<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED    JUNE 30, 1998
                               ------------------------------------------------

                                       OR

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

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

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

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

         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)

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

                                       N/A
--------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
                                     REPORT)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                         Yes  X   No
                             ---     ---


<PAGE>   2


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

                                      INDEX

PART I:  FINANCIAL INFORMATION                                             PAGE

    Item 1 - Financial Statements:

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

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

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

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

             Notes to Financial Statements                                 7-12

    Item 2 - Management's Discussion and Analysis of
             Financial Condition and Results of Operations                13-18

PART II: OTHER INFORMATION                                                   19


<PAGE>   3


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

                          PART I: FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                                 BALANCE SHEETS
                                   (UNAUDITED)

                                     ASSETS


<TABLE>
<CAPTION>

                                                                  JUNE 30,          DECEMBER 31,
                                                                   1998                1997
                                                                   ----                ----
<S>                                                            <C>                 <C>         
Cash and cash equivalents                                      $  2,406,906        $  2,502,844
Restricted cash                                                      59,400              58,400
Other assets                                                        225,816              90,816

Deferred expenses, net of accumulated
   amortization of $375,217 in 1998 and
   $329,823 in 1997                                                 384,683             360,166

Investment in property:

   Land                                                           6,198,330           6,198,330
   Buildings and improvements                                    17,342,479          17,342,479
                                                               ------------        ------------
                                                                 23,540,809          23,540,809
   Less:   accumulated depreciation                              (5,102,522)         (4,787,156)
                                                               ------------        ------------
                                                                 18,438,287          18,753,653
                                                               ------------        ------------

        Total assets                                           $ 21,515,092        $ 21,765,879
                                                               ============        ============

                       LIABILITIES AND PARTNERS' EQUITY

Liabilities:

Accounts payable and accrued expenses                          $    368,381        $    263,396
Accounts payable to affiliates                                      231,561             150,907
                                                               ------------        ------------
        Total liabilities                                           599,942             414,303

Partners' equity/(deficit):

   General Partners' deficit                                       (249,692)           (245,328)
   Limited Partners' equity                                      21,164,842          21,596,904
                                                               ------------        ------------

        Total partners' equity                                   20,915,150          21,351,576
                                                               ------------        ------------

        Total liabilities and partners' equity                 $ 21,515,092        $ 21,765,879
                                                               ============        ============
</TABLE>


                        See Notes to Financial Statements


                                       3


<PAGE>   4


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

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                          JUNE 30,                           JUNE 30,
                                                   1998             1997              1998               1997
                                                   ----             ----              ----               ----
<S>                                             <C>              <C>              <C>                <C>        
Income:

      Rental income                             $ 637,264        $ 741,803        $ 1,273,319        $ 1,442,396
      Interest income                              23,693           21,276             49,760             43,802
                                                ---------        ---------        -----------        -----------

        Total income                              660,957          763,079          1,323,079          1,486,198

Expenses:

      Depreciation                                157,901          164,929            315,366            338,012
      General and administrative expenses         145,424           76,956            216,996            206,610
      Property operating expenses                  79,270          115,578            140,790            199,214
      Amortization of deferred expenses            25,451           30,804             45,394             60,123
      Management fee                               15,705           18,869             33,768             37,772
                                                ---------        ---------        -----------        -----------

        Total expenses                            423,751          407,136            752,314            841,731
                                                ---------        ---------        -----------        -----------

        Net income/(loss)                       $ 237,206        $ 355,943        $   570,765        $   644,467
                                                =========        =========        ===========        ===========


Allocation of net income/(loss):

      General Partner                           $   2,373        $   3,560        $     5,708        $     6,445
      John Hancock Limited Partner                 (6,991)         (12,291)           (13,982)           (24,582)
      Investors                                   241,824          364,674            579,039            662,604
                                                ---------        ---------        -----------        -----------
                                                $ 237,206        $ 355,943        $   570,765        $   644,467
                                                =========        =========        ===========        ===========

Net income/(loss) per Unit                      $    2.64        $    3.98        $      6.32        $      7.23
                                                =========        =========        ===========        ===========
</TABLE>


                        See Notes to Financial Statements


                                       4


<PAGE>   5


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

                         STATEMENTS OF PARTNERS' EQUITY
                                   (UNAUDITED)

                       SIX MONTHS ENDED JUNE 30, 1998 AND
                          YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>

