SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

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

                 For the fiscal year ended December 31, 2003

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

               For the transition period _________to _________

                         Commission file number 0-10673

                       REAL ESTATE ASSOCIATES LIMITED III
                 (Name of small business issuer in its charter)

         California                                           95-3547611
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)

                         55 Beattie Place, PO Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

                                 (864) 239-1000
                            Issuer's telephone number

        Securities registered under Section 12(b) of the Exchange Act:

                                      None

        Securities registered under Section 12(g) of the Exchange Act:

                      11,432 Limited Partnership Interests
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past ninety 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-KSB or any
amendment to this Form 10-KSB. [X]

State Issuer's revenue for its most recent fiscal year $16,000.

State the aggregate  market value of the voting  Partnership  interests  held by
non-affiliates  computed  by  reference  to the price at which  the  Partnership
interests  were sold,  or the average bid and asked  prices of such  Partnership
interests,  as of December  31,  2003.  No market for the  Registrant's  limited
partnership  interests exists, and, therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


<PAGE>

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Partnership operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Partnership's  financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Partnership  files  from  time to time with the  Securities  and
Exchange Commission.

                                     PART I.

ITEM 1.       Description of 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. 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. Since these two transactions,  REAL
III has not  received,  nor are limited  partners  required to make,  additional
capital  contributions.  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.

The  general  partners  of Real  Estate  Associates  Limited  III  are  National
Partnership  Investments Corp. ("NAPICO" or the "Corporate General Partner"),  a
California Corporation and National Partnership Investment 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.

 On December 3, 2001,  Casden  Properties Inc.,  entered into a merger agreement
and certain other transaction documents with Apartment Investment and Management
Company,  ("AIMCO"), a publicly traded real estate investment trust, and certain
of its subsidiaries, pursuant to which, on March 11, 2002, AIMCO acquired Casden
Properties Inc. and its subsidiaries,  including 100% of the outstanding capital
stock of NAPICO.
Prior to March 11, 2002, Casden Properties Inc. owned a 95.25% economic interest
in NAPICO, with the balance owned by Casden Investment Corporation ("CIC"). CIC,
which is wholly owned by Alan I. Casden, owned 95% of the voting common stock of
NAPICO prior to March 11, 2002.

REAL III holds limited  partnership  interests in nine local  partnerships  (the
"Local Partnerships") as of December 31, 2003, and a general partner interest in
Real Estate  Associates  ("REA").  The general  partners of REA are REAL III and
NAPICO.  During the year ended  December 31, 2003, two Local  Partnerships  sold
their investment properties.  During the year ended December 31, 2002, one Local
Partnership sold its investment property. In December 1998, the Partnership sold
its interest in 20 Local Partnerships. Each of the Local 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.


<PAGE>



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  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 Partnerships
is  limited  to  its  investment.   The  local  general  partner  of  the  Local
Partnerships 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 Partnerships,  but
otherwise  does  not  exercise  control  over  the  activities  and  operations,
including refinancing or selling decisions of the Local Partnerships.

Although each of the Local 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.

The  Partnership  does not have any  employees.  Services are  performed for the
Partnership by the Corporate General Partner and agents retained by it.

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 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.


<PAGE>



When the HAP  Contracts are subject to renewal,  there can be no assurance  that
the  Local  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.

Laws  benefiting   disabled  persons  may  result  in  the  Local  Partnerships'
incurrence of unanticipated expenses.  Under the Americans with Disabilities Act
of 1990,  or ADA,  all places  intended to be used by the public are required to
meet certain Federal requirements related to access and use by disabled persons.
Likewise,  the Fair Housing Amendments Act of 1988, or FHAA,  requires apartment
properties  first  occupied  after  March  13,  1990  to be  accessible  to  the
handicapped.  These  and  other  Federal,  state  and  local  laws  may  require
modifications to the Local Partnership's  properties, or restrict renovations of
the properties.  Noncompliance with these laws could result in the imposition of
fines or an award of damages to private  litigants  and also could  result in an
order to correct any  non-complying  feature,  which could result in substantial
capital  expenditures.  Although the Corporate General Partner believes that the
Local  Partnership's  properties are  substantially  in compliance  with present
requirements,  the Local Partnerships may incur unanticipated expenses to comply
with the ADA and the FHAA.

During  2003,  the projects in which REAL III had  invested  were  substantially
rented.  The  following is a schedule of the status as of December 31, 2003,  of
the projects owned by Local Partnerships in which REAL III is a limited partner.

                   SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
                          IN WHICH REAL III HAS AN INVESTMENT
                                   DECEMBER 31, 2003
<TABLE>
<CAPTION>

                                                     Units
                                                   Authorized
                                                   For Rental
                                     Financed   Assistance Under
                                     Insured       Section 8     Percentage of Percentage of
                                       And       Or Other Rent    Total Units   Total Units
                         No. of     Subsidized    Supplement       Occupied     Occupied
   Name and Location      Units       Under       Program (B)        2003          2002

<S>                        <C>                                        <C>           <C>
Charlotte Lakes Apts.      553         (A)             --             95%           93%
Rochester, NY

Jenks School Apts.          83         (B)             82             100%          99%
Pawtucket, RI

Lakeside Apts.              32         (C)             21              97%          96%
Stuart, FL

Ramblewood Apts.            64         (C)            13               86%          89%
Fort Payne, AL

Santa Maria Apts.           86         (C)             86             100%         100%
San German, Puerto
Rico

Village Apts.               51         (C)            50               97%           98%
La Follette, TN
</TABLE>




                   SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
                          IN WHICH REAL III HAS AN INVESTMENT
                             DECEMBER 31, 2003 (Continued)

<TABLE>
<CAPTION>

                                                     Units
                                                   Authorized
                                                   For Rental
                                     Financed   Assistance Under
                                     Insured     or Other Rent   Percentage of  Percentage of
                                       And         Supplement     Total Units   Total Units
                         No. of     Subsidized      Program       Occupied        Occupied
   Name and Location      Units       Under       Section 8 (B)       2003          2002

<S>                          <C>                       <C>           <C>           <C>
Vincente Geigel              80        (C)             80            100%          100%
Polanco Apts.
Isabela, Puerto
Rico

Vista De Jagueyes            73        (B)             73             75%          100%
Aguas Buenas, PR

Westgate Apts.               72        (C)             16             85%           95%
Albertville, AL

TOTALS                    1,094                       421
</TABLE>

(A)  The mortgage is insured by the Federal Housing Administration ("FHA") under
     the provisions of Section 236 of the National Housing Act.
(B)  The mortgage is insured by FHA under the provisions of Section 221(d)(3) of
     the National Housing Act.
(C)  The mortgage is insured by USDA, Rural Development.

During the year ended  December  31,  2003,  two Local  Partnerships  sold their
investment properties.

The following table details the Partnership's ownership percentages of the Local
Partnerships  and the cost of acquisition of such  ownership.  All interests are
limited partner  interests.  Also included is the total mortgage  encumbrance on
each property for each of the Local Partnerships as of December 31, 2003.

<TABLE>
<CAPTION>

                                      Real Estate
                                      Associates
                                      Limited III   Original Cost
                                      Percentage     of Ownership   Mortgage    Notes Payable and
              Partnership              Interest        Interest       Note      Accrued Interest
<S>                                       <C>         <C>          <C>              <C>
    Alabama Properties Ltd. V             99%         $   205      $ 1,448          $    --
    Charlotte Lake River
     Associates                           95%          10,500       11,951            1,005
    Village Apartment Ltd.                98%             210        1,402               --
    Lakeside Apartments Ltd.              95%              65          905               --
    Santa Maria Limited Dividend
     Partnership Assoc.                   99%             420        2,652               --
    Marina Del Ray Limited
     Dividend Partnership Assoc.          99%             395        2,471               --
    300 Broadway Assoc.                   98%             632          843               --
    Vista Housing Assoc. L.P.             98%             445        2,713               --
    Westgate Apartments, Ltd.             94%             218          886               --
                                                      $13,090      $25,271          $ 1,005
</TABLE>

Although each Local  Partnership in which the  Partnership  has invested owns an
apartment complex which must compete with other apartment complexes for tenants,
government  mortgage  interest and rent subsidies make it possible to rent units
to eligible  tenants at below  market  rates.  In general,  this  insulates  the
properties from market competition.

ITEM 2.       Description of Properties

See "Item 1" for the real estate owned by the Partnership  through the ownership
of limited partnership interests in Local Partnerships.

ITEM 3.       Legal Proceedings

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission of the transfer of partnership interests and an accounting.

On April 29, 2003, the court entered  judgment  against NAPICO and certain other
defendants  in the amount of  approximately  $25.2  million  for  violations  of
securities laws and against NAPICO for approximately  $67.3 million for breaches
of fiduciary  duty, both amounts plus interest of  approximately  $25.6 million,
and for punitive damages against NAPICO in the amount of $2.6 million.

On August 11, 2003,  Apartment  Investment and Management  Company ("AIMCO") and
NAPICO  entered  into  a  Stipulation  of  Settlement   (the   "Stipulation   of
Settlement")  with the  plaintiff  class (the  "Plaintiffs")  and their  counsel
relating  to the  settlement  of the  litigation.  The  principal  terms  of the
Stipulation of Settlement include,  among other things (1) payments in both cash
($29 million) and stock ($19  million) by Alan I. Casden,  on behalf of himself,
NAPICO and other defendants,  to the Plaintiffs,  (2) guaranteed  payments in an
aggregate  amount  of $35  million  ($7  million  per  year for 5  years),  plus
interest,  by NAPICO to the  Plaintiffs,  (3) a release of claims of all parties
associated with the litigation and (4) joint agreement by the parties to request
that a new judgment be entered in the litigation to, among other things, expunge
the judgment originally entered against NAPICO and the other defendants.

