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, 2002

[ ]   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:

                      11,442 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 $44,000.

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,  2002.  No market for the  Registrant's  limited
partnership  interests exists, and, therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

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.  The discussions of the  Registrant's
business  and  results  of  operations,   including  forward-looking  statements
pertaining to such matters,  do not take into account the effects of any changes
to the  Registrant's  business  and results of  operations.  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 Registrant 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; and possible  environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  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.

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

On 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 11 Local  Partnerships  (the
"Local Partnerships") as of December 31, 2002, 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, 2002, one Local Partnership sold its
investment  property.  In December 1998, the Partnership sold its interest in 20
Local Partnerships to the Operating Partnership.  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.

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  limited
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 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.

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

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  2002,  the projects in which REAL III had  invested  were  substantially
rented.  The  following is a schedule of the status as of December 31, 2002,  of
the projects owned by local limited  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, 2002

<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)        2002          2001

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

Hidden Pines Apts.          40         (C)             40             94%           96%
Greenville, MI

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

Lakeside Apts.             32          (C)             21             96%           98%
Stuart, FL

Ramblewood Apts.           64          (C)            13              89%           93%
Fort Payne, AL

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

Sunshine Canyon            26          (C)             26              83%          95%
Stanton, MI

Village Apts.              51          (C)            50               98%          98%
La Follette, TN

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

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

Westgate Apts.               72        (C)             16             95%           94%
Albertville, AL

TOTALS                    1,160                        487
</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.

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, 2002.

<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>
    Hidden Pines L.P.                     99%         $   315      $ 1,329           $   --
    Sunshine Canyon L.P.                  99%             170          809               --
    Alabama Properties Ltd. V             99%             205        1,457            1,005
    Charlotte Lake River
     Associates                           95%          10,500       11,951               --
    Village Apartment Ltd.                98%             210        1,411               --
    Lakeside Apartments Ltd.              95%              65          911
    Santa Maria Limited Dividend
     Partnership Assoc.                   99%             420        2,680               --
    Marina Del Ray Limited
     Dividend Partnership Assoc.          99%             395        2,494               --
    300 Broadway Assoc.                   98%             632        1,162               --
    Vista Housing Assoc. L.P.             98%             445        2,372               --
    Westgate Apartments, Ltd.             94%             218          916               --
                                                      $13,575      $27,492          $ 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.  The
matter was tried in October  and  November  2002.  In  November  2002,  the jury
returned  special  verdicts  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.
In addition,  the jury awarded the plaintiffs punitive damages against NAPICO of
approximately  $92.5 million. On April 3, 2003, the judge entered certain orders
in connection with the litigation that denied defendants' motion for a new trial
and set April 28,  2003 as the date for entry of  judgment  against  NAPICO  and
certain  other  defendants  in the amount of $25.2  million  for  violations  of
securities  laws and against  NAPICO for $67.3 million for breaches of fiduciary
duty, both amounts plus interest,  subject to plaintiffs'  agreement to reducing
the jury award for punitive  damages  against  NAPICO from $92.5 million to $2.6
million.  While the case is expected to be  appealed,  the entire  matter is the
responsibility  of the former  shareholder of Casden Properties Inc. pursuant to
the documents  related to AIMCO's  acquisition of Casden  Properties Inc., which
was completed in March 2002.

Consent Solicitation

In March 2001, a limited  partner of the  Partnership,  which acquired its units
through a tender offer, commenced a consent solicitation to remove NAPICO as the
Corporate  General  Partner of the  Partnership.  In April 2001, the Partnership
commenced an action to enjoin the  solicitation  alleging  that the  information
contained  in the  solicitation  was  materially  false  and  misleading  and in
violation of the federal  securities  laws. In November  2002, a settlement  was
reached between NAPICO and the limited partner whereby the lawsuit was dismissed
and all claims between the parties were released.

The Corporate General Partner of the Partnership is involved in various 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.

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership and to elect Millenium as the new general  partner.  The Partnership
has filed  with the SEC a  preliminary  Consent  Revocation  Statement  opposing
Millenium's and Everest's efforts to remove the general partners.

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, 2002.

                                    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, 2002,
there were 1,875  registered  holders of units in REAL III. The  Partnership has
invested in certain  government  assisted  projects under programs which in many
instances  restrict the cash return available to Project owners. The Partnership
was not designed to provide  cash  distributions  to investors in  circumstances
other  than  refinancing  or  disposition  of  its  investment  in  the  limited
partnerships.  A distribution in the aggregate amount of $3,345,000 (or $584 per
unit) was made in 1989.  This  represented  the proceeds from the sale of one of
the Partnership's real estate  investments.  In March 1999, the Partnership made
distributions  of $6,881,025 to the limited  partners and $69,506 to the general
partners,  which  included  using  proceeds  from  the  sale of the  partnership
interests.  In 2001, the  Partnership  paid a distribution  of $3,000,000 to the
limited partners.  No other  distributions have been made since the inception of
the Partnership.

AIMCO and its affiliates currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include 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

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.

Capital Reserves and Liquidity

The Properties in which the Partnership has invested, through its investments in
the Local Limited Partnerships, receive one or more forms of assistance from the
Federal  Government.  As a result,  the Local Limited  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 limited
partnerships  in which the  Partnership  has invested  will  generate  cash flow
sufficient to provide for distributions to the Partnership's limited partners in
any material amount.


