UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, DC.  20549
                               FORM 10-K/A
                             Amendment No. 1


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

For the fiscal year ended         December 31, 2002
                         ---------------------------------------------
                                  or
[   ]  TRANSITION  REPORT  PURSUANT TO SECTION  13  OR  15(d)  OF  THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________

Commission file number                0-15843
                       -----------------------------------------------

                     DIVERSIFIED HISTORIC INVESTORS III
----------------------------------------------------------------------
        (Exact name of registrant as specified in its charter)

     Pennsylvania                                        23-2391927
-------------------------------                    -------------------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                     Identification No.)

                1521 Locust Street, Philadelphia, PA  19102
----------------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code    (215) 557-9800
                                                    ------------------

Securities registered pursuant to Section 12(b) of the Act:   NONE
                                                            ----------

Securities registered pursuant to section 12(g) of the Act: 13,981.5 Units
                                                            ------------

                 Units of Limited Partnership Interest
----------------------------------------------------------------------
                           (Title of Class)

Indicate  by  check  mark whether the registrant  (1)  has  filed  all
reports  required to be filed by Section 13 or 15(d) of the Securities
Exchange  Act  of  1934 during the preceding 12 months  (or  for  such
shorter period that the registrant was required to file such reports),
and  (2) has been subject to such filing requirements for the past  90
days.                                            Yes          No  X
                                                     -----       -----

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

Aggregate  market  value  of  Units  held  by  non-affiliates  of  the
Registrant:                                           Not Applicable *
                                                      ----------------
*Securities not quoted in any trading market to Registrant's knowlege.

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).   Yes ___ No_X_


<PAGE>


                           EXPLANATORY NOTE
                           ----------------

Diversified Historic Investors III (the "Registrant") is filing
the following Annual Report on Form 10-K/A for the period ended
December 31, 2002 containing consolidated financial statements.

On July 11th, 2005 the Securities and Exchange Commission ("SEC")
notified the Registrant of its non-compliance in meeting
reporting requirements under Section 13(a) or 15(d) of the
Securities and Exchange Act of 1934. The Registrant's inability
to meet its reporting requirements is due to the dissolution of
its former auditor, Gross Kreger & Passio, LLC. This event was
discussed in Item 4.01 of the Registrant's Form 8-K filed on June
27th, 2005.

The Registrant recently engaged a new firm, Russell Bedford
Stefanou Mirchandani, LLP to audit and review the Registrants'
outstanding consolidated financial statements. Accordingly, the
Company is re-filing the Original Filing in its entirety with an
updated Item 8 and 14 of the Original Filing. The Company has not
made any other changes to the Original Filing. This Amendment No.
1 on Form 10-K/A continues to speak as of the date of the
Original Filing, and the Company has not updated the disclosures
contained therein to reflect any events that occurred at a later
date.

<PAGE>

                             PART I
                             ------

Item 1.   Business
          --------

             a.     General Development of Business

             Diversified Historic Investors III ("Registrant") is
a  limited partnership formed in 1986 under Pennsylvania Law.  As
of  December 31, 2002, Registrant had outstanding 13,981.5  units
of limited partnership interest (the "Units").

              Registrant is presently in its operating stage.  It
originally  owned  five  properties or  interests  therein.   Two
properties have been lost due to foreclosure and one property was
sold.   See  Item 2. Properties, for a description  thereof.   It
currently  owns  two  properties or  interests  therein.   For  a
discussion of the operations of the Registrant, See Part II, Item
7.  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations.

             b.     Financial Information about Industry Segments

               The Registrant operates in one industry segment.

             c.     Narrative Description of Business

                Registrant  is  in  the  business  of  operating,
holding,  selling, exchanging and otherwise dealing in  and  with
real  properties  containing improvements  which  are  "Certified
Historic  Structures," as such term is defined  in  the  Internal
Revenue Code (the "Code"), for use as apartments, offices, hotels
and  commercial spaces, or any combination thereof, or low income
housing eligible for the tax credit provided by Section 42 of the
Code, and such other uses as the Registrant's general partner may
deem appropriate.

