**FORM 10-Q**

 

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

| **ý****  QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------------------------------------------------------------------------------------------------------------------|
|                                                                                                               |
| **For the quarter ended September 30, 2003**                                                                  |
|                                                                                                               |
| **Commission file number 33-18756**                                                                                |

 

**ASSISTED HOUSING FUND L.P.I**

(Exact nameof 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 toSection 12(b) of the Act:  **None**

 

Securities registered pursuant toSection 12(g) of the Act:

 

**Units of Limited Partnership Interest**

(Title ofclass)

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  ý  No  o

 

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Part I.  Financial Information

 

Item 1. Financial Statements

 

**ASSISTEDHOUSING FUND L.P. I AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(Unaudited)**

 
|                                             |   | **September 30,  2003** |       | **December 31,  2002** |   |
|--------------------------------------------------|--------|------------------------------|------------|-----------------------------|--------|
| **ASSETS**                                       |   |                         |       |                        |   |
|                                             |   |                         |       |                        |   |
| Rental property  and equipment, at cost:         |   |                         |       |                        |   |
| Buildings and  equipment                         |   | $                            | 16,036,506 |                        | $      | 16,018,401 |   |
| Accumulated  depreciation                        |   | (8,361,375                   | )          | (7,959,382                  | )      |
|                                             |   | 7,675,131                    |       | 8,059,019                   |   |
| Land                                             |   | 723,111                      |       | 723,111                     |   |
|                                             |   | 8,398,242                    |       | 8,782,130                   |   |
|                                             |   |                         |       |                        |   |
| Cash:                                            |   |                         |       |                        |   |
| Rental  operation                                |   | 130,663                      |       | 138,910                     |   |
| Partnership                                      |   | 12,639                       |       | 27,368                      |   |
|                                             |   | 143,302                      |       | 166,278                     |   |
|                                             |   |                         |       |                        |   |
| Restricted  deposits:                            |   |                         |       |                        |   |
| Tenant trust -  security deposits                |   | 116,765                      |       | 119,646                     |   |
| Reserve  accounts                                |   | 580,725                      |       | 651,193                     |   |
|                                             |   | 697,490                      |       | 770,839                     |   |
|                                             |   |                         |       |                        |   |
| Other assets:                                    |   |                         |       |                        |   |
| Accounts  receivable                             |   | 39,739                       |       | 39,779                      |   |
| Accounts  receivable - DGPs                      |   | 24,079                       |       | 24,079                      |   |
| Prepaid  expenses                                |   | 32,536                       |       | 19,115                      |   |
|                                             |   | 96,354                       |       | 82,973                      |   |
|                                             |   |                         |       |                        |   |
| **TOTAL ASSETS**                                 |   | $                            | 9,335,388  |                        | $      | 9,802,220 |   |
|                                             |   |                         |       |                        |   |
| **LIABILITIES**                                  |   |                         |       |                        |   |
| Mortgage notes  payable                          |   | $                            | 12,226,526 |                        | $      | 12,257,788 |   |
| Accounts  payable                                |   | 246,049                      |       | 259,338                     |   |
| Due to  affiliates                               |   | 796,635                      |       | 740,768                     |   |
| Accrued liabilities                              |   | 134,696                      |       | 111,491                     |   |
| Security  deposits payable                       |   | 119,194                      |       | 120,483                     |   |
| **TOTAL LIABILITIES**                            |   | 13,523,100                   |       | 13,489,868                  |   |
|                                             |   |                         |       |                        |   |
| Minority  interests in property partnerships     |   | 365,711                      |       | 388,449                     |   |
|                                             |   |                         |       |                        |   |
| **PARTNERS’ DEFICIT**                       |   |                         |       |                        |   |
| Limited  partners                                |   | (4,476,681                   | )          | (4,004,129                  | )      |
| General partner                                  |   | (76,742                      | )          | (71,968                     | )      |
|                                             |   | (4,553,423                   | )          | (4,076,097                  | )      |
| **TOTAL LIABILITIES AND PARTNERS’ DEFICIT** |   | $                            | 9,335,388  |                        | $      | 9,802,220 |   |

 

See Accompanying Notes to Consolidated Financial Statements.

