<PAGE>   1
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

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

FOR THE FISCAL YEAR ENDED    December 31, 1999
                          ------------------------------------------------------

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

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

COMMISSION FILE NUMBER           0-15680
                       ---------------------------------------------------------

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

<TABLE>
<S>                                               <C>
             Massachusetts                                     04-2921566
---------------------------------------           -----------------------------------
    (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)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (800) 722-5457
                                                    ----------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Units of Investor
   Limited Partnership Interest

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
                             -----         ------
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]

STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO THE
PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF SUCH
STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING. (SEE
DEFINITION OF AFFILIATE IN RULE 405.) Not applicable, since the securities are
non-voting

NOTE: IF A DETERMINATION AS TO WHETHER A PARTICULAR PERSON OR ENTITY IS AN
AFFILIATE CANNOT BE MADE WITHOUT INVOLVING UNREASONABLE EFFORT AND EXPENSE, THE
AGGREGATE MARKET VALUE OF THE COMMON STOCK HELD BY NON-AFFILIATES MAY BE
CALCULATED ON THE BASIS OF ASSUMPTIONS REASONABLE UNDER THE CIRCUMSTANCES,
PROVIDED THAT THE ASSUMPTIONS ARE SET FORTH IN THIS FORM.

                         Exhibit Index on Pages 17 - 21
                                  Page 1 of 22
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                     PART I


<S>                                                                               <C>
     Item 1       Business                                                           3
     Item 2       Properties                                                         5
     Item 3       Legal Proceedings                                                  5
     Item 4       Submission of Matters to a Vote
                    of Security Holders                                              6


                                     PART II


     Item 5       Market for the Partnership's Securities and Related
                    Security Holder Matters                                          6
     Item 6       Selected Financial Data                                            7
     Item 7       Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                              7
     Item 8       Financial Statements and Supplementary Data                       12
     Item 9       Changes in and Disagreements with Accountants
                    on Accounting and Financial Disclosure                          12


                                    PART III


     Item 10      Directors and Executive Officers of the Registrant                13
     Item 11      Executive Compensation                                            15
     Item 12      Security Ownership of Certain Beneficial Owners
                    and Management                                                  15
     Item 13      Certain Relationships and Related Transactions                    15


                                     PART IV


     Item 14      Exhibits, Financial Statement Schedules and
                    Reports on Form 8-K                                             17

                  Signatures                                                        22
</TABLE>

                                       2
<PAGE>   3
                                     PART I

ITEM 1 -- BUSINESS

The Registrant, John Hancock Realty Income Fund Limited Partnership (the
"Partnership"), is a limited partnership organized on June 12, 1986 under the
Massachusetts Uniform Limited Partnership Act. As of December 31, 1999, the
partners in the Partnership consisted of John Hancock Realty Equities, Inc. (the
"General Partner"), John Hancock Realty Funding, Inc. (the "John Hancock Limited
Partner"), and 3,712 Investor Limited Partners (the "Investors") owning 91,647
Units of Investor Limited Partnership Interests (the "Units"). The John Hancock
Limited Partner and the Investors are collectively referred to as the Limited
Partners. The initial capital of the Partnership was $2,000 representing capital
contributions of $1,000 from the General Partner and $1,000 from the John
Hancock Limited Partner. During the offering period, the John Hancock Limited
Partner made additional capital contributions of $7,330,760. There have been no
changes in the number of Units outstanding subsequent to the termination of the
offering period. The Amended Agreement of Limited Partnership of the Partnership
(the "Partnership Agreement") authorized the sale of up to 100,000 Units of
Investor Limited Partnership Interests.

The Units were offered and sold to the public during the period from September
9, 1986 to September 9, 1987, pursuant to a Registration Statement on Form S-11
under the Securities Act of 1933. The Partnership sold the Units for $500 per
Unit. No established public market exists on which the Units may be traded.

The Partnership was engaged in the business of acquiring, improving, holding for
investment and disposing of existing, income-producing, commercial and
industrial properties on an all-cash basis, free and clear of mortgage
indebtedness. Although the Partnership's properties were acquired and are held
free and clear of mortgage indebtedness, the Partnership had the ability to
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,
2016, 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 properties of the Partnership will be disposed of,
and the Partnership terminated, before December 31, 2016. As initially stated in
its Prospectus, it was expected that the Partnership would be dissolved upon the
sale of its last remaining property, which at that time was expected to be
within seven to ten years following the date such property was acquired by the
Partnership. During 1999 the Partnership sold the last four properties in its
portfolio resulting in the termination of the operations of the Partnership. The
Partnership will be dissolved, in accordance with the terms of the Partnership
Agreement as soon as reasonably practicable.

The Partnership's equity real estate investments were subject to various risk
factors. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removal or remediation of certain hazardous substances released on or
in its property. Such laws often impose such liability without regard to whether
the owner or operator knew of, or was responsible for, the release of such
hazardous substances. If any such substances were found in or on any property
previously owned by the Partnership, the Partnership could be exposed to
liability and be required to incur substantial remediation costs.

On February 17, 1987, the Partnership acquired the Marlboro Square Shopping
Center property (Marlboro Square), a neighborhood shopping center located in
Marlboro, Massachusetts. Market conditions in Marlboro weakened since the
Partnership acquired the property and remained depressed. An excess of supply
over demand for retail space resulted in continued high vacancy rates and
competitive pricing for available space in the Marlboro area. The General
Partner anticipated that vacancy rates for retail space in the Marlboro,
Massachusetts area would persist based upon both the lack of demand and the
amount of available retail space in the area. Given the existing supply and
demand conditions in the Marlboro area, the General Partner's projection of
future leasing activity and the projected capital requirements of the property,
the General Partner listed Marlboro Square for sale during September 1998
because it did not believe that the property would be likely to appreciate in
value during the foreseeable future. On March 17, 1999, the Partnership sold
Marlboro Square to a non-affiliated buyer and received net sales proceeds of
$1,131,999. During May 1999, the Partnership distributed $956,795 of the net
sales proceeds, of which $824,823 was distributed to the Investors and $131,972
was distributed to the John Hancock Limited Partner. The Partnership retained
$175,204 in working capital reserves. This amount was subsequently distributed
during November 1999 of which $151,038 was distributed to the Investors and
$24,166 was distributed to the John Hancock Limited Partner.

                                       3
<PAGE>   4
ITEM 1 -- BUSINESS (CONTINUED)

On November 20, 1987, the Partnership acquired the Crossroads Square Shopping
Center, a neighborhood shopping center located in Jacksonville, Florida. During
August 1998, the General Partner listed Crossroads Square for sale based upon
the then existing real estate market conditions in the Jacksonville, Florida
area, where the Crossroads Square is located, and the property's projected
income performance. Subsequent to listing Crossroads Square for sale, the
General Partner became aware that the property was environmentally contaminated
with certain hazardous materials. The General Partner then sought to determine
the scope of the contamination and to determine the impact on the future
operating costs, repair and maintenance expenses and market value of the
property. The General Partner estimated that to remediate the contamination
would cost approximately $450,000. On July 13, 1999, the Partnership sold
Crossroads Square to a non-affiliated buyer and received net proceeds of
$8,733,420. The sale was not contingent upon the environmental issues, the costs
of which were factored into the purchase price by the buyer. The General Partner
has no reason to believe, as of the date of this report, that the Partnership
will be held responsible for any further environmental costs associated with
this property. No assurances can be given that no environmental liabilities will
arise in the future. During August 1999 the Partnership distributed $6,873,525
of the net sales proceeds to the Investors. During November 1999 an additional
$644,716 of the net sales proceeds were distributed to the Investors. The
Partnership retained $1,215,179 in working capital reserves.

On February 25, 1988, the Partnership acquired the Warner Plaza Shopping Center
("Warner Plaza"), a neighborhood shopping center located in Chandler, Arizona.
The Partnership acquired Warner Plaza exclusive of areas totaling 55,562
rentable square feet owned by a non-affiliate of the Partnership. Real estate
market conditions declined in the Chandler area after the Partnership acquired
the property. However, steady population growth in the Chandler area over the
past few years had increased demand for available retail space and stimulated
the development of new retail space. Given these market conditions and the
status of the property, the General Partner listed the Warner Plaza for sale
during June 1998. On March 18, 1999, the Partnership sold Warner Plaza to a
non-affiliated buyer and received net sales proceeds of $6,210,535. During May
1999, Partnership distributed $5,528,147 of the net sales proceeds of which
$4,765,644 was distributed to the Investors and $762,503 was distributed to the
John Hancock Limited Partner. The Partnership retained $682,388 in working
capital reserves. This amount was subsequently distributed during November 1999
of which $588,266 was distributed to the Investors and $94,122 was distributed
to the John Hancock Limited Partner.

On December 22, 1987, the Partnership acquired the Carnegie Center, a
multi-tenant office/industrial facility located in Cincinnati, Ohio. After the
Partnership acquired the Carnegie Center, the Cincinnati industrial real estate
market experienced an oversupply of office/industrial space that resulted in a
decline in rental rates and an increase in vacancy rates. After late in 1994 the
property's occupancy gradually improved. Given the existing status of the
property, the projected future capital requirements necessary for the property
to maintain its competitive position within the market and the existing
conditions in the Cincinnati real estate market, the General Partner listed the
Carnegie Center for sale during July 1998. On January 7, 1999, the Partnership
sold the Carnegie Center to a non-affiliated buyer and received net sales
proceeds of $4,096,441. During February 1999, the Partnership distributed
$4,092,955 of the net sales proceeds, of which $3,528,410 was distributed to the
Investors, and $564,545 was distributed to the John Hancock Limited Partner. The
Partnership retained $3,486 in working capital reserves. This amount was
subsequently distributed during November 1999, of which $3,004 was distributed
to the Investors and $481 was distributed to the John Hancock Limited Partner.

On October 24, 1986, the Partnership acquired the 1300 North Dutton Avenue
property, an office/industrial facility located in Santa Rosa, California. Due
to the then existing favorable market conditions in the Santa Rosa, California
area, the General Partner listed the property for sale during October 1996. On
September 29, 1997, the Partnership sold the property to a non-affiliated buyer
and received net sales proceeds of $2,673,278. During November 1997, the
Partnership distributed $2,126,210 of the net sales proceeds, of which
$1,832,940 was distributed to the Investors, and $293,270 was distributed to the
John Hancock Limited Partner. The Partnership retained $547,068 in working
capital reserves. This amount was subsequently distributed during November 1999,
of which $471,610 was distributed to the Investors and $75,458 was distributed
to the John Hancock Limited Partner.

