<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 September 30, 1998              Commission File Number 0-13323


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



       Massachusetts                                      04-2803902
(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 II;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                     FOR QUARTER ENDED SEPTEMBER 30, 1998

                                    PART I

                             FINANCIAL INFORMATION
                            ----------------------
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
                                    September 30, 1998  December 31, 1997
                                    ------------------  -----------------
<S>                                 <C>                 <C>
ASSETS
 
Real estate investments:

   Property, net                       $         -          $11,660,486
   Property held for disposition        11,520,400                    -
                                       -----------          -----------
                                        11,520,400           11,660,486
                                                            
Cash and cash equivalents                2,338,398            2,111,776
Short-term investments                           -            1,844,431
Interest and rent receivable                15,949               31,341
                                       -----------          -----------
                                       $13,874,747          $15,648,034
                                       ===========          ===========
                                                            
LIABILITIES AND PARTNERS' CAPITAL                           
                                                            
Accounts payable                       $    37,766          $    65,476
Accrued management fee                      64,561               36,169
Deferred disposition fees                1,172,249            1,172,249
                                       -----------          -----------
Total liabilities                        1,274,576            1,273,894
                                       -----------          -----------
                                                            
Partners' capital:                                          
   Limited partners ($172.58                                
   per unit; 110,000                                        
   units authorized, 39,917 units                           
   issued and outstanding)              12,504,875           14,261,105
   General partner                          95,296              113,035
                                       -----------          -----------
Total partners' capital                 12,600,171           14,374,140
                                       -----------          -----------
                                                            
                                       $13,874,747          $15,648,034
                                       ===========          ===========
</TABLE>


          (See accompanying notes to unaudited financial statements)
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP
 
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE> 
<CAPTION> 
                                        Three Months Ended   Nine Months Ended    Three Months Ended   Nine Months Ended
                                        September 30, 1998   September 30, 1998   September 30, 1997   September 30, 1997
                                        ------------------   ------------------   ------------------   ------------------
<S>                                     <C>                  <C>                  <C>                  <C>
INVESTMENT ACTIVITY
 
Property rentals                             $ 622,380           $2,008,448           $  682,113           $2,226,978
Property operating expenses                   (233,390)            (605,944)            (284,990)            (700,225)
Depreciation and amortization                  (86,909)            (260,727)            (187,550)            (567,243)
                                             ---------           ----------           ----------           ----------
                                               302,081            1,141,777              209,573              959,510
Ground rentals and interest on            
  mortgage loans                                     -                    -              459,249            1,467,015
                                             ---------           ----------           ----------           ----------
        Total real estate operations           302,081            1,141,777              668,822            2,426,525
                                          
Gain on sale of investment                           -                    -            3,332,401            3,332,401
                                             ---------           ----------           ----------           ----------
        Total real estate activity             302,081            1,141,777            4,001,223            5,758,926
                                          
Interest on cash equivalents              
  and short term investments                    37,179              138,546              100,810              232,744
                                             ---------           ----------           ----------           ----------
        Total investment activity              339,260            1,280,323            4,102,033            5,991,670
                                             ---------           ----------           ----------           ----------
Portfolio Expenses                        
                                          
Management fee                                  64,561              291,542               72,536              182,238
General and administrative                      32,402              102,020               29,371              108,187
                                             ---------           ----------           ----------           ----------
                                                96,963              393,562              101,907              290,425
                                             ---------           ----------           ----------           ----------
                                          
Net Income                                     242,297              886,761           $4,000,126           $5,701,245
                                             =========           ==========           ==========           ==========
                                          
Net income per limited partnership unit      $    6.01           $    21.99           $    99.21           $   141.40
                                             =========           ==========           ==========           ==========
Cash distributions per                    
  limited partnership unit                   $   46.57           $    66.00           $    13.41           $   166.93
                                             =========           ==========           ==========           ==========
Number of limited partnership             
  units outstanding during the period           39,917               39,917               39,917               39,917
                                             =========           ==========           ==========           ==========
 
</TABLE>
          (See accompanying notes to unaudited financial statements)
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
                                          Three Months Ended       Nine Months Ended      Three Months Ended     Nine Months Ended
                                          September 30, 1998       September 30, 1998     September 30, 1997     September 30, 1997
                                        ----------------------   ----------------------   --------------------  -------------------
                                         General     Limited     General      Limited     General   Limited     General  Limited
                                         Partner     Partners    Partner      Partners    Partner   Partners    Partner  Partners
                                        --------   -----------   --------   -----------   -------  -----------  ------- -----------
<S>                                     <C>        <C>           <C>        <C>           <C>      <C>          <C>     <C> 
Balance at beginning of period          $111,650   $14,123,936   $113,035   $14,261,105   $75,911  $34,275,052  $70,863 $38,719,002

Cash distributions                       (18,777)   (1,858,935)   (26,607)   (2,634,123)   (5,407)    (535,287) (17,370) (6,663,345)