In connection with the Stipulation of Settlement, on August 12, 2003, NAPICO and
AIMCO executed a Settlement  Agreement  (the  "Settlement  Agreement")  with the
prior  shareholders  of  Casden  Properties,  Inc.  The  principal  terms of the
Settlement  Agreement  include,   among  other  things,  that  (1)  NAPICO  will
voluntarily  discontinue  the action it  commenced  on May 13, 2003  against the
former  shareholders  of Casden  Properties,  Inc. and other  indemnitors in the
Casden  Merger,  (2) Alan I. Casden and certain  related  entities  will resolve
certain  pending  claims for  indemnification  made by  NAPICO,  AIMCO and their
affiliates,  (3) AIMCO or an  affiliate  will  provide  $25  million  of the $29
million in cash that Alan I. Casden is obligated to provide under the Stipulaton
of Settlement in exchange for 531,915 shares of AIMCO Class A Common Stock owned
by The Casden Company,  and (4) The Casden Company will promise to pay to NAPICO
an  aggregate  amount of $35 million  ($7  million  per year for 5 years),  plus
interest,  on a secured,  nonrecourse  basis.  The Casden Company can prepay its
obligation  set forth in item (4) above in shares of AIMCO Class A Common  Stock
having a value based on the greater of $47 per share or the market value of such
shares at the time of payment.

On December 30, 2003,  the  Stipulation of Settlement  with the plaintiff  class
(the  "Plaintiffs")  and their counsel  relating to the settlement of litigation
against the Registrant,  National Partnership  Investments Corp.  ("NAPICO") and
certain  other  defendants  became  effective in accordance  with its terms.  In
addition,  on  December  30,  2003,  the  Settlement  Agreement  with the  prior
shareholders of Casden  Properties,  Inc.,  NAPICO and Apartment  Investment and
Management Company ("AIMCO") also closed in accordance with its terms.

In addition to the litigation  discussed above, the Corporate General Partner is
involved in various 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.

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

No matters were submitted to a vote of the unit holders through the solicitation
of proxies or otherwise during the quarter ended December 31, 2003.


<PAGE>

                                    PART II.

ITEM 5.       MARKET FOR THE  REGISTRANT'S  PARTNERSHIP  INTERESTS AND RELATED
              PARTNERSHIP 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;  therefore,  an investor may be unable to sell or otherwise dispose of
his or her interest in the  Partnership.  Limited  Partnership  Interests may be
transferred only if certain  requirements  are satisfied.  At December 31, 2003,
there were 1,844 registered holders of units in REAL III owning a total of 5,716
limited  partnership  units  (or  11,432  limited  partnership  interests).  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
Local  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.  In 2001, the  Partnership  paid a distribution  of $3,000,000 to the
limited partners.  In 2003, the Partnership made  distributions of approximately
$1,295,000 to the limited partners,  which involved using proceeds from the sale
of  partnership  interests  of  approximately  $210,000  and excess  reserves of
approximately $1,085,000 to the limited partners.

AIMCO and its affiliates owned 239 limited  partnership  units (the "Units") (or
478 limited partnership interests) in the Partnership  representing 4.18% of the
outstanding  Units  at  December  31,  2003.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates  will acquire Units in exchange for cash or a combination of cash and
units in AIMCO  Properties,  L.P., the operating  partnership  of AIMCO,  either
through private  purchases or tender offers.  Under the  Partnership  Agreement,
unitholders  holding a majority  of the Units are  entitled  to take action with
respect to a variety of matters that include,  but are not limited to, voting on
certain  amendments  to the  Partnership  Agreement  and  voting to  remove  the
Corporate General Partner. Although the Corporate General Partner owes fiduciary
duties to the limited partners of the Partnership, the Corporate General Partner
also owes fiduciary duties to AIMCO as its sole  stockholder.  As a result,  the
duties of the Corporate General Partner,  as corporate  general partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the Corporate General Partner to AIMCO, as its sole stockholder.

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This item should be read in conjunction with the financial  statements and other
items contained elsewhere in this document.

The Corporate  General  Partner  monitors  developments in the area of legal and
regulatory   compliance  and  is  studying  new  federal  laws,   including  the
Sarbanes-Oxley  Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests
additional compliance measures with regard to governance,  disclosure, audit and
other areas.  In light of these changes,  the  Partnership  expects that it will
incur higher expenses related to compliance, including increased legal and audit
fees.

Liquidity and Capital Resources

The properties in which the Partnership has invested, through its investments in
the Local Partnerships, receive one or more forms of assistance from the Federal
Government.  As a result,  the Local  Partnerships'  ability to  transfer  funds
either to the Partnership or among themselves in the form of cash distributions,
loans  or  advances  is  generally  restricted  by these  government  assistance
programs.   These  restrictions,   however,  are  not  expected  to  impact  the
Partnership's ability to meet its cash obligations.

The  Partnership's  primary sources of funds include interest income earned from
investing  available cash and distributions from the Local Partnerships in which
the  Partnership  has  invested.  It is not  expected  that  any  of  the  Local
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.

As of December 31, 2003 and 2002, the Partnership has cash and cash  equivalents
of approximately $1,172,000 and $2,076,000,  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 balances due to distributions in 2003 and decreasing interest
rates.  This  resulted  in the  Partnership  earning  approximately  $16,000 and
$44,000 in  interest  income for the years  ended  December  31,  2003 and 2002,
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.

During the year ended  December 31, 2003, the  Partnership  sold its interest in
Hidden Pines, a limited partnership,  to an unrelated third party and realized a
gain of approximately  $457,000.  The gain equaled the net proceeds  received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

During the year ended  December 31, 2003, the  Partnership  sold its interest in
Sunshine Canyon, a limited partnership, to an unrelated third party and realized
a gain of approximately  $245,000. The gain equaled the net proceeds received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

During the year ended  December 31, 2002, the  Partnership  sold its interest in
Sunset Grove, a limited partnership,  to an unrelated third party and realized a
gain of approximately  $210,000.  The gain equaled the net proceeds  received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

The Partnership distributed the following amounts during the year ended December
31, 2003 and 2002 (in thousands, except per unit data):

<TABLE>
<CAPTION>

                      Year Ended      Per Limited       Year Ended      Per Limited
                     December 31,     Partnership      December 31,     Partnership
                         2003             Unit             2002             Unit

<S>        <C>         <C>              <C>              <C>               <C>
Operations (1)         $1,085           $ 94.83          $   --            $    --
Sale (2)                  210             18.35              --                 --
                       $1,295           $113.18          $   --            $    --
</TABLE>

(1)   During the year ended December 31, 2003, it was determined  that a limited
      partner was overpaid  approximately  $4,500 of distributions.  The limited
      partner returned this amount during the year ended December 31, 2003.

(2)   Proceeds from the sale of Sunset Grove in 2002.

Except for money market funds, the Partnership's investments consist entirely of
interests in other Local Partnerships owning government assisted projects. Funds
temporarily not required for such  investments in projects are invested in money
market funds which  provide  interest  income as reflected in the  statements of
operations.  These  investments  can  be  readily  converted  to  cash  to  meet
obligations as they arise.

Results of Operations

At  December  31,  2003,  the   Partnership   had   investments  in  nine  Local
Partnerships,  all of which own housing  projects  that were  substantially  all
rented.  The Partnership,  as a limited partner,  does not exercise control over
the activities and operations, including refinancing or selling decisions of the
Local Partnerships.  Accordingly, the Partnership accounts for its investment in
the Local Partnerships using the equity method. Thus the individual  investments
are  carried  at cost plus the  Partnership's  share of the Local  Partnership's
profits  less  the  Partnership's  share  of  the  Local  Partnership's  losses,
distributions  and impairment  charges.  However,  since the  Partnership is not
legally  liable  for  the  obligations  of  the  Local  Partnerships,  or is not
otherwise committed to provide additional support to them, it does not recognize
losses  once its  investment  in each of the Local  Partnerships  reaches  zero.
Distributions  from the Local  Partnerships  are accounted for as a reduction of
the  investment  balance  until  the  investment  balance  is  reduced  to zero.
Subsequent  distributions  received are recognized as income in the accompanying
statements  of  operations.  For those  investments  where the  Partnership  has
determined that the carrying value of its investments approximates the estimated
fair value of those investments, the Partnership's policy is to recognize equity
in income (loss) of the Local  Partnerships  only to the extent of distributions
received,  and amortization of acquisition costs from those Local  Partnerships.
The Partnership  recognized  equity in income of  approximately  $83,000 for the
year  ended  December  31,  2003  compared  to equity  in loss of  approximately
$308,000 during the year ended December 31, 2002,  respectively,  from the Local
Partnerships.  Included  in  the  amount  for  2002  are  impairment  losses  of
approximately $300,000, related to a Local Partnership. There were no impairment
losses recorded for a Local Partnership during the year ended December 31, 2003.
During the years ended  December  31, 2003 and 2002,  the  Partnership  received
approximately  $29,000 and $34,000,  respectively,  in distributions  from Local
Partnerships  that were  recognized  as income in the  statements  of operations
since the Partnership's investment in the Local Partnerships has been reduced to
zero.

Partnership  revenues  consist  primarily of interest income earned on temporary
investment  of funds not  required for  investment  in Local  Partnerships.  The
decrease in interest  income for the year ended  December  31,  2003,  is due to
lower  interest  rates  combined with lower average cash balances  maintained in
interest bearing accounts.

An annual  management  fee is payable to the  Corporate  General  Partner of the
Partnership  and is  calculated  at 0.4  percent of the  Partnership's  invested
assets.  The  management  fee is paid to the Corporate  General  Partner for its
continuing management of the Partnership's affairs. The fee is payable beginning
with  the  month  following  the  Partnership's  initial  investment  in a Local
Partnership.  Management fees were  approximately  $125,000 and $129,000 for the
years ended December 31, 2003 and 2002, respectively.

