<PAGE>   1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For Quarter Ended                    June 30, 1999
                      ----------------------------------------------------------

Commission file number                   0-13563
                      ----------------------------------------------------------

                      DAMSON/BIRTCHER REALTY INCOME FUND - I
--------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)


                       Pennsylvania                              13-3264491
--------------------------------------------------------------------------------
               (State or other jurisdiction of               (I.R.S. Employer
                incorporation or organization)              Identification No.)


 27611 La Paz Road, P.O. Box 30009, Laguna Niguel, California    92607-0009
--------------------------------------------------------------------------------
       (Address of principal executive offices)                   (Zip Code)


                                 (949) 643-7700
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                       N/A
--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report.)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


                                 Yes [X] No [ ]



<PAGE>   2


                      DAMSON/BIRTCHER REALTY INCOME FUND-I
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE THREE MONTHS ENDED JUNE 30, 1999

                                      INDEX
<TABLE>
<CAPTION>


                                                                                                                        Page
                                                                                                                        ----

<S>                                                                                                                     <C>
PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Statements of Net Assets in Liquidation - June 30, 1999
           (Unaudited) and December 31, 1998 (Audited)..............................................................        3

           Statements of Changes of Net Assets in Liquidation -
           Three and Six Months Ended June 30, 1999 and 1998 (Unaudited)............................................        4

           Notes to Financial Statements (Unaudited)................................................................        5

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations............................................................       13

Item 3.    Quantitative and Qualitative Market Risk Disclosures.....................................................       19


PART II.   OTHER INFORMATION........................................................................................       19

</TABLE>

                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION


ITEM 1.           FINANCIAL STATEMENTS


                      DAMSON/BIRTCHER REALTY INCOME FUND-I
                     STATEMENTS OF NET ASSETS IN LIQUIDATION

<TABLE>
<CAPTION>

                                                    June 30,          December 31,
                                                     1999                 1998
                                                   -----------        -----------
ASSETS (Liquidation Basis):                        (unaudited)
<S>                                                <C>                <C>

Properties                                         $32,762,000        $34,431,000

Cash and cash equivalents                              611,000            351,000
Accounts receivable, net                                29,000            171,000
Other assets                                           156,000            121,000
                                                   -----------        -----------

    Total Assets                                    33,558,000         35,074,000
                                                   -----------        -----------

LIABILITIES (Liquidation Basis):

Accounts payable and accrued liabilities               950,000            896,000
Secured loan payable                                 2,391,000          2,509,000
Accrued expenses for liquidation (including
  prepayment penalty)                                  873,000            873,000
                                                   -----------        -----------

    Total Liabilities                                4,214,000          4,278,000
                                                   -----------        -----------

Net Assets in Liquidation                          $29,344,000        $30,796,000
                                                   ===========        ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>   4

                      DAMSON/BIRTCHER REALTY INCOME FUND-I
               STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                              Three Months Ended                             Six Months Ended
                                                   June 30,                                       June 30,
                                          ---------------------------------         ---------------------------------
                                              1999                 1998                 1999                 1998
                                          ------------         ------------         ------------         ------------
<S>                                       <C>                  <C>                  <C>                  <C>
Net assets in liquidation
 at beginning of period                   $ 30,926,000         $ 32,052,000         $ 30,796,000         $ 32,026,000
Increase (decrease) during period:
  Operating activities:
    Property operating income, net             800,000              911,000            1,466,000            1,592,000
    Interest income                              3,000                1,000                7,000                6,000
    General and administrative
     expenses                                 (244,000)            (273,000)            (451,000)            (507,000)
    Interest expense on mortgage
     payable                                   (55,000)             (59,000)            (111,000)            (121,000)
    Leasing commissions                        (55,000)            (110,000)             (66,000)            (218,000)
                                          ------------         ------------         ------------         ------------

                                               449,000              470,000              845,000              752,000
                                          ------------         ------------         ------------         ------------
  Liquidating activities:
    Adjustment to the carrying
     value of real estate                   (1,717,000)          (2,600,000)          (1,717,000)          (2,600,000)
    Distributions to partners                 (314,000)                  --             (580,000)            (256,000)
                                          ------------         ------------         ------------         ------------

                                            (2,031,000)          (2,600,000)          (2,297,000)          (2,856,000)
                                          ------------         ------------         ------------         ------------

Net decrease in assets
in liquidation                              (1,582,000)          (2,130,000)          (1,452,000)          (2,104,000)
                                          ------------         ------------         ------------         ------------

Net assets in liquidation at
end of period                             $ 29,344,000         $ 29,922,000         $ 29,344,000         $ 29,922,000
                                          ============         ============         ============         ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>   5
                      DAMSON/BIRTCHER REALTY INCOME FUND-I

NOTES TO FINANCIAL STATEMENTS - UNAUDITED

(1)      Accounting Policies

         The financial statements of Damson/Birtcher Realty Income Fund-I (the
         "Partnership") included herein have been prepared by the General
         Partner, without audit, pursuant to the rules and regulations of the
         Securities and Exchange Commission. These financial statements include
         all adjustments which are of a normal recurring nature and, in the
         opinion of the General Partner, are necessary for a fair presentation.
         Certain information and footnote disclosures normally included in
         financial statements prepared in accordance with generally accepted
         accounting principles have been condensed or omitted, pursuant to the
         rules and regulations of the Securities and Exchange Commission. These
         financial statements should be read in conjunction with the financial
         statements and notes thereto included in the Partnership's annual
         report on Form 10-K for the year ended December 31, 1998.

         Liquidation Basis of Accounting

         On February 18, 1997, the Partnership mailed a Consent Solicitation to
         the Limited Partners which sought their consent to dissolve the
         Partnership and sell and liquidate all of its remaining properties as
         soon as practicable, consistent with selling the Partnership's
         properties to the best advantage under the circumstances. A majority in
         interest of the Limited Partners consented by March 14, 1997. As a
         result, the Partnership adopted the liquidation basis of accounting as
         of March 31, 1997. The liquidation basis of accounting is appropriate
         when liquidation appears imminent, the Partnership can no longer be
         classified as a going concern and the net realizable values of the
         Partnership's assets are reasonably determinable. The difference
         between the adoption of the liquidation basis of accounting as of March
         14, 1997 and March 31, 1997 was not material.