 

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**ASSISTEDHOUSING FUND L.P. I AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)**

 
|                                                                  |   | **Three Months Ended  September 30,** |     | **Nine Months Ended  September 30,** |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------|----------|-------------------------------------------|--------|
|                                                                  |   | **2003**                                   |     | **2002**                                  |   | **2003** |   | **2002** |   |
| **Revenue:**                                                          |   |                                       |     |                                      |   |   |   |   |   |
| Rent                                                                  |   | $                                          | 424,818  |                                      | $      | 412,096 |   | $ | 1,305,460 |   | $ | 1,252,520 |   |
| Miscellaneous                                                         |   | 16,935                                     |     | 17,748                                    |   | 45,623 |   | 51,355 |   |
|                                                                  |   | 441,753                                    |     | 429,844                                   |   | 1,351,083 |   | 1,303,875 |   |
| **Rental operating expenses:**                                        |   |                                       |     |                                      |   |   |   |   |   |
| Repairs and  maintenance                                              |   | 104,321                                    |     | 102,037                                   |   | 307,319 |   | 278,200 |   |
| Utilities                                                             |   | 80,918                                     |     | 69,630                                    |   | 252,070 |   | 231,752 |   |
| General and  operating                                                |   | 93,882                                     |     | 94,764                                    |   | 314,947 |   | 321,057 |   |
| Taxes and  insurance                                                  |   | 94,640                                     |     | 91,973                                    |   | 271,193 |   | 270,764 |   |
| Interest                                                              |   | 74,181                                     |     | 65,953                                    |   | 232,902 |   | 210,473 |   |
| Depreciation                                                          |   | 139,904                                    |     | 137,839                                   |   | 401,993 |   | 410,953 |   |
|                                                                  |   | 587,846                                    |     | 562,196                                   |   | 1,780,424 |   | 1,723,199 |   |
| **Loss from rental operations**                                       |   | (146,093                                   | )        | (132,352                                  | )      | (429,341 | ) | (419,324 | ) |
|                                                                  |   |                                       |     |                                      |   |   |   |   |   |
| **Other income (expense):**                                           |   |                                       |     |                                      |   |   |   |   |   |
| Interest earned  on partnership cash                                  |   | 17                                         |     | 22                                        |   | 56 |   | 77 |   |
| Minority interest  in operations                                      |   | 6,746                                      |     | 6,605                                     |   | 20,143 |   | 20,047 |   |
| General and  administrative                                           |   | (8,009                                     | )        | (3,028                                    | )      | (68,184 | ) | (42,238 | ) |
|                                                                  |   | (1,246                                     | )        | 3,599                                     |   | (47,985 | ) | (22,114 | ) |
|                                                                  |   |                                       |     |                                      |   |   |   |   |   |
| **Net loss**                                                          |   | $                                          | (147,339 | )                                         | $      | (128,753 | ) | $ | (477,326 | ) | $ | (441,438 | ) |
|                                                                  |   |                                       |     |                                      |   |   |   |   |   |
| Net loss per  unit of limited partnership interest   (703 units) |   | $                                          | (210     | )                                         | $      | (183 | ) | $ | (679 | ) | $ | (628 | ) |

 

See Accompanying Notes to Consolidated Financial Statements.

 

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**ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)**