Operating  expenses,  exclusive  of the  management  fee,  consist  of legal and
accounting  fees for  services  rendered  to the  Partnership  and  general  and
administrative  expenses.  Legal and accounting fees were approximately $190,000
and $208,000 for the years ended December 31, 2003 and 2002,  respectively.  The
decrease in legal fees during 2003 is related to a consent  solicitation lawsuit
that  originated in April 2001 and was dismissed in November  2002.  General and
administrative  expenses  were  approximately  $35,000 and $79,000 for the years
ended  December  31, 2003 and 2002,  respectively.  The  decrease in general and
administrative  expenses is attributable  to a decrease in the costs  associated
with the  preparation  and  filing of the  Partnership's  quarterly  and  annual
financial statements.

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  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.

AIMCO and its affiliates owned 239 limited  partnership  units (the "Units") (or
478 limited partnership interests) in the Partnership  representing 4.18% of the
outstanding  Units  at  December  31,  2003.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates  will acquire Units in exchange for cash or a combination of cash and
units in AIMCO  Properties,  L.P., the operating  partnership  of AIMCO,  either
through private  purchases or tender offers.  Under the  Partnership  Agreement,
unitholders  holding a majority  of the Units are  entitled  to take action with
respect to a variety of matters,  that included,  but are not limited to, voting
on certain  amendments  to the  Partnership  Agreement  and voting to remove the
Corporate General Partner. Although the Corporate General Partner owes fiduciary
duties to the limited partners of the Partnership, the Corporate General Partner
also owes fiduciary duties to AIMCO as its sole  stockholder.  As a result,  the
duties of the Corporate General Partner,  as corporate  general partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the Corporate General Partner to AIMCO, as its sole stockholder.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003,  and with respect to public  entities with  variable  interest
held before  February 1, 2003,  FIN 46 will apply to  financial  statements  for
periods ending after December 15, 2004.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in  unconsolidated  Local  Partnerships  that may be deemed variable
interest  entities under the provisions of FIN 46. The  Partnership  has not yet
determined  the  anticipated  impact of adopting FIN 46 for its  investments  in
Local  Partnerships  that  existed as of January 31, 2003.  However,  FIN 46 may
require the  consolidation of the assets,  liabilities and operations of certain
of the Partnership's unconsolidated investments in Local Partnerships.  Although
the Partnership does not believe the full adoption of FIN 46 will have an impact
on its cash flow, the Partnership  cannot make any definitive  conclusion on the
impact, if any, on net earnings until it completes its evaluation,  including an
evaluation of the Partnership's maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely deferred the provisions of SFAS 150 for finite life partnerships.

Critical Accounting Policies and Estimates

A summary of the Partnership's  significant  accounting  policies is included in
"Note 1 - Organization and Summary of Significant  Accounting Policies" which is
included in the financial  statements  in "Item 7.  Financial  Statements".  The
Corporate  General  Partner  believes that the  consistent  application of these
policies enables the Partnership to provide readers of the financial  statements
with useful and reliable  information about the Partnership's  operating results
and financial  condition.  The preparation of financial statements in conformity
with accounting  principles generally accepted in the United States requires the
Partnership to make estimates and  assumptions.  These estimates and assumptions
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial statements as well as reported amounts of revenues and expenses during
the  reporting  period.  Actual  results  could  differ  from  these  estimates.
Judgments  and  assessments  of  uncertainties  are  required  in  applying  the
Partnership's  accounting  policies in many areas.  The  following may involve a
higher degree of judgment and complexity.

Method of Accounting for Investments in Local Partnerships

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage (between 95% and 99%). The Partnership is also entitled to 99% of the
profits and losses of REA.  Distributions  of surplus cash from  operations from
most  of the  Local  Partnerships  are  restricted  by the  Local  Partnerships'
Regulatory  Agreements  with the United  States  Department of Housing and Urban
Development  ("HUD").  These  restrictions  limit the distribution to a portion,
generally  less than 10%, of the initial  invested  capital.  The excess surplus
cash is  deposited  into a  residual  receipts  reserve,  of which the  ultimate
realization by the  Partnership  is uncertain as HUD frequently  retains it upon
sale or  dissolution  of the Local  Partnership.  The  Partnership  is allocated
profits and losses and receives  distributions  from  refinancings  and sales in
accordance with the Local Partnerships' partnership agreements. These agreements
usually limit the Partnership's  distributions to an amount  substantially  less
than its ownership percentage in the Local Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the  Local  Partnership's  profits  less the  Partnership's  share of the  Local
Partnership's  losses,  distributions  and  impairment  charges.  See  "Note 1 -
Organization and Summary of Significant  Accounting  Policies" for a description
of the  impairment  policy.  The  Partnership  is not  legally  liable  for  the
obligations of the Local Partnerships and is not otherwise  committed to provide
additional  support to them.  Therefore,  it does not recognize  losses once its
investment in each of the Local  Partnerships  reaches zero.  Distributions from
the Local  Partnerships  are  accounted  for as a  reduction  of the  investment
balance until the  investment  balance is reduced to zero.  When the  investment
balance  has  been  reduced  to  zero,  subsequent  distributions  received  are
recognized as income in the accompanying statements of operations.


<PAGE>



For those  investments  where the  Partnership  has determined that the carrying
value  of its  investments  approximates  the  estimated  fair  value  of  those
investments,  the  Partnership's  policy is to recognize equity in income of the
Local Partnerships only to the extent of distributions received and amortization
of acquisition costs from those Local Partnerships.  Therefore,  the Partnership
limits its recognition of equity earnings to the amount it expects to ultimately
realize.


<PAGE>



Item 7.     Financial Statements

REAL ESTATE ASSOCIATES LIMITED III

LIST OF FINANCIAL STATEMENTS


      Report of Ernst & Young, LLP Independent Auditors

      Balance Sheet - December 31, 2003

      Statements of Operations - Years ended December 31, 2003 and 2002

      Statements  of Changes in  Partners'  (Deficiency)  Equity - Years ended
      December 31, 2003 and 2002

      Statements of Cash Flows - Years ended December 31, 2003 and 2002

      Notes to Financial Statements



<PAGE>


                   Report of Independent Public Accountants



To Partners
Real Estate Associates Limited III


We have audited the accompanying balance sheet of Real Estate Associates Limited
III as of December 31, 2003, and the related statements of operations, partners'
(deficiency)  equity,  and cash  flows for each of the two  years in the  period
ended December 31, 2003. These financial  statements are the  responsibility  of
the  Partnership's  management.  Our  responsibility is to express an opinion on
these financial  statements based on our audits.  We 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  a
substantial  portion  of the  investee  information  in Note 2 and  Note 6.  The
financial  statements  of  these  limited  partnerships  were  audited  by other
auditors whose 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. 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  Partnership  management,  as well as evaluating  the overall  financial
statement presentation.  We believe that our audits and the reports of the other
auditors provide a reasonable basis for our opinion.

In our opinion, based upon our audits and the reports of the other auditors, the
financial statements referred to above present fairly, in all material respects,
the  financial  position of Real Estate  Associates  Limited III at December 31,
2003,  and the results of its  operations and its cash flows for each of the two
years in the period ended  December  31, 2003,  in  conformity  with  accounting
principles generally accepted in the United States.



                                                          /s/Ernst & Young LLP
Greenville, South Carolina
April 16, 2004


<PAGE>



                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                                  BALANCE SHEET
                                 (in thousands)

                                DECEMBER 31, 2003



                           Assets

  Investments in local partnerships (Note 2)                      $ 102
  Cash and cash equivalents                                        1,172
       Total assets                                              $ 1,274

        Liabilities and partners'(deficiency) equity

Liabilities:
  Accounts payable and accrued expenses                            $ 6

Contingencies (Note 7)

Partners' (deficiency) equity:
  General partners                                               $ (143)
  Limited partners                                                 1,411
                                                                   1,268

       Total liabilities and partners' (deficiency) equity       $ 1,274


                See Accompanying Notes to Financial Statements



<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                           STATEMENTS OF OPERATIONS
                   (in thousands, except per interest data)

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                                                 2003             2002

<S>                                                              <C>              <C>
Interest income                                                  $ 16             $ 44

Operating expenses:
  Legal and accounting                                              190             208
  Management fees - general partner (Note 3)                        125             129
  General and administrative (Note 3)                                35              79
      Total operating expenses                                      350             416

Loss from partnership operations                                   (334)           (372)
Gain on sale of local partnership interest (Note 2)                 702             210
Distributions from local partnerships
    recognized as income (Note 2)                                    29              34
Equity in income (loss) of local partnerships and
     amortization of acquisition costs (Note 2)                      83            (308)

Net income (loss)                                               $ 480            $ (436)

Net income (loss) allocated to general partners (1%)                  5              (4)
Net income (loss) allocated to limited partners (99%)               475            (432)
                                                                $ 480            $ (436)
Net income (loss) per limited partnership interest
  (Note 1)                                                     $ 41.51          $(37.71)
Distributions per limited partnership interest                 $ 113.18         $    --


                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

            STATEMENTS OF CHANGES IN PARTNERS' (DEFICIENCY) EQUITY
                     (in thousands, except interest data)

<TABLE>
<CAPTION>

                                                     General        Limited
                                                    Partners        Partners        Total
Partnership interests (A)                                            11,432

Partners' (deficiency) equity,
<S>       <C>                                      <C>           <C>             <C>
  January 1, 2002                                  $  (144)      $    2,663      $   2,519

Net loss for the year ended
  December 31, 2002                                     (4)            (432)          (436)

Partners' (deficiency) equity,
  January 1, 2003                                     (148)           2,231          2,083

Distributions to partners                               --           (1,295)        (1,295)

Net income for the year ended
  December 31, 2003                                      5              475            480

Partners' (deficiency) equity,
  December 31, 2003                                $  (143)        $  1,411        $ 1,268

(A)   Consists  of 5,716  limited  partnership  units (the  "Units")  (or 11,432
      limited  partnership  interests)  at December  31, 2003 and 5,721  limited
      partnership  units (or 11,442 limited  partnership  interests) at December
      31, 2002. A Unit  consists of two limited  partnership  interests.  During
      2003, 10 limited  partnership  interests  were  abandoned.  (see "Note 5 -
      Abandonment of Interests").