As of December 31, 2002 and 2001, the Partnership has cash and cash  equivalents
of approximately $2,076,000 and $2,178,000,  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 and cash equivalent  balances and decreasing  interest rates.
This resulted in the Partnership earning  approximately  $44,000 and $196,000 in
interest  income for the years ended  December 31, 2002 and 2001,  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.

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,  2002,  the   Partnership  had  investments  in  eleven  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  and
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  of the  Local  Partnerships  only  to the  extent  of  distributions
received,  and amortization of acquisition costs from those Local  Partnerships.
During the years ended  December 31, 2002 and 2001, the  Partnership  recognized
equity in loss of approximately $308,000 and $618,000,  respectively, from Local
Partnerships.  Included in these amounts are impairment  losses of approximately
$300,000 and $806,000, respectively,  related to a Local Partnership. During the
years ended December 31, 2002 and 2001, the Partnership  received  approximately
$34,000 and $22,000, 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,  2002,  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  affairs. The fee is payable beginning
with  the  month  following  the  Partnership's  initial  investment  in a Local
Partnership.  Management fees were approximately  $129,000 for each of the years
ended December 31, 2002 and 2001, 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 $208,000
and $472,000 for the years ended December 31, 2002 and 2001,  respectively.  The
decrease  in legal  fees  during  2002 is related  to the  consent  solicitation
lawsuit,  discussed in Note 4 -  Contingencies,  that  originated in April 2001.
General and administrative  expenses were approximately $79,000 and $190,000 for
the years  ended  December  31,  2002 and 2001,  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 and a decrease in costs associated with the consent
solicitation lawsuit.

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 is equaled to the net proceeds received
by the  Partnership,  as the  Partnership  had no remaining  investment  balance
related to this limited 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 limited  partnerships  in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

AIMCO and its affiliates currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include 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  FASB  issued  FASB  Interpretation  No.  46  ("FIN46"),
Consolidation of Variable  Interest  Entities,  an Interpretation of ARB No. 51.
FIN46 requires  certain  variable  interest  entities to be  consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional subordinated financial support from other parties. FIN46 is effective
for all new variable  interest  entities  created or acquired  after January 31,
2003. For variable  interest  entities  created or acquired prior to February 1,
2003,  the  provisions  of FIN46 must be applied for the first interim or annual
period  beginning after June 15, 2003. The  Partnership is currently  evaluating
the  effect,  if any,  that the  adoption  of FIN46 will have on its  results of
operations and financial condition.

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 Limited Partnerships

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local  Limited  Partnerships.  Accordingly,  the  Partnership  accounts  for its
investments  in the Local  Limited  Partnerships  using the equity  method.  The
Partnership  is allocated  profits and losses of the Local Limited  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  Limited
Partnerships  are  restricted  by the  Local  Limited  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  Limited  Partnership.  The  Partnership  is allocated  profits and
losses and receives distributions from refinancings and sales in accordance with
the Local Limited Partnerships' partnership agreements. These agreements usually
limit the Partnership's  distributions to an amount  substantially less than its
ownership percentage in the Local Limited Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the Local  Limited  Partnership's  profits less the  Partnership's  share of the
Local Limited  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 Limited 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  Limited  Partnerships  reaches zero.
Distributions  from  the  Local  Limited  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  Limited  Partnerships  only to the extent of  distributions  received and
amortization  of  acquisition  costs  from  those  Local  Limited  Partnerships.
Therefore,  the  Partnership  limits its  recognition of equity  earnings to the
amount it expects to ultimately realize.


Item 7.     Financial Statements

REAL ESTATE ASSOCIATES LIMITED III

LIST OF FINANCIAL STATEMENTS


Report of Ernst & Young,  LLP Independent  Auditors as of and for the year ended
December 31, 2002

Report of  Deloitte  & Touche,  LLP,  independent  auditors,  for the year ended
December 31, 2001

Balance Sheet - December 31, 2002

Statements of Operations - Years ended December 31, 2002 and 2001

Statements of Changes in Partners'  (Deficiency)  Equity - Years ended  December
31, 2002 and 2001

Statements of Cash Flows - Years ended December 31, 2002 and 2001

Notes to Financial Statements


                    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, 2002, and the related statements of operations, partners'
(deficiency)  equity,  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 opinion on these financial  statements based on
our  audit.  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 audit 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 audit and the reports of the other
auditors provide a reasonable basis for our opinion.

In our opinion,  based upon our audit 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,
2002,  and the  results of its  operations  and its cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States.



                                                            /s/Ernst & Young LLP
Greenville, South Carolina
April 10, 2003


                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying statements of operations,  changes in partners'
(deficiency)  equity and cash flows of Real  Estate  Associates  Limited  III (a
California  limited  partnership)  for the year ended  December 31, 2001.  These
financial   statements  are  the   responsibility   of  the  management  of  the
Partnership.  Our  responsibility  is to express  an opinion on these  financial
statements  based on our audit.  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
equity in income of these  limited  partnerships  represents  38  percent of the
total net income of the  Partnership  for the year ended  December  31, 2001 and
these  limited  partnerships  represent a  substantial  portion of the  investee
information in Note 2 to the financial  statements.  The financial statements of
these limited  partnerships  were audited by other auditors.  Their reports have
been  furnished  to us and our  opinion,  insofar as it  relates to the  amounts
included for these limited  partnerships,  is based solely on the reports of the
other auditors.

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

In our  opinion,  based on our  audit and the  reports  of other  auditors,  the
financial statements referred to above present fairly, in all material respects,
the results of operations and cash flows of Real Estate  Associates  Limited III
for the year ended December 31, 2001 in conformity  with  accounting  principles
generally accepted in the United States of America.