         Under the liquidation basis of accounting, assets are stated at their
         estimated net realizable values and liabilities are stated at their
         anticipated settlement amounts. The valuation of assets and liabilities
         necessarily requires many estimates and assumptions, and there are
         substantial uncertainties in carrying out the dissolution of the
         Partnership. The actual values upon dissolution and costs associated
         therewith could be higher or lower than the amounts recorded.

         Segment Reporting

         The Partnership adopted Statement of Financial Accounting Standards No.
         131, "Disclosures About Segments of an Enterprise and Related
         Information" ("SFAS 131"). SFAS 131 requires, among other items, that a
         public business enterprise report a measure of segment profit or loss,
         certain specific revenue and expense items, segment assets, information
         about the revenues derived from the enterprise's products or services
         and major customers. SFAS 131 also requires that the enterprise report
         descriptive information about the way that the operating segments were
         determined and the products and services provided by the operating
         segments. Given that the Partnership is in the process of liquidation,


                                       5
<PAGE>   6
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)

(1)      Accounting Policies (Cont'd.)

         Segment Reporting (Cont'd.)

         the Partnership has identified only one operating business segment
         which is the business of asset liquidation. The adoption of SFAS 131
         did not have an impact on the Partnership's financial reporting.

         Rental income from FISERV, Inc. (formerly d.b.a. Citicorp CIR, Inc.)
         totaled $255,000 and $237,000 for the three months ended June 30, 1999
         and 1998, or approximately 18% and 16% respectively of the
         Partnership's total rental income. For the six months ended June 30,
         1999 and 1998, rental income totaled $516,000 and $471,000, or 19% and
         16% of the Partnership's total rental income, respectively.

         Sale of the Properties

         In November 1998, the Partnership entered into a definitive Purchase
         and Sale Agreement with Abbey Investments, Inc. to sell all the
         Partnership's properties for a range between $34,500,000 and
         $36,000,000, depending on final occupancy rates at the time of closing.
         However, in January 1999, the agreement was terminated because Abbey
         had requested a material reduction in the purchase price, which the
         Partnership did not agree to.

         On April 30, 1999, the Partnership and Praedium Performance Fund IV
         ("Praedium") executed a Purchase and Sale Agreement to sell all of the
         Partnership's properties except Terracentre to Praedium for
         $31,700,000. Praedium deposited $243,100 into escrow, pending
         completion of its due diligence inspection and review. Praedium's
         contingency period expired on June 14, 1999. During and after the
         contingency period, Praedium, in a series of negotiations with the
         Partnership, sought reductions in the purchase price of each of the
         properties and declined to include the Cornerstone, Ladera-I and
         Certified Distribution Center in its offers. During this time, the
         General Partner negotiated with Praedium, and also sought other
         purchasers for the properties, both individually and as a group.
         Finally, in late July 1999, the Partnership declined Praedium's offer
         to purchase only Cornerstone, Oakpointe and Washington Tech for a
         materially reduced purchase price and terminated its dealings with
         Praedium.

         Immediately thereafter, on July 29, 1999, the Partnership entered into
         a Purchase and Sale Agreement and Joint Escrow Instructions to sell all
         of the Partnership's properties except Terracentre, The Cornerstone and
         Ladera-I Shopping Center to Rubin Pachulsky Dew Properties, LLC ("Rubin
         Pachulsky Dew") for an aggregate purchase price of $14,650,000. Rubin
         Pachulsky Dew deposited $356,448 into escrow, which deposit is
         nonrefundable except in the event of the Partnership's breach of the
         sale agreement. Rubin Pachulsky Dew is a third-party real estate
         investment entity that is not affiliated in any way with the
         Partnership, its General Partner or any of its principals or
         affiliates.

         Except for a few technical exceptions, such as the Partnership's breach
         of the sale agreement or title issues that cannot be corrected or
         insured against by the Partnership to Rubin Pachulsky Dew's
         satisfaction, the purchase is not subject to any conditions. It is
         currently scheduled to close on September 14, 1999, and both buyer and
         seller have agreed to use their best efforts to close the transaction
         sooner.

         Rubin Pachulsky Dew will hire Birtcher or an affiliate as property
         manager for the properties for a fee that is approximately the same as
         the current fee paid to the General Partner for property management. In
         addition, Rubin Pachulsky Dew will hire Birtcher or an affiliate to
         provide certain asset management services for the properties, and pay
         an incentive fee approximately equal


                                       6


<PAGE>   7
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)

(1)      Accounting Policies (Cont'd.)

         Sale of the Properties (Cont'd.)

         to 10% of the profits, if any, after Rubin Pachulsky Dew has received a
         15% return on its investment. The incentive fee, if earned, is not
         payable until the last property is sold or four years from date of
         purchase, whichever comes first. The property management agreement is
         cancelable at any time upon 60 days notice, but the incentive fee will
         survive termination of the contract.

         Terracentre

         On March 24, 1999, the Partnership signed a Purchase and Sale Agreement
         to sell Terracentre for $6,450,000 to Halcyon Real Estate, Inc.
         ("Halcyon"), a local Denver real estate development company. During its
         due diligence period Halcyon asked to extend its contingency period to
         address zoning and land-use changes with the city of Denver (it
         apparently wanted to change the site from office to residential
         condominium use). The General Partner did not accept the request for
         extension. Halcyon thereupon asked to reduce the purchase price from
         $6,450,000 to $4,500,000. The Partnership rejected this request and
         terminated its dealings with Halcyon.

         On June 18, 1999, the Partnership entered into a Purchase and Sale
         Agreement with Charles Callaway ("Callaway"), an unaffiliated Denver
         real estate developer and operator, for $6,450,000. The purchaser
         deposited $200,000 into escrow on June 21, 1999, all but $50,000 of
         which is refundable pending completion of its due diligence
         investigation. Unfortunately, at a Denver city council meeting on
         August 10, 1999, certain council members discussed condemning
         Terracentre in order to expand the adjacent convention center. At this
         time, the Callaway transaction is on hold, pending further action by
         the City of Denver.

