<PAGE>
                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                   For the Fiscal Year Ended DECEMBER 31, 2001

                             Commission File Number
                                     0-10673

                       REAL ESTATE ASSOCIATES LIMITED III

                        A CALIFORNIA LIMITED PARTNERSHIP

                  I.R.S. Employer Identification No. 95-3547611

         9090 Wilshire Blvd., Suite 201, Beverly Hills, California 90211

        Registrant's Telephone Number, Including Area Code (310) 278-2191

      Securities Registered Pursuant to Section 12(b) or 12(g) of the Act:

                                      NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve months (or 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


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE>
PART I.

ITEM 1.  BUSINESS:

Real Estate Associates Limited III ("REAL III" or the "Partnership") is a
limited partnership which was formed under the laws of the State of California
on July 25, 1980. On January 5, 1981, Real Estate Associates Limited III offered
3,000 units consisting of 6,000 Limited Partnership Interests and Warrants to
purchase a maximum of 6,000 Additional Limited Partnership Interests through a
public offering managed by E.F. Hutton Inc.

The general partners of Real Estate Associates Limited III are National
Partnership Investments Corp. ("NAPICO"), a California Corporation (the
"Corporate General Partner"), and Coast Housing Investments Associates, a
Limited Partnership formed under the California Limited Partnership Act and
consisting of Messrs. Nicholas G. Ciriello, an unrelated individual, as general
partner, and Charles H. Boxenbaum as limited partner. The business of REAL III
is conducted primarily by NAPICO.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P. (the "Operating
Partnership"), a majority owned subsidiary of Casden Properties Inc., a real
estate investment trust organized by Alan I. Casden, purchased a 95.25% economic
interest in NAPICO. The current members of NAPICO's Board of Directors are
Charles H. Boxenbaum, Bruce E. Nelson and Alan I. Casden

On December 3, 2001, Casden Properties Inc., entered into a merger agreement and
certain other transaction documents with Apartment Investment and Management
Company, a Maryland corporation ("AIMCO") and certain of its subsidiaries,
pursuant to which, on March 11, 2002, AIMCO acquired Casden Properties Inc. and
its subsidiaries, including NAPICO.

REAL III holds limited partnership interests in 11 local limited partnerships as
of December 31, 2001, and a general partner interest in Real Estate Associates
("REA") which in turn holds limited partnership interests in an additional
partnership; therefore, REAL III holds directly or indirectly through REA,
investments in 12 local limited partnerships. The general partners of REA are
REAL III and NAPICO. In December 1998, the Partnership sold its interest in 20
local limited partnerships to the Operating Partnership. Each of the limited
partnerships owns a low income housing project which is subsidized and/or has a
mortgage note payable to or insured by agencies of the federal or local
government.

In order to stimulate private investment in low income housing, the federal
government and certain state and local agencies have provided significant
ownership incentives, including among others, interest subsidies, rent
supplements, and mortgage insurance, with the intent of reducing certain market
risks and providing investors with certain tax benefits, plus limited cash
distributions and the possibility of long-term capital gains. There remain,
however, significant risks. The long-term nature of investments in government
assisted housing limits the ability of REAL III to vary its portfolio in
response to changing economic, financial and investment conditions; such
investments are also subject to changes in local economic circumstances and
housing patterns, as well as rising operating costs, vacancies, rent collection
difficulties, energy shortages and other factors which have an impact on real
estate values. These projects also require greater management expertise and may
have higher operating expenses than conventional housing projects.

Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts may not be
in an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements of
existing loans insured by the Federal Housing Administration of HUD ("FHA")
unless
<PAGE>
such mortgage loans are restructured. In order to address the reduction in
payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides for
the restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will be
amortized on a current basis and a low interest second mortgage loan payable to
FHA which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by the owner
of the FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

The partnerships in which REAL III has invested were, at least initially,
organized by private developers who acquired the sites, or options thereon, and
applied for applicable mortgage insurance and subsidies. REAL III became the
principal limited partner in these local limited partnerships pursuant to
arm's-length negotiations with these developers, or others, who act as general
partners. As a limited partner, REAL III's liability for obligations of the
local limited partnership is limited to its investment. The local general
partner of the local limited partnership retains responsibility for developing,
constructing, maintaining, operating and managing the Project. Under certain
circumstances of default, REAL III has the right to replace the general partner
of the local limited partnerships, but otherwise does not have control of sale
or refinancing, etc.

Although each of the partnerships in which REAL III has invested generally owns
a project which must compete in the market place for tenants, interest subsidies
and rent supplements from governmental agencies make it possible to offer these
dwelling units to eligible "low income" tenants at a cost significantly below
the market rate for comparable conventionally financed dwelling units in the
area.
<PAGE>
During 2001, the projects in which REAL III had invested were substantially
rented. The following is a schedule of the status as of December 31, 2001, of
the projects owned by local limited partnerships in which REAL III is a limited
partner.


            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL III HAS AN INVESTMENT
                                DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                             Units Authorized
                                                                For Rental
                                                            Assistance Under
                                                              Section 8 or
                                                                Other Rent                                    Percentage of
                                         No. of                 Supplement                Units                Total Units
Name and Location                         Units                  Program                Occupied                Occupied
-----------------------------            ------             ----------------            --------              -------------
<S>                                      <C>                <C>                         <C>                   <C>
Charlotte Lakeview, Riverview              553                    553/ 0                   506                     92%
 Residential Project
 Rochester, NY

Hidden Pines Apts                           40                     40/ 0                    38                     95%
 Greenville, MI

Jenks School Apts                           83                     83/ 0                    83                    100%
 Pawtucket, RI

Lakeside Apts                               32                     0/ 21                    31                     97%
 Stuart, FL

Ramblewood Apts                             64                     0/ 13                    56                     88%
 Fort Payne, AL

Santa Maria Apts                            86                     86/ 0                    86                    100%
 San German, Puerto Rico

Sunset Grove Apts                           22                     22/ 0                    18                     82%
 Carson City, MI

Sunshine Canyon                             26                     26/ 0                    25                     96%
 Stanton, MI

Village Apts                                51                     50/ 0                    50                     98%
 La Follette, TN
</TABLE>
<PAGE>
            SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL III HAS AN INVESTMENT
                          DECEMBER 31, 2001 (CONTINUED)

<TABLE>
<CAPTION>
                                                     Units Authorized
                                                       For Rental
                                                     Assistance Under
                                                      Section 8 or
                                                       Other Rent                               Percentage of
                                     No. of            Supplement              Units             Total Units
  Name and Location                   Units             Program               Occupied            Occupied
---------------------                ------          ----------------         --------          -------------
<S>                                  <C>             <C>                      <C>               <C>
Vincente Geigel                          80                 80/ 0                 80                100%
 Polanco Apts
 Isabela, Puerto Rico

Vista De Jagueyes                        73                 73/ 0                 72                 99%
 Aguas Buenas, PR

Westgate Apts                            72                 0/ 16                 65                 90%
 Albertville, AL                     ------          ----------------         --------

TOTALS                                1,182             1,013/ 50              1,110                 94%
                                     ======          ================         ========
</TABLE>
<PAGE>
ITEM 2.  PROPERTIES:

The local limited partnerships in which REAL III holds interests own various
multi-family rental properties. See Item 1 for information pertaining to these
properties.


ITEM 3.  LEGAL PROCEEDINGS:

CLASS ACTION

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (a partnership in
which NAPICO is a general partner) and two investors holding an aggregate of
five units of limited partnership interest in Real Estate Associates Limited VI
(another partnership in which Company is a general partner) commenced an action
in the United States District Court for the Central District of California on
behalf of themselves and all other similarly situated, against the Partnership,
NAPICO and certain other affiliated entities. The complaint alleges that the
defendants breached their fiduciary duty to the limited partners of such Funds
and made materially false and misleading statements in the consent solicitation
statements that were disseminated to the limited partners of such Funds relating
to approval of the transfer of partnership interests in limited partnerships to
the Operating Partnership. The plaintiffs seek preliminary and permanent
injunction relief and other equitable relief, as well as compensatory and
punitive damages. However, plaintiffs made no effort to enjoin the transaction
from taking place. On August 4, 1999, a holder of one unit of limited
partnership interest in Housing Programs Limited (a partnership in which the
Company is a general partner) filed a lawsuit similar to the one discussed above
against added Housing Programs Limited. The second action has been subsumed in
the first action, which has been certified as a class action.