On September 13, 1988, the Partnership acquired the J.C. Penney Credit
Operations Center, an office/service center located in Albuquerque, New Mexico
and 100% occupied by J.C. Penney. The General Partner listed the J.C. Penney
Credit Operations Center for sale during July 1995 based upon then existing
favorable real estate market conditions in Albuquerque, New Mexico. On December
29, 1995, the Partnership sold the J.C. Penney Credit Operations Center to a
non-affiliated buyer and received net sales proceeds of $5,392,032. During
February 1996, the Partnership distributed $5,315,526 of the net sales proceeds,
of which $4,582,350 was distributed to the Investors, and $733,176 was
distributed to the John Hancock Limited Partner. The Partnership retained
$76,506 in working capital reserves. This amount was subsequently distributed
during November 1999, of which $65,953 was distributed to the Investors and
$10,553 was distributed to the John Hancock Limited Partner.

                                       4
<PAGE>   5
ITEM 1 -- BUSINESS (CONTINUED)

Within the power accorded to the General Partner under the terms of the
Partnership Agreement, the General Partner contracted, effective as of January
1, 1992, with Hancock Realty Investors Incorporated ("HRI"), a wholly-owned,
indirect subsidiary of John Hancock Mutual Life Insurance Company ("John
Hancock"), to assist the General Partner in the performance of its management
duties as enumerated in the Partnership Agreement. Effective May 28, 1993, HRI
subcontracted with John Hancock to assist HRI in the performance of its duties
as enumerated in the January 1, 1992 contract. The Partnership has not incurred
any additional costs or expenses as a result of these agreements. The General
Partner is further described in Item 10 ("Directors and Executive Officers of
the Partnership") of this Report.

Industry segment information has not been provided since the Partnership is
engaged in only one industry segment.

ITEM 2 -- PROPERTIES

At December 31, 1999, the Partnership held no properties in its portfolio.

ITEM 3 -- 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 a limited partnership
affiliated with 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 that was preliminarily approved by the court on November
10, 1999 and finally approved by the court on December 22, 1999. Under the terms
of the settlement, the defendants have guaranteed certain minimum returns to
class members on their investments and paid fees and expenses to class counsel
in an amount determined by the court of $1.5 million. Payments under the
settlement agreement will have no financial impact on 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 John
Hancock Realty Income Fund-II Limited Partnership ("RIF-II"), a limited
partnership affiliated with the Partnership. The complaint named the General
Partner as a defendant.

The plaintiff sought unspecified damages that 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 RIF-II. 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-II
as defendants. As a result of the defendants' demurrer (motion to dismiss), in
May 1998 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 RIF-II, leaving only the breach of contract
and breach of fiduciary duty claims involving the Partnership. 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. The parties commenced settlement discussions, which resulted in a
settlement agreement on February 18, 2000 terminating all litigation between the
parties. The settlement will not have a material adverse impact on the
Partnership's financial position.

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

                                       5
<PAGE>   6
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders of the Partnership
during the fourth quarter of 1999.

                                     PART II

ITEM 5 -- MARKET FOR THE PARTNERSHIP'S SECURITIES AND RELATED SECURITY HOLDER
          MATTERS

(a)  MARKET INFORMATION

The Partnership's outstanding securities consist of 91,647 Units originally sold
for $500 per Unit. The Units were offered and sold to the public during the
period from September 9, 1986 to September 9, 1987. No established public market
exists on which the Units may be traded. Consequently, holders of Units may not
be able to liquidate their investments in the event of an emergency, or for any
other reason. Additionally, the assignment or other transfer of Units would be
subject to compliance with the minimum investment and suitability standards
imposed by the Partnership or by applicable law, including state "Blue Sky"
laws.

(b)  NUMBER OF SECURITY HOLDERS

<TABLE>
<CAPTION>
                                                Number of             Number of Units
                                          record holders as of       outstanding as of
       Title of Class                       December 31, 1999        December 31, 1999
       --------------                       -----------------        -----------------
<S>                                       <C>                        <C>
       Units of Investor Limited
       Partnership Interests                        3,615                    91,647
</TABLE>

(c)  DIVIDEND HISTORY AND RESTRICTIONS

During the fiscal year ended December 31, 1999, the Partnership distributed cash
in the aggregate amount of $20,074,644 to the Partners. Of this amount, $493,854
was generated from Distributable Cash from Operations, and $19,580,790 was
generated from Distributable Cash from Sales or Financings (defined in the
Partnership Agreement). These amounts were distributed in accordance with the
Partnership Agreement. During the fiscal year ended December 31, 1998, the
Partnership distributed cash in the amount of $2,001,645 to the Partners. All of
this amount was generated from Distributable Cash from Operations (defined in
the Partnership Agreement).

The following table reflects aggregate cash distributions with respect to
Distributable Cash from Operations and Distributable Cash from Sales or
Financings made during 1998 and 1999:

<TABLE>
<CAPTION>
                                                                         Amount Paid to
           Date of                  Amount of        Amount Paid to       John Hancock         Amount Paid         Distribution
        Distribution              Distribution       General Partner     Limited Partner      to Investors           Per Unit
--------------------------       -------------       ---------------   -----------------      -------------        ------------
<S>                               <C>                <C>               <C>                    <C>                  <C>
     February 13, 1998              $509,151            $5,092         $           --             $504,059             $5.50
     May 15, 1998                    498,041             4,980                     --              493,061              5.38
     August 14, 1998                 497,396             4,335                     --              493,061              5.38
     November 13, 1998               497,057             3,998                     --              493,060              5.38
     February 12, 1999*            4,586,810               795                564,545            4,021,470             43.88
     May 14, 1999*                 6,484,942                --                894,475            5,590,467             61.00
     August 13, 1999*              6,873,525                --                     --            6,873,525             75.00
     November 15, 1999*            2,129,367                --                204,780            1,924,587             21.00
</TABLE>

     * Includes Distributable Cash from Sales or Financings

The amount of future cash distributions will be dependent upon the need to draw
down working capital reserves. As of the date of this report, all of the
properties in the Partnership have been sold. In order to adequately provide for
all future contingencies, the General Partner has determined (as permitted by
the Partnership Agreement) to retain rather than distribute to investors, net
cash provided by the Partnership's normal operations in order to fund cash
reserves for contingencies. Accordingly, no cash distributions with respect to
Distributable Cash from Operations pertaining to 1999 were made to the Limited
Partners. All distributions represent Distributable Cash from Sales. At such
time as all liabilities with respect to the Partnership are resolved, the
General Partner will make a final distribution of net assets to the Limited
Partners, in accordance with the terms of the Partnership Agreement. Such final
distribution, if any, will result in the liquidation and, as soon as reasonable
practicable, dissolution of the Partnership.

                                       6
<PAGE>   7
ITEM 6 -- SELECTED FINANCIAL DATA

The following table sets forth selected financial information regarding the
Partnership's financial position and operating results for the five-year period
ended December 31, 1999. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Financial Statements and Notes thereto, which are included in
Items 7 and 8, respectively, of this Report.

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                  1999            1998              1997               1996               1995
                                                  ----            ----              ----               ----               ----
<S>                                           <C>             <C>               <C>                <C>                <C>
Rental income ..............................  $    886,432    $  2,544,074      $  2,861,166       $  2,614,989       $  3,065,751
Interest income ............................       246,789         100,005           107,469            171,767            173,286
(Loss)/gain on sale of property ............     1,320,277              --            (5,321)                --            128,539
Property write-downs .......................            --              --          (668,520)        (1,907,093)                --
Net income/(loss) ..........................     1,403,520       1,050,152           636,383           (851,115)         1,551,706
Net income/(loss) per Unit(b) ..............         13.19           11.53             8.41               (5.60)             17.42
Ordinary tax income/(loss)(a) ..............    (8,052,297)        761,396         1,167,990          1,130,346          1,480,158
Ordinary tax income/(loss) per Unit (b) ....        (92.52)           8.68             13.33              12.74              16.80
Cash distribution per Unit from
    operations .............................          5.38           21.64             22.52              23.44              25.00
Distributable cash from sales
    or financings ..........................    19,580,790              --         2,126,210                 --          5,315,526
Cash distribution per Unit from sales or
    Financings .............................        195.50              --             20.00              50.00                 --
Cash and cash equivalents at
    December 31 ............................     2,476,260       2,055,017         2,502,844          2,197,847          8,397,420
Total assets at December 31 ................     2,476,260      21,026,013        21,765,879         25,375,190         33,605,444
</TABLE>

(a)      The ordinary tax income (loss) for the Partnership was allocated as
         follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                       1999             1998              1997              1996              1995
                                       ----             ----              ----              ----              ----
<S>                               <C>               <C>               <C>               <C>               <C>
General Partner ................  $   (80,523)      $     7,614       $    11,680       $    11,303       $    14,802
John Hancock Limited Partner ...      506,967           (41,901)          (65,297)          (48,543)          (74,321)
Investors ......................   (8,478,741)          795,683         1,221,607         1,167,586         1,539,677
                                  -----------       -----------       -----------       -----------       -----------
    Total ......................  $(8,052,297)      $   761,396       $ 1,167,990       $ 1,130,346       $ 1,480,158
                                  ===========       ===========       ===========       ===========       ===========
</TABLE>

(b)      The ordinary tax income per Unit as presented was computed by dividing
         the Investors' share of ordinary tax income by the number of Units
         outstanding at December 31, 1999, 1998, 1997, 1996 and 1995,
         respectively. The actual ordinary tax income/(loss) per Unit has not
         been presented because the actual ordinary tax income/(loss) is
         allocated between tax-exempt and tax-paying entities based upon the
         respective number of Units held by each group at December 31, 1999,
         1998, 1997, 1996 and 1995.

ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

GENERAL

During the offering period from September 9, 1986 to September 9, 1987, the
Partnership sold 91,647 Units representing gross proceeds (exclusive of the John
Hancock Limited Partner's contribution which was used to pay sales commissions,
acquisition fees and organizational and offering expenses) of $45,823,500. The
proceeds of the offering were used to acquire investment properties and fund
reserves. These properties are described more fully in Item 2 of this Report and
Note 4 to the Financial Statements included in Item 8 of this Report.

                                       7
<PAGE>   8
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

IMPACT OF YEAR 2000

The Partnership participated in the Year 2000 remediation project of its parent,
John Hancock Life Insurance Company (John Hancock). By late 1999, John Hancock
and the Partnership completed their Year 2000 readiness plan to address issues
that could result from computer programs written using two digits to define the
applicable year rather than four to define the applicable year and century. As a
result, John Hancock and the Partnership were prepared for the transition to the
Year 2000 and did not experience any significant Year 2000 problems with respect
to mission critical information technology ("IT") or non-IT systems,
applications or infrastructure. During the date rollover to the year 2000, John
Hancock and the Partnership implemented and monitored their millennium rollover
plan and conducted business as usual on Monday, January 3, 2000.

