EXHIBIT 13.1
                       Equipment Asset Recovery Fund, L.P.
                               1998 ANNUAL REPORT
<PAGE>
1

--------------------------------------------------------------------------------
                              MESSAGE TO INVESTORS
--------------------------------------------------------------------------------


Presented for your review is the 1998 Annual Report for Equipment Asset Recovery
Fund, L.P. (the "Partnership"), which includes the Partnership's audited
consolidated financial statements for the year ended December 31, 1998.

As you are aware, in November 1996 the Partnership, in conjunction with the DSC
Venture and SFN Corporation, sold its fleet of heavy-lift cranes, related
equipment and existing customer crane rental agreements. While it is the General
Partners' intention to expedite the liquidation process, the Partnership cannot
be liquidated until the litigation discussed below is resolved, and any
potential Partnership liabilities are determined.

As discussed in previous correspondence, on June 4, 1997, a purported class
action suit was commenced in the District Court for Harris County, Texas by a
limited partner who acquired interests through a tender offer, on behalf of,
among others, all limited partners of the Partnership against Steven A. Webster,
Equipment Management Inc., the Partnership (a nominal defendant) and others
(collectively, the "Defendants"). The suit made a number of allegations. The
Defendants filed a Motion for Summary Judgment and partial summary judgment was
granted by the Court on March 31, 1998. On August 24, 1998, the Court heard a
Motion for Summary Judgment (the "Motion") filed by a co-defendant. Although
that Motion was taken under consideration, the judge recused herself before
ruling. The case was then reassigned to another judge, and a hearing was held on
the Motion on March 8, 1999 with the Court granting the Motion in part and
overruling it in part. The Court has now set a scheduling conference for May 5,
1999, at which time all remaining deadlines will be set, including a trial date.
The Defendants believe the remaining allegations in this complaint are without
merit and intend to defend the action vigorously.

It is uncertain at this time what impact the pending class action suit will have
on the amount of the final liquidating distribution to investors or on the
timing of the Partnership's liquidation. We will update you on the status of the
litigation and the Partnership's liquidation process in future reports. In the
interim, should you have any questions regarding the Partnership, you may
contact your Financial Consultant or Partnership Investor Services. All requests
for a change of address or transfer should be submitted in writing to the
Partnership's administrative agent at P.O. Box 7090, Troy, MI 48007-7090.
Partnership Investor Services can be reached at (617) 342-4225, and the
Partnership's administrative agent can be reached at (248) 637-7900.


Very truly yours,



Michael T. Marron                      Steven A. Webster
President                              General Partner
Equipment Management Inc.
General Partner



March 26, 1999
<PAGE>
2

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
                                               At December 31,   At December 31,
                                                         1998              1997
-------------------------------------------------------------------------------
<S>                                                <C>               <C>       
Assets
Cash and cash equivalents                          $1,585,699        $1,909,899
-------------------------------------------------------------------------------
      Total Assets                                 $1,585,699        $1,909,899
===============================================================================
Liabilities and Partners' Capital
Liabilities:
  Accounts payable and accrued expenses            $1,566,319        $1,605,246
                                                   ----------------------------
      Total Liabilities                             1,566,319         1,605,246
                                                   ----------------------------

Commitments and Contingencies

Partners' Capital:
  General Partners                                         775           12,186
  Limited Partners                                      18,412          289,421
  Special Limited Partner                                  193            3,046
                                                   ----------------------------
      Total Partners' Capital                           19,380          304,653
-------------------------------------------------------------------------------
      Total Liabilities and Partners' Capital      $ 1,585,699       $1,909,899
===============================================================================
</TABLE>


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1998, 1997 and 1996
                                                              Special
                                  General        Limited      Limited
                                 Partners       Partners      Partner           Total
-------------------------------------------------------------------------------------
<S>                             <C>          <C>            <C>          <C>          
Balance at December 31, 1995    $(415,303)   $        --    $      --    $   (415,303)
Net Income                        862,687     10,625,369      111,846      11,599,902
Distributions                    (413,331)    (9,816,600)    (103,333)    (10,333,264)
-------------------------------------------------------------------------------------
Balance at December 31, 1996       34,053        808,769        8,513         851,335
Net Loss                          (21,867)      (519,348)      (5,467)       (546,682)
-------------------------------------------------------------------------------------
Balance at December 31, 1997    $  12,186    $   289,421    $   3,046    $    304,653
Net Loss                          (11,411)      (271,009)      (2,853)       (285,273)
-------------------------------------------------------------------------------------
Balance at December 31, 1998    $     775    $    18,412    $     193    $     19,380
=====================================================================================
</TABLE>