 
|                                                                                       |   | **Nine Months Ended  September 30,** |     |
|--------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                                       |   | **2003**                                  |     | **2002** |   |
|                                                                                       |   |                                      |     |   |   |
| **Cash flows from operating activities:**                                                  |   |                                      |     |   |   |
| Net loss                                                                                   |   | $                                         | (477,326 | ) | $ | (441,438 | ) |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities: |   |                                      |     |   |   |
| Depreciation                                                                               |   | 401,993                                   |     | 410,953 |   |
| Minority  interests in operations                                                          |   | (22,738                                   | )        | (20,104 | ) |
| Changes in  certain assets and liabilities:                                                |   |                                      |     |   |   |
| Accounts  receivable                                                                       |   | 40                                        |     | (9,601 | ) |
| Prepaid  expenses                                                                          |   | (13,421                                   | )        | (13,025 | ) |
| Accounts  payable                                                                          |   | (13,289                                   | )        | (5,949 | ) |
| Due to  affiliates                                                                         |   | 55,867                                    |     | 53,908 |   |
| Accrued  liabilities                                                                       |   | 23,205                                    |     | 7,417 |   |
| Tenant security  deposits                                                                  |   | 1,592                                     |     | 2,839 |   |
|                                                                                       |   |                                      |     |   |   |
| Net cash used  in operating activities                                                     |   | (44,077                                   | )        | (15,000 | ) |
|                                                                                       |   |                                      |     |   |   |
| **Cash flows from investing activities:**                                                  |   |                                      |     |   |   |
| Purchase of  depreciable property                                                          |   | (18,105                                   | )        | (60,598 | ) |
| Net decrease in  reserve accounts deposits                                                 |   | 70,468                                    |     | 65,971 |   |
|                                                                                       |   |                                      |     |   |   |
| Net cash  provided by investing activities                                                 |   | 52,363                                    |     | 5,373 |   |
|                                                                                       |   |                                      |     |   |   |
| **Cash flows from financing activities:**                                                  |   |                                      |     |   |   |
| Mortgage  principal payments                                                               |   | (31,262                                   | )        | (28,388 | ) |
|                                                                                       |   |                                      |     |   |   |
| Net cash used  in financing activities                                                     |   | (31,262                                   | )        | (28,388 | ) |
|                                                                                       |   |                                      |     |   |   |
| Net decrease in  cash                                                                      |   | (22,976                                   | )        | (38,015 | ) |
| Cash -  beginning of year                                                                  |   | 166,278                                   |     | 199,668 |   |
|                                                                                       |   |                                      |     |   |   |
| Cash - end of  period                                                                      |   | $                                         | 143,302  |   | $ | 161,653 |   |
|                                                                                       |   |                                      |     |   |   |
| Supplemental  disclosure of cash flow information:                                         |   |                                      |     |   |   |
| Cash paid for  interest                                                                    |   | $                                         | 232,902  |   | $ | 210,473 |   |

 

See Accompanying Notes to Consolidated Financial Statements.

 

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**ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

 

**Note 1: Accounting Policies**

** **

*Basis ofPresentation*

 

The accompanyingConsolidated Financial Statements are unaudited and include the accounts ofAssisted Housing Fund L.P. I (the Investor Partnership).  The Investor Partnership’s accounting andfinancial reporting policies are in accordance with accounting principlesgenerally accepted in the United States of America.  The information furnished in these interim statements reflectsall adjustments that are, in the opinion of management, necessary for a fairstatement of the results for the periods presented.  Such adjustments are of a normal recurring nature unlessotherwise disclosed in this Form 10-Q.  The results of operations in the interim statements are notnecessarily indicative of the results that may be expected for the fullyear.  The interim financial informationshould be read in conjunction with Assisted Housing Fund L.P. I’s 2002 AnnualReport on Form 10-K.  Certain priorperiod amounts have been reclassified to conform to current periodclassifications.

 

**Note 2: Transactions withAffiliates**

** **

In connection with theacquisition and development of rental property and the management of both the rentalproperty and the Investor Partnership, the Investor Partnership and PropertyPartnerships, as defined in Critical Accounting Policies, have paid or accruedthe following amounts to certain affiliates:

 
|                                                                              |   | **Nine  Months Ended  September 30, 2003** |   | **Nine Months  Ended  September 30, 2002** |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|-------------------------------------------------|--------|
| Murphey  Favre Properties (MFP) – partnership service fees                   |   | $                                               | 5,625  |                                            | $      | 5,625 |   |
|                                                                              |   |                                            |   |                                            |   |
| Developer  General Partners (DGPs) and affiliates – property management fees |   | $                                               | 73,738 |                                            | $      | 64,711 |   |

 

Property management fees arepaid out of rental operations. Partnership service fees are payable from future sales of theproperties, to the extent they are not paid from distributions of rentaloperation cash.

 

Under terms of themanagement service agreements, seven of the eleven Property Partnerships haveaffiliates of the DGPs which provide property management services for therental properties.  These affiliatesreceive compensation for services in amounts approximating 8.8% of rentalreceipts.  Three of the rentalproperties are co-managed by affiliates of their DGPs.  These affiliates receive compensation forthe services provided in amounts approximating 2.1% of rental receipts.

