<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                  June 30, 1998
                               -------------------------------------------------

                                       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 
INCORPORATION OR ORGANIZATION)                               IDENTIFICATION NO.)


                     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


PART I:  FINANCIAL INFORMATION                                             PAGE

         Item 1 -  Financial Statements:

                   Balance Sheets at June 30, 1998 and
                   December 31, 1997                                          3

                   Statements of Operations for the Three and Six
                   Months Ended June 30, 1998 and 1997                        4

                   Statements of Partners' Equity for the
                   Six Months Ended June 30, 1998 and
                   Year Ended December 31, 1997                               5

                   Statements of Cash Flows for the Six
                   Months Ended June 30, 1998 and 1997                        6

                   Notes To Financial Statements                           7-14

         Item 2 -  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations          15-19


PART II: OTHER INFORMATION                                                   20






                                       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)

                                     ASSETS

<TABLE>
<CAPTION>
                                                         JUNE 30,          DECEMBER 31,
                                                          1998                 1997
                                                       -----------         -----------
<S>                                                    <C>                 <C>        

Cash and cash equivalents                              $ 3,657,002         $ 3,393,737
Restricted cash                                            100,987             100,987
Other assets                                                70,066              84,802

Deferred expenses, net of accumulated
     amortization of $1,290,286 in 1998 and
     $1,181,419 in 1997                                    740,585             847,637

Real estate loans                                                0           1,700,000

Investment in joint venture                              7,132,003           7,284,761

Investment in property:
     Land                                                5,040,000           5,040,000
     Buildings and improvements                         14,218,208          14,218,208
                                                       -----------         -----------
                                                        19,258,208          19,258,208
     Less: accumulated depreciation                      4,586,007           4,349,042
                                                       -----------         -----------
                                                        14,672,201          14,909,166
                                                       -----------         -----------

         Total assets                                  $26,372,844         $28,321,090
                                                       ===========         ===========


                        LIABILITIES AND PARTNERS' EQUITY

Accounts payable and accrued expenses                  $   276,704         $   146,933
Accounts payable to affiliates                             194,689             125,905

         Total liabilities                                 471,393             272,838

Partners' equity/(deficit):
     General Partners' deficit                            (179,836)           (175,225)
     Limited Partners' equity                           26,081,287          28,223,477
                                                       -----------         -----------

         Total partners' equity                         25,901,451          28,048,252
                                                       -----------         -----------

         Total liabilities and partners' equity        $26,372,844         $28,321,090
                                                       ===========         ===========

</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           SIX MONTHS ENDED
                                                      JUNE 30,                     JUNE 30,
                                                --------------------        ------------------------
                                                  1998       1997             1998           1997
                                                --------    --------        ----------    ----------
<S>                                             <C>         <C>             <C>           <C>       

Income:

     Rental income                              $537,824    $517,450        $1,071,543    $1,058,824
     Income from joint venture                   200,849     186,173           391,971       374,710
     Interest income                              56,490      82,375           141,575       226,736
                                                --------    --------        ----------    ----------

         Total income                            795,163     785,998         1,605,089     1,660,270

Expenses:

     Depreciation                                118,483     118,483           236,965       236,965
     Property operating expenses                  96,539     100,759           187,213       192,776
     General and administrative expenses         163,358      65,298           219,121       177,361
     Amortization of deferred expenses            53,525      59,195           108,867       113,755
                                                --------    --------        ----------    ----------

         Total expenses                          431,905     343,735           752,166       720,857
                                                --------    --------        ----------    ----------

         Net income                             $363,258    $442,263        $  852,923    $  939,413
                                                ========    ========        ==========    ==========

Allocation of net income:

     General Partner                            $  3,632    $  4,423        $    8,529    $    9,394
     John Hancock Limited Partner                     --          --                --            --
     Investors                                   359,626     437,840           844,394       930,019
                                                --------    --------        ----------    ----------
                                                $363,258    $442,263        $  852,923    $  939,413
                                                ========    ========        ==========    ==========

Net income per Unit                             $   0.13    $   0.17        $     0.32    $     0.36
                                                ========    ========        ==========    ==========

</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)

                       SIX MONTHS ENDED JUNE 30, 1998 AND
                          YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
                                                        GENERAL         LIMITED
                                                        PARTNER         PARTNERS           TOTAL
                                                       ---------      ------------     ------------
<S>                                                    <C>            <C>              <C>         

