SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM l0-Q

                   Quarterly Report Under Section 13 or 15(d)
                     of The Securities Exchange Act of 1934

                      For Quarter Ended September 30, 1998

                         Commission file number O-17248


                         OWENS MORTGAGE INVESTMENT FUND,
                        a California Limited Partnership
             (Exact Name of Registrant as specified In Its charter)


             California                                        68-0023931
    (State or other jurisdiction                             (I.R.S. Employer
  of incorporation or organization)                         Identification No.)


       2221 Olympic Boulevard
      Walnut Creek, California                                    94595
(Address of principal executive office)                         (Zip Code)


           (925) 935-3840
   (Registrant's Telephone number,
        including area code)


        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>



PART I. FINANCIAL INFORMATION


Item 1. Financial Statements
<TABLE>
<CAPTION>


                                              OWENS MORTGAGE INVESTMENT FUND
                                            (A California Limited Partnership)

                                                      BALANCE SHEETS
                                         September 30, 1998 and December 31, 1997


                                                                           September 30           December 31
                                                                               1998                  1997
                                                                               ----                  ----
                                                                            (Unaudited)
                                                          ASSETS

<S>                                                                        <C>                  <C>           
Cash and cash equivalents (Note 2)                                         $  9,356,194           $  3,073,115
Certificates of deposit (Note 2)                                                534,006              1,000,000
Commercial paper (Note 2)                                                     3,040,867                      -

Loans secured by trust deeds (Notes 2 and 3)                                176,446,203            174,714,607
Less:  Allowance for loan losses (Note 2)                                    (3,500,000)            (3,500,000)
                                                                            -----------            -----------
                                                                            172,946,203            171,214,607
Real estate held for sale, net of allowance
  for losses (Notes 2 and 4)                                                 10,229,499             14,151,141
Interest receivable                                                           2,724,432              1,773,608
Other receivables                                                               531,399                112,583
                                                                            -----------            -----------
     Total Assets                                                          $199,362,600           $191,325,054
                                                                            ===========            ===========


                                            LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES:
Accrued distributions payable (Note 5)                                     $    519,376           $    544,385
Accounts payable and accrued liabilities                                      1,548,353                 49,534
                                                                            -----------            -----------

     Total Liabilities                                                        2,067,729                593,919
                                                                            -----------            -----------

PARTNERS' CAPITAL:
General partners (Note 5)                                                     1,946,559              1,864,033
Limited partners (Note 5) (Units Subject to Redemption)                     195,348,312            188,867,102
                                                                            -----------            -----------
     Total Partners' Capital                                                197,294,871            190,731,135
                                                                            -----------            -----------
     Total Liabilities and Partners' Capital                               $199,362,600           $191,325,054
                                                                            ===========            ===========

              The accompanying notes are an integral part of these
                             financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                         OWENS MORTGAGE INVESTMENT FUND
                       (A California Limited Partnership)

                              STATEMENTS OF INCOME
   For the Three and Nine Months Ended September 30, 1998 and 1997 (Unaudited)

                                                            For the Three Months Ended              For the Nine Months Ended
                                                            --------------------------              -------------------------
                                                          September 30          September 30       September 30        September 30
                                                              1998                  1997               1998                1997
                                                              ----                  ----               ----                ----
  <S>                                                   <C>                   <C>                <C>                 <C>
  REVENUES:           
     Interest income on loans secured by trust deeds    $   5,030,646         $   4,572,435      $   14,267,744      $   13,251,545
     (Loss) gain on sale of real estate (Note 4)               (2,074)              449,015           1,251,943           2,249,142
     Other income                                             241,070               190,892             586,927             525,130
                                                          -----------           -----------        ------------        ------------
     Total revenues                                         5,269,642             5,212,342          16,106,614          16,025,817
                                                          -----------           -----------        ------------        ------------

OPERATING EXPENSES:
     Management fees to General Partner (Note 7)            1,720,721               895,820           2,493,560           3,121,387
     Servicing fees to General Partner (Note 7)               108,097                99,006             356,829             337,664
     Promotional interest (Note 5)                                  -                19,203              38,460              59,856
     Administrative                                            23,480                14,299              53,220              42,557
     Legal and accounting                                      20,629                    60              79,798              77,914
     Real estate operations, net                                3,753                10,886              23,280              83,162
     Other                                                         59                     -              13,156               8,843
                                                          -----------           -----------        ------------        ------------
     Total operating expenses                               1,876,739             1,039,274           3,058,303           3,731,383
                                                          -----------           -----------        ------------        ------------
     Net income                                         $   3,392,903         $   4,173,068      $   13,048,311      $   12,294,434
                                                          ===========           ===========        ============        ============

     Net income allocated to general partner            $      33,593         $      40,715      $      129,191      $      119,496
                                                          ===========           ===========        ============        ============

Net income allocated to limited partners                $   3,359,310         $   4,132,353      $   12,919,120      $   12,174,938
                                                          ===========           ===========        ============        ============

Net income allocated to limited partners
    per weighted limited partnership unit (Note 8)      $.017                 $.022              $.066               $.066
                                                         ====                  ====               ====                ====

                          The accompanying notes are an
                  integral part of these financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                                                       
                         OWENS MORTGAGE INVESTMENT FUND
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS
        For the Nine Months Ended September 30, 1998 and 1997 (Unaudited)
                            September 30 September 30
                                                                                1998                    1997
                                                                                ----                    ----
<S>                                                                       <C>                    <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income                                                           $   13,048,311         $    12,294,434
Adjustments to reconcile net income
      to net cash provided by operating activities:
     Gain on sale of real estate by limited partnership                       (1,227,070)             (2,249,142)
     Gain on sale of real estate properties                                      (24,873)                      -
     Changes in operating assets and liabilities:
       Interest receivable                                                      (950,824)                (66,888)
       Other receivables                                                        (418,816)                      -
       Accrued distributions payable                                             (25,009)                 17,682
       Accounts payable and accrued liabilities                                1,498,819                     174
       Deferred income                                                                 -                 132,742
                                                                             -----------             -----------
          Net cash provided by operating activities                           11,900,538              10,129,002
                                                                             -----------             -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of loans secured by trust deeds                               (62,688,044)            (63,406,952)
     Principal collected                                                       1,327,576               1,495,912
     Loan payoffs                                                             60,270,185              41,632,527
     Investment in real estate properties                                       (261,451)             (2,378,711)
     Net proceeds from disposition of real estate properties                     179,555                       -
     Investment in limited partnership                                        (1,250,395)             (3,203,564)
     Distributions received from limited partnership                           5,944,129               7,141,248
     Investment in corporate joint venture                                       (79,566)                      -
     Unsecured loan to General Partner                                                 -                 488,764
     Investments in certificates of deposit                                      (84,006)               (150,000)
     Proceeds from maturities of certificates of deposit                         550,000                       -
     Investment in commercial paper                                           (3,040,867)                      -
                                                                             -----------             -----------
         Net cash provided by (used in) investing activities                     867,116             (18,380,776)
                                                                             -----------             -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from sale of partnership Units                                   9,193,566              13,176,560
     Partners' cash distributions                                             (4,733,054)             (4,587,638)
     Partners' capital withdrawals                                           (10,945,087)             (8,704,838)
                                                                             -----------             -----------
     Net cash used in financing activities                                    (6,484,575)               (115,916)
                                                                             -----------             -----------

INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                                  6,283,079              (8,367,690)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                                          3,073,115              11,386,661
                                                                             -----------             -----------
CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                                           $    9,356,194         $     3,018,971
                                                                             ===========             ===========

See notes 3, 4 and 5 for  supplemental  disclosure  of  non-cash  investing  and
financing activities.
                          The accompanying notes are an
                  integral part of these financial statements.
</TABLE>


<PAGE>


                         OWENS MORTGAGE INVESTMENT FUND
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998



    (1)  Organization

         Owens Mortgage Investment Fund (the Partnership),  a California limited
         partnership,  was formed on June 14, 1984 to invest in loans secured by
         first,  second and third trust  deeds,  wraparound,  participating  and
         construction  mortgage  loans and  leasehold  interest  mortgages.  The
         Partnership  commenced  operations  on the date of  formation  and will
         continue until December 31, 2034 unless  dissolved  prior thereto under
         the provisions of the partnership agreement.