                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                            STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                                                    2003            2002

Cash flows from operating activities:
<S>                                                           <C>              <C>
  Net income (loss)                                           $    480         $   (436)
  Adjustments to reconcile net income (loss) to net
    cash used in operating activities:
      Gain on sale of local partnership interests                 (702)            (210)
      Equity in (income) loss of local partnerships and
        amortization of acquisition costs                          (83)             308
      Decrease in advances due to affiliates                        (5)              --
      (Decrease) increase in accounts payable and
         accrued expenses                                          (84)              26
         Net cash used in operating activities                    (394)            (312)

Cash flows from investing activities:
  Distributions from local partnership recognized
   as return of capital                                             83               --
  Proceeds from sale of local partnership interests                702              210
         Net cash provided by investing activities                 785              210

Cash flows used in financing activities:
  Distributions to partners                                     (1,295)              --

Net decrease in cash and cash equivalents                         (904)            (102)

Cash and cash equivalents, beginning of year                     2,076            2,178

Cash and cash equivalents, end of year                        $  1,172         $  2,076


                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>



                       REAL ESTATE ASSOCIATES LIMITED III
                       (A California limited partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 2003


1.  Organization and Summary of Significant Accounting Policies

Organization

Real Estate  Associates  Limited III (the  "Partnership",  or "Registrant")  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" or the "Corporate General Partner"),  a
California  Corporation and National Partnership Investment Associates ("NAPIA")
a limited partnership. The business of the Partnership is conducted primarily by
NAPICO.

 On December 3, 2001,  Casden  Properties Inc.,  entered into a merger agreement
and certain other transaction documents with Apartment Investment and Management
Company,  ("AIMCO"), a publicly traded real estate investment trust, and certain
of its subsidiaries, pursuant to which, on March 11, 2002, AIMCO acquired Casden
Properties Inc. and its subsidiaries,  including 100% of the outstanding capital
stock of NAPICO.  Prior to March 11, 2002, Casden Properties Inc. owned a 95.25%
economic  interest  in  NAPICO,  with the  balance  owned by  Casden  Investment
Corporation ("CIC").  CIC, which is wholly owned by Alan I. Casden, owned 95% of
the voting common stock of NAPICO prior to March 11, 2002.

The general  partners  have a one 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.

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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  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 local limited  partnerships  (the "Local  Partnerships")  are
accounted for on the equity method. Acquisition,  selection fees and other costs
related  to the  acquisition  of the  projects  are  capitalized  as part of the
investment  account and are being amortized by the straight line method over the
estimated lives of the underlying assets, which is generally 30 years.

Net Income (Loss) Per Limited Partnership Interest

Net income (loss) per limited partnership  interest was computed by dividing the
limited  partners'  share  of  net  income  (loss)  by  the  number  of  limited
partnership  interests  outstanding  at the beginning of the year. The number of
limited partnership interests was 11,432 and 11,442 for the years ended December
31,  2003 and  2002,  respectively.  During  2003 and  2002,  10 and 14  limited
partnership interests were abandoned, respectively.

Cash and Cash Equivalents

Cash and cash  equivalents  include  cash in banks and money  market  funds.  At
certain  times,  the amount of cash  deposited at a bank may exceed the limit on
insured deposits. Cash balances include approximately $1,172,000 at December 31,
2003  that are  maintained  by an  affiliated  management  company  on behalf of
affiliated entities in cash concentration accounts.

Impairment of Long-Lived Assets

The  Partnership  reviews its  investments in 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.
Impairment  losses of  approximately  $300,000 were  recognized  during the year
ended December 31, 2002.  There were no impairment  losses  recorded  during the
year ended December 31, 2003.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About
Fair  Value  of  Financial  Instruments,"  requires  disclosure  of  fair  value
information about significant  financial  instruments.  The Partnership believes
that the carrying amount of other assets and liabilities reported on the balance
sheet  that  require  such  disclosure  approximates  fair  value  due to  their
short-term maturity.

Segment Reporting

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information"  established standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments in interim financial reports.  SFAS No. 131 also establishes  standards
for related disclosures about products and services, geographic areas, and major
customers.  As defined in SFAS No. 131, the  Partnership has only one reportable
segment.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003,  and with respect to public  entities with  variable  interest
held before  February 1, 2003,  FIN 46 will apply to  financial  statements  for
periods ending after December 15, 2004.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in  unconsolidated  Local  Partnerships  that may be deemed variable
interest  entities under the provisions of FIN 46. The  Partnership  has not yet
determined  the  anticipated  impact of adopting FIN 46 for its  investments  in
Local  Partnerships  that  existed as of January 31, 2003.  However,  FIN 46 may
require the  consolidation of the assets,  liabilities and operations of certain
of the Partnership's unconsolidated investments in Local Partnerships.  Although
the Partnership does not believe the full adoption of FIN 46 will have an impact
on its cash flow, the Partnership  cannot make any definitive  conclusion on the
impact, if any, on net earnings until it completes its evaluation,  including an
evaluation of the Partnership's maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely deferred the provisions of SFAS 150 for finite life partnerships.


<PAGE>

2.  Investments in Local Partnerships

As of December 31, 2003, the Partnership holds limited partnership  interests in
nine Local  Partnerships.  In addition,  the Partnership holds a general partner
interest in Real Estate Associates ("REA").  NAPICO is also a general partner in
REA.  The  Local   Partnerships  own  residential  low  income  rental  projects
consisting of 1,094  apartment  units.  The mortgage loans of these projects are
payable to or insured by various governmental agencies.

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage  (between 94.9% and 99%). The  Partnership is also entitled to 99% of
the profits and losses of REA.  Distributions  of surplus  cash from  operations
from most of the Local  Partnerships  are restricted by the Local  Partnerships'
Regulatory  Agreements  with the United  States  Department of Housing and Urban
Development  ("HUD").  These  restrictions  limit the distribution to a portion,
generally  less than 10%, of the initial  invested  capital.  The excess surplus
cash is  deposited  into a  residual  receipts  reserve,  of which the  ultimate
realization by the  Partnership  is uncertain as HUD frequently  retains it upon
sale or  dissolution  of the Local  Partnership.  The  Partnership  is allocated
profits and losses and receives  distributions  from  refinancings  and sales in
accordance with the Local Partnerships' partnership agreements. These agreements
usually limit the Partnership's  distributions to an amount  substantially  less
than its ownership percentage in the Local Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the  Local  Partnership's  profits  less the  Partnership's  share of the  Local
Partnership's  losses,  distributions  and  impairment  charges.  See  "Note 1 -
Organization and Summary of Significant  Accounting  Policies" for a description
of the  impairment  policy.  The  Partnership  is not  legally  liable  for  the
obligations of the Local Partnerships and is not otherwise  committed to provide
additional  support to them.  Therefore,  it does not recognize  losses once its
investment in each of the Local  Partnerships  reaches zero.  Distributions from
the Local  Partnerships  are  accounted  for as a  reduction  of the  investment
balance until the  investment  balance is reduced to zero.  When the  investment
balance  has  been  reduced  to  zero,  subsequent  distributions  received  are
recognized as income in the accompanying statements of operations.

For those  investments  where the  Partnership  has determined that the carrying
value  of its  investments  approximates  the  estimated  fair  value  of  those
investments,  the  Partnership's  policy is to recognize equity in income of the
Local Partnerships only to the extent of distributions received and amortization
of acquisition costs from those Local Partnerships.  Therefore,  the Partnership
limits its recognition of equity earnings to the amount it expects to ultimately
realize.

At  December  31,  2003,  the  investment  balance  in eight  of the nine  Local
Partnerships had been reduced to zero.

The following is a summary of the investments in Local Partnerships for the year
ended December 31, 2003 (in thousands):


Investment balance, beginning of year                   $  102
Equity in income of Local Partnerships                      84
Amortization of acquisition costs                           (1)
Distributions from Local Partnerships recognized
  as a reduction of investment balance                     (83)
Investment balance, end of year                         $  102

The  Partnership  determined  that its  investment  balance  in one of its Local
Partnerships  was impaired and  recognized an impairment  loss of  approximately
$300,000  during the year ended December 31, 2002.  There was no impairment loss
recognized during the year ended December 31, 2003.

Following  is  selected  unaudited  financial   information  from  the  combined
financial  statements  at December 31, 2003 and for each of the two years in the
period  ended  December  31,  2003,  of the  Local  Partnerships  in  which  the
Partnership has investments:

            Condensed Combined Balance Sheet of the Local Partnerships
                                 (in thousands)

                                                    December 31,
                                                        2003
Assets
  Land                                               $  1,253
  Building and improvements, net of accumulated
   depreciation of approximately $32,738                6,833
  Other assets                                          3,247
Total assets                                         $ 11,333

Liabilities and Partners Deficit:
Liabilities:
  Mortgage notes payable                             $ 25,271
  Notes payable                                         1,005
  Other liabilities                                     1,668
                                                       27,944
Partners' deficit                                     (16,611)

Total Liabilities and Partners' Deficit              $ 11,333


        Condensed Combined Results of Operations of the Local Partnerships
                                 (in thousands)
                                                       Years ended December 31,
                                                         2003            2002
                                                                      (Restated)

Rental and other income                                $ 6,127         $ 6,085

Expenses:
Operating expenses                                       4,197           3,992
Financial expenses                                       1,424           1,556
Depreciation                                               892           1,216
Total expenses                                           6,513           6,764

Net loss                                               $  (386)        $  (679)

The  operations of Hidden Pines and Sunshine  Canyon have been excluded from the
condensed  combined  results of operation for both periods  presented due to the
sale of the Partnership's  interests in the Local  Partnerships  during 2003. In
addition,  the operations of Sunset Grove have been excluded for 2002 due to the
sale of the Partnership's interest in the Local Partnership during 2002.