After defendants moved for summary disposition of the action, plaintiffs filed a
motion for leave to file an amended complaint. Although defendants opposed the
filing of the complaint proposed by plaintiffs, the court issued an order on
July 20, 2001 granting plaintiffs leave to amend but denying them leave to file
the complaint they proposed. Plaintiffs filed a Second, Restated, Amended and
Supplemental Complaint dated August 7, 2001 and on August 21, 2001 filed a
Corrected Second, Restated, Amended and Supplemental Complaint (CSRASC). The
CSRASC adds eight new defendants and six new counts which were not included in
prior complaints. The new counts include; (i) violations of the anti-bundling
rules of the Securities and Exchange Act of 1934, (ii) violation of the doctrine
of inherent fairness, (iii) a declaratory judgment that the certain defendants
are not entitled to indemnification under the partnership agreements, (iv)
rescission of the business combination discussed in Note 1, (v) a constructive
trust on any recovery from a separate lawsuit pending in the United States
District Court of the Middle District of Pennsylvania which was brought on
behalf of several limited partnerships which are not parties to this action; and
(vi) an accounting. Defendants made a motion to dismiss the CSRASC, which was
denied. The court found that the issues presented would be more appropriate
resolved in a motion for summary judgment or summary adjudication. Defendants
intend to make such a motion. The deadline to do so is April 1, 2002.

Defendants denied allegations in the CSRASC in their answer. The parties are in
the process of conducting discovery. The discovery deadline is February 28, 2002
and the trial is scheduled for July 16, 2002. A motion is before the court to
extend these deadlines and the hearing on that issue is scheduled for February
4, 2002. Once discovery is complete, defendants will move for summary judgement
dismissing the complaint.

OTHER

The Partnership and NAPICO filed a lawsuit in 2001 against certain defendants
for damages, injunctive and declaratory relief for a materially false and
misleading proxy solicitation. Defendants disseminated the proxy solicitation to
the limited partners of the Partnership seeking their consent to (i) remove the
general partners of the Partnership, (ii) elect a new general partner, (iii)
analyze the possible disposition of the Partnership assets, (iv) distribute the
Partnership cash reserves, (v) investigate alleged claims against the general
partners of the Partnership
<PAGE>
and (vi) reduced management fees. The complaint contains causes of action for
violations of securities regulations. The action has been stayed pending the
outcome of the proxy solicitation. The proxy solicitation is scheduled to
terminate March 31, 2002.

Plaintiff, who is a limited partner in the Partnership filed a lawsuit in 2001,
which claims that NAPICO and other defendants (1) have refused to provide the
plaintiff with access to the books and records of the Partnership, and (2) have
breached their fiduciary duties and the partnership agreement by failing to
provide such access and by failing to act in the best interest of the
Partnership. The defendants have, however, provided their books and records to
plaintiff pursuant to a protective order. Plaintiff has failed to quantify its
purported damages. Trial is schedule for August 13, 2002.

The managing general partner of such NAPICO managed partnerships and the other
defendants believe that the plaintiffs' claims are without merit and intend to
contest the actions vigorously.

As of December 31, 2001, REAL III's Corporate General Partner was plaintiff or
defendant in several other lawsuits. None of these suits were related to REAL
III.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests, held for investment by the Partnership, by the Operating
Partnership, together with certain amendments to the Partnership Agreement and
other disclosures of various conflicts of interest in connection with the
proposed transaction. Prior to the sale of the partnership interests in 1998,
the consents of the limited partners to the sale and amendments to the
Partnership Agreement were obtained.


PART II.

ITEM 5.  MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY
         HOLDER MATTERS:

The Limited Partnership Interests are not traded on a public exchange but were
sold through a public offering managed by E.F. Hutton Inc. It is not anticipated
that any public market will develop for the purchase and sale of any Partnership
interest. Limited Partnership Interests may be transferred only if certain
requirements are satisfied. At December 31, 2001, there were 1,878 registered
holders of units in REAL III. The Partnership has invested in certain government
assisted projects under programs which in many instances restrict the cash
return available to Project owners. The Partnership was not designed to provide
cash distributions to investors in circumstances other than refinancing or
disposition of its investment in the limited partnerships. A distribution in the
aggregate amount of $3,345,000 (or $584 per unit) was made in 1989. This
represented the proceeds from the sale of one of the Partnership's real estate
investments. In March 1999, the Partnership made distributions of $6,881,025 to
the limited partners and $69,506 to the general partners, which included using
proceeds from the sale of the partnership interests. No other distributions have
been made since the inception of the Partnership.
<PAGE>
     ITEM 6.       SELECTED FINANCIAL DATA:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                ----------------------------------------------------------------------------
                                    2001             2000           1999            1998            1997
                                ------------    ------------    ------------    ------------    ------------
<S>                             <C>             <C>             <C>             <C>             <C>
Loss From Operations            $   (594,349)   $     (2,728)   $   (515,047)   $   (928,096)   $   (443,767)

Gain on Sale of Limited
   Partnership Interests                  --              --              --       2,647,716              --

Distributions From
   Limited Partnerships
   Recognized as Income               21,925          34,619          18,112       1,508,602       1,072,912

Equity in (Loss) Income of
   Limited Partnerships
   and Amortization of
   Acquisition Costs                (618,485)        216,729         190,985         564,059         255,652
                                ------------    ------------    ------------    ------------    ------------

Net (Loss) Income               $ (1,190,909)   $    248,620    $   (305,950)   $  3,792,281    $    884,797
                                ============    ============    ============    ============    ============

Net (Loss) Income Per Limited
   Partnership Interest         $       (103)   $         21    $        (26)   $        328    $         76
                                ============    ============    ============    ============    ============


Total assets                    $  2,588,231    $  6,725,476    $  6,467,723    $ 14,026,790    $ 11,960,231
                                ============    ============    ============    ============    ============

Investments in Limited
   Partnerships                 $    410,000    $  1,069,713    $    894,213    $    744,457    $  1,249,421
                                ============    ============    ============    ============    ============

Notes Payable                   $         --    $         --    $         --    $         --    $  1,510,000
                                ============    ============    ============    ============    ============
</TABLE>
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS:

LIQUIDITY

The Partnership's primary sources of funds include interest income on money
market investments and certificates of deposit and distributions from local
partnerships in which the Partnership has invested. It is not expected that any
of the local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to the Partnership's
limited partners in any material amount. The Partnership made a cash
distribution to investors in March 1999, primarily using proceeds from the
disposition of its investments in certain limited partnerships.

CAPITAL RESOURCES

REAL III received $14,320,000 in subscriptions for units of Limited Partnership
Interests (at $5,000 per unit) during the period March 31, l981 to October 30,
1981, pursuant to a registration statement on Form S-11. As of March 10, 1982,
REAL III received an additional $14,320,000 in subscriptions pursuant to the
exercise of warrants and the sale of Additional Limited Partnership Interests.

RESULTS OF OPERATIONS

The Partnership was formed to provide various benefits to its partners as
discussed in Item 1.

At December 31, 2001, the Partnership has investments in 12 limited
partnerships, all of which own housing projects that were substantially all
rented. The Partnership sold its interests in 20 local partnerships in December
1998. The Partnership, as a limited partner, is entitled to 95% to 99% of the
profits and losses of the local limited partnerships. The Partnership accounts
for its investments in the local limited partnerships on the equity method,
thereby adjusting its investment balance by its proportionate share of the
income or loss of the local limited partnerships. Equity in losses of limited
partnerships are recognized in the financial statements until the limited
partnership investment account is reduced to a zero balance. Losses incurred
after the limited partnership investment account is reduced to zero are not
recognized. Limited partners are not liable for losses beyond their contributed
capital. At December 31, 2001, the Partnership has a positive investment balance
in only one local limited partnership.

Distributions received from limited partnerships are recognized as return of
capital until the investment balance has been reduced to zero or to a negative
amount equal to future capital contributions required. Subsequent distributions
received are recognized as income.

The total net loss from the local limited partnerships that was allocated to the
Partnership was $1,345,000, $499,000 and $310,000 for the years ended December
31, 2001, 2000 and 1999, respectively. However, because losses incurred after
the investment account is reduced to a zero balance are not recognized and
subsequent income is not recognized until the investment account becomes
positive again, the Partnership recognized equity in (loss) income of limited
partnerships of $(618,485), $216,729 and $190,985 for the years ended December
31, 2001, 2000 and 1999, respectively. The loss recognized in 2001 is the result
of the Partnership recognizing an impairment loss of $806,000 during the year.
The cumulative amount of the unrecognized equity in losses of certain limited
partnerships was approximately $18,189,000 and $17,460,000 as of December 31,
2001 and 2000, respectively.

Distributions from the local limited partnerships in which the Partnership did
not have a positive investment balance were $21,925, $34,619 and $18,112 for the
years ended December 31, 2001, 2000 and 1999, respectively. These amounts were
recognized as income in the accompanying statements of operations, in accordance
with the equity method of accounting.
<PAGE>
As of December 31, 2001 and 2000, the Partnership has cash and cash equivalents
of $2,178,231 and $5,655,763, respectively. Substantially all of these amounts
are on deposit primarily with high credit quality financial institutions,
earning interest. Interest income has been decreasing as a result of decreasing
cash and cash equivalent balances and decreasing interest rates. This resulted
in the Partnership earning $196,320, $314,363 and $215,072 in interest income
for the years ended December 31, 2001, 2000 and 1999, respectively. The amount
of interest income varies with market rates available on deposits and with the
amount of funds available for investment. Cash equivalents can be converted to
cash to meet obligations of the Partnership as they arise. The Partnership
intends to continue investing available funds in this manner.

