<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                 ------------
                                   FORM 10-Q

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

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

For Quarter Ended June 30, 1999                   Commission File Number 0-14052


                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP
            (Exact name of registrant as specified in its charter)



         Massachusetts                                   04-2847256
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

         225 Franklin Street, 25th Fl.
         Boston, Massachusetts                                       02110
(Address of principal executive offices)                         (Zip Code)

              Registrant's telephone number, including area code:
                                (617) 261-9000



-------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report

     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 twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                                               Yes  X                    No
<PAGE>

                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                        FOR QUARTER ENDED JUNE 30, 1999

                                    PART I

                             FINANCIAL INFORMATION
                             ----------------------
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

BALANCE SHEETS

<TABLE>
<CAPTION>

                                         June 30, 1999      December 31, 1998
                                          (Unaudited)           (Audited)

                                       -----------------    -----------------
<S>                                    <C>                  <C>
ASSETS

Real estate investments:
       Property, net                        $  6,093,602         $  6,156,334
       Property held for
              Disposition, net                         -            1,197,305
                                            ------------         ------------
                                               6,093,602            7,353,639


Cash and cash equivalents                      1,533,165            1,952,504
                                            ------------         ------------
                                            $  7,626,767         $  9,306,143
                                            ============         ============

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                            $     82,837         $     87,947
Accrued management fee                            14,968               21,939
                                            ------------         ------------
Total liabilities                                 97,805         $    109,886
                                            ------------         ------------

Partners' capital:
       Limited partners ($194.42 and
         $231.54 per unit, respectively;
         75,000 units authorized, 68,414
         units issued and outstanding)         7,520,030            9,196,048
       General partners                            8,932                  209
                                            ------------         ------------
Total partners' capital                        7,528,962            9,196,257
                                            ------------         ------------
                                            $  7,626,767         $  9,306,143
                                            ============         ============
</TABLE>


          (See accompanying notes to unaudited financial statements)
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
                                     Three Months Ended      Six Months Ended       Three Months Ended       Six Months Ended
                                        June 30, 1999          June 30, 1999           June 30, 1998          June 30  ,1998
                                       --------------        ----------------         --------------          --------------
<S>                                  <C>                     <C>                    <C>                      <C>
INVESTMENT ACTIVITY

Property rentals                       $        277,573       $       594,440           $      323,224        $       647,947
Property operating expenses                     (60,689)             (163,384)                 (78,346)              (139,908)
Depreciation and amortization                   (56,038)             (123,690)                 (75,325)              (151,422)
                                       ----------------      ----------------         ----------------        ---------------
                                                160,846               307,366                  169,553                356,617

Joint venture earnings                                -                     -                  227,806                552,679

Amortization                                          -                     -                   (1,569)                (3,138)
                                       ----------------      ----------------         ----------------        ---------------
     Total real estate operations               160,846               307,366                  395,790                906,158

Gain on sale of property                              -             1,509,931                        -                      -
                                       ----------------      ----------------         ----------------        ---------------
     Total real estate activity                 160,846             1,817,297                  395,790                906,158

Interest on cash equivalents
     and short-term investments                  39,710                61,965                   33,071                 66,110
                                       ----------------      ----------------         ----------------        ---------------
     Total investment activity                  200,556             1,879,262                  428,861                972,268
                                       ----------------      ----------------         ----------------        ---------------

Portfolio Expenses

General and administrative                       60,271               145,252                   51,635                108,288
Management fee                                   14,968                71,216                   45,655                 91,310
                                       ----------------      ----------------         ----------------        ---------------
                                                 75,239               216,468                   97,290                199,598
                                       ----------------      ----------------         ----------------        ---------------
Net Income                             $        125,317       $     1,662,794           $      331,571        $       772,670
                                       ================      ================         ================        ===============
</TABLE>
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

<TABLE>

<S>                                         <C>                   <C>                      <C>                   <C>
Net income per limited partnership
     unit                                   $      1.81           $     24.06              $      4.80           $      11.18
                                            ===========           ===========              ===========           ============
Cash distributions per
     limited partnership unit               $     45.35           $     48.56              $      6.68           $      13.36
                                            ===========           ===========              ===========           ============

Number of limited partnership
     units outstanding during the perio          68,414                68,414                   68,414                 68,414
                                            ===========           ===========              ===========           ============
</TABLE>