 

As of September 30, 2003and December 31, 2002, related party payables consisted of the following:

 
|                               |   | **September 30, 2003** |        | **December 31, 2002** |       |
|------------------------------------|--------|-----------------------------|-------------|----------------------------|------------|
| **Advances from DGPs**             |   | **$**                       | **201,784** | ** **                 | **$**      | **201,784** | ** ** |
| **Program management fees**        |   | **326,726**                 | ** **  | **326,726**                | ** ** |
| **Partnership services fees**      |   | **65,625**                  | ** **  | **60,000**                 | ** ** |
| **Advances from MFP**              |   | **201,525**                 | ** **  | **151,283**                | ** ** |
| **Advances from affiliate of DGP** |   | **975**                     | ** **  | **975**                    | ** ** |
| **Total Related Party Payables**   |   | **$**                       | **796,635** | ** **                 | **$**      | **740,768** | ** ** |

 

Advances from DGPs were  $201,784 at September 30, 2003 andDecember 31, 2002.  Terms of RuralHousing Services (RHS) loan agreements require each DGP to provide interest-freeadvances of stipulated amounts

 

5

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as initial operating capital to the Property Partnerships.  The balances at September 30, 2003 andDecember 31, 2002 include DGP interest-free advances of $152,107.  In addition, the balances include DGPadvances of $35,468 for land improvements and $14,209 to fund operatingdeficits.  Advances from the DGPs mayonly be repaid from the proceeds of future sales of the respective properties.

 

Program management fees dueto MFP of $326,726 represents amounts accrued through December 31,1996.  No accruals have been recordedsince that date.  Partnership servicesfees are also payable to MFP and reflect accruals through September 30,2003 and December 31, 2002. Partnership fees are payable from future salesof the properties, to the extent they are not paid from distributions of rentaloperation cash.

 

During the nine months endedSeptember 2003 and the full year 2002, MFP advanced $50,242 and $48,284,respectively, to the Investor Partnership for administrative expenses.  These advances brought the balances due toMFP at September 30, 2003 and December 31, 2002 to $201,525 and$151,283, respectively.

 

The Investor Partnershipmaintains deposits in checking and money market accounts which aggregated $12,639and $27,368 at September 30, 2003 and December 31, 2002,respectively.

 

**Note 3:Cash in Reserve Accounts**

 

The loan agreements betweenthe Property Partnerships and RHS require the Property Partnerships to depositinto separate reserve accounts, maintained as savings accounts, $127,196annually until the reserve accounts reach $1,271,277.  Subject to RHS approval, these funds may be used for specificpurposes.  During the nine months endedSeptember 30, 2003, RHS approved the withdrawal of reserve funds atseveral of the Property Partnerships which resulted in a net decrease of$70,468 in the restricted deposit reserve accounts.

 

**Note 4:Mortgage Notes Payable**

 

The mortgage notes arepayable to RHS in monthly installments totaling $26,959.  In accordance with the provisions of theInterest Credit Agreements, RHS provides monthly interest credits totaling$69,129, which reduce the interest rates stated in the mortgage notes toeffective rates of one percent, over the lives of the mortgages.  Amortization of principal is based on thestated rates of 8.75% to 10.75% under RHS’s Predetermined AmortizationSchedule System.  The mortgagenotes mature May, 2039 through March, 2040. Substantially all of the rental property and equipment is pledged ascollateral on the mortgages.  No partneris individually liable on the mortgage notes.

 

The mortgage notes areregulated by the U.S. Government; there is no public or private market for themortgage notes. Accordingly, management has determined that users of the financialstatements would derive no benefit from any estimate of fair value andperforming such an analysis would not be practicable.

 

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

 
| **Year**     |   | **Amount** |       |
|--------------|--------|------------|------------|
| **2003 (1)** |   | **$**      | **10,492** | ** ** |
| 2004         |   | 46,132     |       |   |
| 2005         |   | 50,465     |       |   |
| 2006         |   | 55,205     |       |   |
| 2007         |   | 60,392     |       |   |
| Thereafter   |   | 12,003,840 |       |   |
|         |   | $          | 12,226,526 |   |
|              |        |            |            |  |  |  |

 

----

(1) For the remaining 3 months

 

6

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**Note 5:Guarantees**

 

Each of the DGPs has made aguarantee to the respective Property Partnership that they will compensate theInvestor Partnership in the event the actual low-income housing tax credit isless than 85% to 90% of the available credit. Through September 30, 2003 no payments have been made under theseguarantees.

