FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

     [X]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
          EXCHANGE ACT OF 1934

For the fiscal year-ended  December 31, 1998

                                       OR

     [ ]  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.)


                1191 Second  Avenue,  Suite 904,  Seattle,  WA 98101 (Address of
                principal executive offices) (Zip code)

Registrant's telephone number, including area code: (206) 461-4782

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) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No


               The Exhibit Index appears at page 18. There are 18 pages.
<PAGE>


                                     PART I

Item 1. Business

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

The  Partnership  raised  $3,511,000  from  the  sale of 703  units  of  limited
partnership  through  a  public  offering  completed  on  April  14,  1989.  The
Partnership   has  invested  as  a  limited  partner  in  eleven  other  limited
partnerships (Property Partnerships) which develop, own, and operate residential
apartment  complexes  located in small towns across the country.  Each apartment
complex benefits from several forms of federal assistance programs and qualifies
for low-income  housing credits (Tax Credits)  pursuant to the Internal  Revenue
Code by the Tax Reform Act of 1986. There are 332 partners in the Partnership.

The Partnership's  general partner is Murphey Favre  Properties,  Inc., (MFP), a
wholly-owned subsidiary of WM Financial, Inc. which is a wholly-owned subsidiary
of  Washington  Mutual Bank (WMB),  a wholly-  owned  subsidiary  of  Washington
Mutual, Inc.

Table A on page 4 lists the Property  Partnerships  in which the Partnership has
invested.  Item 7 of this Report  contains other  significant  information  with
respect to such Property Partnerships.

Each Property Partnership has, as its general partner  (developer),  one or more
individuals  or an  entity  not  affiliated  with  the  Partnership  or MFP.  In
accordance  with the  Partnership  Agreements  under  which  such  entities  are
organized,  the Partnership depends on the developers for the management of each
Property  Partnership.  As of December 31, 1998, the Property  Partnerships  and
their developers were:

<PAGE>





PROPERTY PARTNERSHIP                         DEVELOPER GENERAL PARTNER

 1.  Fairview Apartments Company Limited     Rural Housing Corporation
     Partnership (Fairview)

 2.  Ionia Limited Divided Housing           Rural Housing Corporation
     Association (LDHA) Limited
     Partnership (Ionia)

 3.  Logan Apartments Company Limited        Rural Housing Corporation and
     Partnership (Logan)                     Arthur H. Winer

 4.  Rolling Brook II LDHA Limited           Rural Housing Corporation
     Partnership (Rolling Brook)

 5.  Wexford Manor LDHA Limited              Rural Housing Corporation
     Partnership (Wexford

 6.  Blue Heron Apartment Associates         Dujardin Development Co.
     Limited Partnership (Blue Heron)

 7.  Glenwood Apartment Associates Limited   Dujardin Development Co.
     Partnership (Glenwood)

 8.  Pacific Place Apartment Associates      Dujardin Development Co.
     Limited Partnership (Pacific Place)

 9.  Cove LDHA Limited Partnership (Cove)    Kenneth & Lowell Werth

10.  Washington Street LDHA Limited          Kenneth & Lowell Werth
     Partnership (Washington)

11.  Fayette Hills Limited Partnership       LeRoy Eslinger and
     (Fayette)                               Douglas E. Pauley


A wholly-owned  subsidiary of MFP, Murphey Favre Housing  Managers (MFHM),  is a
special  limited partner in each Property  Partnership and has certain  approval
rights over the actions by the developers of the Property Partnerships.


<PAGE>



                                     Table A

                                SELECTED PROPERTY
                                PARTNERSHIP DATA
<TABLE>
<CAPTION>

Property                                   Date Interest        Number of
Partnerships      Location                 Acquired             Apt. Units
<S>               <C>                      <C>                     <C>

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
</TABLE>
<PAGE>


Item 2. Properties

Rental   property   consists  of   apartment   projects   renting  to  low-  and
moderate-income tenants.

As of December 31, 1998, the Property  Partnerships had placed rental properties
into operation in the following locations:

                                                Date Placed
                       Location                 In Service

                       Plymouth, WI             June 13, 1990
                       Ionia, MI                August 8, 1990
                       Logan, OH                January 11, 1991
                       Algonac, MI              March 8, 1990
                       Onsted, MI               February 21, 1990
                       Bainbridge Island, WA    May 1, 1990
                       Lake Stevens, WA         April 1, 1989
                       South Bend, WA           May 1, 1989
                       Big Rapids, MI           March 1, 1990
                       Perry, MI                January 1, 1990
                       Fayetteville, WV         December 1, 1989

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

                                     PART II

Item 5.  Market for  the  Registrant's  Securities  and  Related Security Holder
Matters

The  Registrant's  securities  consist  of  703  units  of  Limited  Partnership
Interest,  valued at $5,000 per unit,  for which  there is no market.  Units may
only be sold, assigned,  exchanged or otherwise transferred upon compliance with
the terms of the Limited Partnership Agreement.

As of the  date of  filing  of this  report,  the  Partnership  has 332  limited
partners and one general partner.

The Partnership has not made any  distributions  in 1996, 1997 and 1998 and does
not anticipate making any significant distributions in the future.