See accompanying notes to the consolidated financial statements.
<PAGE>
3

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
                                                    1998         1997           1996
------------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>        
Income
Rental                                         $      --    $      --    $ 4,239,442
Interest                                         149,352      213,557        123,965
Other                                                 --        5,662         22,558
                                               -------------------------------------
      Total Income                               149,352      219,219      4,385,965
------------------------------------------------------------------------------------
Expenses
Rental                                                --           --      1,271,192
General, selling and administrative              434,625      652,514      4,118,219
Depreciation and amortization                         --           --      1,207,668
Interest                                              --           --        175,855
Management fee                                        --           --        947,609
                                               -------------------------------------
      Total Expenses                             434,625      652,514      7,720,543
                                               -------------------------------------
Loss from Operations                            (285,273)    (433,295)    (3,334,578)
------------------------------------------------------------------------------------
Other Income
Gain on sales of equipment                            --           --     16,217,725
Gain on extinguishment of debt                        --           --        130,144
                                               -------------------------------------
      Total Other Income                              --           --     16,347,869
------------------------------------------------------------------------------------
Net Income (Loss) before Minority Interest
  and Provision for Income Taxes                      --     (433,295)    13,013,291
Minority Interest                                     --     (492,868)    (1,034,312)
                                               -------------------------------------
Income (Loss) before Provision for
  Income Taxes                                  (285,273)    (926,163)    11,978,979
Benefit from (Provision for) income taxes             --      379,481       (379,077)
------------------------------------------------------------------------------------
      Net Income (Loss)                        $(285,273)   $(546,682)   $11,599,902
====================================================================================
Net Income (Loss) Allocated:
To the General Partners                        $ (11,411)   $ (21,867)   $   862,687
To the Limited Partners                         (271,009)    (519,348)    10,625,369
To the Special Limited Partner                    (2,853)      (5,467)       111,846
------------------------------------------------------------------------------------
                                               $(285,273)   $(546,682)   $11,599,902
====================================================================================
Per limited partnership unit
(32,722 outstanding)                              $(8.28)     $(15.87)       $324.72
------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to the consolidated financial statements.
<PAGE>
4

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
                                                         1998            1997            1996
---------------------------------------------------------------------------------------------
<S>                                                <C>           <C>             <C>         
Cash Flows From Operating Activities
Net Income (Loss)                                  $ (285,273)   $   (546,682)   $ 11,599,902
Adjustments to reconcile net income to
net cash used for operating activities:
  Gain on sales of cranes                                  --              --     (16,217,725)
  Gain on extinguishment of debt                           --              --        (130,144)
  Minority interest                                        --          46,868        (680,688)
  Depreciation and amortization                            --              --       1,207,668
  Increase (decrease) in cash arising
  from changes in operating assets and
  liabilities:
    Accounts receivable, net                               --         173,415          99,422
    Other assets                                           --         193,397        (140,273)
    Accounts payable and accrued expenses             (38,927)       (140,499)      1,282,615
    Management fee payable                                 --      (1,445,685)       (444,133)
    Due to affiliates                                      --              --        (147,000)
    Income taxes payable                                   --        (624,065)          4,745
                                                   ------------------------------------------
Net cash used for operating activities               (324,200)     (2,343,251)     (3,565,611)
---------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
  Proceeds from sales of cranes, vehicles
  and equipment                                            --              --      21,986,776
                                                   ------------------------------------------
Net cash provided by investing activities                  --              --      21,986,776
---------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
  Proceeds from long-term debt                             --              --         100,000
  Principal payments on long-term debt                     --              --      (4,422,401)
  Distributions paid to minority interest                  --        (631,181)             --
  Distributions paid to partners                           --     (10,333,264)             --
                                                   ------------------------------------------
Net cash used for financing activities                     --     (10,964,445)     (4,322,401)
---------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents                                     (324,200)    (13,307,696)     14,098,764
Cash and cash equivalents, beginning of period      1,909,899      15,217,595       1,118,831
                                                   ------------------------------------------
Cash and cash equivalents, end of period           $1,585,699    $  1,909,899    $ 15,217,595
=============================================================================================
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest           $       --    $         --    $    175,855
Cash paid during the period for taxes              $       --    $    615,520    $    376,998
---------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to the consolidated financial statements.
<PAGE>
5

