UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934
For the year ended December 31, 1998
-----------------
Transition Report Pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934
For the Transition period from to
--------- ---------
Commission file number: 33-9921
-------
SENIOR INCOME FUND L. P.
Exact name of Registrant as specified in its charter
Delaware 13-3392077
-------- ----------
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
3 World Financial Center, 29th Floor
New York, NY Attn.: Andre Anderson 10285
- --------------------------------------- -----
Address of principal executive offices Zip code
Registrant's telephone number, including area code: (212) 526-3183
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
4,827,500 DEPOSITORY UNITS OF LIMITED PARTNERSHIP INTEREST
----------------------------------------------------------
Title of Class
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 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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE:Portions of Parts I, II, III and IV are
incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1998.
<PAGE>
2
PART I
Item 1. Business
(a) General Development of Business
-------------------------------
Senior Income Fund L.P. (the "Partnership", formerly Shearson Lehman Senior
Income Fund Limited Partnership), a Delaware limited partnership, was formed on
October 14, 1986 pursuant to a Limited Partnership Agreement, as amended and
restated on March 17, 1987 pursuant to an Amended and Restated Limited
Partnership Agreement (the "Partnership Agreement"). The Partnership was formed
for the purpose of acquiring a general partnership interest in Shearson August
Property Partnership, a California general partnership (the "Property
Partnership"), with August Financial Partners II ("AFP-II") an affiliate of
August Financial Corporation ("August").
The general partner of the Partnership is Senior Income Fund Inc. (the "General
Partner", formerly Shearson Lehman Senior Income Fund, Inc.), a Delaware
corporation, and wholly owned subsidiary of Lehman Brothers Inc. (formerly
Shearson Lehman Brothers Inc.).
On November 21, 1996, the Partnership purchased the general partnership interest
of the successor to AFP-II for a purchase price of $850,000. As a result of such
purchase, all of the Property Partnership's assets were distributed to the
Partnership and the Property Partnership was dissolved. Accordingly, all sale
proceeds received upon a sale of any property belong to the Partnership and no
amount is owed to AFP-II. The Partnership will continue until December 31, 2036
unless terminated earlier pursuant to the provisions of the Partnership
Agreement.
The Property Partnership was formed to acquire, operate and ultimately sell four
specified residential properties for senior citizens (the "Properties") as
follows: (i) Pacific Inn, a 134-unit apartment complex located in Torrance,
California; (ii) Nohl Ranch Inn, a 133-unit apartment complex located in
Anaheim, California; (iii) Ocean House, a 121-unit apartment complex located in
Santa Monica, California, and; (iv) Prell Gardens, a 102-unit apartment complex
located in Van Nuys, California.
On August 1, 1997, the Partnership closed the sale of three of its four
Properties -- Prell Gardens, Nohl Ranch and Pacific Inn, for net proceeds of
$30,148,357. On October 13, 1998, the Partnership closed on the sale of the
remaining property, Ocean House, for a net selling price of $998,579. The
General Partner is in the process of winding up the Partnership's affairs and
expects to dissolve the Partnership during 1999. Reference is made to Item 7 for
a discussion of the sales.
(b) Financial Information about Industry Segments
---------------------------------------------
Substantially all of the Partnership's revenues, operating profit or loss and
assets relate solely to its interest as general partner of the Property
Partnership whose operating profit or loss and assets relate to its ownership
and operation of the Properties, until November 21, 1996, at which time the
Partnership purchased AFP-II's general partner interest in the Property
Partnership, as noted in Item 1(a).
(c) Narrative Description of Business
---------------------------------
The Partnership's principal objectives at inception were:
(1) to provide quarterly cash distributions a portion of which will be
"tax sheltered;"
(2) to preserve and protect capital;
(3) to achieve long-term appreciation in the value of the Properties for
distributions upon sale of the Properties.
Presently, the General Partner is in the process of winding up the Partnership's
affairs and expects to dissolve the Partnership in accordance with the
Partnership Agreement during 1999.
(d) Employees
---------
The Partnership has no employees.
<PAGE>
3
Item 2. Properties
As of December 31, 1998, all four of the Partnership's properties had been sold.