<PAGE>


Item 6.  Selected Financial Data
<TABLE>
<CAPTION>

                   Year Ended     Year Ended     Year Ended     Year Ended     Year Ended
                    12/31/98       12/31/97       12/31/96       12/31/95       12/31/94
<S>                <C>            <C>            <C>            <C>            <C>

Rental Revenue      $1,505,575     $1,448,422     $1,415,977     $1,381,245     $1,336,598


Interest
Revenue                 24,835         24,538         21,800         21,158         18,868


Income (Loss)         (500,629)      (535,351)      (618,708)      (615,345)      (600,996)

Income (Loss)
per Limited
Partnership
Unit                      (705)          (754)          (871)          (867)          (846)


Total Assets        11,949,410     12,514,876     13,022,213     13,620,436     14,107,470

Mortgage Notes
Payable
                    12,348,628    $12,375,470    $12,399,750    $12,422,388    $12,442,696
</TABLE>

Item  7.   Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations

During the year, management's emphasis was on the continued  operation of eleven
properties. At December 31, 1998,  five  properties  were   100% occupied, three
were  between 94% and 96% occupied and three were  between 80% and 88% occupied.
The three properties with  the lowest  occupancy,  located in  Michigan and West
Virginia, continue to have cash flow problems.  As a result, property  taxes for
the  three  properties  were  delinquent  at  December 31, 1998  although  other
obligations  were  current.  These  properties  will  continue  to  be   closely
monitored by management.

The  properties  are located in rural towns with  populations of 14,000 or less.
Five  properties are located in Michigan,  three in Washington,  and one each in
Ohio,  West Virginia and Wisconsin.  The properties  range in size from 24 to 68
units for a total portfolio of 394 units.

Results of Operations

On a consolidated  basis,  net income (loss) before  depreciation for 1998, 1997
and 1996  was $134,348, $96,827, and $12,240, respectively. Rental revenues  for
1998 were up 3.9% from 1997 as compared to increases of 2.3% from 1996  to 1997,
and  3% from  1995  to 1996.  Expenses for 1998, including depreciation, were up
0.7% over 1997, while  expenses, includin  depreciation, for 1997  and 1996 were
up 0.9% and 1.8% over 1996 and 1995, respectively.

The Partnership paid $22,690,  $25,726,  and $22,226, in accounting expenses for
the Partnership for 1998, 1997 and 1996, respectively.

Interest  revenue for 1998 increased 1.4% from 1997 and decreased 0.9% from 1996
to 1997.
<PAGE>
Liquidity and Capital Resources

The Partnership completed its public offering of units of limited partnership on
April 14, 1989, with proceeds totaling $3,511,000 from 339 limited partners.  As
of December 31,  1998,  the  Partnership  had  invested  $2,542,000  of offering
proceeds in eleven Property Partnerships.

Offering proceeds equal to $175,750 were reserved by the Partnership to fund its
operating  expenses.  As  of  December  31,  1998,  the  cash  reserves  of  the
Partnership  totaled  $13,276.  It is expected that the Partnership will draw on
the reserves in future years to fund accounting and other operating  expenses of
the Partnership.  Nominal cash distributions from the Property Partnerships will
supplement  the cash  reserves.  In 1998,  the  Partnership  received  $9,930 in
distributions from the Property  Partnerships.  The expectation is that all cash
distributions received from the Property Partnerships will be used to defray the
operating expenses of the Partnership and thus it is not likely any distribution
will be made to the limited partners.

The  Partnership  is not  required to fund  additional  amounts to the  Property
Partnerships based on each Property Partnership  agreement.  Additionally,  each
Property  Partnership  is operated  as an  individual  project,  and without any
contractual arrangements of any kind between the Property Partnerships. In 1998,
four  properties  generated  positive  cash flow and seven  properties generated
deficit cash flow.  The deficits  were  funded from  rental  operating  cash and
from authorized withdrawals from the reserve accounts.

As of December 31, 1998, one developer general partner had advanced $14,209 to a
Property  Partnership  under the deficit  funding  agreement in place during the
guarantee  period.  The guarantee  periods ended in 1991 and 1992. The developer
general partners are no longer obligated to fund operating deficits.

The Property  Partnerships  financed  construction  with a  combination  of bank
financing and funds from the Partnership. The permanent loans for the properties
were  provided by the Farmers Home  Administration,  now known as Rural  Housing
Service  (RHS),  under  Section  515 of the  National  Housing  Act of 1949,  as
amended.  RHS  provides an interest  credit to the Property  Partnerships  which
reduces  the  interest  rates  stated in the  mortgage  notes to an  effective 1
percent rate over the lives of the mortgages. All property loans are current.

Capital expenditures on the properties are expected to increase over the initial
years'capital expenses due to the natural aging process of the newly constructed
(10  properties) or newly rehabilitated (1 property) projects at the time of the
formation of the Partnership. As part of RHS loan requirements,a reserve account
is funded at an annual rate of 1% of the original  property  loan balance  until
the  balance  equals 10% of the  original  loan  balance.  Additions to  reserve
accounts are  funded from  property operations  and are  established  for future
capital expenditures.

 <PAGE>
Included in cash deposits on the  consolidated  balance  sheets were $13,276 and
$8,195 held as deposits by the  Partnership  in WMB  accounts as of December 31,
1998 and 1997,  respectively.  As discussed in Part I, Item 1, WMB is affiliated
with MFP.