A recurring partnership expense is the annual management fee. The fee is payable
to the Corporate General Partner of the Partnership and is calculated at .4
percent of the Partnership's original remaining invested assets. The management
fee is paid to the Corporate General Partner for its continuing management of
partnership affairs. The fee is payable beginning with the month following the
Partnership's initial investment in a local limited partnership. Management fees
were $129,292 for 2001, 2000 and 1999.

Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts may not be
in an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements of
existing loans insured by the Federal Housing Administration of HUD ("FHA")
unless such mortgage loans are restructured. In order to address the reduction
in payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides for
the restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will be
amortized on a current basis and a low interest second mortgage loan payable to
FHA which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable to the owner
of the FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.

As a result of the foregoing, the Partnership in 1997 commenced an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to $434,940 for the year ended December 31, 1999, and are included in
administrative expenses.

On December 30, 1998, the Partnership sold its limited partnership interests in
20 local limited partnerships, with a total carrying value of $988,570, to the
Operating Partnership. The sale resulted in proceeds to the Partnership of
$1,950,530 and a net gain of $2,647,716, after being relieved of notes and
interest payable of $1,947,962 and incurring selling costs of $262,206. The cash
proceeds were held in escrow at December 31, 1998 and received subsequent to
year-end. In March 1999, the Partnership made cash distributions of $6,881,025
to the limited partners and $69,506 to the general partners, which included
using proceeds from the sale of the partnership interests.
<PAGE>
The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (iii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners" interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.

Operating expenses, other than management fees and interest expense, consist of
legal and accounting fees for services rendered to the Partnership and
administrative expenses. Legal and accounting fees were generally consistent and
were $471,808, $121,717 and $94,550 for the years ended December 31, 2001, 2000
and 1999, respectively. Administrative expenses were $189,569, $66,082 and
$506,277 for the years ended December 31, 2001, 2000 and 1999, respectively.
Legal fees and administrative expenses increased in 2001 as a result of the
litigation initiated during the year, which is discussed under legal
proceedings. Included in administrative expenses are reimbursements to NAPICO
for certain expenses, which totaled $14,243, $11,349 and $16,488 for the years
ended December 31, 2001, 2000 and 1999, respectively. Also included in
administrative expenses for 1999 is $434,940, related to the aforementioned
third party review of the properties owned by the local partnerships.

Total revenue for the local partnerships were $6,724,000, $6,583,000 and
$6,525,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

Total expenses for the local partnerships were $8,093,000, $7,090,000 and
$6,835,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

The total net loss for the local partnerships for 2001, 2000 and 1999 aggregated
$1,368,000, $507,000 and $310,000, respectively. The loss allocated to the
Partnership was $1,345,000, $499,000 and $310,000 for 2001, 2000 and 1999,
respectively.

The Partnership, as a Limited Partner in the local limited partnerships in which
it has invested, is subject to the risks incident to the construction,
management, and ownership of improved real estate. The Partnership investments
are also subject to adverse general economic conditions, and, accordingly, the
status of the national economy, including substantial unemployment, concurrent
inflation and changing legislation which could increase vacancy levels, rental
payment defaults, and operating expenses, which in turn, could substantially
increase the risk of operating losses for the projects.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.
<PAGE>
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

The Financial Statements and Supplementary Data are listed under Item 14.


ITEM 9.  CHANGES WITH AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE:

Not applicable.
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                              FINANCIAL STATEMENTS,
                          FINANCIAL STATEMENT SCHEDULES
                   AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT
                                DECEMBER 31, 2001
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Real Estate Associates Limited III
(A California limited partnership)

We have audited the accompanying balance sheets of Real Estate Associates
Limited III (a California limited partnership) as of December 31, 2001 and 2000,
and the related statements of operations, partners' equity (deficiency) and cash
flows for each of the three years in period ended December 31, 2001. Our audits
also included the financial statement schedules listed in the index in item 14.
These financial statements and financial statement schedules are the
responsibility of the management of the Partnership. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
certain limited partnerships, the investments in which are reflected in the
accompanying financial statements using the equity method of accounting. The
investments in these limited partnerships represent 14 percent and 16 percent of
total assets as of December 31, 2001 and 2000, respectively, and the equity in
income of these limited partnerships represents 38 percent, 25 percent and 17
percent of the total net income of the Partnership for the years ended December
31, 2001, 2000 and 1999, respectively, and represent a substantial portion of
the investee information in Note 2 and the financial statement schedules. The
financial statements of these limited partnerships were audited by other
auditors. Their reports have been furnished to us and our opinion, insofar as it
relates to the amounts included for these limited partnerships, is based solely
on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 our audits and the reports of other
auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Real Estate Associates Limited III as of December 31,
2001 and 2000, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America. Also,
in our opinion, based on our audits and the reports of other auditors, such
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.



DELOITTE & TOUCHE LLP

Los Angeles, California
March 22, 2002
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>
                                               ASSETS
                                                                            2001           2000
                                                                         -----------    -----------
<S>                                                                      <C>            <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2)                             $   410,000    $ 1,069,713

CASH AND CASH EQUIVALENTS (Note 1)                                         2,178,231      5,655,763
                                                                         -----------    -----------

         TOTAL ASSETS                                                    $ 2,588,231    $ 6,725,476
                                                                         ===========    ===========


                                  LIABILITIES AND PARTNERS' EQUITY

LIABILITIES:
     Accounts payable                                                    $    64,458    $    15,294
     Fees and expenses due general partner (Note 3)                            4,500             --
                                                                         -----------    -----------
                                                                              68,958         15,294

COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)


PARTNERS' EQUITY (DEFICIENCY):
     General partners                                                       (143,784)      (131,875)
     Limited partners                                                      2,663,057      6,842,057
                                                                         -----------    -----------

                                                                           2,519,273      6,710,182
                                                                         -----------    -----------
         TOTAL LIABILITIES AND PARTNERS'
           EQUITY                                                        $ 2,588,231    $ 6,725,476
                                                                         ===========    ===========
</TABLE>

     The accompanying notes are integral part of these financial statements.
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                     2001           2000           1999
                                                  -----------    -----------    -----------
<S>                                               <C>            <C>            <C>
INTEREST AND OTHER INCOME                         $   196,320    $   314,363    $   215,072

OPERATING EXPENSES:
     Legal and accounting                             471,808        121,717         94,550
     Management fees - general partner (Note 4)       129,292        129,292        129,292
     Administrative  (Note 4)                         189,569         66,082        506,277
                                                  -----------    -----------    -----------

         Total operating expenses                     790,669        317,091        730,119
                                                  -----------    -----------    -----------

LOSS FROM OPERATIONS                                 (594,349)        (2,728)      (515,047)

DISTRIBUTIONS FROM LIMITED
     PARTNERSHIPS RECOGNIZED AS
     INCOME (Note 2)                                   21,925         34,619         18,112

EQUITY IN (LOSS) INCOME OF LIMITED
     PARTNERSHIPS AND AMORTI-
     ZATION OF ACQUISITION
     COSTS (Note 2)                                  (618,485)       216,729        190,985
                                                  -----------    -----------    -----------

NET (LOSS) INCOME                                 $(1,190,909)   $   248,620    $  (305,950)
                                                  ===========    ===========    ===========

NET (LOSS) INCOME PER LIMITED
     PARTNERSHIP INTEREST (Note 1)                $      (103)   $        21    $       (26)
                                                  ===========    ===========    ===========
</TABLE>

     The accompanying notes are integral part of these financial statements.
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                   STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                   General              Limited
                                   Partners             Partners               Total
                                 ------------         ------------         ------------
<S>                              <C>                  <C>                  <C>
EQUITY (DEFICIENCY),
   January 1, 1999               $    (61,795)        $ 13,779,838         $ 13,718,043

   Distributions                      (69,506)          (6,881,025)          (6,950,531)

   Net loss for 1999                   (3,060)            (302,890)            (305,950)
                                 ------------         ------------         ------------

EQUITY (DEFICIENCY),
   December 31, 1999                 (134,361)           6,595,923            6,461,562

   Net income for 2000                  2,486              246,134              248,620
                                 ------------         ------------         ------------

EQUITY (DEFICIENCY),
   December 31, 2000                 (131,875)           6,842,057            6,710,182

   Distributions                                        (3,000,000)          (3,000,000)

   Net income for 2001                (11,909)          (1,179,000)          (1,190,909)
                                 ------------         ------------         ------------

EQUITY (DEFICIENCY),
   December 31, 2001             $   (143,784)        $  2,663,057         $  2,519,273
                                 ============         ============         ============
</TABLE>