Item 3. Legal Proceedings
The Registrant is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the holders of Units ("Limited Partners")
during the fourth quarter of the year for which this report is filed.
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters
(a) Market Price Information
There is no established trading market for the units nor is there anticipated to
be.
(b) Holders
As of December 31, 1998, there were 3,298 Limited Partners of record.
(c) Cash Distributions per Unit
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------
<S> <C> <C>
1st Quarter $ 0.000 $ 0.075
2nd Quarter 0.000 0.000
3rd Quarter 0.000 0.000
Special Distribution 1.1111 5.7502
4th Quarter 0.000 0.000
--------------------
Total $ 1.111 $ 5.825
---------------------------------------------
<FN>
(1) On November 17, 1998, the Partnership paid a cash distribution in the
amount of $1.11 per Unit representing proceeds from the sale of Ocean
House and a portion of the Partnership's cash reserves.
(2) On August 25, 1997, the Partnership paid a cash distribution in the
amount of $5.75 per Unit representing proceeds from the sale of Prell
Gardens, Nohl Ranch, and Pacific Inn and cash flow from operations for
the second quarter of 1997.
</FN>
</TABLE>
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 another
distribution upon liquidation.
<PAGE>
4
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in thousands, except per Unit data) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental Income $ 3,155 $ 8,233 $10,782 $10,838 $10,387
Interest and Other Income 272 344 205 199 98
Total Income 3,427 8,577 13,305(2) 11,037 10,485
Income (Loss) From Operations 277 931 3,154 (7,877)(3) 137
Gain On Sale Of Properties 2,072 11,840 -- -- --
Net Income (Loss) 2,349 12,771(4) 3,154 (7,877)(3) 137
Income (Loss) From Operations
Per Unit(1) .06 .19 .65 (1.63) .03
Net Income (Loss) Per Unit(1) .49 2.58 .65 (1.63) .03
Cash Distributions Per Unit(1) 1.11 5.82 .90 .30 .30
-------------------------------------------------------
Total Assets $ 1,111 $ 5,547 $22,574 $22,976 $32,459
- ---------------------------------------------------------------------------------------------------
<FN>
(1) Total Units outstanding: 4,827,500.
(2) Includes net insurance settlement income of $2,318,387, in connection
with the Partnership's settlement of its litigation with its insurance
carrier in November 1996.
(3) Includes the recognition of a $8,712,292 loss on the write-down of
real estate assets in compliance with Financial Accounting Standards
No. 121 in 1995.
(4) Includes the recognition of a $11,839,814 gain on sale of three
properties.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(a) Liquidity and Capital Resources
-------------------------------
On June 9, 1997, the Partnership executed an agreement with an unaffiliated
third party, MBK Senior Properties, Ltd. (the "Buyer") to sell the Partnership's
four Properties (the "Sale") for $36,300,000, subject to adjustments and
prorations for closing costs, and a credit for the cost to repair earthquake
damage at the Ocean House property. On August 1, 1997, the Partnership closed
the Sale for three of the four Properties - Prell Gardens, Nohl Ranch and
Pacific Inn, for net proceeds of $30,148,357. On October 13, 1998 the
Partnership closed on the sale of the fourth property, Ocean House. The gross
selling price of the property was $5,172,750, less a credit for cost of repairs
due to earthquake damages of $4,174,171, resulting in a net selling price of
$998,579.
As a result of the Sales, the Partnership suspended the payment of quarterly
cash distributions beginning with the second quarter 1997 distribution which
would have been paid on or about August 15, 1997. On August 25, 1997, the
Partnership paid a cash distribution in the amount of $5.75 per Unit,
representing proceeds from the sale of Prell Gardens, Nohl Ranch, and Pacific
Inn and cash flow from operations for the second quarter of 1997. On November
17, 1998, the Partnership made a special distribution of $1.11 per Unit,
representing net sales proceeds from the sale of Ocean House, 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 another distribution upon liquidation.
The General Partner is in the process of winding up the Partnership's affairs
and expects to dissolve the Partnership during 1999.
