<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED           SEPTEMBER 30, 1999
                               -------------------------------------------------

                                       OR

[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                     N/A
                               -------------------------------------------------

COMMISSION FILE NUMBER                        0-17664
                       ---------------------------------------------------------


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           MASSACHUSETTS                                 04-2969061
  -------------------------------           -----------------------------------
  (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
  INCORPORATION OR ORGANIZATION)

                     200 CLARENDON STREET, BOSTON, MA 02116
--------------------------------------------------------------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                   (ZIP CODE)

                                 (800) 722-5457
--------------------------------------------------------------------------------
               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:

                                       N/A
--------------------------------------------------------------------------------

              (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 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
                                                   Yes   X        No
                                                        ---           ---




<PAGE>   2

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                     (A MASSACHUSETTS LIMITED PARTNERSHIP)


                                      INDEX

<TABLE>
<CAPTION>

PART I:       FINANCIAL INFORMATION                                                         PAGE
<S>                                                                                         <C>

              Item 1     -   Financial Statements:

                             Balance Sheets at September 30, 1999 and
                             December 31, 1998                                                3

                             Statements of Operations for the Three and Nine
                             Months Ended September 30, 1999 and 1998                         4

                             Statements of Partners' Equity for the
                             Nine Months Ended September 30, 1999 and
                             Year Ended December 31, 1998                                     5

                             Statements of Cash Flows for the Nine
                             Months Ended September 30, 1999 and 1998                         6

                             Notes To Financial Statements                                 7-14

              Item 2     -   Management's Discussion and Analysis of
                             Financial Condition and Results of Operations                15-20


PART II:      OTHER INFORMATION                                                              21
</TABLE>






                                       2
<PAGE>   3

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                          PART I: FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                                 BALANCE SHEETS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                       ASSETS

                                                                         SEPTEMBER 30,            DECEMBER 31,
                                                                             1999                    1998
                                                                             ----                    ----

<S>                                                                      <C>                      <C>
Cash and cash equivalents                                                $13,898,454             $ 3,261,458
Restricted cash                                                              121,709                 122,222
Other assets                                                                  57,920                  56,769

Deferred expenses, net of accumulated
     amortization of $1,189,189 in 1999 and
     $1,344,298 in 1998                                                      426,759                 732,094

Investment in joint venture                                                6,959,482               6,971,992

Investment in property:
     Land                                                                  2,410,000               5,040,000
     Buildings and improvements                                           10,476,229              14,218,208
                                                                         -----------             -----------
                                                                          12,886,229              19,258,208
     Less:  accumulated depreciation                                       3,910,079               4,822,969
                                                                         -----------             -----------
                                                                           8,976,150              14,435,239
                                                                         -----------             -----------

         Total assets                                                    $30,440,474             $25,579,774
                                                                         ===========             ===========


                        LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued expenses                                    $   304,205             $   171,824
Accounts payable to affiliates                                               283,522                 211,644
                                                                         -----------             -----------
         Total liabilities                                                   587,727                 383,468

Partners' equity/(deficit):
     General Partners' deficit                                              (132,221)               (185,981)
     Limited Partners' equity                                             29,984,968              25,382,287
                                                                         -----------             -----------

         Total partners' equity                                           29,852,747              25,196,306
                                                                         -----------             -----------

         Total liabilities and partners' equity                          $30,440,474             $25,579,774
                                                                         ===========             ===========
</TABLE>






                        See Notes to Financial Statements





                                       3
<PAGE>   4

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                     (A MASSACHUSETTS LIMITED PARTNERSHIP)


                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                             SEPTEMBER 30,                          SEPTEMBER 30,
                                                        1999              1998               1999                  1998
                                                        ----              ----               ----                  ----

<S>                                                  <C>                <C>                <C>                <C>
Income:

     Rental income                                   $  387,299         $  515,022         $1,538,088         $1,586,565
     Income from joint venture                          212,302            187,450            637,905            579,421
     Interest income                                    120,872             47,378            194,755            188,953
     Gain on sale of property                         5,286,379                 --          5,286,379                 --
                                                     ----------         ----------         ----------         ----------

         Total income                                 6,006,852            749,850          7,657,127          2,354,939

Expenses:

     Depreciation                                        87,306            118,482            293,090            355,447
     Property operating expenses                        145,213             86,129            370,242            273,342
     General and administrative expenses                 84,833            125,452            243,345            344,573
     Amortization of deferred expenses                   36,562             54,012            130,405            162,879
                                                     ----------         ----------         ----------         ----------

         Total expenses                                 353,914            384,075          1,037,082          1,136,241
                                                     ----------         ----------         ----------         ----------

         Net income                                  $5,652,938         $  365,775         $6,620,045         $1,218,698
                                                     ==========         ==========         ==========         ==========

Allocation of net income:

     General Partner                                 $   56,529         $    3,658         $   66,200         $   12,187
     John Hancock Limited Partner                       387,668                 --            387,668                 --
     Investors                                        5,208,741            362,117          6,166,177          1,206,511
                                                     ----------         ----------         ----------         ----------
                                                     $5,652,938         $  365,775         $6,620,045         $1,218,698
                                                     ==========         ==========         ==========         ==========

Net income per Unit                                  $     2.00         $     0.14         $     2.37         $     0.46
                                                     ==========         ==========         ==========         ==========
</TABLE>




                        See Notes to Financial Statements




                                       4
<PAGE>   5


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                         STATEMENTS OF PARTNERS' EQUITY
                                   (UNAUDITED)

                    NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
                          YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                               GENERAL              LIMITED
                                                               PARTNER             PARTNERS                TOTAL
                                                               -------             --------                -----
<S>                                                          <C>                <C>                   <C>
Partners' equity/(deficit) at January 1, 1998
    (2,601,552 Units outstanding)                            ($175,225)         $ 28,223,477          $ 28,048,252

Less: Cash distributions                                       (25,364)           (4,287,359)           (4,312,723)

Add:  Net income                                                14,608             1,446,169             1,460,777
                                                             ---------          ------------          ------------

Partner's equity/(deficit) at December 31, 1998               (185,981)           25,382,287            25,196,306
   (2,601,552 Units outstanding)

Less: Cash distributions                                       (12,440)           (1,951,164)           (1,963,604)

Add:  Net income                                                66,200             6,553,845             6,620,045
                                                             ---------          ------------          ------------

Partners' equity/(deficit) at September 30, 1999
   (2,601,552 Units outstanding)                             ($132,221)         $ 29,984,968          $ 29,852,747
                                                             =========          ============          ============
</TABLE>









                        See Notes to Financial Statements





                                       5
<PAGE>   6


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED
                                                                                  SEPTEMBER 30,
                                                                         1999                      1998
                                                                         ----                      ----

<S>                                                                  <C>                       <C>
Operating activities:
     Net income                                                      $  6,620,045              $ 1,218,698

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

         Depreciation                                                     293,090                  355,447
         Amortization of deferred expenses                                130,405                  162,879
         Cash distributions over equity in
           income from joint venture                                       12,510                  142,362
         Gain on sale of property                                      (5,286,379)                      --
                                                                     ------------              -----------
                                                                        1,769,671                1,879,386