Since January 3, 2000, the information systems, including mission critical
systems, which in the event of a Year 2000 failure would have the greatest
impact on operations, have functioned properly. In addition, neither John
Hancock nor the Partnership experienced any significant Year 2000 issues related
to interactions with material business partners. No disruptions have occurred
which impact John Hancock or the Partnership's ability to process claims, update
customer accounts, process financial transactions, report accurate data to
management and no business interruptions due to Year 2000 issues have been
experienced. While John Hancock and the Partnership continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, as of the date of this report neither John
Hancock nor the Partnership have reason to expect any such issues.

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 sale of Partnership
properties, the dissolution and liquidation of the Partnership, actions that
would be taken in the event of lack of liquidity, litigation expenses and
indemnification claims, distributions to the General Partner and to Investors,
the impact of the year 2000 on computer systems 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, 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.

LIQUIDITY AND CAPITAL RESOURCES

As initially stated in its Prospectus, it was expected that the Partnership
would be dissolved upon the sale of its last remaining property, which at that
time was expected to be within seven to ten years following the date such
property was acquired by the Partnership. The Partnership sold the last property
in its portfolio, Crossroads Square Shopping Center, on July 13, 1999. The sale
of this last remaining property resulted in the termination of the operations of
the Partnership, and the Partnership will be dissolved, in accordance with the
terms of the Partnership Agreement as soon as reasonably practicable. At such
time as all liabilities with respect to the Partnership are resolved, the
General Partner will make a final distribution of net assets to the Limited
Partners, as soon as practicable. No assurances can be given as to whether any
distribution can be made after all liabilities of the Partnership are resolved.
Such final distribution, if any, will result in the liquidation and termination
of the Partnership. At such time of such final distribution, the outstanding
Units will be canceled and, in accordance with federal securities laws, they
will be de-registered with the Securities and Exchange Commission, after which
time the Partnership will no longer be required to file periodic reports with
the Commission.

                                       8
<PAGE>   9
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

At December 31, 1999, the Partnership had $2,476,260 in cash and cash
equivalents. Cash and cash equivalents increased by $421,243 from 1998. This
increase occurred because the Partnership retained a portion of net sales
proceeds in working capital reserves as permitted by the Partnership Agreement.

The Partnership's working capital reserve has a current balance of approximately
$1,729,000. The General Partner anticipates that such amount should be
sufficient to satisfy the Partnership's general liquidity requirement as the
Partnership business is wound down. Liquidity would, however, be materially
adversely affected by significant unanticipated operating and liquidation costs
(including but not limited to litigation expenses). 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, or short-term loans from the General
Partner or its Affiliates.

During 1999, cash from working capital reserves in the aggregate amount of
$22,434 was used for the payment of leasing costs incurred at the Crossroads
Square, and Warner Plaza properties. The Partnership will not incur any leasing
costs during 2000.

During the years ended December 31, 1999 and 1998, approximately $6,886 and
$92,000, respectively, of cash from operations was used to fund non-recurring
maintenance and repair expenses incurred at the Partnership's properties. The
Partnership will not incur any non-recurring maintenance and repair expenses
during 2000.

The Partnership has incurred approximately $525,246 in legal expenses in
connection with the class action lawsuit (see Part I, Item 3 of this Report). Of
this amount, approximately $315,147 relates to the Partnership's own defense and
approximately $210,098 relates to the indemnification of the General Partner and
its Affiliates for their defense. In addition, the Partnership incurred
approximately $834,663 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 I, Item 3 of this Report). Of this
amount, approximately $509,901 relates to the Partnership's own defense and
approximately $324,762 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, winding down and distributions. 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, or short-term loans from the General
Partner or its Affiliates.

Cash in the amount of $20,074,644 was distributed to the General Partner and the
Limited Partners during 1999. The amount was $756 less than expected due to an
adjustment for the third quarter of 1998. Of this distribution amount, $494,854
was from Distributable Cash from Operations for the quarter ended December 31,
1998 and $19,580,790 was from Distributable Cash from Sales during 1999. As a
result of the disposition by the Partnership of all four of its remaining
properties during 1999, the General Partner determined that it was in the best
interests of the Partnership to retain, rather than distribute to Investors, net
cash provided by the Partnership's normal operations in order to fund cash
reserves for contingencies, as is permitted by the Partnership Agreement.
Accordingly, for 1999, no cash distributions with respect to Distributable Cash
from Operations were made to Investors.

The General Partner evaluated the carrying value of each of the Partnership's
properties as of December 31, 1998 by comparing such value to the respective
property's future undiscounted cash flows and the then most recent internal
appraisal. No impairment in values exists with respect to the Partnership's
properties as of December 31, 1998 and, therefore no write-downs were recorded.
As of December 31, 1999, all of the properties in the Partnership have been
sold.

                                       9
<PAGE>   10
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS

Average occupancy for the Partnership's properties was as follows:

<TABLE>
<CAPTION>
                                                        Years ended December 31,
                                                    1999*              1998             1997
                                                    -----              ----             ----
<S>                                                 <C>                <C>              <C>
     Marlboro Square Shopping Center                 N/A                62%              65%
     Crossroads Square Shopping Center               N/A                95%              95%
     Carnegie Center Office/Industrial               N/A                73%              68%
     Warner Plaza Shopping Center                    N/A                96%              99%
</TABLE>

         *As of December 31, 1999, all of the Partnership's properties had been
sold.

RESULTS OF OPERATIONS -- 1999 COMPARED WITH 1998

Net income for 1999 was $1,403,520 as compared to $1,050,152 in 1998. The 1999
results include a net non-recurring gain of $1,320,277 resulting from the sales
of the Carnegie Center, Marlboro Square, Warner Plaza and Crossroads Square
properties. Excluding the results of this gain, net income decreased by
$966,909, or 92%, during 1999 as compared to 1998. This decrease is primarily
due to the sales of these four buildings during 1999.

Rental income for 1999 decreased by $1,657,642, or 65%, as compared to 1998.
This decrease is primarily due to the sales of the Carnegie Center, Marlboro
Square, Warner Plaza and Crossroads Square properties during 1999.

Interest income for the year ended December 31, 1999 increased by $146,784, or
147% as compared to 1998. This increase is primarily due to an increase in
working capital reserves, which increased because the Partnership retained a
portion of the net sales proceeds from the sales of the Marlboro Square, Warner
Plaza and Crossroads Square properties.

Depreciation expense for 1999 decreased by $372,850, or 100%, as compared to
1998. This decrease is due to the reclassification of the Crossroads Square,
Warner Plaza, Carnegie Center and Marlboro Square properties as "Property Held
for Sale" during 1998. Accordingly, no depreciation has been recorded on these
properties since the time that they were listed for sale.

The Partnership's share of property operating expenses for 1999 decreased by
$257,803, or 65%, as compared to 1998. This decrease is primarily due to the
sales of the Carnegie Center, Marlboro Square, Warner Plaza and Crossroads
Square Properties.

General and administrative expenses increased during 1999 by $200,684, or 28%,
as compared to the 1998. This increase is primarily due to an increase in legal
fees incurred by the Partnership in connection with the legal proceedings
described in Item 3 of Part I of this Report.

Amortization of deferred expenses for 1999 decreased by $63,358, or 100%, as
compared to 1998. This decrease is due to reclassifying deferred expenses to
"Property Held for Sale" and, accordingly, no longer amortizing such amounts.

Management fee expense, which is equal to 3.5% of Cash from Operations (as
defined in the Partnership Agreement), decreased during 1999 by $50,622, or 94%,
as compared to the same period in 1998. This decrease was due to a decline in
Cash from Operations between periods which resulted from the sales of the
Carnegie Center, Marlboro Square, Warner Plaza and Crossroads Square properties
as well as from an increase in general and administrative expenses between
periods.

RESULTS OF OPERATIONS -- 1998 COMPARED WITH 1997

Net income for 1998 was $1,050,152 as compared to $636,383 in 1998. The 1997
results include a $668,520 write-down of the value of the Marlboro Square
property and a $5,321 non-recurring loss resulting from the sale of the 1300
North Dutton Avenue property as well as approximately $196,000 of operating
income from the 1300 North Dutton Avenue property. Excluding these amounts, net
income decreased by 7% during 1998 as compared to 1997.

                                       10
<PAGE>   11
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS -- 1998 COMPARED WITH 1997 (CONTINUED)

Rental income for 1998 decreased by $317,092, or 11%, as compared to 1997. This
decrease is primarily due to the sale of the 1300 North Dutton Avenue property
on September 29, 1997. Excluding rental income generated by the 1300 North
Dutton Avenue property, rental income was consistent between periods. Increases
in rental income at the Crossroads Square and Carnegie Center properties were
offset by decreases in rental income at Marlboro Square and Warner Plaza.

Interest income for the year ended December 31, 1998 decreased by $7,464, or 7%
as compared to 1997. This decrease is primarily due to a decrease in working
capital reserves, which declined due to an increase in general and
administrative expenses.

Depreciation expense for 1998 decreased by $295,019, or 44%, as compared to
1997. This decrease is primarily due to the reclassification of the Crossroads
Square, Warner Plaza, Carnegie Center and Marlboro Square properties as
"Property Held for Sale" during 1998. Accordingly, no depreciation has been
recorded on these properties since the time that they were listed for sale. In
addition, depreciation expense also declined due to the write-down in value of
Marlboro Square's carrying value at December 31, 1997.

The Partnership's share of property operating expenses was consistent between
1998 and 1997; however, excluding amounts attributable to 1300 North Dutton
Avenue, the Partnership's share of property operating expenses increased by 23%.
Increases in the Partnership's share of property operating expenses at the
Marlboro Square and Crossroads Square properties were partially offset by a
decrease in the Partnership's share of property operating expenses at the Warner
Plaza. The Partnership's share of property operating expenses was consistent
between periods at the Carnegie Center.

The Partnership's share of property operating expenses at the Marlboro Square
increased $38,000 during 1998 as compared to 1997 primarily due to a decrease in
occupancy at the property, and therefore, decreases in tenant reimbursements for
such expenses.

The Partnership's share of property operating expenses at Crossroads Square
increased in 1998 as compared to 1997 primarily due to an increase in
non-recurring maintenance and repair expenses during 1998 as compared to 1997.
The property incurred approximately $50,000 and $15,000 of non-recurring
maintenance and repair expenses during 1998 and 1997, respectively.