          (See accompanying notes to unaudited financial statements)
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)

<TABLE>
<CAPTION>
                               Three Months Ended                   Six Months Ended                       Three Months Ended
                                  June 30, 1999                       June 30, 1999                           June 30, 1998
                               -------------------                  ----------------                       ------------------

                             General           Limited          General             Limited           General           Limited
                            Partners          Partners         Partners            Partners          Partners          Partners
                           ----------        ----------       ----------          ----------        ----------        ----------
<S>                        <C>              <C>               <C>               <C>                 <C>              <C>
Balance at
beginning of
period                     $   13,366       $ 10,498,541      $      209        $    9,196,048      $  (57,715)      $ 20,838,820

Cash
distributions                  (5,687)        (3,102,575)         (7,905)           (3,322,184)         (4,616)          (457,006)

Net income                      1,253            124,064          16,628             1,646,166           3,316            328,255
                           ----------       ------------      ----------        --------------      ----------       ------------

Balance at
end of period              $    8,932       $  7,520,030      $    8,932        $    7,520,030      $  (59,015)      $ 20,710,069
                           ==========       ============      ==========        ==============      ==========       ============

<CAPTION>

                                 Six Months Ended
                                  June 30, 1998
                                 ---------------

                             General            Limited
                            Partners           Partners
                           ----------         ----------
<S>                        <C>               <C>
Balance at
beginning of
period                     $  (57,510)       $ 20,859,138

Cash
distributions                  (9,232)           (914,012)

Net income                      7,727             764,943
                           ----------        ------------

Balance at
end of period              $  (59,015)       $ 20,710,069
                           ==========        ============
</TABLE>

          (See accompanying notes to unaudited financial statements)
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
                                                                                Six Months Ended June 30,
                                                                             ----------------------------------
                                                                                1999                    1998
                                                                             ----------              ----------
<S>                                                                         <C>                     <C>
Net cash provided by operating activities                                   $    276,126            $  1,297,236
                                                                            ------------            ------------

Cash flows from investing activities:
       Net proceeds from sale of property                                      2,639,445                       -
       Capital expenditures on owned property                                     (4,821)                 (7,714)
       Decrease in short-term
              investments, net                                                         -                 931,125
                                                                            ------------            ------------
                 Net cash provided by
                 investing activities                                          2,634,624                 923,411
                                                                            ------------            ------------

Cash flows from financing activity:
       Distributions to partners                                              (3,330,089)               (923,244)
                                                                            ------------            ------------

                 Net increase (decrease) in
                 cash and cash equivalents                                      (419,339)              1,297,403

Cash and cash equivalents:
       Beginning of period                                                     1,952,504               1,645,244
                                                                            ------------            ------------

       End of period                                                        $  1,533,165            $  2,942,647
                                                                            ============            ============
</TABLE>


Non-cash transaction:

Effective January 1, 1998, the Partnership's joint venture investment in 270
Technology Park was converted to a wholly-owned property. The carrying value of
this investment at conversion was $6,162,959.

          (See accompanying notes to unaudited financial statements)
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

NOTES TO UNAUDITED FINANCIAL STATEMENTS (Unaudited)

     In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of June 30, 1999 and December 31, 1998 and the results of
its operations, its cash flows and partners' capital (deficit) for the three and
six months ended June 30, 1999 and 1998. These adjustments are of a normal
recurring nature.

     See notes to unaudited financial statements included in the Partnership's
1998 Annual Report on Form 10-K for additional information relating to the
Partnership's financial statements.

NOTE 1 - ORGANIZATION AND BUSINESS
----------------------------------

     New England Life Pension Properties III; A Real Estate Limited Partnership
(the "Partnership") is a Massachusetts limited partnership organized for the
purpose of investing primarily in newly constructed and existing income
producing real properties. The Partnership primarily serves as an investment for
qualified pension and profit sharing plans and other entities intended to be
exempt from federal income tax. The Partnership commenced operations in July
1985 and acquired the one investment it currently owns prior to the end of 1988.
The Partnership intends to dispose of its investments within twelve years of
their acquisition, and then liquidate; however, the managing general partner
could extend the investment period if it is in the best interest of the limited
partners. The Partnership has engaged AEW Real Estate Advisors, Inc. ("AEW") to
provide asset management advisory services.