     Changes in operating assets and liabilities:
         Decrease in restricted cash                                          513                    4,944
         (Increase) in other assets                                        (1,152)                 (25,264)
         Increase/(decrease) in accounts payable
           and accrued expenses                                           132,381                  249,313
         Increase in accounts payable to
           affiliates                                                      71,878                   70,211
                                                                     ------------              -----------
              Net cash provided by operating activities                 1,973,291                2,178,590

Investing activities:
     Principal payments on real estate loans                                   --                1,700,000
     Increase in deferred expenses                                        (67,594)                 (23,026)
     Proceeds from sale of property                                    10,694,903                       --
                                                                     ------------              -----------
              Net cash provided by investing activities                10,627,309                1,676,974

Financing activities:
     Cash distributed to Partners                                      (1,963,604)              (3,656,680)
                                                                     ------------              -----------

              Net cash used in financing activities                    (1,963,604)              (3,656,680)
                                                                     ------------              -----------

              Net increase in cash and cash
                equivalents                                            10,636,996                  198,884

              Cash and cash equivalents at beginning
                of year                                                 3,261,458                3,393,737
                                                                     ------------              -----------

              Cash and cash equivalents at end
                of period                                            $ 13,898,454              $ 3,592,621
                                                                     ============              ===========
</TABLE>





                        See Notes to Financial Statements





                                       6
<PAGE>   7

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    ORGANIZATION OF PARTNERSHIP

         John Hancock Realty Income Fund-II Limited Partnership (the
         "Partnership") was formed under the Massachusetts Uniform Limited
         Partnership Act on September 30, 1987. As of September 30, 1999, the
         partners in the Partnership consisted of John Hancock Realty Equities,
         Inc. (the "General Partner"), a wholly-owned, indirect subsidiary of
         John Hancock Mutual Life Insurance Company; John Hancock Realty
         Funding, Inc. (the "John Hancock Limited Partner"); John Hancock Income
         Fund-II Assignor, Inc. (the "Assignor Limited Partner"); and 4,069
         Unitholders (the "Investors"). The Assignor Limited Partner holds
         2,601,552 Assignee Units (the "Units"), representing economic and
         certain other rights attributable to Investor Limited Partnership
         Interests in the Partnership, for the benefit of the Investors. The
         John Hancock Limited Partner, the Assignor Limited Partner and the
         Investors are collectively referred to as the Limited Partners. The
         General Partner and the Limited Partners are collectively referred to
         as the Partners. The initial capital of the Partnership was $2,000,
         representing capital contributions of $1,000 by the General Partner and
         $1,000 from the John Hancock Limited Partner. The Amended Agreement of
         Limited Partnership of the Partnership (the "Partnership Agreement")
         authorized the issuance of up to 5,000,000 Assignee Units at $20 per
         Unit. During the offering period, which terminated on January 2, 1989,
         2,601,552 Units were sold and the John Hancock Limited Partner made
         additional capital contributions of $4,161,483. There were no changes
         in the number of Units outstanding subsequent to the termination of the
         offering period.

         The Partnership is engaged solely in the business of (i) acquiring,
         improving, holding for investment and disposing of existing
         income-producing retail, industrial and office properties on an
         all-cash basis, free and clear of mortgage indebtedness, and (ii)
         making mortgage loans consisting of conventional first mortgage loans
         and participating mortgage loans secured by income-producing retail,
         industrial and office properties. Although the Partnership's properties
         were acquired and are held free and clear of mortgage indebtedness, the
         Partnership may incur mortgage indebtedness on its properties under
         certain circumstances as specified in the Partnership Agreement.

         The latest date on which the Partnership is due to terminate is
         December 31, 2017, unless it is sooner terminated in accordance with
         the terms of the Partnership Agreement. It is expected that, in the
         ordinary course of the Partnership's business, the investments of the
         Partnership will be disposed of, and the Partnership terminated, before
         December 31, 2017.

2.    SIGNIFICANT ACCOUNTING POLICIES

         The accompanying unaudited financial statements have been prepared in
         accordance with generally accepted accounting principles for interim
         financial information and with the instructions for Form 10-Q and Rule
         10-01 of Regulation S-X. Accordingly, they do not include all of the
         information and footnotes required by generally accepted accounting
         principles for complete financial statements. In the opinion of
         management, all adjustments (consisting of normal recurring accruals)
         considered necessary for a fair representation have been included.
         Operating results for the nine-month period ended September 30, 1999
         are not necessarily indicative of the results that may be expected for
         the year ending December 31, 1999. For further information, refer to
         the financial statements and footnotes thereto included in the
         Partnership's Annual Report on Form 10-K for the year ended December
         31, 1998.

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenue
         and expenses during the reporting period. Actual results may differ
         from those estimates.



                                       7
<PAGE>   8

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


2.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Cash equivalents are highly liquid investments with maturities of three
         months or less when purchased. These investments are recorded at cost
         plus accrued interest, which approximates market value. Restricted cash
         represents funds restricted for tenant security deposits.

         Property held for sale is recorded at the lower of its carrying amount,
         at the time the property is listed for sale, or its fair value, less
         cost to sell. Carrying amount includes the property's costs, as
         described below, less accumulated depreciation thereon and less any
         property write-downs for impairment in value and plus any related
         unamortized deferred expenses.

         Investments in property are recorded at cost less any property
         write-downs for impairment in value. Cost includes the initial purchase
         price of the property plus acquisition and legal fees, other
         miscellaneous acquisition costs and the cost of significant
         improvements.

         Depreciation has been provided on a straight-line basis over the
         estimated useful lives of the various assets: thirty years for the
         buildings and five years for related improvements. Maintenance and
         repairs are charged to operations as incurred.

         The Partnership measures impairment in value in accordance with
         Financial Accounting Standards Board Statement No. 121, "Accounting for
         the Impairment of Long-Lived Assets to Be Disposed Of" ("Statement
         121"). Statement 121 requires impairment losses to be recorded on
         long-lived assets used in operations where indicators of impairment are
         present and the undiscounted cash flows estimated to be generated by
         those assets are less than the assets' carrying amounts.

         Investment in joint venture is recorded using the equity method.

         Fees paid to the General Partner for the acquisition of joint venture
         and mortgage loan investments have been deferred and are being
         amortized over the life of the investments to which they apply. During
         1993, the Partnership reduced the period over which its remaining
         deferred acquisition fees are amortized from thirty years, the
         estimated useful life of the buildings owned by the Partnership, to
         eight and one-half years, the then estimated remaining life of the
         Partnership. Capitalized tenant improvements and lease commissions are
         being amortized on a straight-line basis over the terms of the leases
         to which they relate.

         The net income per Unit for the periods hereof was calculated by
         dividing the Investors' share of net income by the number of Units
         outstanding at the end of such period.

         No provision for income taxes has been made in the Financial Statements
         since such taxes are the responsibility of the individual Partners and
         Investors and not of the Partnership.