                 Since   the  Registrant's  inception,  all   the
properties  acquired either by the Registrant, or the  subsidiary
partnerships in which it has an interest, have been rehabilitated
and  certified  as  historic structures  and  have  received  the
related  investment tax credit.  The properties  that  Registrant
owns  or in which it has interest are held for rental operations.
Registrant  anticipates that all the properties will continue  to
be  held for this purpose. As real property values increase,  the
Registrant will re-evaluate its investment strategy regarding the
properties.

                As  of  December 31, 2002, Registrant  owned  two
properties  (or  interests therein), located in Pennsylvania  and
North Carolina. One property is an apartment building and one  is
a  commercial/office  building.  In  total,  the  two  properties
contain 58 apartment units and 62,146 rentable square feet ("sf")
of  commercial space. As of December 31, 2002, 55 apartment units
were  under  lease at monthly rental rates ranging from  $475  to
$1,800. In addition, 22,169 sf of the commercial space was  under
lease  at  annual rates ranging from $12.13 per sf to $15.00  per
sf.   Rental  of  the  apartments and  commercial  space  is  not
seasonal.  For further discussion of the properties, see Item  2.
Properties.

                The Registrant is affected by and subject to  the
general  competitive conditions of the residential and commercial
real estate industries. The competition for both residential  and
commercial  tenants in the local markets where  the  Registrant's
properties  are located is generally strong.  As  a  result,  the
Registrant is forced to keep its rent levels competitively low in
order  to  maintain  moderate  to  high  occupancy  levels.   The
residential  property  is  located  in  Philadelphia,   PA.   The
commercial/office  building is located  in  Winston-Salem,  North
Carolina. The Philadelphia property is located very close to  the
"city  line,"  ie.  the  boundary  between  Philadelphia  and   a
neighboring  suburb.  Many potential residents  would  prefer  to
live  on  the non-city side, to avoid paying the city  wage  tax.
The  Registrant attempts to keep its rents at a level that is low
enough  to  offset  the difference.  In both the  locations,  the
competition  for  tenants  remains  stiff  and  several   similar
buildings  exist.  The  apartment and commercial  market  remains
stable   and   new  construction  remains  virtually  nonexistent
although the availability of favorable home financing has  placed
pressure on the rental tenant base.

                 Registrant   has  no  employees.    Registrant's
activities  are overseen by Brandywine Construction & Management,
Inc., ("BCMI"), a real estate management firm.

              d.   Financial Information About Foreign and
              Domestic Operations and Export Sales

              See  Item 8. Financial Statements and Supplementary
Data.


Item 2.             Properties
                    ----------

               As  of  the  date  hereof,  Registrant  owned  two
properties, or interests therein.  A summary description of  each
property held at December 31, 2002 is given below.