         The Cornerstone

         On June 29, 1999, the Partnership signed a Purchase and Sale Agreement
         and Joint Escrow Instructions to sell the Cornerstone to GDA Real
         Estate Services, LLC ("GDA"), a local real estate developer and
         operator that is not affiliated in any way with the Partnership, its
         General Partner or the General Partner's affiliates, for a sale price
         of $8,500,000. GDA deposited $250,000 into escrow on June 30, 1999,
         which sum is nonrefundable. Closing of the transaction is currently
         scheduled for August 29, 1999. GDA may extend the closing date for an
         additional 30 days by depositing an additional nonrefundable payment of
         $100,000 into escrow. Prior to the close of the sale, the Partnership
         shall deposit into escrow the sum of $230,000 to make certain repairs
         to the parking lot.

         GDA is represented by a third party broker in the transaction. The
         broker will be paid an amount not to exceed $171,000 from the sale
         proceeds. GDA will not hire the General Partner or any affiliate to
         perform asset management or property management services for this
         property after close of the sale. The Partnership has granted Rubin
         Pachulsky Dew an option to purchase the Cornerstone for the same price
         and on the same terms as GDA, should the GDA purchase fail for any
         reason.

                                       7
<PAGE>   8
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)

(1)      Accounting Policies (Cont'd.)

         Sale of the Properties (Cont'd.)

         Ladera-I

         On August 9, 1999, the Partnership signed a Purchase and Sale Agreement
         and Joint Escrow Instructions to sell Ladera-I shopping center to CA
         New Mexico, LLC, a wholly-owned subsidiary of CenterAmerica Trust
         ("CenterAmerica"), a Houston-based real estate investment trust that is
         not affiliated in any way with the Partnership, its General Partner or
         the General Partner's affiliates. The purchase price is $4,424,000.
         CenterAmerica deposited $79,000 into escrow on August 10, 1999, which
         sum is fully refundable pending completion of its due diligence. The
         due diligence contingency period is scheduled to end on September 7,
         1999, with closing to occur on September 22, 1999.

         CenterAmerica is represented by a third party broker in the
         transaction. The broker will be paid an amount not to exceed $176,960
         from the sale proceeds. CenterAmerica will not hire the General Partner
         or any affiliate to perform asset management or property management
         services for this property after close of the sale.

         Adjustment to the Carrying Value of Real Estate

         During the three months ended June 30, 1999, the General Partner
         determined that the carrying values of Ladera-I Shopping Center and
         Oakpointe were in excess of their respective estimated net realizable
         values, less estimated selling cost. As a result, their carrying values
         were adjusted by $1,217,000 and $500,000, to $4,203,000, and
         $5,812,000, respectively.

         Earnings Per Unit

         The Partnership Agreement does not designate investment interests in
         units. All investment interests are calculated on a "percent of
         Partnership" basis, in part to accommodate original reduced rates on
         sales commissions for subscriptions in excess of certain specified
         amounts.

         A Limited Partner who was charged a reduced sales commission or no
         sales commission was credited with proportionately larger Invested
         Capital and therefore had a disproportionately greater interest in the
         capital and revenues of the Partnership than a Limited Partner who paid
         commissions at a higher rate. As a result, the Partnership has no set
         unit value as all accounting, investor reporting and tax information is
         based upon each investor's relative percentage of Invested Capital.
         Accordingly, earnings or loss per unit is not presented in the
         accompanying financial statements.

(2)      Transactions with Affiliates

         The Partnership has no employees and, accordingly, the General Partner
         and its affiliates perform services on behalf of the Partnership in
         connection with administering the affairs of the Partnership. The
         General Partner and affiliates are reimbursed for their general and
         administrative costs actually incurred and associated with services
         performed on behalf of the Partnership. For the three months ended June
         30, 1999 and 1998, the


                                       8

<PAGE>   9

                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)

(2)      Transactions with Affiliates (Cont'd.)

         Partnership incurred approximately $52,000 and $50,000, respectively.
         Such costs were $85,000 and $90,000 for the six months there ended.

         An affiliate of the General Partner provides property management
         services with respect to the Partnership's properties and receives a
         fee for such services not to exceed 3% of the gross receipts from the
         properties under management. Such fees amounted to approximately
         $42,000 and $44,000 for the three months ended June 30, 1999 and 1998,
         and $85,000 and $85,000, respectively for the six months there ended.
         In addition, an affiliate of the General Partner received $85,000 and
         $87,000 for the three months ended June 30, 1999 and 1998,
         respectively, as reimbursement of costs of on-site property management
         personnel and other reimbursable costs. For the six months there ended,
         such reimbursements were $171,000 and $161,000, respectively.

         As previously reported, on June 24, 1993, the Partnership completed its
         solicitation of written consents from its Limited Partners. A majority
         in interest of the Partnership's Limited Partners approved each of the
         proposals contained in the Information Statement dated May 5, 1993.
         Those proposals were implemented by the Partnership as contemplated by
         the Information Statement as amendments to the Partnership Agreement,
         and are reflected in these financial statements as such.

         The amended Partnership Agreement provides for the Partnership's
         payment to the General Partner of an annual asset management fee equal
         to .45% for 1999 and .55% for 1998 of the aggregate appraised value of
         the Partnership's properties as determined by independent appraisal
         undertaken in January of 1998 and by the General Partner's estimate of
         fair value for 1999. Such fees for the three months ended June 30, 1999
         and 1998, amounted to $39,000 and $52,000, respectively. For the six
         months there ended, these fees amounted to $79,000 and $105,000,
         respectively.

         In addition, the amended Partnership Agreement provides for payment to
         the General Partner of a leasing fee for services rendered in
         connection with leasing space in a Partnership property after the
         expiration or termination of leases. Fees for leasing services for the
         three months ended June 30, 1999 and 1998, amounted to $17,000 and
         $12,000, respectively. For the six months there ended, such fees were
         $18,000 and $35,000, respectively.

(3)      Commitments and Contingencies

         Litigation

         So far as is known to the General Partner, neither the Partnership nor
         its properties are subject to any material pending legal proceedings,
         except for the following:

         Bigelow/Diversified Secondary Partnership's Fund 1990 Litigation

         On March 25, 1997, a limited partner named Bigelow/Diversified
         Secondary Partnership Fund 1990 filed a purported class action lawsuit
         in the Court

                                       9
<PAGE>   10
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENT - UNAUDITED (Cont'd.)

(3)      Commitments and Contingencies (Cont'd.)