NOTE 2 - REAL ESTATE JOINT VENTURES
-----------------------------------

     The 270 Technology Park joint venture was restructured to a wholly-owned
property effective January 1, 1998 (See Note 3).

     The following summarized financial information is presented for one the
Bayberry venture which was sold on August 7, 1998.

<TABLE>
<CAPTION>
                                                                Results of Operations
                                                        --------------------------------------

                                                                Six Months ended June 30,
                                                        --------------------------------------
                                                            1999                       1998
                                                            ----                       ----
<S>                                                     <C>                      <C>
Revenue
     Rental income                                      $          -             $   1,204,840
     Other                                                         -                     2,386
                                                        ------------             -------------
                                                                   -                 1,207,226
                                                        ------------             -------------
Expenses
     Operating expenses                                            -                   484,673
     Depreciation and amortization                                 -                   169,874
                                                        ------------             -------------
                                                                   -                   654,547
                                                        ------------             -------------
     Net income                                         $          -             $     552,679
                                                        ============             =============
</TABLE>
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

     Expenses exclude amounts owed and attributable to the Partnership on behalf
of its various financing arrangements with the joint venture.

NOTE 3 - PROPERTY
-----------------

     270 Technology Park
     -------------------

     Effective January 1, 1998, the 270 Technology Park joint venture was
restructured and the venture partner's ownership interest was assigned 99% to
the Partnership, and 1% to an affiliate of the Partnership. Accordingly, as of
this date, the investment is being accounted for as a wholly-owned property. The
carrying value of the joint venture investment at conversion ($6,162,959) was
allocated to land, building and improvements, and other net operating assets.

     The building is being depreciated over 30 years, beginning January 1, 1998.

     North Cabot Industrial Park (formerly Marathon/Hayward)
     -------------------------------------------------------

     In September 1985, the Partnership acquired land in Hayward, California,
for $786,130 and leased it back to the seller. The Partnership also made a
nonrecourse permanent mortgage loan of $2,663,870 to the ground lessee to
finance the two research and development buildings located on the land.

     On November 15, 1994, the Partnership restructured this ground
lease/mortgage loan investment into a wholly-owned property, due to the
inability of the ground lessee/mortgagor to meet its financial obligations. The
Partnership received $85,000 in settlement of the guaranty that had been
provided by principals of the ground lessee. The Partnership obtained title to
the improvements on the land and to certain other operating assets in full
satisfaction of the related mortgage loan and obligations under the ground
lease, and in consideration of the assumption by the Partnership of certain
operating liabilities. The carrying value of the ground lease/mortgage loan
investment as of the date of restructuring was allocated to land, buildings and
net operating assets.

     The buildings and improvements (two industrial buildings in Hayward,
California) were being depreciated over 25 years beginning November 15, 1994.

     Prior to 1994, the Managing General Partner determined that the carrying
value of this investment should be reduced to its estimated fair market value.
Accordingly, the carrying value was reduced by $2,500,000.

     On March 18, 1999, the North Cabot Industrial Park investment was sold to
an unaffiliated third party (the "Buyer") for gross proceeds of $2,800,000. The
terms of the sale were determined by arm's length negotiation between the Buyer
and the Partnership. The Partnership received net proceeds of $2,639,445 and
recognized a gain of $1,509,931 ($21.85 per limited partnership unit). On April
29, 1999, the Partnership made a capital distribution of $2,539,528 ($37.12 per
limited partnership unit) from the proceeds of the sale.
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

         The following is a summary of the Partnership's investment in property
(one at June 30, 1999, and two at December 31, 1998):

<TABLE>
<CAPTION>
                                                       June 30, 1999              December 31, 1998
                                                    ----------------              -----------------
<S>                                                 <C>                           <C>
     Land                                               $    215,404                  $     215,404
     Buildings and improvements                            5,658,212                      5,653,391
     Accumulated depreciation
         and amortization                                   (249,824)                      (156,156)
     Net operating assets                                    469,810                        443,695
     Property held for disposition                                 -                      1,197,305
                                                    ----------------              -----------------
                                                        $  6,093,602                  $   7,353,639
                                                    ================              =================
</TABLE>