DELOITTE & TOUCHE LLP

Los Angeles, California
March 22, 2002

                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                                  BALANCE SHEET
                                 (in thousands)

                                DECEMBER 31, 2002



                           Assets

  Investments in limited partnerships (Note 2)                    $ 102
  Cash and cash equivalents                                        2,076
       Total assets                                              $ 2,178

        Liabilities and partners'(deficiency) equity

Liabilities:
  Accounts payable and accrued expenses                           $ 90
  Fees and expenses due general partner (Note 3)                       5
                                                                     95

Commitments and contingencies (Note 7)

Partners' (deficiency) equity:
  General partners                                                  (148)
  Limited partners                                                 2,231
                                                                   2,083

       Total liabilities and partners' (deficiency) equity       $ 2,178

                 See Accompanying Notes to Financial Statements


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

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


<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                                                 2002             2001

<S>                                                              <C>             <C>
Interest income                                                  $ 44            $ 196

Operating expenses:
  Legal and accounting                                             208              472
  Management fees - general partner (Note 3)                       129              129
  General and administrative (Note 3)                               79              190
      Total operating expenses                                     416              791

Loss from Partnership operations                                  (372)            (595)
Gain on sale of limited partnership interest (Note 2)              210               --
Distributions from limited partnerships
    recognized as income (Note 2)                                   34               22
Equity in loss of limited partnerships and
     amortization of acquisition costs (Note 2)                   (308)            (618)

Net loss                                                       $ (436)         $ (1,191)

Net loss allocated to general partners (1%)                         (4)              (12)
Net loss allocated to limited partners (99%)                      (432)           (1,179)
                                                               $ (436)         $ (1,191)
Net loss per limited partnership interest (Note 1)              $ (38)          $ (103)

                 See Accompanying Notes to Financial Statements
</TABLE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

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


<TABLE>
<CAPTION>


                                                     General        Limited
                                                    Partners        Partners        Total
<S>                                                                  <C>
Partnership interests (A)                                            11,442

Partners' (deficiency) equity,
  January 1, 2001                                     (132)           6,842          6,710

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

Net loss for the year ended
  December 31, 2001                                    (12)          (1,179)        (1,191)

Partners' (deficiency) equity,
  January 1, 2002                                     (144)           2,663          2,519

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

Partners' (deficiency) equity,
  December 31, 2002                                $  (148)        $  2,231        $ 2,083


(A)   Consists of 11,442 units at December 31, 2002 and 11,456 units at December
      31, 2001. During 2002, 14 units were abandoned (Note 5).

                 See Accompanying Notes to Financial Statements
</TABLE>


                       REAL ESTATE ASSOCIATES LIMITED III
                       (a California limited partnership)

                            STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>

                                                                 Years Ended December 31,
                                                                    2002            2001

Cash flows from operating activities:
<S>                                                           <C>                 <C>
  Net loss                                                    $   (436)           $ (1,191)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Gain on sale of limited partnership interests               (210)                 --
      Equity in loss of limited partnerships and
        amortization of acquisition costs                          308                 618
      Increase in fees and expenses due general partner             --                   5
      Increase in accounts payable and accrued expenses             26                  49
         Net cash used in operating activities                    (312)               (519)

Cash flows from investing activities:
  Distributions from limited partnership recognized
   as return of capital                                             --                  41
  Proceeds from sale of limited partnership interests              210                  --
         Net cash provided by investing activities                 210                  41

Cash flows from financing activities:
  Distributions to partners                                         --              (3,000)

Net decrease in cash and cash equivalents                         (102)             (3,478)

Cash and cash equivalents, beginning of year                     2,178               5,656

Cash and cash equivalents, end of year                        $  2,076            $  2,178

                 See Accompanying Notes to Financial Statements
</TABLE>


                    REAL ESTATE ASSOCIATES LIMITED III
                    (A California limited partnership)

                       NOTES TO FINANCIAL STATEMENTS
                             December 31, 2002


1.  Organization and Summary of Significant Accounting Policies

Organization

Real Estate  Associates  Limited III (the  "Partnership")  was formed  under the
California Limited  Partnership Act on July 25, 1980. The Partnership was formed
to invest  either  directly or indirectly  in other  partnerships  which own and
operate primarily federal, state and local government-assisted housing projects.
The general partners are National Partnership Investments Corp. ("NAPICO" 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.

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

 On December 3, 2001,  Casden  Properties Inc.,  entered into a merger agreement
and certain other transaction documents with Apartment Investment and Management
Company,  ("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 and these  differences
could be material.

Method of Accounting for Investments in Limited Partnerships

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

Net loss per limited  partnership  interest was computed by dividing the limited
partners'  share of net loss by the  number  of  limited  partnership  interests
outstanding  during the year.  The number of limited  partnership  interests was
11,442 and 11,456 for the years ended December 31, 2002 and 2001, respectively.

Cash and Cash Equivalents

Cash and cash  equivalents  consist of cash 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 $117,000 at December 31, 2002 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 and $806,000 were recognized during
the years ended December 31, 2002 and 2001, respectively.

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 August 2001, the Financial  Accounting  Standards  Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived  Assets".  SFAS No. 144
provides  accounting  guidance for  financial  accounting  and reporting for the
impairment or disposal of long-lived  assets.  SFAS No. 144 supersedes  SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years  beginning
after December 15, 2001. The Partnership  adopted SFAS No. 144 effective January
1, 2002. The adoption did not have a material  effect on the financial  position
or results of operations for the Partnership. However, the accompanying combined
results of operations of the Local  Partnerships  (Note 2) have been restated as
of January 1, 2001 to reflect  the  operations  of Sunset  Grove as income  from
discontinued operations due to its sale in October of 2002.