 

**Note 6:Contingencies and Subsequent Events**

 

The Investor Partnership hasceased accrual of the annual program management fee, payable in part to thegeneral partner.  Management hasdetermined that the source of payment, a future sale or refinance of one ormore of the Property Partnerships, may not be sufficient to pay fees accrued inexcess of the $544,540 payable at December 31, 1996.  As a consequence, management has elected totreat fees for years subsequent to 1996 as a contingent liability.  At September 30, 2003 andDecember 31, 2002, the contingent liability for program management feestotaled $447,102 and $372,585, respectively.

 

A DGP of Logan ApartmentsCompany Limited Partnership, a Property Partnership, did not comply with RHSregulations regarding the handling of project cash during 2001 and 2000.  As a result, RHS issued a Letter ofAcceleration on the mortgage note on August 29, 2001.  The mortgage note had a balance of $985,124on September 30, 2003.  This DGPfiled a Chapter 7 Petition in Bankruptcy on February 19, 2002.  MFP, on behalf of the Investor Partnership,filed a Complaint to Determine Dischargability of Debt and for Judgment onMay 31, 2002 and a Motion for Summary Judgment against the DGP onOctober 23, 2002.  On April 2,2003, the bankruptcy trustee drafted a motion to sell the DGP’s interest inLogan to Buckeye Community Hope Foundation (Buckeye), an Ohio non-profitorganization.  As a condition of thesale, the non-profit would restore or replenish the assets that were misappropriatedby the Logan DGP.  An Objection to theTrustee’s Motion was filed by the Investor Partnership on April 21, 2003.

 

After analysis of theTrustee’s Motion To Sell the DGP’s interest in Logan to Buckeye and the detailsof Buckeye’s offer to purchase the DGP’s interest in Logan, the InvestorPartnership withdrew its Objection to the Trustee’s Motion To Sell.  On September 23, 2003 (to be effectiveno earlier than October 3, 2003), the U.S. Bankruptcy Court (S.D. WV)signed an Order Granting Trustee’s Motion To Sell [Etc.] the DGP’s interest inLogan to Buckeye.  Upon completion ofthe sale (anticipated during the fourth quarter of 2003), Buckeye will become aDGP in Logan, and it will restore and replenish assets misappropriated by theformer DGP.

 

These contingencies andsubsequent events are described in greater detail in the Investor Partnership’s2002 Annual Report on Form 10-K in Note 8 to the Consolidated FinancialStatements - “Contingency and Subsequent Events” and “Part II – Other Information,Item 1. Legal Proceedings” of the Investor Partnership’s September 30,2003 on Form 10-Q.

 

**MANAGEMENT’SDISCUSSION AND ANALYSIS**

 

**Forward-Looking Statements**

 

This quarterly report andother documents that we file with the Securities and Exchange Commissioncontain forward-looking statements. Forward-looking statements can be identified by the fact that they donot relate strictly to historical or current facts.  They often include words such as “expects,” “anticipates,”“intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similarmeaning, or future or conditional verbs such as “will,” “would,” “should,”“could,” or “may.”

 

Forward-looking statementsprovide our expectations or predictions of future conditions, events orresults. They are not guarantees of future performance.  By their nature, forward-looking statementsare subject to risks and uncertainties. These statements speak only as of the date they are made.  We do not undertake to updateforward-looking statements to reflect the impact of circumstances or eventsthat arise after the date the forward-looking statements were made.  There are a number of factors, many of whichare beyond our control, which could cause actual conditions, events or resultsto differ significantly from those described in the forward-lookingstatements.  These factors include:

 

•                  Generalbusiness, economic and real estate conditions may significantly affect ourearnings;

 

7

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•                  Ourability to effectively manage or predict occupancy levels could adverselyaffect our earnings.

 

**Controlsand Procedures**

 

An evaluation was performedunder the supervision and with the participation of the Investor Partnership’smanagement, including the President and the Principal Accounting Officer of theGeneral Partner, of the effectiveness of the design and operation of theInvestor Partnership’s disclosure controls and procedures within 90 days beforethe filing date of this quarterly report. Based on that evaluation, the Investor Partnership’s management,including the President and the Principal Accounting Officer of the GeneralPartner, concluded that the disclosure controls and procedures wereeffective.  There have been nosignificant changes in the Investor Partnership’s internal controls or in otherfactors that could significantly affect internal controls subsequent to theirevaluation.

