<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, 1997             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, 1997

                                     PART I

                             FINANCIAL INFORMATION
                             ----------------------
<PAGE>
 
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
 
 
                                           September 30, 1997  December 31, 1996
                                           ------------------  -----------------
<S>                                          <C>                 <C>
ASSETS
 
Real estate investments:
   Ground leases and mortgage loans,
       net                                     $12,893,765        $12,896,144
   Property, net                                         -         16,795,323
   Deferred leasing costs and
       other assets, net                                 -            809,629
                                               -----------        -----------
                                                12,893,765         30,501,096
 
 
Cash and cash equivalents                       24,020,036          7,877,668
Short-term investments                           2,129,366          1,912,918
Interest and rent receivable                        18,553             46,982
                                               -----------        -----------
                                               $39,061,720        $40,338,664
                                               ===========        ===========

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                               $    63,540        $ 1,014,398
Accrued management fee                              72,536             62,089
Deferred disposition fees                        1,115,249            472,312
                                               -----------        -----------
Total liabilities                                1,251,325          1,548,799
                                               -----------        -----------
 
Partners' capital:
    Limited partners ($766.04 and
      $889.89 per unit, respectively;
      110,000 units authorized,
      39,917 units issued and outstanding)      37,699,890         38,719,002
    General partner                                110,505             70,863
                                               -----------        -----------
Total partners' capital                         37,810,395         38,789,865
                                               -----------        -----------
                                               $39,061,720        $40,338,664
                                               ===========        ===========
</TABLE>

                (See accompanying notes to financial statements)
<PAGE>
 
<TABLE>
<CAPTION>
 
STATEMENTS OF OPERATIONS
(Unaudited)
                                      Quarter Ended      Nine Months Ended      Quarter Ended      Nine Months Ended
                                    September 30, 1997   September 30, 1997   September 30, 1996   September 30, 1996
                                    ------------------   ------------------   ------------------   ------------------
<S>                                     <C>                  <C>                  <C>                  <C>
INVESTMENT ACTIVITY
 
Property rentals                            $  682,113           $2,226,978            $ 594,992           $1,722,436
Property operating expenses                   (284,990)            (700,225)            (233,072)            (721,120)
Depreciation and amortization                 (187,550)            (567,243)            (179,381)            (511,135)
                                            ----------           ----------            ---------           ----------
                                               209,573              959,510              182,539              490,181
 
Provision for impaired mortgage
  loans                                              -                    -                    -             (310,000)
Ground rentals and interest on
  mortgage loans                               459,249            1,467,015              630,948            1,894,379
                                            ----------           ----------            ---------           ----------
    Total real estate operations               668,822            2,426,525              813,487            2,074,560
 
Gain on sale of investment                   3,332,401            3,332,401                    -                    -
                                            ----------           ----------            ---------           ----------
    Total real estate activity               4,001,223            5,758,926              813,487            2,074,560
 
Interest on cash equivalents
  and short term investments                   100,810              232,744               74,746              207,742
                                            ----------           ----------            ---------           ----------
    Total investment activity                4,102,033            5,991,670              888,233            2,282,302
                                            ----------           ----------            ---------           ----------
Portfolio Expenses
 
Management fee                                  72,536              182,238               62,089              186,266
General and administrative                      29,371              108,187               47,565              136,642
                                            ----------           ----------            ---------           ----------
                                               101,907              290,425              109,654              322,908
                                            ----------           ----------            ---------           ----------
Net Income                                  $4,000,126           $5,701,245            $ 778,579           $1,959,394
                                            ==========           ==========            =========           ==========
Net income per limited partnership
  unit                                      $    99.21           $   141.40            $   19.31           $    48.60
                                            ==========           ==========            =========           ==========
Cash distributions per
  limited partnership unit                  $    13.41           $   166.93            $   15.57           $    46.71
                                            ==========           ==========            =========           ==========
Number of limited partnership
  units outstanding during the period           39,917               39,917               39,917               39,917
                                            ==========           ==========            =========           ==========
 
</TABLE>
                (See accompanying notes to financial statements)


<PAGE>
 
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited)

<TABLE>
<CAPTION>
                          Quarter Ended        Nine Months Ended       Quarter Ended       Nine Months Ended
                       September 30, 1997      September 30, 1997    September 30, 1996    September 30, 1996
                       ------------------     ------------------     ------------------    ------------------
                       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               $ 75,911     $34,275,052  $ 70,863  $38,719,002   $64,140  $38,053,437  $ 64,888  $38,127,446

