of them severally, its or his true and lawful
attorneys to execute on behalf of MGI Properties and the undersigned any and
all amendments to this Report and to file the same with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission. Each of such attorneys shall have the power to act hereunder with
or without the other.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: January 29, 1999
                          MGI PROPERTIES
                          (Registrant)


                          By: /s/ W. Pearce Coues
                              --------------------------------
                              W. Pearce Coues, Chairman of the Board of Trustees

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
     Signature                            Title                              Date
     ---------                            -----                              ----
<S>                            <C>                                      <C>
/s/ W. Pearce Coues            Chairman of the Board of Trustees and
---------------------          Chief Executive Officer                  January 29, 1999
W. Pearce Coues 

/s/ Phillip C. Vitali
---------------------
Phillip C. Vitali              Principal Financial Officer              January 29, 1999

/s/ David P. Morency
---------------------
David P. Morency               Principal Accounting Officer             January 29, 1999

/s/ George S. Bissell
---------------------
George S. Bissell              Trustee                                  January 29, 1999

/s/ Francis P. Gunning
---------------------
Francis P. Gunning             Trustee                                  January 29, 1999

/s/ George M. Lovejoy, Jr.
---------------------
George M. Lovejoy, Jr.         Trustee                                  January 29, 1999

/s/ Robert M. Melzer
---------------------
Robert M. Melzer               Trustee                                  January 29, 1999

/s/ William F. Murdoch, Jr.
---------------------
William F. Murdoch, Jr.        Trustee                                  January 29, 1999

/s/ Rodger P. Nordblom
---------------------
Rodger P. Nordblom             Trustee                                  January 29, 1999
</TABLE>

                                       27
<PAGE>




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



                                   FORM 10-K



                   ITEM 8-CONSOLIDATED FINANCIAL STATEMENTS
                               November 30, 1998



                                 MGI PROPERTIES
                                        



<PAGE>

                                MGI PROPERTIES

            Index to Consolidated Financial Statements and Schedules

<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                  <C>
Independent Auditors' Report                                             F-1
Financial Statements:
Consolidated Balance Sheets, November 30, 1998 and 1997                  F-2
Consolidated Statements of Earnings, Years ended November 30,
 1998, 1997 and 1996                                                     F-3
Consolidated Statements of Cash Flows, Years ended November
 30, 1998, 1997 and 1996                                                 F-4
Consolidated Statements of Changes in Shareholders' Equity, Years
 ended November 30, 1998, 1997 and 1996                                  F-5
Notes to Consolidated Financial Statements                            F-6 - F-13

Schedules and Exhibits
Financial Statement Schedule (as of or for the year ended
 November 30, 1998):
 Schedule III-Real Estate and Accumulated Depreciation               F-14 - F-16
Exhibit XI-Computation of Diluted Earnings per Share                     F-17
</TABLE>

Other schedules are omitted as they are not required, are not applicable, or
the required information is set forth in the consolidated financial statements
or notes thereto.
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
MGI PROPERTIES:

We have audited the consolidated financial statements of MGI Properties and
subsidiaries (the "Trust") as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MGI Properties and
subsidiaries as of November 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.

As further described in footnote 1, in 1998 the Trust announced its intention,
and secured shareholder approval, to liquidate its assets, distribute the
proceeds to shareholders and terminate the Trust.



                                                          KPMG Peat Marwick LLP

Boston, Massachusetts
December 16, 1998

                                      F-1
<PAGE>

                                MGI PROPERTIES

                          Consolidated Balance Sheets

                           November 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                         1998             1997
----------------------------------------------------------------------------------
<S>                                                 <C>               <C>
ASSETS
Real estate (notes 2, 3, 4, and 5):
Properties held for sale                            $365,543,000      $          -
Net investments in real estate                                 -       334,785,000
Cash and cash equivalents                             12,265,000        13,964,000
Accounts receivable                                    5,040,000         3,654,000
Other assets                                          11,655,000         9,641,000
----------------------------------------------------------------------------------
                                                    $394,503,000      $362,044,000
==================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
 Loans payable (note 5)                             $130,517,000      $113,171,000
 Other liabilities                                     7,164,000         6,488,000
----------------------------------------------------------------------------------
    Total liabilities                                137,681,000       119,659,000

Shareholders'equity (notes 6, 7 and 8):
 Common shares-$1 par value; 17,500,000 shares
  authorized; 13,764,221 issued at November 30,
  1998 (13,625,489 at November 30, 1997)              13,764,000        13,625,000
 Additional paid-in capital                          208,278,000       207,031,000
 Undistributed net income                             34,780,000        21,729,000
----------------------------------------------------------------------------------
    Total shareholders' equity                       256,822,000       242,385,000
----------------------------------------------------------------------------------
                                                    $394,503,000      $362,044,000
==================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>

                                MGI PROPERTIES

                      Consolidated Statements of Earnings

<TABLE>
<CAPTION>
                                                          Year ended November 30,
                                             ---------------------------------------------
                                                 1998             1997             1996
------------------------------------------------------------------------------------------
<S>                                          <C>              <C>              <C>
INCOME:
 Rental                                      $70,338,000      $62,567,000      $54,507,000
 Interest                                        651,000          639,000          421,000
------------------------------------------------------------------------------------------
    Total income                              70,989,000       63,206,000       54,928,000
------------------------------------------------------------------------------------------
EXPENSES:
Property operating expenses                   16,348,000       15,384,000       14,099,000
Real estate taxes                              8,134,000        7,443,000        6,490,000
Depreciation and amortization                 10,379,000       10,662,000        9,463,000
Interest                                      10,122,000        9,539,000        9,198,000
General and administrative                     3,592,000        3,206,000        2,873,000
Liquidation plan expenses                        972,000                -                -
------------------------------------------------------------------------------------------
Total expenses                                49,547,000       46,234,000       42,123,000
------------------------------------------------------------------------------------------
Income before net gains                       21,442,000       16,972,000       12,805,000
Net gains on sale of real estate assets        8,375,000        3,800,000       11,500,000
------------------------------------------------------------------------------------------
Income before extraordinary item              29,817,000       20,772,000       24,305,000
Extraordinary item--prepayment of debt                 -         (306,000)               -
------------------------------------------------------------------------------------------
Net income                                   $29,817,000      $20,466,000      $24,305,000
==========================================================================================