         The general  partners  include Owens  Financial  Group,  Inc. (OFG) and
         certain  individuals  who are  OFG's  shareholders  and  officers.  The
         individual  partners have assigned to OFG their interest in any present
         or  future  promotional  allowance  from  the  Partnership.  OFG  is  a
         California  corporation  engaged  in the  origination  of  real  estate
         mortgage loans for eventual sale and the subsequent  servicing of those
         mortgages for the Partnership and other third-party investors.

         The  general  partners  are  authorized  to offer and sell units in the
         Partnership  up to an aggregate of  250,000,000  units  outstanding  at
         $1.00  per  unit,  representing  $250,000,000  of  limited  partnership
         interests in the Partnership.  Limited  partnership  units  outstanding
         were  195,544,095 and  189,063,122,  at September 30, 1998 and December
         31, 1997, respectively.

    (2)  Summary of Significant Accounting Policies

         (a)    General

                In  the  opinion  of the  management  of  the  Partnership,  the
                accompanying   unaudited   financial   statements   contain  all
                adjustments,   consisting  of  normal,   recurring  adjustments,
                necessary to present fairly the financial  information  included
                therein.   These   financial   statements   should  be  read  in
                conjunction with the audited  financial  statements  included in
                the  Partnership's  Form 10-K for the fiscal year ended December
                31, 1997 filed with the Securities and Exchange Commission.  The
                results of operations for the three-month and nine-month periods
                ended September 30, 1998 are not  necessarily  indicative of the
                operating results to be expected for the full year.

         (b)    Management 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 reporting
                period. Actual results could differ from those estimates.

    (2)  Summary of Significant Accounting Policies, Continued

         (c)    Loans Secured by Trust Deeds

                Loans  secured  by trust  deeds  are  acquired  from OFG and are
                recorded  at cost.  Interest  income on loans is  accrued by the
                simple interest method.

                The  Partnership  accounts for its loans in accordance  with the
                Financial   Accounting  Standards  Board's  Statement  No.  114,
                Accounting by Creditors for  Impairment of a Loan,  and No. 118,
                Accounting  by  Creditors  for   Impairment  of  a  Loan--Income
                Recognition and Disclosures.  Under Statement No. 114, a loan is
                impaired when,  based on current  information and events,  it is
                probable   that  a  creditor  will  be  unable  to  collect  the
                contractual  interest and principal payments of a loan according
                to the contractual  terms of the loan  agreement.  Statement No.
                114  requires  that  impaired  loans be  measured on the present
                value of  expected  future cash flows  discounted  at the loan's
                effective  interest  rate or, as a practical  expedient,  at the
                loan's  observable  market  price  or  the  fair  value  of  the
                collateral  if the loan is collateral  dependent.  Statement No.
                118  clarifies   interest  income   recognition  and  disclosure
                provisions of Statement No. 114.

                The Partnership does not recognize interest income on loans once
                they are determined to be impaired or once they become more than
                ninety  days  delinquent  in  payments  until  the  interest  is
                collected  in cash.  Cash  receipts  are  allocated  to interest
                income, except when such payments are specifically designated as
                principal  reduction  or when  management  does not  believe the
                Partnership's investment in the loan is fully recoverable.

         (d)    Allowance for Loan Losses

                The Partnership  maintains an allowance for loan losses equal to
                $3,500,000  as of  September  30, 1998 and  December  31,  1997.
                Management of the Partnership  believes that based on historical
                experience  and a  review  of the  loans  and  their  respective
                collateral, the allowance for loan losses is adequate in amount.

                The  outstanding  balance  of all loans  delinquent  in  monthly
                payments  greater than ninety days is $13,444,000 and $5,236,000
                as of September  30, 1998 and  December 31, 1997,  respectively.
                The  Partnership  discontinues  the accrual of interest on loans
                when, in the opinion of management,  there is significant  doubt
                as to the  collectibility  of  interest  or  principal  from the
                borrower or when the payment of  principal or interest is ninety
                days past due, unless OFG purchases the interest receivable from
                the Partnership.  OFG was purchasing the interest  receivable on
                delinquent  Partnership  loans in the total amount of $1,896,000
                and  $1,485,000  as of September 30, 1998 and December 31, 1997,
                respectively.  As of  September  30, 1998 and December 31, 1997,
                loans totaling  $11,548,000  and $3,751,000,  respectively,  are
                classified as non-accrual loans.

                OFG advances  certain  payments to the  Partnership on behalf of
                borrowers, such as property taxes, mortgage interest pursuant to
                senior  indebtedness,   and  development  costs.   Purchases  of
                interest receivable and payments made on loans by OFG during the
                nine months ended September 30, 1998 and the year ended December
                31, 1997 but not collected as of September 30, 1998 and December
                31,  1997,  respectively,  totaled  approximately  $179,000  and
                $219,000, respectively.

    (2)  Summary of Significant Accounting Policies, Continued

         (e)    Cash and Cash Equivalents

                Cash  and  cash   equivalents   include   interest-bearing   and
                noninterest-bearing   bank  deposits,  money  market  funds  and
                short-term  certificates of deposit with original  maturities of
                three months or less.

         (f)    Marketable Securities

                Marketable   securities  include  certificates  of  deposit  and
                commercial  paper  with  various  financial   institutions  with
                original   maturities  of  up  to  one  year.  The   Partnership
                classifies  its  debt  securities  as  held-to-maturity,  as the
                Partnership  has the ability  and intent to hold the  securities
                until maturity. These securities are recorded at amortized cost,
                adjusted  for the  amortization  or  accretion  of  premiums  or
                discounts. A decline in the market value of any held-to-maturity
                security  below cost that is deemed to be other  than  temporary
                results in a  reduction  in carrying  amount to fair value.  The
                impairment  is charged to earnings and a new costs basis for the
                security is established. Premiums and discounts are amortized or
                accreted over the life of the related  security as an adjustment
                to yield  using the  effective  interest  method.  Dividend  and
                interest  income  are  recognized  when  earned.  There  was  no
                significant  difference  between the carrying value and the fair
                value of  marketable  securities  as of  September  30, 1998 and
                December 31, 1997.

         (g)    Real Estate Held for Sale

                Real estate held for sale includes real estate acquired  through
                foreclosure  and  is  carried  at  the  lower  of  the  recorded
                investment in the loan, inclusive of any senior indebtedness, or
                the  property's  estimated fair value,  less estimated  costs to
                sell.

                Certain real estate held for sale acquired by the Partnership is
                held in a limited  partnership and corporate joint venture.  The
                Partnership   accounts  for  its   investments  in  the  limited
                partnership  and corporate joint venture under the equity method
                of  accounting.  The limited  partnership  and  corporate  joint
                venture  investment  in real  estate is  carried at the lower of
                cost or estimated fair value,  less estimated costs to sell. The
                Partnership  increases  its  investment  by advances made to the
                limited  partnership and corporate joint venture.  Any profit or
                loss generated from the  investment in limited  partnership  and
                corporate joint venture is recorded as a gain or loss on sale of
                real estate.