3.    THE PARTNERSHIP AGREEMENT

         Distributable Cash from Operations (defined in the Partnership
         Agreement) is distributed 1% to the General Partner and the remaining
         99% in the following order of priority: first, to the Investors until
         they receive a 7% non-cumulative, non-compounded annual cash return on
         their Invested Capital (defined in the Partnership Agreement); second,
         to the General Partner to pay the Subordinated Allocation (defined in
         the Partnership Agreement) equal to 3 1/2% of Distributable Cash from
         Operations for managing the Partnership's activities; third, to the
         John Hancock Limited Partner until it receives a 7% non-cumulative,
         non-compounded annual cash return on its Invested Capital; fourth, to
         the Investors and the John Hancock Limited Partner in proportion to
         their respective Capital Contributions (defined in the Partnership
         Agreement), until they have received a 10% non-cumulative,
         non-compounded annual cash return on their Invested Capital; fifth, to
         the General Partner to pay the Incentive Allocation (defined in the
         Partnership Agreement) equal to 2 1/2% of Distributable Cash from
         Operations; and sixth, to the Investors and the John Hancock Limited
         Partner in proportion to their respective Capital Contributions. Any
         Distributable Cash from Operations which is available as a result of a
         reduction of working capital reserves funded by Capital Contributions
         of the Investors, will be distributed 100% to the Investors.




                                       8
<PAGE>   9

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


3.    THE PARTNERSHIP AGREEMENT (CONTINUED)

         Cash from a Sale, Financing or Repayment (defined in the Partnership
         Agreement) of a Partnership Investment, is first used to pay all debts
         and liabilities of the Partnership then due and then to fund any
         reserves for contingent liabilities. Cash from Sales, Financings or
         Repayments is then distributed and paid in the following order of
         priority: first, to the Investors and the John Hancock Limited Partner,
         with the distribution made between the Investors and the John Hancock
         Limited Partner in proportion to their respective Capital
         Contributions, until the Investors and the John Hancock Limited Partner
         have received an amount equal to their Invested Capital; second, to the
         Investors until they have received, after giving effect to all previous
         distributions of Distributable Cash from Operations and any previous
         distributions of Cash from Sales, Financings or Repayments after the
         return of their Invested Capital, the Cumulative Return on Investment
         (defined in the Partnership Agreement); third, to the John Hancock
         Limited Partner until it has received, after giving effect to all
         previous distributions of Distributable Cash from Operations and any
         previous distributions of Cash from Sales, Financings or Repayments
         after the return of its Invested Capital, the Cumulative Return on
         Investment; fourth, to the General Partner to pay any Subordinated
         Disposition Fees then payable pursuant to Section 6.4(c) of the
         Partnership Agreement; and fifth, 99% to the Investors and the John
         Hancock Limited Partner and 1% to the General Partner, with the
         distribution made between the Investors and the John Hancock Limited
         Partner in proportion to their respective Capital Contributions.

         Cash from the sale or repayment of the last of the Partnership's
         properties or mortgage loans is distributed in the same manner as Cash
         from Sales, Financings or Repayments, except that before any other
         distribution is made to the Partners, each Partner shall first receive
         from such cash, an amount equal to the then positive balance, if any,
         in such Partner's Capital Account after crediting or charging to such
         account the profits or losses for tax purposes from such sale. To the
         extent, if any, that a Partner is entitled to receive a distribution of
         cash based upon a positive balance in its capital account prior to such
         distribution, such distribution will be credited against the amount of
         such cash the Partner would have been entitled to receive based upon
         the manner of distribution of Cash from Sales, Financings or
         Repayments, as specified in the previous paragraph.

         Profits for tax purposes from the normal operations of the Partnership
         for each fiscal year are allocated to the Partners in the same amounts
         as Distributable Cash from Operations for that year. If such profits
         are less than Distributable Cash from Operations for any year, then
         they are allocated in proportion to the amounts of Distributable Cash
         from Operations allocated for that year. If such profits are greater
         than Distributable Cash from Operations for any year, they are
         allocated 1% to the General Partner and 99% to the John Hancock Limited
         Partner and the Investors, with the allocation made between the John
         Hancock Limited Partner and the Investors in proportion to their
         respective Capital Contributions. Losses for tax purposes from the
         normal operations of the Partnership are allocated 1% to the General
         Partner and 99% to the John Hancock Limited Partner and the Investors,
         with the allocation made between the John Hancock Limited Partner and
         the Investors in proportion to their respective Capital Contributions.

         Profits and Losses from Sales, Financings or Repayments are generally
         allocated 99% to the Limited Partners and 1% to the General Partners.

         Neither the General Partner nor any Affiliate (as defined in the
         Partnership Agreement) of the General Partner shall be liable,
         responsible or accountable in damages to any of the Partners or the
         Partnership for any act or omission of the General Partner or such
         affiliate in good faith on behalf of the Partnership within the scope
         of the authority granted to the General Partner by the Partnership
         Agreement and in the best interest of the Partnership, except for acts
         or omissions constituting fraud, negligence, misconduct or breach of
         fiduciary duty.





                                       9
<PAGE>   10

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


3.    THE PARTNERSHIP AGREEMENT (CONTINUED)

         The General Partner and its Affiliates performing services on behalf of
         the Partnership shall be entitled to indemnity from the Partnership for
         any loss, damage, or claim by reason of any act performed or omitted to
         be performed by the General Partner or such Affiliates in good faith on
         behalf of the Partnership and in a manner within the scope of the
         authority granted to the General Partner by the Partnership Agreement
         and in the best interest of the Partnership, except that they shall not
         be entitled to be indemnified in respect of any loss, damage, or claim
         incurred by reason of fraud, negligence, misconduct, or breach of
         fiduciary duty. Any indemnity shall be provided out of and to the
         extent of Partnership assets only. The Partnership shall not advance
         any funds to the General Partner or its Affiliates for legal expenses
         and other costs incurred as a result of any legal action initiated
         against the General Partner or its Affiliates by a Limited Partner in
         the Partnership, except under certain specified circumstances.

4.    TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES

         Fees and expenses incurred and/or paid by the General Partner or its
         Affiliates on behalf of the Partnership during the nine months ended
         September 30, 1999 and 1998 and to which the General Partner or its
         affiliates are entitled to reimbursement from the Partnership were
         $81,555 and $81,222, respectively. These expenses are included in
         expenses on the Statements of Operations.

         The Partnership provides indemnification to the General Partner and its
         Affiliates for any acts or omissions of the General Partner or an
         Affiliate in good faith on behalf of the Partnership, except for acts
         or omissions constituting fraud, negligence, misconduct or breach of
         fiduciary duty. The General Partner believes that this indemnification
         applies to the class action complaint described in Note 10.
         Accordingly, included in the Statements of Operations for the nine
         months ended September 30, 1999 and 1998 are $23,744 and $72,398,
         respectively, representing the Partnership's share of costs incurred by
         the General Partner and its Affiliates relating to the class action
         complaint. Through September 30, 1999, the Partnership has accrued a
         total of $202,055 as its share of the costs incurred by the General
         Partner and its Affiliates resulting from this matter.

         Accounts payable to affiliates represents amounts due to the General
         Partner or its Affiliates for various services provided to the
         Partnership, including amounts to indemnify the General Partner or its
         Affiliates for claims incurred by them in connection with their actions
         with respect to the Partnership. All amounts accrued by the Partnership
         to indemnify the General Partner or its Affiliates for legal fees
         incurred by them, shall not be paid unless or until all conditions set
         forth in the Partnership Agreement for such payment have been
         fulfilled.