Partners' equity/(deficit) at January 1, 1997

    (2,601,552 Units outstanding)                      $(166,057)     $ 37,925,372     $ 37,759,315

Less: Cash distributions                                 (27,855)      (11,551,932)     (11,579,787)

Add: Net income                                           18,687         1,850,037        1,868,724
                                                       ---------      ------------     ------------

Partner's equity/(deficit) at December 31, 1997         (175,225)       28,223,477       28,048,252
   (2,601,552 Units outstanding)

Less: Cash distributions                                 (13,140)       (2,986,584)      (2,999,724)

Add: Net income                                            8,529           844,394          852,923
                                                       ---------      ------------     ------------

Partners' equity/(deficit) at June 1998
   (2,601,552 Units outstanding)                       $(179,836)     $ 26,081,287     $ 25,901,451
                                                       =========      ============     ============

</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>
                                                                SIX MONTHS ENDED
                                                                     JUNE 30,
                                                            ----------------------------
                                                               1998             1997
                                                            -----------     ------------
<S>                                                         <C>             <C>         

Operating activities:
  Net income                                                $   852,923     $    939,413

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

    Depreciation                                                236,965          236,965
    Amortization of deferred expenses                           108,867          113,755
    Cash distributions over equity in
      income from joint venture                                 152,758           65,166
                                                            -----------     ------------
                                                              1,351,513        1,355,299

  Changes in operating assets and liabilities:
    Decrease in restricted cash                                      --           12,060
    Decrease in other assets                                     14,736           24,623
    Increase/(decrease) in accounts payable
      and accrued expenses                                      129,771          (77,488)
    Increase in accounts payable to affiliates                   68,784           17,593
                                                            -----------     ------------
      Net cash provided by operating activities               1,564,804        1,332,087

Investing activities:
  Principal payments on real estate loans                     1,700,000        3,545,361
  Increase in deferred expenses                                  (1,815)         (26,527)
                                                            -----------     ------------
      Net cash provided by investing activities               1,698,185        3,518,834

Financing activities:
  Cash distributed to Partners                               (2,999,724)     (10,265,870)
                                                            -----------     ------------

      Net cash used in financing activities                  (2,999,724)     (10,265,870)
                                                            -----------     ------------

      Net (increase)/decrease in cash and cash
        equivalents                                             263,265       (5,414,949)

      Cash and cash equivalents at beginning of year          3,393,737        8,669,990
                                                            -----------     ------------

      Cash and cash equivalents at end of period            $ 3,657,002     $  3,255,041
                                                            ===========     ============

</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 June 30, 1987. As of June 30, 1998, 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 4,281 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 six-month period ended June 30, 1998 are not
        necessarily indicative of the results that may be expected for the year
        ending December 31, 1998. 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, 1997.

        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.

        Real estate loans are recorded at amortized cost unless the General
        Partner determines that in economic substance the loan represents an
        investment in property or joint venture. In such instances, these
        investments are accounted for using the equity method.

        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 six months ended June
        30, 1998 and 1997 and to which the General Partner or its affiliates are
        entitled to reimbursement from the Partnership were $56,730 and
        $145,916, 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 six months ended June
        30, 1998 and 1997 are $39,896 and $38,173, respectively, representing
        the Partnership's share of costs incurred by the General Partner and its
        Affiliates relating to the class action complaint. Through June 30,
        1998, the Partnership has accrued a total of $135,463 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>
                                                              June 30,          December 31,
                                                                1998               1997
                                                             -----------        -----------
           <S>                                               <C>                <C>        

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





                                       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: i) 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 is
        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. Since 1996, the Partnership has 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 March 31, 1997, 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 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                                   June 30, 1998     December 31, 1997
                        -----------                                   -------------     -----------------

           <S>                                                          <C>                   <C>

           $35,072 acquisition fee for 205 Newbury St.
           loan. This amount is amortized
           over the term of the loan.                                    $        0           $    948

           $152,880 acquisition fee for investment in
           the Affiliated Joint Venture. This amount
           is amortized over a period of 31.5 years.                      106,975              109,402