     The accompanying notes are integral part of these financial statements.
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                       2001            2000            1998
                                                                   ------------    ------------    ------------
<S>                                                                <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net (loss) income                                           $ (1,190,909)   $    248,620    $   (305,950)
       Adjustments to reconcile net (loss) income to net cash
         (used in) provided by operating activities:
           Equity in income of limited partnerships and
             amortization of acquisition costs                          618,485        (216,729)       (190,985)
           Decrease (increase) in other assets                               --           2,144          (2,144)
           Increase (decrease) in accounts payables                      49,163           9,133        (302,586)
           Increase in fees and expenses due general partner              4,500              --              --
                                                                   ------------    ------------    ------------

             Net cash (used in) provided by operating activities       (518,761)         43,168        (801,665)
                                                                   ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Distribution from limited partnerships
           recognized as return of capital                               41,229          41,229          41,229
       Proceeds from the sale of limited partnership interests               --              --       1,950,530
                                                                   ------------    ------------    ------------

             Net cash provided by investing activities                   41,229          41,229       1,991,759
                                                                   ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Distributions to partners                                     (3,000,000)             --      (6,950,531)
                                                                   ------------    ------------    ------------


NET (DECREASE) INCREASE IN CASH AND
      CASH EQUIVALENTS                                               (3,477,532)         84,397      (5,760,437)

CASH AND CASH EQUIVALENTS,
       BEGINNING OF YEAR                                              5,655,763       5,571,366      11,331,803
                                                                   ------------    ------------    ------------

CASH AND CASH EQUIVALENTS,
       END OF YEAR                                                 $  2,178,231    $  5,655,763    $  5,571,366
                                                                   ============    ============    ============
</TABLE>

     The accompanying notes are integral part of these financial statements.
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2001


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization

         Real Estate Associates Limited III (the "Partnership") was formed under
         the California Limited Partnership Act on July 25, 1980. The
         Partnership was formed to invest either directly or indirectly in other
         partnerships which own and operate primarily federal, state and local
         government-assisted housing projects. The general partners are National
         Partnership Investments Corp. ("NAPICO"), the corporate general
         partner, and Coast Housing Investment Associates ("CHIA"), a limited
         partnership. The business of the Partnership is conducted primarily by
         NAPICO.

         Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of
         Casden Investment Corporation ("CIC"), which is wholly owned by Alan I.
         Casden. On December 30, 1998, Casden Properties Operating Partnership,
         L.P. (the "Operating Partnership"), a majority owned subsidiary of
         Casden Properties Inc., a real estate investment trust organized by
         Alan I. Casden, purchased a 95.25% economic interest in NAPICO. The
         remaining economic interest, including a majority of the voting common
         stock, continues to be owned by CIC.

         On December 3, 2001, Casden Properties Inc., entered into a merger
         agreement and certain other transaction documents with Apartment
         Investment and Management Company, a Maryland corporation ("AIMCO") and
         certain of its subsidiaries, pursuant to which, on March 11, 2002,
         AIMCO acquired Casden Properties Inc. and its subsidiaries, including
         NAPICO.

         The Partnership offered 3,000 units and issued 2,864 units of limited
         partner interests through a public offering. Each unit was comprised of
         two limited partner interests and a warrant granting the investor the
         right to purchase two additional limited partner interests. An
         additional 5,728 interests were issued from the exercise of the
         warrants and the sale of interests associated with warrants not
         exercised. The general partners have a 1 percent interest in profits
         and losses of the Partnership. The limited partners have the remaining
         99 percent interest in proportion to their respective investments.

         The Partnership shall be dissolved only upon the expiration of 52
         complete calendar years (December 31, 2032) from the date of the
         formation of the Partnership or the occurrence of other events as
         specified in the terms of the Partnership agreement.


                                       6
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         Upon total or partial liquidation of the Partnership or the disposition
         or partial disposition of a project or project interest and
         distribution of the proceeds, the general partners will be entitled to
         a liquidation fee as stipulated in the Partnership agreement. The
         limited partners will have a priority return equal to their invested
         capital attributable to the project(s) or project interest(s) sold and
         shall receive from the sale of the project(s) or project interest(s) an
         amount sufficient to pay state and federal income taxes, if any,
         calculated at the maximum rate then in effect. The general partners'
         liquidation fee may accrue but shall not be paid until the limited
         partners have received distributions equal to 100 percent of their
         capital contributions.

         Basis of Presentation

         The accompanying financial statements have been prepared in conformity
         with accounting principles generally accepted in the United States of
         America.

         Recent Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board issued Statement
         of Financial Accounting Standards Number (SFAS No.) 141, "Business
         Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets."
         SFAS No. 141 was effective immediately and SFAS 142 will be effective
         January 2002. The new standards are not expected to have a significant
         impact on the Partnership's financial statements.

         Use of Estimates

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         Method of Accounting for Investments in Limited Partnerships

         The investments in limited partnerships are accounted for on the equity
         method. Acquisition, selection and other costs related to the
         acquisition of the projects are capitalized as part of


                                       7

<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          the investment account and are being amortized on a straight line
          basis over the estimated lives of the underlying assets, which is
          generally 30 years.

          Net (Loss) Income Per Limited Partnership Interest

          Net (loss) income per limited partnership interest was computed by
          dividing the limited partners' share of net (loss) income by the
          number of limited partnership interests outstanding during the year.
          The number of limited partnership interests was 11,456 for all years
          presented.

          Cash and Cash Equivalents

          Cash and cash equivalents consist of cash and bank certificates of
          deposit with an original maturity of three months or less. The
          Partnership has its cash and cash equivalents on deposit with high
          credit quality financial institutions. Such cash and cash equivalents
          are in excess of the FDIC insurance limit.

          Impairment of Long-Lived Assets

          The Partnership reviews long-lived assets to determine if there has
          been any permanent impairment whenever events or changes in
          circumstances indicate that the carrying amount of the asset may not
          be recoverable. If the sum of the expected future cash flows is less
          than the carrying amount of the assets, the Partnership recognizes an
          impairment loss. An impairment loss of $806,000 was recognized during
          the year ended December 31, 2001.

2.        INVESTMENTS IN LIMITED PARTNERSHIPS

          The Partnership holds limited partnership interests in 12 limited
          partnerships as of December 31, 2001 and 2000, after selling its
          interest in 20 limited partnerships in 1998. The limited partnerships
          own residential low income rental projects consisting of 1,181
          apartment units. The mortgage loans of these projects are payable to
          or insured by various governmental agencies.

          The Partnership, as a limited partner, is entitled to between 95
          percent and 99 percent of the profits and losses of the limited
          partnerships.


                                       8
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

2.        INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

          Equity in losses of limited partnerships is recognized in the
          financial statements until the limited partnership investment account
          is reduced to a zero balance. Losses incurred after the limited
          partnership investment account is reduced to zero are not recognized.
          The cumulative amount of the unrecognized equity in losses of certain
          limited partnerships was, approximately $18,189,000 and $17,460,000 as
          of December 31, 2001 and 2000, respectively.

          Distributions from limited partnerships are recognized as a reduction
          of capital until the investment balance has been reduced to zero.
          Subsequent distributions received are recognized as income.

          The following is a summary of the investments in limited partnerships
          and reconciliation to the limited partnership accounts:

<TABLE>
<CAPTION>

                                                                           2001           2000
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
          Investment balance, beginning of year                         $1,069,713    $   894,214
          Equity in (loss) income of limited partnerships                 (616,264)       218,950
          Amortization of capitalized acquisition costs and fees            (2,221)        (2,221)
          Cash distributions recognized as return of capital               (41,229)       (41,229)
                                                                       -----------    -----------
          Investment balance, end of year                              $   410,000     $1,069,714
                                                                       ===========    ===========
</TABLE>

          The difference between the investment in the accompanying balance
          sheets at December 31, 2001 and 2000, and the deficiency per the
          limited partnerships' combined financial statements is due primarily
          to the cumulative unrecognized equity in losses of certain limited
          partnerships, costs capitalized to the investment account and
          cumulative distributions recognized as income.