In April 2002,  the Financial  Accounting  Standards  Board issued SFAS No. 145,
"Rescission of FASB  Statements  No. 4, 44 and 64". SFAS No. 4 "Reporting  Gains
and Losses from Extinguishment of Debt," required that all gains and losses from
extinguishment  of  debt  be  aggregated  and,  if  material,  classified  as an
extraordinary item. SFAS No. 145 rescinds SFAS No. 4, and accordingly, gains and
losses from extinguishment of debt should only be classified as extraordinary if
they are  unusual in nature and occur  infrequently.  Neither of these  criteria
applies to the Partnership. SFAS No. 145 is effective for fiscal years beginning
after May 15, 2002 with early adoption an option.  The Partnership  adopted SFAS
No. 145 effective  April 1, 2002. The adoption did not have a material effect on
the financial position or results of operations of the Partnership.

In  January  2003,  the  FASB  issued  FASB  Interpretation  No.  46  ("FIN46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51".
FIN46 requires  certain  variable  interest  entities to be  consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional subordinated financial support from other parties. FIN46 is effective
for all new variable  interest  entities  created or acquired  after January 31,
2003. For variable  interest  entities  created or acquired prior to February 1,
2003,  the  provisions  of FIN46 must be applied for the first interim or annual
period  beginning after June 15, 2003. The  Partnership is currently  evaluating
the  effect,  if any,  that the  adoption  of FIN46 will have on its  results of
operations and financial condition.

2.  Investments in Limited Partnerships

As of December 31, 2002, the Partnership holds limited partnership  interests in
11 limited partnerships (the "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 1,160 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,  2002,  the  investment  balance  in ten of the  eleven  Local
Partnerships had been reduced to zero.

The following is a summary of the investments in Local Partnerships for the year
ended December 31, 2002 (in thousands):


Investment balance, beginning of year          $  410
Equity in loss of limited partnerships           (306)
Amortization of acquisition
 costs                                             (2)
Investment balance, end of year                $  102

The  difference  between the  investment  in the  accompanying  balance sheet at
December 31,  2002,  and the  deficiency  per the Local  Partnership's  combined
financial  statements is due primarily to the cumulative  unrecognized equity in
losses of  certain  Local  Partnerships,  impairment  losses  recognized  on the
Partnership's  investments,  costs  capitalized  to the  investment  account and
cumulative distributions recognized as income.

The  Partnership  determined  that its  investment  balance  in one of its Local
Partnerships  was impaired and  recognized an impairment  loss of  approximately
$300,000  and  $806,000  during  the years  ended  December  31,  2002 and 2001,
respectively.

Selected  financial  information  from  the  combined  financial  statements  at
December 31, 2002 and for each of the two years in the period ended December 31,
2002, of the Local Partnerships in which the Partnership has investments:


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

                                                    December 31,
                                                        2002
Assets
  Land                                               $  1,280
  Building and improvements, net of accumulated
   depreciation of approximately $34,508                7,558
  Other Assets                                          2,953
Total Assets                                         $ 11,791

Liabilities and Partners Deficit:
Liabilities:
  Mortgage notes payable                             $ 27,492
  Notes payable                                         1,005
  Other liabilities                                     1,467
                                                       29,964
Partners' deficit                                     (18,173)

Total liabilities and Partners' Deficit              $ 11,791

        Condensed Combined Results of Operations of the Local Partnerships
                                  (in thousands)
                                                       Years ended December 31,
                                                         2002            2001
                                                                  (Reclassified)
Rental income                                          $ 6,193         $ 6,094
Other income                                               413             457
  Total revenues                                         6,606           6,551

Expenses:
Operating expenses                                       4,235           5,323
Financial expenses                                       1,786           1,536
Depreciation                                             1,219           1,088
Total expenses                                           7,240           7,947

Loss from continuing operations                           (634)         (1,396)
Income from discontinued operations                         --              28
Net loss                                               $  (634)        $(1,368)


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 or 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  property  to  positive  cash flow.  The  Partnership  has no
investment balance in the Local Partnership.

During  2002,  the  Partnership  sold its  interest in Sunset  Grove,  a limited
partnership,  to an unrelated  third party and realized a gain of $210,000.  The
gain  was  equal  to  the  net  proceeds  received  by the  Partnership,  as the
Partnership  had  no  remaining  investment  balance  related  to  this  limited
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 limited  partnerships  in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

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 partnerships. The management fee incurred for each of the years ended
December 31, 2002 and 2001, was approximately $129,000.

The Partnership  reimburses  NAPICO for certain  expenses.  The reimbursement to
NAPICO was  approximately  $14,000 for each of the years ended December 31, 2002
and 2001, respectively, and is included in general and administrative expenses.

AIMCO and its affiliates currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include 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  Limited
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 is as follows:

                                                  Years Ended December 31,
                                                     2002            2001
                                                       (in thousands)

Net loss per financial statements                 $  (436)      $(1,191)

  Other                                               110           409
  Partnership's share of limited local
   Partnership                                      1,090           846
Income per tax return                             $   764       $    64
Net income per limited partnership interest       $ 66.77       $  5.52

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

                                                   December 31, 2002
                                                     (in thousands)

      Net assets as reported                           $  2,083
      Add (deduct):
       Investment in Partnerships                       (17,115)
        Deferred offering expenses                        4,276
       Other                                                 87
      Net deficit - federal tax basis                  $(10,669)

5.    Abandonment Of Limited Partnership Units

In 2002 the number of Limited  Partnership  Units  decreased  by 14 units due to
limited  partners  abandoning  their  units.  In  abandoning  his or her Limited
Partnership  Unit(s),  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  Unit in the  accompanying  consolidated
statements of operations is calculated based on the number of units  outstanding
at the beginning of the year.