 

We intend to review andevaluate the design and effectiveness of our disclosure controls and procedureson an ongoing basis to improve our controls and procedures over time and tocorrect any deficiencies that we may discover in the future.  Our goal is to ensure that our seniormanagement has timely access to all material financial and non-financial informationconcerning our business.  While webelieve the present design of our disclosure controls and procedures iseffective to achieve our goal, future events affecting our business may causeus to modify our disclosure controls and procedures.

 

**CriticalAccounting Policies**

 

The preparation of financial statements in accordancewith accounting principles generally accepted in the United States of Americarequires management to make a number of judgments, estimates and assumptionsthat affect the reported amount of assets, liabilities, income and expenses inour Consolidated Financial Statements and accompanying notes.  We believe that the judgments, estimates andassumptions used in preparation of our Consolidated Financial Statements areappropriate given the factual circumstances as of September 30, 2003.

 

Principles of Consolidation:

 

The financial statements consolidate the financialstatements 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 LimitedPartnership (Ionia)

Logan Apartments Company Limited Partnership (Logan)

Rolling Brook II Limited Dividend Housing AssociationLimited Partnership (Rolling Brook)

Wexford Manor Limited Dividend Housing AssociationLimited 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 LimitedPartnership (Cove)

Washington Street Limited Dividend Housing AssociationLimited Partnership (Washington)

Fayette Hills Limited Partnership (Fayette).

 

The financial statements are presented on a consolidatedbasis because the Investor Partnership holds approximately 99 percent of theprofit and loss interests and approximately 55 percent of the equity interestsin each Property Partnership.  Throughan affiliate, who is a Special Limited Partner in each of the 11 PropertyPartnerships, the Investor Partnership controls certain fundamental decisionsaffecting the operation of the Property Partnerships.  These fundamental decisions include significant purchases ofassets, material borrowings or creation of liens on the underlying properties,entering into material contracts, making tax elections and any act that would

 

8

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cause termination of the Property Partnership.  All material inter-partnership transactionsand balances have been eliminated.  Netlosses allocable to the minority partners for the nine months endedSeptember 30, 2003 and the twelve months ended December 31, 2002 were$20,143 and $26,594, respectively.

 

The critical accounting policies are described ingreater detail in the Investor Partnership’s 2002 Annual Report on Form 10-K inNote 1 to the Consolidated Financial Statements - “Nature of Business andSummary of Significant Accounting Policies.”

 

**Results of Operations**

 

For the Investor Partnershipand its subsidiary Property Partnerships, the net loss increased $18,586 and$35,888, or (14%) and (8%) for the three and nine months endedSeptember 30, 2003, compared with the same periods in 2002.  For the three months endedSeptember 30, 2003, the net loss before depreciation was $7,435, comparedwith a net gain before depreciation of $9,086 for the three months endedSeptember 30, 2002 with depreciation expense of $139,904 and $137,839,respectively.  Net loss beforedepreciation was $75,333 and $30,485 for the nine months endedSeptember 30, 2003 and 2002, with depreciation expense of $401,993 and$410,953, respectively.

 

Total revenue of $441,753and $1,351,083 for the three and nine months ended September 30, 2003increased $11,909 and $47,208 compared with the same periods of 2002,respectively.  The year over yearrevenue increase was primarily due to rent level increases.  Overall operating expenses increasedslightly for the three and nine months ended September 30, 2003, ascompared with the same periods of 2002. Operating expenses increased primarily due to increased costs for repairand maintenance during the three and nine months ended September 30, 2003.  Loss from rental operations was $146,093 and$429,341 for the three and nine months ended September 30, 2003, comparedwith $132,352 and $419,324 for the three and nine months endedSeptember 30, 2002.

 

Non-operating expense of$1,246 increased $4,845 for the three months ended September 30, 2003,compared with non-operating income of $3,599 for the same period in 2002.  Non-operating expense increased $25,871 forthe nine months ended September 30, 2003 compared to the same period2002.  The year to date expensesincluded audit and accounting fees related to the Investor Partnership.  In 2002, audit and accounting expenses wererecorded in the second quarter. Additionally, in the first quarter of 2003, the Investor Partnershippaid approximately $7,500 related to audit fees for five of the PropertyPartnerships.  Previously additionalaudit procedures were done when the financial statements were consolidated atthe partnership level.  These particularProperty Partnerships, because of their small number of dwelling units, are notrequired by U.S. Department of Agriculture Rural Development Agency, throughits RHS, to have audited financial statements.   In support of the new reporting and controls requirements of theSarbanes-Oxley Act of 2002, the Investor Partnership now requires audited financialstatements for all Property Partnerships.