Cash
distributions          (5,407)       (535,287)  (17,370)  (6,663,345)   (6,278)    (621,508)  (18,834)  (1,864,524)

Net income             40,001       3,960,125    57,012    5,644,233     7,786      770,793    19,594    1,939,800
                     --------     -----------  --------  -----------   -------  -----------  --------  -----------
Balance at
end of period        $110,505     $37,699,890  $110,505  $37,699,890   $65,648  $38,202,722  $ 65,648  $38,202,722
                     ========     ===========  ========  ===========   =======  ===========  ========  ===========
</TABLE> 

                (See accompanying notes to financial statements)


<PAGE>
 
SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE> 
<CAPTION> 
                                                     Nine Months Ended September 30,
                                                     -------------------------------
                                                           1997          1996
                                                        ---------      --------
<S>                                                   <C>            <C>           
Net cash provided by operating activities             $ 2,765,068     $ 2,507,467
                                                      -----------     -----------
Cash flows from investing activities:
    Net proceeds from sale of investment               20,394,954         836,852   
    Deferred disposition fee                              642,937          27,450
    Capital expenditures on owned property               (763,428)       (875,423)
    (Increase)decrease in short-term
         investments, net                                (216,448)      1,211,228
                                                      -----------     -----------
            Net cash provided by
            investing activities                       20,058,015       1,200,107
                                                      -----------     -----------
 
Cash flows from financing activity:
    Distributions to partners                          (6,680,715)     (1,883,358)
                                                      -----------     -----------
           Net increase in
           cash and cash equivalents                   16,142,368       1,824,216
 
Cash and cash equivalents:
    Beginning of period                                 7,877,668       2,731,930
                                                      -----------     -----------
 
    End of period                                     $24,020,036     $ 4,556,146
                                                      ===========     ===========
</TABLE>


                (See accompanying notes to financial statements)
<PAGE>
 
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, 1997 and December 31, 1996 and the
results of its operations, its cash flows and partners' capital for the interim
periods ended September 30, 1997 and 1996.  These adjustments are of a normal
recurring nature.

     See notes to financial statements included in the Partnership's 1996 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, four of which have
been sold as of September 30, 1997.  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 - INVESTMENTS IN GROUND LEASES AND MORTGAGE LOANS
--------------------------------------------------------

     One of the two Elkridge buildings was sold in May 1996, and the other was
sold in December 1996.  The Susana Corporate Center was sold in October 1996.
Each of these investments was sold for a price which approximated the
Partnership's carrying value, as previously adjusted for valuation allowances.
On January 30, 1997, the Partnership made a capital distribution of $4,943,720
($123.85 per limited partnership unit) from the proceeds of these sales.

     In October 1996, the Partnership reached an agreement in principle (the
"Agreement") with the borrower on the Oakland and Case Communications mortgage
loans which had matured in 1994 and 1995, respectively, whereby the maturity
dates will be extended to December 1997.  In addition, effective January 1,
1997, the fixed interest and ground rental payments will be reduced, but the
Partnership's rate of participation in revenue from the underlying properties
will be increased.  The Agreement will also allow the Partnership to cause a
sale of the respective properties.  In November 1997, the Partnership formally
executed the Agreement to renew the mortgage loans at the previously agreed upon
terms.
<PAGE>
 
     The mortgage loans on Case Communications are impaired, as were the
mortgage loans on Elkridge and Susana Corporate Center.  Accordingly, a
valuation allowance has been established to adjust the carrying value of each
loan to its estimated fair market value less anticipated costs of sale.  The
activity in the valuation allowance during 1996 and 1997, together with the
related recorded and carrying values of the impaired mortgage loans at the
beginning and end of the respective periods, are as follows:
<TABLE>
<CAPTION>
 
                                     Recorded     Valuation     Carrying
                                       Value      Allowance       Value
                                    -----------  ------------  -----------
<S>                                 <C>          <C>           <C>
 
Balance at January 1, 1996          $15,619,235  $(3,898,000)  $11,721,235
                                    ===========                ===========
Decrease in estimated fair
 market value of
 collateral (Elkridge)                               (60,000)
 
Decrease in estimated fair
 market value of collateral
 (Susana Corporate Center)                          (250,000)
 
Sale of collateral (Elkridge)                        155,915
                                                 -----------
Balance at September 30, 1996       $14,766,769   (4,052,085)  $10,714,684
                                    ===========                ===========
 