PER SHARE DATA:
Basic earnings                               $      2.17      $      1.54      $      2.11
==========================================================================================
Diluted earnings                             $      2.12      $      1.51      $      2.07
==========================================================================================
Weighted average shares outstanding           13,736,729       13,289,781       11,540,972
==========================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                                MGI PROPERTIES

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                       Year ended November 30,
                                                          ------------------------------------------------
                                                              1998               1997               1996
----------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                $ 29,817,000      $ 20,466,000      $ 24,305,000
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                               10,379,000        10,662,000         9,463,000
Net gains                                                   (8,375,000)       (3,800,000)      (11,500,000)
Extraordinary item                                                  --           306,000                --
Other                                                       (1,030,000)        1,456,000        (1,231,000)
----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                   30,791,000        29,090,000        21,037,000
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of real estate                                (57,140,000)      (48,000,000)      (38,667,000)
Additions to real estate                                    (3,816,000)       (3,114,000)       (3,234,000)
Tenant improvements                                         (3,666,000)       (2,669,000)       (2,702,000)
Deferred tenant charges                                     (2,579,000)       (2,085,000)       (1,348,000)
Net proceeds from sales of real estate                      22,274,000        15,562,000        11,103,000
Other                                                          (86,000)         (112,000)           35,000
----------------------------------------------------------------------------------------------------------
Net cash used in investing activities                      (45,013,000)      (40,418,000)      (34,813,000)
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common shares                          1,137,000        41,566,000           678,000
Repayment of loans payable                                 (18,398,000)      (43,184,000)       (2,242,000)
Additions to loans payable                                  46,550,000        26,500,000        34,743,000
Mortgage prepayment penalty                                         --          (306,000)               --
Cash distributions                                         (16,766,000)      (14,424,000)      (11,308,000)
----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                   12,523,000        10,152,000        21,871,000
----------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents        (1,699,000)       (1,176,000)        8,095,000
Cash and cash equivalents:
Beginning of year                                           13,964,000        15,140,000         7,045,000
----------------------------------------------------------------------------------------------------------
End of year                                               $ 12,265,000      $ 13,964,000      $ 15,140,000
==========================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                                MGI PROPERTIES

          Consolidated Statements of Changes in Shareholders' Equity

<TABLE>
<CAPTION>
                                                             Additional
                                             Common           paid-in        Undistributed
                                             shares           capital          net income
-----------------------------------------------------------------------------------------
<S>                                       <C>              <C>               <C>
Balance at November 30, 1995              $11,502,000      $166,348,000      $  2,690,000
Net income                                          -                 -        24,305,000
Dividend reinvestment and
 share purchase plan (note 6)                  23,000           357,000                 -
Distributions (note 8)                              -                 -       (11,308,000)
Options exercised and other (note 7)           38,000           480,000                 -
-----------------------------------------------------------------------------------------
Balance at November 30, 1996               11,563,000       167,185,000        15,687,000
Net income                                          -                 -        20,466,000
Dividend reinvestment and
 share purchase plan (note 6)                  18,000           365,000                 -
Distributions (note 8)                              -                 -       (14,424,000)
Sales of common shares (note 6)             2,000,000        39,075,000                 -
Options exercised and other (note 7)           44,000           406,000                 -
-----------------------------------------------------------------------------------------
Balance at November 30, 1997               13,625,000       207,031,000        21,729,000
Net income                                          -                 -        29,817,000
Dividend reinvestment and
 share purchase plan (note 6)                  13,000           333,000                 -
Distributions (note 8)                              -                 -       (16,766,000)
Options exercised and other (note 7)          126,000           914,000                 -
-----------------------------------------------------------------------------------------
Balance at November 30, 1998              $13,764,000      $208,278,000      $ 34,780,000
=========================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

1-THE TRUST

(A) Organization

MGI Properties (the "Trust" or "MGI") is an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts. MGI commenced
operations in 1971 as a real estate investment trust (a "REIT"). The Trust
qualifies to be treated as a REIT under Sections 856-860 of the Internal
Revenue Code of 1986, as amended (the "Code").

     MGI is a self-administered equity REIT that directly and through its
wholly-owned subsidiaries owns and operates a diversified portfolio of real
estate assets. At November 30, 1998, the Trust owned 66 commercial properties,
containing approximately 5.6 million square feet and three multi-family
residential properties aggregating 959 units. As of November 30, 1998,
approximately 4.5 million square feet, representing 66% of the Trust's total
real estate assets, at cost, were located in New England.

(B) Plan of Liquidation

On August 12, 1998, the Board of Trustees unanimously voted to recommend a Plan
of Complete Liquidation and Termination of the Trust (the "Plan") and directed
that the Plan be submitted to the Trust's shareholders for approval. The
shareholders of the Trust approved the Plan at a special meeting held on
October 14, 1998. The Plan calls for the sale of all of the Trust's assets. Net
sales proceeds and available cash will be used to satisfy existing debts and
obligations with remaining funds to be distributed to shareholders (see note
8). It is presently estimated that substantially all of the Trust's assets will
be sold within 12 to 15 months from the adoption of the Plan and that net
proceeds will be distributed on a schedule to be determined by the Board of
Trustees. Although it is expected that the Trust will continue to qualify as a
REIT for the period prior to the distribution of MGI's assets to shareholders,
no assurance can be given that the Trust will not lose or terminate its status
as a REIT as a result of unforeseen circumstances.