         Litigation (Cont'd.)

         Bigelow Diversified Secondary Partnership Fund 1990 litigation
         (Cont'd.)

         of Common Pleas of Philadelphia County against Damson/Birtcher
         Partners, Birtcher Investors, Birtcher/Liquidity Properties, Birtcher
         Investments, L.F. Special Fund II, L.P., L.F. Special Fund I, L.P.,
         Arthur Birtcher, Ronald Birtcher, Robert Anderson, Richard G. Wollack
         and Brent R. Donaldson alleging breach of fiduciary duty and breach of
         contract and seeking to enjoin the Consent Solicitation dated February
         18, 1997. On April 18, 1997, the court denied the plaintiff's motion
         for a preliminary injunction. On June 10, 1997, the court dismissed the
         plaintiff's complaint on the basis of lack of personal jurisdiction and
         forum non conveniens.

         On June 13, 1997, the Partnership's affiliated partnerships,
         Damson/Birtcher Realty Income Fund-II and Real Estate Income Partners
         III, and their general partner, Birtcher/Liquidity Properties, filed a
         complaint for declaratory relief in the Court of Chancery in Delaware
         against Bigelow/Diversified Secondary Partnership Fund 1990 L.P. The
         complaint seeks a declaration that the vote that the limited partners
         of Damson/Birtcher Realty Income Fund-II and Real Estate Income
         Partners III took pursuant to the respective consent solicitations
         dated February 18, 1997 was effective to dissolve the respective
         partnerships and complied with applicable law, that the actions of the
         General Partner in utilizing the consent solicitations to solicit the
         vote of the limited partners did not breach any fiduciary or
         contractual duty to such limited partners, and an award of costs and
         fees to the plaintiffs. The defendant has answered the complaint. The
         parties have initiated discovery. No motions are pending at this time.

         In September 1998, Bigelow/Diversified Secondary Partnership 1990
         informed the Partnership that it was filing suit in the Delaware
         Chancery Court against Damson/Birtcher Partners, Birtcher Investors,
         Birtcher Liquidity Properties, Birtcher Investments, BREICORP, LF
         Special Fund I, LP, LF Special Fund II. LP, Arthur Birtcher, Ronald
         Birtcher, Robert Anderson, Richard G. Wollack and Brent R. Donaldson
         alleging a purported class action on behalf of the limited partners of
         Damson/Birtcher Realty Income Fund-I, Damson/Birtcher Realty Income
         Fund-II and Real Estate Income Partners III alleging breach of
         fiduciary duty and incorporating the allegations set forth in the
         previously dismissed March 25, 1997 complaint filed in the Court of
         Chancery of Philadelphia County. Plaintiff has engaged in preliminary
         discovery and the parties have held settlement discussions. No motions
         are pending at this time.

         Rex Garton, et al. v. Damson/Birtcher Partners, et al.

         This action was filed on September 25, 1998 in the District Court of
         Oklahoma County for the State of Oklahoma against the Partnership's
         general partner, Damson/Birtcher Partners, other related defendants and
         numerous unrelated defendants. Damson/Birtcher Partners and other
         related defendants were brought into the action in late December 1998,
         when they were served

                                       10
<PAGE>   11
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENT - UNAUDITED (Cont'd.)

(3)      Commitments and Contingencies (Cont'd.)

         Litigation (Cont'd.)

         Rex Garton, et al. v. Damson/Birtcher Partners, et al. (Cont'd.)

         with the Second Amended Petition. The other related defendants are
         Birtcher Partners, Birtcher Properties, The Birtcher Group, Birtcher
         American Properties, Arthur B. Birtcher, Ronald E. Birtcher, LF Special
         Fund II, L.P., and Liquidity Fund Asset Management Inc., but The
         Birtcher Group and Birtcher American Properties have not been served
         with process and have not appeared in the action. The Partnership
         itself is not named as a defendant. The case is a class action brought
         on behalf of investors in the Partnership who purchased limited
         partnership interests from May 7, 1984 to September 17, 1985. The
         Second Amended Petition alleges breach of contract, intentional and
         negligent misrepresentation, breach of fiduciary duties, and violations
         of various Oklahoma and federal statutes in connection with the sale of
         the limited partnership interests. Plaintiff seeks unspecified
         compensatory damages and $10 million in punitive damages.

         Damson/Birtcher Partners and the related defendants have removed the
         case to the United States District Court for the Western District of
         Oklahoma, and have filed a motion to dismiss the case for lack of
         personal jurisdiction or, alternatively, to transfer the action to the
         United States District Court for the Central District of California,
         for the convenience of the parties and witnesses and in the interests
         of justice. Plaintiff's motion to remand the case back to the Oklahoma
         state court was denied. The motion to dismiss or transfer is pending.
         Damson/Birtcher Partners and the related defendants intend to present a
         vigorous defense on the merits of plaintiff's claims, should this be
         necessary.

         Madison Partnership and ISA Partnership Litigation

         On April 2, 1999, Madison Partnership Liquidity Investors XVI, LLC and
         ISA Partnership Liquidity Investors filed a purported class and
         derivative action in the California Superior Court in Orange County,
         California against Damson Birtcher Partners, Birtcher/Liquidity
         Properties, Birtcher Partners, Birtcher Investors, Birtcher
         Investments, Birtcher Limited, Breicorp LP Special Fund II, L.P.,
         Liquidity Fund Asset Management, Inc., Robert M. Anderson, Brent R.
         Donaldson, Arthur B. Birtcher, Ronald E. Birtcher, and Richard G.
         Wollack, Defendants, and Damson/Birtcher Realty Income Fund-I,
         Damson/Birtcher Realty Income Fund-II, and Real Estate Income Partners
         III, Nominal Defendants. The complaint asserts claims for breach of
         fiduciary duty and breach of contract. The gravamen of the complaint is
         that the General Partners of these limited partnerships have not
         undertaken all reasonable efforts to expedite liquidation of the
         Partnerships' properties and to maximize the returns to the
         Partnerships' limited partners. The complaint seeks unspecified
         monetary damages, attorneys' fees and litigation expenses, and an order
         for dissolution of the Partnerships and appointment of an independent
         liquidating trustee. The Partnership has moved to dismiss the case on
         the grounds that the pending Bigelow class action, discussed above,
         raises essentially the same claims. If the case is not dismissed, the
         Partnership intends to present a vigorous defense.