Net income                                 2,423       239,874      8,868       877,893    40,001    3,960,125   57,012   5,644,233
                                        --------   -----------   --------   -----------   -------  -----------  ------- -----------
Balance at end of period                 $95,296   $12,504,875   $ 95,296   $12,504,875  $110,505  $37,699,890 $110,505 $37,699,890
                                        ========   ===========   ========   ===========  ========  ===========  ======= ===========
</TABLE> 

          (See accompanying notes to unaudited financial statements)

<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE> 
<CAPTION> 
                                                      Nine Months Ended 
                                                        September 30,
                                                  -------------------------
                                                      1998          1997
                                                  -----------   -----------
<S>                                               <C>           <C>
Net cash provided by operating activities         $ 1,065,183   $ 2,765,068
                                                  -----------   -----------
 
Cash flows from investing activities:
        Net proceeds from sale of investment                -    20,394,954
        Deferred disposition fee                            -       642,937
        Capital expenditures on owned property        (22,262)     (763,428)
        (Increase)decrease in short-term
                investments, net                    1,844,431      (216,448)
                                                  -----------   -----------
                   Net cash provided by
                   investing activities             1,822,169    20,058,015
                                                  -----------   -----------
Cash flows from financing activity:
        Distributions to partners                  (2,660,730)   (6,680,715)
                                                  -----------   -----------
                  Net increase in
                  cash and cash equivalents           226,622    16,142,368
 
Cash and cash equivalents:
        Beginning of period                         2,111,776     7,877,668
                                                  -----------   -----------

        End of period                             $ 2,338,398   $24,020,036
                                                  ===========   ===========
</TABLE>


          (See accompanying notes to unaudited financial statements)
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

NOTES TO 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 September 30, 1998 and December 31, 1997 and the
results of its operations, its cash flows and partners' capital for the three
and nine months ended September 30, 1998 and 1997.  These adjustments are of a
normal recurring nature.

     See notes to financial statements included in the Partnership's 1997 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 II; 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 June,
1984 and acquired six real estate investments through 1986, five of which have
been sold as of September 30, 1998.  It intends to dispose of its investments
within twelve years of their acquisition, and then liquidate; however, the
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. (the "Advisor") to provide asset management advisory services.

NOTE 2 - INVESTMENT IN PROPERTY
--------------------------------

     As previously described in the Partnership's 1997 Annual Report on 
Form 10-K, the Partnership originally held the Case Communications Building
investment as a combination ground lease/mortgage loan. As a result of the
restructuring of this investment in October 1997, the Partnership acquired
virtually the same risks and potential rewards as ownership of the property
would entail. Accordingly, in October 1997, the Partnership commenced accounting
for this investment as a wholly owned property. As discussed in Note 3, the
property was sold on October 13, 1998 and therefore is classified as Property
Held for Disposition at September 30, 1998.

The following is a summary of the Partnership's wholly-owned investment.
<TABLE>
<CAPTION>
 
                                  September 30, 1998  December 31, 1997
                                  ------------------  -----------------
<S>                               <C>                 <C>
 
Land                                     $         -        $ 2,581,367
Building and Other Assets, net                     -          9,079,119
Property, held for disposition            11,520,400                  -
                                         -----------        -----------
Total Property                           $11,520,400        $11,660,486
                                         ===========        ===========
</TABLE>
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

The buildings and improvements are being depreciated over 30 years using the
straight-line method.

NOTE 3 - SUBSEQUENT EVENTS
--------------------------

     Distributions of cash from operations relating to the quarter ended
September 30, 1998 were made on October 29, 1998 in the aggregate amount of
$417,314 ($10.35 per limited partnership unit).  In addition, a special
distribution was also made on October 29, 1998 in the aggregate amount of
$235,470 ($5.84 per limited partnership unit).  This special distribution was
funded from excess operating cash flow previously held in reserves.

     On October 13, 1998 the Case Communications property located in Columbia,
Maryland, was sold for a gross sale price of $20,008,520.  The Partnership
received net proceeds of $12,200,000 representing a return of capital plus its
participation in net sales proceeds of approximately $5,869,000.  On October 29,
1998 the Partnership made a capital distribution of sales proceeds in the amount
of $16,484,923 ($412.98 per limited partnership unit).
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
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 November, 1984.  A total of 39,917 units were sold.  The Partnership
received proceeds of $36,296,995, net of selling commissions and other offering
costs, which have been used for investment in real estate and the payment of
related acquisition costs, or retained as working capital reserves.  The
Partnership made six real estate investments; five investments have been sold,
one in 1993, two in 1996 and two in 1997.  In October 1998, the remaining
investment was also sold, see further discussion below.  Capital of $33,028,124
($827.42 per limited partnership unit) has been returned to the limited partners
as a result of sales and similar transactions. At September 30, 1998 the
adjusted capital contribution was $172.58 per Unit.