                                       9
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

2.        INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

          Selected financial information from the combined financial statements
          at December 31, 2001 and 2000 and for each of the three years in the
          period ended December 31, 2001, of the limited partnerships in which
          the Partnership has invested directly or indirectly, is as follows:

                                 Balance Sheets
                                 --------------
<TABLE>
<CAPTION>
                                                                              2001               2000
                                                                           ---------          ---------
                                                                                  (in thousands)

<S>                                                                        <C>                <C>
          Land and buildings, net                                          $   9,686          $  11,520
                                                                           =========          =========
          Total assets                                                      $ 13,068          $  14,802
                                                                            ========          =========
          Mortgages payable                                                 $ 28,278          $  29,064
                                                                            ========          =========
          Total liabilities                                                 $ 31,120          $  31,431
                                                                            ========          =========
          Deficiency in Equity of Real Estate Associates
            Limited III                                                     $(18,295)          $(16,910)
                                                                           =========          =========
          Equity of other partners                                         $     243          $     281
                                                                           =========          =========
</TABLE>

                            Statements of Operations
                            ------------------------

<TABLE>
<CAPTION>
                                                                2001         2000                1999
                                                              --------     ---------          ---------
                                                                         (in thousands)
<S>                                                           <C>          <C>                <C>
          Total revenue                                       $  6,724     $   6,583          $   6,525
                                                              ========     =========          =========
          Interest expense                                    $  1,467     $   1,799          $   1,787
                                                              ========     =========          =========
          Depreciation                                        $  1,092     $   1.278          $   1,264
                                                              ========     =========          =========
          Total expenses                                      $  8,093     $   7,090          $   6,835
                                                              ========     =========          =========
          Net loss                                            $ (1,368)    $    (507)          $   (310)
                                                              ========     =========          =========
          Net loss allocable to the Partnership               $ (1,345)    $    (499)         $    (310)
                                                              ========     =========          =========
</TABLE>


                                       10
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

2.        INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

          Land and buildings, above, have been adjusted for the amount by which
          the investments in the limited partnerships exceed the Partnership's
          share of the net book value of the underlying net assets of the
          investee which are recorded at historical costs. Depreciation on the
          adjustment is provided for over the estimated remaining useful lives
          of the properties.

          Under recently adopted law and policy, the United States Department of
          Housing and Urban Development ("HUD") has determined not to renew the
          Housing Assistance Payment ("HAP") Contracts on a long term basis on
          the existing terms. In connection with renewals of the HAP Contracts
          under such new law and policy, the amount of rental assistance
          payments under renewed HAP Contracts will be based on market rentals
          instead of above market rentals, which may be the case under existing
          HAP Contracts. The payments under the renewed HAP Contracts may not be
          in an amount that would provide sufficient cash flow to permit owners
          of properties subject to HAP Contracts to meet the debt service
          requirements of existing loans insured by the Federal Housing
          Administration of HUD ("FHA") unless such mortgage loans are
          restructured. In order to address the reduction in payments under HAP
          Contracts as a result of this new policy, the Multi-family Assisted
          Housing Reform and Affordability Act of 1997 ("MAHRAA") provides for
          the restructuring of mortgage loans insured by the FHA with respect to
          properties subject to the Section 8 program. Under MAHRAA, an
          FHA-insured mortgage loan can be restructured into a first mortgage
          loan which will be amortized on a current basis and a low interest
          second mortgage loan payable to FHA which will only be payable on
          maturity of the first mortgage loan. This restructuring results in a
          reduction in annual debt service payable to the owner of the
          FHA-insured mortgage loan and is expected to result in an insurance
          payment from FHA to the holder of the FHA-insured loan due to the
          reduction in the principal amount. MAHRAA also phases out
          project-based subsidies on selected properties serving families not
          located in rental markets with limited supply, converting such
          subsidies to a tenant-based subsidy.

          When the HAP Contracts are subject to renewal, there can be no
          assurance that the local limited partnerships in which the Partnership
          has an investment will be permitted to restructure its mortgage
          indebtedness under MAHRAA. In addition, the economic impact on the
          Partnership of the combination of the reduced payments under the HAP
          Contracts and the restructuring of the existing FHA-insured mortgage
          loans under MAHRAA is uncertain.

          As a result of the foregoing, the Partnership in 1997 commenced an
          extensive review of disposition, refinancing or re-engineering
          alternatives for the properties in which the limited partnerships have
          invested and are subject to HUD mortgage and rental subsidy programs.


                                       11
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

2.        INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)

          The Partnership has incurred expenses in connection with this review
          by various third party professionals, including accounting, legal,
          valuation, structural and engineering costs, which amounted to
          $434,940 for the year ended December 31, 1999, and are included in
          administrative expenses.

          On December 30, 1998, the Partnership sold its limited partnership
          interests in 20 local limited partnerships, with a total carrying
          value of $988,570, to the Operating Partnership. The sale resulted in
          proceeds to the Partnership of $1,950,530 and a net gain of
          $2,647,716, after being relieved of notes and interest payable of
          $1,947,962 and incurring selling costs of $262,206. The cash proceeds
          were held in escrow at December 31, 1998 and were collected in 1999.
          In March 1999, the Partnership made cash distributions of $6,881,025
          to the limited partners and $69,506 to the general partners, which
          included using proceeds from the sale of the partnership interests.

          The Operating Partnership purchased such limited partner interests for
          cash, which it raised in connection with a private placement of its
          equity securities. The purchase was subject to, among other things,
          (i) the purchase of the general partner interests in the local limited
          partnerships by the Operating Partnership; (ii) the approval of HUD
          and certain state housing finance agencies; and (iii) the consent of
          the limited partners to the sale of the local limited partnership
          interests held for investment by the Partnership.

          In August 1998, a consent solicitation statement was sent to the
          limited partners setting forth the terms and conditions of the
          purchase of the limited partners' interests held for investment by the
          Partnership, together with certain amendments to the Partnership
          Agreement and other disclosures of various conflicts of interest in
          connection with the proposed transaction. Prior to the sale of the
          partnership interests, the consents of the limited partners to the
          sale and amendments to the Partnership Agreement were obtained.

3.        FEES AND EXPENSES DUE GENERAL PARTNER

          Under the terms of the Restated Certificate and Agreement of Limited
          Partners, the Partnership is liable to NAPICO for an annual management
          fee equal to .4 percent of the original invested assets of the
          remaining limited partnerships. Invested assets is defined as the
          costs of acquiring project interests, including the proportionate
          amount of the mortgage loans related to the Partnership's interest in
          the capital accounts of the respective partnerships.


                                       12
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

3.        FEES AND EXPENSES DUE GENERAL PARTNER (CONTINUED)

          The Partnership reimburses NAPICO for certain expenses. The
          reimbursement to NAPICO was $14,243, $11,349 and $16,488 in 2001, 2000
          and 1999, respectively, and is included in administrative expenses.

4.        CONTINGENCIES

          CLASS ACTION

          On August 27, 1998, two investors holding an aggregate of eight units
          of limited partnership interests in Real Estate Associates Limited III
          (a partnership in which NAPICO is a general partner) and two investors
          holding an aggregate of five units of limited partnership interest in
          Real Estate Associates Limited VI (another partnership in which
          Company is a general partner) commenced an action in the United States
          District Court for the Central District of California on behalf of
          themselves and all other similarly situated, against the Partnership,
          NAPICO and certain other affiliated entities. The complaint alleges
          that the defendants breached their fiduciary duty to the limited
          partners of such Funds and made materially false and misleading
          statements in the consent solicitation statements that were
          disseminated to the limited partners of such Funds relating to
          approval of the transfer of partnership interests in limited
          partnerships to the Operating Partnership. The plaintiffs seek
          preliminary and permanent injunction relief and other equitable
          relief, as well as compensatory and punitive damages. However,
          plaintiffs made no effort to enjoin the transaction from taking place.
          On August 4, 1999, a holder of one unit of limited partnership
          interest in Housing Programs Limited (a partnership in which the
          Company is a general partner) filed a lawsuit similar to the one
          discussed above against added Housing Programs Limited. The second
          action has been subsumed in the first action, which has been certified
          as a class action.

          After defendants moved for summary disposition of the action,
          plaintiffs filed a motion for leave to file an amended complaint.
          Although defendants opposed the filing of the complaint proposed by
          plaintiffs, the court issued an order on July 20, 2001 granting
          plaintiffs leave to amend but denying them leave to file the complaint
          they proposed. Plaintiffs filed a Second, Restated, Amended and
          Supplemental Complaint dated August 7, 2001 and on August 21, 2001
          filed a Corrected Second, Restated, Amended and Supplemental Complaint
          (CSRASC). The CSRASC adds eight new defendants and six new counts
          which were not included in prior complaints. The new counts include;
          (i) violations of the anti-bundling rules of the Securities and
          Exchange Act of 1934, (ii) violation of the doctrine of inherent
          fairness, (iii) a declaratory judgment that the certain defendants are
          not entitled to indemnification under the partnership agreements, (iv)
          rescission of the business


                                       13
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001

4.        CONTINGENCIES (CONTINUED)

          combination discussed in Note 1, (v) a constructive trust on any
          recovery from a separate lawsuit pending in the United States District
          Court of the Middle District of Pennsylvania which was brought on
          behalf of several limited partnerships which are not parties to this
          action; and (vi) an accounting. Defendants made a motion to dismiss
          the CSRASC, which was denied. The court found that the issues
          presented would be more appropriate resolved in a motion for summary
          judgment or summary adjudication. Defendants intend to make such a
          motion. The deadline to do so is April 1, 2002.