                                       11
<PAGE>   12
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



NOTES TO FINANCIAL STATEMENT - UNAUDITED (Cont'd.)

(4)      Accrued Expenses for Liquidation

         Accrued expenses for liquidation as of June 30, 1999, include estimates
         of costs to be incurred in carrying out the dissolution and liquidation
         of the Partnership. These costs include estimates of legal fees,
         accounting fees, tax preparation and filing fees, other professional
         services and the pre-payment penalty associated with the anticipated
         early retirement of the mortgage loan secured by the Certified
         Distribution Center property. The actual costs could vary significantly
         from the related provisions due to the uncertainty related to the
         length of time required to complete the liquidation and dissolution and
         the complexities which may arise in disposing of the Partnership's
         remaining assets.

                                       12
<PAGE>   13
                      DAMSON/BIRTCHER REALTY INCOME FUND-I


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         Liquidity and Capital Resources

         Since the completion of its acquisition program in September 1985, the
         Partnership has been engaged in the operation of its properties. The
         Partnership's original objective had been to hold its properties as
         long-term investments. However, an Information Statement, dated May 5,
         1993, mandated that the General Partner seek a vote of the Limited
         Partners no later than December 31, 1996, regarding prompt liquidation
         of the Partnership in the event that properties with appraised values
         as of January 1993 which constituted at least one half of the aggregate
         appraised values of all Partnership properties as of that date were not
         sold or under contract for sale by the end of 1996. Given the mandate
         of the May 5, 1993 Information Statement, as of December 31, 1995, the
         General Partner decided to account for the Partnership's properties as
         assets held for sale, instead of for investment. In a Consent
         Solicitation dated February 18, 1997, the Partnership solicited and
         received the consent of the Limited Partners on March 14, 1997 to
         dissolve the Partnership and sell and liquidate all of its remaining
         properties as soon as practicable, consistent with selling the
         Partnership's properties to the best advantage under the circumstances.
         The Partnership's properties were held for sale throughout 1998 and
         continue to be held for sale.

         In November 1998, the Partnership entered into a definitive Purchase
         and Sale Agreement with Abbey Investments, Inc. to sell all the
         Partnership's properties for a range between $34,500,000 and
         $36,000,000, depending on final occupancy rates at the time of closing.
         However, in January 1999, the agreement was terminated because Abbey
         had requested a material reduction in the purchase price, which the
         Partnership did not agree to.

         On April 30, 1999, the Partnership and Praedium Performance Fund IV
         ("Praedium") executed a Purchase and Sale Agreement to sell all of the
         Partnership's properties except Terracentre to Praedium for
         $31,700,000. Praedium deposited $243,100 into escrow, pending
         completion of its due diligence inspection and review. Praedium's
         contingency period expired on June 14, 1999. During and after the
         contingency period, Praedium, in a series of negotiations with the
         Partnership, sought reductions in the purchase price of each of the
         properties and declined to include the Cornerstone, Ladera-I and
         Certified Distribution Center in its offers. During this time, the
         General Partner negotiated with Praedium, and also sought other
         purchasers for the properties, both individually and as a group.
         Finally, in late July 1999, the Partnership declined Praedium's offer
         to purchase only Cornerstone, Oakpointe and Washington Tech for a
         materially reduced purchase price and terminated its dealings with
         Praedium.

         Immediately thereafter, on July 29, 1999, the Partnership entered into
         a Purchase and Sale Agreement and Joint Escrow Instructions to sell all
         of the Partnership's properties except Terracentre, The Cornerstone and
         Ladera-I Shopping Center to Rubin Pachulsky Dew Properties, LLC ("Rubin
         Pachulsky Dew") for an aggregate purchase price of $14,650,000. Rubin
         Pachulsky Dew deposited $356,448 into escrow, which deposit is
         nonrefundable except in the event of the Partnership's breach of the
         sale agreement. Rubin Pachulsky Dew is a third-party real estate
         investment entity that is not affiliated in any way with the
         Partnership, its General Partner or any of its principals or
         affiliates.

         Except for a few technical exceptions, such as the Partnership's breach
         of the sale agreement or title issues that cannot be corrected or
         insured against by the Partnership to Rubin Pachulsky Dew's
         satisfaction, the purchase is not subject to any conditions. It is
         currently scheduled to close on September 14, 1999, and both buyer and
         seller have agreed to use their best efforts to close the transaction
         sooner.


                                       13

<PAGE>   14

                      DAMSON/BIRTCHER REALTY INCOME FUND-I


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (Cont'd.)

         Liquidity and Capital Resources (Cont'd.)

         Rubin Pachulsky Dew will hire Birtcher or an affiliate as property
         manager for the properties for a fee that is approximately the same as
         the current fee paid to the General Partner for property management. In
         addition, Rubin Pachulsky Dew will hire Birtcher or an affiliate to
         provide certain asset management services for the properties, and pay
         an incentive fee approximately equal to 10% of the profits, if any,
         after Rubin Pachulsky Dew has received a 15% return on its investment.
         The incentive fee, if earned, is not payable until the last property is
         sold or four years from date of purchase, whichever comes first. The
         property management agreement is cancelable at any time upon 60 days
         notice, but the incentive fee will survive termination of the contract.

         Terracentre

         On March 24, 1999, the Partnership signed a Purchase and Sale Agreement
         to sell Terracentre for $6,450,000 to Halcyon Real Estate, Inc.
         ("Halcyon"), a local Denver real estate development company. During its
         due diligence period Halcyon asked to extend its contingency period to
         address zoning and land-use changes with the city of Denver (it
         apparently wanted to change the site from office to residential
         condominium use). The General Partner did not accept the request for
         extension. Halcyon thereupon asked to reduce the purchase price from
         $6,450,000 to $4,500,000. The Partnership rejected this request and
         terminated its dealings with Halcyon.

         On June 18, 1999, the Partnership entered into a Purchase and Sale
         Agreement with Charles Callaway ("Callaway"), an unaffiliated Denver
         real estate developer and operator, for $6,450,000. The purchaser
         deposited $200,000 into escrow on June 21, 1999, all but $50,000 of
         which is refundable pending completion of its due diligence
         investigation. Unfortunately, at a Denver city council meeting on
         August 10, 1999, certain council members discussed condemning
         Terracentre in order to expand the adjacent convention center. At this
         time, the Callaway transaction is on hold, pending further action by
         the City of Denver.