                                                       GENERAL            LIMITED
                                                       PARTNER            PARTNERS            TOTAL
                                                       -------            --------            -----

<S>                                                   <C>              <C>                 <C>         
Partners' equity/(deficit) at January 1, 1997
   (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                                (10,072)           (997,119)         (1,007,191)

Add:  Net income                                          5,708             565,057             570,765
                                                      ---------        ------------        ------------

Partners' equity/(deficit) at June 30, 1998
   (91,647 Units outstanding)                         ($249,692)       $ 21,164,842        $ 20,915,150
                                                      =========        ============        ============
</TABLE>

                        See Notes to Financial Statements


                                       5


<PAGE>   6


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

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                                         SIX MONTHS ENDED
                                                                             JUNE 30,
                                                                     1998               1997
                                                                     ----               ----
<S>                                                              <C>                <C>        
Operating activities:

   Net income/(loss)                                             $   570,765        $   644,467

   Adjustments to reconcile net income/(loss) to net
   cash provided by operating activities:

       Depreciation                                                  315,366            338,012
       Amortization of deferred expenses                              45,394             60,123
                                                                 -----------        -----------

                                                                     931,525          1,042,602
   Changes in operating assets and liabilities:
       Increase in restricted cash                                    (1,000)            (2,633)
       (Increase) in other assets                                   (135,000)          (113,370)
       Increase/(decrease) in accounts payable and accrued
           expenses                                                  104,985            (50,361)
       Increase in accounts payable to affiliates                     80,654             36,447
                                                                 -----------        -----------

             Net cash provided by operating activities               981,164            912,685

Investing activities:

   Increase in deferred expenses                                     (69,911)           (90,890)
                                                                 -----------        -----------

             Net cash used in investing activities                   (69,911)           (90,890)

Financing activities:

   Cash distributed to Partners                                   (1,007,191)        (1,042,369)
                                                                 -----------        -----------

             Net cash used in financing activities                (1,007,191)        (1,042,369)
                                                                 -----------        -----------

             Net decrease in cash and cash
                 equivalents                                         (95,938)          (220,574)

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

             Cash and cash equivalents at
                 end of period                                   $ 2,406,906        $ 1,977,273
                                                                 ===========        ===========
</TABLE>


                        See Notes to Financial Statements


                                       6


<PAGE>   7


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


                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

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 June 30, 1998, 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 3,818 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.

2.      SIGNIFICANT ACCOUNTING POLICIES

           The accompanying unaudited financial statements have been prepared in
           accordance with generally accepted accounting principles for interim
           financial information and with the instructions to Form 10-Q and Rule
           10-01 of Regulation S-X. Accordingly, they do not include all of the
           information and footnotes required by generally accepted accounting
           principles for complete financial statements. In the opinion of
           management, all adjustments (consisting of normal recurring accruals)
           considered necessary for a fair presentation have been included.
           Operating results for the six-month period ended June 30, 1998 are
           not necessarily indicative of the results that may be expected for
           the year ending December 31, 1998. For further information, refer to
           the financial statements and footnotes thereto included in the
           Partnership's Annual Report on Form 10-K for the year ended December
           31, 1997.

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

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


                                       7


<PAGE>   8


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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

2.      SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

           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.

           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 the periods hereof are computed by
           dividing the Investors' share of net income by the number of Units
           outstanding at the end of such periods.

           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.


                                       8


<PAGE>   9


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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

3.      THE PARTNERSHIP AGREEMENT (CONTINUED)

           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.

           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.


                                       9


<PAGE>   10


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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

4.      INVESTMENT IN PROPERTY

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

                                                      June 30, 1998    December 31, 1997
                                                      -------------    -----------------

<S>                                                    <C>               <C>        
               Marlboro Square Shopping Center         $ 1,000,000       $ 1,000,000
               Crossroads Square Shopping Center        12,266,920        12,266,920
               Carnegie Center Office/Warehouse          3,800,000         3,800,000
               Warner Plaza Shopping Center              6,473,889         6,473,889
                                                       -----------       -----------

                              Total                    $23,540,809       $23,540,809
                                                       ===========       ===========
</TABLE>

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

5.      DEFERRED EXPENSES

           Deferred expenses consist of the following:
<TABLE>
<CAPTION>
                                                                        Unamortized    Unamortized
                                                                         Balance at     Balance at
                             Description                               June 30, 1998 December 31, 1997
                             -----------                               ------------- -----------------
<S>                                                                       <C>            <C>    
               $496,449 of tenant improvements.  These amounts
               are amortized over the terms of the leases to which
               they relate                                                243,845        221,699

