**FORM 10 - K**

 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

| **ý****      ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| **For  the fiscal year ended December 31, 2002**                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| **OR**                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| **o****  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   33-18756**                                                                                                                                                                                                                                                                                                                                                                       |

 

| **ASSISTED HOUSING FUND L.P. I**                                             |
|------------------------------------------------------------------------------|
| (Exact name of  registrant as specified in its charter)                      |
|                                                                         |
| **Washington**                                                               |   | **91-1391150** |
| (State of organization)                                                      |   | (IRS Employer  Identification No.) |
|                                                                         |   |   |
| **1301  Fifth Avenue, Suite 1330, Seattle, WA 98101**                        |
| (Address of principal  executive offices)     (Zip code) |
|                                                                         |
| Registrant’s telephone  number, including area code: **(206) 377-1310** |
|                                                                         |
| Securities registered  pursuant to Section 12(b) of the Act:   **None** |
|                                                                         |
| Securities registered  pursuant to Section 12(g) of the Act:                 |
|                                                                         |
| **Units  of Limited Partnership Interest**                                   |
| (Title of class)                                                             |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes  ý   No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of the registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K.  ý

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-12 of theAct).  Yes  o No  ý

 

 

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PART I

 

Item 1. Business

 

Overview

 

Assisted Housing Fund L.P. I (the Investor Partnership) is a limitedpartnership formed on November 2, 1987 and organized under the laws of theState of Washington.

 

The Investor Partnership’s General Partner is Murphey Favre Properties,Inc., (MFP), a wholly-owned subsidiary of WM Financial, Inc. which is awholly-owned subsidiary of Washington Mutual Bank (WMB), a wholly-ownedsubsidiary of Washington Mutual, Inc.

 

The Investor Partnership raised $3,511,000 from the sale of 703 unitsof limited partnership through a public offering completed on April 14, 1989.The Investor Partnership is solely engaged in the business of real estateinvestment. Accordingly, a presentation of information about industry segmentsis not applicable and would not be material to an understanding of the InvestorPartnership’s business taken as a whole.

 

The Investor Partnership has invested as a Limited Partner in 11limited partnerships (Property Partnerships) which developed, own, and operateresidential apartment complexes located in various locations across thecountry.  Each apartment complexbenefits from several forms of federal assistance programs and qualifies for low-incomehousing tax credits (Tax Credits) pursuant to Section 42 of the InternalRevenue Code (the Code). There are 335 partners in the Investor Partnership.

 

The investment objectives of the Investor Partnership include thefollowing:

(1) provide LimitedPartners with tax benefits from investing in the Investor Partnership in theform of low-income housing tax credits under Section 42 of the Code,

(2) preserve and protectthe Investor Partnership capital, and

(3) realize long-termcapital appreciation in the value of the properties upon the sale orrefinancing of the properties or the Property Partnerships.

 

During the next several years the properties will have completed the15-year compliance period, thus eliminating the opportunity for an occurrenceof a tax credit recapture event which may occur when there is a failure tocomply with the requirements of the Internal Revenue Service.  As each property completes the complianceperiod the Investor Partnership may explore opportunities to sell or refinancethe properties within the guidelines allowed and permissions granted by theU.S. Department of Agriculture Rural Development Agency, through its RuralHousing Service (RHS) under its mortgage note agreements.  The sale of any properties will be determinedindividually on a case-by-case basis, and we cannot assure you that we willsell any of the properties or if we do sell any of the properties, that we willrealize any meaningful profit as a result of the sale.

 

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Property Partnerships

 

The Property Partnerships own rental property consisting of apartmentprojects occupied by low- and moderate-income tenants.  Duration of leases for occupancy in theproperties is generally 12 months.

 

The following table provides information regarding the PropertyPartnerships and their locations.

 
| **Property  Partnership** |   | **Location**          |   | **Date  Interest  Acquired** |   | **Number of  Apt. Units** |   |
|---------------------------|--------|-----------------------|--------|------------------------------|--------|---------------------------|--------|
| Fairview                  |   | Plymouth, WI          |   | December 1, 1989             |   | 40                        |   |
| Ionia                     |   | Ionia, MI             |   | December 1,1989              |   | 24                        |   |
| Logan                     |   | Logan, OH             |   | December 1, 1989             |   | 32                        |   |
| Rolling Brook             |   | Algonac, MI           |   | December 1, 1989             |   | 24                        |   |
| Wexford                   |   | Onsted MI             |   | December 1, 1989             |   | 24                        |   |
| Blue Heron                |   | Bainbridge Island, WA |   | March 20, 1989               |   | 40                        |   |
| Glenwood                  |   | Lake Stevens, WA      |   | June 1, 1988                 |   | 46                        |   |
| Pacific Place             |   | South Bend, WA        |   | October 4, 1988              |   | 24                        |   |
| Cove                      |   | Big Rapids, MI        |   | July 12, 1989                |   | 48                        |   |
| Washington                |   | Perry, MI             |   | July 12, 1989                |   | 24                        |   |
| Fayette                   |   | Fayetteville, WV      |   | December 1, 1989             |   | 68                        |   |
|                      |   |                  |   |                         |   | 394                       |   |

 

For information regarding placed in service dates, please see ScheduleIII.

 

All of the projects owned by the respectiveProperty Partnerships were financed and constructed under Section 515 of theNational Housing Act, as amended, and are administered by RHS. Under this RHSprogram the Property Partnerships provide affordable housing to tenants subjectto regulation by RHS as to rental charges and operating methods.  Lower rental charges to tenants arerecovered by the respective Property Partnerships through an interest reductionprogram which reduces the effective interest rate over the lives of therespective mortgages to 1 percent and a rental assistance program whereby RHSpays the respective Property Partnerships for a portion of qualified tenantrents.

 

Each Property Partnership has, as its Developer General Partner (DGP),one or more individuals or an entity not affiliated with the InvestorPartnership or MFP.  In accordance withthe Property Partnership agreements under which such entities are organized,the Investor Partnership depends on the DGPs for the management of eachProperty Partnership.  See Management’sDiscussion and Analysis of the Financial Condition and Results of Operations inItem 7 for additional information regarding the Property Partnerships.  As of December 31, 2002, the PropertyPartnerships and their DGPs were as follows:

 

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| **PROPERTY  PARTNERSHIP** |                                                                                       | **DEVELOPER  GENERAL PARTNER** |                                                           |
|---------------------------|--------------------------------------------------------------------------------------------|--------------------------------|----------------------------------------------------------------|
|                      |                                                                                       |                           |                                                           |
| 1.                        | Fairview Apartments Company Limited Partnership  (Fairview)                                |                           | Rural Housing Corporation                                      |   |
|                      |                                                                                       |                           |                                                           |   |
| 2.                        | Ionia Limited Dividend Housing Association Limited  Partnership (Ionia)                    |                           | Rural Housing Corporation                                      |   |
|                      |                                                                                       |                           |                                                           |   |
| 3.                        | Logan Apartments Company Limited Partnership (Logan)                                       |                           | Rural Housing Corporation  Thomas R. Runquist  Arthur H. Winer |   |
|                      |                                                                                       |                           |                                                           |   |
| 4.                        | Rolling Brook II Limited Dividend Housing  Association Limited Partnership (Rolling Brook) |                           | Rural Housing Corporation                                      |   |
|                      |                                                                                       |                           |                                                           |   |
| 5.                        | Wexford Manor Limited Dividend Housing Association  Limited Partnership (Wexford)          |                           | Rural Housing Corporation                                      |   |
|                      |                                                                                       |                           |                                                           |   |
| 6.                        | Blue Heron Apartment Associates Limited Partnership  (Blue Heron)                          |                           | Dujardin Development Co.                                       |   |
|                      |                                                                                       |                           |                                                           |   |
| 7.                        | Glenwood Apartment Associates Limited Partnership  (Glenwood)                              |                           | Dujardin Development Co.                                       |   |
|                      |                                                                                       |                           |                                                           |   |
| 8.                        | Pacific Place Apartment Associates Limited  Partnership (Pacific Place)                    |                           | Dujardin Development Co.                                       |   |
|                      |                                                                                       |                           |                                                           |   |
| 9.                        | Cove Limited Dividend Housing Association Limited  Partnership (Cove)                      |                           | Kenneth & Lowell Werth                                     |   |
|                      |                                                                                       |                           |                                                           |   |
| 10.                       | Washington Street Limited Dividend Housing  Association Limited Partnership (Washington)   |                           | Kenneth & Lowell Werth                                     |   |
|                      |                                                                                       |                           |                                                           |   |
| 11.                       | Fayette Hills Limited Partnership (Fayette)                                                |                           | LeRoy Eslinger and Douglas E. Pauley                           |   |

 

A wholly-owned subsidiary of MFP, Murphey Favre Housing Managers, Inc.(MFHM), is a Special Limited Partner of each Property Partnership and hascertain approval rights over the actions of the DGPs of the Property Partnerships.

 

Regulatory Compliance and Liquidity 

 

Each of the Property Partnerships has received an allocation of TaxCredits.  In general, the Tax Creditruns for ten years from the date the property is placed in service.  The required holding period (the CompliancePeriod) of the properties is 15 years. During these 15 years, the properties must satisfy rent restrictions,tenant income limitations and other requirements,

 

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as promulgated by the Internal Revenue Service, in order to maintaineligibility for the Tax Credits at all times during the Compliance Period.  Once a Property Partnership has becomeeligible for Tax Credits, it may lose such eligibility and suffer an event ofrecapture if its property fails to remain in compliance with therequirements.  To date, none of theProperty Partnerships has suffered an event of recapture of Tax Credits.

 

In 2002, reserveaccount deposits of Fairview, Logan, Pacific Place and Wexford fell short ofthe amounts required by RHS.  Inaddition, Logan’s tenant security deposit liability was under-funded by $3,050and Logan was $10,150 in arrears for property taxes due in 2002, which are bothviolations of RHS regulations.  Cove hadoverdue property taxes amounting to $1,138 at December 31, 2002.  While Cove made the required reservedeposits in 2002, its reserve account balance at December 31, 2002 totaled$17,514 which is $88,656 below its required balance.  As a result of violations of RHS regulations in 2000 and 2001, RHSissued a Letter of Acceleration on the mortgage note on the Logan property onAugust 29, 2001.  RHS suspended furtherproceedings on October 11, 2001, based on preliminary agreements reached withthe Logan DGPs and the Logan property management agent.