 

**Liquidity and Capital Resources**

 

The objective of liquiditymanagement is to ensure the Company has the continuing ability to maintain cashflows that are adequate to fund operations and meet obligations and othercommitments on a timely and cost-effective basis.  The principal source of liquidity is from the parent holdingcompany, Murphey Favre Properties, Inc.

 

At September 30, 2003,the Investor Partnership’s operating cash was $12,639 and the PropertyPartnerships’ operating cash totaled $130,663 for a combined total of$143,302.  At September 30, 2002,the cash balance of $161,653 included $31,688 in Investor Partnership cash and$129,965 in operating cash accounts of the Property Partnerships.

 

Net cash used in operatingactivities for the nine months ended September 30, 2003 totaled $44,077compared to $15,000 for the same period of 2002.  Achieving positive cash flows is an ongoing challenge for

 

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several of the Property Partnerships. For the nine months ended September 30, 2003, only four propertiesgenerated positive cash flow. For the seven that generated negative cash flow,the deficits were funded by authorized reserve account withdrawals.  The Investor Partnership is not required tofund additional amounts to the Property Partnerships based on each PropertyPartnership agreement.  Additionally,each Property Partnership is operated as an individual project and without anycontractual arrangements of any kind among the Property Partnerships.

 

At September 30, 2003,Logan Apartments Company Limited Partnership's (Logan’s) tenant securitydeposit account was underfunded by $3,897. Additionally, Logan was approximately $27,000 in arrears in property taxesat September 30, 2003.  While bothof these liquidity matters are violations of RHS regulations, RHS has taken noaction against Logan.  Further actionstaken by a Logan DGP in 2000 and 2001 that led to certain other violations ofRHS regulations are the subject of litigation and bankruptcy proceedings, morefully described in Part II. Item 1. Legal Proceedings.

 

**Market Risk Management**

 

The management of theInvestor Partnership does not believe that the operation of the InvestorPartnership and the Property Partnerships are materially affected by interestrates or other financial market risks at this time.  In the event of a proposed future sale of any of the PropertyPartnerships’ properties, mortgage interest rates and availability of financingto potential buyers may have an impact on the selling opportunity.

 

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**PARTII. OTHER INFORMATION**

 

Exceptfor the disclosures, set forth below, all items under Part II are inapplicableor have a negative response and are therefore omitted.

 

**Item 1. Legal Proceedings**

 

In2001 and 2000, Arthur H. Winer (Winer), a DGP of Logan, did not comply with RHSregulations in handling project cash. This non-compliance was reported to appropriate authorities in 2001.  Winer made multiple unauthorized withdrawalsof project cash totaling $9,000 and $15,079, for personal business. Further,project bank accounts, totaling $60,131 at December 31, 2002, were alsopledged.  As a result, RHS issued aLetter of Acceleration on August 29, 2001. RHS suspended further proceedingson October 11, 2001, based on preliminary agreements reached with Logan’sother DGPs and the Logan property management agent.

 

OnFebruary 19, 2002, Winer filed a Chapter 7 Petition in Bankruptcy in theU.S. Bankruptcy Court for the Southern District of West Virginia, inCharleston, WV, triggering the “automatic stay” under the Bankruptcy Code,which precluded all actions to collect Winer debts, absent approval of theBankruptcy Court, including the unauthorized withdrawals of project cash andpledging of project bank accounts mentioned above.  MFP, General Partner of the Investor Partnership, through outsidebankruptcy counsel, and on behalf of Logan, filed a creditor’s claim againstand also filed a Complaint to Determine Dischargeability of Debt and forJudgment to protect the claim for Logan debt from being dischargeable and toobtain a judgment against Winer for the amount of the creditor’s claim.  Winer filed an Answer to the Complaintcontesting its assertions.  The U.S.Trustee filed a Motion to Sell Personal Property Free and Clear of All Liensand Encumbrances and to Allow Expenses (Trustee’s Motion) seeking, in part, tosell Winer’s partnership interest in Logan, free of all liens and encumbrances,to Buckeye Community Hope Foundation, an Ohio non-profit corporation(Buckeye).  The Investor Partnershipinitially prepared and filed an Objection to the Trustee’s Motion, but asresult of further research and discussions, it will withdraw its Objection.  A hearing on the Trustee’s Motion was scheduledfor May 16, 2003, but was continued to August 15, 2003.