     In association with the Plan, MGI anticipates incurring a variety of costs
and fees including costs related to sales, fees to advisors and other
professionals, severance compensation, payments to holders of stock options
(see note 7), and other expenses related to liquidation. Among the costs is an
estimated $4.2 million of employee severance compensation, which includes a
base and incentive component. Payment of employee severance compensation is
contingent upon the employee's continuing employment and is being recognized as
an expense over a 15-month period beginning October 14, 1998. The Trust has
entered into agreements with a financial advisor and with an exclusive sales
agent. Each agreement provides for a fee of $1.5 million to be paid in the
event of a complete liquidation or merger, with a minimum of $400,000 to be
paid to each. In addition, the Trust has agreed to reimburse their
out-of-pocket expenses up to $650,000 in the aggregate. The costs and
professional fees associated with the Plan are separately reflected in the
statement of earnings under the caption "Liquidation plan expenses."

2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Consolidation

The consolidated financial statements of MGI Properties (the "Trust") include
the accounts of its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

(B) Income Taxes

The Trust intends to continue to qualify to be taxed as a REIT under the Code.
In order to qualify as a REIT for tax purposes, the Trust, among other things,
must distribute to shareholders at least 95% of its taxable income. It has been
the Trust's policy to distribute 100% of its taxable income to shareholders;
accordingly, no provision has been made for Federal income taxes. (See notes 1
and 8.)

                                      F-6
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

(C) Real Estate

As a result of the Plan, all of the Trust's real estate assets are classified
as held for sale and in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of, are reported at carrying value,
which is less than estimated fair market value. The Trust ceased depreciating
real estate assets based upon shareholder approval of the Plan. The Trust
expects to sell the real estate assets over a 12-15 month period and is engaged
in an ongoing marketing program. Prior to the adoption of the Plan, real estate
assets were stated at cost less depreciation. Realestate investments, excluding
land costs, were previously depreciated using the straight-line method over
their estimated useful lives. Tenant improvements were amortized over the
shorter of their estimated useful lives or lease terms. Maintenance and repairs
are charged to expense as incurred; major improvements are capitalized.

(D) Revenues

Rental income from leases with scheduled rent increases is recognized using the
straight-line method over the life of the lease.

(E) Deferred Financing and Leasing Costs

Included in other assets are costs incurred in connection with financing or
leasing which are capitalized and amortized using the straight-line method over
the terms of the related loan or lease. Amortization of deferred financing
costs is included in interest expense in the consolidated statements of
earnings. Unamortized deferred costs are charged to expense upon the early
termination of the lease or upon the early prepayment of the financing.

(F) Statements of Cash Flows

For purposes of the statements of cash flows, short-term investments with a
maturity at date of purchase of three months or less are considered to be cash
equivalents.

     During 1998, the Trust sold two apartment complexes for $15.5 million. The
properties secured mortgage loans totaling $10.8 million which were assigned to
the seller at closing. During 1997, the Trust sold seven industrial properties
for $14.9 million in a single transaction. The properties secured an $8.7
million loan payable which was assigned to the purchaser at closing. During
1996, the Trust acquired three properties that were subject to an aggregate of
$21.3 million of existing debt. Only the cash portion of these transactions is
reflected in the accompanying consolidated statements of cash flows.

     Cash interest payments of $9.5 million, $8.7 million and $8.6 million were
made for the years ended November 30, 1998, 1997 and 1996, respectively.

(G) Fair Value of Financial Instruments

The Trust estimated the fair values of its financial instruments at November
30, 1998 using discounted cash flow analysis and quoted market prices. Such
financial instruments include short-term investments, U.S. Government
securities, mortgage loans payable and a line of credit. The excess of the
aggregate fair value of the Trust's financial instruments over their aggregate
carrying amounts is not material.

(H) Net Income Per Share

During fiscal 1998, the Trust adopted SFAS No. 128, Earnings Per Share. Basic
earnings per common share is computed based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per common share
is based upon the weighted average number of shares outstanding during the
period and includes the effect of the potential issuance of additional shares
if stock options were exercised or converted into common shares.

(I) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
con-

                                      F-7
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

tingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.


3-REAL ESTATE ASSETS

With shareholder approval of the plan of liquidation on October 14, 1998, the
Trust reclassified its real estate assets to "properties held for sale" and on
that date ceased depreciation of the assets and reclassified accumulated
depreciation and amortization on that date of $50,226,000 to the appropriate
categories. A summary of real estate assets at November 30 follows:

<TABLE>
<CAPTION>
                                                                    1998
----------------------------------------------------------------------------
<S>                                                             <C>
Land                                                            $ 83,129,000
Buildings and improvements, net                                  272,115,000
Tenant improvements, net                                          10,299,000
----------------------------------------------------------------------------
Properties held for sale                                        $365,543,000
============================================================================
</TABLE>                                                    
                                                            
<TABLE>                                                     
<CAPTION>                                                   
                                                                    1997
----------------------------------------------------------------------------
<S>                                                            <C>
Land                                                           $  82,989,000
Buildings and improvements                                       288,095,000
Tenant improvements                                               10,859,000
----------------------------------------------------------------------------
   Total real estate assets                                      381,943,000
Accumulated depreciation and amortization                        (47,158,000)
----------------------------------------------------------------------------
   Net investments in real estate                              $ 334,785,000
============================================================================
</TABLE> 

     Properties held for sale at November 30, 1998 consist of 1,814,000 square
feet of office space, 1,685,000 square feet of industrial space, 1,394,000
square feet of office/research and development space, 755,000 square feet of
retail space, and 959 apartment units.