         The Cornerstone

         On June 29, 1999, the Partnership signed a Purchase and Sale Agreement
         and Joint Escrow Instructions to sell the Cornerstone to GDA Real
         Estate Services, LLC ("GDA"), a local real estate developer and
         operator that is not affiliated in any way with the Partnership, its
         General Partner or the General Partner's affiliates, for a sale price
         of $8,500,000. GDA deposited $250,000 into escrow on June 30, 1999,
         which sum is nonrefundable. Closing of the transaction is currently
         scheduled for August 29, 1999. GDA may extend the closing date for an
         additional 30 days by depositing an additional nonrefundable payment of
         $100,000 into escrow. Prior to the close of the sale, the Partnership
         shall deposit into escrow the sum of $230,000 to make certain repairs
         to the parking lot.

         GDA is represented by a third party broker in the transaction. The
         broker will be paid an amount not to exceed $171,000 from the sale
         proceeds. GDA

                                       14
<PAGE>   15

                      DAMSON/BIRTCHER REALTY INCOME FUND-I



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Cont'd.)

         Liquidity and Capital Resources (Cont'd.)

         The Cornerstone (Cont'd.)

         will not hire the General Partner or any affiliate to perform asset
         management or property management services for this property after
         close of the sale. The Partnership has granted Rubin Pachulsky Dew an
         option to purchase the Cornerstone for the same price and on the same
         terms as GDA, should the GDA purchase fail for any reason.

         Ladera-I

         On August 9, 1999, the Partnership signed a Purchase and Sale Agreement
         and Joint Escrow Instructions to sell Ladera-I Shopping Center to CA
         New Mexico, LLC, a wholly-owned subsidiary of CenterAmerica Trust
         ("CenterAmerica"), a Houston-based real estate investment trust that is
         not affiliated in any way with the Partnership, its General Partner or
         the General Partner's affiliates. The purchase price is $4,424,000.
         CenterAmerica deposited $79,000 into escrow on August 10, 1999, which
         sum is fully refundable pending completion of its due diligence. The
         due diligence contingency period is scheduled to end on September 7,
         1999, with closing to occur on September 22, 1999.

         CenterAmerica is represented by a third party broker in the
         transaction. The broker will be paid an amount not to exceed $176,960
         from the sale proceeds. CenterAmerica will not hire the General Partner
         or any affiliate to perform asset management or property management
         services for this property after close of the sale.

         Although there can be no assurance that the proposed sales of the
         properties will be completed, if the sales are completed at the stated
         prices, the limited partners will receive total aggregate sale proceeds
         of approximately $302 per $1,000 originally invested in the
         Partnership.

         The General Partner's estimate of sales proceeds does not take into
         account the expenditure of Partnership cash reserves, operating
         expenses or net income or loss of the Partnership for any period prior
         to the time the remaining properties are sold, which could affect the
         amount of sales proceeds available for distribution. Therefore, the
         actual proceeds to be received by the limited partners may vary
         materially, up or down, from the estimate.

         Regular distributions through June 30, 1999 represent cash flow
         generated from operations of the Partnership's properties and interest
         earned on the temporary investment of working capital net of capital
         reserve requirements.

         Future cash distributions will be made principally to the extent of
         cash flow attributable to operations and sales of the Partnership's
         properties and interest earned on the investment of capital reserves,
         after loan repayments, payment for capital improvements to the
         Partnership's properties and providing for capital reserves.


                                       15
<PAGE>   16
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (Cont'd.)

         Liquidity and Capital Resources (Cont'd.)

         On July 30, 1993, the Partnership obtained a loan secured by a First
         Deed of Trust on the Certified Distribution Center in Salt Lake City,
         Utah. The loan, in the amount of $3,500,000, carries a fixed interest
         rate of 9% per annum over a 13-year fully amortizing term and a
         prepayment penalty of approximately $700,000 at current interest rates.

         In March 1996, the Partnership entered into a loan agreement pursuant
         to which it could borrow up to $1,500,000 (similar to a credit line
         arrangement), evidenced by a note secured by a first deed of trust and
         financing statement on the Ladera I Shopping Center in Albuquerque, New
         Mexico. Pursuant to the note and loan agreement, the Partnership
         borrowed $700,000 in March 1996. The net proceeds of the foregoing loan
         were used to fund a portion of the renovation and tenant improvements
         at The Cornerstone and tenant improvements at Oakpointe. The
         Partnership made interest only payments at the rate of 1% over prime
         (the loan rate was 9.25%) through November 1996, when the entire
         balance was paid off utilizing a portion of the proceeds from the sale
         of Arlington Executive Plaza. The Partnership has the ability to borrow
         against this credit facility (up to $1,500,000) through April 2002
         should its cash requirements necessitate.

         Other Matters

         The Partnership is in the process of liquidating its remaining assets.
         It is anticipated that a sale of those assets will occur on or before
         January 1, 2000. It is the opinion of the General Partner that the
         value of those assets is not subject to any valuation risk as a result
         of year 2000 issues, other than general economic climate issues that
         may arise. Based on current information, the cost of addressing
         potential year 2000 problems is not expected to have a material adverse
         impact on the Partnership's financial position, results of operations
         or cash flows in future periods. As of June 30, 1999, the investor
         services system used to track the limited partners' interests,
         distributions and tax information has been tested and appears to be
         free of year 2000 bugs. The Partnership's properties are under review
         utilizing the Building Owners and Managers Association ("BOMA")
         industry standards as a guideline for necessary corrections and the
         Partnership's accounting systems are undergoing a software upgrade to
         correct any year 2000 issues to be completed in August 1999. The cost
         of the upgrades are being borne by the General Partner and will not be
         reimbursed by the Partnership. In addition, the General Partner has
         made inquiries of its banks, all of which indicate that any problems
         have been addressed adequately by those institutions.

         Even if attempts to correct any deficiencies in the Partnership's
         software are unsuccessful, the General Partner anticipates that in the
         short term it could convert its systems to standard spreadsheet or data
         base programs at nominal costs.