Increase in estimated fair
 market value of collateral
 (Case Communications)                               300,000
 
Increase in estimate
 fair market value of collateral
 (Susana Corporate Center)                            58,668
 
Decrease in estimate fair
 market value of collateral
 (Elkridge)                                          (31,377)
 
Sale of collateral (Elkridge)                        320,462
 
Sale of collateral
 (Susana Corporate Center)                         2,604,332
                                                 -----------
Balance at January 1, 1997          $ 9,907,088     (800,000)  $ 9,107,088
                                    ===========                ===========
 
Balance at September 30, 1997       $ 9,907,088  $  (800,000)  $ 9,107,088
                                    ===========  ===========   ===========
</TABLE>

     The average recorded value of the impaired mortgage loans did not differ
materially from the balances at the end of the quarterly periods.
<PAGE>
 
NOTE 3 - INVESTMENT IN PROPERTY
--------------------------------

     On September 18, 1997, the Willows Shopping Center, in Concord, California,
which was owned by the Partnership (75%) and an affiliate (25%), was sold to an
institutional buyer (the "Buyer") which is unaffiliated with the Partnership.
The selling price was determined by arm's length negotiations between the
Partnership and its affiliate and the Buyer.  The total sales price was
$28,575,000.  The Partnership received its share of the net proceeds totaling
$21,037,891, after closing costs, and recognized a gain of $3,332,401 ($82.65
per limited partnership unit).  A disposition fee of $642,937 was accrued but
not paid to the Advisor.  On October 30, 1997, the Partnership made a capital
distribution of $21,037,856 ($527.04 per limited partnership unit) from the
proceeds of the sale.


NOTE 4 - SUBSEQUENT EVENTS
--------------------------

     Distributions of cash from operations relating to the quarter ended
September 30, 1997 were made on October 30, 1997 in the aggregate amount of
$733,424 ($18.19 per limited partnership unit).

     Additionally, the Partnership made two capital distributions, $21,037,856
($527.04 per limited partnership unit) was made from proceeds from the sale of
Willows Shopping Center and $979,164 ($24.53 per limited partnership unit) was
made from accumulated cash reserves.

     On October 27, 1997, the Oakland property located in Columbia, Maryland,
was sold to an institutional buyer (the "Buyer") which is unaffiliated with the
Partnership.  The selling price was determined by arm's length negotiations
between the Partnership and the Buyer.  The property was sold for $1,900,000.
The Partnership received net proceeds of $1,207,283 in full satisfaction of its
ground lease and mortgage loan investments and related accrued interest.  The
Partnership received additional proceeds of approximately $472,000 after closing
costs as its participation share of the remaining proceeds after it recovered
its investment in the land and mortgage loan.
<PAGE>
 
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; four investments have been sold,
one in each of 1993 and 1997 and two in 1996.  Capital of $9,338,981 ($233.96
per limited partnership unit)has been returned to the limited partners through
September 30, 1997 as a result of sales and similar transactions.  On October
30, 1997, the Partnership distributed total capital of $22,017,020 ($551.57 per
limited partnership unit) which represents proceeds from the sale of Willows
Shopping Center (see below) and a reduction of accumulated cash reserves.  This
capital distribution reduces the adjusted capital contribution to $214.47 per
limited partnership unit.

     On September 18, 1997, the Willows Shopping Center, in Concord, California,
which was owned by the Partnership (75%) and an affiliate (25%), was sold to an
institutional buyer (the "Buyer") which is unaffiliated with the Partnership.
The selling price was determined by arm's length negotiations between the
Partnership and its affiliate and the Buyer.  The total sales price was
$28,575,000.  The Partnership received its share of the net proceeds totaling
$21,037,891, after closing costs, and recognized a gain of $3,332,401 ($82.65
per limited partnership unit).  A disposition fee of $642,937 was accrued but
not paid to the Advisor.  On October 30, 1997, the Partnership made a capital
distribution of $21,037,856 ($527.04 per limited partnership unit) from the
proceeds of the sale.

     On October 27, 1997, the Oakland property located in Columbia, Maryland,
was sold to an institutional buyer (the "Buyer") which is unaffiliated with the
Partnership.  The selling price was determined by arm's length negotiations
between the Partnership and the Buyer.  The property was sold for $1,900,000.
The Partnership received net proceeds of $1,207,283 in full satisfaction of its
ground lease and mortgage loan investments and related accrued interest.  The
Partnership received additional proceeds of approximately $472,000 after closing
costs as its participation share of the remaining proceeds after it recovered
its investment in the land and mortgage loan.