         The General Partner serves in a similar capacity for two other
         affiliated real estate limited partnerships.

5.    INVESTMENT IN PROPERTY

         Investment in property at cost consists of managed, fully-operating,
         commercial real estate as follows:
<TABLE>
<CAPTION>

                                                       SEPTEMBER 30,              DECEMBER 31,
                                                           1999                       1998
                                                           ----                       ----

<S>                                                     <C>                        <C>
           Park Square Shopping Center                  $12,886,230                $12,886,230
           Miami International Distribution Center               -                   6,371,978
                                                        -----------                -----------
                                                        $12,886,230                $19,258,208
                                                        ===========                ===========
</TABLE>

         On August 9, 1999 the Partnership sold the Miami International
         Distribution Center to a non-affiliated buyer for a net sales price of
         $10,694,903, after deductions for commissions and selling expenses
         incurred in connection with the sale of the property. This transaction
         resulted in a non-recurring gain of $5,286,379, representing the
         difference between the net sales price and the property's carrying
         value of $5,408,524.



                                       10
<PAGE>   11


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


5.    INVESTMENT IN PROPERTY (CONTINUED)

         The real estate market is cyclical in nature and is materially affected
         by general economic trends and economic conditions in the market where
         a property is located. As a result, determination of real estate values
         involves subjective judgments. These judgments are based on current
         market conditions and assumptions related to future market conditions.
         These assumptions involve, among other things, the availability of
         capital, occupancy rates, rental rates, interest rates and inflation
         rates. Amounts ultimately realized from each property may vary
         significantly from the values presented and the differences could be
         material. Actual market values of real estate can be determined only by
         negotiation between the parties in a sales transaction.

         The Partnership leases its properties to non-affiliated tenants
         primarily under long-term operating leases.

6.    REAL ESTATE LOANS

         On March 10, 1988, the Partnership made a $1,700,000 participating
         non-recourse mortgage loan to a non-affiliated borrower, secured by a
         first mortgage on commercial real estate known as 205 Newbury Street,
         located in Boston, Massachusetts. Under the terms of the loan
         agreement, the borrower was obligated to pay interest only monthly at
         an annual rate of 9.5% with the entire outstanding principal balance of
         the loan due on April 1, 1998. In addition to these amounts the
         borrower was obligated to pay the Partnership 25% of the net cash flow
         derived from the operations of the property during the term of the loan
         and 25% of the Net Appreciated Value of the property (defined in the
         Contingent Interest Agreement) upon its sale, refinancing or mortgage
         maturity date.

         Contingent interest payments, based on the net cash flow from the
         property, were not received from 1990 through 1995 because the property
         did not generate any cash flow in excess of the required minimum debt
         service payments. From 1996 until the loan matured, the Partnership
         received contingent interest payments, the sum of which is not
         material.

         On April 1, 1998, the loan matured and the borrower repaid the entire
         outstanding principal balance of the loan. At that time, the Net
         Appreciated Value of the property was not sufficient to provide the
         Partnership with any additional amounts.

7.    INVESTMENT IN JOINT VENTURE

         On December 28, 1988, the Partnership acquired a 99.5% interest in JH
         Quince Orchard Partners (the "Affiliated Joint Venture"), a joint
         venture between the Partnership and John Hancock Realty Income Fund-III
         Limited Partnership ("Income Fund-III"). The Partnership had an initial
         99.5% interest and Income Fund-III had an initial 0.5% interest in the
         Affiliated Joint Venture. Pursuant to the partnership agreement of the
         Affiliated Joint Venture, Income Fund-III had the option, exercisable
         prior to December 31, 1990, to increase its investment and interest in
         the Affiliated Joint Venture to 50%. During the second quarter of 1989,
         Income Fund-III exercised its option and the Partnership sold a 49.5%
         interest in the Affiliated Joint Venture to Income Fund-III. The
         Partnership has held a 50% interest in the Affiliated Joint Venture
         since the second quarter of 1989.

         On December 28, 1988, the Affiliated Joint Venture contributed 98% of
         the invested capital of, and acquired a 75% interest in, QOCC-1
         Associates, an existing partnership which owns and operates the Quince
         Orchard Corporate Center, a three-story office building and related
         land and improvements located in Gaithersburg, Maryland. The
         partnership agreement of QOCC-1 Associates provides that the Affiliated
         Joint Venture shall contribute 95% of any required additional capital
         contributions. Of the cumulative total invested capital in QOCC-1
         Associates at September 30, 1999, 97.55% has been contributed by the
         Affiliated Joint Venture. The Affiliated Joint Venture continues to
         hold a 75% interest in QOCC-1 Associates.




                                       11
<PAGE>   12

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


7.    INVESTMENT IN JOINT VENTURE (CONTINUED)

         Net cash flow from QOCC-1 Associates is distributed in the following
         order of priority: first, to the payment of all debts and liabilities
         of QOCC-1 Associates and to fund reserves deemed reasonably necessary;
         second, to the partners in proportion to their respective invested
         capital until each has received a 9% return on invested capital; third,
         the balance, if any, to the partners in proportion to their interests.
         Prior to 1996, QOCC-1 Associates had not provided the partners with a
         return in excess of 9% on their invested capital. During 1998, 1997 and
         1996, the partners received returns on invested capital of
         approximately 12%.

         Income and gains of QOCC-1 Associates, other than the gains allocated
         arising from a sale other similar event with respect to the Quince
         Orchard Corporate Center, are allocated in the following order of
         priority: i) to the partners who are entitled to receive a distribution
         of net cash flow, pro rata in the same order and amounts as such
         distributions are made and ii) the balance, if any, to the partners,
         pro rata in accordance with their interests.

8.    DEFERRED EXPENSES

         Deferred expenses consist of the following:
<TABLE>
<CAPTION>

                                                                           UNAMORTIZED              UNAMORTIZED
                                                                           BALANCE AT               BALANCE AT
                        DESCRIPTION                                    SEPTEMBER 30, 1999        DECEMBER 31, 1998
                        -----------                                    ------------------        -----------------
<S>                                                                          <C>                       <C>
           $152,880 acquisition fee for investment in
           the Affiliated Joint Venture.  This amount
           is amortized over a period of 31.5 years.                         $100,909                  $104,549

           $1,203,097 acquisition fees paid to the
           General Partner.   Prior to September 30, 1993, this
           amount was amortized over a period of 30 years.
           Subsequent to September 30, 1993, the unamortized
           balance is amortized over a period of 8.5 years.                   272,821                   363,761

           $112,217 of tenant improvements.  These amounts
           are amortized over the terms of the leases
           to which they relate.                                                5,178                    38,235

           $147,754 of lease commissions.  These amounts
           are amortized over the terms of the leases
           to which they relate.                                               47,851                   225,549
                                                                             --------                 ---------
                                                                             $426,759                  $732,094
                                                                             ========                  ========
</TABLE>







                                       12
<PAGE>   13




             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


9.    FEDERAL INCOME TAXES

         A reconciliation of the net income reported in the Statements of
         Operations to the net income reported for federal income tax purposes
         is as follows:
<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED SEPTEMBER 30,
                                                                           1999                      1998
                                                                           ----                      ----
<S>                                                                    <C>                       <C>
           Net income per Statements of Operations                     $6,620,045                $1,218,698