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


<TABLE>
<CAPTION>


                                       Buildings
                                          And
                                         Related
                                         Personal            Accumulated   Date of
     Description       Encumbrance Land   Property  Total(2)  Depreciation Construction
                                                      (3)        (3)

<S>                       <C>    <C>      <C>       <C>      <C>            <C>
Hidden Pines L.P.         (1)    $   44   $ 1,648   $ 1,692  $  1,645       1981
Sunshine Canyon L.P.      (1)        20     1,003     1,023       988     1981-1982
Alabama Properties
 Ltd. V                   (1)        53     2,125     2,178     1,296     1980-1981
Charlotte River
 Assoc.                   (1)       552    19,369    19,921    17,705       1980
Village Apartments
 Ltd.                     (1)        65     1,812     1,877     1,379     1981-1982
Lakeside Apts. Ltd.       (1)        72     1,018     1,090       830     1980-1981
Santa Maria Ltd.
 Dividend
 Partnership Assoc.       (1)        86     3,493     3,579     2,500     1981-1982
300 Broadway Assoc.       (1)        97     3,707     3,804     2,444     1981-1982
Vista Housing Assoc.      (1)       103     3,258     3,361     2,566     1981-1982
Westgate Apt. Ltd.        (1)        80     1,496     1,576       955     1980-1981
Marina Del Ray
 Ltd. Dividend
 Partnership Assoc.       (1)       108     3,137     3,245     2,200     1981-1982
Total                     (1)    $1,280   $42,066   $43,346   $34,508
</TABLE>

(1)    Schedule of Encumbrances

<TABLE>
<CAPTION>

                                                                   Notes
                                                                Payable and
                                                   Mortgage       Accrued
Partnership Name                                    Notes        Interest      Total
                                                              (in thousands)
<S>                                             <C>            <C>           <C>
Hidden Pines L.P.                               $  1,329       $     --      $  1,329
Sunshine Canyon L.P.                                 809             --           809
Alabama Properties Ltd. V                          1,457             --         1,457
Charlotte River Assoc.                            11,951          1,005        12,956
Village Apartments Ltd.                            1,411             --         1,411
Lakeside Apartments Ltd.                             911             --           911
Santa Maria Limited Dividend
 Partnership Assoc.                                2,680             --         2,680
Maria Del Day Ltd. Dividend Partnership Assoc.     2,494             --         2,494
300 Broadway Assoc.                                1,162             --         1,162
Vista Housing Assoc.                               2,372             --         2,372
Westgate Apts. Ltd.                                  916             --           916
Total - December 31, 2002                       $ 27,942       $  1,005      $ 28,497
</TABLE>


(3) Reconciliation of real estate

                                                 Years Ended December 31,
                                                   2002           2001
                                                      (in thousands)
       Real Estate:

Balance at beginning of period                   $ 43,901       $ 43,765
Improvements during the period                        340            136
Disposals of rental properties                       (895)            --
Balance at end of period                         $ 43,346       $ 43,901

       Reconciliation of accumulated depreciation

                                                 Years Ended December 31,
                                                   2002           2001
                                                      (in thousands)
       Accumulated Depreciation:

Balance at beginning of period                   $ 34,159       $ 33,003
Depreciation expense for the period                 1,213          1,156
Disposals of rental properties                       (864)        $ --
Balance at end of period                         $ 34,508       $ 34,159

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.  The
matter was tried in October  and  November  2002.  In  November  2002,  the jury
returned  special  verdicts  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.
In addition,  the jury awarded the plaintiffs punitive damages against NAPICO of
approximately  $92.5 million. On April 3, 2003, the judge entered certain orders
in connection with the litigation that denied defendants' motion for a new trial
and set April 28,  2003 as the date for entry of  judgment  against  NAPICO  and
certain  other  defendants  in the amount of $25.2  million  for  violations  of
securities  laws and against  NAPICO for $67.3 million for breaches of fiduciary
duty, both amounts plus interest,  subject to plaintiffs'  agreement to reducing
the jury award for punitive  damages  against  NAPICO from $92.5 million to $2.6
million.  While the case is expected to be  appealed,  the entire  matter is the
responsibility  of the former  shareholder of Casden Properties Inc. pursuant to
the documents  related to AIMCO's  acquisition of Casden  Properties Inc., which
was completed in March 2002.

Consent Solicitation

In March 2001, a limited  partner of the  Partnership,  which acquired its units
through a tender offer, commenced a consent solicitation to remove NAPICO as the
Corporate  General  Partner of the  Partnership.  In April 2001, the Partnership
commenced an action to enjoin the  solicitation  alleging  that the  information
contained  in the  solicitation  was  materially  false  and  misleading  and in
violation of the federal  securities  laws. In November  2002, a settlement  was
reached between NAPICO and the limited partner whereby the lawsuit was dismissed
and all claims between the parties were released.

The Corporate General Partner of the Partnership is involved in various 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.

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership and to elect Millenium as the new general  partner.  The Partnership
has filed  with the SEC a  preliminary  Consent  Revocation  Statement  opposing
Millenium's and Everest's efforts to remove the general partners.