                In accordance with Statement of Financial  Accounting  Standards
                No. 121, "Accounting for the Impairment of Long-lived Assets and
                Long-lived   Assets  to  Be  Disposed   Of",   the   Partnership
                periodically compares the carrying value of real estate held for
                sale to expected  future cash flows for the purpose of assessing
                the  recoverability  of the  recorded  amounts.  If the carrying
                value exceeds future cash flows,  the assets are reduced to fair
                value.  There were no required  reductions to the carrying value
                of real  estate  held for sale  made  for the  quarter  and nine
                months ended September 30, 1998 and 1997.





    (2)  Summary of Significant Accounting Policies, Continued

         (h)    Income Taxes

                No provision is made for income taxes since the  Partnership  is
                not a  taxable  entity.  Accordingly,  any  income  or  loss  is
                included in the tax returns of the partners.

    (3)  Loans Secured by Trust Deeds

                Loans  secured  by trust  deeds  as of  September  30,  1998 and
                December 31, 1997 are as follows:


                                                September 30        December 31
                                                   1998                  1997
                                                   ----                  ----

              Income-producing properties    $  157,902,115    $    165,201,582
              Single-family residences            2,159,101           2,088,606
              Unimproved land                    16,384,987           7,424,419
                                                -----------         -----------

                                             $  176,446,203    $    174,714,607
                                                ===========         ===========


              First mortgages                 $  159,185,333        161,275,350
              Second mortgages                    16,699,954         12,744,274
              Third mortgages or
               all-inclusive deeds of trust          560,916            694,983
                                                 -----------        -----------

                                              $  176,446,203    $   174,714,607
                                                 ===========        ===========

         Scheduled  maturities  of loans  secured by trust deeds as of September
30, 1998 and the interest rate sensitivity of such loans is as follows:
<TABLE>
<CAPTION>

                                                   Fixed             Variable
             Year ending                          interest           interest
            September 30,                           rate               rate               Total

<S>                                        <C>                      <C>                <C>       
              1998 (Past Maturity)         $    17,466,378          4,155,449          21,621,827
              1999                              27,954,241          8,958,250          36,912,491
              2000                              48,449,477         19,139,027          67,588,504
              2001                               4,948,481          4,984,755           9,933,236
              2002                               1,810,634         10,545,467          12,356,101
              2003                               1,011,705          3,051,760           4,063,465
              Thereafter (through 2012)          7,435,357         16,535,222          23,970,579
                                             -------------      -------------      --------------

                                           $   109,076,273         67,369,930         176,446,203
                                             =============      =============      ==============
</TABLE>

         Variable  rate  loans use as  indices  the one and five  year  Treasury
         Constant Maturity Index (4.41% and 4.24%, respectively, as of September
         30,  1998),  the prime rate (8.50% as of  September  30,  1998) and the
         weighted  average  cost of funds index for  Eleventh  District  savings
         institutions  (4.899% as of September  30,  1998).  Premiums over these
         indices have varied from 250-550  basis  points  depending  upon market
         conditions at the time the loan is made.

    (3)  Loans Secured by Trust Deeds, Continued

         The scheduled maturities for 1998 include approximately  $21,622,000 of
         loans  which are past  maturity  as of  September  30,  1998,  of which
         $7,448,000  represents loans for which interest payments are delinquent
         over ninety days.  During the nine months ended  September 30, 1998 and
         the year ended  December 31, 1997,  the  Partnership  refinanced  loans
         totaling $9,941,000 and $2,741,000, respectively, thereby extending the
         maturity dates of such loans.

         The Partnership's total investment in loans delinquent over ninety days
         is $13,444,000 and $5,236,000 as of September 30, 1998 and December 31,
         1997,  respectively.  Of these  amounts,  approximately  $3,893,000 and
         $3,279,000  were in the process of foreclosure as of September 30, 1998
         and December 31, 1997. OFG has purchased the Partnership's  receivables
         for delinquent  interest of $82,000 and $73,000,  related to delinquent
         loans  for  the  nine  months  ended   September  30,  1998  and  1997,
         respectively.

         The  Partnership's  investment in delinquent  loans as of September 30,
         1998  totals  approximately  $13,444,000,  of  which  $8,026,000  has a
         specific  related  allowance for credit losses  totaling  approximately
         $2,215,000.  There is a specific and non-specific  allowance for credit
         losses of $1,285,000  for the remaining  balance of $5,418,000  and for
         other  current  loans.  There was no  additional  allowance  for credit
         losses during the nine months ended September 30, 1998.

         The average  recorded  investment in impaired  loans was $7,074,000 and
         $7,998,000 during the nine months ended September 30, 1998 and the year
         ended  December 31, 1997,  respectively.  Interest  income  received on
         impaired loans during the nine months ended  September 30, 1998 and the
         year ended  December  31,  1997,  totaled  approximately  $420,000  and
         $722,000,  respectively,  $360,000  and  $670,000  of which was paid by
         borrowers  and   963949075$60,000  and  $52,000  of  which  related  to
         purchases of interest receivable by OFG, respectively.

         As of September 30, 1998 and December 31, 1997, the Partnership's loans
         secured  by  deeds  of trust on real  property  collateral  located  in
         Northern  California  totaled  approximately  54% ($95,425,000) and 67%
         ($117,352,000),  respectively,  of the  loan  portfolio.  The  Northern
         California  region  (which  includes  the  following  counties  and all
         counties north:  Monterey,  Fresno,  Kings, Tulare and Inyo) is a large
         geographic  area which has a diversified  economic base. The ability of
         borrowers to repay loans is influenced by the economic  strength of the
         region and the impact of prevailing  market  conditions on the value of
         real  estate.  Such loans are  secured by deeds of trust on real estate
         properties  and are  expected  to be  repaid  from the cash flow of the
         properties or proceeds from the sale or refinancing of the  properties.
         The policy of the  Partnership  is to require real property  collateral
         with a value,  net of senior  indebtedness,  that  exceeds the carrying
         amount  of the  loan  balance  and to  record  a deed of  trust  on the
         underlying property.









     4)  Real Estate Held for Sale

         Real estate  held for sale  includes  the  following  components  as of
         September 30, 1998 and December 31, 1997:
                                                   September 30     December 31
                                                        1998            1997
                                                        ----            ----

         Real estate properties held for sale     $   9,165,112    $  9,699,656
         Investment in limited partnership              345,458       3,812,122
         Investment in corporate joint venture          718,929         639,363
                                                    -----------     -----------

                                                   $ 10,229,499      14,151,141
                                                     ==========      ==========

         Gain on sale of real estate  includes the following  components for the
         nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>

                                                                               September 30         September 30
                                                                                   1998                 1997

              <S>                                                          <C>                       <C>         
              Gain on sale of real estate properties                         $      24,873                   -
              Gain on sale of real estate by limited partnership                 1,227,070           2,249,142
                                                                                 ---------         -----------

                                                                             $   1,251,943           2,249,142
                                                                                ==========         ===========
</TABLE>

         (a)    Real Estate Properties Held for Sale

                Real estate  properties  held for sale at September 30, 1998 and
                December 31, 1997 consists of the following  properties acquired
                through foreclosure in 1993 through 1998:
<TABLE>
<CAPTION>

                                                                                   September 30       December 31
                                                                                       1998              1997
                <S>                                                              <C>                    <C> 
                Light industrial warehouse, Merced, California,
                  net of valuation allowance of $350,000                         $    650,028           650,000
                Commercial lot/residential development, Vallejo, California         1,039,116         1,030,566
                Commercial lot, Sacramento, California,
                  net of valuation allowance of $250,000                              299,828           299,828
                Office building and undeveloped land, Monterey, California,
                  net of valuation allowance of $200,000                            1,885,731         1,902,855
                Manufactured home subdivision development, Ione, California,
                  net of valuation allowance of $384,000                            2,565,010         2,451,286
                Self storage, Oakland, California                                     453,815           444,063
                Undeveloped land, Reno, Nevada                                        215,420           230,000
                Manufactured home subdivision development, Sonora, California,
                  net of valuation allowance of $712,000 as of December 31, 1997          ---         1,149,807
                Light industrial building, Paso Robles, California                  1,547,422         1,541,251
                Commercial building, Sacramento, California                            30,000               ---
                Commercial building, Gresham, Oregon                                  425,557               ---
                22% interest in 6-unit residential building, Oakland,
                    California                                                         53,185               ---
                                                                                    ---------         ---------

                                                                                  $ 9,165,112         9,699,656
                                                                                    =========         =========
</TABLE>

         4)       Real Estate Held for Sale, Continued

                The  acquisition  of certain  of these  properties  resulted  in
                non-cash  increases  in real estate  held for sale and  non-cash
                decreases  in loans  secured  by trust  deeds  of  $508,742  and
                $3,273,258  for the nine  months  ended  September  30, 1998 and
                1997, respectively.