The Partnership's share of property operating expenses at Warner Plaza decreased
in 1998 as compared to 1997 primarily due to an decrease in non-recurring
maintenance and repair expenses during 1998 as compared to 1997. The property
incurred approximately $23,000 and $75,000 of non-recurring maintenance and
repair expenses during 1998 and 1997, respectively. This decrease in the
Partnership's share of property operating expenses was partially offset by an
increase in certain operating expenses as well as a decrease in average
occupancy between periods, and therefore decreases in tenant reimbursements for
such expenses.

General and administrative expenses increased during 1998 by $324,094, or 84%,
as compared to the 1997. This increase is primarily due to an increase in legal
fees incurred by the Partnership in connection with the legal proceedings
described in Item 3 of Part I of this Report.

Amortization of deferred expenses for 1998 decreased by $71,145, or 53%, as
compared to 1997. This decrease is primarily due to reclassifying deferred
expenses to "Property Held for Sale" and, accordingly, no longer amortizing such
amounts.

Management fee expense, which is equal to 3.5% of Cash from Operations (as
defined in the Partnership Agreement), decreased during 1998 by $21,535, or 29%,
as compared to the same period in 1997. This decrease was due to a decline in
Cash from Operations between periods which resulted from the sale of the 1300
North Dutton Avenue property as well as from an increase in general and
administrative expenses between periods.

                                       11
<PAGE>   12
ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS -- 1998 COMPARED WITH 1997 (CONTINUED)

During 1997, the General Partner determined that the value of the Marlboro
Square property had been impaired. As a result, the Partnership reduced the
carrying amount of the property by $668,520 and this amount was charged directly
to operations.

The General Partner believes that inflation has had no significant impact on the
Partnership's operations during the last three fiscal years, and the General
Partner anticipates that inflation will not have a significant impact during
2000.

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>
                                                                             Years Ended December 31,
                                                 1999            1998              1997              1996              1995
                                                 ----            ----              ----              ----              ----
<S>                                         <C>               <C>               <C>               <C>               <C>
Net cash provided by
    operating activities (a) .........      $   345,926       $ 1,705,891       $ 2,066,766       $ 2,239,462       $ 2,431,249
Net change in operating assets
    and liabilities (a) ..............         (262,683)         (219,531)           45,830          (201,460)           77,507
                                            -----------       -----------       -----------       -----------       -----------
Cash provided by operations (a) ......           83,243         1,486,360         2,112,596         2,038,002         2,508,756
Increase in working capital reserves .          (83,243)               --           (39,893)               --          (194,438)
Add:    Accrual basis Partnership
          management fee .............            3,019            53,641            75,176            76,619            83,939
                                            -----------       -----------       -----------       -----------       -----------
Cash from operations (b) .............            3,019         1,540,001         2,147,879         2,114,621         2,398,257
Decrease in working capital reserves .               --           500,747                --            74,507                --
Less:   Accrual basis Partnership
          management fee .............           (3,019)          (53,641)          (75,176)          (76,619)          (83,939)
                                            -----------       -----------       -----------       -----------       -----------
Distributable cash from operations (b)      $         0       $ 1,987,107       $ 2,072,703       $ 2,112,509       $ 2,314,318
                                            ===========       ===========       ===========       ===========       ===========

Allocation to General Partner ........      $        --       $    14,864       $    20,727       $    21,125       $    23,143
Allocation to John Hancock
    Limited Partner ..................               --                --                --                --                --
Allocation to Investors ..............               --         1,972,243         2,051,976         2,091,384         2,291,175
                                            -----------       -----------       -----------       -----------       -----------
Distributable cash from operations (b)      $        --       $ 1,987,107       $ 2,072,703       $ 2,112,509       $ 2,314,318
                                            ===========       ===========       ===========       ===========       ===========
</TABLE>

(a)    Net cash provided by operating activities, net change in operating assets
       and liabilities, and cash provided by operations are as calculated in the
       Statements of Cash Flows included in Item 8 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.

ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this Item appears beginning on page F-1 of this Report.

ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

No events requiring disclosure under this Item have occurred.

                                       12
<PAGE>   13
                                    PART III

ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

(a-b)  IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

By virtue of its organization as a limited partnership, the Partnership has no
directors or executive officers. As indicated in Item 1 of this Report, the
General Partner of the Partnership is John Hancock Realty Equities, Inc., a
Delaware corporation. Pursuant to the terms of the Partnership Agreement, the
General Partner is solely responsible for the management of the Partnership's
business. The names and ages of the directors and executive officers of the
General Partner at December 31, 1999 were as follows:

<TABLE>
<CAPTION>
                  Name                          Title                            Age
               ----------                   -------------                      -------
<S>      <C>                         <C>                                         <C>
         John M. Garrison            President and Director                       49
         Malcolm G. Pittman, III     Director                                     48
         Susan M. Shephard           Director                                     47
         Virginia H. Lomasney        Treasurer (Chief Accounting Officer)         38
</TABLE>

The term of office and other positions held by the persons listed above appear
in paragraph (e) below.

 (c)  IDENTIFICATION OF CERTAIN SIGNIFICANT PERSONS

The General Partner is responsible for the identification, analysis, purchase,
operation, and disposal of specific Partnership real estate investments. The
General Partner has established a Real Estate Investment Committee utilizing
senior real estate personnel of John Hancock and its Affiliates (defined in the
Partnership Agreement) to review each proposed investment. The members of the
Real Estate Investment Committee are designated each year at the annual meeting
of the Board of Directors of John Hancock Realty Equities, Inc. The current
members of the committee are as follows:

<TABLE>
<CAPTION>
             Name                                               Title                                                   Age
           --------                                           ---------                                               -------
<S>                                                <C>                                                                <C>
    Edward P. Dowd                                   Senior Vice President of                                            57
                                                     John Hancock's Real Estate
                                                     Investment Group

    John M. Garrison                                 Senior Investment Officer of John                                   49
                                                     Hancock's Real Estate Investment
                                                     Group, President of John Hancock
                                                     Realty Equities, Inc.

    John M. Nagle                                    Senior Investment Officer of                                        49
                                                     John Hancock's Real Estate
                                                     Investment Group, Vice President of
                                                     John Hancock Realty Equities, Inc.
</TABLE>

(d)  FAMILY RELATIONSHIPS

There exist no family relationships among any of the foregoing directors or
officers of the General Partner.

                                       13
<PAGE>   14
ITEM 10 -- DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP (CONTINUED)

(e)  BUSINESS EXPERIENCE

John M. Garrison (age 49) joined John Hancock in 1995 as an Investment Officer.
He has been President and a Director of the General Partner, Hancock Realty
Investors Incorporated and John Hancock Property Investors Corp. since July
1999. His term as Director of the General Partner expires in May 2000. Mr.
Garrison has been a Senior Investment Officer of John Hancock since November
1999. Prior to joining John Hancock, he held a number of positions with the
Metropolitan Life Real Estate Investment Group. He holds an M.B.A. from Yale
University and a B.A. from Hamilton College.

Malcolm G. Pittman III (age 48) joined John Hancock in 1986 as an Assistant
Counsel. He has been a Director of the General Partner since November 1991. His
term as a Director of the General Partner expires in May 2000. Mr. Pittman has
been a Counsel of John Hancock's Real Estate Law Division since 1993. From 1989
to 1993, he was an Associate Counsel of John Hancock. He holds a J.D. from Yale
Law School and a B.A. from Oberlin College.

Susan M. Shephard (age 47) joined John Hancock in 1985 as an Attorney. She has
been a Director of the General Partner since November 1991. Her term as a
Director of the General Partner expires in May 2000. Ms. Shephard has been a
Mortgage Investment Officer of John Hancock since 1991. From 1988 to 1991, she
was an Associate Counsel of John Hancock and from 1987 to 1988, she was an
Assistant Counsel of John Hancock. She holds a J.D. from Georgetown University
Law Center and a B.A. from the University of Rhode Island.

Virginia H. Lomasney (age 38) joined John Hancock in 1983. She was appointed
Treasurer of the General Partner effective March 25, 1999. Ms. Lomasney has been
an Associate Investment Officer of John Hancock since 1993. She holds an M.B.A.
from Bentley College and a B.S. from Boston University.

John M. Nagle (age 49) joined John Hancock in 1979. He has been Vice President
of the General Partner, John Hancock Realty Services Corp. and Hancock Realty
Investors Incorporated since July 1999. Mr. Nagle has been a Senior Investment
Officer of John Hancock since 1987. From 1991 through 1993 he was Vice President
of Hancock Realty Investors Incorporated. He holds an M.B.A. and a B.B.A. from
the University of Massachusetts at Amherst.

Edward P. Dowd (age 57) joined John Hancock in 1970. He has been a Director of
Hancock Realty Investors, Incorporated since 1991, and a Director of John
Hancock Realty Services Corp. and subsidiaries and John Hancock Property
Investors Corp. since 1987. Mr. Dowd has been a Senior Vice President of John
Hancock since 1991. From 1989 to 1990, he was a Vice President of John Hancock
and from 1986 to 1989, he was a Second Vice President of John Hancock. Prior to
that time, he held a number of positions including Senior Real Estate Investment
Officer and Real Estate Investment Officer of John Hancock. From July 1982 to
May 1986, Mr. Dowd was President of the General Partner. He holds an A.B. from
Boston College.

 (f)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

None

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
General Partner's directors and executive officers, as well as any person
holding more than ten percent of the Units, are required to report their initial
ownership of Units and any subsequent change in such ownership to the Securities
and Exchange Commission and the Partnership (such requirements hereinafter
referred to as "Section 16(a) filing requirements"). Specific time deadlines for
Section 16(a) filing requirements have been established.

To the Partnership's knowledge, no officer or director of the General Partner
has or had an ownership interest in the Partnership at any time during the 1999
fiscal year or as of the date hereof. In addition, to the Partnership's
knowledge, the Commonwealth of Massachusetts Pension Reserve Investment Trust
Fund, the only greater than ten percent holder of the Units, was not required to
file any reports relating to Section 16(a) filing requirements during the 1999
fiscal year.

                                       14
<PAGE>   15
ITEM 11 -- EXECUTIVE COMPENSATION

None of the officers or directors of the General Partner or any of the Real
Estate Investment Committee members referred to in Item 10(c) receive any
current or proposed direct remuneration from the Partnership in their capacities
as officers, directors or Real Estate Investment Committee members, pursuant to
any standard arrangements or otherwise, nor is any such remuneration currently
proposed. In addition, the Partnership has not given and does not propose to
give any options, warrants or rights, including stock appreciation rights, to
any such persons in such capacities. No long-term incentive plan exists with any
such persons in such capacities and no remuneration plan or arrangement exists
with any such persons resulting from resignation, retirement or any other
termination. Therefore, tables relating to these topics have been omitted.