There are no additional acquisitions nor any dispositions planned.

Regulatory Restrictions

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

The tenants of all the properties  must be tax credit and RHS eligible  tenants.
It is management's goal to have all units, except for managers' units,  occupied
by  tax  credit  eligible   tenants.   In  order  to  meet  established   income
requirements,  tenants must not earn more than 60% of the median  income for the
areas in which the  properties are located.  Seven of the eleven  properties are
further restricted to renting apartment units only to senior citizens.

Additionally,  the properties  cannot be sold without prior approval of the RHS,
cannot  make  more  than an 8%  cash  distribution  annually  to its  owner  (as
described in Note 6 to the Partnership's financial statements),  and must remain
under  the  low-income  housing  tax  credit  program  for 15 years to avoid any
recapture of the low-income  housing tax credits.  Furthermore,  pursuant to RHS
loan  agreements,  RHS may  refuse  prepayment  of the  loans  and  require  the
properties be used for the purpose of providing  housing to eligible tenants for
a minimum period of 20 years.

Inflation

Operating  expenses  and  rental  revenues  of  each  property  are  subject  to
inflationary  factors.  Low rates of inflation  could result in rental  revenues
remaining  constant  or  increasing  at slower  rates  than in  periods  of high
inflation.  High  rates  of  inflation  raise  the  operating  expenses  of  the
properties, and to the extent the increased operating expenses are not passed on
to the tenants by rental increases, the properties' operation could be adversely
affected.


<PAGE>


Tax Credit

As of December 31, 1998, 1997 and 1996, tax credits equal to 15.17%,  15.17% and
15.17%,  respectively,  of the limited partners' capital contributions have been
generated.

Impact of Year 2000

The Partnership's  general  partner has  reviewed the  potential exposure due to
computer  problems that  may arise subsequent to 1999.  We are  currently in the
process  of  taking  the necessary  precautions to  minimize any  disruptions to
normal   business  operations.   The  Partnership  may   remain  susceptible  to
consequences of the  Year 2000 issue  because of the inherent uncertainty of all
systems from outside vendors, or other companies, relied upon by the Partnership
and/or Property Partnerships.

Item 8. Financial Statements and Supplementary Data

The  financial  statements  of Assisted  Housing  Fund L.P. I as of December 31,
1998, 1997 and 1996,  together with the independent  auditors'  reports thereon,
are filed herewith in Part IV, Item 14 of this Form 10-K.

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

None.



                                    PART III


Item 10. Directors and Executive Officers of the Registrant

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


Item 11. Executive Compensation


Name of Individual      Capacities
  or Number of           in Which                    Cash
 Persons in Group         Served                 Compensation


                                       Year Ended   Year Ended   Year Ended
                                       12/31/98     12/31/97     12/31/96



     None


<PAGE>



Item 12. Security Ownership of Certain Beneficial Owners and Management

                  Name and                  Amount and
                  Address of                Nature of
Title of          Beneficial                Beneficial            Percent
Class             Owner                     Owner                 of Class

General           Murphey Favre             (1)                   100%
Partner's         Properties, Inc.
Interest          Suite 904
                  1191 Second Avenue
                  Seattle, WA  98101

(1) The  General  Partner's  interest  is owned of record  and  beneficially  by
Murphey Favre  Properties,  Inc. Its capital interest as of December 31, 1998 is
($51,370).


Item 13. Certain Relationships and Related Transactions

The  Property  Partnerships  have  entered  into  certain  agreements  with  the
developer or its affiliates under which the developer or its affiliates  receive
compensation,  perform services, or make loans. Note 2 of the Notes to Financial
Statements,  which are filed in Part IV,  Item 14 of this  Form  10-K,  provides
additional information pertaining to the individual Property Partnerships.
<PAGE>
                                   PART IV

Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K

(a)          1. The following financial statements of Assisted Housing Fund L.P.
             I and subsidiaries are incorporated by reference in Part II and are
             attached as pages 1 to 13 of Exhibit 13.
                                 Page of Annual
                                                                       Report

              Independent Auditor's Report..........................       1

              Balance Sheets as of December 31, 1998 and 1997.......       2

              Statements of Operations for each of the years ended
              December 31, 1998, 1997 and 1996......................       3

              Statements of Partners' Equity (Deficit) for each of
              the years ended December 31, 1998, 1997 and 1996......       4

              Statements of Cash Flows for each of the years ended
              December 31, 1998, 1997 and 1996......................       5

              Notes to Financial Statements for each of the years
              ended December 31, 1998, 1997 and 1996...............      6-12

              2.  Financial statement schedules                Page of Form 10-K

              Independent Auditor's Report on Schedules.............      13

              Schedule III - Real Estate and Accumulated
              Depreciation..........................................    14-16

              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 financial statements or notes thereto.

               3.  Exhibits:  All  exhibits  to this  report  are  listed in the
               Schedule Index at page 17.

(b) No reports on Form 8K were filed during 1998.

<PAGE>



                                   SIGNATURES





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


                          ASSISTED HOUSING FUND L.P. I
                                   Registrant

By:  Murphey Favre Properties, Inc.
     Its Managing General Partner




By:              Herbert F. Fox /s/          Date:    3/31/99
              Herbert F. Fox, Vice President
              and Principal Financial Officer

Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:

By:           Murphey Favre Properties, Inc.



