Exhibit 13.1

                           Senior Income Fund L.P.

                              1998 Annual Report
<PAGE>
1

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


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

The Partnership's remaining property, Ocean House, was sold to MBK Senior Living
Communities, Ltd. ("MBK") on October 13, 1998. As you are aware, the Partnership
previously agreed to sell all four of its properties to MBK with the first three
properties sold in August 1997. After closing costs and a credit for the cost of
repairs due to extensive earthquake damage at Ocean House, the net sales price
for the entire portfolio totaled approximately $31.1 million.

As a result of the sale of Ocean House, the Partnership made a special
distribution of $1.11 per Unit on November 17, 1998, representing net sales
proceeds and a portion of the Partnership's cash reserves. The remaining
reserves will be used to pay the Partnership's liabilities and expenses through
liquidation. If any proceeds remain, the Partnership intends to make one final
distribution upon liquidation. Since inception, the Partnership has paid total
cash distributions of $12.34 per original $10 Unit.

An update on the dissolution of the Partnership will be provided in future
investor correspondence. In the interim, questions regarding the Partnership
should be directed to 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,

Senior Income Fund Inc.,
General Partner



Michael T. Marron
President

March 31, 1999
<PAGE>
2

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
                                                     At December 31,   At December 31,
                                                               1998              1997
-------------------------------------------------------------------------------------
<S>                                                      <C>               <C>       
Assets
Real estate assets held for disposition                 $        --       $    21,542
Cash and cash equivalents                                 1,060,585         5,320,317
Prepaid expenses                                             50,754           204,867
-------------------------------------------------------------------------------------
     Total Assets                                       $ 1,111,339       $ 5,546,726
=====================================================================================
Liabilities and Partners' Capital (Deficit)
Liabilities:
  Accounts payable and accrued expenses                 $    92,716       $   180,192
  Deferred rent payable                                          --         1,236,564
  Due to affiliates                                          22,000            61,973
  Security deposits payable                                      --            56,831
                                                        -----------------------------
     Total Liabilities                                      114,716         1,535,560
                                                        -----------------------------
Partners' Capital (Deficit):
  General Partner                                                --                --
  Limited Partners (4,827,500 units outstanding)            996,623         4,011,166
     Total Partners' Capital                                996,623         4,011,166
-------------------------------------------------------------------------------------
     Total Liabilities and Partners' Capital            $ 1,111,339       $ 5,546,726
=====================================================================================
</TABLE>


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the years ended December 31, 1998, 1997 and 1996
                                              General         Limited
                                              Partner        Partners           Total
-------------------------------------------------------------------------------------
<S>                                         <C>          <C>             <C>         
Balance at December 31, 1995                $ (42,568)   $ 20,921,231    $ 20,878,663
Net Income                                     31,545       3,122,954       3,154,499
Distributions                                 (43,887)     (4,344,750)     (4,388,637)
-------------------------------------------------------------------------------------
Balance at December 31, 1996                  (54,910)     19,699,435      19,644,525
Net Income                                    338,949      12,431,919      12,770,868
Distributions                                (284,039)    (28,120,188)    (28,404,227)
-------------------------------------------------------------------------------------
Balance at December 31, 1997                       --       4,011,166       4,011,166
Net income                                         --       2,349,347       2,349,347
Distributions                                      --      (5,363,890)     (5,363,890)
-------------------------------------------------------------------------------------
Balance at December 31, 1998                $      --    $    996,623    $    996,623
=====================================================================================
</TABLE>