Charlotte Lakes River Associates,  one of the Local Partnerships,  is a 553-unit
apartment  building  in  Rochester,  New  York.  The  Managing  General  Partner
("Managing  General  Partner")  is the Finch  Group and Real  Estate  Associates
Limited III is the Limited Partner ("Limited Partner").  Currently, the mortgage
on the property is in default,  as cash generated  from property  operations has
been insufficient to meet required  principal and interest payments due pursuant
to the loan agreement, placing the property at risk of foreclosure. The Managing
General Partner has entered into formal  negotiations  with the lender and local
housing  agencies in an attempt to  negotiate a  forbearance,  a cure plan,  and
strategy to return the property to positive cash flow.  The  Partnership  has no
investment balance in the Local Partnership.

During the year ended  December 31, 2003, the  Partnership  sold its interest in
Hidden Pines, a limited partnership,  to an unrelated third party and realized a
gain of approximately  $457,000.  The gain equaled the net proceeds  received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

During the year ended  December 31, 2003, the  Partnership  sold its interest in
Sunshine Canyon, a limited partnership, to an unrelated third party and realized
a gain of approximately  $245,000. The gain equaled the net proceeds received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

During the year ended  December 31, 2002, the  Partnership  sold its interest in
Sunset Grove, a limited partnership,  to an unrelated third party and realized a
gain of approximately  $210,000.  The gain equaled the net proceeds  received by
the Partnership,  as the Partnership had no remaining investment balance related
to this Local Partnership.

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  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.

3.  Transactions with Affiliated Parties

Under the terms of the Restated  Certificate and Agreement of Limited  Partners,
the Partnership is obligated to NAPICO for an annual management fee equal to 0.4
percent of the  invested  assets.  Invested  assets are  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 Local Partnerships. The management fee incurred for each of the years
ended  December 31, 2003 and 2002,  was  approximately  $125,000  and  $129,000,
respectively.

The Partnership  reimburses  NAPICO for certain  expenses.  The reimbursement to
NAPICO was  approximately  $14,000 for each of the years ended December 31, 2003
and 2002 and is included in general and administrative expenses.

AIMCO and its affiliates owned 239 limited  partnership  units (the "Units") (or
478 limited partnership interests) in the Partnership  representing 4.18% of the
outstanding  Units  at  December  31,  2003.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates  will acquire Units in exchange for cash or a combination of cash and
units in AIMCO  Properties,  L.P., the operating  partnership  of AIMCO,  either
through private  purchases or tender offers.  Under the  Partnership  Agreement,
unitholders  holding a majority  of the Units are  entitled  to take action with
respect to a variety of matters,  that included,  but are not limited to, voting
on certain  amendments  to the  Partnership  Agreement  and voting to remove the
Corporate General Partner. Although the Corporate General Partner owes fiduciary
duties to the limited partners of the Partnership, the Corporate General Partner
also owes fiduciary duties to AIMCO as its sole  stockholder.  As a result,  the
duties of the Corporate General Partner,  as corporate  general partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the Corporate General Partner to AIMCO, as its sole stockholder.

4.  Income Taxes

The  Partnership  is not taxed on its income.  The  partners  are taxed in their
individual  capacities based upon their  distributive share of the Partnership's
taxable  income  or  loss  and are  allowed  the  benefits  to be  derived  from
off-setting  their  distributive  share of the tax losses against taxable income
from other sources  subject to passive loss  limitations.  The taxable income or
loss differs from  amounts  included in the  statements  of  operations  because
different  methods are used in determining the losses of the Local  Partnerships
as  discussed  below.  The tax  loss  is  allocated  to the  partner  groups  in
accordance with Section 704(b) of the Internal Revenue Code and therefore is not
necessarily proportionate to the interest percentage owned.

A reconciliation follows:

                                                  Years Ended December 31,
                                                     2003            2002
                                                       (in thousands)

Net income (loss) per financial statements        $   480          $  (436)

  Other                                              (412)             110
  Partnership's share of Local Partnership          2,062            1,090
Income per tax return                             $ 2,130          $   764
Net income per limited partnership interest       $184.29          $ 66.77

The following is a reconciliation between the Partnership's reported amounts and
the federal tax basis of net assets (liabilities):

                                                   December 31, 2003
                                                     (in thousands)

      Net assets as reported                           $  1,268
      Add (deduct):
       Investment in Local Partnerships                 (15,614)
        Deferred offering expenses                        3,896
       Other                                                619
      Net deficit - federal tax basis                  $ (9,831)


<PAGE>



5.    Abandonment of Limited Partnership Interests

During  the years  ended  December  31,  2003 and 2002,  the  number of  limited
partnership  interests decreased by 10 and 14 due to limited partners abandoning
their interest(s).  In abandoning his or her limited  partnership  interests,  a
limited partner  relinquishes all right,  title, and interest in the partnership
as of the date of abandonment.  However, the limited partner is allocated his or
her share of net  income or loss for that year.  The income or loss per  limited
partnership interest in the accompanying  consolidated  statements of operations
is calculated  based on the number of interests  outstanding at the beginning of
the year.

6.        Real Estate and  Accumulated  Depreciation  of Local  Partnerships  in
          which Real III Has Invested

The  following  is a  summary  of  real  estate,  accumulated  depreciation  and
encumbrances  of the  Local  Partnerships  in which  REAL III has  invested  (in
thousands):


<TABLE>
<CAPTION>

                                         Buildings
                                            And
                                          Related
                                         Personal            Accumulated   Date of
     Description       Encumbrance Land   Property  Total(2)  Depreciation Construction (2)

Alabama Properties
<S>                       <C>    <C>     <C>       <C>       <C>          <C>  <C>
 Ltd. V                   (1)    $   53  $ 2,137   $ 2,190   $ 1,351      1980-1981
Charlotte River
 Assoc.                   (1)       552   19,438    19,990    17,958        1980
Village Apartments
 Ltd.                     (1)        65    1,856     1,921     1,431      1981-1982
Lakeside Apts. Ltd.       (1)        72    1,018     1,090       840      1980-1981
Santa Maria Ltd.
 Dividend
 Partnership Assoc.       (1)       107    3,489     3,596     2,605      1981-1982
300 Broadway Assoc.       (1)        97    3,707     3,804     2,595      1981-1982
Vista Housing Assoc.      (1)       103    3,287     3,390     2,665      1981-1982
Westgate Apt. Ltd.        (1)        80    1,504     1,584       996      1980-1981
Marina Del Ray
 Ltd. Dividend
 Partnership Assoc.       (1)       124    3,135     3,259     2,297      1981-1982
Total                     (1)    $1,253  $39,571   $40,824   $32,738
</TABLE>

(1)    Schedule of Encumbrances

<TABLE>
<CAPTION>

                                                                   Notes
                                                                 Payable and
                                                   Mortgage       Accrued
Partnership Name                                    Notes        Interest      Total
                                                               (in thousands)
<S>                                                <C>            <C>         <C>
Alabama Properties Ltd. V                          $ 1,448        $    --     $ 1,448
Charlotte River Assoc.                              11,951          1,005      12,956
Village Apartments Ltd.                              1,402             --       1,402
Lakeside Apartments Ltd.                               905             --         905
Santa Maria Limited Dividend
 Partnership Assoc.                                  2,652             --       2,652
Maria Del Day Ltd. Dividend Partnership Assoc.       2,471             --       2,471
300 Broadway Assoc.                                    843             --         843
Vista Housing Assoc.                                 2,713             --       2,713
Westgate Apts. Ltd.                                    886             --         886
Total - December 31, 2003                          $25,271        $ 1,005     $26,276
</TABLE>

(2) Reconciliation of real estate

                                                 Years Ended December 31,
                                                   2003           2002
                                                      (in thousands)
       Real Estate:

Balance at beginning of period                   $ 43,346       $ 43,901
Improvements during the period                        251            340
Disposals of rental properties                     (2,773)          (895)
Balance at end of period                         $ 40,824       $ 43,346

       Reconciliation of accumulated depreciation

                                                 Years Ended December 31,
                                                   2003           2002
                                                      (in thousands)
       Accumulated Depreciation:

Balance at beginning of period                   $ 34,508       $ 34,159
Depreciation expense for the period                   892          1,213
Disposals of rental properties                     (2,662)          (864)
Balance at end of period                         $ 32,738       $ 34,508


<PAGE>



7. CONTINGENCIES

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission of the transfer of partnership interests and an accounting.

On April 29, 2003, the court entered  judgment  against NAPICO and certain other
defendants  in the amount of  approximately  $25.2  million  for  violations  of
securities laws and against NAPICO for approximately  $67.3 million for breaches
of fiduciary  duty, both amounts plus interest of  approximately  $25.6 million,
and for punitive damages against NAPICO in the amount of $2.6 million.

On August 11, 2003,  Apartment  Investment and Management  Company ("AIMCO") and
NAPICO  entered  into  a  Stipulation  of  Settlement   (the   "Stipulation   of
Settlement")  with the  plaintiff  class (the  "Plaintiffs")  and their  counsel
relating  to the  settlement  of the  litigation.  The  principal  terms  of the
Stipulation of Settlement include,  among other things (1) payments in both cash
($29 million) and stock ($19  million) by Alan I. Casden,  on behalf of himself,
NAPICO and other defendants,  to the Plaintiffs,  (2) guaranteed  payments in an
aggregate  amount  of $35  million  ($7  million  per  year for 5  years),  plus
interest,  by NAPICO to the  Plaintiffs,  (3) a release of claims of all parties
associated with the litigation and (4) joint agreement by the parties to request
that a new judgment be entered in the litigation to, among other things, expunge
the judgment originally entered against NAPICO and the other defendants.