4-LEASES

All leases relating to real estate investments are operating leases;
accordingly, rental income is reported when earned. Operating leases on
apartments generally have a term of one year or less.

     Future minimum lease payments on noncancelable operating leases at
commercial properties at November 30, 1998 are: $52.1 million in 1999, $34.4
million in 2000, $15.4 million in 2001, $9.5 million in 2002, and $12.4 million
thereafter.

     The above amounts do not include rental income which is received under
certain leases based upon tenant sales, ad valorem taxes, property operating
expenses and/or costs to maintain common areas. This rental income was $10.1
million in 1998, $8.1 million in 1997 and $7.4 million in 1996.

     One of the Trust's real estate investments, a 107,000 square foot retail
building, is being leased in its entirety by Bradlees, Inc. which filed for
bankruptcy under Chapter 11 of the Federal Bankruptcy Code in June 1995.
Bradlees has obtained an extension to submit a reorganization plan until
February 1999. Bradlees is current with its rent through November 30, 1998.


                                      F-8
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

5-LOANS PAYABLE

Loans payable at November 30 follow:

<TABLE>
<CAPTION>
                                                                                         1998               1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>
Mortgage loans, maturing 2000 through 2014, at effective interest rates ranging
 from 7.5% to 8.9%                                                                   $ 95,517,000       $ 91,921,000
Housing revenue bond at an effective interest rate of 5.9% at November 30,
 1997                                                                                          --          5,750,000
Amounts outstanding under the line of credit, at an effective interest rate of
 6.53% and 7.7% at November 30, 1998 and 1997, respectively                            35,000,000         15,500,000
--------------------------------------------------------------------------------------------------------------------
                                                                                     $130,517,000       $113,171,000
====================================================================================================================
Weighted average interest rate                                                               7.75%              7.89%
====================================================================================================================
</TABLE>

Mortgage Loans

The mortgage loans payable are nonrecourse and are collateralized by certain
real estate investments having a net carrying value of $142.9 million. Loans
require monthly principal amortization and/or a balloon payment at maturity.

     Principal payments on mortgage loans payable due in the next five years
and thereafter are as follows: $3.2 million in 1999, $14.9 million in 2000,
$44.5 million in 2001, $2.8 million in 2001, $3.1 million in 2003, and $62.0
million thereafter.

     Subsequent to November 30, 1998, the Trust repaid a $12.3 million mortgage
loan maturing in 2000, which had a stated rate of 8.5%. The repayment was
funded from available cash and a $7.5 million advance under the line of credit.
The Trust incurred a prepayment penalty of $286,000 in conjunction with the
transaction.

Line of Credit

During fiscal 1998, MGI entered into a $75 million unsecured syndicated credit
facility (the "Agreement") which replaced two secured lines of credit that
totaled $45 million. The line, which matures in March of 2001, bears interest
at either LIBOR plus 1.25% or prime. A fee, which does not exceed .25% per
annum, is charged on the unused amounts. The Agreement contains customary
representations, covenants and events of default including covenants that,
among other things, requires the Trust to maintain certain financial ratios and
restricts the incurrence of certain indebtedness, the making of certain
investments, and distributions. The Agreement contains exceptions to these
limitations to allow the Trust to make distributions necessary to maintain its
status as a REIT. It is not anticipated that this covenant will adversely
affect MGI's ability to make distributions or to declare dividends, including
the execution of the plan of liquidation.


6-SHAREHOLDERS' EQUITY

(A) Shelf Registration

In October 1996, the Trust filed a shelf registration with the Securities and
Exchange Commission to register $100 million of common shares, preferred
shares, debt securities, warrants, rights or units that the Trust may issue
through underwriters or in privately negotiated transactions from time to time.
In January 1997, the Trust completed a public offering of 2,000,000 common
shares at a price of $22 per share.

(B) Dividend Reinvestment and Share Purchase Plan

Under the Trust's Dividend Reinvestment and Share Purchase Plan, shareholders
of record who own 100 shares or more have the option of electing to receive, in
full or in part, dividends in the form of MGI shares in lieu of cash. The price
of shares purchased with reinvested dividends is at a 3% discount in the case
of newly issued shares. If MGI purchases shares in the open market for the
plan, the price for such shares is 100% of the average purchase price paid.

                                      F-9
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

Participants in the plan may make additional cash purchases of shares at the
same price as shares purchased through the reinvestment of dividends. During
the years ended November 30, 1998, 1997 and 1996, the Trust issued 13,456,
18,217, and 22,808, respectively, common shares through its Dividend
Reinvestment and Share Purchase Plan.

(C) Preferred Shares

At November 30, 1998 and 1997, the Trust had six million preferred shares, $1
par value authorized, of which none were issued.

(D) Shareholder Rights Plan

On June 21, 1989, the Board of Trustees adopted a shareholder rights plan.
Under this plan, one right was attached to each outstanding common share on
July 5, 1989, and one right is attached to each share issued thereafter. Each
right entitles the holder to purchase, under certain conditions, one
one-hundredth of a share of Series A participating preferred stock for $60. The
rights may also, under certain conditions, entitle the holders to receive
common shares of the Trust, common shares of an entity acquiring the Trust, or
other consideration, each having a value equal to twice the exercise price of
each right ($120).

     One hundred fifty thousand preferred shares have been designated as Series
A participating preferred shares and are reserved for issuance under the
shareholder rights plan. The rights are redeemable by the Trust at a price of
$.01 per right. If not exercised or redeemed, all rights expire in July 1999.