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

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
                                                 1998            1997            1996
-------------------------------------------------------------------------------------
<S>                                       <C>             <C>             <C>        
Income
Rental                                    $ 3,155,478     $ 8,232,614     $10,782,123
Insurance settlement, net                          --              --       2,318,387
Interest and other                            271,562         344,439         204,526
                                          -------------------------------------------
     Total Income                           3,427,040       8,577,053      13,305,036
-------------------------------------------------------------------------------------
Expenses
Payroll                                       916,592       2,574,322       3,074,006
General and administrative                    602,131       1,527,054       1,774,183
Rent and utilities                            925,702       1,444,213       1,607,967
Depreciation                                       --              --       1,507,326
Supplies                                      293,301         890,148       1,136,163
Repairs and maintenance                       271,770         841,709         627,158
Real estate taxes                             123,081         290,595         380,439
Travel and entertainment                       17,567          29,958          43,295
Loss on real estate held for disposition           --          48,000              --
                                          -------------------------------------------
     Total Expenses                         3,150,144       7,645,999      10,150,537
-------------------------------------------------------------------------------------
     Income from Operations               $   276,896     $   931,054    $  3,154,499
-------------------------------------------------------------------------------------
Other Income:
Gain on sale of properties                  2,072,451      11,839,814              --
-------------------------------------------------------------------------------------
     Net Income                           $ 2,349,347     $12,770,868     $ 3,154,499
=====================================================================================
Net Income (Loss) Allocated:
To the General Partner                    $        --     $   338,949     $    31,545
To the Limited Partners                     2,349,347      12,431,919       3,122,954
-------------------------------------------------------------------------------------
                                          $ 2,349,347     $12,770,868     $ 3,154,499
=====================================================================================
Per limited partnership unit
(4,827,500 outstanding)                         $ .49           $2.58           $ .65
-------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.
<PAGE>
4
SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

<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)                         $ 2,349,347    $ 12,770,868     $ 3,154,499
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
  Gain on sale of properties               (2,072,451)    (11,839,814)             --
  Insurance settlement, net                        --              --      (2,318,387)
  Depreciation                                     --              --       1,507,326
  Loss on real estate assets held
  for disposition                                  --          48,000              --
  Increase (decrease) in cash arising
  from changes in operating assets
  and liabilities:
    Prepaid expenses                           97,282         (36,608)        (31,977)
    Accounts payable and accrued expenses     145,029        (853,124)        124,883
    Deferred rent payable                      35,514          45,395          45,395
    Due to affiliates                         (39,973)       (128,636)            774
    Security deposits                              --         (91,869)          3,225
                                          -------------------------------------------
Net provided by (cash used) for
operating activities                          514,748         (85,788)      2,485,738
-------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
  Proceeds from disposal of asset             589,410      30,148,357              --
  Proceeds from insurance settlement               --              --       3,200,000
  Legal fees and payment on construction
  contract                                         --              --        (223,593)
  Purchase of general partnership interest         --              --        (850,000)
  Additions to real estate                         --         (77,000)       (262,540)
                                          -------------------------------------------
Net cash provided by (used for)
investing activities                          589,410      30,071,357       1,863,867
-------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
  Distributions paid to partners           (5,363,890)    (28,769,947)     (4,388,637)
                                          -------------------------------------------
Net cash used for financing activities     (5,363,890)    (28,769,947)     (4,388,637)
-------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents                           (4,259,732)      1,215,622         (39,032)
Cash and cash equivalents,
beginning of year                           5,320,317       4,104,695       4,143,727
                                          -------------------------------------------
Cash and cash equivalents, end of year    $ 1,060,585    $  5,320,317     $ 4,104,695
=====================================================================================
Supplemental Disclosure of Non-Cash
Investing Activities:
  Settlement costs funded through
  accounts payable                        $   232,505    $        --      $   658,020
=====================================================================================
Supplemental Disclosure of Non-Cash
Operating Activities:
  In connection with the sale of the properties, prepaid expenses, deferred rent
  payable, and security deposits in the amounts of $56,831, $1,272,078, and
  $56,831 were netted against gain on sale of properties.
</TABLE>


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

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

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

1.   Organization
Senior Income Fund L.P. (the "Partnership"), a Delaware limited partnership (see
below), was formed on October 14, 1986 for the purpose of acquiring a general
partnership interest in Shearson August Property Partnership (the "Property
Partnership"), a California general partnership. As discussed below, through
November 21, 1996, the other general partner of the Property Partnership was
August Financial Partners II ("AFP-II"), an affiliate of August Financial
Corporation ("August"). The Property Partnership was formed to acquire and
operate four specified senior residential properties (the "Properties", see Note
7). The General Partner of the Partnership is Senior Income Fund Inc., (the
"General Partner"), a Delaware corporation, and an affiliate of Lehman Brothers
Inc. (see below). The Partnership will continue until December 31, 2036, unless
terminated sooner in accordance with the terms of the Partnership Agreement.