 

On September 23, 2003(to be effective no earlier than October 3, 2003), the U.S. BankruptcyCourt (S.D. WV) signed an Order Granting Trustee’s Motion To Sell [Etc.] theDGP’s interest in Logan to Buckeye. Upon completion of the sale (anticipated during the fourth quarter of2003), Buckeye will become a DGP in Logan and it will restore and replenishassets misappropriated by the former DGP (i.e., Winer).

 

TheInvestor Partnership also filed a Motion for Summary Judgment (SJ Motion)against Winer, which was later modified. A Response to the SJ Motion was filed by Winer (Response) contesting theSJ Motion.  A hearing date on the SJMotion has not yet been set by the Bankruptcy Court in WV.  Trial in the Adversary Proceeding waspreviously scheduled for April 11, 2003 but was continued indefinitelypending Court-mandated additional briefing (since filed) on issues arisingunder the SJ Motion and the Response.

 

The Investor Partnershipalso sent a demand letter to Thomas Runquist (Runquist) and Rural HousingCorporation (RHC), the other DGPs of Logan, requiring that Runquist and RHC,who are jointly liable for the actions of Winer, reimburse Logan for itsdamages and costs sustained as a result of Winer’s improper actions.  A written response to the demand letter wasreceived from counsel for Runquist and RHC, acknowledging the demand butdeclining to reimburse Logan for Winer’s improper actions.  The Investor Partnership will reply to theRunquist/RHCresponseletter based on the results of the hearing on the Trustee’s Motion.

 

We believe the claims by AHFand MFP are meritorious and that the cash balances of Logan will be restored asa result of these claims.  However,litigation and legal disputes are inherently uncertain.  We cannot guarantee that AHF or MFP willprevail in their efforts, if the cash balances of the Logan property will berestored or if any cash will be recovered. Any cash shortfalls at Logan that will require replenishment by the InvestorPartnership will have an adverse effect on its financial position.

 

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Item 6.   Exhibits and Reportson Form 8-K

 

a.)                                   Exhibits.

 

**INDEX OFEXHIBITS**

 
| **Exhibit No.** |   | **Description**                                                                                                                                             |
|-----------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                        |
| 31(a)           |   | Certification  of the President of the General Partner Pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 (filed herewith).                    |
|            |   |                                                                                                                                                        |
| 31(b)           |   | Certification  of the Principal Accounting Officer of the General Partner Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). |
|            |   |                                                                                                                                                        |
| 32(a)           |   | Certification  of the President of the General Partner Pursuant to 18 U.S.C.  Section 1350 (filed herewith).                                           |
|            |   |                                                                                                                                                        |
| 32(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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**SIGNATURES**

 

Pursuantto the requirements of the Securities and Exchange Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized and on the date indicated.

 

 
| ASSISTED HOUSING FUND L.P. I |
|------------------------------|
| Registrant                   |
|                         |   |   |
| By:                          | Murphey  Favre Properties, Inc. |   |
|                         | *General Partner* |   |
|                         |   |   |
|                         |   |   |
| By:                          | /s/  Robert K.  Stump |   | Date: | November 12,  2003 |   |
|                         | Robert  K.  Stump |   |
|                         | *President* |   |
|                              |  |  |  |  |  |  |  |

 

Pursuantto the requirements of the Securities and Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated:

 
| By:    | Murphey  Favre Properties, Inc.               |   |
|--------|-----------------------------------------------|--------|
|   | *General Partner*                             |   |
|   |                                          |   |
|   |                                          |   |
| By:    | /s/  Brett J. Atkinson                        |   | Date: | November 12,  2003 |   |
|   | Brett  J. Atkinson                            |   |
|   | *Treasurer and Principal  Accounting Officer* |   |
|        |                                               |        |  |  |  |

 

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