              a.      Lincoln  Court - consists of  58  apartment
units  in  three  buildings located at 5351 Overbrook  Avenue  in
Philadelphia,   Pennsylvania.  In  March  1987,  the   Registrant
acquired  the  buildings and is the 100%  equity  owner  of  this
property.  Registrant acquired and rehabilitated the property for
$3,417,640 ($64 per sf) (such amount is exclusive of $158,985  of
capitalized  fees  incurred) which were  funded  by  Registrant's
equity  contributions, including mortgage financing of $1,730,000
and  a  note payable of $10,000 (total balance due of $10,000  at
December 31, 2002).  The note payable bears interest at  10%.  It
is  payable interest only on a quarterly basis; the principal was
due  in  1994.   In  1988,  a $95,000 second  mortgage  loan  was
obtained.  In 1991, and $100,000 third mortgage loan was obtained
which was due in 1994. Due to decreased cash flow, the Registrant
stopped  making scheduled debt service payments to the holder  of
the  first,  second and third mortgages.  Notice of  default  was
received  from  the lender on November 29, 1993.  The  Registrant
pursued  settlement  discussions with  the  lender;  however,  in
December  1994  the  mortgage notes were  sold.   The  Registrant
entered  into  an agreement with the new holder of the  mortgages
whereby  the  maturities of the notes were extended to  1999  and
monthly  payments of interest were to be made  to  the  new  note
holder in an amount equal to net operating income.  In June 1996,
the  Registrant refinanced $1,268,000 of the first  mortgage.  In
November 1998, the Registrant restructured the mortgage notes. On
September  26,  2002,  the  Lincoln  Court  first  mortgage   was
refinanced with a temporary bridge loan and the net proceeds were
used  to partially repay the second mortgage on the property.  In
exchange  for  a  20%  ownership interest in Lincoln  Court,  the
second  mortgagee contributed the balance of the second  mortgage
to  capital and cancelled its loan. Permanent financing closed on
January 31, 2003.

             The property is managed by BCMI.  As of December 31,
2002,  55  residential units (95%) were under  lease  at  monthly
rents ranging from $475 to $1,800.  All leases are renewable, one-
year  leases.  The occupancy for the previous four years was  98%
for  2001,  86%  for 2000, 88% for 1999, and 88%  for  1998.  The
monthly  rental ranges for the previous four years were  $471  to
$1,700  during  2001 $460 to $1,700 during 2000, $460  to  $1,565
during  1999  and  1998. For tax purposes, this  property  has  a
federal  tax  basis  of $3,447,096 and is depreciated  using  the
straight-line  method  with a useful life  of  27.5  years.   The
annual  real  estate  taxes are $34,924  which  is  based  on  an
assessed value of $426,880 taxed at a rate of $82.64 per  $1,000.
No  one tenant occupies ten percent or more of the building.  The
Registrant  believes that the property is adequately  covered  by
insurance.


               b.      The  Loewy  Building  -  consists  of  two
adjoining buildings located at 505 West Fourth Street in Winston-
Salem,  North Carolina.  The buildings consist of 62,146 rentable
sf  of  commercial  space.   In  November  1986,  the  Registrant
acquired  its  interest  in this Property  by  purchasing  a  99%
interest  in  Triad Properties General Partnership  ("Triad"),  a
Pennsylvania  general  partnership, for a  cash  contribution  of
$2,250,000.   Triad  contracted to acquire and  rehabilitate  the
Property for $5,690,000 ($88 per sf).  Additionally, $560,000  of
working capital/marketing reserves were provided.  The total cost
of  the  project was funded by Registrant's equity  contribution,
mortgage financing of $3,560,000 (principal balance of $3,916,716
at  December  31,  2002)  and  a $500,000  note  payable  to  the
developer (Cwood Properties, Inc., Thomas L. Kummer and  Gail  R.
Citron;  all of whom are general partners of Triad).   The  first
mortgage bears interest at 11.5% and is due in January 2012.  The
developers  note  was  sold in September  1997.   The  Registrant
entered into an agreement with the new holder of the note whereby
monthly payments of interest are to be made in an amount equal to
net  operating income with a minimum monthly payment of  $27,500.
The  Registrant  advanced  an  additional  $1,098,000  and  Triad
obtained  $200,000  of additional financing  in  1987  (principal
balance  due  of  $200,000 at December 31,  2002)  to  fund  cost
overruns resulting from delays and changes in rehabilitation  and
construction  plans. The additional financing bears  interest  at
the prime rate with a minimum of 6% and a maximum of 8% adjusting
annually  on  January 2 (6% at December 31, 2002 and  2001).  The
property is managed by BCMI.