 

During 2002, RHS did not take action againstany of the Property Partnerships that were not in compliance with itsregulations.  While RHS has notpursued any further action against Logan or initiated any action against Covewith respect to its overdue property taxes, we cannot assure you that RHS willnot take action against the Property Partnerships which are not in compliancewith applicable regulations.  This couldresult in acceleration of a Property Partnership’s mortgage note and ultimatelyforeclosure on its property.  Theforeclosure on any of the properties might result in the complete loss of thatProperty Partnership’s investment, and might lead to a tax recapture event withrespect to that property, which would have a material adverse effect on thefinancial condition of the Investor Partnership.

 

Each of the Property Partnerships tries to maintain compliance with allof the applicable regulations and each of those Property Partnerships that arenot in compliance are taking steps to remedy their respective situations.  However, we cannot assure that all of theProperty Partnerships will remain in compliance with all applicableregulations.  Accordingly, we cannot assureyou that RHS will not foreclose against any of the Properties or that a taxrecapture event with respect to any of the Properties will not occur.

 

Subsequent Events

 

On February 5, 2003, under deposition in his own bankruptcyproceedings, Mr. Arthur H. Winer , one of Logan's DGPs, admitted that he hadused Logan funds for unauthorized purposes contrary to federal governmentregulations.  The Investor Partnershipis actively pursuing restitution of these funds and is exploring thepossibility of obtaining a replacement DGP for the Logan property.  We cannot assure you that we will besuccessful in either of these efforts, which could have an adverse effect onLogan and, as a result, the Investor Partnership.  For additional information, please see

 

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“Item 3. Legal Proceedings.”

 

Item 2. Properties

 

The Investor Partnership owns limited partner interests in the 11Property Partnerships which own and operate properties, all of which benefitfrom some form of federal assistance program and which qualify for the TaxCredits added to the Code by the Tax Reform Act of 1986.

 

Each Property Partnership has received anallocation of federal low-income housing tax credits under Section 42 of theInternal Revenue Code, administered by the respective state allocatingagency.  Under this program, housingprovided by each Property Partnership is subject to additional monitoring oftenant eligibility by the respective state allocating agency.

 

The individual Property Partnerships have loan agreements with andmortgage notes held by RHS.  All mortgagenotes have a maturity of 50 years and bear stated interest rates between 8.75%and 10.75% and have an effective interest rate of approximately 1% resultingfrom participating in the RHS interest reduction program.  The mortgage notes are secured by the realestate, rents and any profits of the Property Partnerships.

 

For additional information regarding the properties of the PropertyPartnerships, please see “Item 1. Business—Property Partnerships.”

 

Item 3. Legal Proceedings

 

During 2001 and 2000, Mr. Arthur H. Winer, one of the Logan DGPs, mademultiple unauthorized withdrawals of project cash totaling approximately$24,000 in violation of RHS regulations. Further, it was discovered that project bank accounts, valued at $60,131at December 31, 2002, had been pledged in violation of RHS regulations.  As a result of the DGP’s actions, RHS issueda Letter of Acceleration on the mortgage note on the Logan property on August29, 2001. The mortgage note balance totaled $987,480 at December 31, 2002.  RHS suspended further proceedings on October11, 2001, based on preliminary agreements reached with Logan’s other DGPs andLogan property management agent.

 

On February 19, 2002, Arthur H. Winer, one of Logan's DGPs, filed aPetition in Bankruptcy in the U.S. Bankruptcy Court for the Southern Districtof West Virginia, in Charleston, WV, under Chapter 7 of the U.S. BankruptcyCode. The bankruptcy filing is styled In Re Winer, Arthur H. (BankruptcyNo. 0240067). As of the date of filing of the Petition in Bankruptcy, the“automatic stay” under the Bankruptcy Code went into effect and all actions tocollect debts of Mr. Winer are precluded, absent approval of the U.S.Bankruptcy Court.  Among these debts arefunds from Logan totaling approximately $84,000 (the Logan Debts), comprised ofoperating and reserve account funds of approximately $60,000, tenant securitydeposit funds of approximately $9,000, and other funds of approximately $15,000that Winer used for personal business.

 

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On May 22, 2002, MFP retained outside bankruptcy counsel torepresent it, on behalf of Logan, in the DGP bankruptcy action and to prepareand file a Proof of Claim on its behalf, to register with the Bankruptcy Court,Logan’s creditor’s claim for the Logan Debts, which Mr. Winer had removed fromthe various Logan reserve and other accounts. A Complaint To Determine Dischargeability of Debt and For Judgment wasalso prepared and filed on behalf of Logan on May 31, 2002, in which Loganseeks to obtain a Court order that Logan’s creditor’s claim for the Logan Debtsis not dischargeable as a part of Mr. Winer’s bankruptcy action and to obtain ajudgment against him for the amount of the creditor’s claim (thus creating an“adversary proceeding” in the bankruptcy action (i.e., Adversary Proceeding No.00-0070)).  Mr. Winer (the Petitioner)prepared and filed an Answer to Complaint To Determine Dischargeability of Debtand For Judgment on or about June 17, 2002 denying the materialallegations of the Complaint.  OnFebruary 5, 2003, under deposition, Mr. Winer admitted that he had used Loganfunds for unauthorized purposes and contrary to federal government regulations.

 

MFP has filed a Motion For Summary Judgment asking the Court to decidethe question of the non-dischargeability of the Petitioner’s debt to MFP basedon the pleadings and evidence currently before it.  No response to the Motion has been received from the Petitioner.  A trial on the adversary proceeding has beenscheduled for April 11, 2003 and a pre-trial conference has been scheduled forApril 1, 2003.

 

MFP is also seeking to enforce the provisions of the Amended andRestated Certificate and Agreement of Logan Apartments Company LimitedPartnership that provides for the termination of Mr. Winer as a DGP of Loganeffective as of his filing for bankruptcy.

 

The Investor Partnership is actively pursuing restitution of the LoganDebts and is exploring the possibility of obtaining a replacement DGP for theLogan property.  We cannot assure youthat we will be successful in either of these efforts, which could have anadverse effect on the Logan Property Partnership and, as a result, the InvestorPartnership.

 

Item 4. Submission of Matters to a Vote of SecurityHolders

 

None

 

PART II

 

Item 5.  Marketfor the Registrant’s Securities and Related Security Holder Matters

 

The Registrant’s securities consist of 703 Units of Limited PartnershipInterest (the Units), originally valued at $5,000 per unit.  There is no market for the Units and it isnot anticipated that any public market is likely to develop in the future.  Units may only be sold, assigned, exchangedor otherwise transferred upon compliance with the terms of the LimitedPartnership Agreement. As of the date of filing of this report, the Partnershiphas 334 Limited Partners and one General Partner.

 

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The Partnership has not made any distributions to holders of the Unitsin 2000, 2001 and 2002 and does not anticipate making any significant distributionsin the future.

 

Item 6. Selected Financial Data 

 

The following selected consolidated financial data should be read inconjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations,” the Consolidated Financial Statements and Notesthereto and other financial information included elsewhere in this report.

 
|                                        |   | **Year Ended  12/31/02** |       | **Year Ended  12/31/01** |   | **Year Ended  12/31/00** |   | **Year Ended  12/31/99** |       | **Year Ended  12/31/98** |   |
|---------------------------------------------|--------|--------------------------|------------|--------------------------|--------|--------------------------|--------|--------------------------|------------|--------------------------|--------|
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Rental Revenue                              |   | $                        | 1,652,137  |                     | $      | 1,608,923                |   | $                        | 1,586,293  |                     | $      | 1,540,441 |   | $ | 1,505,575 |   |
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Interest Revenue                            |   | 13,752                   |       | 17,860                   |   | 25,085                   |   | 24,068                   |       | 24,835                   |   |
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Income (Loss)                               |   | (570,606                 | )          | (518,516                 | )      | (457,473                 | )      | (513,222                 | )          | (500,629                 | )      |
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Income (Loss)  Per Limited Partnership Unit |   | (812                     | )          | (738                     | )      | (651                     | )      | (730                     | )          | (712                     | )      |
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Total Assets                                |   | 9,802,220                |       | 10,410,686               |   | 10,933,585               |   | 11,431,980               |       | 11,949,410               |   |
|                                        |   |                     |       |                     |   |                     |   |                     |       |                     |   |
| Mortgage Notes  Payable                     |   | $                        | 12,257,788 |                     | $      | 12,296,564               |   | $                        | 12,287,154 |                     | $      | 12,319,268 |   | $ | 12,348,628 |   |

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Resultsof Operations

 

Certain matters discussed herein constitute forward-looking statementswithin the meaning of the Private Securities Litigation Reform Act of1995.  The Investor Partnership intendssuch forward-looking statements to be covered by the safe harbor provisions forforward-looking statements and is including this statement for purposes of complyingwith these safe harbor provisions. Although the Investor Partnership believes the forward-lookingstatements are based on reasonable assumptions, the Investor Partnership cangive no assurance that their expectations will be attained.  Actual results and the timing of certainevents could differ materially from those projected or contemplated by theforward-looking statements due to a number of factors including, withoutlimitation, general economic and real estate conditions and interest rates.

 

Liquidity and CapitalResources

 

At December 31, 2002, the Investor Partnership’s operating cash totaled$27,368 and the Property Partnerships’ operating cash totaled $138,910 for acombined total of $166,278. At December 31, 2001, the cash balance of

 

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$199,668 was comprised of $25,493 in the Investor Partnership and$174,175 in the operating accounts of the Property Partnerships.

 

The Investor Partnership’s primary source of cash is distributionsreceived from the Property Partnerships. In 2002, the Investor Partnership received cash distributions of $10,746as compared to $9,797 in 2001.

 

Consolidated operational cash flows decreased from a positive $49,088in 2001 to a positive $14,526 in 2002. Achieving positive operational cash flowcontinued to be a problem for some of the Property Partnerships. For 2002,three of the Property Partnerships recorded operational cash flow deficitsversus one in 2001. Thosewith 2002 negative cash flows included Fayette, Glenwood, and PacificPlace.  Seven of the 11 PropertyPartnerships experienced operating cash flows below those generated in 2001.