               $263,451 of lease commissions.  These amounts
               are amortized over the terms of the leases to which
               they relate                                                140,838        138,467
                                                                         --------       --------
                                                                         $384,683       $360,166
                                                                         ========       ========
</TABLE>


                                       10


<PAGE>   11


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

6.      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>
                                                                    Six Months Ended
                                                                        June 30,
                                                               1998                  1997
                                                               ----                  ----
<S>                                                           <C>                  <C>     
                Reimbursement for operating expenses          $60,812              $162,973
                Partnership management fee expense             34,258                37,772
                                                              -------              --------
                                                              $95,070              $200,745
                                                              =======              ========
</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 in
           good faith on behalf of the Partnership, except for acts or omissions
           constituting fraud, negligence, misconduct or breach of fiduciary
           duty. The General Partner believes that this indemnification applies
           to the class action complaint described in Note 8. Accordingly,
           included in the Statements of Operations for the six months ended
           June 30, 1998 and 1997 is $58,302 and $38,173, respectively,
           representing the Partnership's share of costs incurred by the General
           Partner and its Affiliates relating to the class action complaint.
           Through June 30, 1998, the Partnership has accrued a total of
           $135,463 as its share of the costs incurred by the General Partner
           and its Affiliates resulting from this matter.

           Accounts payable to affiliates represents amounts due to the General
           Partner or its Affiliates for various services provided to the
           Partnership, including amounts to indemnify the General Partner or
           its Affiliates for claims incurred by them in connection with their
           actions 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.

7.         FEDERAL INCOME TAXES

           A reconciliation of the net income reported on the Statements of
           Operations to the net income reported for federal income tax purposes
           is as follows:
<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                             June 30,
                                                                    1998                 1997
                                                                    ----                 ----
<S>                                                               <C>                  <C>     
                Net income per Statements of Operations           $583,779             $644,467

                Add/(deduct): Excess of tax depreciation
                                over book depreciation             (49,078)             (94,766)
                              Excess of book amortization
                                over tax amortization               20,044                8,093
                                                                  --------             --------

                Net income for federal income tax purposes        $554,745             $557,794
                                                                  ========             ========
</TABLE>


                                       11


<PAGE>   12


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

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

8.         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 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 $338,000
           in legal expenses in connection with the class action lawsuit (see
           Part l, Item 3 of this Report). Of this amount, approximately
           $203,000 relates to the Partnership's own defense and approximately
           $135,000 relates to the indemnification of the General Partner and
           its Affiliates for their defense. These expenses are funded from the
           operations of the Partnership.

           At the present time, the General Partner can not estimate the
           aggregate amount of legal expenses and 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 the estimate potential damages, they could possible be
           material.



                                       12


<PAGE>   13


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


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

GENERAL

During the offering period from 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. The Partnership's properties are described more fully in Note 4 to the
Financial Statements included in Item 1 of this Report.

IMPACT OF YEAR 2000

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

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

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

FORWARD-LOOKING STATEMENTS

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

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

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


                                       13


<PAGE>   14


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


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

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1998, the Partnership had $2,406,906 in cash and cash equivalents
and $59,400 in restricted cash.

The Partnership has established a working capital reserve with a current balance
of approximately 3% of the Investors' Invested Capital (defined in the
Partnership Agreement). The General Partner anticipates that such amount should
be sufficient to satisfy the Partnership's general liquidity requirements.
Liquidity would, however, be materially adversely affected by a significant
reduction in revenues or significant unanticipated operating costs (including
but not limited to litigation expenses), unanticipated leasing costs or
unanticipated capital expenditures. If any or all of these events were to occur,
to the extent that the working capital reserve would be insufficient to satisfy
the cash requirements of the Partnership, it is anticipated that additional
funds would be obtained through a reduction of cash distributions to Investors,
bank loans, short-term loans from the General Partner or its Affiliates, or the
sale or financing of Partnership properties.

During the six months ended June 30, 1998, cash from working capital reserves
was used for the payment of leasing costs in the amount of $69,911 incurred at
the Carnegie Center and Marlboro Square properties. The General Partner
estimates that the Partnership will incur approximately $320,000 of additional
leasing costs at its properties during the remainder of 1998. The General
Partner anticipates that the current balance in the working capital reserve will
be sufficient to pay such costs.