In connection with the Stipulation of Settlement, on August 12, 2003, NAPICO and
AIMCO executed a Settlement  Agreement  (the  "Settlement  Agreement")  with the
prior  shareholders  of  Casden  Properties,  Inc.  The  principal  terms of the
Settlement  Agreement  include,   among  other  things,  that  (1)  NAPICO  will
voluntarily  discontinue  the action it  commenced  on May 13, 2003  against the
former  shareholders  of Casden  Properties,  Inc. and other  indemnitors in the
Casden  Merger,  (2) Alan I. Casden and certain  related  entities  will resolve
certain  pending  claims for  indemnification  made by  NAPICO,  AIMCO and their
affiliates,  (3) AIMCO or an  affiliate  will  provide  $25  million  of the $29
million in cash that Alan I. Casden is obligated to provide under the Stipulaton
of Settlement in exchange for 531,915 shares of AIMCO Class A Common Stock owned
by The Casden Company,  and (4) The Casden Company will promise to pay to NAPICO
an  aggregate  amount of $35 million  ($7  million  per year for 5 years),  plus
interest,  on a secured,  nonrecourse  basis.  The Casden Company can prepay its
obligation  set forth in item (4) above in shares of AIMCO Class A Common  Stock
having a value based on the greater of $47 per share or the market value of such
shares at the time of payment.

On December 30, 2003,  the  Stipulation of Settlement  with the plaintiff  class
(the  "Plaintiffs")  and their counsel  relating to the settlement of litigation
against the Registrant,  National Partnership  Investments Corp.  ("NAPICO") and
certain  other  defendants  became  effective in accordance  with its terms.  In
addition,  on  December  30,  2003,  the  Settlement  Agreement  with the  prior
shareholders of Casden  Properties,  Inc.,  NAPICO and Apartment  Investment and
Management Company ("AIMCO") also closed in accordance with its terms.

In addition to the litigation  discussed above, the Corporate General Partner is
involved in various 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.

Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the  Central  Regional  Office of the  United  States  Securities  and  Exchange
Commission is conducting an  investigation  relating to certain  matters.  AIMCO
believes the areas of investigation  include AIMCO's  miscalculated  monthly net
rental  income  figures in third  quarter 2003,  forecasted  guidance,  accounts
payable,  rent concessions,  vendor rebates,  and capitalization of expenses and
payroll.  AIMCO is cooperating  fully.  AIMCO does not believe that the ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition or results of operations  taken as a whole.  Similarly,  the Corporate
General Partner does not believe that the ultimate  outcome will have a material
adverse effect on the Partnership's financial condition or results of operations
taken as a whole.



<PAGE>



ITEM 8.       CHANGES IN AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

None.

ITEM 8A.    CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the Corporate  General Partner,  who are the equivalent of the  Partnership's
principal executive officer and principal financial officer,  respectively,  has
evaluated  the  effectiveness  of  the  Partnership's  disclosure  controls  and
procedures (as such term is defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report.  Based on such  evaluation,  the principal
executive  officer and  principal  financial  officer of the  Corporate  General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal  financial officer,  respectively,  have concluded that, as of the
end of such period,  the  Partnership's  disclosure  controls and procedures are
effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fourth quarter of 2003 that have materially  affected,  or are reasonably likely
to  materially  affect,  the  Partnership's   internal  control  over  financial
reporting.


<PAGE>


                                    PART III.

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

Real Estate Associates  Limited III (the  "Partnership" or the "Registrant") has
no directors or officers.  The general  partner  responsible  for conducting the
business  of  the  Partnership  is  National  Partnership   Investments  Corp  a
California Corporation ("NAPICO" or the "Corporate General Partner").

The names and ages of, as well as the positions and offices held by, the present
directors  and officers of NAPICO are set forth  below:  The  Corporate  General
Partner manages and controls  substantially all of the Partnership's affairs and
has general  responsibility  and ultimate authority in all matters affecting its
business.  There are no family  relationships  between or among any directors or
officers.

Peter K. Kompaniez              58    Director
David R. Robertson              37    President, Chief Executive Officer
                                        and Director
Charles McKinney                52    Senior Vice President and Director
                                        of Asset Management
Jeffrey H. Sussman              38    Senior Vice President, General
                                        Counsel and Secretary
Brian H. Shuman                 41    Senior Vice President and Chief
                                        Financial Officer

Peter K.  Kompaniez has been Director of the Corporate  General  Partner since
April 1, 2002. Mr.  Kompaniez has been Vice Chairman of the Board of Directors
of AIMCO  since  July  1994 and was  appointed  President  in July  1997.  Mr.
Kompaniez  has also  served as Chief  Operating  Officer  of NHP  Incorporated
after it was acquired by AIMCO in December 1997.  Effective April 1, 2004, Mr.
Kompaniez  resigned as President of AIMCO.  Mr. Kompaniez will continue in his
role as  Director  of the  Corporate  General  Partner  and Vice  Chairman  of
AIMCO's  Board  and will  serve  AIMCO on a variety  of  special  and  ongoing
projects in an operating role.

David R. Robertson has been President, Chief Executive Officer and a Director of
the Corporate  General  Partner since  October 2002.  Mr.  Robertson has been an
Executive  Vice  President  of AIMCO  since  February  2002,  and was  appointed
President and Chief  Executive  Officer of AIMCO  Capital in October  2002.  Mr.
Robertson  is  responsible  for  property   operations,   asset  management  and
transaction   activities   within  AIMCO   Capital's   portfolio  of  affordable
properties,  and for  redevelopment  and  construction  activities  for both the
conventional  and  affordable  property  portfolios.  Since  February  1996, Mr.
Robertson has been Chairman and Chief Executive Officer of Robeks Corporation, a
privately held chain of specialty food stores.

Charles McKinney has been Senior Vice President and Director of Asset Management
of the  Corporate  General  Partner and AIMCO Capital since January 2003 and has
overall responsibility for monitoring the construction, lease-up, operations and
compliance  issues for all  assets  constituting  a part of  AIMCO's  affordable
portfolio.  Mr.  McKinney  joined AIMCO as Vice President of Transactions in the
Affordable  Group  in  June  2002  and  had   responsibility   for  value  added
dispositions  of  affordable  properties  in the  Western  portion of the United
States.  From  September  2000  through  May 2002,  Mr.  McKinney  was  Managing
Underwriter for Real Estate Recovery, Inc. where he was responsible for the real
estate loan underwriting and loan review for the company's  clients.  From March
1998 through August 2000, Mr.  McKinney was the Executive  Managing  Director of
American Capital Advisors, Inc. an investment banking company.


<PAGE>



Jeffrey H. Sussman has been Senior Vice President, General Counsel and Secretary
of the Corporate  General  Partner since joining  NAPICO in 1998. Mr. Sussman is
responsible for the legal affairs of NAPICO and its affiliates. Prior to joining
NAPICO in 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.

Brian H. Shuman has been Senior Vice  President and Chief  Financial  Officer of
the  Corporate  General  Partner  since  joining  NAPICO in 2000.  Mr. Shuman is
responsible  for  the  financial  affairs  of  NAPICO  as  well  as the  limited
partnership  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.

The board of directors of the Corporate General Partner does not have a separate
audit  committee.  As such,  the board of  directors  of the  Corporate  General
Partner fulfills the functions of an audit committee. The board of directors has
determined  that Brian H. Shuman meets the  requirement  of an "audit  committee
financial expert".

The directors and officers of the Corporate  General Partner with authority over
the Partnership are all employees of subsidiaries of AIMCO.  AIMCO has adopted a
code of ethics that applies to such  directors  and  officers  that is posted on
AIMCO's  website  (www.AIMCO.com).   AIMCO's  website  is  not  incorporated  by
reference to this filing.

ITEM 10.   EXECUTIVE COMPENSATION

None of the directors and officers of the Corporate General Partner received any
remuneration from the Partnership during the year ended December 31, 2003.

ITEM 11.  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 or entity is known to own  beneficially  in excess of 5% of
the outstanding limited partnership interests.

(b)   None of the directors and officers of the  Corporate  General  Partner own
      directly or beneficially any limited partnership interests in Real III.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under the terms of the Restated  Certificate and Agreement of Limited  Partners,
the Partnership is obligated to NAPICO for an annual management fee equal to 0.4
percent of the  invested  assets.  Invested  assets are  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 Local  Partnerships.  The management fee incurred for the years ended
December  31,  2003  and  2002,   was   approximately   $125,000  and  $129,000,
respectively.

The Partnership  reimburses  NAPICO for certain  expenses.  The reimbursement to
NAPICO was  approximately  $14,000 for each of the years ended December 31, 2003
and 2002, and is included in general administrative expenses.

AIMCO and its affiliates owned 239 limited  partnership  units (the "Units") (or
478 limited partnership interests) in the Partnership  representing 4.18% of the
outstanding  Units  at  December  31,  2003.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates  will acquire Units in exchange for cash or a combination of cash and
units in AIMCO  Properties,  L.P., the operating  partnership  of AIMCO,  either
through private  purchases or tender offers.  Under the  Partnership  Agreement,
unitholders  holding a majority  of the Units are  entitled  to take action with
respect to a variety of matters, that include, but are not limited to, voting on
certain  amendments  to the  Partnership  Agreement  and  voting to  remove  the
Corporate General Partner. Although the Corporate General Partner owes fiduciary
duties to the limited partners of the Partnership, the Corporate General Partner
also owes fiduciary duties to AIMCO as its sole  stockholder.  As a result,  the
duties of the Corporate General Partner,  as corporate  general partner,  to the
Partnership  and its limited  partners may come into conflict with the duties of
the Corporate General Partner to AIMCO, as its sole stockholder.

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K:

(a) Exhibits

      Exhibit 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.