7. STOCK OPTION PLANS

Under the Trust's 1997 and 1994 stock option plans for key employees and
Trustees (the "Option Plans"), incentive stock options or nonqualified options
and related stock appreciation rights and restricted stock awards may be
granted to employees, and nonqualified options may be granted to Trustees.
Under the Option Plans, options may be granted at an exercise price not less
than fair market value of the Trust's common shares on the date of grant.

     Following shareholder approval of the Plan on October 14, 1998, option
holders, in accordance with their option agreements, have elected, as an
alternative to exercising their options, to receive in cash the difference
between the per share option exercise price and the aggregate per share net
liquidation proceeds to be distributed to shareholders. The estimated expense
associated with these elections, which is the difference between the per share
option exercise price and the aggregate per share net liquidation proceeds
expected to be distributed to shareholders, will be recognized upon declaration
of the related liquidating dividends. Holders of approximately 1.5 million
options with an aggregate average exercise price of approximately $19.84 have
made this election.


                                      F-10
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

Changes in options outstanding during the years ended November 30 were as
follows:

<TABLE>
<CAPTION>
                                                           1998                    1997                    1996
                                                   --------------------     -------------------     ------------------
                                                               Weighted                Weighted                Weighted
                                                                Average                 Average                Average
                                                               Exercise                Exercise                Exercise
                                                    Shares       Price      Shares       Price      Shares      Price
----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>            <C>        <C>           <C>        <C>         <C>
Outstanding, beginning of year                      997,619     $15.59      810,411      $13.68      669,411    $13.02
Granted                                             680,000     $24.38      240,000      $21.42      161,500    $16.24
Exercised                                          (169,394)    $12.99      (51,792)     $12.31      (14,500)   $11.86
Expired or forfeited                                   (750)    $24.19       (1,000)     $21.00       (6,000)   $12.63
----------------------------------------------------------------------------------------------------------------------
Outstanding, end of year                          1,507,475     $19.84      997,619      $15.59      810,411    $13.68
======================================================================================================================
Options exercisable, end of year                  1,397,350     $19.49      893,619      $14.91      739,661    $13.42
======================================================================================================================
Weighted average fair value of options granted                                          
 during the year                                 $     2.95                $   3.44                 $   2.28
======================================================================================================================
</TABLE>

     The following table summarizes information about stock options outstanding
at November 30, 1998:

<TABLE>
<CAPTION>
                                    Options Outstanding                        Options Exercisable
                      ------------------------------------------------   -------------------------------
                                         Weighted
                                         Average
                                        Remaining         Weighted                           Weighted
      Range of            Number       Contractual         Average           Number          Average
  Exercise Prices      Outstanding         Life        Exercise Price     Exercisable     Exercise Price
--------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>                <C>             <C>                <C>
$7.375 to $11.125          47,500       2.8 years          $10.10             47,500          $10.10
$12.625 to $16.75         547,225       4.5 years          $14.37            547,225          $14.37
$21.00 to $26.50          912,750       9.1 years          $23.62            802,625          $23.52
--------------------------------------------------------------------------------------------------------
$7.375 to $26.50        1,507,475       7.3 years          $19.84          1,397,350          $19.49
========================================================================================================
</TABLE>

     As provided for in the Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation, the Trust applies
APB Opinion No. 25 and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized. Had compensation cost
for the plans been determined based on the fair value at the grant dates for
awards under the plans consistent with the method prescribed by SFAS No. 123,
the Trust's net income and net income per share would have been reduced to the
pro forma amounts indicated as follows:

<TABLE>
<CAPTION>
Year ended November 30:           1998             1997             1996
                             ----------------------------------------------
Net income:                  
<S>                          <C>              <C>              <C>
As reported                   $29,817,000      $20,466,000      $24,305,000
Pro forma                     $27,825,000      $19,842,000      $23,969,000
Net income per share:
Basic earnings per share      $      2.17      $      1.54      $      2.11
Pro forma                     $      2.03      $      1.49      $      2.08
</TABLE>

                                      F-11
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

     For purposes of this pro forma disclosure, the fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants: dividend
yield of 5.7% for 1998, 6.2% for 1997, and 6.9% for 1996; expected volatility
of 19.1% for 1998, 24.8% for 1997, and 26.1% for 1996; expected lives of seven
years for all three years; and risk-free interest rates of 5.57% for 1998,
6.38% for 1997, and 6.78% for 1996.


8-CASH DISTRIBUTIONS

The Trust made cash distributions of $16.8 million in 1998, $14.4 million in
1997 and $11.3 million in 1996, which is allocated between taxable ordinary
income and taxable capital gain, on a per share basis, as follows:

<TABLE>
<CAPTION>
                             Ordinary     Capital     Taxable
Year ended November 30:      Income        Gain       Income
                             --------------------------------
<S>                           <C>          <C>        <C>  
1998                          $1.08        $0.14      $1.22
1997                          $1.06        $0.04      $1.10
1996                          $0.56        $0.42      $0.98
 </TABLE>

     On December 17, 1998, the Trust declared a dividend of $.33 per share
payable on January 19, 1999 to shareholders of record on January 8, 1999. Under
the provisions of the Code, distributions made within 24 months of the adoption
of the Plan are considered liquidating distributions and will not be dividend
income when received by shareholders. Distributions in liquidation should first
be used to reduce a shareholder's basis in his or her shares of MGI with any
excess constituting a capital gain if the shares were held as a capital asset.
If the sum of all liquidating distributions is less than a shareholder's basis,
the difference will constitute a capital loss.