          Defendants denied allegations in the CSRASC in their answer. The
          parties are in the process of conducting discovery. The discovery
          deadline is February 28, 2002 and the trial is scheduled for July 16,
          2002. A motion is before the court to extend these deadlines and the
          hearing on that issue is scheduled for February 4, 2002. Once
          discovery is complete, defendants will move for summary judgement
          dismissing the complaint.

          OTHER

          The Partnership and NAPICO filed a lawsuit against certain defendants
          for damages, injunctive and declaratory relief for a materially false
          and misleading proxy solicitation. Defendants disseminated the proxy
          solicitation to the limited partners of the Partnership seeking their
          consent to (i) remove the general partners of the Partnership, (ii)
          elect a new general partner, (iii) analyze the possible disposition of
          the Partnership assets, (iv) distribute the Partnership cash reserves,
          (v) investigate alleged claims against the general partners of the
          Partnership and (vi) reduced management fees. The complaint contains
          causes of action for violations of securities regulations. The action
          has been stayed pending the outcome of the proxy solicitation. The
          proxy solicitation is scheduled to terminate March 31, 2002.

          Plaintiff, who is a limited partner in the Partnership filed a lawsuit
          in 2001, which claims that NAPICO and other defendants (1) have
          refused to provide the plaintiff with access to the books and records
          of the Partnership, and (2) have breached their fiduciary duties and
          the partnership agreement by failing to provide such access and by
          failing to act in the best interest of the Partnership. The defendants
          have, however, provided their books and records to plaintiff pursuant
          to a protective order. Plaintiff has failed to quantify its purported
          damages. Trial is schedule for August 13, 2002.

          The managing general partner of such NAPICO managed partnerships and
          the other defendants believe that the plaintiffs' claims are without
          merit and intend to contest the actions vigorously.




                                       14
<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2001


4.        CONTINGENCIES (CONTINUED)

          The corporate general partner of the Partnership is a plaintiff in
          various lawsuits and has also been named a defendant in other lawsuits
          arising from transactions in the ordinary course of business. In the
          opinion of management and the corporate general partner, the claims
          will not result in any material liability to the Partnership.

5.        INCOME TAXES

          No provision has been made for income taxes in the accompanying
          financial statements since such taxes, if any, are the liability of
          the individual partners. The major differences in tax and financial
          reporting result from the use of different bases and depreciation
          methods for the properties held by the limited partnerships.
          Differences in tax and financial losses also arise as losses are not
          recognized for financial reporting purposes when the investment
          balance has been reduced to zero.

6.        FAIR VALUE OF FINANCIAL INSTRUMENTS

          Statement of Financial Accounting Standards No. 107, "Disclosure about
          Fair Value of Financial Instruments," requires disclosure of fair
          value information about financial instruments. The carrying amount of
          assets and liabilities reported on the balance sheets that require
          such disclosure approximates fair value due to their short-term
          maturity.

7.        FOURTH QUARTER ADJUSTMENT

          The Partnership's policy is to record its equity in income of limited
          partnerships on a quarterly basis, using estimated financial
          information furnished by the various local operating general partners.
          The equity in income reflected in the accompanying annual financial
          statements is based primarily upon audited financial statements of the
          investee limited partnerships. The difference of approximately
          $781,031, between the estimated nine-month equity in income and the
          actual total for 2001 equity in loss has been recorded in the fourth
          quarter.


                                       15
<PAGE>
                                                                        SCHEDULE
                       REAL ESTATE ASSOCIATES LIMITED III
                       INVESTMENTS IN LIMITED PARTNERSHIPS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                      Year Ended December 31, 2001
                                        ---------------------------------------------------------------------------------------
                                                                                         Cash
                                         Balance         Capital                         Distri-      Equity          Balance
                                        January 1,       Contri-      Amortization      butions        in          December 31,
Limited Partnerships                     2001            butions       Acq costs        Received       Loss            2001
----------------------------            ----------       -------       -----------      --------    ----------       ---------
<S>                                     <C>              <C>          <C>               <C>         <C>              <C>

Charlotte                                        -       $             $                   $        $        -       $       -

Hidden Pines Apartments                          -                                                           -               -

Jenks School Apartments                 1,069,714                           (2,221)      (41,229)     (616,264)        410,000

Lakeside Apartments                              -                                                           -               -

Ramblewood Apartments                            -                                                           -               -

Santa Maria Apartments                           -                                                           -               -

Sunset Grove Apartments                          -                                                           -               -

Sunshine Canyon Apartments                       -                                                           -               -

Vicente Geigel Polanco Apts.                     -                                                           -               -

Village Apartments                               -                                                           -               -

Vista De Jagueyes                                -                                                           -               -

Westgate (PBO)                                   -                                                           -               -
                                        ----------       -------       -----------      --------    ----------       ---------
                                        $1,069,714             -       $    (2,221)     $(41,229)   $ (616,264)      $ 410,000
                                        ==========       =======       ===========      ========    ==========       =========
</TABLE>
<PAGE>
                                                                        SCHEDULE
                                                                     (Continued)

                       REAL ESTATE ASSOCIATES LIMITED III
                      INVESTMENTS IN LIMITED PARTNERSHIPS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                      Year Ended December 31, 2000
                                        ---------------------------------------------------------------------------------------
                                                                                         Cash
                                         Balance         Capital                         Distri-      Equity          Balance
                                        January 1,       Contri-      Amortization      butions        in          December 31,
Limited Partnerships                     2001            butions       Acq costs        Received       Loss            2001
----------------------------            ----------       -------       -----------      --------    ----------       ---------
<S>                                     <C>              <C>          <C>               <C>         <C>              <C>


Charlotte                               $                $            $                 $           $                $
Hidden Pines Apartments
Jenks School Apartments                    894,213                                       (41,229)      216,729        1,069,713
Lakeside Apartments
Ramblewood Apartments
Santa Maria Apartments
Sunset Grove Apartments
Sunshine Canyon Apartments
Vicente Geigel Polanco Apts.
Village Apartments
Vista De Jagueyes
Westgate Apartments
                                        ----------       -------       -----------      --------    ----------       ----------
                                           894,213             -      $          -      $(41,229)   $  216,729       $1,069,713
                                        ==========       =======       ===========      ========    ==========       ==========
</TABLE>
<PAGE>
                                                                      SCHEDULE
                                                                     (CONTINUED)


                       REAL ESTATE ASSOCIATES LIMITED III
                       INVESTMENTS IN LIMITED PARTNERSHIPS
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                  Year Ended December 31, 1999
                                                                  ----------------------------
                                                                                        Cash
                                        Balance                                         Distri-         Equity          Balance
                                        January         Capital       Amortization      butions           in           December
Limited Partnerships                    1, 1999      Contributions      Acq costs       Received        Income         31, 1999
--------------------                    -------      -------------      ---------       --------        ------         --------
<S>                                  <C>             <C>              <C>            <C>             <C>             <C>
Charlotte                            $               $                $               $               $               $
Hidden Pines Apartments
Jenks School Apartments                   744,457                                         (41,229)        190,985         894,213
Lakeside Apartments
Ramblewood Apartments
Santa Maria Apartments
Sunset Grove Apartments
Sunshine Canyon Apartments
Vicente Geigel Polanco Apts.
Village Apartments
Vista De Jagueyes
Westgate Apartments                 -------------    ------------    -----------     ------------    ------------    ------------

                                     $    744,457    $          -     $         -    $    (41,229)   $    190,985    $    894,213
                                     ============    ============    ============    ============    ============    ============
</TABLE>
<PAGE>
                                                                      SCHEDULE
                                                                     (CONTINUED)


                       REAL ESTATE ASSOCIATES LIMITED III
          INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED
                        FROM AFFILIATES AND OTHER PERSONS
                                   YEARS ENDED
                        DECEMBER 31, 2001, 2000 AND 1999


NOTES:    1.      Equity in income (losses) of the limited partnerships
                  represents the Partnership's allocable share of the net loss
                  from the limited partnerships for the year. Equity in losses
                  of the limited partnerships will be recognized until the
                  investment balance is reduced to zero or below zero to an
                  amount equal to future capital contributions to be made by the
                  Partnership.

