<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               March 31, 1999     
                               -------------------------------------------------

                                       OR

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

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

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

               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

                                                                            PAGE
PART I:  FINANCIAL INFORMATION                                        

   Item 1 -  Financial Statements:

             Balance Sheets at March 31, 1999 and
             December 31, 1998                                                 3

             Statements of Operations for the Three
             Months Ended March 31, 1999 and 1998                              4

             Statements of Partners' Equity for the
             Three Months Ended March 31, 1999 and

             for the Year Ended December 31, 1998                              5

             Statements of Cash Flows for the Three

             Months Ended March 31, 1999 and 1998                              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


                                       2

<PAGE>   3
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)

                          PART I: FINANCIAL INFORMATION

                          ITEM 1: FINANCIAL STATEMENTS

                                 BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                     ASSETS
                                                                MARCH 31,       DECEMBER 31,
                                                                  1999             1998
                                                               -----------      -----------
<S>                                                            <C>              <C>        

Cash and cash equivalents                                      $ 9,121,445      $ 2,055,017
Restricted cash                                                     36,777           63,879
Other assets                                                        87,933           77,433
Property held for sale                                           9,083,771       18,829,684
                                                               -----------      -----------
        Total assets                                           $18,329,926      $21,026,013
                                                               ===========      ===========

                        LIABILITIES AND PARTNERS' EQUITY

Liabilities:
Accounts payable and accrued expenses                          $   152,078      $   309,631
Accounts payable to affiliates                                     423,791          316,299
                                                               -----------      -----------
        Total liabilities                                          575,869          625,930

Partners' equity/(deficit):
   General Partner's deficit                                      (234,619)        (253,231)
   Limited Partners' equity                                     17,988,676       20,653,314
                                                               -----------      -----------
        Total partners' equity                                  17,754,057       20,400,083
                                                               -----------      -----------
        Total liabilities and partners' equity                 $18,329,926      $21,026,013
                                                               ===========      ===========

</TABLE>



                        See Notes to Financial Statements


                                       3
<PAGE>   4
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                   THREE MONTHS ENDED
                                                        MARCH 31,
                                                -------------------------
                                                   1999            1998
                                                ----------       --------
Income:

      Rental income                             $  526,533       $636,055
      Interest income                               40,857         26,067
       Gain on sale                              1,667,428             --
                                                ----------       --------
        Total income                             2,280,818        662,122

Expenses:

      Depreciation                                      --        157,465
      General and administrative expenses          254,690         71,572
      Property operating expenses                   75,791         61,520
      Amortization of deferred expenses                 --         19,943
      Management fee                                 9,552         18,063
                                                ----------       --------
        Total expenses                             340,033        328,563
                                                ----------       --------
        Net income                              $1,940,785       $333,559
                                                ==========       ========


Allocation of net income:

      General Partner                           $   19,408       $  3,335
      John Hancock Limited Partner                 229,056         (6,991)
      Investors                                  1,692,321        337,215
                                                ----------       --------
                                                $1,940,785       $333,559
                                                ==========       ========
Net income per Unit                             $    18.47       $   3.68
                                                ==========       ========




















                        See Notes to Financial Statements



                                       4
<PAGE>   5
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                         STATEMENTS OF PARTNERS' EQUITY
                                   (UNAUDITED)


                      THREE MONTHS ENDED MARCH 31, 1999 AND
                          YEAR ENDED DECEMBER 31, 1998

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

Partners' equity/(deficit) at January 1, 1998
   (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                                   (796)         (4,586,015)         (4,586,811)
Add: Net income                                          19,408           1,921,377           1,940,785
                                                      ---------        ------------        ------------
Partners' equity/(deficit) at March 31, 1999
    (91,647 Units outstanding)                        $(234,619)       $ 17,988,676        $ 17,754,057
                                                      =========        ============        ============

</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>
                                                                            THREE MONTHS ENDED
                                                                                 MARCH 31,
                                                                         -------------------------- 
                                                                             1999          1998
                                                                         -----------     ----------
<S>                                                                      <C>             <C>       
Operating activities:
   Net income                                                            $ 1,940,785     $  333,559
   Adjustments to reconcile net income to net cash provided 
     by operating activities:
       Depreciation                                                               --        157,465
       Amortization of deferred expenses                                          --         19,943
       Gain on sale of property                                           (1,677,428)            --
                                                                         -----------     ----------
                                                                             263,567        510,967
   Changes in operating assets and liabilities:
       Decrease/(increase) in restricted cash                                 27,102         (1,000)
       Decrease/(increase) in other assets                                   (10,500)      (110,000)
       Increase/(decrease) in accounts payable and accrued
           expenses                                                         (157,553)        76,545
       Increase in accounts payable to affiliates                            107,492         (1,617)
                                                                         -----------     ----------
             Net cash provided by operating activities                       229,898        474,895