 

At December 31, 2002, Logan’s tenant securitydeposit liability was under-funded by $3,050 and Logan was $10,150 in arrears for property taxes due in2002.  Cove also had overdue propertytaxes amounting to $1,138 at December 31, 2002. While Cove made the requiredreserve deposits in 2002, its reserve account balance at December 31, 2002totaled $17,514 which is $88,656 below its required balance.  The Cove reserve account balance at December31, 2002 may not be sufficient to fund necessary capital expenditures in thenear and longer-term.

 

In violation of RHS regulations and mortgageloan covenants, the 2002 reserve account deposits of Fairview, Logan, PacificPlace and Wexford fell short of the required amounts for the year.  At December 31, 2002, the total reservedeposit shortfall for the 11 Property Partnerships amounted to approximately$7,400.   During 2002 RHS did not takeaction against any of the Property Partnerships that were not in compliance.

 

The preceding description of unfavorableliquidity conditions at some of the Property Partnerships at December 31, 2002may indicate future difficulty in meeting cash requirements and/or action byRHS which would be unfavorable to the continued operation of the PropertyPartnerships. All of the Property Partnerships made the required loan principaland interest payments due on their mortgage notes.

 

During 2000, RHS advanced funds to Washington Street, located in Michigan,to pay delinquent real estate taxes of $42,917.  The advance was added to the mortgage note and re-amortized in2001.  RHS has provided additionalrental assistance to the project, which should improve occupancy and supportthe increased rents necessary to make the increased mortgage payments.

 

While RHS has not pursued any further action against Logan or initiatedany action against Cove with respect to its overdue property taxes, there canbe no assurance that RHS will not take action against the Property Partnershipswhich are not in compliance with applicable regulations.  This could result in acceleration of aProperty Partnership’s mortgage note and ultimately foreclosure on itsproperty.

 

With each of the properties having been in service for at least tenyears, it is anticipated that funds will be required to maintain the conditionof the

 

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properties at a level which will provide adequate living conditions tothe current tenants and to attract future tenants, as well as maintain thevalue of the properties.  The fundingfor these expenditures must come from either operating cash flows or fromauthorized reserve account withdrawals. There is no assurance that these sources will be adequate to meet themaintenance requirements of the properties.

 

Results of Operations

 

Occupancy levels at the Property Partnershipsare monitored on a monthly basis and are one of the key operating factors forthe Property Partnerships.   At December31, 2002, three Property Partnerships were 100% occupied, six were in the 90%to 99% occupancy range, and two were in the 80% to 89% range. At December 31,2002, four Property Partnerships experienced occupancy levels below that atDecember 31, 2001 and five Property Partnerships experienced occupancy levelsabove that at December 31, 2001. The lowest occupancy level at December 31,2002 was 88%, while at December 31, 2001, the lowest occupancy level was 82%.

 

On a consolidatedbasis for the Investor Partnership and its Property Partnerships, net income(loss) for 2002, 2001 and 2000 totaled ($570,606), ($518,516) and ($457,473),respectively.  The net loss experiencedin 2002 was 10.1% higher than that recorded in 2001. The net loss for 2001 was13.3.% greater than that of 2000. Net income before depreciation for 2002, 2001and 2000 was $29,878, $70,293 and $147,091 with depreciation expense of$600,484, $589,439 and $604,564 in each of the same respective years.

 

Revenue totaled$1,734,730, $1,696,592 and $1,676,034 in 2002, 2001, and 2000, respectively.The year-over-year revenue increase was 2.2% for 2002 and 1.2% for 2001.  During the years ended December 31, 2002,2001 and 2000, rental assistance revenue from RHS totaled $554,587, $508,019and $482,617, representing 34%, 32% and 30% of rent revenue, respectively.

 

Rental operatingexpenses for 2002, 2001 and 2000 were $2,280,967, $2,204,887, and $2,125,132,respectively, and represented year-over-year increases of 3.5% for 2002 and3.8% for 2001.  In 2002, the expensecategory experiencing the largest increase was general repairs and maintenancewhich increased by approximately $69,000 or 25.6% over 2001. This was dueprimarily to a large paving repair project at one of the Property Partnerships.Insurance increased in both 2002 and 2001 reflecting higher insurance ratesresulting after the September 11, 2001 tragedy.

 

Loss fromoperations amounted to ($546,237), ($508,295) and ($449,098) for 2002, 2001 and2000, respectively, as operating expense growth outpaced revenue growth in thesame periods.

 

The Investor Partnership paid accounting feesof $36,452, $27,152 and $23,500, for 2002, 2001 and 2000, respectively.

 

The Investor Partnership’s interest incomeamounted to $96, $335 and $504 in 2002, 2001 and 2000, respectively.   The primary cause of the lower interestincome in each of the years was declining interest rates.

 

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During 2002, 2001 and 2000 growth inoperating expenses outpaced rental revenue growth and operating losses haveincreased in each of those years.  Therecan be no assurances that these financial results will improve.  This combined with the liquidity issues atcertain of the Property Partnerships (see Liquidity and Capital Resources) maycause any of the Property Partnerships to cease being able to operate as agoing concern in the future.

 

Regulatory Restrictions

 

Because the properties are operated under RHS loans and benefit fromthe federal low-income housing tax credit program, the properties arerestricted as to their use and must comply with the requirements of therespective federal programs.

 

The tenants of all the properties must be tax credit and RHS eligibletenants.  It is management’s goal tohave all units, except for managers’ units, occupied by tax credit eligibletenants.  In order to meet establishedincome requirements, tenants must not earn more than 60% of the median incomefor the areas in which the properties are located.  Seven of the 11 properties are further restricted to rentingapartment units only to senior citizens.

 

Additionally, the properties cannot be sold without prior approval ofRHS, cannot make more than an 8% cash distribution annually to its owner (asdescribed in Note 6 to the accompanying consolidated financial statements) andmust remain under the low-income housing tax credit program for 15 years toavoid any recapture of the low-income housing tax credits.  Furthermore, pursuant to RHS loanagreements, RHS may refuse prepayment of the loans and require the propertiesbe used for the purpose of providing housing to eligible tenants for a minimumperiod of 20 years.

 

Inflation

 

Operating expenses and rental revenues of each property are subject toinflationary factors.  Low rates ofinflation could result in rental revenues remaining constant or increasing atslower rates than in periods of high inflation.  High rates of inflation raise the operating expenses of theproperties, and to the extent the increased operating expenses are not passedon to the tenants by rental increases, the properties’ operations could beadversely affected. During the three year period of 2000 through 2002 inflationhas not been a significant factor for the Property Partnerships’ operations.

 

Tax Credits

 

At December 31, 2002, 2001, and 2000, tax credits equal to 0.06%, 0.22%and 5.86%, respectively, of the limited partners’ capital contributions havebeen generated.

 

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Subsequent Events

 

On February 5, 2003, under deposition in connection with his bankruptcyproceedings, Mr. Arthur H. Winer admitted he had used Logan funds forunauthorized purposes contrary to federal government regulations.  In light of Mr. Winer’s deposition, MFPfiled a Supplement to Plaintiff’s Motion For Summary Judgment with the U.S.Bankruptcy Court for the Southern District of West Virginia on March 7,2003.   A hearing on MFP’s Motion ForSummary Judgment, as Supplemented, will be set by the Bankruptcy Court.

 

Also on February 5, 2003, at Mr. Winer’s deposition, a draftTrustee’s Motion to Sell Property Free and Clear of Liens and EncumbrancesPursuant to 11 U.S.C. Section 363(f) and to Allow All 11 U.S.C.Section 506(c) Expenses (Trustee’s Motion) was received by MFP.  The Trustee’s Motion seeks court approval tosell (1) Mr. Winer’s interest in all limited partnerships, includingLogan, owned by Mr. Winer and (2) the receivables claimed by Mr. Winer to beowed to him by those limited partnerships, to Buckeye Community HopeFoundation, an Ohio non-profit entity (Buckeye), for $85,000.  In addition, Buckeye would contribute fundsto the limited partnerships sufficient to replenish their respective reserveaccounts and security deposits used by Mr. Winer as well as obtain replacementor re-delivery of limited partnership assets pledged to support personalobligations of Mr. Winer.  MFP isreviewing the Trustee’s Motion and will prepare a proper response to it inadvance of any Bankruptcy Court hearing scheduled to argue the Motion.  MFP and its counsel are evaluating otheroptions to recover all amounts owed to Logan. The Bankruptcy Court’s decision on the Trustee’s Motion may affect thedecision to pursue other options for recovery.

 

A court-ordered Settlement Conference is scheduled for April 1, 2003 todetermine whether the non-dischargeability claim can be settled prior to atrial.  Trial on the claim is scheduledfor April 11, 2003.  MFP is alsoseeking to enforce the provisions of the Amended and Restated Certificate andAgreement of Logan Apartments Company Limited Partnership that provides for thetermination of Mr. Winer as a DGP of Logan effective as of his filing forbankruptcy.

 

Litigation is inherently uncertain, and we cannot assure you that wewill recover any Logan funds from Mr. Winer or from any other partyinvolved.  In the event we cannotrecover from any party the money needed to bring the Logan Property’s accountsinto compliance with applicable regulations, the Investor Partnership may berequested to contribute additional capital into the Logan or risk foreclosureby RHS on the Logan property, either of which would have a material adverseeffect on the financial condition of the Investor Partnership.  For additional information regarding the ourclaims against Mr. Winer, please see “Item 3. Legal Proceedings.”

 

Factors Affecting Results of Operations

 

The operation of the Property Partnerships will continue to be subjectto competition from existing and future apartment complexes in the samegeographical areas where their properties are located.  The successful

 

12

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operation of the Investor Partnership will depend on outside factors,most of which are beyond the control of the Investor Partnership and whichcannot be predicted at this time. Such factors include general economic andreal estate market conditions, both on a national basis and in those areaswhere the properties are located; real estate tax rates; operating expenses;energy costs and government regulations. In addition, other risks inherent in real estate investment mayinfluence the ultimate success of the Investor Partnership, including (1)possible reduction in rental incomes due to an inability to maintain highoccupancy levels; (2) possible adverse changes in general economic conditionsand adverse local conditions, such as competitive overbuilding, a decrease inemployment or adverse changes in the real estate laws, include building codes;and (3) possible future adoption of rent control legislation which would notpermit increased costs to be passed onto the tenants in the form of rentincreases or which suppresses the ability of the Property Partnerships togenerate positive operating cash flows. Since all of the Property Partnerships benefit from some form of federalgovernment assistance, the Investor Partnership is subject to the inherentrisks in that area including decreased subsidies, difficulties in findingsuitable tenants and obtaining permission for rent increases.  In addition, any Tax Credits allocated tolimited partners of the Investor Partnership are subject to recapture to theextent that a Property Partnership or any portion thereof ceases to qualify forthe Tax Credits.  Other changes infederal and state income tax laws affecting real estate ownership or limited partnershipscould have a material and adverse affect on the business of the InvestorPartnership.