The initial capital contributions to the Partnership totaled $110, representing
capital contributions of $100 by the General Partner and $10 by Senior Income
Depositary Inc., formerly known as Shearson Lehman Senior Depositary, Inc. (the
Assignor Limited Partner).

The agreement of limited partnership authorized the issuance of 4,827,500
depositary units at $10 per unit, which represent assignments of economic and
certain other rights attributable to the partnership interests. The offering
period ended on March 17, 1987, at which time 4,827,500 depositary units had
been issued.

On November 21, 1996, the Partnership purchased the general partnership interest
of the successor to AFP-II for a purchase price of $850,000. The Partnership's
purchase of the general partnership interest was funded from cash reserves. As a
result of such purchase, the Property Partnership was dissolved in 1997 and all
of its assets were distributed to the Partnership. Accordingly, all sale
proceeds received upon a sale of any property will belong to the Partnership and
no amount will be owed to AFP-II.

On August 1, 1997, the Partnership closed the sale of three of its four
Properties, Prell Gardens, Nohl Ranch and Pacific Inn to MBK Senior Properties,
Ltd. (the "Buyer"), for net proceeds of $30,148,357 and a gain on the Sale of
$11,839,814. On October 13, 1998, the Partnership closed on the sale of its
remaining Property, Ocean House, to MBK Senior Living Communities, Ltd.,
formerly known as MBK Senior Properties, Ltd., for a net selling price of
$998,579 and a gain on the Sale of $2,072,451, including the assignment of the
land lease obligation. The Partnership remains contingently liable under the
terms of the ground lease. The General Partner is in the process of winding up
the Partnership's affairs and expects to dissolve the Partnership during 1999.

2.   Significant Accounting Policies

Financial Statements  The consolidated financial statements include the accounts
of the Partnership and the Property Partnership from inception through November
21, 1996. The effect of transactions between the Partnership and the Property
Partnership have been eliminated in consolidation. As described in Note 1, as of
November 21, 1996, the Property Partnership was dissolved.

Cash and Cash Equivalents  Cash and cash equivalents consist of short-term 
highly liquid investments, including commercial paper, which have maturities of
three months or less from the date of purchase. The carrying value approximates
fair value because of the short maturity of these instruments. Certain cash and
cash equivalents reflected on the Partnership's balance sheet were on deposit
with an affiliate of the General Partner during a portion of 1996. Since that
point, no cash and cash equivalents were on deposit with an affiliate of the
General Partner.

Concentration of Credit Risk  Financial instruments which potentially subject 
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institutions' insurance limits.
The Partnership invests available cash with high credit quality financial
institutions.
<PAGE>
6

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

Real Estate Investments  Real estate investments are stated at the lower of 
cost, less accumulated depreciation, or fair value. Cost includes the initial
purchase price of the property, legal fees, acquisition and closing costs.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the properties. Maintenance and repairs are charged to
operations as incurred. Significant betterments and improvements are capitalized
and depreciated over their useful lives.

For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in income for the period.

Accounting for Impairment  In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"), which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. FAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Partnership adopted
FAS 121 in the fourth quarter of 1995.

Real Estate Assets Held for Disposition  Real estate assets held for disposition
are carried at the lower of carrying value or fair market value less costs to
sell. During the fourth quarter of 1996, all real estate assets were
reclassified as held for disposition and will no longer be depreciated. No
adjustment to carrying value resulted from the reclassification.