Investing activities:
   Proceeds from sales of properties                                      11,436,275             --
   Increase in deferred expenses                                             (12,934)       (33,417)
                                                                         -----------     ----------
             Net cash used in investing activities                        11,423,341        (33,417)

Financing activities:

   Cash distributed to Partners                                           (4,586,811)      (509,151)
                                                                         -----------     ----------
             Net cash used in financing activities                        (4,586,811)      (509,151)
                                                                         -----------     ----------
             Net increase (decrease) in cash and
                 cash equivalents                                          7,066,428        (67,673)
             Cash and cash equivalents at
                 beginning of year                                         2,055,017      2,502,844
                                                                         -----------     ----------
             Cash and cash equivalents at
                 end of period                                           $ 9,121,445     $2,435,171
                                                                         ===========     ==========


</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 March 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
       3,673 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 three-month period ended March 31, 1999 are not
       necessarily indicative of the results that may be expected for the year
       ending December 31, 1999. For further information, refer to the financial
       statements and footnotes thereto included in the Partnership's Annual
       Report on Form 10-K for the year ended December 31, 1998.

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

       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.

       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.



                                       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.   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 are
       classified as "Property Held for Sale" on the Balance Sheets at March 31,
       1999 and December 31, 1998 at their carrying values, which are not in
       excess of their estimated fair values, which are not in excess of their
       estimated fair values, less selling costs. Property held for sale
       consists of commercial real estate as follows:

<TABLE>
<CAPTION>
                                                           March 31,    December 31,
                                                             1999          1998
                                                           --------     -----------
       <S>                                                <C>           <C>        

       Marlboro Square Shopping Center                    $       --    $   989,981
       Crossroads Square Shopping Center                   9,083,771      9,070,837
       Carnegie Center Office/Warehouse                           --      3,763,285
       Warner Plaza Shopping Center                               --      5,005,581
                                                          ----------    -----------
                      Total                               $9,083,771    $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 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 $6,207,835, 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 $5,005,581.

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>
                                                             Three Months Ended
                                                                   March 31,
                                                             ------------------
                                                              1999        1998
                                                             -------    -------
       <S>                                                   <C>        <C>    

       Reimbursement for operating expenses                  $48,628    $35,480
       Partnership management fee expense                      9,552     18,063
                                                             -------    -------
                                                             $58,180    $53,543
                                                             =======    =======
</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 legal
       proceedings described in Note 7. Accordingly, included in the Statements
       of Operations for the three months ended March 31, 1999 and 1998 is
       $101,396 and $3,462, respectively, representing the Partnership's share
       of costs incurred by the General Partner and its Affiliates relating to
       such legal proceedings. Through March 31, 1999, the Partnership has
       accrued a total of $365,612 as its share of the costs incurred by the
       General Partner and its Affiliates resulting from this matter.

                                       10

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


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


5.   TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (CONTINUED)

       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.

6.   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>
                                                                Three Months Ended
                                                                    March 31,
                                                             ----------------------
                                                               1999          1998
                                                             -------       --------
       <S>                                                   <C>           <C>    

       Net income per Statements of Operations               $1,940,785    $333,559

       Add/(deduct): Excess of tax depreciation
                        over book depreciation                  (96,401)    (24,539)
                     Excess of tax amortization
                        over book amortization                   (2,507)     10,022
                                                             ----------    --------

       Net income for federal income tax purposes            $1,841,877    $319,042
                                                             ==========    ========
</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 have answered the complaint,
       denying the material allegations and raising numerous affirmative
       defenses. Discovery has commenced, and the Partnership and other
       defendants have produced documents relating to the plaintiff's claims. No
       depositions are scheduled. The court has heard the defendants' motion to
       dismiss certain claims on grounds of the expiration of the statues of
       limitations and has stated it intends to hold a further hearing on that
       matter to determine whether the case can be resolved by the disposition
       of certain claims. The Partnership and the other defendants intend to
       move to decertify the class and for summary judgment dismissing the
       breach of contract claims.

       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 plaintiffs 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.




                                       11
<PAGE>   12
               JOHN HANCOCK REALTY INCOME FUND LIMITED PARTNERSHIP
                      (A MASSACHUSETTS LIMITED PARTNERSHIP)


                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)

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 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 $865,000 in
       legal expenses in connection with these legal proceedings. Of this
       amount, approximately $499,000 relates to the Partnership's own defense
       and approximately $366,000 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 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 currently estimates that to remediate the
       contamination will cost approximately $450,000. The General Partner has
       listed the property for sale and continues to seek a buyer for the
       property. The presence of these hazardous materials could adversely
       affect the Partnership's ability to dispose of the property and the
       Partnership could be exposed to liability and be required to incur
       substantial remediation costs.