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

Effective  August 29,  2002,  the  Registrant  dismissed  its prior  Independent
Auditors, Deloitte & Touche LLP ("Deloitte") and retained as its new Independent
Auditors,  Ernst & Young LLP.  Deloitte's  Independent  Auditors'  Report on the
Registrant's  financial statements for the calendar year ended December 31, 2001
did not  contain an adverse  opinion or a  disclaimer  of  opinion,  and was not
qualified or modified as to uncertainty,  audit scope or accounting  principles.
The  decision to change  Independent  Auditors  was  approved  by the  Corporate
General  Partner.  During the  calendar  year ended 2001 and through  August 29,
2002,  there were no  disagreements  between the  Registrant and Deloitte on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure  which  disagreements  if  not  resolved  to  the
satisfaction of Deloitte,  would have caused it to make reference to the subject
matter of the disagreements in connection with its reports.

Effective  August 29,  2002,  the  Registrant  engaged  Ernst & Young LLP as its
Independent Auditors.  During the last two calendar years and through August 29,
2002,  the  Registrant  did not consult  Ernst & Young LLP  regarding any of the
matters or events set forth in Item 304 (a)(2)(i) and (ii) of Regulation S-B.

                                    PART III.

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

Real Estate Associates  Limited III (the  "Partnership" or the "Registrant") has
no officers or directors.  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 executive  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
Michael J. Hornbrook            48    Executive Vice President and Chief
                                        Operating Officer
Jeffrey H. Sussman              37    Senior Vice President, General
                                       Counsel and Secretary
Brian H. Shuman                 40    Senior Vice President and Chief
                                       Financial Officer

Peter K.  Kompaniez  has been a Director  of NAPICO  since  April 1,  2000.  Mr.
Kompaniez  has been  Vice  Chairman  of the  Board  of  Directors  of  Apartment
Investment and Management  Company  ("AIMCO")  since July 1994 and was appointed
President of AIMCO in July 1997.

David R. Robertson has been President, Chief Executive Officer and a Director of
NAPICO since October 2002.  Mr.  Robertson is also  Executive  Vice President of
AIMCO  and  is  responsible  for  property  operations,   asset  management  and
transaction   activities   within  AIMCO   Capital's   portfolio  of  affordable
properties. Prior to joining AIMCO, Mr. Robertson was a member of the investment
banking group at Smith Barney from 1991 to 1996,  where he was  responsible  for
real estate investment  banking  transactions in the western United States,  and
was part of the Smith Barney team that managed  AIMCO's  initial public offering
in 1994.  From February 1996 until  February  2002,  when Mr.  Robertson  joined
AIMCO, he was the Chairman and Chief Executive Officer of Robeks Corporation,  a
privately held chain of specialty food stores.

Michael J.  Hornbrook has been  Executive Vice President of NAPICO since January
2002 and became Chief Operating  Officer of NAPICO in April 2002. Mr.  Hornbrook
is also  Senior  Vice  President  of AIMCO  and is  responsible  for tax  credit
placement activities and transactions involving properties in AIMCO's affordable
housing portfolio  located in the western United States.  Prior to January 2002,
Mr.  Hornbrook  was a partner in the law firm of McGuire Woods LLP in the firm's
Chicago office and  specialized in the area of real estate law with a particular
focus on affordable  housing and tax credits.  Mr. Hornbrook was the Chairman of
the firm's Affordable Housing Group.

Jeffrey H.  Sussman is Senior Vice  President,  General  Counsel and  Secretary,
having joined NAPICO in 1998. Mr.  Sussman is responsible  for the legal affairs
of NAPICO and its affiliates. Prior to joining NAPICO in April 1998, Mr. Sussman
was an associate with the law firm of Rus, Miliband, Williams & Smith in Irvine,
California.  His practice  emphasized real estate finance and insolvency law and
included the representation of borrowers,  lenders, and court-appointed trustees
in matters involving apartment complexes, retail centers and hotels.

Brian H. Shuman is Senior Vice  President and Chief  Financial  Officer,  having
joined NAPICO in 2000.  Mr. Shuman is responsible  for the financial  affairs of
NAPICO,  as well as the limited  partnerships  sponsored  by it. From 1996 until
joining  NAPICO in August  2000,  Mr.  Shuman was Vice  President  - Finance for
Preferred Health  Management  Inc., the largest provider of worker  compensation
diagnostic  imaging  services in California  formed in 1996, and was responsible
for establishing and managing the accounting,  billing, collection, treasury and
financial  reporting  departments.  From  1994  to  1996,  Mr.  Shuman  was  the
Controller  for DVI Business  Credit  Corporation,  which  provides  asset based
lending to a wide range of health concerns.

The executive  officers and directors of the Corporate  General  Partner fulfill
the obligations of the Audit Committee and oversee the  Partnership's  financial
reporting process on behalf of the Corporate General Partner. Management has the
primary  responsibility  for the financial  statements and the reporting process
including  the  systems  of  internal  controls.  In  fulfilling  its  oversight
responsibilities,  the executive officers and directors of the Corporate General
Partner reviewed the audited  financial  statements with management  including a
discussion  of the  quality,  not  just  the  acceptability,  of the  accounting
principles,  the  reasonableness  of significant  judgments,  and the clarity of
disclosures in the financial statements.