Leases  Leases are accounted for under the operating method. Under this method,
revenue is recognized as rentals are earned and expenses (including
depreciation) are charged to operations when incurred. Leases are generally for
terms of one year or less.

Fair Value of Financial Instruments  Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments" ("FAS 107"),
requires that the Partnership disclose the estimated fair values of its
financial instruments. Fair values generally represent estimates of amounts at
which a financial instrument could be exchanged between willing parties in a
current transaction other than in forced liquidation.

Fair value estimates are subjective and are dependent on a number of significant
assumptions based on management's judgment regarding future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments, and other factors. In addition, FAS 107 allows a wide
range of valuation techniques, therefore, comparisons between entities, however
similar, may be difficult.

Income Taxes  No provision for income taxes has been made in the consolidated
financial statements since income, losses and tax credits are passed through to
the individual partners.

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

Reclassifications - Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
<PAGE>
7

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

3.   Property Partnership and Partnership Agreements

Property Partnership Agreement
With respect to the Property Partnership, the Partnership had a 100% interest,
during the guaranty period (through December 31, 1989), in the income, losses
and cash distributions of the Property Partnership, other than expenses and
deductions allocable to AFP-II to the extent of its funding of the Minimum Yield
Guaranty (see Note 4). After the guaranty period, all income, losses and cash
distributions were to be allocated 100% to the Partnership until it received its
Cumulative Preferred Return, as defined, and thereafter 99.5% to the Partnership
and .5% to AFP-II.

Distributions of Net Cash Flow from Operations, Net Proceeds from Interim
Capital Transactions and Net Proceeds upon Dissolution were to be distributed
95% to the Partnership and 5% to AFP-II.

On November 21, 1996, the Partnership purchased AFP-II's interest in the
Property Partnership. Accordingly, all Net Cash Flow from Operations, Net
Proceeds from Interim Capital Transactions and Net Proceeds from Dissolution
will be paid to the Partnership and no amount will be owed to AFP-II.

Partnership Agreement 
The Partnership Agreement provides for the allocation of Income, Losses, Net
Cash Flow from Operations, Net Proceeds from Interim Capital Transactions and
Net Proceeds upon Dissolution, as follows:

Income is generally allocated 99% to the Limited Partners and 1% to the General
Partner until the Limited Partners have received their Preferred Return, as
defined. The balance is allocated 95% to the Limited Partners and 5% to the
General Partner.

Losses are allocated to the General Partner and Limited Partners in proportion
to, and to the extent of their positive capital account balances, as defined. At
such time as the partners' capital account balances are zero, losses will be
allocated in the same proportion as distributions.

Net Cash Flow from Operations with respect to each fiscal year will generally
be distributed 99% to the Limited Partners and 1% to the General Partner, until
such time as each Limited Partner has received an amount equal to his Preferred
Return, as defined. The Partnership's share of any remaining Net Cash Flow from
Operations will be distributed 95% to the Limited Partners and 5% to the General
Partner.

Net Proceeds from Interim Capital Transactions, as defined, generally will be
distributed 99% to the Limited Partners and 1% to the General Partner until each
Limited Partner has received an amount equal to his unpaid Cumulative Preferred
Return and Unrecovered Capital, as defined. The Partnership's share of any
excess Net Proceeds will be distributed 95% to the Limited Partners and 5% to
the General Partner.

Net Proceeds upon Dissolution will be made in proportion to partners' capital
accounts. It is anticipated that Net Proceeds from any final liquidation of the
Partnership's assets generally will be distributed 99% to the Limited Partners
and 1% to the General Partner until each Limited Partner has received an amount
equal to any unpaid Preferred Return and his Unrecovered Capital as defined. The
Partnership's share of any excess Net Proceeds generally will be distributed 95%
to the Limited Partners and 5% to the General Partner.