 

Item 7A. Quantitative and Qualitative DisclosuresAbout Market Risks

 

The management of the Investor Partnership does not believe that theoperation of the Investor Partnership and the Property Partnerships arematerially affected by interest rates or other financial market risks at thistime.  In the event of proposed futuresale of any of the Property Partnerships’ properties, mortgage interest ratesand availability of financing to potential buyers may have an impact on theselling opportunity.

 

Item 8. Financial Statements and Supplementary Data

 

The financial statements of Assisted Housing Fund L.P. I as of December31, 2002, 2001 and 2000, together with the independent auditors’ reportsthereon, are filed herewith in Part IV, Item 15 of this Form 10-K.

 

Item 9. Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure

 

None.

 

PART III

 

Item 10. Directors and Executive Officers of theRegistrant

 

Murphey Favre Properties, Inc. (MFP) is the general partner of theInvestor Partnership. The Registrant has no employees.

 

13

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Item 11. Executive Compensation

 

Not applicable.

 

Item 12. Security Ownership of Certain BeneficialOwners and Management

 
| **Title of  Class**                 |   | **Name and  Address of  Beneficial  Owner**                                       |   | **Amount and  Nature of  Beneficial  Ownership** |   | **Percent  of Class** |   |
|-------------------------------------|--------|-----------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|-----------------------|--------|
|                                |   |                                                                              |   |                                             |   |                  |   |
| General   Partner’s   Interest |   | Murphey Favre  Properties, Inc.  Suite 1330  1301 Fifth Avenue  Seattle, WA 98101 |   | (1)                                              |   | 100%                  |   |

 

 

(1) The General Partner’sinterest is owned of record and beneficially by Murphey Favre Properties, Inc.Its capital interest as of December 31, 2002 is ($71,968).

 

Item 13. Certain Relationships and RelatedTransactions

 

The Property Partnerships have entered into some agreements with theirrespective DGPs or affiliates under which the DGPs or affiliates receivecompensation from, perform services for, or make loans to the PropertyPartnerships.  For specific informationregarding these arrangements, please see Note 2 of the Notes to ConsolidatedFinancial Statements, which are filed elsewhere in this report.

 

Item 14. Controls and Procedures

 

Within the ninety (90) days prior to the dateof this report, an evaluation was performed under the supervision and with theparticipation of the Investor Partnership, including the President and thePrincipal Accounting Officer of the General Partner, of the effectiveness ofthe design and operation of the Investor Partnership’s disclosure controls andprocedures. Based on that evaluation, the Investor Partnership’s management,including the President and Principal Accounting Officer of the GeneralPartner, concluded that the Investor Partnership’s disclosure controls andprocedures were effective as of December 31, 2002. There have been nosignificant changes in the Investor Partnership’s internal controls or in otherfactors that could significantly affect internal controls subsequent toDecember 31, 2002.

 

14

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PART IV

 

Item 15. Exhibits, Consolidated Financial Statements, Schedules, andReports on Form 8-K

 
| (a)    | 1. The following consolidated financial statements  of Assisted Housing Fund L.P. I and subsidiaries are incorporated by  reference in Part II and are attached as pages 23 to 36.                                                                                                        | Page No. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Independent Auditor’s  Report                                                                                                                                                                                                                                                        | 23       |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Consolidated Balance Sheets  as of December 31, 2002 and 2001                                                                                                                                                                                                                             | 24-25    |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Consolidated Statements  of Operations for each of the years ended December 31, 2002, 2001 and 2000                                                                                                                                                                                       | 26       |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Consolidated  Statements of Partners’ Equity (Deficit) for each of the years ended December  31, 2002, 2001 and 2000                                                                                                                                                                 | 27       |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Consolidated  Statements of Cash Flows for each of the years ended December 31, 2002, 2001  and 2000                                                                                                                                                                                      | 28       |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Notes  to  Consolidated Financial Statements  for each of the years ended December 31, 2002, 2001 and 2000                                                                                                                                                                           | 29-36    |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | 2.     Consolidated financial statement schedules                                                                                                                                                                                                                          |     |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Independent  Auditor’s Report on Schedules                                                                                                                                                                                                                                           | 37       |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | Schedule  III - Real Estate and Accumulated Depreciation                                                                                                                                                                                                                                  | 38-40    |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | All other schedules for which provision is made in  the applicable accounting regulations of the Securities and Exchange  Commission are omitted because either they are not applicable or the required  information is shown in the consolidated financial statements or notes  thereto. |     |
|   |                                                                                                                                                                                                                                                                                      |     |
|   | 3.     Exhibits:  All exhibits to this  report are listed in the Index of Exhibits at page 41.                                                                                                                                                                        |     |
|   |                                                                                                                                                                                                                                                                                      |     |
| (b)    | No reports on Form 8K were filed during 2002.                                                                                                                                                                                                                                             |     |

 

15

----

 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 

 

| ASSISTED HOUSING FUND  L.P. I |
|-------------------------------|
| Registrant                    |

 
| By:    | Murphey Favre Properties, Inc. |
|--------|--------------------------------|
|   | Its General Partner            |
|        |                                |  |

 

 
| By:    | /s/ Robert K. Stump |   | Date: | 3/28/2003 |
|--------|---------------------|--------|-------|-----------|
|   | Robert K. Stump     |   |
|   | Its President       |   |

 

Pursuant to the requirements of the Securities and Exchange Act of1934, this report has been signed below by the following persons on behalf ofthe Registrant and in the capacities and on the dates indicated:

 

 
| By: | Murphey Favre Properties, Inc. |
|-----|--------------------------------|

 

 
| By:    | /s/ Brett J. Atkinson                       |   | Date: | 3/28/2003 |
|--------|---------------------------------------------|--------|-------|-----------|
|   | Brett J. Atkinson                           |   |
|   | Its Treasurer, Principal Accounting Officer |   |

 

 
| By:    | /s/ Edward S. Robertson |   | Date: | 3/28/2003 |
|--------|-------------------------|--------|-------|-----------|
|   | Edward S. Robertson     |   |
|   | Its Director            |   |

 

 
| By:    | /s/ Catharine E. Killien |   | Date: | 3/28/2003 |
|--------|--------------------------|--------|-------|-----------|
|   | Catharine E. Killien     |   |
|   | Its Director             |   |

 

 
| By:    | /s/ David G. Murphy |   | Date: | 3/28/2003 |
|--------|---------------------|--------|-------|-----------|
|   | David G. Murphy     |   |
|   | Its Director        |   |

 

16

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ASSISTED HOUSING FUNDL.P. I

CERTIFICATION

 

 
| I,     | Robert K. Stump, certify that:                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                         |
| 1)     | I have reviewed this annual report on Form 10-K of  Assisted Housing Fund L.P. I;                                                                                                                                                                                                                                            |
| 2)     | Based on my knowledge, this annual report does not  contain any untrue statement of a material fact or omit to state a material  fact necessary to make the statements made, in light of the circumstances  under which such statements were made, not misleading with respect to the  period covered by this annual report; |
| 3)     | Based on my knowledge, the financial statements, and  other financial information included in this annual report, fairly present in  all material respects the financial condition, results of operations and cash  flows of the registrant as of, and for, the periods presented in this annual  report;                    |
| 4)     | The registrant’s other certifying officers and I are  responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and have:                                                                                               |
|   | a)                                                                                                                                                                                                                                                                                                                           | designed such disclosure controls and procedures to  ensure that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this annual report is being  prepared; |
|   | b)                                                                                                                                                                                                                                                                                                                           | evaluated the effectiveness of the registrant’s  disclosure controls and procedures as of a date within 90 days prior to the  filing date of this annual report (the “Evaluation Date”); and |
|   | c)                                                                                                                                                                                                                                                                                                                           | presented in this annual report our conclusions  about the effectiveness of the disclosure controls and procedures based on  our evaluation as of the Evaluation Date; |
| 5)     | The registrant’s other certifying officers and I  have disclosed, based on our most recent evaluation, to the registrant’s  auditors and the audit committee of registrant’s board of directors (or  persons performing the equivalent functions):                                                            |
|   | a)                                                                                                                                                                                                                                                                                                                           | all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant’s  ability to record, process, summarize and report financial data and have  identified for the registrant’s auditors any material weaknesses in internal  controls; and |
|   | b)                                                                                                                                                                                                                                                                                                                           | any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant’s  internal controls; and |
| 6)     | The registrant’s other certifying officers and I  have indicated in this annual report whether there were significant changes  in                                                                                                                                                                                       |

 

17

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|   | internal controls or in other factors that could  significantly affect internal controls subsequent to the date of our most  recent evaluation, including any corrective actions with regard to  significant deficiencies and material weaknesses. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Date:  March 28, 2003

 
|   | By:    |            | /s/ Robert K. Stump |   |
|--------|--------|-----------------|---------------------|--------|
|   |   | Robert K. Stump |
|   |   | *President*     |

 