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996

1.  Organization
Equipment Asset Recovery Fund, L.P. (the "Partnership"), formerly Hutton Asset
Recovery Fund, was organized as a Limited Partnership under the laws of Texas
pursuant to a Certificate and Agreement of Limited Partnership (the "Partnership
Agreement") dated and filed October 27, 1983. The Partnership was inactive from
its inception through December 1983. The Partnership was formed for the primary
purpose of acquiring, operating, leasing and selling various types of assets.

Equipment Management, Inc. ("EMI"), formerly Hutton Equipment Management, Inc.,
an affiliate of Lehman Brothers Inc., and Steven A. Webster are the General
Partners of the Partnership. On July 31, 1993, certain of Shearson Lehman
Brothers Inc.'s domestic retail brokerage and management businesses were sold to
Smith Barney, Harris Upham & Co. Inc. Included in the purchase was the name
"Hutton." Consequently, the Hutton Equipment Management, Inc. General Partner's
and the Partnership's names were changed to delete any reference to "Hutton."
San Felipe Investors, a Texas general partnership, is the Special Limited
Partner.

At December 31, 1998, the Partnership consisted of a 99%-owned consolidated
venture, DSC Venture ("DSC"). SFN Corporation ("SFN"), in which the Partnership
had held a 51% controlling interest, liquidated in January 1997.

On November 27, 1996, the Partnership, DSC and SFN completed a bulk sale of
their remaining equipment assets for $15,900,000. The Partnership received net
proceeds of $2,772,051 for its crane fleet and $7,366,940 in a distribution from
its interests in DSC. The Partnership also received $1,938,000 in management
fees from SFN during 1996 and $459,000 in January 1997. In addition, the
Partnership received initial liquidating distributions of approximately $552,138
from SFN in February 1997 and received a further distribution of $204,000 in
September 1997. The Partnership expects to receive a final liquidating
distribution from its interest in SFN pending resolution of litigation
outstanding (see Note 9). The amount of such distribution will be dependent on
any costs relating to the litigation incurred by SFN. The General Partners
declared a special cash distribution to unitholders of record as of November 27,
1996 in the amount of $10,333,264 ($300 per limited partnership unit). The
remaining sales proceeds, with the Partnership's cash, will first be used to
provide for all liabilities and obligations of the Partnership through
liquidation (including expenses associated with the pending litigation as
discussed in Note 9), following which any remaining amounts will be distributed
to the partners upon dissolution of the Partnership.

2.  Significant Accounting Policies

Basis of Accounting  The accompanying consolidated financial statements have
been prepared on the accrual basis of accounting in accordance with generally
accepted accounting principles. Revenues were recognized as earned and expenses
were recorded as obligations were incurred.

Construction Cranes  Investments in construction cranes included the initial
purchase price and related acquisition costs. Depreciation was computed using
the straight-line method based on the estimated useful lives of the assets,
which were generally between 10 to 20 years.

Cash Equivalents  Cash equivalents consist of highly liquid short-term
investments with maturities of three months or less from the date of issuance.
The carrying amount approximates fair value because of the short maturity of
these instruments.

Concentration of Credit Risk  Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash in
excess of the financial institutions' insurance limits. The Partnership invests
available cash with high credit quality financial institutions.


<PAGE>
6

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

Organization and Loan Closing Costs  Organization costs were amortized on a
straight-line basis over five years. Loan closing costs were amortized over the
life of the related loan.

Rental Revenues  Leases of construction cranes were generally on a month-to-
month basis and were accounted for as operating leases.

Income Taxes  No provision for income taxes has been made in the consolidated
financial statements for the Partnership and DSC since these taxes are the
responsibility of the individual partners or co-venturers rather than that of
the Partnership or DSC. However, an income tax provision or benefit has been
included in the accompanying consolidated financial statements related to the
Partnership's corporate consolidated subsidiary, SFN, which is a separate
taxable entity.

Use of Estimates  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 revenues and expenses during the period.
Actual results could differ from those estimates.