By:              Kerry K. Killinger /s/         Date:    3/31/99
              Kerry K. Killinger
                Its Director



By:              David G. Murphy /s/            Date:     3/31/99
              David G. Murphy
                Its Director



<PAGE>
                    INDEPENDENT AUDITOR'S REPORT ON SCHEDULES




General Partner and Limited Partners
Assisted Housing Fund L.P. I
Seattle, Washington

We have audited the consolidated  financial  statements of Assisted Housing Fund
L.P. I and its  subsidiaries,  as of and for the years ended  December 31, 1998,
1997 and 1996 listed under Item 14(a)1 hereof and have issued our report thereon
dated March 23, 1999 (which  report is  incorporated  by reference  elsewhere in
this Form 10-K).  In the course of our audits of such financial  statements,  we
have also  audited the  schedules  listed  under Item 14(a)2 for the years ended
December 31, 1998, 1997 and 1996. These schedules are the  responsibility of the
Partnership's  management.  Our responsibility is to express an opinion based on
our audits.  In our opinion,  these schedules  present  fairly,  in all material
respects,  when read in conjunction with the related financial  statements,  the
information therein set forth.




Blume Loveridge & Co., PLLC
Bellevue, Washington
March 23, 1999

<PAGE>


                           ASSISTED HOUSING FUND LP I
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                          Year Ended December 31, 1998
<TABLE>
<CAPTION>

      COLUMN A           COLUMN B                        COLUMN C                        COLUMN D
--------------------------------------------------------------------------------------------------------
                                                                                     Costs Capitalized
                                                                                        Subsequent
    Description        Encumbrances              Initial Cost to Partnership          to Acquisition
--------------------------------------------------------------------------------------------------------
<S>                      <C>              <C>          <C>            <C>               <C>

                                                     Buildings &      Personal
                                           Land      Improvements     Property       Improvements
                                       -----------------------------------------------------------------
Fairview                 $ 1,279,581      $ 55,413                                      $ 1,580,336

Ionia                        714,791        24,000                                          917,910

Logan                        999,705        55,129                                        1,208,945

Rolling Brook                751,449        35,000                                          927,015

Wexford                      729,539        22,000                                          944,922

Blue Heron                 1,477,409       248,569                                        1,622,709

Glenwood                   1,446,793       145,000                                        1,595,734

Pacific Place                760,929        30,000                                          888,081

Cove                       1,439,385        47,000                                        1,718,133

Washington                   719,033         8,000                                          875,004

Fayette                    2,056,856        53,000     $1,815,992     $40,800               599,691

AHF                                                       444,240
                     -----------------------------------------------------------------------------------

Total                    $12,375,470      $723,111     $2,260,232     $40,800           $12,878,480
                     ===================================================================================
Construction in
  Progress                        $0                                                             $0
                     ==================                                             ====================
</TABLE>
<PAGE>

                           ASSISTED HOUSING FUND LP I
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                    (Continued) Year Ended December 31, 1998
                                    <TABLE>
<CAPTION>

     COLUMN A                    COLUMN E                                   COLUMN F      COLUMN G       COLUMN H     COLUMN I
---------------------------------------------------------------------------------------------------------------------------------
    Description        Gross Amount at Which Carried at End of Period      Accumulated     Date of       Date of       Life on
                                                                          Depreciation  Construction   Acquisition      Which
                                                                                                                     Depreciation
                                                                                                                      in Latest
                                                                                                                       Income
                                                                                                                      Statement
                                                                                                                     is Computed
---------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>         <C>            <C>           <C>            <C>           <C>           <C>          <C>

                     Land        Buildings       Land            Total
                                              Improvements
                                              and Personal
                                                Property
                     ------------------------------------------------------
Fairview             $ 55,413    $ 1,418,320    $  162,016    $ 1,635,749    $  556,979    13-Jun-90                  27.5/15/10

Ionia                $ 24,000        805,590       112,320        941,910       321,865    08-Aug-90                  27.5/15/10/7

Logan                $ 55,129      1,022,974       185,971      1,264,074       418,566    11-Jan-91                  27.5/15/10

Rolling Brook        $ 35,000        794,263       132,752        962,015       339,915    08-Mar-90                  27.5/15/10/7

Wexford              $ 22,000        815,821       129,101        966,922       348,758    21-Feb-90                  27.5/15/10

Blue Heron           $248,569      1,890,967        90,217      2,229,753       663,017    01-May-90                  27.5/10

Glenwood             $145,000      1,701,975        47,676      1,894,651       645,015    01-Apr-89                  27.5/10/7

Pacific Place        $ 30,000        943,619        21,532        995,151       351,990    01-May-89                  27.5/10/7

Cove                 $ 47,000      1,635,278        82,855      1,765,133       589,757    01-Mar-90                  27.5/10/7

Washington           $  8,000        836,929        38,075        883,004       301,113    01-Jan-90                  27.5/10

Fayette              $ 53,000      2,341,984       114,499      2,509,483       859,513    01-Dec-89                  27.5/15/10/7

AHF                  $      0        444,240                      444,240       144,207                  Various
                     ------------------------------------------------------------------
Total                $723,111    $14,651,960    $1,117,014    $16,492,085    $5,540,695
                     ====================================================================
Construction in
  Progress                                                              0
                                                            ==============
</TABLE>
<PAGE>