                In  February   1998,   OFG  purchased  the   manufactured   home
                subdivision  development property located in Sonora,  California
                from the  Partnership for  $1,150,000.  The Partnership  carried
                back a loan secured by a trust deed on the property for the full
                purchase  price.  The note bears interest at 8% per annum and is
                due on demand.

                During 1997, the Partnership  sold three  properties for a sales
                price  of  approximately   $1,659,000.   On  one  of  the  three
                properties,  the Partnership took back a loan secured by a trust
                deed in the amount of $840,000.

                During 1997,  the  Partnership  sold two loans secured by second
                deeds of trust to OFG for $600,000 (face value). The Partnership
                subsequently  purchased  the  property  (located in Paso Robles,
                California)  securing  the  loans  at  the  senior  lienholder's
                trustee sale for $1,350,000; thus, wiping out OFG's junior deeds
                of trust.  OFG  recorded a loss of  $600,000 as a result of this
                transaction.

         (b)    Investment in Limited Partnership

                In 1993, the  Partnership  foreclosed on a loan in the amount of
                $600,000 secured by a junior lien on 30 residential lots located
                in Carmel Valley,  California,  and in 1994, paid off the senior
                loan  in  the  amount  of  $500,000.  The  Partnership  incurred
                additional  costs of $502,798 in 1994 to protect its investment,
                increasing  the carrying  value of the lots to  $1,602,798.  The
                Partnership began to develop the lots and incurred an additional
                $671,118 in costs during 1995.

                During 1995, the Partnership entered into a limited partnership,
                WV-OMIF  Partners,  L.P.  (WV-OMIF  Partners)  with an unrelated
                developer/builder,  Wood Valley Development,  Inc. (Woodvalley),
                for the purpose of  constructing  single-family  homes on the 30
                lots. The Partnership  contributed the lots to WV-OMIF  Partners
                in 1996 in  exchange  for a limited  partnership  interest.  The
                $671,118 in capitalized costs incurred in 1995 was considered an
                advance to WV-OMIF Partners pursuant to the limited  partnership
                agreement   in  1996  when  the  lots  were   contributed.   The
                Partnership provides advances to WV-OMIF Partners to develop and
                construct  the homes.  The  Partnership  is  entitled to receive
                interest  at a rate of prime plus 2% on the  advances to WV-OMIF
                Partners.

                OFG and  Woodvalley  exercised  their  option of  purchasing  34
                similar  lots  which are  interspersed  among the 30 lots  being
                developed by WV-OMIF Partners. WV-OMIF Partners incurred certain
                infrastructure costs which benefit all 64 lots, including the 34
                lots developed by OFG and Woodvalley.  As of September 30, 1998,
                OFG  and  Woodvalley  had  developed  and  sold 28  lots.  As of
                September 30, 1998, OFG and Woodvalley had reimbursed all shared
                development  costs in the total  amount of  $750,675  to WV-OMIF
                Partners from the sale of homes.



    (4)  Real Estate Held for Sale, Continued

                During the nine months ended  September  30, 1998 and 1997,  the
                Partnership advanced an additional  $1,250,395 and $3,203,564 to
                WV-OMIF.  WV-OMIF  sold  thirteen  homes  during the nine months
                ended September 30, 1998 for proceeds of $6,443,101, and the net
                gain  allocable to the  Partnership  was  $1,227,070,  including
                interest  income  of  $173,203.   WV-OMIF  Partners  distributed
                $5,944,129  (including  $102,579 in reimbursements  from OFG and
                Woodvalley)  to OMIF during the nine months ended  September 30,
                1998.  WV-OMIF  Partners  sold  fourteen  homes  during the nine
                months ended  September 30, 1997 for proceeds of $7,545,606  and
                the  net  gain  allocable  to the  Partnership  was  $2,249,142,
                including   interest  income  of  $274,557.   WV-OMIF   Partners
                distributed  $7,141,248  (including  $628,980 in  reimbursements
                from  OFG  and  Woodvalley)  to OMIF  during  this  period.  The
                Partnership's  investment in WV-OMIF  Partners  totaled $345,458
                and  $3,812,122  as of September 30, 1998 and December 31, 1997,
                respectively.

                WV-OMIF Partners is distributing  cash received from the sale of
                the lots in the following priority:  (1) to third parties,  such
                as real property taxes and  assessments,  lenders,  contractors,
                etc.; (2) to pay the  Partnership the amount of $70,000 per lot,
                as each lot sells;  (3) to pay the  Partnership  the interest on
                the cash advances in full,  as each lot sells;  (4) to reimburse
                the  Partnership  for its  out-of-pocket  cash advances for each
                lot, as each lot sells;  and (5) the remainder to Woodvalley and
                the  Partnership  at a rate of 30% to Woodvalley  and 70% to the
                Partnership.

                The  WV-OMIF  Partners  Partnership  Agreement  states  that the
                Partnership  shall  take no part in the  conduct  or  control of
                WV-OMIF  Partner's  business  or  in  the  operation,  right  or
                authority to act for WV-OMIF  Partners.  Thus,  the  Partnership
                does not have  control of WV-OMIF  Partners and accounts for its
                investment  in  WV-OMIF  Partners  under  the  equity  method of
                accounting.

         (c)    Investment in Corporate Joint Venture

                In 1995, the  Partnership  foreclosed on a loan in the amount of
                $571,853 secured by a senior lien on a commercial parcel of land
                located in Los Gatos,  California.  During 1997, the Partnership
                contributed the land into 720 University,  LLC (the Company),  a
                corporate  joint venture formed between the  Partnership and BGC
                Properties, LLC (BGC). The purpose of the Company is to develop,
                construct  and  operate  a  commercial  office  building  or R&D
                facility  on the land to be held  for  investment  and  eventual
                sale.  The  Partnership  may  provide  loans to the  Company  to
                develop  and  construct  the  building or the  Partnership  will
                obtain  loans  from  third  parties  for  such   purposes.   The
                Partnership  is entitled to receive  interest at a rate of prime
                plus 2% on the loans it makes to the Company.

                During  1997,  the  Partnership  capitalized  $56,889  in  costs
                incurred prior to the property being  contributed to the Company
                and advanced $10,621 to the Company for development.  During the
                nine months ended September 30, 1998, the  Partnership  advanced
                an additional $79,566 to the Company for development.  The total
                investment in the corporate  joint venture  totals  $718,929 and
                $639,363  as of  September  30,  1998  and  December  31,  1997,
                respectively.

    (4)  Real Estate Held for Sale, Continued

                The net cash flows from the  operations of the Company are to be
                distributed in accordance with the following priorities:  1) 70%
                to the  Partnership  and 30% to BGC until the sum of all current
                and prior  distributions  of net cash flows  equals the members'
                priority return on capital as of the end of the calendar quarter
                immediately preceding  distribution;  and 2) thereafter,  70% to
                the Partnership and 30% to BGC.