4.  Property Management
From April 6, 1988 through July 31, 1997, the Partnership's properties were
managed by Leisure Care, Inc. ("Leisure Care"), an unaffiliated third party. On
August 1, 1997, simultaneous with the sale of three of the Partnership's four
properties, MBK Senior Living Communities, Ltd., an affiliate of the Buyer, was
retained to manage Ocean House, the remaining Property, which was sold in
October 1998.
<PAGE>
8

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

Management fees for the years ended December 31, 1998, 1997 and 1996 amounted to
$172,354, $291,660 and $323,000, respectively.

For the years ended December 31, 1997 and 1996, Leisure Care earned $197,796 and
$169,545, respectively, in performance incentive fees.

5.   Transactions with Related Parties
The Partnership reimburses the General Partner or its affiliates for certain
administrative expenses. For the years ended December 31, 1998, 1997 and 1996,
the General Partner or its affiliates were reimbursed approximately $21,000,
$179,000 and $27,000, respectively. The General Partner or its affiliates were
owed approximately $22,000, $62,000 and $191,000 at December 31, 1998, 1997 and
1996, respectively.

Relating to the sale of the three properties in 1997, a brokerage commission was
received by an affiliate of the General Partner in the amount of $233,454. In
1998, the affiliate received a commission on the sale of Ocean House in the
amount of $7,489.

6.   Real Estate
On August 1, 1997, the Partnership closed the Sale of three of its four
Properties, Prell Gardens, Nohl Ranch and Pacific Inn, to the Buyer for net
proceeds of $30,148,357 and a gain on the sale of the properties of $11,839,814.
On October 13, 1998, the Partnership closed on the sale of its remaining
Property, Ocean House, for a gross selling price of $5,172,750, less a credit
for cost of repairs due to earthquake damage of $4,174,171, resulting in a net
selling price of $998,579. The sale resulted in a gain of $2,072,451, including
the assignment of the land lease obligation. The Partnership remains
contingently liable under the terms of the ground lease. The General Partner is
in the process of winding up the Partnership's affairs and expects to dissolve
the Partnership during 1999.

Pursuant to the requirements of FAS 121 and to obtain further support in
connection with the Partnership's insurance claim and engineering studies (see
Note 9), during the fourth quarter of 1995 the Partnership obtained preliminary
estimates of fair market value from an independent appraiser. Such estimates of
fair value made use of a combination of certain generally accepted valuation
techniques, including direct capitalization and comparative sales analyses, and,
in the instances of Ocean House and Prell Gardens, have considered the
structural damage caused by the Northridge earthquake (see Note 10). As a
consequence of this valuation process, and pursuant to the requirements of FAS
121, the Partnership recognized an impairment loss of $8,712,292 as of December
31, 1995. The losses of $4,809,497, $2,081,900 and $1,820,895, aggregating the
$8,712,292, are attributable to Ocean House, Prell Gardens and Nohl Ranch Inn,
respectively.

On November 21, 1996, the Partnership purchased the general partnership interest
of the successor to AFP-II for a purchase price of $850,000. Accordingly, the
purchase resulted in an additional investment of $850,000 in the Properties.

7.   Distributions Paid
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognize specific record dates for
payments within each calendar year. The consolidated statements of cash flows
recognize actual cash distributions paid during the calendar year. The following
table discloses the annual amounts as presented on the consolidated financial
statements:

<TABLE>
<CAPTION>
                   Distributions                                   Distributions
                         Payable   Distributions   Distributions         Payable
               Beginning of Year        Declared            Paid     December 31
--------------------------------------------------------------------------------
<S>                     <C>          <C>             <C>               <C>     
1998                    $     --     $ 5,363,780     $ 5,363,780        $     --
1997                     365,720      28,404,227      28,769,947              --
1996                     365,720       4,388,637       4,388,637         365,720
--------------------------------------------------------------------------------
</TABLE>
<PAGE>
9

SENIOR INCOME FUND L.P.
AND CONSOLIDATED PARTNERSHIP

8.   Reconciliation of Net Income to Taxable Income (Loss)
The following is a reconciliation of the net income (loss) for consolidated
financial statement purposes to net income for federal income tax purposes for
the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                 1998           1997          1996
--------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>           <C>        
Net income per consolidated financial statements          $ 2,349,347    $12,770,868   $ 3,154,499