           Add/(deduct):   Excess of book gain over tax
                             gain on disposition of assets               (154,926)                        -
                           Excess of book depreciation
                             over tax depreciation                         19,452                    57,415
                           Excess of book amortization
                             over tax amortization                         62,495                    55,377
                                                                     ------------                ----------

           Net income for federal income tax purposes                  $6,547,066                $1,331,490
                                                                       ==========                ==========
</TABLE>

10.   CONTINGENCIES

         In February 1996, a putative class action complaint was filed in the
         Superior Court in Essex County, New Jersey by a single investor in the
         Partnership. The complaint named as defendants the Partnership, the
         General Partner, certain other Affiliates of the General Partner, two
         limited partnerships affiliated with the Partnership, and certain
         unnamed officers, directors, employees and agents of the named
         defendants. The plaintiff sought unspecified damages stemming from
         alleged misrepresentations and omissions in the marketing and offering
         materials associated with the Partnership and two limited partnerships
         affiliated with the Partnership. On March 18, 1997, the court certified
         a class of investors who were original purchasers in the Partnership.

         The Partnership and the other defendants answered the complaint,
         denying the material allegations and raising numerous affirmative
         defenses. Discovery was conducted, and the Partnership and other
         defendants produced documents relating to the plaintiff's claims. The
         court ruled on statute of limitations defenses as to certain claims and
         ordered a hearing as to statute of limitations defenses as to other
         claims. The parties commenced settlement discussions, which resulted in
         a settlement agreement which was preliminarily approved by the court on
         November 10, 1999. The settlement is subject to final court approval at
         a hearing scheduled for December 22, 1999. Under the terms of the
         settlement, the defendants will guarantee certain minimum returns to
         class members on their investments and will pay fees and expenses for
         class counsel in an amount to be determined by the court up to $1.5
         million.

         The Partnership provides indemnification to the General Partner and its
         Affiliates for acts or omissions of the General Partner in good faith
         on behalf of the Partnership, except for acts or omissions constituting
         fraud, negligence, misconduct or breach of fiduciary duty. The General
         Partner believes that this indemnification applies to the class action
         complaint described above.

         The Partnership has incurred approximately $510,000 in legal expenses
         in connection with the class action lawsuit (see Part II, Item 1 of
         this Report). Of this amount, approximately $309,000 relates to the
         Partnership's own defense and approximately $201,000 relates to the
         indemnification of the General Partner and its Affiliates for their
         defense. These expenses are funded from the operations of the
         Partnership.

         In September 1997, a complaint for damages was filed in the Superior
         Court of the State of California for the County of Los Angeles by an
         investor in the Partnership. The complaint named the General Partner as
         a defendant.





                                       13
<PAGE>   14


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

10.   CONTINGENCIES (CONTINUED)

         The plaintiff sought unspecified damages which allegedly arose from the
         General Partner's refusal to provide, without reasonable precautions on
         plaintiff's use of, a list of investors in the Partnership and in John
         Hancock Realty Income Fund Limited Partnership ("RIF"), a limited
         partnership affiliated with the Partnership. Plaintiff alleges that the
         General Partner's refusal unconditionally to provide a list was a
         breach of contract and a breach of the General Partner's fiduciary
         duty.

         In 1998, the plaintiff amended the complaint to name the Partnership
         and RIF as defendants. As a result of the defendants' demurrer (motion
         to dismiss), in May 1998 plaintiff's additional claims for tortious
         interference with prospective economic advantage and intentional
         interference with contract, were dismissed. In addition, as a result of
         a motion for summary judgment, in August 1998, the court dismissed all
         claims involving the Partnership, leaving only the breach of contract
         and breach of fiduciary duty claims involving RIF. On the eve of trial,
         plaintiffs dismissed without prejudice those claims not previously
         dismissed by the court, and subsequently filed a notice of appeal from
         the dismissal of the claims that the court had dismissed on motion. The
         Partnership has commenced its own action against the plaintiff seeking
         the court's declaration that the claims that remained on the eve of
         trial are without merit and seeking to bar the plaintiff from
         attempting to assert those claims at a later date. Discovery is nearing
         an end in that action and trial is scheduled for January 18, 2000.

         The Partnership has incurred approximately $105,000 in legal expenses
         in connection with the above described lawsuit (see Part II, Item 1 of
         this Report). Of this amount, approximately $70,000 relates to the
         Partnership's own defense and approximately $35,000 relates to the
         indemnification of the General partner and its Affiliates for their
         defense. These expenses were funded from the operations of the
         Partnership.

         At the present time, the General Partner can not estimate the aggregate
         amount of legal expenses and potential indemnification claims to be
         incurred and their impact on the Partnership's Financial Statements,
         taken as a whole. Accordingly, no provision for any liability that
         could result from the eventual outcome of these matters has been made
         in the accompanying financial statements. However, while it is still
         too early to estimate potential damages, they could possibly be
         material.








                                       14
<PAGE>   15


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)





ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

GENERAL

During the offering period, from October 2, 1987 to January 2, 1989, the
Partnership sold 2,601,552 Units representing gross proceeds (exclusive of the
John Hancock Limited Partners' contribution, which was used to pay sales
commissions) of $52,031,040. The proceeds of the offering were used to acquire
investments, fund reserves, and pay acquisition fees and organizational and
offering expenses. These investments are described more fully in Notes 5, 6 and
7 to the Financial Statements included in Item 1 of this Report.

IMPACT OF YEAR 2000

The Partnership along with the General Partner is participating in the Year 2000
remediation project of the General Partner's ultimate parent, John Hancock
Mutual Life Insurance Company (John Hancock). John Hancock and the Partnership
have deployed and are executing a plan to address the impact of the Year 2000
issues that result from computer programs being written using two digits to
reflect the year rather than four to define the applicable year and century.
Historically, the first two digits were hardcoded to save memory. Many of the
Partnership's 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 an information technology (IT) system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, cause settlements of trades to fail,
lead to incomplete or inaccurate accounting, recording or processing trades in
securities, or engage in similar normal business activities. In addition, non-IT
systems including, but not limited to, security alarms, elevators and telephones
are subject to malfunction due to their dependence on embedded technology such
as microcontrollers for proper operation. As described, the Year 2000 project
presents a number of challenges for financial institutions since the correction
of Year 2000 issues in IT and non-IT systems will be complex and costly for the
entire industry.

John Hancock began to address the Year 2000 project as early as 1994. John
Hancock's plan to address the Year 2000 Project includes an awareness campaign,
an assessment period, a renovation stage, validation work and an implementation
of solutions.

The continuous awareness campaign serves several purposes: defining the problem,
gaining executive level support and sponsorship, establishing a team and overall
strategy, and assessing existing information system management resources,
Additionally, the awareness campaign establishes an education process to ensure
that all employees are aware of the Year 2000 issue and knowledgeable of their
role in securing solutions.

The assessment phase, which was completed for both IT and non-IT systems as of
April 1998, included the identifications, inventory, analysis, and
prioritization of IT and non-IT systems and processes to determine their
conversion or replacement. Those systems, which in the event of a Year 2000
failure would have the greatest impact on operations were deemed to be mission
critical and prioritized accordingly. The systems which in the event of a Year
2000 failure would cause minimal disruption to our operations were classified as
non-mission critical.