The executive  officers and directors of the Corporate  General Partner reviewed
with the independent auditors,  who are responsible for expressing an opinion on
the conformity of those audited  financial  statements  with generally  accepted
accounting  principles,  their  judgments  as  to  the  quality,  not  just  the
acceptability,  of the Partnership's accounting principles generally accepted in
the United  States and such other  matters as are required to be discussed  with
the  Audit  Committee  or its  equivalent  under  auditing  standards  generally
accepted in the United States.  In addition,  the Partnership has discussed with
the  independent  auditors the auditors'  independence  from  management and the
Partnership  including  the matters in the written  disclosures  required by the
Independence  Standards  Board and  considered  the  compatibility  of non-audit
services with the auditors' independence.

The executive  officers and directors of the Corporate General Partner discussed
with the  Partnership's  independent  auditors  the overall  scope and plans for
their audit. In reliance on the reviews and discussions  referred to above,  the
executive  officers and directors of the Corporate General Partner have approved
the  inclusion of the audited  financial  statements  in the Form 10-KSB for the
year  ended  December  31,  2002 for filing  with the  Securities  and  Exchange
Commission.

The Corporate  General Partner has reappointed  Ernst & Young LLP as independent
auditors to audit the financial statements of the Partnership for 2003. Fees for
2002 were  audit  services  of  approximately  $31,000  and  non-audit  services
(principally tax-related) of approximately $32,000.

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, 2002.

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  officers or directors 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  partnerships.  The  management  fee  incurred  for the  years  ended
December  31,  2002  and  2001,   was   approximately   $129,000  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, 2002
and 2001, respectively, and is included in general administrative expenses.

AIMCO and its affiliates currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include 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 10 Material contracts: The registrant is not party to any material
      contracts,  other than the Restated  Certificate  and Agreement of Limited
      Partnership  dated  January  5,  1981,  and  the  thirty-three   contracts
      representing   the  Partnership   investment  in  Local   Partnerships  as
      previously filed at the Securities and Exchange Commission,  File #268983,
      which is hereby incorporated by reference.

      Exhibit 16.1 Letter dated August 29, 2002,  from the  Registrant's  former
      independent accountants regarding its concurrence with the statements made
      by the Registrant  incorporated by reference to the  Registrant's  Current
      Report on Form 8-K dated September 6, 2002.

      Exhibit 99.0 Certification of Chief Executive Officer and Chief Financial
                   Officer

      Exhibit 99.1 Independent Auditors Report for Charlotte Lake River
                   Associates

      Exhibit 99.2 Independent Auditors Report for Hidden Pines, L.P.

      Exhibit 99.3 Independent Auditors Report for Lakeside Apartments, Ltd.

      Exhibit 99.4 Independent Auditors Report for Alabama Properties, Ltd. V.

      Exhibit 99.5  Independent  Auditors  Report for Santa Maria  Limited Div.
                    Partnership Assoc.

      Exhibit 99.6 Independent Auditors Report for Sunshine Canyon, L.P.

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

      Exhibit 99.8 Independent Auditors Report for Marina Del Ray, Ltd.

      Exhibit 99.9 Independent Auditors Report for Westgate Apartments, Ltd.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December 31, 2002.

Item 14.  Controls and Procedures

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, within 90 days of
the filing  date of this  annual  report,  evaluated  the  effectiveness  of the
Partnership's  disclosure  controls and  procedures  (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) and have determined that such disclosure controls
and  procedures  are  adequate.  There have been no  significant  changes in the
Partnership's  internal  controls or in other  factors that could  significantly
affect the  Partnership's  internal  controls since the date of evaluation.  The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls. Accordingly, no corrective actions
have been taken.

                                   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/Peter K. Kompaniez
                                          Peter K. Kompaniez
                                          Director

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

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

                                    Date: April 18, 2003

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:  April 18, 2003
Peter K. Kompaniez



/s/David R. Robertson         President, Chief Executive    Date: April 18, 2003
David R. Robertson             Officer and Director



/s/Brian H. Shuman            Senior Vice President and     Date: April 18, 2003
Brian H. Shuman                 Chief Financial Officer



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


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


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


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


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      annual report (the "Evaluation Date"); and


      c) Presented in this annual report our conclusions about the effectiveness
      of the disclosure  controls and  procedures  based on our evaluation as of
      the Evaluation Date;


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


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date:  April 18, 2003

                               /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

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


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


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


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


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      annual report (the "Evaluation Date"); and


      c) Presented in this annual report our conclusions about the effectiveness
      of the disclosure  controls and  procedures  based on our evaluation as of
      the Evaluation Date;


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


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date:  April 18, 2003

                                 /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

                       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.

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

  16.1      Letter  dated  August  29,  2002,  from  the   Registrant's   former
            independent   accountants   regarding  its   concurrence   with  the
            statements  made by the Registrant  incorporated by reference to the
            Registrant's Current Report on Form 8-K dated September 6, 2002.

  99.0      Certification of Chief Executive Officer and Chief Financial Officer

  99.1      Independent Auditors Report for Charlotte Lake River Associates

  99.2      Independent Auditors Report for Hidden Pines, L.P.

  99.3      Independent Auditors Report for Lakeside Apartments, Ltd.

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

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

  99.6      Independent Auditors Report for Sunshine Canyon, L.P.

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

  99.8      Independent Auditors Report for Marina Del Ray, Ltd.

  99.9      Independent Auditors Report for Westgate Apartments, Ltd.


Exhibit 99


                          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, 2002 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: April 18, 2003


                                    /s/Brian H. Shuman
                              Name: Brian H. Shuman
                              Date: April 18, 2003


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

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, 2002 and 2001,  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 or 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, 2002 and 2001, 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
19, 2003 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 19
through  47 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 19, 2003                               52-1088612


Audit Principal:  Renee G. Scruggs

Exhibit 99.2



                          Independent Auditors' Report

To The Partners
Hidden Pines, A Limited Partnership
Lansing, Michigan


We have  audited the  accompanying  balance  sheets of Hidden  Pines,  A Limited
Partnership  as of December  31, 2002 and 2001,  and the related  statements  of
income,  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.