                           ASSISTED HOUSING FUND LP I
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                    (Continued) Year Ended December 31, 1998


<TABLE>
<CAPTION>


                                                  Year Ended                 Year Ended                 Year Ended
REAL ESTATE                                    December 31, 1996        December 31, 1997        December 31, 1998
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>            <C>        <C>           <C>        <C>
Balance at beginning of period                          $16,410,747               $16,434,240              $16,450,047
  Additions during period:
    Property acquisitions                   $     0                     $     0                  $     0
    Acquisitions through foreclosure              0                           0                        0
    Other acquisitions                            0                           0                        0
    Improvements etc. (New Construction)     23,493                      15,807                   42,038
       Other (Acquisition Cost)                   0                           0                        0
                                            ---------------------------------------------------------------------------
                                                       $16,434,240                 $16,450,047              $16,492,085
    Deductions during period:
       Cost of real estate sold             $     0                     $     0                  $     0
       Other (describe)                           0              0            0              0         0              0
                                            ---------------------------------------------------------------------------
    Balance at close of period                         $16,434,240                 $16,450,047              $16,492,085
                                                       ===========                 ===========              ===========
</TABLE>

<TABLE>
<CAPTION>
                                                  Year Ended                 Year Ended                 Year Ended
ACCUMULATED DEPRECIATION                       December 31, 1996         December 31, 1997          December 31, 1998
----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>        <C>              <C>        <C>           <C>        <C>
Balance at beginning of period                         $3,642,593                  $4,273,541               $4,905,719

  Existing property:                                      630,948                     632,178                  634,977
  Depreciation on additions:
    Property acquisitions                   $    0                      $0                       $0
    Acquisitions through foreclosure             0                       0                        0
    Other acquisitions                           0                       0                        0
    Improvements etc. (New Construction)         0                       0                        0
    Other (Acquisition Costs)                    0                       0                        0
                                            --------------------------------------------------------------------------
                                                       $4,273,541                  $4,905,719               $5,540,696
  Depreciation on deductions:
    Cost of real estate sold                $    0                      $0                       $0
    Other (describe)                             0              0        0                  0     0                  0
                                            --------------------------------------------------------------------------
Balance at close of period                             $4,273,541                  $4,905,719               $5,540,696
                                                       ==========                  ==========               ==========
</TABLE>
<PAGE>

Exhibit                                             Incorporated by
No.                                                 Reference From

 3       Certificate of Limited Partnership         Exhibit C to Form S-11
                             Registration Statement
                                 No. 91-1391150

13       Annual Report to Security Holders          Attached hereto
<PAGE>


                          ASSISTED HOUSING FUND L.P. I
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                                       AND
                          INDEPENDENT AUDITOR'S REPORT

                        FOR THE YEARS ENDED DECEMBER 31,
                               1998, 1997 AND 1996


<PAGE>


                                    CONTENTS

                                                                         Page


INDEPENDENT AUDITOR'S REPORT.......................................      1

FINANCIAL STATEMENTS:

Consolidated Balance Sheets........................................      2

Consolidated Statements of Operations..............................      3

Consolidated Statements of Partners' Equity (Deficit)..............      4

Consolidated Statements of Cash Flows..............................      5

Notes to Financial Statements.......................................    6-12
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


Partners
Assisted Housing Fund L.P. I
Seattle, Washington

We have audited the accompanying consolidated balance sheets of Assisted Housing
Fund L.P. I and its  subsidiaries,  as of December  31,  1998 and 1997,  and the
related  consolidated  statements of operations,  partners' equity (deficit) and
cash flows for the years ended December 31, 1998, 1997 and 1996. These financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards  require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Assisted Housing
Fund L.P. I and its  subsidiaries,  as of December  31,  1998 and 1997,  and the
results of their  operations  and cash flows for the years  ended  December  31,
1998,  1997  and  1996,  in  conformity  with  generally   accepted   accounting
principles.




Blume Loveridge & Co., PLLC
Bellevue, Washington
March 23, 1999

<PAGE>
                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                     December 31,
                                             1998                   1997

                                     ASSETS

<S>                                          <C>                    <C>

Rental property and equipment, at cost:
    Buildings and equipment                  $15,768,974           $15,726,936
    Accumulated depreciation                  (5,540,696)           (4,905,719)
                                              -----------           -----------
                                              10,228,278             10,821,217
    Land                                         723,111                723,111
                                              -----------           -----------
                                              10,951,389             11,544,328

Cash:
    Rental operation                             150,756                150,694
    Partnership                                   13,276                  8,195
                                             -----------            -----------
                                                 164,032                158,889

Restricted deposits:
    Tenant trust - security deposits             108,063                103,562
    Reserve accounts                             678,773                644,775
                                             -----------            -----------
                                                 786,836                748,337

Other assets:
    Accounts receivable                           33,715                 36,968
    Accounts receivable - DGP's                    5,671                  4,854
    Prepaid expenses                               7,767                 21,500
                                             -----------            -----------
                                                  47,153                 63,322
                                             -----------            -----------

                                             $11,949,410            $12,514,876
                                             ===========             ===========

</TABLE>




                             Continued on page 2A.