3.  Partnership Allocations
Partnership income and losses will be allocated and net cash will be distributed
4% to the General Partners, 1% to the Special Limited Partner and 95% to the
Limited Partners until each of the Limited Partners has received cash equal to
his or her capital contribution plus an 8% annual cumulative return thereon.
Thereafter, such items will be distributed 85% to the Limited Partners, 12.5% to
the General Partners and 2.5% to the Special Limited Partner.

The amount of any net loss of the Partnership, which would be allocable to a
Limited Partner in excess of a positive capital account, is allocated to the
General Partners in proportion to their relative interests in the Partnership.

The gains on the sales of cranes were first allocated proportionately to the
Partners who had negative capital accounts to restore these accounts to zero and
then in accordance with the aforementioned percentages.

In 1994, the remaining net loss (after allocation of gain on sales of cranes)
was allocated to the Limited Partners and the Special Limited Partner in an
amount that reduced their capital accounts to zero. The remaining loss was
allocated to the General Partners in proportion to their relative interests in
the Partnership. During 1995 and 1996 the entire net loss excluding the gains on
sales of cranes was allocated to the General Partners.

4.  Joint Venture
In accordance with the October 1984 Joint Venture Agreement between the
Partnership and Dayton-Scott Corporation ("Dayton-Scott"), the Partnership
contributed $2,500,000 in cash for a 50% interest in DSC. Dayton-Scott
contributed forty-nine crawler-type cranes and seven crane attachments ("DSC
cranes"), together with all of its other assets, in exchange for assumption of
its outstanding nonrecourse Loan and Security Agreement with Security Pacific
Business Credit, Inc. ("SPBC") and a 50% interest in DSC. Subsequently, the
Partnership wrote off its initial $2,500,000 investment in DSC and additional
capital contributions of $100,000 in 1984 and $121,788 in 1986.

In April 1987, Dayton-Scott sold its entire 50% interest in DSC to the
Partnership (49%) and Dayton-Scott Equipment Company (DSEC) (1%) (the former
manager of the Partnership's construction crane fleet). DSEC subsequently sold
its 1% interest to DRA Management, Inc., an affiliate of EMI. The purchase price
for the additional 49% interest in DSC consisted of $250,000 in cash, assumption
of $15,200,000 in nonrecourse debt (see Notes 5 and 7) and a contingent payment
of $250,000 based on future events and conditions as defined in the purchase and
sale agreement.
<PAGE>
7

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

5.  SFN Corporation
The Partnership acquired 51% of the shares of issued and outstanding Common
Stock of SFN and all of the issued and outstanding shares of nonvoting Class B
Redeemable Preferred Stock of SFN. The Partnership acquired such stock in
consideration for its agreement to cooperate with SFN in connection with SFN's
acquisition of certain assets from SPBC. The Partnership did not contribute any
cash to SFN for the shares of Common Stock and Class B Redeemable Preferred
Stock of SFN, however, the Partnership received a deemed capital account in the
amount of $2,397 for services rendered in connection with this transaction. SFN
was liquidated on January 30, 1997.

Six individuals, who were affiliated with DSEC, which previously managed the
Equipment (defined below), the cranes owned by DSC, and the cranes owned by the
Partnership, owned the remaining 49% of the shares of Common Stock of SFN. These
individuals contributed cash of approximately $275,000 in the aggregate for 49%
of the issued and outstanding shares of Common Stock and all of the nonvoting
Class A Redeemable Preferred Stock of SFN. This equity contribution was used, in
part, to fund a portion of the purchase price of the SPBC Assets (defined below)
and to pay related transaction costs.

The holders of the Class A Redeemable Preferred Stock were entitled to receive a
single preferred dividend of $275,000 in the aggregate, plus a 10% cumulative
return until such dividend was paid, prior to any distributions being made to
the other stockholders of SFN. The Class B Redeemable Preferred Stock received
by the Partnership entitled the Partnership to receive a single preferred
dividend of 104% of the aggregate amount paid to the holders of the Class A
Redeemable Preferred Stock following the payment of the Class A preferred
dividend. Once these preferred dividends were paid to the holders of the Class A
and Class B Redeemable Preferred Stock, all further distributions were made only
to the holders of the Common Stock of SFN in accordance with the pro rata
percentage ownership of the holders of such Common Stock. All such dividends and
distributions were paid during 1997.