Compensation Committee Interlocks and Insider Participation:

The Partnership did not have a Compensation Committee in 1999 and does not
currently have such a committee. During the 1999 fiscal year, no current or
former officer or employee of the General Partner or its Affiliates participated
in deliberations regarding the General Partner's or its Affiliates' compensation
as it relates to the Partnership.

ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a)  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

       No person or group, including the General Partner, is known by the
       General Partner to own beneficially more than 5% of the Partnership's
       91,647 outstanding Units as of December 31, 1999, except as follows:

<TABLE>
<CAPTION>
            Title                                                                Amount and                        Percent
             of                         Name and Address                         Nature of                           of
            Class                       of Beneficial Owner                 Beneficial Ownership                    Class
            -----                       -------------------                 --------------------                    -----
<S>                                     <C>                                 <C>                                    <C>
         Units of                       The Commonwealth of                     10,000 Units                         10.91%
         Investor                       Massachusetts Pension                   owned directly
         Limited                        Reserve Investment
         Partnership                    Trust Fund
         Interests                      125 Summer Street, 10th Floor
                                        Boston, MA
</TABLE>

(b)  SECURITY OWNERSHIP OF MANAGEMENT

         By virtue of its organization as a Limited Partnership, the Partnership
         has no officers or directors. Neither the General Partner nor any
         officer or director of the General Partner possesses the right to
         acquire a beneficial ownership of Units.

(c)  CHANGES IN CONTROL

         The Partnership does not know of any arrangements the operations of
         which may at a subsequent date result in a change of control of the
         Partnership.

ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Note 5 of the Notes to the Financial Statements included in Item 8 of this
Report for a description of certain transactions and related amounts paid by the
Partnership to the General Partner and its Affiliates (as defined in the
Partnership Agreement) during the years ended 1999, 1998 and 1997.

In accordance with the terms of the Partnership Agreement, the General Partner
and/or its Affiliates are entitled to the following types of compensation, fees,
profits/(losses), expense reimbursements and distributions:

The General Partner shall receive a Partnership Management Fee (defined in the
Partnership Agreement) for managing the normal operations of the Partnership in
an amount equal to 3.5% of cash flow from operations. The General Partner was
paid a Partnership Management Fee totaling, $3,019, $53,641 and $75,176 during
the years ended December 31, 1999, 1998 and 1997, respectively.

                                       15
<PAGE>   16
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)

An Affiliate of the General Partner is entitled to receive a Property Management
Fee (defined in the Partnership Agreement) for providing property management
services to the Partnership's properties. The Partnership is obligated to pay a
fee equal to the amount customarily charged in arms-length transactions by other
entities rendering services in an area where the Partnership's properties are
located, but in no event may such fees exceed 6% of the gross receipts of any
property under management. To date, no Affiliate of the General Partner has
provided property management services to the Partnership's properties;
therefore, the Partnership did not pay any such fees during the years ended
December 31, 1999, 1998 or 1997.

The General Partner and its Affiliates are entitled to receive reimbursement for
expenses relating to the administrative services necessary to the prudent
operation of the Partnership, such as legal, accounting, computer, transfer
agent and other services. The amounts charged to the Partnership for such
administrative services may not exceed the lesser of the General Partner's or
such Affiliates' costs or 90% of those which the Partnership would be required
to pay to independent parties for comparable services in the same or comparable
geographic locations. The Partnership reimbursed the General Partner for
$290,965, $250,276 and $252,103 of such expenses during the years ended December
31, 1999, 1998 and 1997, respectively.

Upon disposition of any property, the General Partner is entitled to a
Subordinated Disposition Fee (defined in the Partnership Agreement) in the
amount of 3% of the sales price of each property sold. However, no such
Subordinated Disposition Fees may be paid to the General Partner unless and
until the Investors and the John Hancock Limited Partner have received a return
of their total Invested Capital (defined in the Partnership Agreement) plus the
Cumulative Return on Investment (defined in the Partnership Agreement) of 12%
per annum for all fiscal years ended prior to the date of payment. Such
Subordinated Disposition Fees may not exceed 50% of the competitive real estate
commission in the area where the property is located or, together with any other
brokerage commission payable to or by any other person, exceed 6% of the
contract sales price of such property. The Partnership did not pay any such fees
to the General Partner during the years ended December 31, 1999, 1998 or 1997.

A share of the Partnership's Distributable Cash from Operations (defined in the
Partnership Agreement) may be distributed to the General Partner and the John
Hancock Limited Partner. Distributable Cash from Operations is distributable 1%
to the General Partner and the remaining 99% among the Investors, the General
Partner and the John Hancock Limited Partner, in accordance with Section 8 of
the Partnership Agreement (described more fully in Note 3 to the Financial
Statements included in Item 8 of this Report). The General Partner's Share of
Distributable Cash from Operations was $0, $14,864 and $20,727 for the years
ended December 31, 1999, 1998 and 1997, respectively. In accordance with the
Partnership Agreement, the John Hancock Limited Partner was not entitled to
receive any such distributions during the 1999, 1998 and 1997 fiscal years.

A share of Cash from Sales or Financings (defined in the Partnership Agreement)
may be distributable to the General Partner and the John Hancock Limited
Partner. Cash from Sales or Financings are distributable in accordance with
Section 8 of the Partnership Agreement (described more fully in Note 3 to the
Financial Statements included in Item 8 of this Report). The John Hancock
Limited Partner's share of Cash from Sales or Financings was $1,663,800, $0 and
$293,270 during the years ended December 31, 1999, 1998 and 1997, respectively.
In accordance with the Partnership Agreement, the General Partner was not
entitled to receive any such distributions during the years ended 1999, 1998 or
1997.

A share of the Partnership's profits or losses for tax purposes (defined in the
Partnership Agreement) is allocable to the General Partner and the John Hancock
Limited Partner. Such allocation generally approximates, insofar as practicable,
their percentage share of Distributable Cash from Operations and of Cash from
Sales or Financings. The General Partner is generally allocated 1% of the
Partnership's losses for tax purposes, while the John Hancock Limited Partner is
allocated tax losses associated with the Partnership's sales commissions funded
by the John Hancock Limited Partner's Capital Contributions. The General
Partner's share of such profits or losses, were losses of $80,523 during the
year ended December 31, 1999 and profits of $7,614 and $11,680 during the years
ended December 31, 1998 and 1997, respectively. The John Hancock Limited
Partner's share of such profits or losses were profits of $506,967 during the
year ended December 31, 1999 and losses of $41,901 and $65,297 during the years
ended December 31, 1998 and 1997, respectively.

                                       16
<PAGE>   17
ITEM 13 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)

The following table reflects compensation, fees, profits/(losses), expense
reimbursements or distributions from the Partnership to the General Partner
and/or its Affiliates:

<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                               1999              1998            1997
                                             --------          --------        --------
<S>                                        <C>               <C>              <C>
Partnership management
   fee expense ......................      $     3,019       $    53,641      $    75,176
Reimbursement for operating
   expenses .........................          290,965           250,276          252,103
General Partner's share of
   Distributable Cash from Operations               --            14,864           20,727
John Hancock Limited Partner's share
   of Cash from Sales or Financings .        1,663,800                --          293,270
General Partner's share of profits/
   (losses) for tax purposes ........          (80,253)            7,614           11,680
John Hancock Limited Partner's share
   of profits/(losses) for tax
   purposes .........................          506,967           (41,901)         (65,297)
</TABLE>


The Partnership provides indemnification to the General Partner and its
Affiliates for acts or omissions of the General Partner or its Affiliates
performed in good faith on behalf of the Partnership, subject to certain
specified exceptions, as described in the following paragraph.

The Partnership Agreement provides that 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 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.

The General Partner believes that this indemnification applies to costs incurred
in the legal proceedings described in Item 3 of Part I of this Report.
Accordingly, the Partnership indemnified the General Partner and its Affiliates
for costs of $250,183, $189,111 and $54,092 relating to such legal proceedings
in the years ended December 31, 1999, 1998 and 1997, respectively.

                                     PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      (1) and (2)   --  Listed on Index to Financial Statements and Financial
                           Statement Schedules.

         (3)           --  Listing of Exhibits

<TABLE>
<CAPTION>
    EXHIBIT NUMBER                                                                        PAGE NUMBER OR
         UNDER                                                                           INCORPORATION BY
    REGULATION S-K                 DESCRIPTION                                               REFERENCE
  ------------------             ---------------                                        -------------------
<S>                   <C>                                                               <C>
         4            Instruments defining the rights
                      of security holders

         4.1          Amended Agreement of Limited                                      Exhibit A to the
                      Partnership*                                                      final Prospectus
                                                                                        dated September 4, 1986
                                                                                        filed under the
                                                                                        Partnership's Form S-11
                                                                                        Registration Statement
                                                                                        (File 33-6451)
</TABLE>

                                       17
<PAGE>   18
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
           (CONTINUED)

<TABLE>
<S>                   <C>                                                               <C>
         4.2          The Seventeenth Amendment and                                     Exhibit 4.2 to the
                      Restatement of Certificate of                                     Partnership's Report
                      Limited Partnership filed with                                    on Form 10-K dated
                      the Massachusetts Secretary of                                    December 31, 1987
                      State on September 15, 1987*                                      (File 0-15680)

         10           Material contracts and other documents

         10.1         Form of Escrow Agreement*                                         Exhibit 10.1 to
                                                                                        the Partnership's
                                                                                        Form S-11
                                                                                        Registration Statement
                                                                                        (File 33-6451)

         10.2         Letter from John Hancock                                          Exhibit 10.1 to
                      Subsidiaries, Inc. containing                                     the Partnership's
                      undertaking as to the net                                         Form S-11
                      worth of the General Partner*                                     Registration Statement
                                                                                        (File 33-6451)

         10.3         Documents relating to
                      1300 North Dutton Avenue

              (a)     Agreement of Purchase and Sale                                    Exhibit 10.3(a) to
                      dated September 30, 1986, and                                     the Post-Effective
                      First Amendment to Agreement of                                   Amendment No. 1 to
                      Purchase and Sale dated                                           the Partnership's
                      October 22, 1986, between                                         Form S-11
                      Park Campus Associates and                                        Registration Statement
                      John Hancock Realty Income Fund                                   (File 33-6451)
                      Limited Partnership*