During the six months ended June 30, 1998, approximately $41,000 of cash from
operations was used to fund non-recurring maintenance and repair expenses
incurred at the Partnership's properties. The General Partner estimates that the
Partnership will incur additional non-recurring repair and maintenance expenses
of approximately $209,000 at the properties during the remainder of 1998. These
additional expenses will be funded from the operations of the Partnership's
properties and are not expected to have a significant impact on the
Partnership's liquidity.

Cash in the amount of $1,007,191 generated from the Partnership's operations was
distributed to the General Partner and Investors during the six months ended
June 30, 1998. The General Partner currently anticipates that the Partnership
will be able to make comparable distributions during each of the two remaining
quarters of 1998.

The Partnership has incurred approximately $338,000 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $203,000 relates to the Partnership's own defense
and approximately $135,000 relates to the indemnification of the General Partner
and its Affiliates for their defense. These expenses are funded from the
operations of the Partnership. At the present time, the General Partner cannot
estimate the aggregate amount of legal expenses and indemnification claims to be
incurred and their impact on the Partnership's future operations. Liquidity
would, however, be materially adversely affected by a significant increase in
such legal expenses and related indemnification costs. If such increases were to
occur, to the extent that cash from operations and the working capital reserve
would be insufficient to satisfy the cash requirements of the Partnership, it is
anticipated that additional funds would be obtained through a reduction of cash
distributions to investors, bank loans, short-term loans from the General
Partner or its affiliates, or the sale or financing of Partnership properties.




                                       14


<PAGE>   15


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


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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The following table summarizes the leasing activity and occupancy status at the
Partnership's properties during the six months ended June 30, 1998:
<TABLE>
<CAPTION>
                                   MARLBORO SQ.      CROSSROADS SQ.     CARNEGIE         WARNER PL.
                                   SHOPPING CTR.     SHOPPING CTR.       CENTER         SHOPPING CTR.
                                   -------------     -------------       ------         -------------
<S>                                   <C>              <C>               <C>               <C>   
Square Feet                           42,150           174,196           128,059           92,848

Occupancy at January 1, 1998              67%               95%               73%              98%

New Leases                                16%                1%                2%               0%

Lease Renewals                             0%                0%                5%               2%

Leases Expired (1)                        11%                0%                0%               7%

Occupancy at June 30, 1998                72%               96%               75%              91%

Leases Scheduled to
   Expire, Balance of 1998                 0%               11%               12%               5%

Leases Scheduled to
   Commence, Balance of 1998               0%                0%                0%               0%
</TABLE>

 (1)  Includes leases terminated by the General Partner for non-payment of rent.

At June 30, 1998, Marlboro Square's occupancy was 72%. During the first six
months of 1998, a new tenant took occupancy of 6,600 square feet, or 16% of the
property, under a lease that will expire in January 1999, at which time the
tenant will have the option to renew its lease for a five-year term.
Approximately $20,000 in leasing costs was incurred in connection with this new
lease. However, a lease representing 3,000 square feet, or 7% of the property,
expired. In addition, a tenant with a lease for approximately 1,600 square feet,
or 4% of the property, that was scheduled to expire in January 2001, was
delinquent in rental payments due since February 1998. As a result the General
Partner terminated the tenant's lease effective May 12, 1998. The General
Partner has reached a settlement agreement with the former tenant whereby the
Partnership agreed to release the former tenant from all past due and future
rental obligations in exchange for $2,000.

The General Partner anticipates that absorption of available retail space in the
Marlboro, Massachusetts area will remain sluggish during 1998 based upon both
the lack of demand and the oversupply of available retail space in the area. The
General Partner will continue to offer competitive rental rates and concessions
in an effort to retain existing tenants as well as to lease the remaining vacant
space at the property.

The Carnegie Center's occupancy at June 30, 1998 was 75%. During the remainder
of 1998, three leases representing approximately 15,000 square feet, or 12% of
the property are scheduled to expire. The Cincinnati industrial real estate
market, where the Carnegie Center is located, has an oversupply of
office/industrial space, which has resulted in a decline in rental rates and an
increase in vacancy rates. Because of these market conditions, rental rates and
concessions will be priced aggressively in an effort to retain existing tenants
as well as secure new tenants at the property.

Since late 1994, when the Carnegie Center's occupancy declined to 35%, the
General Partner has gradually improved the property's occupancy to its current
level of 75%. Given the current status of the property, the projected future
capital requirements necessary for the property to maintain its competitive
position within the market and the current conditions in the Cincinnati real
estate market, the General Partner listed the Carnegie Center for sale during
July 1998.