           $1,203,097 acquisition fees paid to the
           General Partner. Prior to June 30, 1993, this
           amount was amortized over a period of 30 years.
           Subsequent to June 30, 1993, the unamortized
           balance is amortized over a period of 8.5 years.               424,389              485,015

           $146,277 of tenant improvements. These amounts
           are amortized over the terms of the leases
           to which they relate.                                           23,368               33,788

           $493,545 of lease commissions. These amounts
           are amortized over the terms of the leases
           to which they relate.                                          185,853              218,484
                                                                         --------             --------
                                                                         $740,585             $847,637
                                                                         ========             ========

</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>
                                                               Six Months Ended June 30,
                                                               ------------------------
                                                                 1998           1997
                                                               --------      ----------
          <S>                                                   <C>           <C>      
 
          Net income per Statements of Operations              $852,923      $  939,413


          Add/(deduct):     Excess of book depreciation
                            over tax depreciation                38,276          38,576
                            Excess of book amortization
                              over tax amortization              40,370          39,225
                            Other income and expense              7,694          (8,504)
                                                               --------      ----------

          Net income for federal income tax purposes           $939,263      $1,008,710
                                                               ========      ==========
</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 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 $338,000 in legal expenses in
        connection with the class action lawsuit (see Part I, Item 3 of this
        Report). Of this amount, approximately $203,000 relates to the
        Partnership's own defense and approximately $135,000 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 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.






                                       13
<PAGE>   14
             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 General Partner and John Hancock Mutual Life Insurance Company, the General
Partner's ultimate parent (together, "John Hancock") along with the Partnership,
have developed a plan to modify or replace significant portions of the
Partnership's computer information and automated technologies so that its
systems will function properly with respect to the dates in the year 2000 and
thereafter. The Partnership presently believes that with modifications to
existing systems and conversions to new technologies, the year 2000 will not
pose significant operational problems for its computer systems. However, if
certain modifications and conversions are not made, or are not completed timely,
the year 2000 issue could have an adverse impact on the operations of the
Partnership.

John Hancock as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which John Hancock's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While John
Hancock is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Partnership's systems rely will be converted timely or will not have
an adverse effect on the Partnership's systems.

The Partnership expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors. However,
there can be no guarantee that this completion target will be achieved.

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, repayment of mortgage loans, actions that would be taken
in the event of lack of liquidity, unanticipated leasing costs, repair and
maintenance expenses, 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.

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.




                                       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 (CONTINUED)


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998 the Partnership had $3,657,002 in cash and cash equivalents,
$100,987 in restricted cash.

The Partnership has a working capital reserve with a current balance of
approximately 6.6% 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 mortgage loan to 205 Newbury Associates matured on April 1, 1998 at which
time the borrower repaid the entire outstanding principal balance in the amount
of $1,700,000. On May 15, 1998, the Partnership distributed $1,685,806 of the
repayment proceeds, of which $1,560,931 was distributed to the Investors and
$124,875 was distributed to the John Hancock Limited Partner. The Partnership
retained $14,194 in working capital reserves.

The Partnership incurred $1,815 of leasing costs at the Park Square Shopping
Center during the six months ended June 30, 1998. The General Partner
anticipates that the Partnership will incur an aggregate of approximately
$152,000 of leasing costs at the Park Square Shopping Center and Miami
International Distribution Center properties during the remainder of 1998. The
current balance in the working capital reserve should be sufficient to pay such
costs.

The Partnership incurred approximately $12,000 of non-recurring repair and
maintenance expenses during the six months ended June 30, 1998. The General
Partner anticipates that the Partnership will incur approximately $84,000 of
non-recurring repair and maintenance expenses at the Park Square Shopping Center
and Miami International Distribution Center properties during the remainder of
1998. 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 $338,000 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $203,000 relates to the Partnership's own defense
and approximately $135,000 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.