                                       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, possible liability for the costs of
remediation of hazardous substances, 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

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. As of March 31, 1999, the Partnership
had only one property remaining in its portfolio, Crossroads Square Shopping
Center, which has been listed for sale. The General Partner currently
anticipates that the Partnership will likely be able to sell this last remaining
property during 1999. Upon the sale of the last remaining property, the
operations of the Partnership will terminate, and the Partnership will be
dissolved, in accordance with the terms of the Partnership Agreement.

At March 31, 1999, the Partnership had $9,121,445 in cash and cash equivalents
and $36,777 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 three months ended March 31, 1999, cash from working capital reserves
was used for the payment of leasing costs in the amount of $15,634 incurred at
the Crossroads Square property. The General Partner estimates that the
Partnership will incur approximately $24,000 of additional leasing costs during
the remainder of 1999. The General Partner anticipates that the current balance
in the working capital reserve will be sufficient to pay such costs.

During the three months ended March 31, 1999, approximately $6,100 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 not incur additional non-recurring repair and maintenance
expenses during the remainder of 1999. Any additional expenses that may be
incurred will be funded from the operations of the Partnership's remaining
property, Crossroads Square Shopping Center, and are not expected to have a
significant impact on the Partnership's liquidity.

Cash in the amount of $4,586,811 was distributed to the General Partner and
Investors during the three months ended March 31, 1999. This amount was $756
less than expected due to an adjustment for the third quarter of 1998. Of this
amount, $494,613 was from Distributable Cash from Operations for the quarter
ended December 31, 1998 and $4,092,956 was from Distributable Cash from Sales
during the first quarter of 1999. Because the Partnership now holds only a
single property, which is listed for sale, the General Partner has determined
that it will be 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 at least the three remaining
quarters of 1999, no cash distributions with respect to Distributable Cash from
Operations will be made to Investors.

The Partnership has incurred approximately $447,000 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $268,000 relates to the Partnership's own defense
and approximately $179,000 relates to the indemnification of the General Partner
and its Affiliates for their defense. These expenses are funded from the
operations of the Partnership. In addition, the Partnership incurred
approximately $418,000 in legal expenses in connection with the lawsuit filed in
the Superior Court of the State of California for the Count of Los Angeles by an
investor in the Partnership. Of this amount, approximately $231,000 relates to
the Partnership's own defense and approximately $187,000 relates to the
indemnification of the General Partner and its Affiliates for their defense.
These expenses are funded from the operations of the Partnership.



                                       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)

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 investments.

The following table summarizes the leasing activity and occupancy status at the
Partnership's remaining property during the three months ended March 31, 1999:

<TABLE>
<CAPTION>
                                                             CROSSROADS SQ.
                                                             SHOPPING CTR.
                                                             --------------
<S>                                                           <C>    
 Square Feet                                                  174,196
 Occupancy at January 1, 1999                                      95%
 New Leases                                                         0%
 Lease Renewals                                                     0%
 Leases Expired                                                     0%
 Occupancy at March 31, 1999                                       95%
 Leases Scheduled to Expire, Balance of 1999                        4%
 Leases Scheduled to Commence, Balance of 1999                      0%

</TABLE>

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.



                                       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)

The General Partner listed the Crossroads Square for sale during August 1998
based upon the 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 currently estimates that to remediate the
contamination would cost approximately $450,000. The General Partner continues
to seek a buyer for the property.

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 independent
or internal appraisal. No permanent impairment in values existed with respect to
the Partnership's properties as of December 31, 1998 and, therefore, no
write-downs were recorded.

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

RESULTS OF OPERATIONS

The Partnership generated net income of $273,357 for the three months ended
March 31, 1999 as compared to net income of $333,559 for the same period in
1998.

Average occupancy for the Partnership's remaining property was as follows:

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                  March 31,
                                                             ------------------
                                                               1999      1998
                                                             -------   --------
<S>                                                            <C>        <C>  
  
Crossroads Square Shopping Center                              95%        95%

</TABLE>

Rental income for the three months ended March 31, 1999 decreased by $75,522, or
12%, as compared to the same period in 1998. This decrease is primarily due to
the sales of the Marlboro Square, Carnegie Center and Warner Plaza properties.
Rental income at the Crossroads Square property was consistent between periods.

Interest income for the three months ended March 31, 1999 increased by $14,789,
or 57%, as compared to the same period in 1998. 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
received the net sales proceeds from the sales of the Carnegie Center, Marlboro
Square and Warner Plaza properties.