Depreciation deducted for tax purposes in excess of
depreciation expense per consolidated financial
statements                                                    (91,954)      (590,360)     (172,815)

Tax basis Property Partnership net income (loss) in
excess of GAAP basis Property Partnership consolidated
net income                                                         --             --    (1,548,903)

Gain on sale per consolidated financial statements
in excess of tax basis gain (loss) on sale                 (4,127,111)      (898,326)           --

Consolidated financial statement loss on write-down
of real estate over tax basis loss on write-down
of real estate                                                     --         48,000            --

Other                                                          53,424        (49,017)           --
--------------------------------------------------------------------------------------------------
Taxable net income (loss)                                 $(1,816,294)   $11,281,165   $ 1,432,781
==================================================================================================
</TABLE>

The following is a reconciliation of consolidated partners' capital for
consolidated financial statement purposes to partners' capital for federal
income tax purposes as of December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                 1998           1997          1996
--------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>           <C>        
Partners' capital per consolidated
financial statements                                      $   996,623    $ 4,011,166   $19,644,525
Adjustment for cumulative
difference between tax basis
net income and net income (loss)
per consolidated financial statements                          58,979      4,224,620     5,714,323
--------------------------------------------------------------------------------------------------
Partners' capital per tax return                          $ 1,055,602    $ 8,233,786   $25,358,848
==================================================================================================
</TABLE>

9.   Insurance Settlement
As a result of the Northridge earthquake that struck the greater Los Angeles
area on January 17, 1994, damages were sustained at two of the properties, Ocean
House and Prell Gardens.

The General Partner pursued reimbursement from the insurance carrier for the
repair costs, less the deductible, under the Partnership's insurance policy.
However, the insurance carrier refused to cover the cost to bring the buildings
into compliance with building codes enacted after the Northridge Earthquake. The
insurance carrier also disputed the amount of damage the buildings sustained. As
a result, on September 15, 1995, the General Partner initiated litigation
against the insurance carrier and insurance broker. On November 19, 1996, the
Partnership and General Partner, executed a Mutual Release and Settlement
Agreement (the "Settlement Agreement") with the Insurance Company of North
America ("INA"), whereby the Partnership agreed to release INA from all claims
pending under the lawsuit and to assign its remaining claim against the
insurance broker to the insurance carrier. The Partnership received $3,200,000
from INA pursuant to the Settlement Agreement. Costs associated with the
litigation which include legal, expert witness and engineering fees and a
payment on the construction contract for Prell Gardens were offset against the
$3,200,000 resulting in net insurance settlement income of $2,318,387.
<PAGE>
10

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



To the Partners of
Senior Income Fund Limited Partnership:


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners' capital (deficit) and cash
flows present fairly, in all material respects, the financial position of Senior
Income Fund Limited Partnership, a Delaware Limited Partnership, and
Consolidated Venture at 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.
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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

As discussed in Notes 1 and 6 to the financial statements, the Partnership
entered into a Purchase and Sale Agreement for its four real estate properties.
The Partnership sold three of the four properties on August 1, 1997. The sale of
the fourth property occurred on October 13, 1998. The Partnership expects to
liquidate in 1999.


                                            /s/PricewaterhouseCoopers LLP

February 24, 1999
<PAGE>
11

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



To the Partners of
Senior Income Fund Limited Partnership:

Our report on the consolidated financial statements of Senior Income Fund
Limited Partnership, a Delaware Limited Partnership, and Consolidated Venture
has been incorporated by reference in this Form 10-K from the Annual Report to
unitholders of Senior Income Fund Limited Partnership for the year ended
December 31, 1998. In connection with our audits of such financial statements,
we have also audited the related financial statement schedule listed in the
index of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.


                                            /s/PricewaterhouseCoopers LLP

February 24, 1999