At December 31, 1998, the Partnership had cash and cash equivalents of
$1,060,585 compared to $5,320,317 at December 31, 1997. The decrease is
primarily due to the payment of a special cash distribution on November 17,
1998, representing net sales proceeds from the sale of Ocean House, and a
portion of the Partnership's cash reserves.
Primarily as a result of the sale of Ocean House, the following balance sheet
categories decreased from December 31, 1997 to December 31, 1998: prepaid
expenses, accounts payable and accrued expenses, deferred rent payable and
security deposits payable. Due to affiliates decreased from $61,973 at December
31, 1997 to $22,000 at December 31, 1998. The decrease reflects lower
Partnership management fees as a result of the sale of the Properties.
<PAGE>
5
Market Risk
- -----------
The Partnership's principal market risk exposure is interest rate risk. As a
result of the sale of Ocean House, the Partnership no longer has any properties
or debt, and its assets consist primarily of cash and cash equivalents.
Accordingly, the Partnership's interest risk exposure is primarily limited to
interest earned on the Partnership's cash and cash equivalents, which are
invested at short-term rates. Such risk is not considered material to the
Partnership's operations.
Year 2000 Initiatives
- ---------------------
The Year 2000 compliance issue concerns the ability of computerized information
systems to accurately calculate, store or use a date after 1999. This could
result in computer system failures or miscalculations causing disruptions of
operations. The Year 2000 issue affects almost all companies and organizations.
As noted above, all of the Partnership's properties have been sold and it is
anticipated that the Partnership will dissolve prior to December 31, 1999. In
the event that the Partnership is not liquidated prior to December 31, 1999,
potential Year 2000 issues relate primarily to outside vendors which provide the
Partnership's administrative services including accounting, tax preparation and
transfer agent services. Such services are heavily reliant on computer systems,
software products and equipment which may or may not be Year 2000 compliant. It
is anticipated that the cost of vendor compliance with Year 2000 problems will
be borne primarily by vendors. Although it is not possible at present to give an
estimate of the cost of this work to the Partnership, the General Partner does
not expect such costs to have a material adverse impact on the Partnership's
long term results of operations.
(b) Results of Operations
---------------------
1998 versus 1997
- ----------------
Partnership operations resulted in net income of $2,349,347 for the year ended
December 31, 1998, compared to $12,770,868 for the year ended December 31, 1997.
Net income in 1997 included a $11,839,814 gain on sale of Prell Gardens, Nohl
Ranch and Pacific Inn, while net income in 1998 included a $2,072,451 gain on
the sale of Ocean House. Excluding these gains, net income from operations
totaled $276,896 in 1998 compared with $931,054 in 1997. The decrease is
primarily due to a decrease in rental income, as a result of the sale of three
of the Properties in 1997, which exceeded the decrease in all expense
categories. The decrease also reflects the sale of Ocean House in October 1998.
Primarily as a result of the sale of three of the Partnership's Properties on
August 1, 1997, rental income and all expense categories decreased from 1997 to
1998. Loss on real estate held for disposition was $-0- in 1998 compared to
$48,000 in 1997. The 1997 amount represents costs associated with balcony
restoration at Ocean House which were expensed through the loss provision in
compliance with Statement of Financial Accounting Standards No. 121.
1997 versus 1996
- ----------------
Partnership operations for the year ended December 31, 1997 resulted in net
income of $12,770,868 compared to $3,154,499 for 1996. The increase is primarily
due to the gain on sale of properties in the amount of $11,839,814. Excluding
this gain, the Partnership incurred net income from operations of $931,054 for
the year ended December 31, 1997. The decrease in net income from operations was
primarily the result of lower rental income due to the sale of properties,
partially offset by the elimination of depreciation expense in 1997 as a result
of the reclassification of the Properties as "real estate assets held for
disposition". The 1996 amount also includes the receipt of insurance settlement
proceeds.
Rental income was $8,232,614 for the year ended December 31, 1997, compared to
$10,782,123 for 1996. The decrease is due to the sale of three of the Properties
on August 1, 1997, which was partially offset by an increase in rental income
from Ocean House.