                                     Page 2 
                             
<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS - (CONTINUED)

<TABLE>
<CAPTION>

                                                     December 31,
                                             1998                   1997

                   LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
<S>                                          <C>                    <C>

Liabilities:
    Mortgage notes payable                   $12,348,628            $12,375,470
    Assessment payable                            47,998                 54,855
    Accounts payable                             251,672                260,661
    Due to affiliates                            609,100                577,665
    Accrued liabilities                          107,926                135,852
    Security deposits payable                    106,620                106,172
                                             -----------            -----------
                                              13,471,944             13,510,675

Minority interests in property
   partnerships                                  493,946                519,852

Contingency

Partners' equity (deficit):
    Limited partners                          (1,964,910)            (1,469,287)
    General partner                              (51,370)               (46,364)
                                             -----------            -----------
                                              (2,016,280)            (1,515,651)
                                             -----------            -----------

                                             $11,949,410            $12,514,876
                                             ===========            ===========

</TABLE>
















                 See accompanying notes to financial statements.
                                     Page 2A
<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                         Years Ended December 31,
                                      1998             1997             1996
<S>                                <C>              <C>              <C>
Revenue:
    Rent                           $1,505,575       $1,448,422       $1,415,977
    Miscellaneous                      73,344           84,211           88,400
                                   ----------       ----------       ----------
                                    1,578,919        1,532,633        1,504,377

Expenses:
    Operating and maintenance         235,793          222,944          208,657
    Utilities                         243,754          257,935          254,135
    General and administrative        359,323          344,847          347,471
    Taxes and insurance               270,871          264,774          251,468
    Interest                          319,192          329,756          336,895
    Depreciation                      634,977          632,178          630,948
                                   ----------       ----------       ----------
                                    2,063,910        2,052,434        2,029,574
                                   ----------       ----------       ----------

                                     (484,991)        (519,801)        (525,197)

Other revenues (expenses):
    Interest earned on
       partnership cash                    92             253              280
    Minority interest
       in operations                   26,022           26,384           26,435
    Accounting and auditing           (22,690)         (25,726)         (22,226)
    General and administrative        (13,685)         (10,991)         (18,081)
    Partnership management fees            -                -           (74,517)
    Incentive management fees          (2,434)          (3,329)          (3,952)
    Miscellaneous                      (2,943)          (2,141)          (1,450)
                                   ----------       ----------       ----------
                                      (15,638)         (15,550)         (93,511)
                                   ----------       ----------       ----------

       Net income (loss)           $ (500,629)      $ (535,351)      $ (618,708)
                                   ==========       ==========       ==========

       Net income (loss) per
         unit of limited
         partnership interest      $     (705)      $     (754)      $     (871)
                                   ==========       ==========       ==========
</TABLE>










                 See accompanying notes to financial statements.
                                     Page 3

<PAGE>

                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

                  Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                   Limited          General
                                   Partners         Partner         Total
<S>                                <C>              <C>             <C>

Profit/loss percentage               99.0%             1.0%          100.0%
                                   ===========      ========        =========

Balance - January 1, 1996          $  (326,769)      (34,823)          (361,592)

Net income (loss) for 1996            (612,521)       (6,187)          (618,708)
                                   -----------      --------        -----------

Balance - December 31, 1996           (939,290)      (41,010)          (980,300)

Net income (loss) for 1997            (529,997)       (5,354)          (535,351)
                                   -----------      --------        -----------

Balance - December 31, 1997         (1,469,287)      (46,364)        (1,515,651)

Net income (loss) for 1998            (495,623)       (5,006)          (500,629)
                                   -----------      --------        -----------
Balance - December 31, 1998        $(1,964,910)     $(51,370)       $(2,016,280)
                                   ===========      ========        ===========

</TABLE>



























                 See accompanying notes to financial statements.
                                     Page 4

<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           Increase (Decrease) in Cash

<TABLE>
<CAPTION>

                                            Years Ended December 31,
                                        1998          1997          1996
<S>                                     <C>           <C>           <C>
Cash flows from operating activities:
    Net income (loss)                   $(500,629)     $(535,351)    $(618,708)
    Adjustments to reconcile net
        income (loss) to net cash
        provided by operating
        activities:
    Depreciation                          634,977        632,178       630,948
    Minority interests in
        operations                        (26,022)       (26,384)      (26,435)
    Changes in certain assets
        and liabilities:
      Accounts receivable                   2,436        (12,953)        8,082
      Prepaid expenses                     13,733          5,580       (16,402)
      Accounts payable                     (8,989)           515        19,375
      Accrued liabilities                 (27,926)        60,365        (2,797)
      Due to affiliates                    31,435         23,131        62,542
      Security deposits                    (4,053)         4,580        (1,030)
                                        ---------      ---------     ---------

    Net cash provided by
        operating activities              114,962        151,661        55,575

Cash flows from investing activities:
    Purchase of depreciable
      property                            (42,038)       (15,807)      (23,493)
    Deposits to reserve accounts         (158,018)      (132,444)     (140,217)
    Withdrawals from
      reserve accounts                    124,020         40,415       115,969
                                         --------       --------     ---------

    Net cash provided (used) by
           investing activities           (76,036)      (107,836)      (47,741)
</TABLE>





                              Continued on page 5A.