18

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ASSISTED HOUSING FUNDL.P. I

CERTIFICATION

 
| I,     | Brett J. Atkinson, certify that:                                                                                                                                                                                                                                                                                             |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                         |
| 1)     | I have reviewed this annual report on Form 10-K of  Assisted Housing Fund L.P. I;                                                                                                                                                                                                                                            |
| 2)     | Based on my knowledge, this annual report does not  contain any untrue statement of a material fact or omit to state a material  fact necessary to make the statements made, in light of the circumstances  under which such statements were made, not misleading with respect to the  period covered by this annual report; |
| 3)     | Based on my knowledge, the financial statements, and  other financial information included in this annual report, fairly present in  all material respects the financial condition, results of operations and cash  flows of the registrant as of, and for, the periods presented in this annual  report;                    |
| 4)     | The registrant’s other certifying officers and I are  responsible for establishing and maintaining disclosure controls and  procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the  registrant and have:                                                                                               |
|   | a)                                                                                                                                                                                                                                                                                                                           | designed such disclosure controls and procedures to  ensure that material information relating to the registrant, including its  consolidated subsidiaries, is made known to us by others within those  entities, particularly during the period in which this annual report is being  prepared; |
|   | b)                                                                                                                                                                                                                                                                                                                           | evaluated the effectiveness of the registrant’s  disclosure controls and procedures as of a date within 90 days prior to the  filing date of this annual report (the “Evaluation Date”); and |
|   | c)                                                                                                                                                                                                                                                                                                                           | presented in this annual report our conclusions  about the effectiveness of the disclosure controls and procedures based on  our evaluation as of the Evaluation Date; |
| 5)     | The registrant’s other certifying officers and I  have disclosed, based on our most recent evaluation, to the registrant’s  auditors and the audit committee of registrant’s board of directors (or  persons performing the equivalent functions):                                                            |
|   | a)                                                                                                                                                                                                                                                                                                                           | all significant deficiencies in the design or  operation of internal controls which could adversely affect the registrant’s  ability to record, process, summarize and report financial data and have  identified for the registrant’s auditors any material weaknesses in internal  controls; and |
|   | b)                                                                                                                                                                                                                                                                                                                           | any fraud, whether or not material, that involves  management or other employees who have a significant role in the registrant’s  internal controls; and |
| 6)     | The registrant’s other certifying officers and I  have indicated in this annual report whether there were significant changes  in internal controls or in other factors that could significantly affect  internal controls subsequent to the date of our most recent                                                    |

 

19

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|   | evaluation, including any corrective actions with  regard to significant deficiencies and material weaknesses. |
|--------|----------------------------------------------------------------------------------------------------------------|

 

Date:  March 28, 2003

 
|   | By:    |                                      | /s/ Brett J.  Atkinson |   |
|--------|--------|-------------------------------------------|------------------------|--------|
|   |   | Brett J. Atkinson                         |
|   |   | *Treasurer  Principal Accounting Officer* |

 

20

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ASSISTEDHOUSING FUND L.P. I

ANDSUBSIDIARIES

 

CONSOLIDATEDFINANCIAL STATEMENTS

AND

INDEPENDENTAUDITOR’S REPORT

 

FORTHE YEARS ENDED DECEMBER 31,

2002,2001, AND 2000

 

21

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CONTENTS

 

 
|   |                                                        | Page No. |
|--------|-------------------------------------------------------------|----------|
|   | INDEPENDENT AUDITOR’S  REPORT                          | 23       |
|   |                                                        |     |
|   | FINANCIAL STATEMENTS:                                       |     |
|   |                                                        |     |
|   | Consolidated Balance Sheets                                 | 24-25    |
|   |                                                        |     |
|   | Consolidated  Statements of Operations                      | 26       |
|   |                                                        |     |
|   | Consolidated  Statements of Partners’ Equity (Deficit) | 27       |
|   |                                                        |     |
|   | Consolidated  Statements of Cash Flows                      | 28       |
|   |                                                        |     |
|   | Notes to  Consolidated Financial Statements                 | 29-36    |

 

22

----

 

INDEPENDENT AUDITOR’S REPORT

 

 

Partners

Assisted Housing Fund L.P. I

Seattle, Washington

** **

We have audited the accompanying consolidatedbalance sheets of Assisted Housing Fund L.P. I and its subsidiaries, as ofDecember 31, 2002 and 2001, and the related consolidated statements ofoperations, partners’ equity (deficit) and cash flows for the years endedDecember 31, 2002, 2001 and 2000.  Thesefinancial statements are the responsibility of the Partnership’s management.  Our responsibility is to express an opinionon these financial statements based on our audits.

** **

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform an audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of Assisted Housing Fund L.P. I and its subsidiaries, as ofDecember 31, 2002 and 2001, and the results of their operations and cash flowsfor the years ended December 31, 2002, 2001 and 2000, in conformity withaccounting principles generally accepted in the United States of America.

 

 
| /s/ Blume Loveridge & Co., PLLC                                 |   |
|---------------------------------------------------------------------|--------|
| Blume Loveridge & Co., PLLC  Bellevue, WashingtonMarch 25, 2003 |

 

23

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ASSISTED HOUSINGFUND L.P. I AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 
|                                     |   | **December  31,** |       |
|------------------------------------------|--------|-------------------|------------|
|                                     |   | **2002**          |       | **2001** |   |
| ASSETS                                   |   |              |       |   |   |
|                                     |   |              |       |   |   |
| Rental property  and equipment, at cost: |   |              |       |   |   |
| Buildings and  equipment                 |   | $                 | 16,018,401 |   | $ | 15,958,315 |   |
| Accumulated depreciation                 |   | (7,959,382        | )          | (7,358,898 | ) |
|                                     |   | 8,059,019         |       | 8,599,417 |   |
| Land                                     |   | 723,111           |       | 723,111 |   |
|                                     |   | 8,782,130         |       | 9,322,528 |   |
| Cash:                                    |   |              |       |   |   |
| Rental operation                         |   | 138,910           |       | 174,175 |   |
| Partnership                              |   | 27,368            |       | 25,493 |   |
|                                     |   | 166,278           |       | 199,668 |   |
| Restricted  deposits:                    |   |              |       |   |   |
| Tenant trust -  security deposits        |   | 119,646           |       | 110,083 |   |
| Reserve accounts                         |   | 651,193           |       | 702,234 |   |
|                                     |   | 770,839           |       | 812,317 |   |
| Other assets:                            |   |              |       |   |   |
| Accounts  receivable                     |   | 39,779            |       | 39,089 |   |
| Accounts  receivable – DGPs         |   | 24,079            |       | 24,079 |   |
| Prepaid expenses                         |   | 19,115            |       | 13,005 |   |
|                                     |   | 82,973            |       | 76,173 |   |
|                                     |   | $                 | 9,802,220  |   | $ | 10,410,686 |   |

 

Continued on page 25

 

24

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ASSISTED HOUSINGFUND L.P. I AND SUBSIDIARIES

 

CONSOLIDATEDBALANCE SHEETS (continued)

 
|                                             |   | **December  31,** |       |
|--------------------------------------------------|--------|-------------------|------------|
|                                             |   | **2002**          |       | **2001** |   |
| LIABILITIES AND  PARTNERS’ EQUITY (DEFICIT) |   |              |       |   |   |
|                                             |   |              |       |   |   |
| Liabilities:                                     |   |              |       |   |   |
| Mortgage notes  payable                          |   | $                 | 12,257,788 |   | $ | 12,296,564 |   |
| Accounts payable                                 |   | 259,338           |       | 304,760 |   |
| Due to  affiliates                               |   | 740,768           |       | 684,984 |   |
| Accrued  liabilities                             |   | 111,491           |       | 102,724 |   |
| Security deposits  payable                       |   | 120,483           |       | 112,007 |   |
|                                             |   | 13,489,868        |       | 13,501,039 |   |
|                                             |   |              |       |   |   |
| Minority  interests in property partnerships     |   | 388,449           |       | 415,138 |   |
| Partners’ equity  (deficit):                |   |              |       |   |   |
| Limited partners                                 |   | (4,004,129        | )          | (3,439,229 | ) |
| General partner                                  |   | (71,968           | )          | (66,262 | ) |
|                                             |   | (4,076,097        | )          | (3,505,491 | ) |
|                                             |   | $                 | 9,802,220  |   | $ | 10,410,686 |   |

 

See accompanying notes tothe consolidated financial statements.

 

25

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ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 
|                                                        |   | **Years  Ended December 31,** |      |
|-------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                        |   | **2002**                      |      | **2001** |   | **2000** |   |
|                                                        |   |                          |      |   |   |   |   |
| Revenue:                                                    |   |                          |      |   |   |   |   |
| Rent                                                        |   | $                             | 1,652,137 |   | $ | 1,608,923 |   | $ | 1,586,293 |   |
| Miscellaneous                                               |   | 82,593                        |      | 87,669 |   | 89,741 |   |
|                                                        |   | 1,734,730                     |      | 1,696,592 |   | 1,676,034 |   |
|                                                        |   |                          |      |   |   |   |   |
| Rental operating  expenses:                                 |   |                          |      |   |   |   |   |
| Repairs and  maintenance                                    |   | 339,056                       |      | 270,029 |   | 254,907 |   |
| Utilities                                                   |   | 290,497                       |      | 303,978 |   | 277,937 |   |
| General and  operating                                      |   | 419,494                       |      | 425,722 |   | 390,368 |   |
| Taxes and  insurance                                        |   | 317,002                       |      | 297,713 |   | 279,440 |   |
| Interest                                                    |   | 314,434                       |      | 318,006 |   | 317,916 |   |
| Depreciation                                                |   | 600,484                       |      | 589,439 |   | 604,564 |   |
|                                                        |   | 2,280,967                     |      | 2,204,887 |   | 2,125,132 |   |
|                                                        |   |                          |      |   |   |   |   |
| Income(loss)  from rental operations                        |   | (546,237                      | )         | (508,295 | ) | (449,098 | ) |
|                                                        |   |                          |      |   |   |   |   |
| Other income  (expense):                                    |   |                          |      |   |   |   |   |
| Interest earned  on partnership cash                        |   | 96                            |      | 335 |   | 504 |   |
| Minority  interest in operations                            |   | 26,594                        |      | 26,226 |   | 25,642 |   |
| General and  administrative                                 |   | (51,059                       | )         | (36,782 | ) | (34,521 | ) |
|                                                        |   | (24,369                       | )         | (10,221 | ) | (8,375 | ) |
| Net income  (loss)                                          |   | $                             | (570,606  | ) | $ | (518,516 | ) | $ | (457,473 | ) |
| Net income  (loss) per unit of limited partnership interest |   | $                             | (812      | ) | $ | (738 | ) | $ | (651 | ) |

 

See accompanying notes tothe consolidated financial statements.