9-QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Quarterly results of operations for the years ended November 30, 1998 and 1997
follow:

<TABLE>
<CAPTION>
                                                     Quarter Ended
                            ---------------------------------------------------------------
1998                         February 28        May 31          August 31       November 30
-------------------------------------------------------------------------------------------
<S>                          <C>             <C>              <C>              <C>
Total income                 $16,488,000     $17,584,000      $18,277,000      $18,640,000
Total expenses                11,735,000      12,459,000       13,387,000       11,968,000
-------------------------------------------------------------------------------------------
Income before net gains        4,735,000       5,125,000        4,890,000        6,672,000
Net gains                      6,075,000       1,950,000          350,000               --
-------------------------------------------------------------------------------------------
Net income                   $10,828,000     $ 7,075,000      $ 5,240,000      $ 6,672,000
===========================================================================================
Per Share Data
Basic earnings               $       .79     $       .51      $       .38      $       .48
===========================================================================================
Diluted earnings             $       .78     $       .50      $       .37      $       .47
===========================================================================================
</TABLE>


                                      F-12
<PAGE>

                                MGI PROPERTIES

                   Notes to Consolidated Financial Statements
                               November 30, 1998

<TABLE>
<CAPTION>
                                                                            Quarter Ended
                                                   ---------------------------------------------------------------
1997                                                February 28        May 31          August 31       November 30
------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>              <C>              <C>
Total income                                        $15,088,000     $15,574,000      $16,145,000      $16,399,000
Total expenses                                       11,433,000      11,310,000       11,601,000       11,890,000
------------------------------------------------------------------------------------------------------------------
Income before net gains and extraordinary item        3,655,000       4,264,000        4,544,000        4,509,000
Net gains and extra-ordinary item                       294,000              --               --        3,200,000
------------------------------------------------------------------------------------------------------------------
Net income                                          $ 3,949,000     $ 4,264,000      $ 4,544,000      $ 7,709,000
==================================================================================================================
Per Share Data
Basic earnings                                      $       .32     $       .31      $       .33      $       .57
==================================================================================================================
Diluted earnings                                    $       .31     $       .31      $       .33      $       .55
==================================================================================================================
</TABLE>


                                      F-13
<PAGE>

                                MGI PROPERTIES
                                                                    Schedule III

                    Real Estate and Accumulated Depreciation
                               November 30, 1998

<TABLE>
<CAPTION>
                                                                                              Gross amounts at which  
                                             Initial Cost                                   carried at close of period*
                                    ----------------------------      Costs       -----------------------------------------------
                                                     Building      capitalized                  Building                     
                                                       and        subsequent to                   and                      Date  
Description           Encumbrances       Land      Improvements    acquisition      Land      Improvements     Total     acquired
---------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>            <C>            <C>             <C>           <C>          <C>           <C>             <C>  
Office:                                                                                                                          
Greenville, SC       $        -     $  246,000     $ 2,490,000     $  523,000    $  246,000   $ 1,593,000   $ 1,839,000     11/86
Greenville, SC                -        213,000       1,647,000        717,000       253,000     1,040,000     1,293,000     11/86
Ann Arbor, MI                 -        686,000       5,618,000      1,751,000       686,000     5,319,000     6,005,000     12/88
Tampa, FL                     -      2,667,000       8,980,000        750,000     2,667,000     5,950,000     8,617,000     12/88
Somerset, NJ                  -      3,264,000      13,379,000      1,019,000     3,264,000    10,627,000    13,891,000     12/88
Boston, MA                    -      1,730,000       6,925,000      2,769,000     1,730,000     8,415,000    10,145,000      6/93
Framingham, MA                -      2,105,000       5,109,000        993,000     2,020,000     5,124,000     7,144,000      9/93
Andover, MA           4,817,000      1,263,000       6,417,000        471,000     1,263,000     6,292,000     7,555,000     10/95
Boston, MA                    -        861,000         507,000        363,000       861,000       734,000     1,595,000     11/95
Portland, ME          8,893,000        996,000      11,182,000        237,000       996,000    10,742,000    11,738,000      7/96
Portland, ME          8,225,000      1,577,000      15,369,000        118,000     1,577,000    14,579,000    16,156,000      7/96
Glastonbury, CT               -        649,000       3,011,000         64,000       651,000     2,956,000     3,607,000      4/97
Glastonbury, CT               -        616,000       3,257,000         17,000       618,000     3,153,000     3,771,000      4/97
Nashua, NH                    -      1,106,000       3,504,000         16,000     1,106,000     3,426,000     4,532,000      9/97
Nashua, NH                    -        452,000       1,110,000         41,000       452,000     1,121,000     1,573,000      9/97
Nashua, NH                    -        499,000       1,768,000        189,000       499,000     1,905,000     2,404,000      9/97
Farmington, CT                -        766,000       4,831,000         12,000       766,000     4,737,000     5,503,000     11/97
South Portland, ME            -        338,000       1,394,000              0       338,000     1,369,000     1,707,000      2/98
South Portland, ME            -        938,000       4,209,000              0       938,000     4,134,000     5,072,000      2/98
South Portland, ME            -        608,000       2,732,000              0       608,000     2,684,000     3,292,000      2/98
Hopkinton, MA                 -        126,000      12,501,000              0       126,000    12,332,000    12,458,000      3/98
Raynham, MA                   -        297,000       2,308,000              0       297,000     2,277,000     2,574,000      3/98
Manchester, NH                -      1,915,000       9,063,000         82,000     1,915,000     9,015,000    10,930,000      4/98
Peabody, MA                   -        701,000       3,595,000              0       701,000     3,554,000     4,255,000      4/98
---------------------------------------------------------------------------------------------------------------------------------
                     21,935,000     24,619,000     130,906,000     10,132,000    24,578,000   123,078,000   147,656,000          
=================================================================================================================================
Office/Research & Development:                                             
Billerica, MA                 -        376,000       1,749,000          1,000       376,000     1,520,000     1,896,000      7/93
Bedford, MA                   -        662,000       1,585,000         77,000       662,000     1,465,000     2,127,000     11/93
Andover, MA           4,108,000      1,441,000       5,799,000          9,000     1,441,000     5,093,000     6,534,000     11/93
Billerica, MA                 -        752,000       3,611,000      1,051,000       752,000     4,185,000     4,937,000     12/93
Billerica, MA                 -        420,000       1,652,000              0       420,000     1,451,000     1,871,000     12/93
Andover, MA           3,500,000      1,185,000       5,307,000              0     1,185,000     4,715,000     5,900,000      5/94
Chelmsford, MA                -        354,000       1,567,000        193,000       354,000     1,551,000     1,905,000     11/94
Billerica, MA                 -        681,000       4,111,000         14,000       681,000     3,716,000     4,397,000     11/94
Littleton, MA                 -        285,000       2,091,000        322,000       285,000     2,247,000     2,532,000      9/95
Chelmsford, MA                -        946,000       3,680,000        147,000       946,000     3,539,000     4,485,000     10/95
Tewksbury, MA         4,560,000      1,640,000       7,289,000         22,000     1,648,000     6,823,000     8,471,000      3/96
Andover, MA                   -      1,171,000       2,818,000          1,000     1,171,000     2,658,000     3,829,000      7/96
Westford, MA                  -      1,053,000       2,426,000         21,000     1,058,000     2,353,000     3,411,000      4/97
Hudson, NH                    -        274,000       3,261,000              0       274,000     3,210,000     3,484,000      3/98
Hopkinton, MA                 -        384,000       2,466,000              0       384,000     2,433,000     2,817,000      3/98
Hopkinton, MA                 -         53,000       5,273,000              0        53,000     5,202,000     5,255,000      3/98
Raynham, MA                   -        534,000       2,018,000              0       534,000     1,991,000     2,525,000      3/98
---------------------------------------------------------------------------------------------------------------------------------
                     12,168,000     12,211,000      56,703,000      1,858,000    12,224,000    54,152,000    66,376,000 
=================================================================================================================================
</TABLE>