                                     Page 5
<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
                           Increase (Decrease) in Cash
<TABLE>
<CAPTION>


                                        Years Ended December 31,
                                    1998          1997          1996
<S>                                 <C>           <C>           <C>

Cash flows from financing activities:
    Minority partners' capital
          contributions             $     (84)     $   (117)     $   (156)
    Mortgage principal payments       (26,842)      (24,280)      (22,638)
    Assessment principal payments      (6,857)       (6,857)       (6,857)
                                     --------      --------       -------

    Net cash provided (used) by
          financing activities        (33,783)      (31,254)      (29,651)
                                     --------      --------      --------

    Net increase (decrease)
          in cash                       5,143        12,571       (21,817)

    Cash - beginning of year          158,889       146,318       168,135
                                     --------      --------      --------

    Cash - end of year               $164,032      $158,889      $146,318
                                     ========      ========      ========


Supplemental disclosure of cash flow information:

    Cash paid for interest           $319,363      $327,080      $340,001
                                     ========      ========      ========


</TABLE>

















                 See accompanying notes to financial statements.
                                     Page 5A


<PAGE>
                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES

General
Assisted Housing Fund L.P. I (the  Partnership) is a limited  partnership  which
was  organized  November  2, 1987 under the laws of the state of  Washington  to
acquire  limited  partnership  interests  in other  partnerships  (the  Property
Partnerships), each of which has been organized to develop or purchase a low- or
moderate-income  apartment project. The Partnership's general partner is Murphey
Favre Properties,  Inc. (MFP), a wholly-owned subsidiary of WM Financial,  Inc.,
which  is  a  wholly-owned   subsidiary  of  Washington  Mutual  Bank  (WMB),  a
wholly-owned  subsidiary of Washington Mutual, Inc. As of December 31, 1998, 332
limited   partners  held  the  703  units  of  limited   partnership   interests
outstanding.

The   Partnership   has  invested  as  a  limited  partner  in  eleven  Property
Partnerships.  The  developer of each  apartment  project  serves as the general
partner (DGP) of the respective Property Partnership.

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

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

During the years ended December 31, 1998, 1997 and 1996, rental revenue from RHS
totaled  $451,730,  $435,076,  and $408,796,  representing  28.6  percent,  28.4
percent and 27.2 percent of total revenue, respectively.


                                     Page 6


<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES - 
         (CONTINUED)

Principles of Consolidation
The financial statements include the financial statements of the Partnership and
the following eleven Property Partnerships 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 a  consolidated  basis because the
Partnership holds  approximately 99 percent of the profit and loss interests and
approximately 55 percent of the equity  interests in each Property  Partnership.
Through  an  affiliate,  who is a  special  limited  partner  in  each of the 11
Property  Partnerships,  the Partnership controls certain fundamental  decisions
affecting  the  operation  of  the  Property  Partnerships.   These  fundamental
decisions  include  significant  purchases  of assets,  material  borrowings  or
creation  of  liens  on  the  underlying  properties,   entering  into  material
contracts,  making tax elections and any act that would cause termination of the
Property Partnership.  All material  interpartnership  transactions and balances
have been eliminated.  For the years ended December 31, 1998, 1997 and 1996, net
losses  allocable to the minority  partners were  $26,002,  $26,384 and $26,435,
respectively.






                                     Page 7
<PAGE>

                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES - 
         (CONTINUED)

Method of Accounting
The accrual method of accounting is used for financial statement purposes.

Cost Overruns
The partnership  agreements for the Property  Partnerships required the DGP's to
fund cost  overruns  on the  development  of  the apartment projects.  Such cost
overruns,  totaling  $589,462,  have been  recorded  as  minority  interests  in
property  partnerships  and have been  included in  the cost basis of the rental
property.  All depreciation  related thereto has been specially allocated to the
respective DGP's.

Depreciation
Depreciation   is  computed  for   financial   statement   purposes   using  the
straight-line  method over the estimated  useful lives of the related  assets as
follows:

       Building shell and components.............. 27.5 years
       Land improvements...... ..................... 15 years
       Appliances............................... 7 - 10 years
       Carpets and draperies.................... 7 - 10 years

Income Taxes
No income tax  provision has been  included in the  financial  statements  since
income or loss of a  Partnership  is required  to be reported by the  respective
partners on their income tax returns.

Cash Equivalents
For  purposes  of the  statement  of  cash  flows,  all  investment  instruments
purchased  with a maturity  of three  months or less are  considered  to be cash
equivalents. At December 31, 1998 and 1997, there were no cash equivalents.

Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.










                                     Page 8


<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - TRANSACTIONS WITH AFFILIATES

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

                                         Years Ended December 31,
                                    1998          1997           1996

Murphey Favre Properties, Inc. -
    Partnership services fee       $  7,500       $  7,500       $  7,500
Partnership administration              -              -           44,710
Developer general partners
        and affiliates -
    Property management fees        124,027       121,887         119,365

As of December  31,  1998 and 1997,  related  party  payables  consisted  of the
following:

                                                1998               1997

         Advances from DGP's                  $201,784           $201,784
         Partnership management fees           326,726            326,726
         Partnership services fees              30,000             22,500
         Advances from general partner          50,590             26,655

                                              $609,100           $577,665

During  1998  and  1997,  the  general partner  advanced  $23,935  and  $15,631,
respectively, to the Partnership for administrative expenses.