 

26

----

 

ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF PARTNERS’EQUITY (DEFICIT)

 
|                         |   | **Years  Ended December 31, 2002, 2001 and 2000** |       |
|------------------------------|--------|---------------------------------------------------|------------|
|                         |   | **Limited  Partners**                             |       | **General  Partner** |   | **Total** |   |
| Profit/loss  percentage      |   | 99.0                                              | %          | 1.0 | % | 100.0 | % |
| Balance -  January 1, 2000   |   | $                                                 | (2,473,000 | ) | $ | (56,502 | ) | $ | (2,529,502 | ) |
| Net income  (loss) for 2000  |   | (452,898                                          | )          | (4,575 | ) | (457,473 | ) |
| Balance -  December 31, 2000 |   | (2,925,898                                        | )          | (61,077 | ) | (2,986,975 | ) |
| Net income  (loss) for 2001  |   | (513,331                                          | )          | (5,185 | ) | (518,516 | ) |
| Balance -  December 31, 2001 |   | (3,439,229                                        | )          | (66,262 | ) | (3,505,491 | ) |
| Net income  (loss) for 2002  |   | (564,900                                          | )          | (5,706 | ) | (570,606 | ) |
| Balance -  December 31, 2002 |   | $                                                 | (4,004,129 | ) | $ | (71,968 | ) | $ | (4,076,097 | ) |

 

See accompanying notes tothe consolidated financial statements.

 

27

----

 

 

ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OFCASH FLOWS

Increase (Decrease) in Cash

 
|                                                                                     |   | **Years  Ended December 31,** |     |
|------------------------------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                                                     |   | **2002**                      |     | **2001** |   | **2000** |   |
|                                                                                     |   |                          |     |   |   |   |   |
| Cash flows from  operating activities:                                                   |   |                          |     |   |   |   |   |
| Net income  (loss)                                                                       |   | $                             | (570,606 | ) | $ | (518,516 | ) | $ | (457,473 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities |   |                          |     |   |   |   |   |
| Depreciation                                                                             |   | 600,484                       |     | 589,439 |   | 604,564 |   |
| Minority  interests in operations                                                        |   | (26,594                       | )        | (26,226 | ) | (25,642 | ) |
| Changes in  certain assets and liabilities:                                              |   |                          |     |   |   |   |   |
| Accounts  receivable                                                                     |   | (690                          | )        | (9,129 | ) | (16,663 | ) |
| Prepaid expenses                                                                         |   | (6,110                        | )        | (3,881 | ) | 5,655 |   |
| Accounts payable                                                                         |   | (45,422                       | )        | 567 |   | 57,000 |   |
| Due to  affiliates                                                                       |   | 55,784                        |     | 22,570 |   | 19,503 |   |
| Accrued  liabilities                                                                     |   | 8,767                         |     | (11,514 | ) | (15,377 | ) |
| Tenant security  deposits                                                                |   | (1,087                        | )        | 5,778 |   | (1,634 | ) |
|                                                                                     |   |                          |     |   |   |   |   |
| Net cash  provided by operating activities:                                              |   | 14,526                        |     | 49,088 |   | 169,933 |   |
|                                                                                     |   |                          |     |   |   |   |   |
| Cash flows from  investing activities:                                                   |   |                          |     |   |   |   |   |
| Purchase of  depreciable property                                                        |   | (60,086                       | )        | (122,055 | ) | (45,879 | ) |
| Decrease  (increase) in restricted deposits                                              |   | 51,041                        |     | 35,743 |   | (38,271 | ) |
|                                                                                     |   |                          |     |   |   |   |   |
| Net cash used in  investing activities:                                                  |   | (9,045                        | )        | (86,312 | ) | (84,150 | ) |
|                                                                                     |   |                          |     |   |   |   |   |
| Cash flows from  financing activities:                                                   |   |                          |     |   |   |   |   |
| Minority  partners’ capital contributions                                           |   | (95                           | )        | (81 | ) | (365 | ) |
| Loan proceeds                                                                            |   |                          |     | 42,917 |   |   |   |
| Mortgage  principal payments                                                             |   | (38,776                       | )        | (33,507 | ) | (32,114 | ) |
| Assessment  principal payments                                                           |   |                          |     |   |   | (41,141 | ) |
|                                                                                     |   |                          |     |   |   |   |   |
| Net cash  provided by/(used in) financing activities:                                    |   | (38,871                       | )        | 9,329 |   | (73,620 | ) |
|                                                                                     |   |                          |     |   |   |   |   |
| Net increase  (decrease) in cash                                                         |   | (33,390                       | )        | (27,895 | ) | 12,163 |   |
| Cash - beginning  of year                                                                |   | 199,668                       |     | 227,563 |   | 215,400 |   |
| Cash - end of  year                                                                      |   | 166,278                       |     | 199,668 |   | 227,563 |   |
|                                                                                     |   |                          |     |   |   |   |   |
| Supplemental  disclosure of cash flow information:                                       |   |                          |     |   |   |   |   |
| Cash paid for  interest                                                                  |   | $                             | 315,517  |   | $ | 314,617 |   | $ | 318,573 |   |
| Fixed assets  retired (fully depreciated)                                                |   | $                             | —   |   | $ | — |   | $ | — |   |

 

See accompanying notes tothe consolidated financial statements.

 

28

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ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

 

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

 

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES

 

Nature of Business

Assisted Housing Fund L.P. I (the InvestorPartnership) is a limited partnership which was organized November 2, 1987under the laws of the state of Washington to acquire limited partnershipinterests in other partnerships (the Property Partnerships), each of which hasbeen organized to develop or purchase a low- or moderate-income apartmentproject.  The Investor Partnership’sGeneral Partner is Murphey Favre Properties, Inc. (MFP), a wholly-ownedsubsidiary of WM Financial, Inc., which is a wholly-owned subsidiary ofWashington Mutual Bank (WMB), a wholly-owned subsidiary of Washington Mutual,Inc.  At December 31, 2002, 335 partnersheld the 703 units of limited partnership interests outstanding.

** **

The Investor Partnership has invested as alimited partner in 11 Property Partnerships. The developer of each apartment project serves as the Developer GeneralPartner (DGP) of the respective Property Partnership.

 

The properties owned by the PropertyPartnerships are located in Michigan, Wisconsin, Ohio, West Virginia andWashington.  The apartment projects werefinanced and constructed under Section 515 of the National Housing Act, asamended (administered by U. S. Department of Agriculture Rural DevelopmentAgency, through its Rural Housing Service (RHS)). Under this program, theProperty Partnerships provide housing to low- and moderate-income tenants.  Lower rental charges to tenants arerecovered by the Property Partnerships through an interest reduction programwhich reduces the effective interest rate over the lives of the mortgages to 1percent and a rental assistance program whereby RHS pays the PropertyPartnerships for a portion of qualified tenant rents.  Construction of the apartment projects began between June, 1988and May, 1990 and rental operations began between April, 1989 and January,1991.

 

Additionally, in exchange for an allocationof federal low-income housing tax credits under Section 42 of the InternalRevenue Code, each Property Partnership has entered into an agreement with anagency of the state in which the apartment project is located, whereby theProperty Partnership has agreed to maintain all apartment units as both rentrestricted and occupied by low-income tenants for a minimum period of 15 years.

 

29

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During the yearsended December 31, 2002, 2001 and 2000, rental revenue from RHS totaled$554,877, $508,019 and $482,617, representing 34%, 32% and 30% of rent revenue,respectively.

** **

Principles of Consolidation

The financial statements include thefinancial statements of the Investor Partnership and the following 11 PropertyPartnerships in which it has invested as a limited partner:

 
| Fairview Apartments  Company Limited Partnership (Fairview)                                |
|--------------------------------------------------------------------------------------------|
| Ionia Limited Dividend  Housing Association Limited Partnership (Ionia)                    |
| Logan Apartments Company  Limited Partnership (Logan)                                      |
| Rolling Brook II Limited  Dividend Housing Association Limited Partnership (Rolling Brook) |
| Wexford Manor Limited  Dividend Housing Association Limited Partnership (Wexford)          |
| Blue Heron Apartment  Associates Limited Partnership (Blue Heron)                          |
| Glenwood Apartment  Associates Limited Partnership (Glenwood)                              |
| Pacific Place Apartment  Associates Limited Partnership (Pacific Place)                    |
| Cove Limited Dividend  Housing Association Limited Partnership (Cove)                      |
| Washington Street Limited  Dividend Housing Association Limited Partnership (Washington)   |
| Fayette Hills Limited  Partnership (Fayette)                                               |

 

The financial statements are presented on aconsolidated basis because the Investor Partnership holds approximately 99percent of the profit and loss interests and approximately 55 percent of theequity interests in each Property Partnership. Through an affiliate, who is a Special Limited Partner in each of the 11Property Partnerships, the Investor Partnership controls certain fundamentaldecisions affecting the operation of the Property Partnerships.  These fundamental decisions includesignificant purchases of assets, material borrowings or creation of liens onthe underlying properties, entering into material contracts, making taxelections and any act that would cause termination of the Property Partnership.  All material inter-partnership transactionsand balances have been eliminated.  Forthe years ended December 31, 2002, 2001 and 2000, net losses allocable to theminority partners were $26,594, $26,226, and $25,642, respectively.

 

Method of Accounting

The accrual methodof accounting is used for financial statement purposes.

 

30

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Cost Overruns

The partnership agreements for the PropertyPartnerships required the DGP’s to fund cost overruns on the development of theapartment projects.  Such cost overruns,totaling $589,462, have been recorded as minority interests in PropertyPartnerships and have been included in the cost basis of the rental property.  All depreciation related thereto has beenspecially allocated to the respective DGP’s.

 

Depreciation

Depreciation is computed for financialstatement purposes using the straight-line method over the estimated usefullives of the related assets as follows:

 
| Building shell and components |   | 27.5  years   |   |
|-------------------------------|--------|---------------|--------|
| Land improvements             |   | 15  years     |   |
| Appliances                    |   | 5  - 10 years |   |
| Carpets and draperies         |   | 5  - 10 years |   |

 

IncomeTaxes

No income tax provision hasbeen included in the financial statements since income or loss of the InvestorPartnership is required to be reported by the respective partners on theirincome tax returns.

 

CashEquivalents

For purposes of thestatement of cash flows, the Investor Partnership considers all investmentinstruments purchased with a maturity of three months or less to be cashequivalents.  At December 31, 2002 and2001, there were no cash equivalents.

** **

Concentrationof Credit

The Property Partnershipsmaintain cash in bank deposit accounts which, at times, may exceed federallyinsured limits.  The PropertyPartnerships have not experienced any losses in such accounts.  Management believes the PropertyPartnerships are not exposed to any significant credit risk on cash in suchbank deposit accounts.