              (b)     Lease dated June 12, 1986, and                                    Exhibit 10.3(b) to
                      First Amendment to Lease dated                                    the Post-Effective
                      June 12, 1986, between                                            Amendment No. 1 to
                      Park Campus Associates and                                        the Partnership's
                      Mag Media Ltd.*                                                   Form S-11
                                                                                        Registration Statement
                                                                                        (File 33-6451)

              (c)     Amended and Restated Statements                                   Exhibit 10.3(c) to
                      of Development Policy and                                         the Post-Effective
                      Declarations of Restrictions of                                   Amendment No. 1 to
                      Santa Rosa Business Park dated                                    the Partnership's
                      June 5, 1986*                                                     Form S-11
                                                                                        Registration Statement
                                                                                        (File 33-6451)

              (d)     Declaration of Covenants,                                         Exhibit 10.3(d) to
                      Conditions and Restrictions of                                    the Post-Effective
                      Park Campus dated October 2,                                      Amendment No. 1 to
                      1986*                                                             the Partnership's
                                                                                        Form S-11
                                                                                        Registration Statement
                                                                                        (File 33-6451)
</TABLE>

                                       18
<PAGE>   19
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
           (CONTINUED)

<TABLE>
<S>                   <C>                                                               <C>
              (e)     Purchase and Sale Agreement                                       Exhibit 1 to the
                      between John Hancock Realty                                       Partnership's Report
                      Income Fund Limited Partnership                                   on Form 8-K dated
                      and GHB Holdings, Inc. dated                                      September 29, 1997
                      June 18, 1997                                                     (File 0-15680)

         10.4         Documents relating to
                      Marlboro Square Shopping Center

              (a)     Agreement of Purchase and Sale                                    Exhibit 10.4(a) to
                      dated January 17, 1987, between                                   the Post-Effective
                      Marlborough GLR Realty Trust                                      Amendment No. 2 to
                      and John Hancock Realty Equities,                                 the Partnership's Form S-11
                      Inc.*                                                             Registration Statement
                                                                                        (File 33-6451)

         10.5         Documents relating to
                      Crossroads Square Shopping Center

              (a)     Agreement of Purchase and Sale                                    Exhibit 1 to the
                      dated November 20, 1987, between                                  Partnership's
                      Crossroads Square Limited                                         Report on
                      Partnership and John Hancock                                      Form 8-K dated
                      Realty Income Fund Limited                                        December 8, 1987
                      Partnership*                                                      (File 0-15680)

              (b)     Limited Warranty Deed dated                                       Exhibit 2 to the
                      November 20, 1987, relating                                       Partnership's
                      to Crossroads Square Shopping                                     Report on
                      Center*                                                           Form 8-K dated
                                                                                        December 8, 1987
                                                                                        (File 0-15680)

              (c)     Master Lease Agreement                                            Exhibit 3 to the
                      dated November 18, 1987,                                          Partnership's
                      relating to Crossroads Square                                     Report on
                      Shopping Center*                                                  Form 8-K dated
                                                                                        December 8, 1987
                                                                                        (File 0-15680)

         10.6         Documents relating to Carnegie
                      Center Office/Warehouse

              (a)     Agreement of Purchase and Sale                                    Exhibit 1 to the
                      between Carnegie Properties                                       Partnership's
                      Partnership, Carnegie Properties                                  Report on
                      Partnership II and John Hancock                                   Form 8-K dated
                      Realty Income Fund Limited                                        January 22, 1988
                      Partnership*                                                      (File 0-15680)

              (b)     General Warranty Deed dated                                       Exhibit 2 to the
                      December 22, 1987, between                                        Partnership's
                      Carnegie Properties Partnership                                   Report on
                      and John Hancock Realty Income                                    Form 8-K dated
                      Fund Limited Partnership*                                         January 22, 1988
                                                                                        (File 0-15680)
</TABLE>

                                       19
<PAGE>   20
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
           (CONTINUED)

<TABLE>
<S>                   <C>                                                               <C>
              (c)     General Warranty Deed dated                                       Exhibit 3 to the
                      December 22, 1987, between                                        Partnership's
                      Carnegie Properties Partnership                                   Report on
                      II and John Hancock Realty Income                                 Form 8-K dated
                      Fund Limited Partnership*                                         January 22, 1988
                                                                                        (File 0-15680)

         10.7         Documents relating to Warner
                      Plaza Shopping Center


              (a)     Agreement of Purchase and Sale                                    Exhibit 1 to the
                      between First Republic bank                                       Partnership's
                      Dallas, N.A., and John Hancock                                    Report on
                      Realty Income Fund Limited                                        Form 8-K dated
                      Partnership*                                                      March 17, 1988
                                                                                        (File 0-15680)

              (b)     Special Warranty Deed dated                                       Exhibit 2 to the
                      February 24, 1988, between                                        Partnership's
                      First Republic bank, Dallas,                                      Report on
                      N.A., and John Hancock                                            Form 8-K dated
                      Realty Income Fund Limited                                        March 17, 1988
                      Partnership*                                                      (File 0-15680)

         10.8         Documents relating to
                      J.C. Penney Credit Operations
                      Center

              (a)     Agreement of Purchase and Sale                                    Exhibit 1 to the
                      between Noro-Rocky Mountains                                      Partnership's
                      B.V., a Netherlands Corporation,                                  Report on
                      and John Hancock Realty Income                                    Form 8-K dated
                      Fund Limited Partnership*                                         November 17, 1988
                                                                                        (File 0-15680)

              (b)     Warranty and Guaranty dated                                       Exhibit 2 to the
                      August 18, 1988, between                                          Partnership's
                      Noro-Rocky Mountains                                              Report on
                      B.V., a Netherlands Corporation,                                  Form 8-K dated
                      and John Hancock Realty Income                                    November 17, 1988
                      Fund Limited Partnership*                                         (File 0-15680)

              (c)     Purchase and Sale Agreement                                       Exhibit 1 to the
                      between John Hancock Realty                                       Partnership's Report
                      Income Fund Limited Partnership                                   on Form 8-K dated
                      and 4580 Paradise Blvd.                                           December 29, 1995
                      Associates Limited Partnership                                    (File 0-15680)
                      dated November 20, 1995*

         10.9         Documents relating to
                      Management Agreement

              (a)     Management Agreement dated                                        Exhibit 10.9(a) to the
                      January 1, 1992, between                                          Partnership's Report on
                      Hancock Realty Investors                                          Form 10-K dated
                      Incorporated and John Hancock                                     December 31, 1992
                      Realty Equities, Inc.*                                            (File 0-15680)

</TABLE>

                                       20
<PAGE>   21
ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
           (CONTINUED)

<TABLE>
<S>                   <C>                                                               <C>
              (b)     Agreement Concerning Subcontracting                               Exhibit 10.9(b) to the
                      of Management Services Pertaining to                              Partnership's Report on
                      John Hancock Realty Income Fund                                   Form 10-K dated
                      Limited Partnership dated May 28, 1993                            December 31, 1993
                      between John Hancock Realty Equities,                             (File 0-15680)
                      Inc., Hancock Realty Investors,
                      Incorporated and John Hancock Mutual
                      Life Insurance Company*


         10.10        Documents relating to Executive
                      Compensation Plans and Arrangements

              (a)     Amended Agreement of                                              Exhibit A to the Final
                      Limited Partnership*                                              Prospectus dated
                                                                                        September 4, 1986,
                                                                                        filed under the
                                                                                        Partnership's Form
                                                                                        S-11 Registration
                                                                                        Statement (File
                                                                                        33-6451)
</TABLE>

(b) No reports on Form 8-K were filed during the quarter ended December 31,
1999.

(c)    Exhibits - See Item 14 (a) (3) of this Report.

(d) Financial Statement Schedules - The response to this portion of Item 14 is
submitted as a separate section of this Report commencing on Page F-15.

---------------------
     +Filed herewith
     *Incorporated by reference

                                       21
<PAGE>   22
                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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 30th day of March,
2000.


                                     JOHN HANCOCK REALTY INCOME FUND
                                     LIMITED PARTNERSHIP


                                     By:  John Hancock Realty Equities, Inc.
                                          General Partner


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


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 30th day of March, 2000.

<TABLE>
<CAPTION>
           Signatures                                  Title
         --------------                              ---------
<S>                                    <C>

      /s/ John M. Garrison             President (Principal Executive Officer) and
-------------------------------------  Director of John Hancock Realty Equities,
          John M. Garrison             Inc. (General Partner of Registrant)





     /s/ Virginia H. Lomasney          Treasurer (Chief Accounting Officer) of
-------------------------------------  John Hancock Realty Equities, Inc.
         Virginia H. Lomasney          (General Partner of Registrant)





   /s/ Malcolm G. Pittman, III         Director of John Hancock Realty Equities,
-------------------------------------  Inc. (General Partner of Registrant)
       Malcolm G. Pittman, III




      /s/ Susan M. Shephard            Director of John Hancock Realty Equities,
-------------------------------------  Inc. (General Partner of Registrant)
          Susan M. Shephard
</TABLE>

                                       22
<PAGE>   23
                           ANNUAL REPORT ON FORM 10-K



                  ITEM 8, ITEM 14 (a) (1) AND (2), (c) AND (d)


                          INDEX TO FINANCIAL STATEMENTS


                              FINANCIAL STATEMENTS


                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP



                              BOSTON, MASSACHUSETTS


                                      F-1
<PAGE>   24
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                         (ITEMS 8 AND 14(a)(1) AND (2))


<TABLE>
<CAPTION>
                                                                                        Page
<S>                                                                                     <C>
1.   Financial Statements

         Report of Independent Auditors                                                  F-3

         Balance Sheets at December 31, 1999 and 1998                                    F-4

         Statements of Operations for the Years Ended
         December 31, 1999, 1998 and 1997                                                F-5

         Statements of Partners' Equity for the Years Ended
         December 31, 1999, 1998 and 1997                                                F-6

         Statements of Cash Flows for the Years Ended
         December 31, 1999, 1998 and 1997                                                F-7

         Notes to Financial Statements                                                   F-8

2.       Financial Statement Schedules

         Schedule III:  Real Estate and Accumulated Depreciation                         S-1
</TABLE>


All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.

                                      F-2
<PAGE>   25
                         Report of Independent Auditors



To the Partners
John Hancock Realty Income Fund Limited Partnership

We have audited the accompanying balance sheets of John Hancock Realty Income
Fund Limited Partnership (the "Partnership") as of December 31, 1999 and 1998,
and the related statements of operations, partners' equity and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial position referred to above present fairly, in all
material respects, the financial position of John Hancock Realty Income Fund
Limited Partnership at December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information set forth
therein.