The Partnership maintains deposits in certain of WMB's interest-bearing accounts
which  aggregated  $13,276  and  $8,195  and at  December  31,  1998  and  1997,
respectively. Interest earned on such deposits totaled $92, $253 and $280 during
the years ended December 31, 1998, 1997 and 1996, respectively.

Terms of the RHS Loan  Agreements  require  each  DGP to  provide  interest-free
advances of  stipulated  amounts as initial  operating  capital to the  Property
Partnerships.  Due to affiliates  includes $152,107 of such advances at December
31, 1998 and 1997. In addition,  these balances  include DGP advances of $35,468
for land improvements and $14,209 to fund operating  deficits.  The remainder of
the balances include property management fees and reimbursements  payable to MFP
for partnership services and administration.







                                     Page 9


<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - TRANSACTIONS WITH AFFILIATES - (CONTINUED)

Advances  from the DGPs may only be repaid from the  proceeds of future sales of
the  respective  properties.  Property  management  fees are paid out of  rental
operations.  Partnership  fees and services are payable from future sales of the
properties,  to the  extent  they  are not paid  from  distributions  of  rental
operation cash (Note 6).

Under the  terms of  management  services  agreements,  affiliates  of the DGP's
provide management  services for the rental properties and receive  compensation
for such services in amounts approximating 8.5% of rental receipts.

NOTE 3 - CASH IN RESERVE ACCOUNTS 
The  Loan  Agreements  between the  Property  Partnerships  and RHS  require the
Property  Partnerships  to  deposit  $126, 889 annually  into  separate  reserve
accounts until the reserve accounts reach $1,268,211.  Subject to RHS  approval,
these  funds  may be used  for  various purposes,  as further  described  in the
Loan  Agreements.  All of the Property Partnerships  are in compliance  with the
minimum  funding requirements  as set forth by RHS for the year  ended  December
31,  1998  and  nine  of the  eleven  Property  Partnerships for  the year ended
December 31, 1997. The reserve account balances  for the  Property  Partnerships
that did not  meet the annual  funding requirements  during  1997 did,  however,
exceed the  required  balances  as of December  31,  1997, as a result of excess
deposits made in prior years.  All withdrawals were approved by RHS and used for
their intended purposes.

NOTE 4 - MORTGAGE NOTES PAYABLE

The mortgage notes are payable to RHS in monthly installments  totaling $26,550.
In  accordance  with  provisions  of Interest  Credit  Agreements,  RHS provides
monthly interest credits totaling $69,199 which reduce the interest rates stated
in the  mortgage  notes to  effective  rates of 1 percent  over the lives of the
mortgages.  Amortization  of  principal is based on the stated rates of 8.75% to
10.75%  under RHS's  Predetermined  Amortization  Schedule  System  (PASS).  The
mortgage notes mature May, 2039 through January, 2040.  Substantially all of the
rental  property and  equipment is pledged as collateral  on the  mortgages.  No
partner is personally liable on the mortgage notes.





                                    Page 10
<PAGE>


                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - MORTGAGE NOTES PAYABLE (CONTINUED)

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

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

                           Year                            Amounts

                           1999                            $    29,360
                           2000                                 32,115
                           2001                                 35,129
                           2002                                 38,422
                           2003                                 42,029
                           2004 and later years             12,171,573

                                                           $12,348,628

NOTE 5 - ASSESSMENT PAYABLE

In September,  1995, the city of Bainbridge Island issued an assessment for Blue
Heron's share of street and utility  improvements in the amount of $68,569.  The
assessment is payable in 10 equal annual installments  together with interest at
the rate of 5.6 percent.  At December 31, 1998, the fair value of the assessment
approximates the amount recorded in the financial statements.

Principal payments on the assessment for the next 5 years are as follows:

                           Year                            Amount

                           1999                            $ 6,857
                           2000                              6,857
                           2001                              6,857
                           2002                              6,857
                           2003                              6,857
                           2004 and later years             13,713

                                                           $47,998

                                    Page 11


<PAGE>



                  ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - RENTAL OPERATION CASH

RHS regulations  limit the distribution of rental operation cash to a maximum of
$38,090 annually. Any distribution to the Partnership from rental operation cash
is to be made in accordance with the respective partnership agreements.  Whether
or not a Property  Partnership  makes any limited  distribution  is based on the
results of its own operations and is at the discretion of the DGP.

NOTE 7 - GUARANTEES

Each of the DGP's has made a guarantee to the  respective  Property  Partnership
that they will  compensate the  Partnership  in the event the actual  low-income
housing  tax  credit is less than 85% to 90% of the  available  credit.  Through
December 31, 1998, no payments have been made under these guarantee agreements.

NOTE 8 - CONTINGENCY

The Partnership has ceased accrual of the annual partnership administration fee,
payable in part to the  general  partner.  Management  has  determined  that the
source of payment,  a future sale or  refinance  of one or more of the  Property
Partnerships,  may not be  sufficient  to pay  fees  accrued  in  excess  of the
$544,540 payable at December 31, 1996.  Management has elected to treat fees for
years  subsequent  to  1996  as  a  contingent  liability.  At December 31, 1998
and 1997 the  contingent liability for  partnership administration  fees totaled
$149,034 and $74,517, respectively.





                                    Page 12



<PAGE>