                                      F-14
<PAGE>

                                MGI PROPERTIES
                                                                    Schedule III
                                                                     (continued)
                    Real Estate and Accumulated Depreciation
                               November 30, 1998

<TABLE>
<CAPTION>
                                                                                              Gross amounts at which  
                                             Initial Cost                                   carried at close of period*
                                    ----------------------------      Costs       -----------------------------------------------
                                                     Building      capitalized                  Building                     
                                                       and        subsequent to                   and                      Date  
Description           Encumbrances       Land      Improvements    acquisition      Land      Improvements     Total     acquired
---------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>          <C>            <C>             <C>           <C>          <C>           <C>             <C>  
Industrial Properties:
Bedford, MA                     -      512,000       2,062,000        154,000       512,000     1,840,000     2,352,000     10/92
Wilmington, MA          3,930,000    2,390,000       4,638,000        259,000     2,390,000     4,205,000     6,595,000      5/93
Wilmington, MA                  -    1,394,000       3,208,000        151,000     1,394,000     2,902,000     4,296,000      8/93
Wilmington, MA                  -      501,000       2,013,000         61,000       501,000     1,854,000     2,355,000     11/94
Tewksbury, MA           8,065,000    1,739,000       8,994,000        723,000     1,739,000     8,634,000    10,373,000      3/95
Marlborough, MA                 -    1,040,000       1,303,000        238,000     1,040,000     1,428,000     2,468,000      6/95
Marlborough, MA                 -      579,000       2,244,000        377,000       579,000     2,422,000     3,001,000     12/95
Franklin, MA                    -      599,000       3,256,000              0       599,000     3,029,000     3,628,000     12/95
Franklin, MA                    -      706,000       2,523,000         20,000       706,000     2,365,000     3,071,000     12/95
Franklin, MA                    -      932,000       4,160,000              0       932,000     3,939,000     4,871,000      8/96
Methuen, MA                     -      540,000       1,220,000          2,000       541,000     1,166,000     1,707,000     12/96
Methuen, MA                     -    1,334,000       3,518,000          3,000     1,335,000     3,362,000     4,697,000     12/96
Andover, MA                     -    1,084,000       3,444,000         93,000     1,088,000     3,413,000     4,501,000      5/97
Nashua, NH                      -      785,000       2,360,000              0       785,000     2,299,000     3,084,000      9/97
Nashua, NH                      -    1,478,000       3,641,000          4,000     1,478,000     3,550,000     5,028,000      9/97
Hopkinton, MA                   -       29,000       1,921,000              0        29,000     1,895,000     1,924,000      3/98
---------------------------------------------------------------------------------------------------------------------------------
                       11,995,000   15,642,000      50,505,000      2,085,000    15,648,000    48,303,000    63,951,000          
=================================================================================================================================
Retail:                                                                                                                          
Hagerstown, MD                  -      364,000       1,459,000              0       364,000       968,000     1,332,000     12/84
Baltimore, MD                   -    2,000,000       5,710,000        131,000     1,832,000     4,301,000     6,133,000      7/87
Temple Terrace, FL      4,734,000    2,600,000       6,540,000        335,000     2,600,000     4,950,000     7,550,000     12/87
Aurora, IL             12,292,000   12,576,000      15,372,000      3,667,000    12,576,000    14,266,000    26,842,000      5/90
Peabody, MA                     -    4,705,000       5,623,000          1,000     4,705,000     5,171,000     9,876,000      8/95
---------------------------------------------------------------------------------------------------------------------------------
                       17,026,000   22,245,000      34,704,000      4,134,000    22,077,000    29,656,000    51,733,000          
=================================================================================================================================
Apartments:                                                                                                                      
Harrison Township, MI  11,462,000      700,000       1,948,000     12,453,000       701,000     8,363,000     9,064,000     11/74
Bloomfield Hills, MI   10,171,000    4,325,000      12,126,000      2,236,000     4,325,000     8,876,000    13,201,000      1/89
Laurel, MD              9,066,000      613,000      12,722,000        (71,000)      613,000     9,974,000    10,587,000      9/90
---------------------------------------------------------------------------------------------------------------------------------
                       30,699,000    5,638,000      26,796,000     14,618,000     5,639,000    27,213,000    32,852,000          
=================================================================================================================================
Other:                                                                                                                           
Portland, ME            1,694,000    2,309,000          12,000              -     2,309,000        12,000     2,321,000      7/96
Tampa, FL                       -      427,000               -              -       427,000             -       427,000     12/95
Mount Clemens, MI               -       25,000               -              -        25,000             -        25,000      7/86
Hopkinton, MA                   -      202,000               -              -       202,000             -       202,000      3/98
---------------------------------------------------------------------------------------------------------------------------------
                        1,694,000    2,963,000          12,000              -     2,963,000        12,000     2,975,000          
=================================================================================================================================
                      $95,517,000  $83,318,000    $299,626,000    $32,827,000   $83,129,000  $282,414,000  $365,543,000          
=================================================================================================================================
</TABLE>