      Exhibit  31.1  Certification  of  equivalent  of Chief  Executive  Officer
      pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a),  as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      Exhibit  31.2  Certification  of  equivalent  of Chief  Financial  Officer
      pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a),  as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      Exhibit 32.1 Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      Exhibit  99.1  Independent  Auditors  Report  for  Charlotte  Lake River
      Associates

      Exhibit 99.2 Independent Auditors Report for Lakeside Apartments, Ltd.

      Exhibit 99.3 Independent Auditors Report for Alabama Properties, Ltd. V.

      Exhibit 99.4  Independent  Auditors  Report for Santa Maria Limited Div.
      Partnership Assoc.

      Exhibit 99.5 Independent Auditors Report for Village Apartments, Ltd.

      Exhibit 99.6 Independent Auditors Report for Marina Del Ray, Ltd.

      Exhibit 99.7 Independent  Auditors Report for Vista Housing  Associates,
      L.P.

      Exhibit 99.8 Independent Auditors Report for Westgate Apartments, Ltd.

(b) Reports on Form 8-K filed during the fourth quarter of 2003:

Current  Report on Form 8-K dated  November  24, 2003 and filed on November  26,
2003 disclosing the Stipulation Settlement between NAPICO and the plaintiffs.


<PAGE>



Item 14.    Principal Accounting Fees and Services

The Corporate  General Partner has reappointed  Ernst & Young LLP as independent
auditors to audit the financial statements of the Partnership for 2004.

Audit  Fees.  The  Partnership   paid  to  Ernst  &  Young  LLP  audit  fees  of
approximately $33,000 and $31,000 for 2003 and 2002, respectively.

Tax Fees.  The  Partnership  paid to Ernst & Young LLP fees for tax services for
each of 2003 and 2002 of approximately $32,000.


<PAGE>



                                   SIGNATURES


In accordance  with the  requirements of Section 13 or 15(d) of the Exchange Act
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                               REAL ESTATE ASSOCIATES LIMITED III
                               (a California Limited Partnership)

                                    By:   NATIONAL   PARTNERSHIP   INVESTMENTS
                                      CORP.
                                          Corporate General Partner

                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          President and Chief Executive
                                          Officer

                                    By:   /s/Brian H. Shuman
                                          Brian H. Shuman
                                          Senior Vice President and
                                          Chief Financial Officer

                                    Date: May 13, 2004

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Registrant and in the capacities and on the
dates indicated.

/s/Peter K. Kompaniez         Director                     Date:  May  13, 2004
Peter K. Kompaniez



/s/David R. Robertson         President, Chief Executive   Date:  May 13, 2004
David R. Robertson             Officer and Director



/s/Brian H. Shuman            Senior Vice President and    Date:  May 13, 2004
Brian H. Shuman                 Chief Financial Officer


<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                                  EXHIBIT INDEX


Exhibit     Description of Exhibit

  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.

  31.1      Certification  of equivalent of Chief Executive  Officer pursuant to
            Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),   as  Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  31.2       Certification of equivalent of Chief Financial  Officer pursuant to
             Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),  as  Adopted
             Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  32.1      Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  99.1      Independent Auditors Report for Charlotte Lake River Associates

  99.2      Independent Auditors Report for Lakeside Apartments, Ltd.

  99.3      Independent Auditors Report for Alabama Properties, Ltd. V.

  99.4      Independent   Auditors   Report  for  Santa  Maria   Limited  Div.
      Partnership Assoc.

  99.5      Independent Auditors Report for Village Apartments, Ltd.

  99.6      Independent Auditors Report for Marina Del Ray, Ltd.

  99.7      Independent Auditors Report for Vista Housing Associates, L.P.

  99.8      Independent Auditors Report for Westgate Apartments, Ltd.


<PAGE>



Exhibit 31.1


                                  CERTIFICATION


I, David R. Robertson, certify that:


1.    I have  reviewed  this  annual  report  on  Form  10-KSB  of  Real  Estate
      Associates Limited III;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer(s) and I are responsible for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      (c)   Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

 5.   The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and


      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.


Date:  May 13, 2004

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President and Chief  Executive  Officer of
                                    National Partnership Investments Corp.,
                                    equivalent of the chief executive  officer
                                    of the Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Brian H. Shuman, certify that:


1.    I have  reviewed  this  annual  report  on  Form  10-KSB  of  Real  Estate
      Associates Limited III;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the registrant as of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer(s) and I are responsible for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for the registrant
      and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            registrant,  including its consolidated subsidiaries,  is made known
            to us by others  within  those  entities,  particularly  during  the
            period in which this report is being prepared;

      (b)   Evaluated the effectiveness of the registrant's  disclosure controls
            and  procedures and presented in this report our  conclusions  about
            the effectiveness of the disclosure  controls and procedures,  as of
            the  end  of the  period  covered  by  this  report  based  on  such
            evaluation; and

      (c)   Disclosed  in this  report any change in the  registrant's  internal
            control  over   financial   reporting   that  occurred   during  the
            registrant's  most recent fiscal  quarter (the  registrant's  fourth
            fiscal  quarter in the case of an annual report) that has materially
            affected,   or  is  reasonably  likely  to  materially  affect,  the
            registrant's internal control over financial reporting; and

5.    The registrant's other certifying  officer(s) and I have disclosed,  based
      on  our  most  recent   evaluation  of  internal  control  over  financial
      reporting,  to the  registrant's  auditors and the audit  committee of the
      registrant's  board of directors  (or persons  performing  the  equivalent
      functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely affect the  registrant's  ability to
            record, process, summarize and report financial information; and


      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees  who have a  significant  role in the  registrant's
            internal control over financial reporting.


Date:  May 13, 2004

                               /s/Brian H. Shuman
                               Brian H. Shuman
                               Senior  Vice  President  and  Chief   Financial
                               Officer  of  National  Partnership  Investments
                               Corp.,   equivalent  of  the  chief   financial
                               officer of the Partnership


<PAGE>



Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In connection  with the Annual  Report on Form 10-KSB of Real Estate  Associates
Limited III (the  "Partnership"),  for the year ended December 31, 2003 as filed
with the Securities and Exchange  Commission on the date hereof (the  "Report"),
David R.  Robertson,  as the  equivalent of the chief  executive  officer of the
Partnership,  and Brian H.  Shuman,  as the  equivalent  of the chief  financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  May 13, 2004


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  May 13, 2004


This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


<PAGE>


Exhibit 99.1

Independent Auditors' Report

To the Partners
Charlotte Lake River Associates

We have  audited  the  accompanying  balance  sheets  of  Charlotte  Lake  River
Associates  as of December  31, 2003 and 2002,  and the  related  statements  of
operations,  partners' equity (deficit) and cash flows for the years then ended.
These  financial   statements  are  the   responsibility  of  the  partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. 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  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Charlotte Lake River Associates
as of December 31, 2003 and 2002, and the results of its operations, the changes
in its partners'  equity  (deficit) and its cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States
of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in note G to the
financial  statements,  the  Partnership  is in default of its  mortgage and its
workout agreement. The Partnership's cash flow has been insufficient to meet its
required  mortgage debt service  payments and other related  obligations.  These
matters raise substantial doubt about the Partnership's ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in note G. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

In accordance with Government  Auditing  Standards and the  "Consolidated  Audit
Guide for Audits of HUD  Programs," we have also issued  reports dated  February
12, 2004 on our  consideration  of  Charlotte  Lake River  Associates'  internal
control and on its compliance with specific requirements applicable to major HUD
programs and fair housing and non-discrimination.  Those reports are an integral
part of an audit performed in accordance with Government  Auditing Standards and
should be read in conjunction with this report in considering the results of our
audits.

Our audits  were  conducted  for the  purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental  information on pages 17
through  46 is  presented  for  purposes  of  additional  analysis  and is not a
required  part of the basic  financial  statements.  Such  information  has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic financial statements taken as a whole.



/s/Reznick, Fedder & Silverman
Bethesda, Maryland                              Taxpayer's      Identification
Number
February 12, 2004                               52-1088612


Audit Principal:  Renee G. Scruggs


<PAGE>


Exhibit 99.2

                          Independent Auditors' Report

To The Partners
Lakeside Apartments, Ltd.

We  have  audited  the  accompanying  basic  financial   statement  of  Lakeside
Apartments,  Ltd., as of and for the years ended  December 31, 2003 and 2002, as
listed  in the table of  contents.  These  basic  financial  statements  are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. 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  statements
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the basic financial statements referred to above present fairly,
in all material respects, the financial position of Lakeside Apartments, Ltd. as
of December 31, 2003 and 2002,  and the results of its  operations  and its cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report
dated  January 16, 2004 on our  consideration  of  Lakeside  Apartments,  Ltd.'s
internal  control over financial  reporting and our tests of its compliance with
certain provisions of laws, regulations,  contracts,  and grants. That report is
an integral part of an audits  performed in accordance with Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The additional  information  presented on
pages 9 through 14 is presented for purposes of additional analysis and is not a
required part of the basic  financial  statements.  The  information  on pages 9
through 13 has been subjected to the auditing  procedures  applied in the audits
of the basic financial  statements and, in our opinion,  is fairly stated in all
material  respects  in  relation to the basic  financial  statements  taken as a
whole. The information on page 14, which is of a nonaccounting  nature,  has not
been  subjected  to the auditing  procedures  applied in the audits of the basic
financial statements, and we express no opinion on it.

/s/ Duggan, Joiner & Company
Ocala, Florida
January 16, 2004


<PAGE>


Exhibit 99.3

                              Independent Auditors Report

To the Partners
Alabama Properties, Ltd. V
Fort Payne, Alabama

We have audited the accompanying balance sheets of Alabama Properties, Ltd. V, a
limited partnership,  RHS Project No.:  01-025-630792246 as of December 31, 2003
and 2002, and the related  statements of operations,  partners' deficit and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the partnership's management. Our responsibility is to express
an opinion on the financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and Government  Auditing Standards issued by the
Comptroller   General  of  the  United  States,  and  the  U.S.   Department  of
Agriculture,  Farmers Home Administration Audit Program. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that the
audits provide a reasonable basis or our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Alabama Properties, Ltd. V, RHS
Project No.:  01-025-630792246 as of December 31, 2003 and 2002, and the results
of its  operations  and its cash flows for the years then ended,  in  conformity
with accounting principles generally accepted in the United States of America.