             As of December 31, 2002, 22,169 sf were rented (36%)
at  annual  rates  ranging from $12.13 to  $15.00  per  sf.   The
occupancy  at year end for the previous four years has  been  36%
for  2001  and  2000,  41%  for  1999,  and  98%  for  1998.  The
significant drop in occupancy as of December 31, 1999 as compared
to  1998  is the result of the expiration of a tenant  lease  for
33,121  sf on December 31, 1999.  The range for annual rents  has
been $6.00 to $14.28 per sf for 2001, $6.00 to $13.41 per sf  for
2000, $6.00 to $13.41 per sf for 1999 and $6.00 to $16.44 per  sf
for  1998.  There are two tenants who each occupy ten percent  or
more  of  the  rentable  square footage.   Both  tenants  operate
principally as law firms.

           The  following  is  a table showing  commercial  lease
expirations at Loewy Building for the next five years.



                                         Total
                                        annual    % of gross
                          Total sf      rental      annual
              Number of      of       covered by    rental
               Leases     expiring     expiring      from
     Years    expiring     leases       leases     property
     -----    ---------   --------    ----------  ----------
     2003         1        3,061       $ 46,000     14%
     2004         0            0              0      0%
     2005         1        2,800        $37,000     13%
     2006         3       16,308       $201,000     73%
     2007         0            0              0      0%


              One  commercial  lease expired  during  2002.   The
lease, for a total of 200 sf, was not renewed.

              For  tax  purposes, this property has  a  basis  of
$5,721,638 and is depreciated using the straight-line method with
a  useful  life  of  39 years. The annual real estate  taxes  are
$22,849  which is based on an assessed value of $3,849,900  taxed
at  a  rate  of  $1.68  per $100. Registrant  believes  that  the
property is adequately covered by insurance.

              Effective as of April 23, 2003, the Loewy  Building
was foreclosed by the mortgage holder.


Item 3.   Legal Proceedings
          -----------------

                To  the best of its knowledge, Registrant is  not
party  to, nor is any of its property the subject of any  pending
material legal proceedings.


Item 4.   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------
                No  matter  was submitted during the fiscal  year
covered by this report to a vote of security holders.

<PAGE>


                             PART II
                             -------

Item  5.    Market  for  Registrant's Common Equity  and  Related
            Stockholder Matters
            -----------------------------------------------------

           a.  There is no established public trading market  for
the  Units.  Registrant does not anticipate any such market  will
develop.   Trading  in  the Units occurs solely  through  private
transactions.  The Registrant is not aware of the prices at which
trades  occur.  Registrant's records indicate that  73  Units  of
record were sold or exchanged in 2002.

           b.  As  of  December 31, 2002,  there  were  1,583 record
holders  of Units.

           c.  Registrant did not declare any cash dividends in 2002
or 2001.


Item 6.   Selected Financial Data
          -----------------------

              The  following selected financial data are for  the
five  years ended December 31, 2002.  The data should be read  in
conjunction  with the consolidated financial statements  included
elsewhere  herein.  This data is not covered by  the  independent
auditors' report.

                    2002        2001       2000        1999         1998
                    ----        ----       ----        ----         ----
Rental income  $  907,392  $  931,137  $  936,392  $1,257,195   $1,251,911
Interest income     2,629       2,414       4,397       3,866        2,113
Net income (loss) 353,288  (3,444,268) (2,006,951) (1,070,903)  (1,297,537)
Net income (loss)
 per Unit           25.01     (243.88)     (142.11)    (75.83)      (91.88)
Total assets (net
 of depreciation
 and
 amortization)  2,309,559   3,348,854    6,024,042  7,307,432    7,758,588
Debt
 obligations    7,365,328   8,996,269    8,972,599  8,966,573    8,970,613

Note:  See  Part  II,  Item  7(3) Results  of  Operations  for  a
discussion  of  factors which materially affect the comparability
of the information reflected in the above table.