Depreciation expense for the three months ended March 31, 1999 decreased by
$157,465, or 100%, as compared to the same period in 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 the third
quarter of 1998. Accordingly no depreciation has been recorded on these
properties since that time that they were listed for sale.

General and administrative expenses for the quarter ended March 31, 1999
increased by $183,118, or 255%, primarily due to an increase in legal fees
incurred by the Partnership in connection with the legal proceedings described
in Item I of Part II of this report. Excluding such legal fees, general and
administrative expenses were consistent between periods.



                                       16
<PAGE>   17
               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)

RESULTS OF OPERATIONS (CONTINUED)

The Partnership's share of property operating expenses for the three months
ended March 31, 1999 increased by $14,272, or 23%, as compared to the same
period in 1998. This increase is primarily due to lower tenant reimbursements
received at the Warner Plaza and Marlboro Square properties.

Property operating expenses at the Crossroads Square property were consistent
between periods.

Amortization of deferred expenses for the three months ended March 31, 1999
decreased by $19,943, or 100%, as compared to the same period in 1998. This
decrease is due to reclassifying deferred expenses to "Property Held for Sale"
and accordingly, no longer amortizing such amounts.

The General Partner believes that inflation has had no significant impact on the
Partnership's operations during the three months ended March 31, 1999, and the
General Partner anticipates that inflation will not have a significant impact
during the remainder of 1999.

CASH FLOW

The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations which are calculated in accordance with
Section 17 of the Partnership Agreement:


<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                                March 31,
                                                         ---------------------
                                                            1999         1998
                                                         ---------    --------
       <S>                                               <C>          <C>    

Net cash provided by operating activities (a)            $ 229,898    $474,895
Net change in operating assets and liabilities (a)          33,669      36,072
                                                         ---------    --------
Cash provided by operations (a)                            263,567     510,967
Increase in working capital reserves                      (263,567)    (12,926)
Add: Accrual basis Partnership management fee                9,552      18,063
                                                         ---------    --------
Cash from operations (b)                                     9,552     516,104
Decrease in working capital reserves
Less: Accrual basis Partnership management fee              (9,552)    (18,063)
                                                         ---------    --------
Distributable cash from operations (b)                   $       0    $498,041
                                                         =========    ========

Allocation to General Partner                            $            $  4,980
Allocation to John Hancock Limited Partner                                  --
Allocation to Investors                                         --     493,061
                                                         ---------    --------
Distributable cash from operations (b)                   $      --    $498,041
                                                         =========    ========
</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.



                                       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 (CONTINUED)

During the second quarter of 1999, the Partnership expects to make a cash
distribution in the aggregate amount of $6,484,942, to all Investors of record
at March 31, 1999 representing a portion of the cash from sales of the Marlboro
Square and Warner Plaza properties during the first quarter of 1999. The
remainder has been retained to increase working capital reserves. These amounts
were distributed in accordance with the Partnership Agreement and were allocated
as follows:

<TABLE>
<CAPTION>
                                                        Distributable Cash
                                                      From Sales or Financings
                                                      ------------------------

<S>                                                          <C>              
Investors                                                    $5,590,467       
John Hancock Limited Partner                                    894,475
General Partner                                                      --
                                                             ----------
Total                                                        $6,484,942
                                                             ==========
</TABLE>
                                                            

The source of future cash distributions is dependent upon cash generated by the
Partnership's properties and the use of working capital reserves. As of March
31, 1999, one property, Crossroads Square Shopping Center, remains in the
Partnership. 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, for at least the remaining quarters of 1999, no cash
distributions with respect to Distributable Cash from Operations will be made to
Investors.




                                       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 Partnership and the other defendants have answered the complaint,
     denying the material allegations and raising numerous affirmative defenses.
     Discovery has commenced, and the Partnership and other defendants have
     produced documents relating to the plaintiff's claims. No depositions are
     scheduled. The court has heard the defendants' motion to dismiss certain
     claims on grounds of the expiration of the statutes of limitations and has
     stated it intends to hold a further hearing on that matter to determine
     whether the case can be resolved by the disposition of certain claims. The
     Partnership and the other defendants intend to move to decertify the class
     and for summary judgment dismissing the breach of contract claims.

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

     In September 1997, a complaint for damages was filed in the Superior Court
     of the State of California for the County of Los Angeles by an Investor in
     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 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.

     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.



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


                           PART II: OTHER INFORMATION

                                   (CONTINUED)

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

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

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 first quarter of 1999.

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
        (a)     There are no exhibits to this report.
        (b)     Reports on Form 8-K were filed on January 7, 1999, March 17,
                1999 and March 18, 1999.



                                       20
<PAGE>   21
               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 May, 1999.


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







                                       21