                The distribution  upon  dissolution  shall be made in accordance
                with the  following  priorities:  1) to third parties to pay all
                debts;  2) to the members to pay all debts; 3) to the members in
                accordance with and to the extent of their  respective  positive
                capital account  balances;  4) 70% to the Partnership and 30% to
                BGC.

                The Company is considered a corporate joint venture,  and, thus,
                the Partnership accounts for its investment in the Company under
                the equity method of accounting.

    (5)  Partners' Capital

         (a)    Allocations, Distributions and Withdrawals

                In accordance with the partnership agreement,  the Partnership's
                profits and losses are allocated to each limited partner and the
                general  partners  in  proportion  to their  respective  capital
                accounts.

                Distributions  of net  income are made  monthly  to the  limited
                partners  in  proportion  to  their  weighted   average  capital
                accounts  as of the last day of the  preceding  calendar  month.
                Accrued   distributions   payable   represent   amounts   to  be
                distributed in January and October,  1998 based on their capital
                accounts  as of  December  31,  1997  and  September  30,  1998,
                respectively.

                The Partnership makes monthly net income  distributions to those
                limited partners who elect to receive such distributions.  Those
                limited  partners  who elect not to receive  cash  distributions
                have  their  distributions   reinvested  in  additional  limited
                partnership   units.  Such  reinvested   distributions   totaled
                $7,789,174 and  $7,550,799  for the nine months ended  September
                30, 1998 and 1997,  respectively.  Reinvested  distributions are
                not shown as partners' cash  distributions or proceeds from sale
                of  partnership  units in the  accompanying  statements  of cash
                flows.



<PAGE>



    (5)  Partners' Capital, Continued

                The limited partners may withdraw,  or partially withdraw,  from
                the  Partnership  and  obtain  the  return of their  outstanding
                capital  accounts at $1.00 per unit (book value)  within 91 days
                after  written  notices are  delivered to the general  partners,
                subject to the following limitations:

                o Any such  payments  are  required  to be made  only  from cash
                  available   for   distribution,   net   proceeds  and  capital
                  contributions (as defined) during said 91-day period.

                o A maximum of $75,000 per partner may be  withdrawn  during any
                  calendar  quarter  (or  $100,000  in the  case  of a  deceased
                  limited partner).

                o The general  partners  are not required to establish a reserve
                  fund for the purpose of funding such payments.

                o No  more  than  10% of  the  outstanding  limited  partnership
                  interest may be withdrawn during any calendar year except upon
                  dissolution of the Partnership.

         (b)    Promotional Interest of General Partners

                The general partners  contributed  capital to the Partnership in
                the amount of 0.5% of the limited  partners'  aggregate  capital
                accounts and,  together  with their  promotional  interest,  the
                general  partners  have an  interest  equal to 1% of the limited
                partners'  capital  accounts.  This promotional  interest of the
                general partners of up to 1/2 of 1% is recorded as an expense of
                the  Partnership  and credited as a contribution  to the general
                partners'  capital  account as  additional  compensation.  As of
                September 30, 1998,  the general  partners had made cash capital
                contributions  of  $995,622  to  the  Partnership.  The  general
                partners are required to continue cash capital  contributions to
                the  Partnership  in order to maintain  their  required  capital
                balance.

                The promotional  interest expense charged to the Partnership was
                $38,460 and $59,856 for the nine months ended September 30, 1998
                and 1997, respectively.

    (6)  Contingency Reserves

         In  accordance  with  the  partnership  agreement  and to  satisfy  the
         Partnership's  liquidity  requirements,  the Partnership is required to
         maintain contingency reserves in an aggregate amount of at least 1-1/2%
         of the  capital  accounts  of the limited  partners.  The cash  capital
         contribution  of  the  general  partners   (amounting  to  $995,622  at
         September  30,  1998),  up to a  maximum  of 1/2  of 1% of the  limited
         partners'  capital  accounts,   will  be  available  as  an  additional
         contingency reserve, if necessary.

         The  contingency  reserves  required at September 30, 1998 and December
         31, 1997 were  approximately  $3,980,000 and $3,829,000,  respectively.
         Certificates of deposit,  commercial paper and certain cash equivalents
         as of the same dates were accordingly maintained as reserves.



    (7)  Transactions with Affiliates

         OFG is entitled to receive from the  Partnership a management fee of up
         to 2.75% per annum of the average unpaid  balance of the  Partnership's
         mortgage  loans at the end of each of the  preceding  twelve months for
         services rendered as manager of the Partnership. The maximum management
         fee is  reduced to 1.75% per annum if OFG has not  provided  during the
         preceding  calendar  year any of the  certain  services  defined in the
         limited partnership agreement.

         All of the  Partnership's  loans are serviced by OFG, in  consideration
         for which OFG  receives  up to .25% per annum of the  unpaid  principal
         balance of the loans.  Servicing fees are paid from the interest income
         of the loans collected from the borrowers.

         OFG,  at its sole  discretion  may,  on a  monthly  basis,  adjust  the
         management  and  servicing  fees as long  as  they  do not  exceed  the
         allowable  limits  calculated on an annual basis.  In  determining  the
         management and servicing  fees and hence the yield to the  Partnership,
         OFG may consider a number of factors, including the then-current market
         yields.  Even though the fees for a month may exceed one-twelfth of the
         maximum  limits,  at the end of the  calendar  year the sum of the fees
         collected  for each of the twelve  months must be equal to or less than
         the stated limits. Management fees amounted to approximately $2,494,000
         and $3,121,000  for the nine months ended  September 30, 1998 and 1997,
         respectively,  and  are  included  in the  accompanying  statements  of
         income.  Service fee payments to OFG approximated $357,000 and $338,000
         for the nine months ended  September  30, 1998 and 1997,  respectively,
         and are included in the accompanying statements of income.

         OFG receives late payment  charges from  borrowers who make  delinquent
         payments.  Such  charges  are in addition  to the normal  monthly  loan
         payments and totaled  approximately  $292,000 and $258,000 for the nine
         months ended September 30, 1998 and 1997, respectively.

         OFG  originates  all loans the  Partnership  invests in and receives an
         investment  evaluation  fee from  borrowers.  Such  fees  earned by OFG
         amounted to approximately $1,341,000 and $1,983,000 for the nine months
         ended September 30, 1998 and 1997, respectively.

         During the nine months ended September 30, 1998, the  Partnership  sold
         the manufactured home subdivision development in Sonora Vista to OFG at
         a loss of approximately  $2,000. An allowance for loss on this property
         in the amount of $712,000  had been  recorded in 1997;  therefore,  the
         loss for the nine months  ended  September  30, 1998 was an  additional
         $2,000.  The  Partnership  carried  back a loan from OFG for the entire
         purchase price of $1,150,000.

         During the nine months ended  September  30, 1997,  OFG  purchased  one
         delinquent  loan secured by a trust deed from OMIF at face value in the
         total amount of $273,000 for  assumption  of a loan of the same amount.
         OFG subsequently foreclosed on the loan.

         Included  in loans  secured by trust  deeds at  September  30, 1998 and
         December  31,  1997  are  notes  totaling  $2,095,332  and  $2,215,549,
         respectively,  which are secured by properties  owned by OFG. The loans
         bear  interest at 8% per annum and are due on demand.  The  Partnership
         earned  interest income of  approximately  $104,000 and $133,000 during
         the nine months ended September 30, 1998 and 1997,  respectively,  from
         OFG under loans secured by trust deeds.