As a result of the sale of three of the Partnership's Properties on August 1,
1997, the following expense categories decreased from 1996 to 1997: payroll,
rent and utilities, supplies, repairs and maintenance and real estate taxes.
<PAGE>
6
General and administrative expenses were $1,527,054 in 1997 as compared with
$1,774,183 in 1996. The decrease is the result of the sale of the three
properties partially offset by an increase in management fees at Ocean House and
an increase in Partnership servicing expense. During 1997, certain expenses
incurred by the General Partner, its affiliates, and an unaffiliated third party
service provider in servicing the Partnership, which were voluntarily absorbed
by affiliates of the General Partner in prior periods, were reimbursable to the
General Partner and its affiliates.
Loss on real estate held for disposition totaled $48,000 for the year ended
December 31, 1997. This represents costs associated with balcony restoration at
Ocean House which were expensed through the loss provision in compliance with
Statement of Financial Accounting Standards No. 121.
For the years ended December 31, 1997 and 1996, Ocean House reported average
occupancy of 95% and 91%, respectively.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1998, which is filed as an exhibit under Item 14.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Partnership
The Partnership has no directors or officers. The General Partner has general
responsibility for all aspects of the Partnership's operation. Certain of the
officers and directors of the General Partner are also officers and employees of
Lehman Brothers Inc.
Certain officers and directors of the General Partner are now serving (or in the
past have served) as officers or directors of entities which act as general
partners of a number of limited partnerships which have sought protection under
the provisions of the Federal Bankruptcy Code. The partnerships which have filed
bankruptcy petitions own assets which have been adversely affected by the
economic conditions in the markets in which that asset is located and,
consequently, the partnerships sought protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
The directors and principal officers of the General Partner are listed below.
Name Office
---- ------
Rocco F. Andriola Director
Michael T. Marron Director, President and Chief Financial Officer
Lawrence M. Ostow Vice President
Rocco F. Andriola, 40, is a Managing Director of Lehman Brothers Inc. in its
Diversified Asset Group and has held such position since October 1996.
Since joining Lehman in 1986, Mr. Andriola has been involved in a wide range
of restructuring and asset management activities involving real estate and
other direct investment transactions. From June 1991 through September
1996, Mr. Andriola held the position of Senior Vice President in Lehman's
Diversified Asset Group. From June 1989 through May 1991, Mr. Andriola held
the position of First Vice President in Lehman's Capital Preservation and
Restructuring Group. From 1986-89, Mr. Andriola served as a Vice President
in the Corporate Transactions Group of Shearson Lehman Brothers' office of
the general counsel. Prior to joining Lehman, Mr. Andriola practiced
corporate and securities law at Donovan Leisure Newton & Irvine in New
York. Mr. Andriola received a B.A. from Fordham University, a J.D. from New
York University School of Law, and an LL.M in Corporate Law from New York
University's Graduate School of Law.
<PAGE>
7
Michael T. Marron, 35, is a Vice President of Lehman Brothers and has been a
member of the Diversified Asset Group since 1990 where he has actively
managed and restructured a diverse portfolio of syndicated limited
partnerships. Prior to joining Lehman Brothers, Mr. Marron was associated
with Peat Marwick Mitchell & Co. serving in both its audit and tax divisions
from 1985 to 1989. Mr. Marron received his B.S. degree from the State
University of New York at Albany and an M.B.A. from Columbia University.
Lawrence M. Ostow, 31, is a Vice President of Lehman Brothers and is
responsible for the management of commercial real estate in the Diversified
Asset Group. Mr. Ostow joined Lehman Brothers in September 1992. Prior to
that, Mr. Ostow was a Senior Consultant with Arthur Andersen & Co. in the
Real Estate Services Group, beginning in July 1990. Mr. Ostow earned an
M.B.A. from the Stern School of Business in 1997 and a B.A. degree in
Economics from the University of Michigan in 1990.
Item 11. Executive Compensation
The Directors and Officers of the General Partner do not receive any salaries or
other compensation from the Partnership. See Item 13, "Certain Relationships and
Related Transactions," for a description of certain transactions of the General
Partner and its affiliates with the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners.