     At September 30, 1997, the Partnership had $26,149,402 in cash, cash
equivalents and short-term investments, of which $733,424 was used for operating
cash distributions, and $22,017,020 for capital distributions to partners on
October 30, 1997. The remainder of the cash and short-term investment balances,
after these distributions, is 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 real estate investments and proceeds from
the sale of such investments.  The adjusted capital contribution was reduced
from $889.89 to $766.04 per limited
<PAGE>
 
partnership unit during the first quarter of 1997, with a distribution of sales
proceeds.  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.
Distributions of cash from operations for 1996 were made at the annualized rate
of 7% for the first, second and third quarters.

     The carrying value of real estate investments in the financial statements,
other than impaired mortgage loans (Case Communications), 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, 1997, the appraised value of Oakland exceeded its related carrying
value by approximately $287,000. The current appraised value of real estate
investments has been estimated by the general partner and is generally based on
a correlation of traditional appraisal approaches performed by the Partnership's
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.


Results of Operations

Operating Factors

     One of the two Elkridge buildings was sold in May 1996; the other was sold
in December 1996.  The Susana Corporate Center was sold in October 1996.

     As previously discussed, the Willows Shopping Center was sold on September
18, 1997, and the Partnership recognized a gain of $3,332,401.  At the time of
sale, the Willows Shopping Center was 94% leased; at September 30, 1996 it was
91% leased.

     Occupancy at the Oakland property was 88% at September 30, 1997, down from
100% at June 30, 1997 due to a month-to-month tenant's vacating during the
quarter.  The property was sold in October 1996, for a gross sale price of
$1,900,000.

     The Case Communications property continues to be fully occupied by a
government agency, whose lease expired in November 1996.  The tenant has
indicated its intention to renew, although a new lease agreement has not yet
been executed.  In the meantime, the tenant has been renting the space on a
month-to-month basis.

     The Partnership's mortgage loans on Oakland and Case Communications matured
in 1994 and 1995, respectively.  In October 1996, the Partnership reached an
agreement in principle (the "Agreement") with the borrowers, whereby the
maturity dates will be extended to December 1997.  In addition, effective
January 1, 1997, the fixed interest and ground rental payments will be reduced,
but the Partnership's rate of participation in revenue from the underlying
properties will be increased.  The Agreement will also allow the
<PAGE>
 
Partnership to cause a sale of the properties.  In November 1997, the
Partnership formally executed the Agreement to renew the mortgage loans at the
previously agreed upon terms.

Investment Results

     Exclusive of the operating results from Susana Corporate Center in 1996 of
$354,629 and Elkridge in 1996 of $92,250 and the provision for impaired mortgage
loans, total real estate operations were $2,426,525 and $1,937,681 for the nine
months ended September 30, 1997 and 1996, respectively.  This increase of
$488,844, is primarily due to improved operating results at the Willows Shopping
Center of approximately $469,000 caused by increased average occupancy and lower
operating expenses due to repairs and maintenance performed in 1996.  Revenue
from Oakland also increased, due to higher percentage rent payments.

     Interest on cash equivalents and short-term investments increased by
approximately $25,000, or 12%, due to higher average investment balances as a
result of the receipt of the Willows Shopping Center sale proceeds.

     The increase in operating cash flow of approximately $257,000 between the
first nine months of 1996 and 1997 is due to the above mentioned operating
results, partially offset by changes in net working capital.

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.

     Management fees decreased slightly between the first nine months of 1996
and 1997 due to a reduction in distributable cash flow for the first six months
of 1997, offset by an increase in distributable cash flow for the last three
months of the nine month period.  General and administrative expenses for the
first nine months of 1997 decreased by approximately $28,000 or 21% as compared
to the respective period of the prior year primarily due to lower professional
fees.
<PAGE>
 
                       NEW ENGLAND PENSION PROPERTIES II;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                      FOR QUARTER ENDED SEPTEMBER 30, 1997

                                    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,
                        1997.
<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 14, 1997
                              /s/ James J. Finnegan
                              -------------------------------
                                James J. Finnegan
                                Vice President
                                of General Partner,
                                Copley Properties Company II, Inc.



November 14, 1997
                              /s/ Karin J. Lagerlund
                              --------------------------------
                                Karin J. Lagerlund
                                Principal Financial and Accounting
                                Officer of General Partner,
                                Copley Properties Company II, Inc.