*Effective October 14, 1998 with the adoption of the Plan, the Trust
 reclassified $50.2 million of accumulated depreciation and amortization against
 the original cost of real estate assets, and captioned the resulting total of
 $365,543,000 as "Properties held for Sale" in the accompanying balance sheet of
 November 30, 1998.


                                      F-15
<PAGE>

                                MGI PROPERTIES
                                                                    Schedule III
                                                                     (continued)
                    Real Estate and Accumulated Depreciation
                               November 30, 1998

A summary of real estate investments and accumulated depreciation and
amortization for the three years ended November 30 follows:


<TABLE>
<CAPTION>
                                                                     November 30,
                                                       1998               1997              1996
                                                 --------------------------------------------------
<S>                                              <C>                 <C>               <C>
Real Estate Investments
Balance at beginning of year                     $381,943,000        $356,024,000      $293,469,000
Add:
Investments                                        57,140,000          48,000,000        59,950,000
Building improvements                               3,816,000           3,114,000         3,307,000
Tenant improvements                                 3,666,000           2,669,000         2,702,000
---------------------------------------------------------------------------------------------------
                                                  446,565,000         409,807,000       359,428,000
Deduct:
Real estate dispositions                           30,796,000          24,046,000         3,404,000
Fully amortized assets and other                            -           3,818,000                 -
Reclassification to properties held for sale       50,226,000                   -                 -
---------------------------------------------------------------------------------------------------
Balance at end of year                           $365,543,000        $381,943,000      $356,024,000
===================================================================================================
Accumulated Depreciation and Amortization
Balance at beginning of year                     $ 47,158,000        $ 44,810,000      $ 36,375,000
Add:
Depreciation and amortization                       9,200,000           9,874,000         8,832,000
Deduct:
Real estate dispositions                            6,132,000           4,292,000           397,000
Fully amortized and other                                   -           3,234,000                 -
Reclassification to properties held for sale       50,226,000                   -                 -
---------------------------------------------------------------------------------------------------
Balance at end of year                           $          -        $ 47,158,000      $ 44,810,000
===================================================================================================
</TABLE>

The aggregate cost for Federal income tax purposes of the above investments at
November 30, 1998 was approximately $414 million.

Refer to note 2 regarding the Trust's accounting policies on real estate
investments and depreciation amortization.

                                      F-16
<PAGE>

                                MGI PROPERTIES
                                                                      Exhibit XI

                   Computation of Diluted Earnings per Share

<TABLE>
<CAPTION>
                                                                            Year ended November 30
                                              --------------------------------------------------------------------------------
                                                   1998             1997             1996             1995             1994
------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>              <C>              <C>              <C>
Net income                                     $29,817,000      $20,466,000      $24,305,000      $14,319,000      $14,491,000
==============================================================================================================================
Weighted average number of common shares
 outstanding                                    13,736,729       13,289,781       11,540,972       11,487,677       11,450,451
Additional number of share equivalents
 assuming exercise of options                      337,400          302,326          180,257           82,408           91,834
------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares assuming
 full dilution                                  14,074,129       13,592,107       11,721,229       11,570,085       11,542,285
==============================================================================================================================
Diluted earnings per share                     $      2.12      $      1.51      $      2.07      $      1.24      $      1.26
==============================================================================================================================
</TABLE>



                                      F-17
<PAGE>

                        CONSENT OF INDEPENDENT AUDITORS

THE BOARD OF TRUSTEES
MGI PROPERTIES:

We consent to incorporation by reference in the registration statements (Nos.
33-21584, 2-97270, 33-65844, 33-53433 and 33-63901) on Form S-8 of MGI
Properties and subsidiaries of our report dated December 16, 1998, relating to
the consolidated balance sheets of MGI Properties and subsidiaries as of
November 30, 1998 and 1997, and the related consolidated statements of earnings
and cash flows for each of the years in the three-year period ended November
30, 1998, and related schedule, which report appears in the November 30, 1998
annual report on Form 10-K of MGI Properties and subsidiaries.



                                                          KPMG Peat Marwick LLP

Boston, Massachusetts
December 16, 1998