The renovation stage reflects the conversion, validation, replacement, or
elimination of selected platforms, applications, databases and utilities,
including the modification of applicable interfaces. Additionally, the
renovation stage includes performance, functionality, and regression testing and
implementation. The renovation phase for mission critical and non-mission
critical systems has been completed.

The validation phase consists of the compliance testing of renovated systems.
The validation phase for mission critical and non-mission critical systems has
been completed. John Hancock will use its testing facilities through the
remainder of 1999 to perform special functional testing. Special functional
testing includes testing, as required, with material third parties and industry
groups and performing reviews of "dry run" of year-end activities.

Finally, the implementation phase involves the actual implementation of
converted or replaced platforms, applications, databases, utilities, interfaces,
and contingency planning. All mission critical systems and non-mission critical
systems have been implemented.








                                       15
<PAGE>   16



             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


ITEM 2:   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

IMPACT OF YEAR 2000 (CONTINUED)

John Hancock and the Partnership face the risk that one or more of our business
partners or customers with whom we have a material relationship will not be able
to interact with our systems due to third party's failures to resolve its own
Year 2000 issues, including those associated with its own external
relationships. We have completed an inventory of third party relationships and
prioritized each third party relationship based upon the potential business
impact, available alternatives and cost of substitution. In the case of
mission-critical business partners such as banks, financial intermediaries (such
as exchanges), mutual fund companies and recordkeepers, IT vendors,
telecommunications providers and other utilities, financial market data
providers, trading counterparties, depositaries, clearing agencies and clearing
houses, we are engaged in discussions with these third parties, and have
obtained detailed information as to those parties' Year 2000 plans and state of
readiness. Scheduled testing of material relationships with third parties is
completed. Testing with other business partners will continue through the
year-end, where appropriate. However, there is no guarantee that the system of
other companies, upon which our systems rely, will be timely converted or that a
failure to convert by another company, or a conversion that is incompatible with
our systems would not have a material adverse effect on us.

If John Hancock's, or the Partnership's, Year 2000 issues were unresolved
potential consequences would include, among other possibilities, the inability
to accurately and timely process claims, update customers' accounts, process
financial transactions, bill customers, assess exposure to risks, determine
liquidity requirements or report accurate data to management, customers,
regulators and others, as well as business interruptions or shutdowns,
including, in the case of third party financial intermediaries such as stock
exchanges and clearing agents, failed trade settlements, inability to trade in
certain markets and disruption of funding flows; financial losses; reputational
harm; increased scrutiny by regulators; and litigation related to Year 2000
issues. John Hancock is attempting to limit the potential impact of the Year
2000 by monitoring the progress of its own Year 2000 project and those of its
material business partners and by developing contingency plans. However, John
Hancock cannot guarantee that we will be able to resolve all of its Year 2000
Issues. Any critical unresolved Year 2000 issues, however, could have a material
adverse effect on the John Hancock's and the Partnership's results of
operations, liquidity or financial condition.

John Hancock's contingency planning initiative related to the Year 2000 project
is underway. The contingency plans address John Hancock's and the Partnership's
readiness as well as that of material business partners on whom we depend. John
Hancock's contingency plans are being designed to keep each subsidiary's
operations functioning in the event of a failure or delay due to the Year 2000
record format and date calculation changes. Contingency plans were constructed
based on the foundation of extensive business resumption plans that John Hancock
has maintained and updated periodically, which outline responses to situations
that may affect critical business functions. These plans also provide emergency
operations guidance, which defines a documented order of actions to respond to
problems. These extensive business resumption plans are being enhanced to cover
Year 2000 situations. Contingency planning also includes specific plans,
staffing, and timelines to carry out proactive assessments and monitoring of
equipment and systems on the actual date rollover to Year 2000. John Hancock's
millennium rollover plans have been drafted and will continue to be updated
through year-end.

FORWARD-LOOKING STATEMENTS

In addition to historical information, certain statements contained herein
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements appear in a number of places in this
Report and include statements regarding the intent, belief or expectations of
the General Partner with respect to, among other things, the prospective sale of
Partnership properties, actions that would be taken in the event of lack of
liquidity, unanticipated leasing costs, repair and maintenance expenses,
litigation and indemnification claims, distributions to the General Partner and
to Investors, the possible effects of tenants vacating space at Partnership
properties, the absorption of existing retail space in certain geographical
areas, and the impact of inflation.

Forward-looking statements involve numerous known and unknown risks and
uncertainties, and they are not guarantees of future performance. The following
factors, among others, could cause actual results or performance of the
Partnership and future events to differ materially from those expressed or
implied in the forward-looking statements: general economic and business
conditions; any and all general risks of real estate ownership, including
without limitation adverse changes in general economic conditions and adverse
local conditions, the fluctuation of rental income from properties, changes in
property taxes, utility costs or maintenance costs and insurance, fluctuations
of real estate values, competition for tenants, uncertainties about whether real
estate sales under contract will close; the ability of the Partnership to sell
its properties; and other factors detailed from time to time in the filings with
the Securities and Exchange Commission.





                                       16
<PAGE>   17


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

FORWARD-LOOKING STATEMENTS (CONTINUED)

Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect the General Partner's analysis only as of the date hereof. The
Partnership assumes no obligation to update forward-looking statements. See also
the Partnership's reports to be filed from time to time with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1999 the Partnership had $13,898,454 in cash and cash
equivalents, $121,709 in restricted cash.

The Partnership has a working capital reserve with a current balance of
approximately 6% of the Investors' Invested Capital (defined in the Partnership
Agreement). The General Partner anticipates that such amount should be
sufficient to satisfy the Partnership's general liquidity requirements. The
Partnership's liquidity would, however, be materially adversely affected if
there were a significant reduction in revenues or significant unanticipated
operating costs (including but not limited to litigation expenses),
unanticipated leasing costs or unanticipated capital expenditures. If any or all
of these events were to occur, to the extent that the working capital reserve
would be insufficient to satisfy the cash requirements of the Partnership, it is
anticipated that additional funds would be obtained through a reduction of cash
distributions to Investors, bank loans, short-term loans from the General
Partner or its Affiliates, or the sale or financing of Partnership investments.

The Partnership incurred $67,594 of leasing costs at the Miami International
Distribution Center and the Park Square Shopping Center during the nine months
ended September 30, 1999. The General Partner anticipates that the Partnership
will incur an aggregate of approximately $29,000 of leasing costs during the
remainder of 1999. The current balance in the working capital reserve should be
sufficient to pay such costs.

The Partnership incurred approximately $43,900 of non-recurring repair and
maintenance expenses at the Park Square Shopping Center during the nine months
ended September 30, 1999. The General Partner anticipates that the Partnership
will incur approximately $17,000 of non-recurring repair and maintenance
expenses at the Park Square Shopping Center during the remainder of 1999. These
expenses will be funded from the operations of the Partnership's properties and
are not expected to have a significant impact on the Partnership's liquidity.

The Partnership has incurred approximately $510,000 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $309,000 relates to the Partnership's own defense
and approximately $201,000 relates to the indemnification of the General Partner
and its Affiliates for their defense.