                                         ERNST & YOUNG LLP

Boston, Massachusetts
February 7, 2000, except for
  Note 7, as to which the
  date is February 18, 2000


                                      F-3

<PAGE>   26
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>


                                                                                               DECEMBER 31,
                                                                                          1999              1998
                                                                                          ----              ----
<S>                                                                                     <C>              <C>
Cash and cash equivalents                                                               $ 2,476,260      $ 2,055,017
Restricted cash                                                                                --             63,879
Other assets                                                                                   --             77,433

Property held for sale                                                                         --         18,829,684
                                                                                        -----------      -----------

       Total assets                                                                     $ 2,476,260      $21,026,013
                                                                                        ===========      ===========


                                           LIABILITIES AND PARTNERS' EQUITY

Liabilities:

Accounts payable and accrued expenses                                                   $   266,759      $   309,631
Accounts payable to affiliates                                                              480,542          316,299
                                                                                        -----------      -----------
       Total liabilities                                                                    747,301          625,930

Partners' equity/(deficit):

   General Partner's deficit                                                               (239,991)        (253,231)
   Limited Partners' equity                                                               1,968,950       20,653,314
                                                                                        -----------      -----------

       Total partners' equity                                                             1,728,959       20,400,083
                                                                                        -----------      -----------

       Total liabilities and partners' equity                                           $ 2,476,260      $21,026,013
                                                                                        ===========      ===========
</TABLE>



                        See Notes to Financial Statements



                                      F-4
<PAGE>   27
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                 1999            1998            1997
                                                 ----            ----            ----
Income:
<S>                                           <C>             <C>             <C>
     Rental income                            $  886,432      $2,544,074      $2,861,166
     Interest income                             246,789         100,005         107,469
     Gain/(loss) on sale of property           1,320,277              --          (5,321)
                                              ----------      ----------      ----------

       Total income                            2,453,498       2,644,079       2,963,314
Expenses:

     Depreciation                                     --         372,850         667,869
     Property operating expenses                 137,454         395,257         396,136
     General and administrative expenses         909,505         708,821         384,727
     Amortization of deferred expenses                --          63,358         134,503
     Management fee                                3,019          53,641          75,176
     Property write-downs                             --              --         668,520
                                              ----------      ----------      ----------

       Total expenses                          1,049,978       1,593,927       2,326,931
                                              ----------      ----------      ----------

       Net income                             $1,403,520      $1,050,152      $  636,383
                                              ==========      ==========      ==========


Allocation of net income/(loss):

     General Partner                          $   14,035      $   10,502      $    6,364
     John Hancock Limited Partner                180,286         (16,927)       (141,179)
     Investors                                 1,209,199       1,056,577         771,198
                                              ----------      ----------      ----------
                                              $1,403,520      $1,050,152      $  636,383
                                              ==========      ==========      ==========

Net income per Unit                           $    13.19      $    11.53      $     8.41
                                              ==========      ==========      ==========
</TABLE>





                        See Notes to Financial Statements



                                      F-5
<PAGE>   28
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                         STATEMENTS OF PARTNERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



<TABLE>
<CAPTION>
                                                               GENERAL              LIMITED
                                                               PARTNER             PARTNERS                TOTAL
<S>                                                           <C>                 <C>                   <C>
Partners' equity/(deficit) at January 1, 1997
   (91,647 Units outstanding)                                 ($230,844)          $25,156,986           $24,926,142

Less:     Cash distributions                                    (20,848)           (4,190,101)           (4,210,949)

Add:      Net income                                              6,364               630,019               636,383
                                                             ----------         -------------         -------------

Partners' equity/(deficit) at December 31, 1997
   (91,647 Units outstanding)                                  (245,328)           21,596,904            21,351,576

Less:     Cash distributions                                    (18,405)           (1,983,240)           (2,001,645)

Add:      Net income                                             10,502             1,039,650             1,050,152
                                                            -----------          ------------         -------------

Partners' equity/(deficit) at December 31, 1998
   (91,647 Units outstanding)                                  (253,231)           20,653,314            20,400,083

Less:     Cash distributions                                       (795)          (20,073,849)          (20,074,644)

Add:      Net Income                                               14,035            1,389,485            1,403,520
                                                             ------------          -----------            ---------

Partners' equity/(deficit) at December 31, 1999
   (91,647 Units outstanding)                                 ($239,991)           $1,968,950           $ 1,728,959
                                                              ==========           ==========           ===========
</TABLE>


                        See Notes to Financial Statements



                                      F-6
<PAGE>   29
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                             YEARS ENDED DECEMBER 31,
                                                                                 1999             1998             1997
                                                                                 ----             ----             ----


Operating activities:

<S>                                                                           <C>              <C>              <C>
Net income                                                                    $ 1,403,520      $ 1,050,152      $   636,383
   Adjustments to reconcile net income to net cash provided by operating
   activities:

      Amortization of deferred expenses                                                --           63,358          134,503
      Depreciation                                                                     --          372,850          667,869
      Property write-downs                                                             --               --          668,520
      (Gain)/loss on sale of property                                          (1,320,277)              --            5,321
                                                                              -----------      -----------      -----------
                                                                                   83,243        1,486,360        2,112,596
   Changes in operating assets and liabilities:
      Decrease/(increase) in restricted cash                                       63,879           (5,479)             732
      (Increase)/decrease in other assets                                          77,433           13,383          (11,817)
      (Decrease)/increase in accounts payable and
         accrued expenses                                                         (42,872)          46,235          (76,691)
      Increase in accounts payable
         to affiliates                                                            164,243          165,392           41,946
                                                                              -----------      -----------      -----------

           Net cash provided by operating activities                              345,926        1,705,891        2,066,766

Investing activities:

   Proceeds from sale of property                                              20,172,395               --        2,673,278
   Increase in deferred expenses                                                  (22,434)        (152,073)        (224,098)
                                                                              -----------      -----------      -----------

           Net cash (used in)/provided by investing activities                 20,149,961         (152,073)       2,449,180

Financing activities:

   Cash distributed to Partners                                                (20,074,644)     (2,001,645)      (4,210,949)
                                                                              -----------      -----------      -----------

           Net cash used in financing activities                               (20,074,644)     (2,001,645)      (4,210,949)
                                                                              ------------     -----------      -----------

           Net increase/(decrease) in cash and
               cash equivalents                                                    421,243        (447,827)         304,997

           Cash and cash equivalents at
               beginning of year                                                 2,055,017        2,502,844        2,197,847
                                                                               -----------      -----------      -----------

           Cash and cash equivalents at
               end of year                                                    $  2,476,260      $ 2,055,017      $ 2,502,844
                                                                              ============      ===========      ===========
</TABLE>




                        See Notes to Financial Statements




                                      F-7
<PAGE>   30
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS

1.   ORGANIZATION OF PARTNERSHIP

         John Hancock Realty Income Fund Limited Partnership (the "Partnership")
         was formed under the Massachusetts Uniform Limited Partnership Act on
         June 12, 1986. As of December 31, 1999, 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"); and 3,615 Investor Limited Partners (the "Investors"),
         owning 91,647 Units of Investor Limited Partnership Interests (the
         "Units"). The John Hancock Limited Partner and the Investors are
         collectively referred to as the Limited Partners. The initial capital
         of the Partnership was $2,000, representing capital contributions of
         $1,000 from 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 100,000 Units of Limited Partnership Interests at $500 per unit.
         During the offering period, which terminated on September 9, 1987,
         91,647 Units were sold and the John Hancock Limited Partner made
         additional capital contributions of $7,330,760. There have been no
         changes in the number of Units outstanding subsequent to the
         termination of the offering period.

         The Partnership is engaged in the business of acquiring, improving,
         holding for investment and disposing of existing, income-producing,
         commercial and industrial properties on an all-cash basis, free and
         clear of mortgage indebtedness. 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, 2016, 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 properties of the
         Partnership will be disposed of, and the Partnership terminated, before
         December 31, 2016.

         As initially stated in its Prospectus, it was expected that the
         Partnership would be dissolved upon the sale of its last remaining
         property, which at that time was expected to be within seven to ten
         years following the date such property was acquired by the Partnership.
         During 1999 the Partnership sold the last four properties in its
         portfolio resulting in the termination of the operations of the
         Partnership. The Partnership will be dissolved in accordance with the
         terms of the Partnership Agreement, as soon as reasonably practicable.

2.   SIGNIFICANT ACCOUNTING POLICIES

         The Partnership maintains its accounting records and recognizes rental
         revenue on the accrual basis.

         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.

         Cash equivalents are highly liquid investments with original 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 and other escrows.

         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 cost, 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 values. Cost includes the initial
         purchase price of the property plus acquisition costs and the cost of
         significant improvements.



                                      F-8
<PAGE>   31
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         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.

         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. Property held for sale
         is not depreciated.

         Deferred expenses relating to tenant improvements and lease commissions
         are amortized on a straight-line basis over the terms of the leases to
         which they relate. 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 four and one-half years, the then estimated remaining
         life of the Partnership.

         The net income per Unit for each year is computed by dividing the
         Investors' share of net income by the number of Units outstanding
         during each year.

         No provision for income taxes has been made in the financial statements
         as such taxes are the responsibility of the individual partners and not
         of the Partnership.

3.       THE PARTNERSHIP AGREEMENT

         Distributable Cash from Operations (defined in the Partnership
         Agreement) is distributed 99% to the Limited Partners and 1% to the
         General Partner. The Limited Partners' share of Distributable Cash from
         Operations is distributed as follows: 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 John Hancock Limited Partner until it receives a 7%
         non-cumulative, non-compounded annual cash return on its Invested
         Capital; and third, to the Investors and the John Hancock Limited
         Partner in proportion to their respective Capital Contributions
         (defined in the Partnership Agreement). However, any Distributable Cash
         from Operations which is available as a result of the reduction of
         working capital reserves funded by Capital Contributions of the
         Investors will be distributed 100% to the Investors.

         Cash from Sales or Financings (defined in the Partnership Agreement) is
         first used to pay all debts and liabilities of the Partnership then due
         and is then used to fund any reserves for contingent liabilities. Cash
         from Sales or Financings is then distributed as follows: first, to the
         Limited Partners until they receive an amount equal to their Invested
         Capital with the distribution being made between the Investors and the
         John Hancock Limited Partner in proportion to their respective Capital
         Contributions; second, to the Investors until they have received, with
         respect to all previous distributions during the year, their Cumulative
         Return on Investment (defined in the Partnership Agreement); third, to
         the John Hancock Limited Partner until it has received, with respect to
         all previous distributions during the year, its Cumulative Return on
         Investment; fourth, to the General Partner to pay any Subordinated
         Disposition Fees (defined in the Partnership Agreement); and fifth, 99%
         to the Limited Partners and 1% to the General Partner, with the
         distribution being made between the Investors and the John Hancock
         Limited Partner in proportion to their respective Capital
         Contributions.