         Results of Operations for the Three Months Ended June 30, 1999

         Because the Partnership is in the process of liquidating its remaining

                                       16
<PAGE>   17
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (Cont'd.)

         Results of Operations for the Three Months Ended June 30, 1999
         (Cont'd.)

         assets, a comparison of the results of operations is not practical. As
         the Partnership's assets (properties) are sold, the results of
         operations will be generated from a smaller asset base, and are
         therefore not comparable. The Partnership's operating results have been
         reflected on the Statements of Changes of Net Assets in Liquidation.

         For the three months ended June 30, 1999, the Partnership generated
         $800,000 of net operating income from operations of its properties. The
         decrease in net operating income for the three months ended June 30,
         1999 when compared to the same period in 1998 was attributable to
         several factors. At The Cornerstone, $94,000 of uncollectable tenant
         rent was written off and the property incurred $41,000 of additional
         operating expenses in 1999 as compared to 1998. In addition, in 1997
         the Partnership wrote off $75,000 in bad debt expenses that were later
         recovered in 1998 at The Cornerstone. That subsequent collection caused
         a one-time increase in operating income for 1998 when compared to 1999.
         These decreases were partially offset by increased rental revenue from
         Washington Technical Center ($28,000) and Oakpointe ($50,000) and
         increased operating expense reimbursements at Terracentre ($21,000).

         Interest income resulted from the temporary investment of Partnership
         working capital. For the three months ended June 30, 1999, interest
         income was approximately $3,000.

         General and administrative expenses for the three months ended June 30,
         1999, include charges of $109,000 from the General Partner and its
         affiliates for services rendered in connection with administering the
         affairs of the Partnership and operating the Partnership's properties.

         Also included in general and administrative expenses for the three
         months ended June 30, 1999, are direct charges of $135,000, relating to
         audit fees, tax preparation fees, legal fees and professional services,
         costs incurred in providing information to the Limited Partners and
         other miscellaneous costs.

         The decrease in general and administrative expenses for the three
         months ended June 30, 1999, as compared to the corresponding period in
         1998, was primarily attributable to decreases in the General Partner's
         liability insurance, asset management fees, consulting and appraisal
         fees during 1999. The aforementioned decreases were partially offset by
         an increase in legal fees incurred.

         During the three months ended June 30, 1999, the General Partner
         determined that the carrying values of Ladera-I Shopping Center and
         Oakpointe were in excess of their respective estimated net realizable
         values, less estimated selling cost. As a result, their carrying values
         were adjusted by $1,217,000 and $500,000, to $4,203,000, and
         $5,812,000, respectively.

         Accrued expenses for liquidation as of June 30, 1999, includes
         estimates of costs to be incurred in carrying out the dissolution and
         liquidation of the Partnership. These costs include estimates of legal
         fees, accounting fees, tax preparation and filing fees, professional
         services, the general partner's liability insurance and the pre-payment
         penalty associated with the anticipated early retirement of the
         mortgage loan secured by the Certified Distribution Center property.
         The actual costs could vary significantly from the related provisions
         due to the uncertainty related

                                       17
<PAGE>   18
                      DAMSON/BIRTCHER REALTY INCOME FUND-I



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (Cont'd.)

         Results of Operations for the Three Months Ended June 30, 1999
         (Cont'd.)

         to the length of time required to complete the liquidation and
         dissolution and the complexities which may arise in disposing of the
         Partnership's remaining assets.

         Interest expense resulted from interest on the first deed of trust on
         Certified Distribution Center.


                                       18
<PAGE>   19
                      DAMSON/BIRTCHER REALTY INCOME FUND-I


ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES

         The Partnership is not exposed to interest rate changes because its
         only obligation outstanding at year-end carries a fixed interest rate
         and the Partnership expects to sell its properties within a short
         period of time. The Partnership's interest rate risk management
         objective is to limit the impact of interest rate changes on earnings
         and cash flows and to lower its overall borrowing costs. To achieve its
         objectives, the Partnership borrows primarily at fixed rates. The
         Partnership does not enter into derivative or interest rate
         transactions for speculative purposes.


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Bigelow Diversified Secondary Partnership Fund 1990 litigation

         On March 25, 1997, a limited partner named Bigelow/Diversified
         Secondary Partnership Fund 1990 filed a purported class action lawsuit
         in the Court of Common Pleas of Philadelphia County against
         Damson/Birtcher Partners, Birtcher Investors, Birtcher/Liquidity
         Properties, Birtcher Investments, L.F. Special Fund II, L.P., L.F.
         Special Fund I, L.P., Arthur Birtcher, Ronald Birtcher, Robert
         Anderson, Richard G. Wollack and Brent R. Donaldson alleging breach of
         fiduciary duty and breach of contract and seeking to enjoin the Consent
         Solicitation dated February 18, 1997. On April 18, 1997, the court
         denied the plaintiff's motion for a preliminary injunction. On June 10,
         1997, the court dismissed the plaintiff's complaint on the basis of
         lack of personal jurisdiction and forum non conveniens.

         On June 13, 1997, the Partnership's affiliated partnerships,
         Damson/Birtcher Realty Income Fund-II and Real Estate Income Partners
         III, and their general partner, Birtcher/Liquidity Properties, filed a
         complaint for declaratory relief in the Court of Chancery in Delaware
         against Bigelow/Diversified Secondary Partnership Fund 1990 L.P. The
         complaint seeks a declaration that the vote that the limited partners
         of Damson/Birtcher Realty Income Fund-II and Real Estate Income
         Partners III took pursuant to the respective consent solicitations
         dated February 18, 1997 was effective to dissolve the respective
         partnerships and complied with applicable law, that the actions of the
         General Partner in utilizing the consent solicitations to solicit the
         vote of the limited partners did not breach any fiduciary or
         contractual duty to such limited partners, and an award of costs and
         fees to the plaintiffs. The defendant has answered the complaint. The
         parties have initiated discovery. No motions are pending at this time.