Cash in the aggregate amount of $2,999,724 was distributed to the Partners
during the six months ended June 30, 1998. Of this amount, $1,313,917 was
generated from Distributable Cash from Operations (defined in the Partnership
Agreement), and $1,685,807 was generated from Distributable Cash from Sales,
Financings or Repayments (defined in the Partnership Agreement). These amounts
were distributed in accordance with the Partnership Agreement and were allocated
as follows:

<TABLE>
<CAPTION>
                                                              From Distributable
                                       From Distributable       Cash From Sales
                                            Cash From           Financings, or
                                           Operations             Repayments
                                       ------------------     ------------------
<S>                                        <C>                    <C>       

Investors                                  $1,300,777             $1,560,932
John Hancock Limited Partner                       --                124,875
General Partner                                13,140                     --
                                           ----------             ----------
         Total                             $1,313,917             $1,685,807
                                           ==========             ==========

</TABLE>





                                       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)


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The amount distributed to the Investors from Distributable Cash from Operations
during the six months ended June 30, 1998 represented a 6% annualized return on
Investors' Invested Capital. The General Partner anticipates that the
Partnership will be able to make comparable quarterly cash distributions from
Distributable Cash from Operations during the remainder of 1998.

The following table summarizes the leasing activity and occupancy status at the
Partnership's remaining equity investments during the six months ended June 30,
1998 and scheduled leasing activity for each investment during the remainder of
1998:

<TABLE>
<CAPTION>
                                     MIAMI INTERNATIONAL     PARK SQUARE       QUINCE ORCHARD
                                       DISTRIBUTION CTR.    SHOPPING CTR.      CORPORATE CTR.
                                     -------------------    -------------      --------------
<S>                                       <C>                 <C>                 <C>   

Square Footage                           215,019             137,108              99,782

Occupancy January 1, 1998                     87%                 88%                100%

New Leases                                     0%                  0%                  0%

Lease Renewals                                 0%                  2%                  0%

Leases Expired                                 0%                  0%                  0%

Occupancy June 30, 1998                       87%                 88%                100%

Leases Scheduled to Expire,
   Balance of 1998                             0%                 16%                  0%

Leases Scheduled to Commence,
   Balance of 1998                             0%                  0%                  0%


</TABLE>

The Miami International Distribution Center is located in an area that the Miami
Airport Authority has targeted for future expansion of the airport. During May
1996, the Miami Airport Authority made an offer to purchase this property at an
amount in excess of its carrying value. Since that time, the General Partner has
continued to negotiate with the Miami Airport Authority towards a mutually
acceptable sale of the property. It is possible that, under certain
circumstances, the Miami Airport Authority could obtain this property through
its powers of eminent domain, although at this time no such plans have been
announced or otherwise communicated to the General Partner. The General Partner
believes that the Miami Airport Authority's desire to acquire the Miami
International Distribution Center has negatively impacted the General Partner's
ability to: i) lease the available space at the property and ii) consider
listing the property for sale.

The Brooklyn Park, Minnesota real estate market, including the Park Square
Shopping Center, has experienced increasing vacancy rates as development of new
retail space continues. This condition has made it increasingly difficult for
property owners to secure new tenants for their locations. The General Partner
expects market conditions in Brooklyn Park to remain competitive during the
remainder 1998 and, therefore, no increase in market rental rates is
anticipated. The General Partner will continue to offer aggressive rental
packages in an effort to retain existing tenants as well as to secure new
tenants for the vacant space at the property.

The Quince Orchard Corporate Center is occupied by 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. As a
result, Hoffman-LaRoche has informed the General Partner that it intends to
terminate operations at the Quince Orchard Corporate Center and to exercise its
right to terminate the lease in June 2000.




                                       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)


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Real estate conditions in the Washington D.C. area for office space similar to
the Quince Orchard Corporate Center have improved recently. The supply of such
office space has been unable to keep pace with the demand, resulting in a slight
increase in market rents. Although this condition gives 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 believes market conditions are
likely to remain favorable through 1998.

The General Partner evaluated the carrying value of each of the Partnership's
properties and its joint venture investment as of December 31, 1997 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
any permanent impairment in values existed. In addition, the General Partner
evaluated the status of its mortgage investment and its ultimate collectibility
as of December 31, 1997. Based upon such evaluations, the General Partner
determined that no permanent impairment in values existed and, therefore, no
write-downs were recorded.

The General Partner will continue to conduct property valuations, using internal
or independent appraisals, in order to determine whether a permanent impairment
in value exists on any of the Partnership's properties.

RESULTS OF OPERATIONS

Net income for the six months ended June 30, 1998 was $852,923, as compared to
net income of $939,413 for the same period in 1997. This decrease is primarily
due to a decrease in interest income and an increase in general and
administrative expenses.