          2.      Cash distributions from the local limited partnerships will be
                  treated as a return on the investment and will reduce the
                  investment balance until such time as the investment is
                  reduced to an amount equal to additional contributions.
                  Distributions subsequently received will be recognized as
                  income.
<PAGE>
                                                                   SCHEDULE III

                       REAL ESTATE ASSOCIATES LIMITED III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                 OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS
                       IN WHICH REAL III HAS INVESTMENTS
                               DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                                     Buildings,
                                                                                    Furnishings
                                                                                   and Equipment-
                                                                                  Initial Cost to
                                                    Outstanding                   Partnership and
   Partnership/Location                   Number      Mortgage       Land          Amount Carried          Total
                                         of Units      Loan                     at Close of Period
<S>                                       <C>      <C>            <C>             <C>                  <C>
Charlottle Lakeview                         553    $ 11,950,614     $ 551,500      $ 19,229,621        $ 19,781,121
  Rochester, NY
Hidden Pines Apartments                      40       1,340,650        43,954         1,648,093           1,692,047
  Greenville, Michagan
Jenks School Apartments                      83       1,162,415        96,740         2,906,085           3,002,825
  Pawtucket, Rhode Island
Lakeside Apartments                          32         916,542        72,336         1,017,782           1,090,118
  Stuart, Florida
Ramblewood Apartments                        64       1,465,393        53,267         2,115,646           2,168,913
  Fort Payne, Alabama
Santa Maria Apartments                       86       2,719,471        86,106         3,462,966           3,549,072
  San German, Puerto Rico
Sunset Groove Apartments                     22         633,982        19,432           815,429             834,861
  Carson City, Michagan
Sunshine Canyon Apartments                   26         817,038        20,262         1,003,251           1,023,513
  Stanton, Michagan
Village Apartments                           50       1,417,626        65,245         1,777,618           1,842,863
  La Follette, Tennessee
Vicente Geigel Polanco Apts.                 80       2,514,934       107,685         3,066,458           3,174,143
  Issabela, Puerto Rico
Vista De Jagueyes                            73       2,423,461       102,554         3,257,806           3,360,360
  Aguas Buenas, Puerto Rico
Westgate Apartments                          72         915,836        80,000         1,487,142           1,567,142
  Albertville, Alabama
Additional basis of real estate
due to REAL III's capital
contribution to investee limited
partnership                                                            84,671         2,649,036           2,733,707
                                                   ------------   -----------      ------------        ------------


TOTAL                                      1181    $ 28,277,962   $ 1,383,752      $ 44,436,933        $ 45,820,685
                                                   ============   ===========      ============        ============
</TABLE>

<TABLE>
<CAPTION>
   Partnership/Location                  Accumulated     Construction
                                        Depreciation        Period
<S>                                     <C>              <C>
Charlottle Lakeview                     $ 17,122,764       (A)
  Rochester, NY
Hidden Pines Apartments                    1,645,247       1981
  Greenville, Michagan
Jenks School Apartments                    2,363,151       1981-1982
  Pawtucket, Rhode Island
Lakeside Apartments                          820,423       1980-1981
  Stuart, Florida
Ramblewood Apartments                      1,238,864       1980-1981
  Fort Payne, Alabama
Santa Maria Apartments                     2,397,913       1981-1982
  San German, Puerto Rico
Sunset Groove Apartments                     803,701       1981-1982
  Carson City, Michagan
Sunshine Canyon Apartments                   984,968       1981-1982
  Stanton, Michagan
Village Apartments                         1,329,098       1981-1982
  La Follette, Tennessee
Vicente Geigel Polanco Apts.               2,098,073       1981-1982
  Issabela, Puerto Rico
Vista De Jagueyes                          2,449,419       1981-1982
  Aguas Buenas, Puerto Rico
Westgate Apartments                          905,886       1980-1981
  Albertville, Alabama
Additional basis of real estate
due to REAL III's capital
contribution to investee limited
partnership                                1,975,138
                                        ------------


TOTAL                                   $ 36,134,645
                                        ============
</TABLE>

(A)  This project was completed when REAL III entered the local partnership.
<PAGE>
                                                                   SCHEDULE III
                                                                   (CONTINUED)


                       REAL ESTATE ASSOCIATES LIMITED III
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                        IN WHICH REAL III HAS INVESTMENTS
                        DECEMBER 31, 2001, 2000 AND 1999


     NOTES:       1.       Each local limited partnership has developed, owns
                           and operates the housing project. Substantially all
                           projects costs, including construction period
                           interest expense, were capitalized by the limited
                           partnerships.

                  2.       Depreciation is provided for by various methods over
                           the estimated useful lives of Projects. The estimated
                           composite useful lives of the buildings are generally
                           from 25 to 40 years.

                  3.       Investments in property and equipment:

<TABLE>
<CAPTION>
                                                   Buildings,
                                                  Furnishings
                                    Land          and Equipment         Total
                                ------------      ------------       ------------
<S>                             <C>               <C>                <C>
Balance, January 1, 1999        $  1,383,752      $ 44,817,687       $ 46,201,439

Net additions during 1999                 --           133,582            133,582
                                ------------      ------------       ------------

Balance, December 31, 1999         1,383,752        44,951,269         46,335,021

Net additions during 2000                 --           163,752            163,752
                                ------------      ------------       ------------

Balance, December 31, 2000         1,383,752        45,115,021         46,498,773

Net deletions during 2001                 --          (678,088)          (678,088)
                                ------------      ------------       ------------

Balance, December 31, 2001      $  1,383,752      $ 44,436,933       $ 45,820,685
                                ============      ============       ============
</TABLE>
<PAGE>
                                                                   SCHEDULE III
                                                                   (CONTINUED)


                       REAL ESTATE ASSOCIATES LIMITED III
              REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY
                       HELD BY LOCAL LIMITED PARTNERSHIPS
                        IN WHICH REAL III HAS INVESTMENTS
                                DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                   Buildings,
                                                                  Furnishings
                                                                      And
                                                                   Equipment
                                                                   ---------
       Accumulated Depreciation:
       -------------------------
<S>                                                              <C>
       Balance, January 1, 1998                                  $ 79,151,083

       Sales of Properties during 1998                            (50,235,484)

       Net additions during 1998                                    3,576,549
                                                                 ------------

       Balance, December 31, 1998                                  32,492,148

       Net additions during 1999                                    1,228,951
                                                                 ------------

       Balance, December 31, 1999                                  33,721,099

       Net additions during 2000                                    1,257,220
                                                                 ------------

       Balance, December 31, 2000                                  34,978,319

       Net additions during 2001                                    1,156,326
                                                                 ------------

       Balance, December 31, 2001                                $ 36,134,645
                                                                 ============
</TABLE>
<PAGE>
PART III.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

REAL ESTATE ASSOCIATES LIMITED III (the "Partnership") has no directors or
executive officers of its own.

Prior to December 30, 1998, NAPICO was a wholly owned subsidiary of Casden
Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. On
December 30, 1998, Casden Properties Operating Partnership, L.P., (the
"Operating Partnership") a majority owned subsidiary of Casden Properties Inc.,
a real estate investment trust organized by Alan I. Casden, purchased a 95.25%
economic interest in NAPICO. On March 11, 2002, NAPICO became wholly owned
subsidiary of Apartment Investment and Management Company. The following
biographical information is presented for the directors and executive officers
of NAPICO with principal responsibility for the Partnership's affairs.

CHARLES H. BOXENBAUM, 72, Chairman of the Board of Directors and Chief Executive
Officer of NAPICO.

Mr. Boxenbaum has been associated with NAPICO since its inception. He has been
active in the real estate industry since 1960, and prior to joining NAPICO was a
real estate broker with the Beverly Hills firm of Carl Rhodes Company. Mr.
Boxenbaum has been a member of the Board of Directors of Casden Properties Inc.
since 1998.

Mr. Boxenbaum has been a guest lecturer at national and state realty
conventions, certified properties exchanger's seminars, Los Angeles Town Hall,
National Association of Home Builders, International Council of Shopping
Centers, Society of Conventional Appraisers, California Real Estate Association,
National Institute of Real Estate Brokers, Appraisal Institute, various mortgage
banking seminars, and the North American Property Forum held in London, England.
He is one of the founders and a past director of the First Los Angeles Bank,
organized in November 1974. Since March 1995, Mr. Boxenbaum has served on the
Board of Directors of the National Housing Council. Mr. Boxenbaum received his
Bachelor of Arts degree from the University of Chicago.

BRUCE E. NELSON, 50, President, Chief Operating Officer and a director of
NAPICO.

Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is
responsible for the operations of all NAPICO sponsored limited partnerships.
Prior to that he was primarily responsible for the securities aspects of the
publicly offered real estate investment programs. Mr. Nelson is also involved in
the identification, analysis, and negotiation of real estate investments. Mr.
Nelson is a member of the Board of Directors of Casden Properties Inc. and is a
Director of the Affordable Housing Tax Credit Coalition.

From February 1979 to October 1980, Mr. Nelson held the position of Associate
General Counsel at Western Consulting Group, Inc., private residential and
commercial real estate syndicators. Prior to that time, Mr. Nelson was engaged
in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor
of Arts degree from the University of Wisconsin and is a graduate of the
University of Colorado School of Law. He is a member of the State Bar of
California and is a licensed real estate broker in California and Texas.

ALAN I. CASDEN, 56, Chairman of the Board of Directors and Chief Executive
Officer of Casden Properties Inc., a director and member of the audit committee
of NAPICO, and chairman of the Executive Committee of NAPICO.