** **

Estimates

The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect certain reported amounts and disclosures.

 

31

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NOTE 2 -TRANSACTIONS WITH AFFILIATES

 

In connection with the acquisition and development of rental propertyand the management of both the rental property and the Investor Partnership,the Investor Partnership and Property Partnerships have paid or accrued thefollowing amounts to certain affiliates:

** **
|                                                                  |   | **Years  Ended December 31,** |   |
|-----------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                  |   | **2002**                      |   | **2001** |   | **2000** |   |
| Murphey Favre  Properties, Inc. - partnership services fees           |   | $                             | 7,500  |   | $ | 7,500 |   | $ | 7,500 |   |
|                                                                  |   |                          |   |   |   |   |   |
| Developer  general partners and affiliates - property management fees |   | $                             | 96,431 |   | $ | 95,718  |   | $ | 95,609 |   |

** **

Property management fees are paid out ofrental operations.  Partnership fees arepayable from future sales of the properties, to the extent they are not paidfrom distributions of rental operation cash (see Note 6).

 

Under the terms of management servicesagreements, seven of the 11 Property Partnerships have affiliates of the DGP’swhich provide management services for the rental properties and receivecompensation for such services in amounts approximating 8.8% of rentalreceipts.  Three of the 11 PropertyPartnerships are co-managed by affiliates of the DGP’s which provide managementservices for the rental properties and receive compensation for such servicesin amounts approximating 2.1% of rental receipts.

 

As of December 31, 2002 and 2001, relatedparty payables consisted of the following:

 
|                            |   | **2002** |    | **2001** |   |
|---------------------------------|--------|----------|---------|----------|--------|
|                            |   |     |    |     |   |
| Advances from  DGPs             |   | $        | 201,784 |     | $      | 201,784 |   |
| Program  management fees        |   | 326,726  |    | 326,726  |   |
| Partnership  services fees      |   | 60,000   |    | 52,500   |   |
| Advances from  MFP              |   | 151,283  |    | 102,999  |   |
| Advances from  affiliate of DGP |   | 975      |    | 975      |   |
|                            |   |     |    |     |   |
|                            |   | $        | 740,768 |     | $      | 684,984 |   |

 

32

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Advances from DGPs amounted to $201,784 atDecember 31, 2002. Terms of RHS Loan Agreements require each DGP to provideinterest-free advances of stipulated amounts as initial operating capital tothe Property Partnerships.  The balanceincludes $152,107 of such advances at December 31, 2002 and 2001.  In addition, the balance includes DGPadvances of $35,468 for land improvements and $14,209 to fund operatingdeficits. Advances from the DGPs may only be repaid from the proceeds of futuresales of the respective properties.

 

Program management fees due to MFP amountedto $326,726 and represent amounts accrued through December 31, 1996.  No accruals have been recorded since thatdate (see Note 8).  Partnership servicesfees are also payable to MFP and reflect accruals through December 31, 2002 and2001. Partnership fees are payable from future sales of the properties, to theextent they are not paid from distributions of rental operation cash (see Note6).

 

During 2002 and 2001, MFP advanced $48,284and $27,518, respectively, to the Investor Partnership for administrativeexpenses.  These advances brought thebalances due to MFP at December 31, 2002 and 2001 to $151,283 and $102,999,respectively.

 

An affiliate of one of the DGPs advanced $975to the Property Partnership of the DGP. Advances made to one of the DGP’sduring 2001 totaled $9,000.  During2000, advances to this same DGP totaled $15,079 (see Note 8).

 

The Investor Partnership maintains depositswith WMB in certain checking and money market accounts which aggregated $27,368and $25,493 at December 31, 2002 and 2001, respectively.  Interest earned on such deposits totaled$96, $335, and $504 during the years ended December 31, 2002, 2001 and 2000,respectively.

 

NOTE 3 - CASH INRESERVE ACCOUNTS

 

The Loan Agreementsbetween the Property Partnerships and RHS require the Property Partnerships todeposit $127,196 annually into separate reserve accounts until the accountsreach $1,271,277.  Subject to RHSapproval, these funds may be used for various purposes, as further described inthe Loan Agreements.  Seven of the 11Property Partnerships were in compliance with the minimum annual fundingrequirements as set forth by RHS for the year ended December 31, 2002, and nineof the 11 Property Partnerships were in compliance with RHS

 

33

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minimum annualfunding requirements for the year ended December 31, 2001.  During 2002 reserve withdrawals were made atten of the 11 Property Partnerships and were in compliance with RHSrequirements. In 2001 reserve withdrawals were made by all of the PropertyPartnerships and were in compliance with RHS requirements.

** **

NOTE 4 - MORTGAGE NOTES PAYABLE

 

The mortgage notes are payable to RHS inmonthly installments totaling $26,959. In accordance with provisions of Interest Credit Agreements, RHSprovides monthly interest credits totaling $69,129 which reduce the interestrates stated in the mortgage notes to effective rates of 1 percent over thelives of the mortgages.  Amortization ofprincipal is based on the stated rates of 8.75% to 10.75% under RHS’sPredetermined Amortization Schedule System (PASS).  The mortgage notes mature May, 2039 through March, 2040.  Substantially all of the rental property andequipment is pledged as collateral on the mortgages.  No partner is individually liable on the mortgage notes.

 

The mortgage notes are regulated by the U.S.Government and therefore, have no market price.  Accordingly, management has determined that users of thefinancial statements would derive no benefit from any estimate of fair valueand performing such an analysis would not be practicable.

** **

Principal payments on the mortgage notes forthe next 5 years are as follows:

 

| **Year**                |   | **Amount** |       |
|-------------------------|--------|------------|------------|
|                    |   |       |       |
| 2003                    |   | $          | 41,754     |   |
| 2004                    |   | 46,132     |       |
| 2005                    |   | 50,465     |       |
| 2006                    |   | 55,205     |       |
| 2007                    |   | 60,392     |       |
| 2008 - and later  years |   | 12,003,840 |       |
|                    |   |       |       |
|                    |   | $          | 12,257,788 |   |

 

34

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NOTE 5 - ASSESSMENT PAYABLE

 

In September, 1995, the city of BainbridgeIsland issued an assessment for Blue Heron’s share of street and utilityimprovements in the amount of $68,569. The assessment was payable in 10 equal annual installments together withinterest at the rate of 5.6 percent. During 2000, funds were withdrawn from the reserve account and thebalance of the assessment was paid in full.

 

NOTE 6 - RENTALOPERATION CASH

 

RHS regulations limit the distribution ofrental operation cash to a maximum of $38,090 annually.  Any distribution to the Investor Partnershipfrom rental operation cash is to be made in accordance with the respectivepartnership agreements.  Whether or nota Property Partnership makes any limited distribution is based on the resultsof its own operations and is at the discretion of the DGP.

** **

NOTE 7 - GUARANTEES

 

Each of the DGP’s has made a guarantee to therespective Property Partnership that they will compensate the Partnership inthe event the actual low-income housing tax credit is less than 85% to 90% ofthe available credit. Through December 31, 2002, no payments have been madeunder these guarantee agreements.

 

NOTE 8 – CONTINGENCY AND SUBSEQUENT EVENTS

 

The Investor Partnership has ceased accrualof the annual program management fee, payable in part to MFP.  Management has determined that the source ofpayment, a future sale or refinance of one or more of the PropertyPartnerships, may not be sufficient to pay fees accrued in excess of the $544,540payable at December 31, 1996. Management has elected to treat fees for years subsequent to 1996 as acontingent liability.  At December 31,2002 and 2001 the contingent liability for program management fees totaled$447,102 and $372,585, respectively.

 

One of Logan's DGPs did not comply with RHS regulations regarding thehandling of project cash during 2001 and 2000. These instances of non-compliance were reported to the appropriateauthorities during 2001.  During 2001and 2000, this DGP made multiple unauthorized withdrawals of project cashtotaling $9,000 and $15,079, respectively. Further, it was discovered that project bank accounts, totaling $60,131as of December 31, 2002, have been pledged in violation of RHSregulations.  As a result of this DGP'sactions, RHS issued a Letter of Acceleration on the mortgage note on August 29,2001.  The mortgage note had a balanceof $987,480 on December 31, 2001.  RHSsuspended further proceedings on October 11, 2001, based on preliminarynegotiations with the other general partners and the property managementagent.  This DGP declaredChapter 7 Bankruptcy on February 19, 2002. MFP, on behalf of the Partnership,filed a Motion for Summary Judgment against the DGP on October 23, 2002.

 

Subsequent to December 31, 2002, thebankruptcy trustee drafted a motion to sell the DGP’s interest in Logan, to anOhio non-profit organization.  As acondition of the sale, the non-profit would

 

35

----

 

restore or replenish the assets that weremisappropriated by the Logan DGP.

 

36

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INDEPENDENTAUDITOR’S REPORT ON SCHEDULES

 

 

Partners

Assisted Housing Fund L.P. I

Seattle, Washington

 

We have audited the consolidated financialstatements of Assisted Housing Fund L.P. I and its subsidiaries, as of and forthe years ended December 31, 2002, 2001 and 2000 listed under Item 15(a)1hereof and have issued our report thereon dated March 25, 2003 (which report isincorporated by reference elsewhere in this Form 10-K).  In the course of our audits of suchfinancial statements, we have also audited the schedules listed under Item15(a)2 for the years ended December 31, 2002, 2001 and 2000. These schedulesare the responsibility of the Partnership’s management.  Our responsibility is to express an opinionbased on our audits.  In our opinion,these schedules present fairly, in all material respects, when read inconjunction with the related financial statements, the information therein setforth.