         In September 1998, Bigelow/Diversified Secondary Partnership 1990
         informed the Partnership that it was filing suit in the Delaware
         Chancery Court against Damson/Birtcher Partners, Birtcher Investors,
         Birtcher Liquidity Properties, Birtcher Investments, BREICORP, LF
         Special Fund I, LP, LF Special Fund II. LP, Arthur Birtcher, Ronald
         Birtcher, Robert Anderson, Richard G. Wollack and Brent R. Donaldson
         alleging a purported class action on behalf of the limited partners of
         Damson/Birtcher Realty Income Fund-I, Damson/Birtcher Realty Income
         Fund-II and Real Estate Income Partners III alleging breach of
         fiduciary duty and incorporating the allegations set forth in the
         previously dismissed March 25, 1997 complaint filed in the Court of
         Chancery of Philadelphia County. Plaintiff has engaged in


                                       19
<PAGE>   20
                      DAMSON/BIRTCHER REALTY INCOME FUND-I


ITEM 1.  LEGAL PROCEEDINGS (Cont'd.)

         Bigelow Diversified Secondary Partnership Fund 1990 litigation
         (Cont'd.)

         preliminary discovery and the parties have held settlement discussions.
         No motions are pending at this time.

         Rex Garton, et al. v. Damson/Birtcher Partners, et al.

         This action was filed on September 25, 1998 in the District Court of
         Oklahoma County for the State of Oklahoma against the Partnership's
         general partner, Damson/Birtcher Partners, other related defendants and
         numerous unrelated defendants. Damson/Birtcher Partners and other
         related defendants were brought into the action in late December 1998,
         when they were served with the Second Amended Petition. The other
         related defendants are Birtcher Partners, Birtcher Properties, The
         Birtcher Group, Birtcher American Properties, Arthur B. Birtcher,
         Ronald E. Birtcher, LF Special Fund II, L.P., and Liquidity Fund Asset
         Management Inc., but The Birtcher Group and Birtcher American
         Properties have not been served with process and have not appeared in
         the action. The Partnership itself is not named as a defendant. The
         case is a class action brought on behalf of investors in the
         Partnership who purchased limited partnership interests from May 7,
         1984 to September 17, 1985. The Second Amended Petition alleges breach
         of contract, intentional and negligent misrepresentation, breach of
         fiduciary duties, and violations of various Oklahoma and federal
         statutes in connection with the sale of the limited partnership
         interests. Plaintiff seeks unspecified compensatory damages and $10
         million in punitive damages.

         Damson/Birtcher Partners and the related defendants have removed the
         case to the United States District Court for the Western District of
         Oklahoma, and have filed a motion to dismiss the case for lack of
         personal jurisdiction or, alternatively, to transfer the action to the
         United States District Court for the Central District of California,
         for the convenience of the parties and witnesses and in the interests
         of justice. Plaintiff's motion to remand the case back to the Oklahoma
         state court was denied. The motion to dismiss or transfer is pending.
         Damson/Birtcher Partners and the related defendants intend to present a
         vigorous defense on the merits of plaintiff's claims, should this be
         necessary.

         Madison Partnership and ISA Partnership Litigation

         On April 2, 1999, Madison Partnership Liquidity Investors XVI, LLC and
         ISA Partnership Liquidity Investors filed a purported class and
         derivative action in the California Superior Court in Orange County,
         California against Damson Birtcher Partners, Birtcher/Liquidity
         Properties, Birtcher Partners, Birtcher Investors, Birtcher
         Investments, Birtcher Limited, Breicorp LP Special Fund II, L.P.,
         Liquidity Fund Asset Management, Inc., Robert M. Anderson, Brent R.
         Donaldson, Arthur B. Birtcher, Ronald E. Birtcher, and Richard G.
         Wollack, Defendants, and Damson/Birtcher Realty Income Fund-I,
         Damson/Birtcher Realty Income Fund-II, and Real Estate Income Partners
         III, Nominal Defendants. The complaint asserts claims for breach of
         fiduciary duty and breach of contract. The gravamen of the complaint is
         that the General Partners of these limited partnerships have not
         undertaken all reasonable efforts to expedite liquidation of the
         Partnerships' properties and to maximize the returns to the
         Partnerships' limited partners. The complaint seeks unspecified
         monetary damages, attorneys' fees and litigation expenses, and an order
         for dissolution of

                                       20
<PAGE>   21
                      DAMSON/BIRTCHER REALTY INCOME FUND-I


ITEM 1.  LEGAL PROCEEDINGS (Cont'd.)

         Madison Partnership and ISA Partnership Litigation (Cont'd.)

         the Partnerships and appointment of an independent liquidating trustee.
         The Partnership has moved to dismiss the case on the grounds that the
         pending Bigelow class action, discussed above, raises essentially the
         same claims. If the case is not dismissed, the Partnership intends to
         present a vigorous defense.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a) Exhibits:

            27 - Financial Data Schedule

         b) Reports on Form 8-K:

            None filed in quarter ended June 30, 1999.

                                       21

<PAGE>   22
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

<TABLE>


<S>                                         <C>

                                            DAMSON/BIRTCHER REALTY INCOME FUND-I


By:      DAMSON/BIRTCHER PARTNERS           By:   BIRTCHER PARTNERS,
         (General Partner)                        a California general partnership

                                                        By:    BIRTCHER INVESTMENTS,
                                                               a California general partnership,
                                                               General Partner of Birtcher Partners

                                                               By:   BIRTCHER LIMITED,
                                                                     a California limited partnership,
                                                                     General Partner of Birtcher Investments

                                                                     By:    BREICORP,
                                                                            a California corporation,
                                                                            formerly known as Birtcher
                                                                            Real Estate Inc., General
                                                                            Partner of Birtcher Limited

Date:    August 15, 1999                                                    By:   /s/Robert M. Anderson
                                                                                  --------------------------
                                                                                  Robert M. Anderson
                                                                                  Executive Director
                                                                                  BREICORP

                                                  By:   LF Special Fund II, L.P.,
                                                        a California limited partnership

                                                        By:    Liquidity Fund Asset Management, Inc.,
                                                               a California corporation, General
                                                               Partner of LF Special Fund II, L.P.

Date:    August 15, 1999                                       By:   /s/ Brent R. Donaldson
                                                                     -----------------------------
                                                                     Brent R. Donaldson
                                                                     President
                                                                     Liquidity Fund Asset Management, Inc.

</TABLE>

                                       22




<PAGE>   23
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT
 NUMBER                   DESCRIPTION
 ------                   -----------
<S>                       <C>
   27                     Financial Data Schedule
</TABLE>