         Cash from the sale of the last of the Partnership's properties is to be
         distributed in the same manner as Cash from Sales or Financings, 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 or Financings, as specified in the
         previous paragraph.



                                      F-9
<PAGE>   32
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.   THE PARTNERSHIP AGREEMENT (CONTINUED)

         Profits from the normal operations of the Partnership for each fiscal
         year are allocated to the Limited Partners and General Partner 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, they are allocated in proportion to the amounts of Distributable
         Cash from Operations for that year. If such profits are greater than
         Distributable Cash from Operations for any year, they are allocated 99%
         to the Limited Partners and 1% to the General Partner, with the
         allocation made between the John Hancock Limited Partner and the
         Investors in proportion to their respective Capital Contributions.
         Losses from the normal operations of the Partnership are allocated 99%
         to the Limited Partners and 1% to the General Partner, with the
         allocation made between the John Hancock Limited Partner and the
         Investors in proportion to their respective Capital Contributions.
         Depreciation deductions are allocated 1% to the General Partner and 99%
         to the Investors, and not to the John Hancock Limited Partner.

         Profits and Losses from Sales or Financings are generally allocated 99%
         to the Limited Partners and 1% to the General Partners. In connection
         with the sale of the last of the Partnership's properties, and
         therefore the dissolution of the Partnership, profits will be allocated
         to any Partners having a deficit balance in their Capital Account in an
         amount equal to the deficit balance. Any remaining profits will be
         allocated in the same order as cash from the sale would be distributed.

         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 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.
         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 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.



                                      F-10
<PAGE>   33
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


4.   PROPERTY HELD FOR SALE

         During 1998, the Marlboro Square Shopping Center, Crossroads Square
         Shopping Center, Carnegie Center Office/Warehouse and Warner Plaza
         Shopping Center were listed for sale. Accordingly, these properties
         were classified as "Property Held for Sale" on the Balance Sheet at
         December 31, 1998 at their carrying values, which were not in excess of
         their estimated fair values, less selling costs.


         Property held for sale consists of commercial real estate as follows:

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                              1998
                                                                              ----
<S>                                                                    <C>
           Marlboro Square Shopping Center                              $    989,981
           Crossroads Square Shopping Center                               9,070,837
           Carnegie Center Office/Warehouse                                3,763,285
           Warner Plaza Shopping Center                                    5,005,581
                                                                        ------------
                  Total                                                  $18,829,684
                                                                         ===========
</TABLE>

         On January 7, 1999, the Partnership sold the Carnegie Center to a
         non-affiliated buyer for a net sales price of $4,096,441, 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 $333,156, representing the difference between the
         net sales price and the property's carrying value of $3,763,285.

         On March 17, 1999, the Partnership sold the Marlboro Square Shopping
         Center to a non-affiliated buyer for a net sales price of $1,131,999,
         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 $142,018, representing the difference between
         the net sales price and the property's carrying value of $989,981.

         On March 18, 1999, the Partnership sold the Warner Plaza Shopping
         Center to a non-affiliated buyer for a net sales price of $6,210,535,
         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 $1,202,254, representing the difference between
         the net sales price and the property's carrying value of $5,008,281.

         On July 13, 1999, the Partnership sold the Crossroads Square Shopping
         Center to a non-affiliated buyer for a net sales price of $8,733,420,
         after deductions for commissions and selling expenses incurred in
         connection with the sale of the property. This transaction resulted in
         a non-recurring loss of $357,151, representing the difference between
         the net sales price and the property's carrying value of $9,090,571.



                                      F-11
<PAGE>   34
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)


5.   TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES

         Fees and expenses incurred or paid by the General Partner or its
         affiliates on behalf of the Partnership and to which the General
         Partner or its affiliates are entitled to reimbursement from the
         Partnership were as follows:

<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                   1999                1998               1997
                                                                                   ----                ----               ----
<S>                                                                             <C>              <C>                    <C>
           Reimbursement for operating expenses                                 $290,965         $   250,276            $252,103
           Partnership management fee expense                                      3,019              53,641              75,176
                                                                               ---------              ------              ------

                  Total                                                         $293,984          $  303,917            $327,279
                                                                                ========          ==========            ========
</TABLE>


         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 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 legal
         proceedings described in Note 7. Accordingly, included in the
         Statements of Operations for the years ended December 31, 1999, 1998,
         and 1997 were $250,183, $189,111, and $54,092, respectively,
         representing the Partnership's share of costs incurred by the General
         Partner and its Affiliates relating to such legal proceedings. As of
         December 31, 1999, the Partnership has incurred a total of $534,861 as
         its share of the costs incurred by the General Partner and its
         Affiliates resulting from these matters.

         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
         as General Partner of 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.



                                      F-12
<PAGE>   35
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6.   FEDERAL INCOME TAXES

         A reconciliation of the net (loss)/income reported in the Statements of
         Operations to the net income reported for federal income tax purposes
         is as follows:

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                            1999              1998            1997
                                                            ----              ----            ----
<S>                                                     <C>               <C>              <C>
Net income/(loss) per Statements of Operations          $ 1,403,520       $ 1,050,152      $   636,383

Add/(deduct):      Excess of book gain over tax
                     gain on disposition of assets       (9,197,379)              --          (131,409)
                   Excess of tax depreciation
                     over book depreciation                (258,378)        (385,605)         (162,002)
                   Excess of book amortization
                     over tax amortization                   (6,945)            6,222           44,071
                   Other income/(loss)                           --             7,774            2,573
                   Impairment write-down                         --                --          668,520
                   Other expenses                             6,885            82,853          109,854
                                                        -----------       -----------      -----------

Net income/(loss) for federal income tax purposes       ($8,052,297)      $   761,396      $ 1,167,990
                                                        ===========       ===========      ===========
</TABLE>


7.   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 a
         limited partnership affiliated with 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. 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 have 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 that was preliminarily approved by the court on
         November 10, 1999 and finally approved by the court on December 22,
         1999. Under the terms of the settlement, the defendants have guaranteed
         certain minimum returns to class members on their investments and paid
         fees and expenses to class counsel in an amount determined by the court
         to be $1.5 million. Payments under the settlement agreement will have
         no financial impact on 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 John Hancock Realty Income Fund-II Limited Partnership
         ("RIF-II"), a limited partnership affiliated with the Partnership. The
         complaint named the General Partner as a defendant. The plaintiff
         sought unspecified damages that 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
         RIF-II. 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.



                                      F-13
<PAGE>   36
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7.   CONTINGENCIES (CONTINUED)

         In 1998, the plaintiff amended the complaint to name the Partnership
         and RIF-II as defendants. As a result of the defendants' demurrer
         (motion to dismiss), in May 1998 plaintiff's additional claims for
         tortuous 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 RIF II, leaving only the breach of
         contract and breach of fiduciary duty claims involving the Partnership.
         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 commenced its own action against
         the plaintiff seeking the court's declaration that the claims that
         remained on the eve of trial were without merit and seeking to bar and
         plaintiff from attempting to assert those claims at a later date. The
         parties commenced settlement discussions, which resulted in a
         settlement agreement on February 18, 2000 terminating all litigation
         between the parties. The settlement will not have a material adverse
         impact on the Fund's financial position.

         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 an aggregate of approximately $1,359,909
         in legal expenses in connection with these legal proceedings. Of this
         amount, approximately $825,046 relates to the Partnership's own defense
         and approximately $534,861 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 Financial Statements, taken as a
         whole. Accordingly, no provision for any liability which 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.

         During August 1998, the General Partner became aware that the
         Crossroads Square Shopping Center was environmentally contaminated with
         certain hazardous materials. The General Partner then sought to
         determine the scope of the contamination and to determine the impact on
         the future operating costs, repair and maintenance expenses and market
         value of the property. The General Partner estimated that to remediate
         the contamination would cost approximately $450,000. The Partnership
         sold the property on July 13, 1999 to a non-affiliated buyer for a net
         sales price of $8,733,420 after deductions for commissions and selling
         expenses incurred in connection with the sale of the property. The sale
         was not contingent upon the environmental issues, the costs of which
         were factored into the purchase price by the buyer. The General Partner
         has no reason to believe, as of the date of this report, that the
         Partnership will be held responsible for any further environmental
         costs associated with this property. No assurances can be given that no
         environmental liabilities will arise in the future.


                                      F-14
<PAGE>   37
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                                  SCHEDULE III

                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                          YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                     Costs Capitalized
                                    Initial Costs to   Subsequent to
                                       Partnership      Acquisition
                                       -----------      -----------

                                       Buildings
                                       and
Description     Encumbrances   Land    Improvements    Improvements
-----------     ------------   ----    ------------    ------------
<S>            <C>            <C>      <C>             <C>

</TABLE>


<TABLE>
<CAPTION>
        Gross Amount
    At Which Carried
   at Close of Period                                                                      Life on Which
   ------------------
                                                                                                             Depreciation in
                    Buildings                                                                                Latest Statement
                       and                       Accumulated               Date of            Date           of Operations
     Land          Improvements      Total     Depreciation (1)          Construction        Acquired          is Computed
     ----          ------------      ------    ----------------          ------------        --------          -----------

<S>                <C>               <C>       <C>                       <C>              <C>                <C>






</TABLE>


There are no real estate investments owned as of December 31, 1999.


(1)    Reconciliation of Real Estate and Accumulated Depreciation

<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                             1999                 1998                   1997
                                                                             ----                 ----                   ----
Investment in Real Estate

<S>                                                                          <C>          <C>                         <C>
   Balance at beginning of year                                                -             $ 23,540,809             $ 24,189,939
   Dispositions                                                                -                       --                       --
   Reduction of carrying value, including leasing costs                                                --                 (649,130)
   Property held for sale                                                      -              (23,540,809)                      --
   Improvements                                                                -                       --                       --
                                                                               -             ------------             ------------
                                                                               -             $         --             $ 23,540,809
                                                                               =             ============             ============
Accumulated Depreciation

   Balance at beginning of year                                                -             $  4,787,156             $  4,214,134
   Additions charged to costs and expenses                                     -                  372,850                  667,869
   Reduction of carrying value                                                 -                       --                  (94,847)
   Property held for sale                                                      -               (5,160,006)                      --
   Dispositions                                                                -                       --                       --
                                                                               -             ------------             ------------
   Balance at end of year                                                      -             $         --             $  4,787,156
                                                                               =             ============             ============
</TABLE>



                                      S-1