Effective April 30, 1992, SFN acquired all of the secured indebtedness of DSC
from SPBC ("SPBC Debt"). In connection with the acquisition of the SPBC Debt by
SFN, SPBC conveyed the following assets to SFN: (i) six cranes, one ringer, and
one tower (the "Equipment") previously owned by SPBC and leased to DSC pursuant
to an equipment lease ("SPBC Lease"), and (ii) the rights and obligations of
SPBC under a Net Profits Agreement ("Profits Agreement") previously entered into
by and among DSC, SPBC, and the Partnership (see Note 7). The SPBC Debt,
Equipment, Lease and Net Profits Agreement are collectively referred to as the
"SPBC Assets."

SFN paid SPBC a total consideration of $10,536,813 for the SPBC Assets,
consisting of $9,536,813 paid in cash at closing and a $1,000,000 subordinated
promissory note ("Subordinated Note") payable to SPBC and secured by a junior
lien on all the assets of SFN. The purchase price for the SPBC Assets was
allocated to the Debt and Equipment based on the relative fair market value at
the date of acquisition.

6.  Construction Cranes
Concurrent with the formation of DSC, the Partnership purchased ten construction
type cranes (the "Partnership cranes") from Dayton-Scott for a cash purchase
price of $1,500,000 and, in 1986, sold one of these construction cranes. In
addition, Dayton-Scott contributed the DSC cranes.

In connection with SFN's acquisition of the DSC promissory notes from SPBC, SPBC
conveyed to SFN the Equipment previously owned by SPBC. The Equipment had been
leased by SPBC to DSC pursuant to the SPBC Lease since April 1987, and SFN
acquired the Equipment subject to the SPBC Lease, as amended on April 30, 1992.

On November 27, 1996, the Partnership, DSC and SFN completed a bulk sale of
their remaining equipment assets. The sales proceeds were used to reduce and
eventually extinguish the Partnership's debt (see Note 1).
<PAGE>
8

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

The following is a summary of the equipment sold for the year ended December 31,
1996:

<TABLE>
<CAPTION>
                              Number             Net          Net          Gain
                           of Cranes   Selling Price   Book Value       On Sale
-------------------------------------------------------------------------------
<S>                              <C>     <C>           <C>          <C>        
  EARF                             9     $ 3,090,478   $  223,359   $ 2,867,119
  DSC                             51      17,391,292    4,879,473    12,511,819
  SFN                              6       1,486,314      650,132       836,182
  DSC Vehicles                    --          18,692       16,087         2,605
                                  ---------------------------------------------

Total                             66     $21,986,776   $5,769,051   $16,217,725
                                  =============================================
</TABLE>

DSEC managed and operated the DSC cranes, SFN cranes and the Partnership cranes
(collectively, the "Fleet") pursuant to a management agreement that reimbursed
all expenses related to the operation of the Fleet, including the salaries of
DSEC's employees. The agreement also provided for incentive compensation if
certain revenue goals were attained and commission payments if cranes were sold.
The following is a summary of the sales commissions, incentive management fee
and severance/termination fee paid to DSEC for the years ended December 31,
1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                Paid         Paid          Paid
                                              During       During        During
                                                1998         1997          1996
-------------------------------------------------------------------------------
<S>                                            <C>       <C>         <C>       
Incentive Management Fees                      $  --     $221,513    $       --
Sales Commissions                                 --           --       558,772
Severance/Termination Fees                        --           --     1,000,000
-------------------------------------------------------------------------------
                                               $  --     $221,513    $1,558,772
                                               ================================
</TABLE>

7.  Loans Payable

Inter-Company Debt
In April 1987, concurrent with the Partnership's acquisition of an additional
49% interest in DSC (see Note 4), the Partnership assumed three notes in the
amounts of $12,000,000, $3,000,000 and $200,000, all of which were purchased by
SFN in 1992. The notes were nonrecourse to DSC and the Partnership and were
collateralized by a first lien on DSC assets.

The $12,000,000 note accrued interest at Bank America's prime lending rate plus
1/2%, subject to a floor of 8% and a cap tied to the revenues of DSC. This note
was paid in full in June 1996 due to prepayments made according to the terms of
the note.

The $3,000,000 note accrued interest at a fixed rate of 7.5% per annum,
compounded annually, and payments on such note were deferred until the $12
million note was paid in full. This note was paid in full on October 4, 1996 due
to prepayments made according to the terms of the note.

The $200,000 note was noninterest-bearing, and was due in full 30 days after the
last payment was made on the $3,000,000 note. This note was paid in full in
1996.