                                       15


<PAGE>   16


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


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

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

A tenant at the Warner Plaza property with a lease for approximately 6,200
square feet, or 7% of the property, vacated the property and filed for
bankruptcy under Chapter 7 of the U.S Bankruptcy Code. The General Partner is
seeking to find a replacement tenant for this space.

Over the past few years steady population growth in the Chandler, Arizona area,
where the Warner Plaza property is located, has increased demand for available
retail space and stimulated the development of new retail space. Given these
market conditions as well as the current status of the property, the General
Partner listed the Warner Plaza for sale during the second quarter of 1998.

During the second quarter of 1997, the anchor tenant at the Crossroads Square
property that occupies 49% of the property under a lease scheduled to expire in
August 2010 informed the General Partner of its intention to vacate its space
during the second half of 1998. As a result, the General Partner has commenced
efforts to find a replacement tenant for the space. The General Partner does not
believe that this situation is likely to have a materially adverse effect on the
Partnership's liquidity.

One tenant at the Crossroads Square property has a clause in its lease that may
be exercisable if the anchor tenant described above ceases to operate at the
property and a replacement tenant is not secured. Such clause provides that the
tenant may: i) reduce rental payments to the lesser of the fixed monthly rent or
2% of gross receipts if the anchor ceases to operate for 180 days, and, ii)
terminate lease obligations if the cessation of operations continues for an
additional six months and a substitute tenant has not been provided. This tenant
occupies approximately 10,500 square feet, or 6% of the property, under a lease
that is scheduled to expire in July 2005. The General Partner does not believe
that any reduction in rental payments or any possible lease termination that may
result from the anchor tenant vacating the property is likely to have a
materially adverse affect on the Partnership's liquidity.

The General Partner evaluated the carrying value of each of the Partnership's
properties as of December 31, 1997 by comparing such value to the respective
property's future undiscounted cash flows and the then most recent independent
or internal appraisal. Based on such evaluations, the General Partner determined
that the Marlboro Square property's estimated future undiscounted cash flows
were not expected to exceed its carrying value. Therefore, a write-down in value
of $668,520, representing the difference between the property's carrying value
and its then estimated market value (and not its estimated future undiscounted
cash flows) was required as of December 31, 1997. No permanent impairment in
values existed with respect to the Partnerships other properties as of December
31, 1997 and, therefore, no additional write-downs were recorded.

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

RESULTS OF OPERATIONS

The Partnership generated net income of $583,779 for the six months ended June
30, 1998 as compared to net income of $644,467 for the same period in 1997.

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

                                                        Six Months Ended
                                                            June 30,
                                                       1998         1997
                                                       ----         ----
            Marlboro Square Shopping Center             72%         66%
            Crossroads Square Shopping Center           95%         94%
            Carnegie Center Office/Warehouse            74%         67%
            Warner Plaza Shopping Center                94%         99%


                                       16


<PAGE>   17


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

RESULTS OF OPERATIONS (CONTINUED)

Rental income for the six months ended June 30, 1998, decreased by $169,077, or
12%, as compared to the same period in 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 increased slightly due to increases in rental income at the
Marlboro Square, Carnegie Center and Crossroads Square properties. Rental income
increased at each of these properties primarily due to increases in average
occupancy. Rental income at the Warner Plaza property was consistent between
periods.

Interest income for the six months ended June 30, 1998 increased by $5,958, or
14%, as compared to the same period in 1997. This increase was primarily due to
an increase in the balance of the Partnership's working capital reserves. The
Partnership's working capital reserves increased because the Partnership
retained a portion of the net sales proceeds from the sale of the 1300 North
Dutton Avenue property.

Depreciation expense for the six months ended June 30, 1998 decreased by
$22,646, or 7%, as compared to the same period in 1997. This decrease is
primarily 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 for the six months ended
June 30, 1998 decreased by $58,424, or 29%, as compared to the same period in
1997. This decrease is primarily due to the sale of the 1300 North Dutton Avenue
property. Excluding amounts attributable to the 1300 North Dutton Avenue
property, the Partnership's share of property operating expenses increased by 7%
primarily due to non-recurring maintenance and repair expenses incurred at the
Carnegie Center, Marlboro Square and Warner Plaza properties. Property operating
expenses at the Crossroads Square property was consistent between periods.