The  audits  were  made for the  purpose  of  forming  an  opinion  of the basic
financial statements taken as a whole. The supplemental  information on pages 10
through  13 is  presented  for  purposes  of  additional  analysis  and is not a
required part of the basic financial  statements.  The supplemental  information
presented in the  Multiple  Family  Housing  Borrower  Balance  Sheet (Form FmHA
1930-8)  Parts I and II for the  year  ended  December  31,  2003 and  2002,  is
presented for purposes of complying with the  requirements  of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit  procedures  applied in the audit of
the basic  financial  statements  and, in our opinion,  is fairly  stated in all
material respects to the basic financial statements taken as a whole.

In accordance with Government Auditing  Standards,  we have also issued a report
dated  January 22, 2004 on our  consideration  of Alabama  Properties,  Ltd, V's
internal  control over  financial  reporting and on our tests of its  compliance
with certain provisions of laws and regulations.

That  report  is an  integral  part of an audit  performed  in  accordance  with
Government Auditing Standards and should be read in conjunction with this report
in considering the results of our audit.


DONALD W. CAUSEY & ASSOCIATES, P.C.
Gadsden, Alabama
January 22, 2004


<PAGE>


Exhibit 99.4

                          Independent Auditors' Report



To The Partners
Santa Maria Limited Dividend Partnership Associates


We have audited the accompanying  balance sheets of Santa Maria Limited Dividend
Partnership  Associates (the Partnership),  RHS Project No.: 63-17-1336329 as of
December 31, 2003 and 2002, and the related statements of operations,  partners'
deficit and cash flows for the years then ended. These financial  statements are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. 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  statements
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Santa Maria Limited Dividend
Partnership  Associates,  RHS Project No.: 63-17-1336329 as of December 31, 2003
and 2002, and the results of its  operations,  the changes in partners'  deficit
and its cash flows for the years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated  February 9, 2004, on our  consideration  of Santa Maria Limited  Dividend
Partnership  Associates  internal control over financial reporting and our tests
on its compliance with certain provisions of laws, regulations,  contracts,  and
grants. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be read in conjunction with this report
in considering the results of our audit.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental  information on pages 16
through  19 is  presented  for  purposes  of  additional  analysis  and is not a
required  part of the basic  financial  statements.  Such  information  has been
subjected to the auditing procedures applied in the audit of the basic financial
statements  and, in our opinion,  is fairly  stated in all material  respects in
relation to the basic financial statements taken as a whole.

/s/ Santiago, Riley & Reznick
San Juan, Puerto Rico
February 9, 2004


<PAGE>


Exhibit 99.5

                          Independent Auditors' Report

To The Partners
Village Apartments, Ltd.
LaFollette, Tennessee


We have audited the accompanying  balance sheet of Village  Apartments,  Ltd. (A
Limited  Partnership)  as of December 31, 2003,  and the related  statements  of
income, changes in partners' capital (deficit), and cash flows for the year then
ended.  These financial  statements are the  responsibility of the Partnership's
management.  Our  responsibility  is to  express  an option  on these  financial
statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government  Auditing Standards issued by the Comptroller General of
the United States. 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  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial position of Village  Apartments,  Ltd. (A
Limited  Partnership) as of December 31, 2003, and the results of its operations
and its cash  flows  for the  year  ten  ended  in  conformity  with  accounting
principles generally accepted in the Unites States of America.

In accordance with Government Auditing Standards, we have also issued our report
dated  February 7, 2004,  on our  consideration  of Village  Apartments,  Ltd.'s
internal  control and on our tests of its compliance with certain  provisions of
laws, regulations,  contracts, and grants. Those reports are an integral part of
an audit performed in accordance with Government  Auditing  Standards and should
be read in  conjunction  with this  report in  considering  the  results  of our
audits.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial   statements  taken  as  a  whole.   The  accompanying   supplementary
information  shown on pages  10-14  is  presented  for  purposes  of  additional
analysis and is not a required  part of the basic  financial  statements  of the
Partnership.  Such  information  has been  subjected to the auditing  procedures
applied in the audit of the basic financial  statements and, in our opinion,  is
fairly  stated,  in all material  respects,  in relation to the basic  financial
statements taken as a whole.

Boring & Goins, P.C.
Knoxville, TN
February 7, 2004


<PAGE>


Exhibit 99.6

                          Independent Auditors' Report



To The Partners
Marina Del Rey Limited Dividend
Partnership Associates

We have  audited  the  accompanying  balance  sheets of Marina  Del Rey  Limited
Dividend   Partnership   Associates,   RHS  Project  No.:   63-20-1337676   (the
Partnership),  as of December 31, 2003 and 2002,  and the related  statements of
operations,  partners'  deficit and cash flows for the years then  ended.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. 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  statements
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Maria Del Rey Limited Dividend
Partnership Associates, RHS Project No.: 63-20-1337676,  as of December 31, 2003
and 2002, and the results of its  operations,  the changes in partners'  deficit
and its cash  flows for the  years  then  ended in  conformity  with  accounting
principles generally accepted in the United States of America.

In accordance with Government  Auditing  Standards,  we have also issued reports
for  the  year  ended  December  31,  2003,  dated  February  9,  2004,  on  our
consideration of Marina Del Rey Limited Dividend Partnership Associates internal
control over financial reporting and on our tests of its compliance with certain
provisions  of laws,  regulations,  contracts,  and  grants.  That  report is an
integral  part of an audit  performed in  accordance  with  Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental  information on pages 16
through  19 is  presented  for  purposes  of  additional  analysis  and is not a
required  part of the basic  financial  statements.  Such  information  has been
subjected  to the  auditing  procedures  applied  in  the  audits  of the  basic
financial  statements  and, in our  opinion,  is fairly  stated in all  material
respects in relation to the basic financial statements taken as a whole.

/s/ Santiago, Riley & Reznick
San Juan, Puerto Rico
February 9, 2004


<PAGE>


Exhibit 99.7



                          Independent Auditors' Report



To The Partners
Vista Housing Associates
(A Limited Partnership)
San Juan, Puerto Rico


I have audited the  accompanying  balance sheets of Vista Housing  Associates (A
Limited Partnership),  HUD Project No.:  056-35094-LD-18 as of December 31, 2003
and 2002 and the related  statements of operations,  partners'  deficiency,  and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Partnership's  management. My responsibility is to express
an opinion on these financial statements based on my audits.

I conducted my audit in accordance with auditing standards generally accepted in
the United  States of America and the standards  applicable to financial  audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States.  Those standards require that I 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.  I  believe  that my  audits  provide  a  reasonable  basis for my
opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Vista Housing Associates (A Limited
Partnership)  as of  December  31,  2003  and  2002,  and  the  results  of  its
operations, its partners' deficiency and its cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States
of America.

In accordance  with Government  Auditing  Standards and the  Consolidated  Audit
Guide for Audits of HUD Programs  issued by the U.S.  Department  of Housing and
Urban  Development,  I have also issued a report dated  January 17, 2003,  on my
consideration of the Partnerships internal control and reports dated January 17,
2003,  on its  compliance  with  specific  requirements  applicable to major HUD
programs,   and   specific   requirements   applicable   to  Fair   Housing  and
Non-Discrimination. These reports are an integral part of the audit performed in
accordance with Government  Auditing Standards and should be read in conjunction
with this report in considering the results of my audit.

/s/ JDM.CPA
San Juan, Puerto Rico
January 17, 2004



<PAGE>


Exhibit 99.8

                              Independent Auditors' Report

To the Partners
Westgate Apartments, Ltd.
Albertville, Alabama

We have audited the accompanying balance sheets, of Westgate Apartments, Ltd., a
limited partnership,  RHS Project No.: 01-048-0630788273 as of December 31, 2003
and 2002, and the related  statements of operations,  partners' deficit and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the partnership's management. Our responsibility is to express
an opinion on the financial statements based on our audits.

We conducted the audits in accordance with auditing standards generally accepted
in the United States of America and Government  Auditing Standards issued by the
Comptroller   General  of  the  United  States,  and  the  U.S.   Department  of
Agriculture,  Farmers Home Administration Audit Program. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that the
audits provide a reasonable basis or our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Westgate Apartments,  Ltd., RHS
Project No.: 01-048-0630788273 as of December 31, 2003 and 2002, and the results
of its  operations  and its cash flows for the years then ended,  in  conformity
with accounting principles generally accepted in the United States of America.

The  audits  were  made for the  purpose  of  forming  an  opinion  of the basic
financial statements taken as a whole. The supplemental  information on pages 10
through  13 is  presented  for  purposes  of  additional  analysis  and is not a
required part of the basic financial  statements.  The supplemental  information
presented in the  Multiple  Family  Housing  Borrower  Balance  Sheet (Form FmHA
1930-8)  Parts I and II for the  year  ended  December  31,  2003 and  2002,  is
presented for purposes of complying with the  requirements  of the Rural Housing
Services and is also not a required part of the basic financial statements. Such
information has been subjected to the audit  procedures  applied in the audit of
the basic  financial  statements  and, in our opinion,  is fairly  stated in all
material respects to the basic financial statements taken as a whole.

In accordance with Government Auditing  Standards,  we have also issued a report
dated  March  15,  2004 on our  consideration  of  Westgate  Apartments,  Ltd.'s
internal  control over  financial  reporting and on our tests of its  compliance
with certain provisions of laws and regulations.

That  report  is an  integral  part of an audit  performed  in  accordance  with
Government Auditing Standards and should be read in conjunction with this report
in considering the results of our audit.



DONALD W. CAUSEY & ASOCIATES, P.C.
Gadsden, Alabama
March 15, 2004