    (8)  Net Income Per Limited Partner Unit

         Net income per limited  partnership unit is computed using the weighted
         average of limited  partnership units outstanding  during the three and
         nine month periods.  These amounts were  approximately  195,746,000 and
         188,928,000  for the three  months ended  September  30, 1998 and 1997,
         respectively, and 194,839,000 and 185,346,000 for the nine months ended
         September 30, 1998 and 1997, respectively.


<PAGE>



Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Results of Operations - Three Months Ended  September 30, 1998 Compared to Three
Months Ended September 30, 1997
-------------------------------

The net income decrease of  approximately  $780,000 (18.7%) for the three months
ended  September  30, 1998 as compared to the three months ended  September  30,
1997 was  primarily  attributable  to the  increase  in  management  fees to the
Corporate General Partner from approximately $896,000 to $1,721,000 ($825,000 or
92.1%) for the three months  ended  September  30, 1997 and 1998,  respectively.
Management  fees are in accordance with the  Partnership  Agreement  (maximum of
2.75% annually of average  mortgage  loans).  Although  interest income on loans
secured by trust  deeds  increased  approximately  $458,000  (10%) for the three
months ended  September 30, 1998 as compared to the three months ended September
30, 1997 as a result of the growth in the loan  portfolio,  total  revenues only
increased  by  $57,000  (1.1%)  due  to  a  loss  on  sale  of  real  estate  of
approximately  $2,000  during  the three  months  ended  September  30,  1998 as
compared  to gain on sale of real  estate of  $449,000  during the three  months
ended  September  30,  1997.  The loss on sale of real  estate  was a result  of
increased  construction  costs  and  fewer  homes  being  sold,  one and  three,
respectively, in the three months ended September 30, 1998 compared to the three
months ended September 30, 1997 from the development limited partnership between
the  Partnership  and  Wood  Valley   Development,   Inc.  (see  "Investment  in
Development Limited Partnership" below).

Results of  Operations - Nine Months Ended  September  30, 1998 Compared to Nine
Months Ended September 30, 1997
-------------------------------

The net income  increase of  approximately  $754,000  (6.1%) for the nine months
ended September 30, 1998 as compared to the nine months ended September 30, 1997
was  primarily  attributable  to the  decrease  in  management  fees paid to the
Corporate   General  Partner   pursuant  to  the   Partnership   Agreement  from
approximately  $3,121,000 to $2,494,000  ($627,000 or 20.1%) for the nine months
ended  September 30, 1997 and 1998,  respectively.  Although  interest income on
loans secured by trust deeds increased  approximately  $1,016,000 (7.7%) for the
nine months  ended  September  30,  1998 as  compared  to the nine months  ended
September  30,  1997 as a result  of the  growth  in the loan  portfolio,  total
revenues only  increased by $81,000  (.05%) due to a decrease in gain on sale of
real estate of $997,000 (44.3%). The decrease in gain on sale of real estate was
a result  of a  decrease  in the gain on  sales  of homes  from the  development
limited partnership  between the Partnership and Wood Valley  Development,  Inc.
(see "Investment in Development Limited Partnership" below). This decrease was a
result of increased  construction costs, the homes sold in the nine months ended
September  30, 1998 were  generally  less  expensive  homes with smaller  profit
margins,  and one fewer home was sold during the nine months ended September 30,
1998 compared to the nine months ended September 30, 1997.




Loan Portfolio

The number of Partnership mortgage investments decreased from 215 to 199 and the
average loan balance  increased  from  approximately  $813,000 to $887,000 as of
December 31, 1997 and September  30, 1998,  respectively.  The average  mortgage
investment  made by the  Partnership  during the period of December  31, 1997 to
September 30, 1998 was  approximately  $1,379,000  showing a trend of increasing
average  mortgage   investments.   These  average  loan  increases  reflect  the
Partnership's   ability  to  invest  in  larger   mortgage   loans  meeting  the
Partnership's objectives.

The Corporate General Partner had previously  purchased all interest  receivable
of  the  Partnership  on  all  delinquent  loans  made  or  invested  in by  the
Partnership. However, on loans originated by the Corporate General Partner on or
after May 1, 1993,  and  effective  November 1, 1994,  for  certain  other loans
originated  prior to May 1, 1993, the Corporate  General Partner has adopted the
policy to not purchase  delinquent  interest or  principal.  As of September 30,
1998 and December 31, 1997, there were approximately $11,548,000 and $3,751,000,
respectively,  in loans held by the Partnership on which payments were more than
90 days delinquent and on which such delinquent interest was not being purchased
by the Corporate  General  Partner.  The  Corporate  General  Partner  purchased
approximately  $82,000 and $73,000 in  delinquent  interest  receivables  of the
Partnership   during  the  nine  months  ended  September  30,  1998  and  1997,
respectively,  that had not  been  collected  from  borrowers  by the  Corporate
General Partner as of September 30, 1998 or 1997.

Approximately  $13,444,000 (7.6%) and $5,236,000 (3.0%) of the loans invested in
by the Partnership  were more than 90 days delinquent in payment as of September
30, 1998 and December 31, 1997,  respectively.  Of these amounts,  approximately
$3,893,000 (2.2%) and $3,279,000 (1.9%) were in the process of foreclosure as of
September 30, 1998 and December 31, 1997, respectively.  Loans more than 90 days
delinquent  increased by  $8,208,000  (157%) from December 31, 1997 to September
30, 1998 primarily due to two large loans which became  delinquent  during 1998.
Management  believes that there is adequate security in one of the loans with an
outstanding  principal  balance  of  approximately   $3,760,000,   and  that  an
additional loan loss reserve for this loan is not needed. The other loan with an
outstanding  principal balance of approximately  $4,247,000 may result in a loss
of principal to the Partnership,  and,  therefore,  management has established a
loan loss reserve for this loan in the amount of $550,000.

A loan loss reserve in the amount of $3,500,000  was  maintained on the books of
the  Partnership  as of September 30, 1998 and December 31, 1997.  The Corporate
General Partner believes that this loan loss reserve is adequate.

As of  September  30,  1998 and  December  31, 1997  approximately  54% and 67%,
respectively,  of the mortgage loans made or invested in by the  Partnership are
secured by real  property  located in Northern  California.  The decrease in the
percentage  of  loans  secured  by real  property  in  Northern  California  has
primarily  been due to the payoff of several  loans  secured  by  properties  in
Northern  California and the purchase of new loans secured by properties outside
of Northern  California  during the nine months ended  September  30,  1998.  In
particular,  the Partnership  made one loan in the amount of $10,600,000  during
the  nine   months   ended   September   30,   1998  which  is  secured  by  two
income-producing  properties  located in the states of  Washington  and Montana.
Also, as the real estate market in Southern  California  has gradually  improved
over the past six to  eighteen  months,  more loans  secured  by real  estate in
Southern California have been invested in by the Partnership.  In general, there
has been increased  competition in the lending business in Northern  California,
particularly  in the San  Francisco  Bay Area,  which has required the Corporate
General Partner to expand its pursuit of loans in areas outside of this region.

The  Partnership's  investment in loans secured by unimproved land has increased
by 121% since December 31, 1997 primarily due to an overall  improvement in real
estate market conditions in the past year which have made development and, thus,
loans on unimproved land more attractive. All of the Partnership's loans secured
by  unimproved  land or land in the process of being  developed  are first trust
deeds.  In  addition,  only one of these loans in the amount of $802,200 is more
than 90 days delinquent in payment as of September 30, 1998.