General and administrative expenses for the six months ended June 30, 1998
increased by $10,386, or 5%, as compared to the same period during 1997. This
increase is primarily due to an increase in legal fees incurred by the
Partnership in connection with the class action compliant (see Part II, Item 1
of this Report).

Amortization of deferred expenses for the six months ended June 30, 1998
decreased by $14,729, or 25%, as compared to the same period in 1997. This
decrease is primarily due to the write-down in carrying value of the Marlboro
Square property at December 31, 1997. The net book value of the Marlboro Square
plus any unamortized deferred expenses relating to the property at the time the
property was written-down were combined to arrive at the property's carrying
value (current market value) after its write-down. Accordingly, some deferred
expense amounts that were amortized during 1997 are included in the property's
carrying value, and depreciated, during 1998.

Management fee expense, which is equal to 3.5% of Cash from Operations,
decreased by $4,004, or 11%, as compared to the same period in 1997. This
decrease was due to a decline in Cash from Operations between periods primarily
resulting from the sale of the 1300 North Dutton Avenue property.

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


                                       17


<PAGE>   18


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

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

CASH FLOW

The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations which are calculated in accordance with
Section 17 of the Partnership Agreement:
<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                                       June 30,
                                                                1998               1997
                                                                ----               ----
<S>                                                         <C>                 <C>        
Net cash provided by operating activities (a)               $ 981,164           $   912,685
Net change in operating assets and liabilities (a)            (49,639)              129,917
                                                            ---------           -----------
Cash provided by operations (a)                               931,525             1,042,602
Increase in working capital reserves                                                 (1,159)
Add:  Accrual basis Partnership
      management fee                                           33,768                37,772
                                                            ---------           -----------
Cash from operations (b)                                      965,293             1,079,215
Decrease in working capital reserves                           63,912                    --
Less: Accrual basis Partnership
      management fee                                          (33,768)              (37,772)
                                                            ---------           -----------
Distributable cash from operations (b)                      $ 995,437           $ 1,041,443
                                                            =========           ===========

Allocation to General Partner                               $   9,315           $    10,414
Allocation to John Hancock Limited Partner                         --                    --
Allocation to Investors                                       986,122             1,031,029
                                                            ---------           -----------
Distributable cash from operations (b)                      $ 995,437           $ 1,041,443
                                                            =========           ===========
</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 1 of this
          Report.

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

During the third quarter of 1998, the Partnership will to make a cash
distribution to the Investors of $493,061, representing a 5% annualized return,
to all Investors of record at June 30, 1998, based on Distributable Cash from
Operations for the quarter then ended.

The source of future cash distributions is dependent upon cash generated by the
Partnership's properties and the use of working capital reserves. The General
Partner currently anticipates that the Partnership's Distributable Cash from
Operations during each of the remaining two quarters of 1998 will be comparable
to that generated during the first two quarters of 1998.


                                       18


<PAGE>   19


               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)
                           PART II: OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

            In February 1996, a putative class action complaint was filed in the
            Superior Court in Essex County, New Jersey by a single investor in 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 certification order
            should not be construed as suggesting that any member of the class
            is entitled to recover, or will recover, any amount in the action.

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

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

            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 which allegedly arose from
            the General Partner's refusal to provide, without reasonable
            precautions on plaintiff's use of, a list of investors in the
            Partnership and in 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. The defendants filed demurrer motions,
            asking that the complaint be dismissed at law. These motions were
            under consideration during the first quarter of 1998.

            Although the court dismissed the complaint against RIF-II during the
            second quarter of 1998, the plaintiff subsequently amended its
            complaint, again naming RIF-II as a defendant. On August 12, 1998,
            the court granted RIF-II's motion for summary adjudication of the
            issues against the plaintiff. The court ruled that the plaintiff
            could not prevail upon its claims since it was not an Investor in
            RIF-II. RIF-II intends to move for a judgment dismissing it from the
            case.
        
            There can be no assurances given as to the timing, costs or outcome
            of this legal proceeding.

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

ITEM 2.     CHANGES IN SECURITIES

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

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

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

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            There were no matters submitted to a vote of security holders of the
            Partnership during the second quarter of 1998.

ITEM 5.     OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K
            (a) There are no exhibits to this report.
            (b) There were no Reports on Form 8-K filed during the second
                quarter of 1998.


                                       19


<PAGE>   20


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

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 14th day of August, 1998.

                             John Hancock Realty Income Fund
                             Limited Partnership

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

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

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





                                       20