As of December 31, 1998, one party was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership. The
owner, LAVRA, Inc., owns a total of 585,482.75 Units or 12.1% of the Units in
one account. LAVRA's address is 245 Fischer Avenue, Suite D-1, Costa Mesa,
California, 92626.
(b) Security ownership of management.
Officers and Directors of the General Partner owned no units of the Partnership
as of December 31, 1998.
(c) Changes in control.
None.
Item 13. Certain Relationships and Related Transactions
For fees paid and reimbursed to the General Partner or its affiliates during
1998, 1997 and 1996, see Note 5, "Transactions with Related Parties," to the
Consolidated Financial Statements which is incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31, 1998,
which is filed as an exhibit under Item 14.
<PAGE>
8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements:
Consolidated Balance Sheets - At December 31, 1998 and 1997 .....(1)
Consolidated Statements of Partners' Capital (Deficit) - For the
years ended December 31, 1998, 1997 and 1996 ....................(1)
Consolidated Statements of Operations - For the years ended
December 31, 1998, 1997 and 1996 ................................(1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1998, 1997 and 1996 ................................(1)
Notes to the Consolidated Financial Statements ..................(1)
Report of Independent Accountants ...............................(1)
(a) (2) Financial Statement Schedules:
No schedules are presented because the information is not applicable
or is included in the Financial Statements or the notes thereto.
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1998, filed as an exhibit
under Item 14.
(a) (3)Exhibits
3.1 The Partnership's Amended and Restated Agreement of Limited
Partnership, Dated March 17, 1987, is hereby incorporated by reference
to Exhibit A to the Prospectus contained in Registration Statement No.
33-9921, which registration Statement (the "Registration Statement")
was declared effective by the Securities and Exchange Commission on
January 30, 1987.
3.2 The Capital Contribution Agreement by and among the General Partner
and Shearson Group is hereby incorporated by reference to Exhibit 3.2
to the Registration Statement.
10.1 Form of the Management Agreement dated as of April 5, 1988 between the
Partnership and the Operator is incorporated by reference to Exhibit
10.2 to the Registration Statement.
10.2 The form of Property Partnership Agreement between the Partnership and
the Property Partner is hereby incorporated by reference to Exhibit
10.6 to the Registration Statement.
10.3 The form of Purchase Agreement concerning the acquisition of the
Properties is hereby incorporated by reference to Exhibit No. 10.4 to
the Registration Statement.
13.1 Annual Report to Unitholders for the year ended December 31, 1998.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
On October 27, 1998 the Partnership filed a report on Form 8-K
reporting the close of the sale of Ocean House.
<PAGE>
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SENIOR INCOME FUND L.P.
BY: SENIOR INCOME FUND INC.
General Partner
Date: March 31, 1999 BY: /s/Michael T. Marron
--------------------
Name: Michael T. Marron
Title: Director, President and Chief Financial
Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SENIOR INCOME FUND L.P.
BY: SENIOR INCOME FUND INC.
General Partner
Date: March 31, 1999 BY: /s/Rocco F. Andriola
--------------------
Name: Rocco F. Andriola
Title: Director
Date: March 31, 1999 BY: /s/Michael T. Marron
--------------------
Name: Michael T. Marron
Title: Director, President and Chief Financial
Officer
Date: March 31, 1999 BY: /s/Lawrence M. Ostow
--------------------
Name: Lawrence M. Ostow
Title: Vice President
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,060,585
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 50,754
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 1,111,339
<CURRENT-LIABILITIES> 92,716
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 996,623
<TOTAL-LIABILITY-AND-EQUITY> 1,111,339
<SALES> 3,155,478
<TOTAL-REVENUES> 3,427,040
<CGS> 000
<TOTAL-COSTS> 2,548,013
<OTHER-EXPENSES> 602,131
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 276,896
<INCOME-TAX> 000
<INCOME-CONTINUING> 276,896
<DISCONTINUED> 000
<EXTRAORDINARY> 2,072,451
<CHANGES> 000
<NET-INCOME> 2,349,347
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