As discussed in Note 1 to the financial statements,  the Partnership depreciates
its buildings using the accelerated  cost recovery method which provides for the
depreciation  of real property over a fifteen year life.  Accounting  principles
generally  accepted in the United State of America require that  depreciation be
computed  over the  estimated  useful  like of the  asset.  As a result  of this
departure from accounting  principles generally accepted in the United States of
America, property and equipment,  less accumulated depreciation,  is understated
and  partners'  deficit is  overstated  by $405,069 and $450,880 at December 31,
2002 and 2001, respectively.  Additionally,  depreciation expense is understated
and net income is overstated by $45,811 and $45,811 for the years ended December
31, 2002 and December 31, 2001, respectively.

In our opinion,  except for the effects of understating  the useful life of real
property as discussed  in the  preceding  paragraph,  the  financial  statements
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Hidden  Pines,  A Limited  Partnership  as of December  31, 2002 and
2001, 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 reports
dated  January 10, 2003,  on our  consideration  of the  Partnership'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 audit  performed in  accordance  with  Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

/s/ Maner, Costerisan & Ellis, P.C.
January 10, 2003

Exhibit 99.3

                          Independent Auditors' Report

To The Partners
Lakeside Apartments, Ltd.

We  have  audited  the  accompanying  basic  financial   statement  of  Lakeside
Apartments,  Ltd.,  as of December  31, 2002 and 2001,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, 2002 and 2001,  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 17, 2003 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
January 17, 2003



Exhibit 99.4

                           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, 2002
and 2001, 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, 2002 and 2001, and the results
of its operations and its cash flows for the year 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 the purpose 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,  2002 and  2001,  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, 2003 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.


/s/DONALD W. CAUSEY & ASSOCIATES, P.C.
DONALD W. CAUSEY & ASSOCIATES, P.C.
Gadsden, Alabama
January 22, 2003


Exhibit 99.5

                          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, 2002 and 2001, 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, the
financial position of Santa Maria Limited Dividend Partnership  Associates,  RHS
Project No.:  63-17-1336329 as of December 31, 2002 and 2001, 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 January 22, 2003,  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 15
through  18 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
January 22, 2003



Exhibit 99.6

                          Independent Auditors' Report

To The Partners
Sunshine Canyon, A Limited Partnership

We have audited the  accompanying  balance sheets of Sunshine  Canyon, A Limited
Partnership  as of December  31, 2002 and 2001,  and the related  statements  of
income,  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.

As discussed in Note 1 to the financial statements,  the Partnership depreciates
its buildings using the accelerated  cost recovery method which provides for the
depreciation  of real property over a fifteen year life.  Accounting  principles
generally  accepted in the United State of America require that  depreciation be
computed  over the  estimated  useful  like of the  asset.  As a result  of this
departure from accounting  principles generally accepted in the United States of
America, property and equipment,  less accumulated depreciation,  is understated
and  partners'  deficit is  overstated  by $252,496 and $280,549 at December 31,
2002 and 2001, respectively.  Additionally,  depreciation expense is understated
and net income is  overstated  by $28,053 for each year ended  December 31, 2002
and December 31, 2001.

In our opinion,  except for the effects of understating  the useful life of real
property as discussed  in the  preceding  paragraph,  the  financial  statements
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Sunshine Canyon,  A Limited  Partnership as of December 31, 2002 and
2001, 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 a report
dated  January 10, 2003,  on our  consideration  of the  Partnership's  internal
control over financial reporting and on 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.

/s/ Maner, Costerisan & Ellis, P.C.
January 10, 2003

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, 2002
and the related statements of operations,  partners' deficiency,  and cash flows
for the year 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 audit. The financial statements of Vista
Housing Associates as of December 31, 2001, were audited by other auditors whose
report,  dated  January 23,  2002,  expressed  an  unqualified  opinion on those
statements.

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  statements
presentation. I believe that my audit 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, 2002,  and the results of its  operations,  its
partners'  deficiency  and its cash flows for the year 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
January 17, 2003


Exhibit 99.8

                          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   (the   Partnership),   RHS  Project   No.:
63-20-1337676  as of December 31, 2002 and 2001,  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, 2002
and 2001, 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,  2002,  dated  January  22,  2003,  on  our
consideration of Marina Del Rey Limited Dividend Partnership Associates internal
control over financial reporting and on 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 14
through  16 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
January 22, 2003

Exhibit 99.9

                          Independent Auditors' Report

To the Partners
Westgate Apartments, Ltd.
Albertville, Alabama

We have audited the accompanying balance sheet of Westgate  Apartments,  Ltd., a
limited partnership, RHS Project No.: 01-048-0630788273 as of December 31, 2002,
and the related  statements of operations,  partners' 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 opinion on the
financial  statements based on our audits. The financial  statements of Westgate
Apartments,  Ltd. as of December 31, 2001,  were audited by other auditors whose
report dated March 8, 2002 expressed an unqualified opinion on those statements.

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, 2002, and the results of its
operations  and its cash  flows  for the year 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 the purpose 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, 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 6, 2003 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.




/s/DONAL W. CAUSEY & ASSOCIATES, P.C.
DONALD W. CAUSEY & ASSOCIATES, P.C.
Gadsden, Alabama
March 6, 2003