 

 
| /s/ Blume Loveridge &  Co., PLLC                                   |   |
|------------------------------------------------------------------------|--------|
| Blume Loveridge & Co.,  PLLC  Bellevue, Washington  March 25, 2003 |

 

37

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ASSISTED HOUSING FUND LP I AND SUBSIDIARIES

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

Year Ended December 31, 2002

 
| **COLUMN A**    |   | **COLUMN B**     |       | **COLUMN C**                     |   | **COLUMN D**                                       |   |
|-----------------|--------|------------------|------------|----------------------------------|--------|----------------------------------------------------|--------|
| **Description** |   | **Encumbrances** |       | **Initial  Cost to Partnership** |   | **Costs  Capitalized  Subsequent  to Acquisition** |   |
|            |   |             |       | **Land**                         |   | **Buildings  &  Improvements**                 |   | **Personal  Property** |   | **Improvements** |   |
| Fairview        |   | $                | 1,263,198  |                             | $      | 55,413                                             |   |   |   |   |   | $ | 1,608,284 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Ionia           |   | 705,848          |       | 24,000                           |   |                                               |   |   |   | 937,578 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Logan           |   | 987,480          |       | 55,129                           |   |                                               |   |   |   | 1,220,097 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Rolling Brook   |   | 740,942          |       | 35,000                           |   |                                               |   |   |   | 929,706 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Wexford         |   | 719,262          |       | 22,000                           |   |                                               |   |   |   | 958,606 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Blue Heron      |   | 1,456,595        |       | 248,569                          |   |                                               |   |   |   | 2,000,202 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Glenwood        |   | 1,426,017        |       | 145,000                          |   |                                               |   |   |   | 1,775,114 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Pacific Place   |   | 751,526          |       | 30,000                           |   |                                               |   |   |   | 993,714 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Cove            |   | 1,418,689        |       | 47,000                           |   |                                               |   |   |   | 1,753,463 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Washington      |   | 753,431          |       | 8,000                            |   |                                               |   |   |   | 890,594 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Fayette         |   | 2,034,800        |       | 53,000                           |   | 1,779,270                                          |   | 40,800 |   | 686,733 |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| AHF             |   |             |       |                             |   | 444,240                                            |   |   |   |   |   |
|            |   |             |       |                             |   |                                               |   |   |   |   |   |
| Total           |   | $                | 12,257,788 |                             | $      | 723,111                                            |   | $ | 2,223,510 |   | $ | 40,800 |   | $ | 13,754,091 |   |
|                 |        |                  |            |                                  |        |                                                    |        |  |  |  |  |  |  |  |  |  |

 

38

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ASSISTED HOUSING FUND LP I AND SUBSIDIARIES

SCHEDULE III - REAL ESTATEAND ACCUMULATED DEPRECIATION (continued)

Year Ended December 31, 2002

 

 
| **COLUMN A**    |   | **COLUMN E**                                        |    | **COLUMN F**                  |   | **COLUMN G**                                   |   | **COLUMN H**             |      | **COLUMN I**                                                                |   |
|-----------------|--------|-----------------------------------------------------|---------|-------------------------------|--------|------------------------------------------------|--------|--------------------------|-----------|-----------------------------------------------------------------------------|--------|
| **Description** |   | **Gross  Amount at Which Carried at End of Period** |    | **Accumulated  Depreciation** |   | **Date of  Construction/ Placed in Service**   |   | **Date of  Acquisition** |      | **Life on which****Depreciation  in Latest  Income Statement is  Computed** |   |
|            |   | **Land**                                            |    | **Buildings**                 |   | **Land  Improvements  and Personal  Property** |   | **Total**                |      |                                                                        |   |   |   |   |   |   |   |
| Fairview        |   | $                                                   | 55,413  |                          | $      | 1,418,319                                      |   | $                        | 189,964   |                                                                        | $      | 1,663,696 |   | $ | 802,695 |   | 13-Jun-90 |   | Various |   | 27.5/15/10/7/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Ionia           |   | 24,000                                              |    | 817,506                       |   | 120,072                                        |   | 961,578                  |      | 466,900                                                                     |   | 08-Aug-90 |   | Various |   | 27.5/15/7/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Logan           |   | 55,129                                              |    | 1,022,974                     |   | 197,123                                        |   | 1,275,226                |      | 618,533                                                                     |   | 11-Jan-91 |   | Various |   | 27.5/15/10 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Rolling Brook   |   | 35,000                                              |    | 794,263                       |   | 135,443                                        |   | 964,706                  |      | 486,346                                                                     |   | 08-Mar-90 |   | Various |   | 27.5/15/10/7 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Wexford         |   | 22,000                                              |    | 815,821                       |   | 142,786                                        |   | 980,607                  |      | 499,445                                                                     |   | 21-Feb-90 |   | Various |   | 27.5/15/7/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Blue Heron      |   | 248,569                                             |    | 1,890,967                     |   | 109,235                                        |   | 2,248,771                |      | 963,059                                                                     |   | 01-May-90 |   | Various |   | 27.5/10/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Glenwood        |   | 145,000                                             |    | 1,701,975                     |   | 73,139                                         |   | 1,920,114                |      | 899,233                                                                     |   | 01-Apr-89 |   | Various |   | 27.5/10/7 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Pacific Place   |   | 30,000                                              |    | 950,979                       |   | 42,735                                         |   | 1,023,714                |      | 497,819                                                                     |   | 01-May-89 |   | Various |   | 27.5/10/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Cove            |   | 47,000                                              |    | 1,635,278                     |   | 118,185                                        |   | 1,800,463                |      | 847,882                                                                     |   | 01-Mar-90 |   | Various |   | 27.5/10/7 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Washington      |   | 8,000                                               |    | 836,929                       |   | 53,665                                         |   | 898,594                  |      | 430,774                                                                     |   | 01-Jan-90 |   | Various |   | 27.5/10 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| Fayette         |   | 53,000                                              |    | 2,347,661                     |   | 159,142                                        |   | 2,559,803                |      | 1,237,865                                                                   |   | 01-Dec-89 |   | Various |   | 27.5/19/15/10/7/5 |   |
|            |   |                                                |    |                          |   |                                           |   |                     |      |                                                                        |   |   |   |   |   |   |   |
| AHF             |   | 0                                                   |    | 444,240                       |   |                                           |   | 444,240                  |      | 208,831                                                                     |   |   |   | Various |   |   |   |
| Total           |   | $                                                   | 723,111 |                          | $      | 14,676,912                                     |   | $                        | 1,341,489 |                                                                        | $      | 16,741,512 |   | $ | 7,959,382 |   |   |   |   |   |   |   |

 

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ASSISTED HOUSING FUND LP I AND SUBSIDIARIES

SCHEDULE III - REAL ESTATEAND ACCUMULATED DEPRECIATION (continued)

Year Ended December 31, 2002

 

 
| **REAL ESTATE**                      |   | **Year Ended  December 31, 2000** |       | **Year Ended  December 31, 2001** |   | **Year Ended  December 31, 2002** |   |
|--------------------------------------|--------|-----------------------------------|------------|-----------------------------------|--------|-----------------------------------|--------|
| Balance at beginning of period       |   | $                                 | 16,513,492 |                              | $      | 16,559,371                        |   | $ | 16,681,425 |   |
| Additions during period:             |   |                              |       |                              |   |                              |   |
| Property acquisitions                |   | 43,722                            |       | 107,175                           |   | 52,727                            |   |
| Acquisitions through foreclosure     |   | 0                                 |       | 0                                 |   | 0                                 |   |
| Other acquisitions                   |   | 0                                 |       | 0                                 |   | 0                                 |   |
| Improvements etc. (New Construction) |   | 2,157                             |       | 14,879                            |   | 7,360                             |   |
| Other (Acquisition Cost)             |   | 0                                 |       | 0                                 |   | 0                                 |   |
|                                 |   | $                                 | 16,559,371 |                              | $      | 16,681,425                        |   | $ | 16,741,512 |   |
| Deductions during period:            |   |                              |       |                              |   |                              |   |
| Cost of real estate sold             |   | 0                                 |       | 0                                 |   | 0                                 |   |
| Other - retired fixed assets         |   | 0                                 |       | 0                                 |   | 0                                 |   |
| Balance at close of period           |   | $                                 | 16,559,371 |                              | $      | 16,681,425                        |   | $ | 16,741,512 |   |

 
| **ACCUMULATED  DEPRECIATION**        |   | **Year Ended  December 31, 2000** |      | **Year Ended  December 31, 2001** |   | **Year Ended  December 31, 2002** |   |
|--------------------------------------|--------|-----------------------------------|-----------|-----------------------------------|--------|-----------------------------------|--------|
| Balance at beginning of period       |   | $                                 | 6,164,895 |                              | $      | 6,769,459                         |   | $ | 7,358,898 |   |
|                                 |   |                              |      |                              |   |                              |   |
| Existing property:                   |   | 600,985                           |      | 581,396                           |   | 594,953                           |   |
| Depreciation on additions:           |   |                              |      |                              |   |                              |   |
| Property acquisitions                |   | 3,501                             |      | 7,502                             |   | 5,264                             |   |
| Acquisitions through foreclosure     |   | 0                                 |      | 0                                 |   | 0                                 |   |
| Other acquisitions                   |   | 0                                 |      | 0                                 |   | 0                                 |   |
| Improvements etc. (New Construction) |   | 78                                |      | 541                               |   | 267                               |   |
| Other (Acquisition Costs)            |   | 0                                 |      | 0                                 |   | 0                                 |   |
|                                 |   | $                                 | 6,769,459 |                              | $      | 7,358,898                         |   | $ | 7,959,382 |   |
| Depreciation on deductions:          |   |                              |      |                              |   |                              |   |
| Cost of real estate sold             |   | 0                                 |      | 0                                 |   | 0                                 |   |
| Other - retired fixed assets         |   | 0                                 |      | 0                                 |   | 0                                 |   |
| Balance at close of period           |   | $                                 | 6,769,459 |                              | $      | 7,358,898                         |   | $ | 7,959,382 |   |

 

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ASSISTED HOUSING FUNDL.P. I

 

Index of Exhibits

 
| **Exhibit  No.** |   | **Description**                                                                                                                                                           |
|------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3                |   | Agreement of Limited Partnership of Assisted Housing  Fund L.P. I (incorporated by reference to Appendix C to the Registrant’s  Registration Statement on Form S-11) |
|             |   |                                                                                                                                                                      |
| 4                |   | Certificate of Limited Partnership (incorporated by  reference to Appendix C to the Registrant’s Registration Statement on Form  S-11)                               |
|             |   |                                                                                                                                                                      |
| 99(a)            |   | Certification of the President of the General  Partner Pursuant to 18 U.S.C. Section 1350 (filed herewith)                                                                |
|             |   |                                                                                                                                                                      |
| 99(b)            |   | Certification of the Principal Accounting Officer of  the General Partner Pursuant to 18 U.S.C. Section 1350 (filed herewith)                                             |

 

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