Mr. Casden has been involved in approximately $3 billion of real estate
financings and sales and has been responsible for the development and
construction of more than 12,000 apartment units and 5,000 single-family homes
and condominiums.
<PAGE>
Mr. Casden is a member of the American Institute of Certified Public Accountants
and of the California Society of Certified Public Accountants. Mr. Casden is a
member of the advisory board of the National Multi-Family Housing Conference,
the Multi-Family Housing Council, the President's Council of the California
Building Industry Association and the Urban Land Institute. He also serves on
the Board of Trustees of the University of Southern California. He holds a
Bachelor of Science degree and a Masters in Business Administration degree from
the University of Southern California.

BRIAN H. SHUMAN, 39, Senior Vice President and Chief Financial Officer.

Mr. Shuman joined NAPICO in 2000, and is responsible for the financial affairs
of NAPICO, as well as the limited partnerships sponsored by it. From 1996 until
joining NAPICO in August 2000, Mr. Shuman was Vice President - Finance for
Preferred Health Management Inc., the largest provider of worker compensation
diagnostic imaging services in California formed in 1996, and was responsible
for establishing and managing the accounting, billing, collection , treasury and
financial reporting departments. From 1994 to 1996, he was the Controller for
DVI Business Credit Corporation, which provides asset based lending to a wide
range of health concerns. From 1985 to 1994, Mr. Shuman served in senior
management positions, as a director or manager of finance, a portfolio tax
analyst, and a senior accountant/tax consultant. He holds a Bachelor of Arts
degree in economics and accounting from the University of Maryland. Mr. Shuman
is a Certified Public Accountant and is a member of American Institute of
Certified Public Accountants and the California Society of Public Accountants.

PATRICIA W. TOY, 72, Senior Vice President - Communications and Assistant
Secretary.

Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the
Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a
U.S. Naval Officer in communications and personnel assignments. She holds a
Bachelor of Arts Degree from the University of Nebraska.

JEFFREY H. SUSSMAN, 35, Senior Vice President, General Counsel and Secretary.

Mr. Sussman joined NAPICO in 1998, and is responsible for the legal affairs of
NAPICO and its affiliates. He is also the President of NPEI and a member of the
preliminary investment committee. Prior to joining NAPICO in April 1998, Mr.
Sussman was an associate with the law firm of Rus, Miliband, Williams & Smith in
Irvine, California. His practice emphasized real estate finance and insolvency
law and included the representation of borrowers, lenders, and court-appointed
trustees in matters involving apartment complexes, retail centers and hotels.
Mr. Sussman received a Bachelor of Arts degree from the University of
California, Berkeley and Juris Doctor and Master in Business Administration
degrees from the University of Southern California. He is a member of the State
Bar of California, and holds Series 22, 39 and 63 licenses issued by the
National Association of Securities Dealers, Inc.

NAPICO and several of its officers, directors and affiliates, including Charles
H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on
June 25, 1997, of an administrative cease and desist order by the U.S.
Securities and Exchange Commission (the "Commission"), without admitting or
denying any of the findings made by the Commission. The Commission found that
NAPICO and others had violated certain federal securities laws in connection
with transactions unrelated to the Partnership. The Commission's order did not
impose any cost, burden or penalty on any partnership managed by NAPICO and does
not impact NAPICO's ability to serve as the Partnership's Managing General
Partner.
<PAGE>
ITEM 11.   MANAGEMENT RENUMERATION AND TRANSACTIONS

Real Estate Associates Limited III has no officers, employees or directors.
However, under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to pay the Corporate General Partner
an annual management fee. The annual management fee is approximately equal to .4
percent of the invested assets, including the Partnership's allocable share of
the mortgages related to real estate properties held by local limited
partnerships is to be paid to the general partners. The fee is earned beginning
in the month the Partnership makes its initial contribution to the limited
partnership. In addition, the Partnership reimburses the Corporate General
Partner for certain expenses.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT:

(a)      Security Ownership of Certain Beneficial Owners

         The general partners own all of the outstanding general partnership
         interests of REAL III; no person is known to own beneficially in excess
         of 5% of the outstanding limited partnership interests.

(b)      At December 31, 2001, security ownership of management is as listed:

<TABLE>
<CAPTION>
                                                                              Amount and            Percentage of
                                                                               Nature of             Outstanding
                                                 Name of                      Beneficial               Limited
Title of Class                              Beneficial Owner                    Owner             Partner Interests
--------------                              ----------------                    -----             -----------------
<S>                                     <C>                                   <C>                 <C>
Limited Partnership Interest            Coast Housing Investments
                                        Associates  (CHIA)
                                        9090 Wilshire Blvd., #201
                                        Beverly Hills, CA 90211                 30,000                     *

Limited Partnership Interest            Charles H. Boxenbaum
                                        780 Latimer Road
                                        Santa Monica, CA 90402                  17,500                     *

Limited Partnership Interest            Bruce E. Nelson
                                        7036 Grasswood Avenue
                                        Malibu, CA 90265                         5,000                     *
</TABLE>



*    Cumulative Limited Partnership interests owned by corporate officers or the
     general partner is less than 1% interest of total outstanding Limited
     Partnership interests.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

The Partnership has no officers, directors or employees of its own. All of its
affairs are managed by the Corporate General Partner, National Partnership
Investments Corp. The Partnership is obligated to NAPICO for an annual
management fee equal to .4 percent of the original remaining invested assets of
the limited partnerships. Invested assets is defined as the costs of acquiring
project interests, including the proportionate amount of the mortgage loans
related to the Partnership's interest in the capital accounts of the respective
partnerships. The management fee was $129,292 for the years ended December 31,
2001, 2000 and 1999.
<PAGE>
The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was $14,243, $11,349 and $16,488 in 2001, 2000 and 1999, respectively,
and is included in operating expenses.

An affiliate of NAPICO was the general partner in one of the limited
partnerships in which the partnership interest was sold on December 30, 1998,
and another affiliate received property management fees of approximately 5
percent of its revenue. The affiliate received property management fees of
$16,128 in 1998.

On December 30, 1998, the Partnership sold its limited partnership interests in
20 local limited partnerships, with a carrying value of $988,570, to the
Operating Partnership. The sale resulted in net proceeds to the Partnership of
$1,950,530 and a net gain of $2,647,716, after being relieved of notes and
interest payable of $1,947,962 and incurring selling cost of $262,206. In March
1999, the Partnership made cash distributions of $6,881,025 to the limited
partners and $69,506 to the general partners, which included using proceeds from
the sale of the partnership interests.

The Operating Partnership purchased such limited partner interests for cash,
which it raised in connection with a private placement of its equity securities.
The purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (ii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.

In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.


ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

FINANCIAL STATEMENTS

Report of Independent Public Accountants.

Balance Sheets as of December 31, 2001 and 2000.

Statements of Operations for the years ended December 31, 2001, 2000 and 1999.

Statements of Partners' Equity (Deficiency) for the years ended December 31,
2001, 2000 and 1999.

Statements of Cash Flow for the years ended December 31, 2001, 2000 and 1999.

Notes to Financial Statements.

FINANCIAL STATEMENT SCHEDULES
APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED III, REAL ESTATE ASSOCIATES AND THE
LIMITED PARTNERSHIPS IN WHICH REAL ESTATE ASSOCIATES LIMITED III AND REAL ESTATE
ASSOCIATES HAVE INVESTMENTS:

Schedule - Investments in Limited Partnerships, December 31, 2001, 2000 and
1999.

Schedule III - Real estate and accumulated depreciation, December 31, 2001, 2000
and 1999.
<PAGE>
The remaining schedules are omitted because the required information is included
in the financial statements and notes thereto or they are not applicable or not
required.

EXHIBITS

(3)   Articles of incorporation and bylaws: The registrant is not incorporated.
      The Partnership Agreement was filed with Form S-11 #268983 incorporated
      herein by reference.


(10)  Material contracts: The registrant is not party to any material contracts,
      other than the Restated Certificate and Agreement of Limited Partnership
      dated January 5, 1981, and the thirty-three contracts representing the
      Partnership investment directly or indirectly in local limited
      partnerships as previously filed at the Securities Exchange Commission,
      File 268983 which is hereby incorporated by reference.

REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the year ended December 31, 2001.
<PAGE>
                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Los Angeles,
State of California.


REAL ESTATE ASSOCIATES LIMITED III

By:    NATIONAL PARTNERSHIP INVESTMENTS CORP.
       General Partner


/s/ Charles H. Boxenbaum
----------------------------------------
Charles H. Boxenbaum
Chairman of the Board of Directors
and Chief Executive Officer


/s/ Bruce E. Nelson
----------------------------------------
Bruce E. Nelson
Director and President


/s/ Alan I. Casden
----------------------------------------
Alan I. Casden
Director


/s/ Brian H. Shuman
----------------------------------------
Brian H. Shuman
Chief Financial Officer