In addition, the Partnership incurred approximately $105,000 in legal expenses
in connection with the lawsuit filed in the Superior Court of the State of
California for the County of Los Angeles by an investor in the Partnership (see
Part II, Item 1 of this Report). Of this amount, approximately $70,000 relates
to the Partnership's own defense and approximately $35,000 relates to the
indemnification of the General Partner and its Affiliates for their defense.
These expenses are funded from the operations of the Partnership.

At the present time, the General Partner cannot estimate the aggregate amount of
legal expenses and indemnification claims to be incurred and their impact on the
Partnership's future operations. Liquidity would, however, be materially
adversely affected by a significant increase in such legal expenses and related
indemnification costs. If such increases were to occur, to the extent that cash
from operations and the working capital reserve would be insufficient to satisfy
the cash requirements of the Partnership, it is anticipated that additional
funds would be obtained through a reduction of cash distributions to investors,
bank loans, short-term loans from the General Partner or its Affiliates, or the
sale or financing of Partnership properties.



                                       17
<PAGE>   18


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Cash in the aggregate amount of $1,963,600 generated from the Partnership's
Operations, was distributed to the Partners during the nine months ended
September 30, 1999. These amounts were distributed in accordance with the
Partnership Agreement. The amount distributed to the Investors from
Distributable Cash from Operations during the nine months ended September 30,
1999 represented an annualized return of 6.25% on remaining Investors' Invested
Capital. The General Partner anticipates that the Partnership's Distributable
Cash from Operations during the fourth quarter of 1999 will be reduced as an
effect of the sale of the Miami International Distribution Center (described
below) which occurred on August 9, 1999.

The following table summarizes the leasing activity and occupancy status at the
Partnership's remaining equity investments during the nine months ended
September 30, 1999 and scheduled leasing activity for each investment during the
remainder of 1999:

                                              PARK SQUARE         QUINCE ORCHARD
                                             SHOPPING CTR.        CORPORATE CTR.
                                             -------------        --------------

Square Footage                                  137,108              99,782

Occupancy January 1, 1999                           88%                100%

New Leases                                           0%                  0%

Lease Renewals                                       0%                  0%

Leases Expired                                       0%                  0%

Occupancy September 30, 1999                        88%                100%

Leases Scheduled to Expire,
   Balance of 1999                                   6%                  0%

Leases Scheduled to Commence,
   Balance of 1999                                   1%                  0%

On August 9, 1999, the Partnership sold the Miami International Distribution
Center to a non-affiliated buyer for a gross sales price of $11,250,000. After
deductions for commissions and selling expenses, the sale generated net proceeds
of $10,694,903 resulting in a gain of $5,286,379, representing the difference
between the net sales price and the property`s carrying value of $5,408,524.

The Brooklyn Park, Minnesota real estate market, where the Park Square Shopping
Center is located, continues to experience increasing demand for tenants as the
development of more retail space continues. The General Partner expects market
conditions in Brooklyn Park to remain competitive for at least the remainder
1999 and, therefore, no increase in market rental rates is anticipated.

The Quince Orchard Corporate Center is leased to Boehringer Mannheim
Pharmaceuticals, Inc. under a ten-year lease which expires in February 2004. The
tenant has two options under the lease agreement, one, to terminate the lease at
the end of its seventy-sixth month of the lease, or June 2000, and, two, to
extend the term of the lease for an additional five- year period. During the
first quarter of 1998, Hoffman-LaRoche, Inc. received approval from the Federal
Trade Commission to acquire Boehringer Mannheim Pharmaceuticals, Inc.
Subsequently, Hoffman-LaRoche vacated and subleased the space. Hoffman-LaRoche
has informed the General Partner that it intends to exercise its right to
terminate the lease in June 2000.





                                       18
<PAGE>   19



             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Real estate conditions in the Washington D.C. area for office space similar to
the Quince Orchard Corporate Center continue to improve. The supply of such
office space has been unable to keep pace with the demand, resulting in a slight
increase in market rents. Further, this condition has given rise to new real
estate development in the area. The General Partner does not anticipate that
this new development will negatively impact the market and therefore expects
market conditions to remain favorable through 1999.

The General Partner evaluated the carrying value of each of the Partnership's
properties and its joint venture investment as of December 31, 1998 by comparing
each such carrying value to the related property's future undiscounted cash
flows and the then most recent internal appraisal in order to determine whether
an impairment in values existed. Based upon such evaluations, the General
Partner determined that no impairment in values existed and, therefore, no
write-downs were recorded.

The General Partner will continue to conduct periodic property and investment
valuations, using internal or independent appraisals, in order to assist in its
evaluation of whether an impairment in value exists on any of the Partnership's
investments.

RESULTS OF OPERATIONS

Net income for the nine months ended September 30, 1999 was $6,620,045, as
compared to net income of $1,218,698 for the same period in 1998. This increase
is the result of the inclusion of a non-recurring gain of $5,286,379 from the
sale of the Miami International Distribution Center during the third quarter of
1999. Excluding the results of this gain, net income for the nine months ended
September 30, 1999 increased by $114,968, or 9%, as compared to the prior year.
This increase is primarily due to a decrease in general and administrative
expenses.

Average occupancy for the Partnership's equity real estate investments was as
follows:
<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED SEPTEMBER 30,
                                                                        1999                   1998
                                                                        ----                   ----

<S>                                                                     <C>                    <C>
   Miami International Distribution Center                               --                     87%
   Park Square Shopping Center                                           88%                    88%
   Quince Orchard Corporate Center (Affiliated Joint Venture)           100%                   100%
</TABLE>

Rental income for the nine months ended September 30, 1999 decreased by $48,477,
or 3%, as compared to the same period during 1998 primarily due to the sale of
the Miami International Distribution Center during the third quarter of 1999.
Rental income at the Partnership's other properties was consistent between
periods.

Depreciation expense for the nine months ended September 30, 1999 decreased by
$62,357, or 18%, as compared to the same period in 1998. This decrease is due to
the reclassification of the Miami International Distribution Center property as
"Property Held for Sale" during the second quarter of 1999. Accordingly, no
depreciation expense has been recorded on this property since April 1999.

Property operating expenses for the nine months ended September 30, 1999
increased by $96,900, or 35%, as compared to the same period in 1998. This
increase was primarily due to approximately $43,900 of non-recurring maintenance
and repair expenses and $13,000 of incentive property management fees paid at
the Park Square Shopping Center.

General and administrative expenses for the nine months ended September 30, 1999
decreased by $101,228, or 29%, primarily due to lower legal fees incurred by the
Partnership in connection with the legal proceedings described in Item 1 of Part
II of this Report. Excluding such legal fees, general and administrative
expenses were consistent between periods.





                                       19
<PAGE>   20
             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

Amortization of deferred expenses for the nine months ended September 30, 1999
decreased by $32,474, or 20%, as compared to the same period in 1998 due to the
reclassifying of deferred expenses for the Miami International Distribution
Center to "Property Held for Sale" and, accordingly, no longer amortizing such
amounts for this property.

The General Partner believes that inflation has had no significant impact on the
Partnership's operations during the nine months ended September 30, 1999, and
the General Partner anticipates that inflation will not have a significant
impact during the remainder of 1999.