NOTE 4 - SUBSEQUENT EVENT
-------------------------

         Distributions of cash from operations relating to the quarter ended
June 30, 1999 were made on July 29, 1999 in the aggregate amount of $151,340
($2.19 per limited partnership unit).
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------

Liquidity and Capital Resources
-------------------------------

         The Partnership completed its offering of units of limited partnership
interest in December 1985 and a total of 68,414 units were sold. The Partnership
received proceeds of $61,950,285, net of selling commissions and other offering
costs, which were invested in real estate, used to pay related acquisition
costs, or retained as working capital reserves. The Partnership made nine real
estate investments, six of which were sold prior to 1994, and one of which was
sold in each of 1998 and 1999. As a result of the sales and similar
transactions, capital of $55,112,950 ($805.58 per limited partnership unit) has
been returned to the limited partners through June 30, 1999.

         At June 30, 1999, the Partnership had $1,533,165 in cash and cash
equivalents, of which $151,340 was used for operating cash distributions to
partners on July 29, 1999; the remainder is being retained as working capital
reserves. The source of future liquidity and cash distributions to partners will
primarily be cash generated by the Partnership's remaining real estate
investment and invested cash and cash equivalents. Distributions of cash from
operations for the first and second quarters of 1999 were made at the annualized
rate of 4.25% on the adjusted capital contribution of $231.54 per limited
partnership unit and the weighted average adjusted capital contribution of
$205.97 per limited partnership unit, respectively. Distributions of cash from
operations for the first two quarters of 1998 were made at the annualized rate
of 5.5% on the adjusted capital contribution of $485.54 per limited partnership
unit. The distribution rate was lower in 1999 primarily due to the sale of
investments in 1998 and 1999 and the consequent reduction in cash flow.

         The carrying value of real estate investments in the financial
statements at June 30, 1999 is at depreciated cost, or if the investment's
carrying value is determined not to be recoverable through expected undiscounted
future cash flows, the carrying value is reduced to estimated fair market value.
The fair market value of such investments is further reduced by the estimated
cost of sale for properties held for sale. Carrying value may be greater or less
than current appraised value. At June 30, 1999, the appraised value of the
Partnership's remaining real estate investment exceeded its related carrying
value by approximately $660,000. The current appraised value of the real estate
investment has been determined by the managing general partner and is generally
based on a combination of traditional appraisal approaches performed by AEW and
independent appraisers. Because of the subjectivity inherent in the valuation
process, the current appraised value may differ significantly from that which
could be realized if the real estate were actually offered for sale in the
marketplace.

Year 2000 Readiness Disclosure
------------------------------

         The Year 2000 Issue is a result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business operations.

         The Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of the Advisor, to generate financial information and
to provide other services, which are dependent on the use of computers. The
Partnership has obtained assurances from
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

AEW Capital Management that:
    .     AEW Capital Management has developed a Year 2000 Plan (the "Plan")
          consisting of five phases: inventory, assessment, testing,
          remediation/repair and certification.

    .     As of September 30, 1998, AEW Capital Management had completed the
          inventory and assessment phases of this Plan and had commenced the
          testing and remediation/repair of internal systems.

    .     AEW Capital Management concluded the internal testing,
          remediation/repair and certifications of its Plan in June 1999.

    The Partnership also relies on joint venture partners and/or property
managers to supply financial and other data with respect to its real properties.
The Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements. To date, the Partnership
is not aware of any problems that would materially impact its results of
operations, liquidity or capital resources. However, the Partnership has not yet
obtained written assurances that these providers would be Year 2000 compliant.

    The Partnership is developing a contingency plan in the event of a
particular provider or system not being Year 2000 compliant. The inability of
one of these providers to complete its Year 2000 resolution process could
materially impact the Partnership. In addition, the Partnership is also subject
to external forces that might generally affect industry and commerce, such as
utility or transportation company Year 2000 compliance failures and related
service interruptions. Given the nature of its operations, the Partnership will
not incur any costs associated with Year 2000 compliance. All such costs are
borne by AEW Capital Management and the property managers.

Results of Operations
---------------------

         Form of Real Estate Investments

         North Cabot Industrial Park, which was sold in March 1999, was a
wholly-owned property. Effective January 1, 1998, 270 Technology Park was
converted to a wholly-owned property; it was previously structured as a joint
venture with a real estate management/development firm. The Bayberry Apartments
investment, which was sold in August 1998, was structured as a joint venture
with a real estate management/development firm.