Average occupancy for the Partnership's equity real estate investments was as
follows:

<TABLE>
<CAPTION>
                                                       Six Months Ended June 30,
                                                       ------------------------
                                                       1998                1997
                                                       ----                ----
       <S>                                              <C>                 <C>

       Miami International Distribution Center          87%                 87%
       Park Square Shopping Center                      88%                 86%
       Quince Orchard Corporate Center 
          (Affiliated Joint Venture)                   100%                100%

</TABLE>

Interest income for the six months ended June 30, 1998 decreased by $85,161, or
38%, as compared to the same period in 1997. Interest decreased primarily due to
the repayment of the 205 Newbury Associates mortgage loan on April 1, 1998 and
to a decline in the interest earned on the net sales/repayment proceeds from the
Fulton Business Park property (sold in December 1996) and the General Camera
mortgage loan (repaid in January 1997). The Partnership distributed such amounts
in February 1997.

General and administrative expenses for the six months ended June 30, 1998
increased by $41,760, or 24%, primarily due to higher legal fees incurred by the
Partnership in connection with the class action complaint (see Part II, Item 1
of this Report). Excluding such legal fees, general and administrative expenses
were consistent between periods.

The General Partner believes that inflation has had no significant impact on the
Partnership's operations during the six months ended June 30, 1998, and the
General Partner anticipates that inflation will not have a significant impact
during the remainder of 1998.




                                       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)


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>
                                                           Six Months Ended June 30,
                                                          ---------------------------
                                                             1998             1997
                                                          -----------     -----------
<S>                                                       <C>             <C>

Net cash provided by operating activities (a)             $ 1,564,804     $ 1,332,087
Net change in operating assets and liabilities (a)           (213,291)        (23,212)
                                                          -----------     -----------
Net cash provided by operations (a)                         1,351,513       1,355,299
Increase in working capital reserves                           37,598              --
                                                          -----------     -----------
Cash from operations (b)                                    1,313,915       1,355,299
Decrease in working capital reserves                               --          11,061
                                                          -----------     -----------
Distributable cash from operations (b)                    $ 1,313,915     $ 1,366,360
                                                          ===========     ===========

Allocation to General Partner                             $    13,139     $    13,553
Allocation to Investors                                     1,300,776       1,352,807
Allocation to John Hancock Limited Partner                         --              --
                                                          -----------     -----------
                                                          $ 1,313,915     $ 1,366,360
                                                          ===========     ===========
</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 third quarter of 1998, the Partnership will make a distribution of
Distributable Cash from Operations to the Investors in the amount of $656,958.
This amount represents a 6.25% annualized return on Investors remaining Invested
Capital.

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 each of the remaining two quarters of
1998 will be comparable to that generated during the first two quarters of 1998.



                                       18
<PAGE>   19
             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 certification order should
          not be construed as suggesting that any member of the class is
          entitled to recover, or will recover, any amount in the action.

          The General Partner believes the allegations are totally without merit
          and will continue to vigorously contest the action.

          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 RIF and the
          Partnership as defendants. The defendants filed demurrer motions,
          asking that the complaint be dismissed at law. These motions were
          under consideration during the first quarter of 1998.

          Although the court dismissed the complaint against the Partnership
          during the second quarter of 1998, the plaintiff subsequently amended
          its complaint, again naming the Partnership as a defendant. On August
          12, 1998, the court granted the Partnership's motion for summary
          adjudication of the issues against the plaintiff. The court ruled that
          the plaintiff could not prevail upon its claims since it was not an
          Investor of the Partnership. The Partnership intends to move for a
          judgement dismissing it from the case.


          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.

ITEM 2.   CHANGES IN SECURITIES

          There were no changes in securities during the second quarter of 1998.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          There were no defaults upon senior securities during the second
          quarter of 1998.

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 second quarter of 1998.

ITEM 5.   OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  There are no exhibits to this report

          (b)  There were no Reports on Form 8-K filed during the second quarter
               of 1998.





                                       19
<PAGE>   20

             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 14th day of August, 1998.


                                   John Hancock Realty Income Fund-II
                                   Limited Partnership


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



                                   By: /s/ William M. Fitzgerald
                                       ----------------------------------- 
                                       William M. Fitzgerald, President



                                   By: /s/ Richard E. Frank
                                       ----------------------------------- 
                                       Richard E. Frank, Treasurer
                                       (Chief Accounting Officer)