Additionally, in consideration for the restructuring of its debt in 1988, DSC
was required to pay additional interest under a Net Profits Agreement, in the
amount of 25% of future net operating profits (as defined) and 25% of all net
proceeds upon the sale or constructive sale of the DSC cranes. For the years
ended December 31, 1996 and 1995, SFN earned $2,779,189 and $34,984,
respectively, under this agreement.
<PAGE>
9

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

Third Party Debt
In order to fund the cash portion of the purchase price for the SPBC Assets and
related transaction costs, the Partnership, through its consolidated subsidiary,
SFN, obtained loans (collectively, the "CIT Loans") from CIT in an aggregate
amount of $9,761,813, consisting of a $8,761,813 term loan (the "Term Loan") and
a $1,000,000 revolving loan (the "Revolving Loan"). The CIT Loans were secured
by a first priority security interest in all the assets of SFN, including the
collateral securing the Notes Receivable from DSC and all the rights under the
Net Profits Agreement.

The Term Loan originally matured on July 31, 2000 and accrued interest at the
Prime Rate plus 1.625% per annum; monthly principal and interest payments
commenced May 31, 1992. Pursuant to the terms of the agreement, net proceeds
from the sales of any DSC cranes or SFN cranes were applied to the Term Loan
and/or Revolving Loan. This note was paid in full in August 1996 due to
prepayments made according to the terms of the note.

The $1,000,000 Revolving Loan was due and payable on March 31, 2001. Interest
accrued at the Prime Rate plus 1.625% per annum and was payable in monthly
installments that commenced May 31, 1992. Additional advances for federal, state
and local taxes and operating expenses, up to a maximum of $40,000 per annum,
constituted a part of the principal and bore interest from the date of the
advance. The balance outstanding on the Revolving Loan was paid in full in
September 1995.

SFN also executed a participation note (the "Participation Note") in the amount
of $252,200, with interest to accrue until November 30, 2000, at the rate of 8%
per annum in favor of CIT, at which time the total principal and interest were
to be $500,000. Pursuant to this note, CIT was entitled to receive the greater
of the accreted value of the note or 25% of the net proceeds from the sale of
the cranes plus 25% of the fair market value of the cranes owned by SFN on
November 30, 2000. At April 30, 1992, the Participation Loan was recorded at 25%
of the fair market value of the cranes or $700,000. On July 25, 1996 SFN paid
$594,856 to CIT in full satisfaction of this note and recorded a gain on
extinguishment of debt of $105,144.

SFN also executed a subordinated promissory note to SPBC in the amount of
$1,000,000. Interest accrued at the rate of 7.5% per annum and was payable on a
monthly basis beginning June 5, 1992. Principal installments were due annually
beginning May 5, 1993 and ending on May 5, 1999. On August 30, 1996 SFN paid
$276,962 to SPBC in full satisfaction of this note and recorded a gain on
extinguishment of debt of $25,000.

8.  Transactions with General Partners and Affiliates
The following is a summary of transactions with General Partners and their
affiliates during the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                Paid         Paid          Paid
                                              During       During        During
                                                1998         1997          1996
-------------------------------------------------------------------------------
<S>                                            <C>     <C>           <C>       
Administrative salaries
  and expenses                                 $  --   $   58,192    $   57,537
Management fees                                   --    1,224,172     1,391,742
-------------------------------------------------------------------------------
                                               $  --   $1,282,364    $1,449,279
                                               ================================
</TABLE>

As of June 1986, the General Partners had agreed to defer payment of monthly
management fees in excess of $5,000 until cash flow of the Partnership improved.
On November 20, 1996, the Partnership paid deferred management fees totaling
$1,331,742 to EMI. On February 3, 1997, the Partnership paid to San Felipe
Resources (for the benefit of Mr. Webster) $948,197 and EMI $275,975.
<PAGE>
10