         Operating Factors

         The North Cabot Industrial Park was sold on March 18, 1999, and the
Partnership recognized a gain of $1,509,931. Occupancy at North Cabot Industrial
Park was 92% at the time of the sale. At June 30, 1998, the property was 86%
occupied.

         Occupancy at 270 Technology Park increased to 100% during the second
quarter of 1999, up from 97% during the second quarter of 1998.

         As previously discussed, the Bayberry Apartments investment was sold on
August 7, 1998, and the Partnership recognized a gain of $6,391,800. At the time
of the sale, the Bayberry Apartments was 95% leased. At June 30, 1998 it was 95%
leased.

         Investment Results

         Interest on cash equivalents and short-term investments for the three
and six months ended June 30, 1999, was $39,710 and $61,965, respectively,
compared to $33,071 and $66,110 for the same periods in 1998. The increase of
approximately
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

$6,600 or 20% for the respective three month periods is primarily due to higher
average investment balances in 1999 as a result of the receipt of the North
Cabot

Industrial Park sale proceeds. The decrease of approximately $4,100 or 6% for
the respective six month periods is primarily due to lower average investment
balances as a result of the distributions related to the sale of Bayberry
Apartments in August 1998 and the sale of North Cabot Industrial Park in March
1999.

         For the three and six months ended June 30, 1999, operating results
from real estate operations were $160,846 and $307,366, respectively, compared
to $395,790 and $906,158 for the comparable periods in 1998. The decreases of
$234,944 and $598,792 for the comparative three and six month periods are
primarily due to no joint venture earnings as a result of the sale of Bayberry
Apartments in August 1998 and lower property operating results as a result of
the North Cabot Industrial Park sale in March 1999.

         Cash flow from operations decreased by approximately $1,021,000 between
the two six-month periods. The decrease is primarily due to the decrease in
operating activity as a result of the sales discussed above, a decrease in
property working capital and an increase in deferred leasing costs.

         Portfolio Expenses

         The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. General and administrative expenses
primarily consist of real estate appraisal, legal, accounting, printing and
servicing agent fees.

         For the three and six months ended June 30, 1999, management fees were
$14,968 and $71,216, respectively, compared to $45,655 and $91,310 for the
comparable periods in 1998. The decreases in management fees for the respective
three and six month periods are due to lower operational cash distributions as a
result of the sales of Bayberry Apartments in 1998 and North Cabot Industrial
Park in 1999.

         General and administrative expenses for the three and six months ended
June 30, 1999 were $60,271 and $145,252, respectively, compared to $51,635 and
$108,288 for the same periods in 1998. The increases of approximately $8,600 or
17% and $37,000 or 34% for the three and six month periods, respectively, are
primarily due to increases in state taxes, accounting fees and investor
servicing fees due to sales.
<PAGE>

                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                        FOR QUARTER ENDED JUNE 30, 1999

                                    PART II

                               OTHER INFORMATION
                              -------------------



Items 1-5  Not Applicable

Item 6.    Exhibits and Reports on Form 8-K

              a.    Exhibits:  (27) Financial Data Schedule

              b.    Reports on Form 8-K: During the quarter ended June 30, 1999,
              one Current Report on Form 8-K was filed on April 2, 1999
              reporting on Item No. 2 (Acquisition or Disposition of Assets) and
              Item No. 7 (Financial statements and Exhibits), relating in both
              cases to the March 18, 1999 sale of North Cabot Industrial Park.

<PAGE>

                                  SIGNATURES
                                  ----------


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                            NEW ENGLAND LIFE PENSION PROPERTIES III;
                            A REAL ESTATE LIMITED PARTNERSHIP
                            (Registrant)


August 6, 1999
                            /s/ Alison Husid Cutler
                            -------------------------------
                            Alison Husid Cutler
                            President, Chief Executive Officer and Director
                            of Managing General Partner,
                            Copley Properties Company III, Inc.




August 6, 1999
                            /s/ Karin J. Lagerlund
                            --------------------------------
                            Karin J. Lagerlund
                            Principal Financial and Accounting Officer of
                            Managing General Partner, Copley Properties
                            Company III, Inc.