     At September 30, 1998, the Partnership had $2,338,398 in cash and cash
equivalents, of which $652,784 was used for cash distributions to partners on
October 29, 1998; the remainder is primarily being retained as working capital
reserves. The source of future liquidity and cash distributions to partners is
expected to be cash generated by the Partnership's remaining real estate
investment, and proceeds from the sale of such investment. Distributions of cash
from operations relating to the first three quarters of 1998 were made at the
annualized rate of 24% on the adjusted capital contribution. Based on weighted
average adjusted capital contributions, distributions from operations were made
at the annualized rate of 7% for the first and second quarters of 1997, and 9.5%
for the third quarter of 1997.

     The carrying value of real estate investments in the financial statements
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 September 30, 1998, the appraised value of the Partnership's investment
exceeded its related carrying value by approximately $4,298,000.  The current
appraised value of the real estate investment has been estimated by the general
partner and is generally based on a correlation of traditional appraisal
approaches performed by the Advisor and independent appraisers.  Because of the
subjectivity inherent in the valuation process, the estimated current appraised
value may differ significantly from that which could be realized if the real
estate were actually offered for sale in the marketplace.

     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 AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services which are dependent on the
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

use of computers.  The Partnership has obtained assurances from 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 expects to conclude the internal testing, remediation/
   repair and certifications of its Plan no later than December 31, 1998.

     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 currently does not have a contingency plan in the event of
a particular provider or system not being Year 2000 compliant.  Such a plan will
be developed if it becomes clear that a provider (including AEW Capital
Management) is not going to achieve its scheduled compliance objectives.  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.

Results of Operations

Operating Factors

     The Willows Shopping Center was sold on September 18, 1997, and the
Partnership recognized a gain of $3,322,455.  At the time of sale, the Willows
Shopping Center was 94% leased.

     Occupancy at Columbia Warehouse declined slightly to 88% during the first
quarter of 1997 where it remained until the time of sale.  On October 27, 1997,
the Partnership sold this property and recognized a gain of $400,826.

     The Case Communications property was fully occupied at September 30, 1998,
as it was at September 30, 1997, by a government agency.  A five-year lease
extension through the year 2003 has been finalized.  As previously mentioned,
the property was sold on October 13, 1998 and a capital distribution was made on
October 29, 1998 in the amount of $412.98 per limited partnership unit.
<PAGE>
 
NEW ENGLAND LIFE PENSION PROPERTIES II;
A REAL ESTATE LIMITED PARTNERSHIP

Investment Results

     For the three and nine months ended September 30, 1998, operating results
from real estate operations were $302,081 and $1,141,777, respectively, compared
to $668,822 and $2,426,525 for the comparable periods in 1997.  The decreases of
$366,741 and $1,284,748 for the three and nine month periods, respectively, are
primarily due to both a reduction in ground rentals and mortgage loans as a
result of the Columbia Warehouse sale in October 1997 and a reduction in
operations as a result of the Willows Shopping Center sale in September 1997.

     Interest on cash equivalents and short-term investments for the three and
nine months ended September 30, 1998, was $37,179 and $138,546, respectively,
compared to $100,810 and $232,744 for the same periods in 1997. The decreases of
approximately $64,000 or 63% and $94,000 or 40% for the three and nine month
periods respectively, are primarily due to lower investment balances in 1998 as
a result of the 1997 sales mentioned above.

     The decrease in operating cash flow of approximately $1,700,000 between the
first nine months of 1997 and 1998 is primarily due to a decrease in real estate
activity as a result of the sales of the Columbia Warehouse and the Willows
Shopping Center in 1997, as mentioned above.

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 general partner.  General and administrative expenses
primarily consist of real estate appraisal, printing, legal, accounting and
investor servicing fees.

     For the three and nine months ended September 30, 1998, management fees
were $64,561 and $291,542, respectively, compared to $72,536 and $182,238 for
the comparable periods in 1997.  The decrease of management fees for the
respective three month periods is due to less operational cash available for
distributions due to the 1997 sales of Willows Shopping Center and Columbia
Warehouse.  The increase of approximately $109,000 for the respective nine month
periods is primarily due to special distributions made in 1998 from operational
reserves.

     General and administrative expenses for the three and nine months ended
September 30, 1998 were $32,402 and $102,020, respectively, compared to $29,371
and $108,187 for the same periods in 1997.  Expenses remained relatively
unchanged for both comparable periods.
<PAGE>
 
                      NEW ENGLAND PENSION PROPERTIES II;
                      A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                     FOR QUARTER ENDED SEPTEMBER 30, 1998

                                    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: No reports on Form 8-K were filed
                          during the quarter ended September 30, 1998.
<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 II;
                              A REAL ESTATE LIMITED PARTNERSHIP
                                      (Registrant)

November 13, 1998
                              /s/ J. Christopher Meyer III
                              -------------------------------
                                J. Christopher Meyer III
                                President, Chief Executive Officer
                                and Director of General Partner,
                                Copley Properties Company II, Inc.



November 13, 1998
                             /s/ Karin J. Lagerlund
                             --------------------------------
                               Karin J. Lagerlund
                               Principal Financial and Accounting
                               Officer of General Partner,
                               Copley Properties Company II, Inc.