EQUIPMENT ASSET RECOVERY FUND, L.P.
AND CONSOLIDATED VENTURE AND SUBSIDIARY

9.  Litigation
On June 4, 1997, a purported class action suit was commenced by a limited
partner who acquired its interest in the Partnership through a tender offer (the
"Plaintiff"), on behalf of, among others, all limited partners of the
Partnership, in the 151st judicial District Court for Harris County, Houston,
Texas against Steven A. Webster, EMI, DSC, DSEC, SFN and the Partnership (a
nominal defendant) (collectively, the "Defendants"). The petition purports to
bring a suit for breach of fiduciary duty and breach of contract with respect to
the management and sale of the construction crane fleet and related equipment.
The Plaintiff has requested that the court enter a judgment against the
Defendants, jointly and severally, (i) declaring a proper class action; (ii)
awarding unspecified compensatory damages, plus interest, expenses and attorneys
fees and (iii) awarding punitive and exemplary damages. The Defendants filed a
Motion for Summary Judgment and a Partial Summary Judgment was granted by the
Court on March 31, 1998. On August 24, 1998, the Court heard a Motion for
Summary Judgment filed by a co-defendant. That Motion was taken under
consideration, but the judge recused herself before ruling. The case was then
reassigned to another judge and a hearing was held on the Motion on March 8,
1999. The Court granted the Motion in part and overruled it in part. The Court
has set a scheduling conference for May 5, 1999, at which time all remaining
deadlines will be set, including a trial date. The Defendants believe the
remaining allegations in this complaint are without merit and intend to defend
the action vigorously.

10.  Reconciliation of Net Income to Taxable Income
The net income or loss reported in the financial statements for the years ended
December 31, 1998, 1997 and 1996 was less than the net income reported for
federal income tax purposes by approximately $62,000, $2,887,000 and $1,961,000,
respectively. The differences for each year were primarily the result of
differences between methods of depreciation for book and tax purposes, timing
differences in the recognition of revenues and expenses between book and tax
methods of accounting, differences in the recognition of the Partnership's share
of DSC's income and the treatment of SFN as a separate taxable entity.

11.  Income Taxes (SFN Corporation)
The provision or benefit for income taxes resulted from the Partnership's
corporate consolidated subsidiary, SFN Corporation, which was a separate taxable
entity, and, therefore, had no effect on the limited partners' taxable income or
loss reportable for the years ended December 31, 1997 and 1996. SFN liquidated
in 1997 and therefore, no provision or benefit for income taxes has been
recorded for 1998 (see Note 5).

SFN Corporation's total benefit for income taxes for 1997 differs from that
which would have been calculated using the statutory federal income tax rate due
primarily to recognition of federal income tax benefits carried back to the
prior year and reductions in tax reserves no longer required due to the
liquidation of SFN in 1997. SFN's total provision for income taxes for 1996
differs from that which would have been calculated using the statutory federal
income tax rate, due primarily to the net effect of the provision for state
income taxes. The current tax liability as of December 31, 1996 resulted from
temporary differences in the recognition of revenues and expenses for tax and
financial reporting purposes primarily related to differences in the methods of
amortization of the discount on notes receivable and methods of depreciation for
book and tax purposes.

The benefit or provision for income taxes and current tax liability at December
31, 1997 and 1996 was the following:

<TABLE>
<CAPTION>
Benefit (provision) for Income Taxes                         1997          1996
-------------------------------------------------------------------------------
<S>                                                      <C>          <C>       
Federal income taxes                                     $369,931     $(345,347)
State taxes                                                 9,550       (33,730)
-------------------------------------------------------------------------------
Benefit (provision) for income taxes                     $379,481     $(379,077)
===============================================================================

Current Tax Liability                                    $     --     $(624,065)
-------------------------------------------------------------------------------
</TABLE>
<PAGE>
11

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                        REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------



To the Partners of
Equipment Asset Recovery Fund, L.P. and
Consolidated Venture and Subsidiary:

We have audited the accompanying consolidated balance sheets of Equipment Asset
Recovery Fund, L.P. (a Texas limited partnership) and Consolidated Venture and
Subsidiary as of December 31, 1998 and 1997, and the related consolidated
statements of operations, partners' capital (deficit) and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

As described in Note 1 to the financial statements, the Partnership sold all of
its equipment assets on November 27, 1996. The Partnership anticipates settling
and liquidating its remaining assets and liabilities and dissolving the
Partnership in 1999. The balance sheets presented herein represent the general
partners' estimated net realizable value of all assets and liabilities as of
December 31, 1998 and 1997 and the statements of operations and cash flows
reflect the activities of the Partnership for each of the three years in the
period ended December 31, 1998, including the operations related to the
equipment assets through November 26, 1996.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Equipment Asset
Recovery Fund, L.P. and Consolidated Venture and Subsidiary as of December 31,
1998 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
March 12, 1999