The  following  amount of  delinquent  loans held by the  Partnership  have been
acquired and foreclosed  upon by the Corporate  General  Partner from January 1,
1994 through September 30, 1998:

                               Delinquent                      Year
        Principal               Interest                    Foreclosed
           58,000                    4,417                      1994
        1,184,223                  252,810                      1995
        2,320,000                   86,981                      1996
          613,400                   50,625                      1997
               --                       --                      1998

The Corporate General Partner has purchased all delinquent  interest  receivable
from the Partnership on the loans foreclosed on in 1994 and 1995. The delinquent
interest on the loans  foreclosed on in 1996 and 1997 was not purchased from the
Partnership by the Corporate  General Partner.  Of these  foreclosed  loans, the
Partnership held three mortgages  totaling  $765,332 as of September 30, 1998 on
which the Corporate  General Partner was making payments which were current.  In
addition, the Partnership held a mortgage in the amount of $1,150,000 secured by
a property sold to the Corporate  General  Partner  during the nine months ended
September 30, 1998, on which the payments were current.

Real Estate Properties Held for Sale

The Partnership currently holds title to eleven properties which were foreclosed
on  from  January  1,  1993  through   September  30,  1998.   Since  1993,  the
Partnership's  investment  in real estate held for sale has increased due to the
Corporate  General Partner's policy to generally not acquire property subject to
foreclosure on which the  Partnership  has a trust deed  investment.  During the
nine  months  ended  September  30,  1998,  the  Partnership   acquired  through
foreclosure  a 22%  interest in a  multi-unit  residential  building in Oakland,
California,  a  commercial  building  located in  Sacramento,  California  and a
commercial  building  located  in  Gresham,  Oregon on which it had  trust  deed
investments  of $53,185,  $30,000 and $425,000,  respectively.  In addition,  in
February  1998,  the  Partnership   sold  the   manufactured   home  subdivision
development  property  located in Sonora,  California to the  Corporate  General
Partner for $1,150,000, resulting in a loss of approximately $2,000.

The properties  located in Merced,  Vallejo and  Sacramento,  California,  Reno,
Nevada and Gresham, Oregon do not currently generate revenue.  Although expenses
from rental  properties have increased from  approximately  $323,000 to $499,000
(54%) for the nine  months  ended  September  30,  1997 and 1998,  respectively,
revenues  associated with these  properties have also increased from $240,000 to
$476,000  (98%)  for  the  nine  months  ended  September  30,  1997  and  1998,
respectively, thus generating a small net loss from real estate held for sale of
$23,000  during the nine  months  ended  September  30,  1998.  The  increase in
expenses  is  primarily  attributable  to the  increased  number of real  estate
properties  owned.  The  increase  in rental  revenues  is  attributable  to the
increased number of properties held which are generating  income as of September
30, 1998 as compared to September 30, 1997.

Investment in Development Limited Partnership

The  development  limited  partnership is building  single-family  residences of
between  approximately 2,200 and 2,800 square feet on the lots. During the three
months ended  September  30, 1998 and 1997,  one and three homes,  respectively,
were sold for aggregate proceeds of $470,991 and $1,635,346,  respectively,  and
the  development  limited  partnership   distributed  $486,665  and  $2,574,940,
respectively,  (including  $15,002 and  $186,411,  respectively,  from the joint
venture formed between the Corporate  General Partner and Wood Valley,  Inc.) to
the Partnership, $81,631 and $449,015, respectively, of which represented profit
and interest. During the nine months ended September 30, 1998 and 1997, thirteen
and fourteen homes, respectively, were sold for aggregate proceeds of $6,443,101
and  $7,545,606,   respectively,   and  the  development   limited   partnership
distributed  $5,944,129 and $7,141,248,  respectively,  (including  $102,579 and
$628,980,  respectively,  from the joint  venture  formed  between the Corporate
General  Partner  and Wood  Valley,  Inc.) to the  Partnership,  $1,227,070  and
$2,249,142,  respectively,  of which  represented  profit  and  interest.  As of
September  30, 1998, a total of 29 homes had been  completed and sold and escrow
closed on the remaining home in October 1998.

During the nine months ended  September 30, 1998, the  Partnership  had advanced
additional  development  costs aggregating  $1,250,395 to WV-OMIF Partners.  The
Partnership's  investment in WV-OMIF Partners totaled $345,458 and $3,812,122 as
of September 30, 1998 and December 31, 1997, respectively.

As of  September  30,  1998,  OFG  and  Woodvalley  had  reimbursed  all  shared
development  costs in the total  amount of  $750,675  to  WV-OMIF  Partners  (an
additional $102,579 since December 31, 1997).

Investment in Corporate Joint Venture

During the nine months ended  September 30, 1998,  the  Partnership  advanced an
additional  $79,566 to the corporate  joint venture for  development.  The total
investment  in the  corporate  joint  venture was  $718,929  and  $639,363 as of
September 30, 1998 and December 31, 1997, respectively. The Company received all
development  approvals  in the  third  quarter  of 1998  and  expects  to  begin
construction in the Spring of 1999.

Interest Receivable and Accounts Payable and Accrued Liabilities

Interest receivable  increased from approximately  $1,774,000 as of December 31,
1997 to $2,724,000 as of September 30, 1998 ($950,000 or 53.6%) due primarily to
interest income accrued on one large loan which was paid at the maturity date of
the loan and also due to the growth in the loan  portfolio in general.  Accounts
payable  and  accrued  liablities  increased  from  approximately  $50,000 as of
December 31, 1997 to $1,548,000 as of September 30, 1998  ($1,498,000  or 2996%)
due primarily to accrued  management fees for the months of August and September
which are in accordance with the Partnership Agreement.

Cash and Cash Equivalents, Certificates of Deposit and Commercial Paper

Cash and cash  equivalents,  certificates  of deposit and commercial  paper have
increased from  approximately  $4,073,000 as of December 31, 1997 to $12,931,000
as of September 30, 1998,  respectively  ($8,858,000 or 217%).  This increase is
primarily  attributable to distributions  received from the development  limited
partnership  during  the nine  months  ended  September  30,  1998  without  the
investment in new loans of the same amount during the period and from continuing
limited  partner  contributions  (including  rollover of limited partner income)
during the period.

Liquidity and Capital Resources

The Partnership relies upon purchases of limited partnership  interests and loan
payoffs for the creation of capital for mortgage  investments.  The  Partnership
has not and does not intend to borrow money for investment purposes.

There has been little  variation in the  percentage  of capital  withdrawals  to
total  capital  invested  by the  limited  partners  in recent  years  excluding
distributions of net income to limited partners.  This withdrawal percentage has
been 7.37%,  6.11%, 7.85% and 6.63% for the years ended December 31, 1994, 1995,
1996 and 1997 and 7.48%  (annualized)  for the nine months ended  September  30,
1998. These percentages are calculated by averaging, on an annual basis, the sum
of the  capital  withdrawals  for each  calendar  quarter  divided  by the total
limited  partner  capital  as of the  end of  each  quarter.  Management  of the
Partnership  does not expect the trend of capital  withdrawals  in  relation  to
total capital invested to change substantially in subsequent periods.

The limited partners may withdraw,  or partially withdraw,  from the Partnership
and obtain the return of their outstanding capital accounts within 91 days after
written notices are delivered to the general partners,  subject to the following
limitations:

       o Any such payments are required to be made only from cash  available for
distribution,  net proceeds and capital  contributions  (as defined) during said
91-day period.

       o A maximum of $75,000 per partner may be  withdrawn  during any calendar
quarter (or $100,000 in the case of a deceased limited partner).

       o The general  partners  are not required to establish a reserve fund for
the purpose of funding such payments.

       o No more than 10% of the outstanding limited partnership interest may be
withdrawn during any calendar year except upon dissolution of the Partnership.

Contingency Reserves

The Partnership maintains cash,  certificates of deposit and commercial paper as
contingency  reserves  in an  aggregate  amount of at least 2% of the  aggregate
capital accounts of the Limited Partners.  To the extent that such funds are not
sufficient  to pay expenses in excess of revenues or to meet any  obligation  of
the  Partnership,  it may be necessary for the  Partnership to sell or otherwise
liquidate  certain of its investments on terms which may not be favorable to the
Partnership.