CASH FLOW

The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations which are calculated in accordance with
Section 17 of the Partnership Agreement:
<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED SEPTEMBER 30,
                                                                      1999                     1998
                                                                      ----                     ----
<S>                                                               <C>                       <C>
Net cash provided by operating activities (a)                     $ 1,973,291               $ 2,178,590
Net change in operating assets and liabilities (a)                   (203,620)                 (299,204)
                                                                  -----------               -----------
Net cash provided by operations (a)                                 1,769,671                 1,879,386
Increase in working capital reserves                                       --                        --
                                                                  -----------               -----------
Cash from operations (b)                                            1,769,671                 1,879,386
Decrease in working capital reserves                                  199,190                    90,572
                                                                  -----------               -----------
Distributable cash from operations (b)                            $ 1,968,861               $ 1,969,958
                                                                  ===========               ===========

Allocation to General Partner                                     $    17,697               $    18,794
Allocation to Investors                                             1,951,164                 1,951,164
Allocation to John Hancock Limited Partner                                 --                        --
                                                                  -----------               -----------
                                                                  $ 1,968,861               $ 1,969,958
                                                                  ===========               ===========
</TABLE>

       (a)    Net cash provided by operating activities, net change in operating
              assets and liabilities, and net cash provided by operations are as
              calculated in the Statements of Cash Flows included in Item 1 of
              this Report.

       (b)    As defined in the Partnership Agreement. Distributable Cash from
              Operations should not be considered as an alternative to net
              income (i.e., not an indicator of performance) or to reflect cash
              flows or availability of discretionary funds.

During the fourth quarter of 1999, the Partnership will make a cash distribution
in the aggregate amount of $11,331,714 to the General Partner and Limited
Partners. Of this amount $654,945 was generated from Distributable Cash from
Operations for the three months ended September 30, 1999 and $10,676,769 was
generated from Distributable Cash from Sales or Financings as a result of the
sale of the Miami International Distribution Building. These amounts are
allocated as follows:
<TABLE>
<CAPTION>
                                                        DIST. CASH           DIST. CASH FROM
                                                      FROM OPERATIONS      SALES OR FINANCINGS
                                                      ---------------      -------------------
<S>                                                       <C>                  <C>
      Investors                                           $650,388             $  9,885,898
      John Hancock Limited Partner                               -                  790,871
      General Partner                                        4,557                        -
                                                          --------              -----------
             Total                                        $654,945              $10,676,769
                                                          ========              ===========
</TABLE>
The source of future cash distributions from operations is dependent upon cash
generated by the Partnership's properties and the use of working capital
reserves. The General Partner currently anticipates that the Partnership's
Distributable Cash from Operations during the remaining fourth quarter of 1999
will be reduced as a result of the Sale of the Miami International Distribution
Center that occurred on August 9, 1999.







                                       20
<PAGE>   21


             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                           PART II: OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
           In February 1996, a putative class action complaint was filed in the
           Superior Court in Essex County, New Jersey by a single investor in
           the Partnership. The complaint named as defendants the Partnership,
           the General Partner, certain other Affiliates of the General Partner,
           and certain unnamed officers, directors, employees and agents of the
           named defendants.

           The plaintiff sought unspecified damages stemming from alleged
           misrepresentations and omissions in the marketing and offering
           materials associated with the Partnership and two limited
           partnerships affiliated with the Partnership. The complaint alleged,
           among other things, that the marketing materials for the Partnership
           and the affiliated limited partnerships did not contain adequate risk
           disclosures.

           On March 18, 1997, the court certified a class of investors who were
           original purchasers in the Partnership.

           The Partnership and the other defendants answered the complaint,
           denying the material allegations and raising numerous affirmative
           defenses. Discovery was conducted, and the Partnership and other
           defendants produced documents relating to the plaintiff's claims. The
           court ruled on statute of limitations defenses as to certain claims
           and ordered a hearing as to statute of limitations defenses as to
           other claims. The parties commenced settlement discussions, which
           resulted in a settlement agreement which was preliminarily approved
           by the court on November 10, 1999. The settlement is subject to final
           court approval at a hearing scheduled for December 22, 1999. Under
           the terms of the settlement, the defendants will guarantee certain
           minimum returns to class members on their investments and will pay
           fees and expenses for class counsel in an amount to be determined by
           the court up to $1.5 million.

           In September 1997, a complaint for damages was filed in the Superior
           Court of the State of California for the County of Los Angeles by an
           investor in the Partnership. The complaint named the General Partner
           as a defendant.

           The plaintiff sought unspecified damages which allegedly arose from
           the General Partner's refusal to provide, without reasonable
           precautions on plaintiff's use of, a list of investors in the
           Partnership and in John Hancock Realty Income Fund Limited
           Partnership ("RIF"), a limited partnership affiliated with the
           Partnership. Plaintiff alleges that the General Partner's refusal
           unconditionally to provide a list was a breach of contract and a
           breach of the General Partner's fiduciary duty.

           In 1998, the plaintiff amended the complaint to name the Partnership
           and RIF as defendants. As a result of the defendant's demurer (motion
           to dismiss), in May 1998 plaintiff's additional claims for tortious
           interference with prospective economic advantage and intentional
           interference with contract, were dismissed. In addition, as a result
           of a motion for summary judgment, in August 1998, the court dismissed
           all claims involving the Partnership, leaving only the breach of
           contract and breach of fiduciary duty claims involving RIF. On the
           eve of trail, plaintiffs dismissed without prejudice those claims not
           previously dismissed by the court, and subsequently filed a notice of
           appeal from the dismissal of the claims that the court had dismissed
           on motion. The Partnership has commenced its own action against the
           plaintiff seeking the court's declaration that the claims that
           remained on the eve of trial are without merit and seeking to bar the
           plaintiff from attempting to assert those claims at a later date.
           Discovery is nearing an end in that action and trial is scheduled for
           January 18, 2000.

           There can be no assurances given as to the timing, costs or outcome
           of this legal proceeding.

           There are no other material pending legal proceedings, other than
           ordinary routine litigation incidental to the business of the
           Partnership, to which the Partnership is a party or to which any of
           its properties is subject.





                                       21
<PAGE>   22

             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                           PART II: OTHER INFORMATION
                                   (CONTINUED)



ITEM 2.    CHANGES IN SECURITIES
           There were no changes in securities during the third quarter of 1999.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
           There were no defaults upon senior securities during the third
           quarter of 1999.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
           No matters were submitted to a vote of security holders of the
           Partnership during the third quarter of 1999.

ITEM 5.    OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K
           (a) There are no exhibits to this report
           (b) A Report on Form 8-K was filed during the third quarter of 1999.






                                       22
<PAGE>   23











             JOHN HANCOCK REALTY INCOME FUND-II LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                                   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, on the 15th day of November, 1999.


                             John Hancock Realty Income Fund-II
                             Limited Partnership


                             By:   John Hancock Realty Equities, Inc.,
                                   General Partner



                                    By: /s/ John M. Garrision
                                        -------------------------------------
                                        John M. Garrison, President



                                    By: /s/ Virginia H. Lomasney
                                        -------------------------------------
                                        Virginia H. Lomasney, Treasurer
                                        (Chief Accounting Officer)