Current Economic Conditions

Although the current  economic  climate in Northern  California  and the Western
United States is generally  strong,  many areas outside of the San Francisco Bay
Area and throughout the Western United States  continue to experience  depressed
values created by the real estate recession of the early 1990's.  Other than the
loss incurred in February 1998 on the sale to the Corporate  General  Partner of
the  Sonora  property  acquired  by the  Partnership  through  foreclosure,  the
Partnership  has not sustained any material  losses to date due primarily to the
Corporate General Partner's prior practice of purchasing delinquent interest and
purchasing loans prior to foreclosure.  The Corporate General Partner has ceased
such practices,  with very limited  exceptions.  Assuming the Corporate  General
Partner  continues in this manner,  the  Partnership is likely to sustain losses
with respect to loans secured by properties  located in areas of declining  real
estate values.

Despite the  Partnership's  ability to purchase  mortgage loans with  relatively
strong yields during 1997 and 1998 from the Corporate General Partner,  there is
increased  competition  from a variety  of  lenders  that has had the  effect of
reducing  mortgage yields in the past twelve months and could have the affect of
reducing  mortgage  yields  further in the future.  As such,  current loans with
relatively high yields could be replaced with loans with lower yields,  which in
turn could reduce the net yield paid to the Limited Partners. In addition,  when
there is a reduction  in the demand by  borrowers  for loans  originated  by the
Corporate  General Partner and, thus,  fewer loans for the Partnership to invest
in, the  Partnership  will  invest its excess cash in shorter  term  investments
yielding considerably less than the current investment portfolio.

Effective  May  1,  1998,  the  Partnership   became  generally  closed  to  new
investments on a temporary  basis and remained  closed as of September 30, 1998.
However,  when the  Partnership  is open,  additional  investments  from new and
existing  Limited Partners are received on a monthly basis which provide capital
for loans,  purchases  of existing  notes and  redemption  of  existing  Limited
Partnership Units.




Year 2000 Readiness

Many computer systems may experience difficulty processing dates beyond the year
1999; as a  consequence,  some computer  hardware and software at most companies
will need to be modified  or replaced  prior to the year 2000 in order to remain
functional.  The Corporate  General  Partner depends on the use of computers and
related  systems  to  provide  timely,  accurate  information  essential  to the
management  and  operation  of  the  Partnership.  These  systems  include  both
information technology (IT) and non-information technology (non-IT) systems. For
IT   and   non-IT    systems    developed   by    independent    third   parties
(externally-developed),    the   Corporate    General   Partner   has   obtained
representations  from their  vendors and  suppliers  that these systems are Year
2000  compliant;  however,  internal  testing of these  systems has not yet been
completed.  The  computer  programs  used by the  Corporate  General  Partner to
account for mortgage loan investments,  investments in Units and other items are
internally-developed  IT  systems.  These  IT  systems  have  been  reviewed  by
independent  consultants engaged to determine whether these programs are able to
recognize the year 2000 and the  consultants are in the process of modifying all
internally-developed IT systems to make them Year 2000 compliant.  Completion of
remediation efforts and testing are expected to take place in early 1999.

Although  not  anticipated  by the  Corporate  General  Partner,  a  failure  to
adequately  address  the Year 2000 issue  could  result in the  misstatement  of
reported information, the inability to accurately track mortgage investments and
payments due or other operational problems. If IT systems are not operational in
the Year 2000,  the  Corporate  General  Partner  has  determined  that they can
operate  manually for several months while correcting the system problems before
experiencing  material  adverse effects on the  Partnership's  and the Corporate
General Partner's business and results of operations. However, shifting portions
of daily  operations to manual processes may result in time delays and increased
processing  costs.  Additionally,  the Partnership and Corporate General Partner
may not be able to provide  borrowers  and  investors  with timely and pertinent
information,  which may  negatively  affect  customer  relations and lead to the
potential loss of new loans and limited partner investments.

The Corporate  General  Partner is in the process of assessing  Year 2000 issues
with third parties,  comprised  primarily of certain financial  institutions and
other vendors,  with whom the Partnership has a material  business  relationship
(Third  Parties).  Currently,  the  Partnership  believes  that if a significant
portion of these  financial  institutions  is  non-compliant  for a  substantial
length of time, the  Partnership's  operations and financial  condition would be
materially  adversely  affected.  Non-compliance  by other Third  Parties is not
expected to have a material  effect on the  Partnership's  results of operations
and  financial  condition.  The Corporate  General  Partner is in the process of
sending letters to these and other Third Parties  requesting  representations of
their Year 2000 readiness.

Based on the preliminary  results of the  consultants'  testing and remediation,
the  Corporate   General   Partner  does  not  anticipate   significant   costs,
uncertainties  or problems  associated  with becoming Year 2000  compliant.  The
total costs to remedy Year 2000  issues  will be paid by the  Corporate  General
Partner. None of such costs will be reimbursed by the Partnership.


Forward Looking Statements and Other Risk Factors

The foregoing analysis of Year 2000 issues includes  forward-looking  statements
and  predictions  about  possible or future  events,  results of operations  and
financial  condition.  As such, this analysis may prove to be inaccurate because
of the  assumptions  made  by  the  Corporate  General  Partner  or  the  actual
development  of  future  events.  No  assurance  can be given  that any of these
forward-looking  statements and predictions  will ultimately prove to be correct
or even substantially correct.

Various  other risks and  uncertainties  could also affect the  Partnership  and
could affect the Year 2000 analysis  causing the effect on the Partnership to be
more severe than  discussed  above.  The Corporate  General  Partner's Year 2000
compliance  testing  cannot  guarantee  that all computer  systems will function
without  error beyond the Year 2000.  Risks also exist with respect to Year 2000
compliance by Third Parties,  such as the risk that an external  party,  who may
have no relationship to the Partnership or the Corporate  General  Partner,  but
who also has a significant relationship with one or more Third Parties, may have
a system failure that  adversely  affects the  Partnership's  ability to conduct
business.  While the  Corporate  General  Partner is attempting to identify such
external  parties,  no  assurance  can be given that they will be able to do so.
Furthermore, Third Parties with direct relationships with the Partnership, whose
systems have been identified as likely to be Year 2000  compliant,  may suffer a
breakdown  due  to  unforeseen  circumstances.  It is  also  possible  that  the
information  collected by the Corporate  General Partner for these Third Parties
regarding their compliance with Year 2000 issues may be incorrect.  Finally,  it
should be noted that the foregoing  discussion of Year 2000 issues  assumes that
to the extent the Corporate General  Partner's systems fail,  whether because of
unforeseen  complications  or because of Third  Parties  failure,  switching  to
manual  operations  will  allow the  Partnership  to  continue  to  conduct  its
business.  While the Corporate  General  Partner  believes this assumption to be
reasonable,  if it is incorrect,  the Partnership's  results of operations would
likely be adversely affected.


<PAGE>


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

The Partnership is not presently involved in any material legal proceedings.


Item 6(b).  Reports on Form 8-K

No reports on Form 8-K have been filed  during the quarter for which this report
is filed.


<PAGE>



                                   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.



Dated:  November 15, 1998              OWENS MORTGAGE INVESTMENT FUND
                                       a California Limited Partnership
                                       (Registrant)

                                        By:   Owens Financial Group, Inc.
                                              a General Partner


                                              By:  \s\ William C. Owens
                                                   William C. Owens
                                                   President

                                              By:  \s\ Bryan H. Draper
                                                   Bryan H. Draper
                                                   Chief Financial Officer
                                                   Principal Financial Officer

                                              By:  \s\ Melina A. Platt
                                                   Melina A. Platt
                                                   Controller
                                                   Principal Accounting Officer