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

             (1)    Liquidity

                At  December  31, 2002, Registrant  had  cash  of
approximately  $24,207.   Registrant  uses  cash  generated  from
operations primarily to fund operating expenses and debt service.
In  recent years the Registrant has realized significant  losses,
including the foreclosure of one property. At the Loewy  Building
the  mortgage  is a cash-flow mortgage, requiring  all  available
cash  after payment of operating expenses to be paid to the first
mortgage holder.  Therefore, it is unlikely that any cash will be
available to the Registrant to pay its general and administrative
expenses.  The Registrant is not aware of any additional  sources
of liquidity.

               As of December 31, 2002, Registrant had restricted
cash  of  $118,080 consisting primarily of funds held as security
deposits,  replacement  reserves and escrows  for  taxes.   As  a
consequence of these restrictions as to use, Registrant does  not
deem these funds to be a source of liquidity.

                It  is the Registrant's intention to continue  to
hold  the  properties  until they can no  longer  meet  the  debt
service  requirements and the properties are foreclosed,  or  the
market  value of the properties increases to a point  where  they
can  be  sold  at  a  price  which is  sufficient  to  repay  the
underlying indebtedness (principal plus accrued interest).


          (2)     Capital Resources

                Any  capital  expenditures needed  are  generally
replacement  items and are funded out of cash from operations  or
replacement reserves, if any.  The Registrant is not aware of any
factors  which would cause historical capital expenditure  levels
not  to  be indicative of capital requirements in the future  and
accordingly does not believe that it will have to commit material
resources  to capital investment in the foreseeable  future.   If
the  need  for capital expenditures does arise, the 20%  minority
owner of Lincoln Court has agreed to fund capital expenditures.

               Results of Operations

                During  2002, Registrant realized net  income  of
$353,288 ($25.01 per limited partnership unit), compared to a net
loss  of  $3,444,268  ($243.88 per limited partnership  unit)  in
2001,   and  a  net  loss  of  $2,006,951  ($142.11  per  limited
partnership unit) in 2000. Included in net income for 2002 are  a
gain   on   sale  of  $271,576  and  an  extraordinary  gain   on
extinguishment of debt of $1,423,902.

                Rental  income was $907,392 in 2002, $931,137  in
2001,  and  $936,392 in 2000. The decrease in  rental  income  at
Lincoln  Court from 2001 to 2002 is due to a decrease in  average
occupancy  (98% to 95%). The decrease in rental income from  2000
to  2001 is due to a decrease at the Loewy Building and the Green
Street  Apartments,  partially offset by an increase  at  Lincoln
Court. The decrease in rental income at the Loewy Building is due
a  decrease  in average occupancy (38% to 36%) and a decrease  in
average rental rates. The decrease at the Green Street Apartments
is  due  to  a  decrease in average occupancy (98% to  86%).  The
increase  at  Lincoln  Court is due to  an  increase  in  average
occupancy (86% to 95%).

              Rental  operations expense was  $635,660  in  2002,
$567,915 in 2001, and $552,505 in 2000. The increase from 2001 to
2002  is  due  to an increase in insurance expense and  utilities
expense  at Lincoln Court and the Loewy Building and an  increase
in  real  estate  tax  expense at the Loewy  Building,  partially
offset by a decrease in maintenance expense at Lincoln Court. The
increase  in  insurance expense at Lincoln Court  and  the  Loewy
Building  is due to insurance market conditions. The increase  in
real  estate  tax  expense at the Loewy Building  is  due  to  an
increase  in  the  property's assessed  value.  The  decrease  in
maintenance  expense  is  due to the  decrease  in  plumbing  and
electrical and alarm service expenses. The increase from 2000  to
2001 is due to an increase in commission expense at Lincoln Court
and  the  Green Street Apartments, partially offset by a decrease
in  legal  and  accounting  expense at the  Loewy  Building.  The
increase  in  commission expense at Lincoln Court and  the  Green
Street  Apartments  is  due to an increase  in  the  turnover  of
apartment  units.  The decrease in legal expenses  at  the  Loewy
Building  is due to a decrease in professional services  rendered
during 2001.

              Interest expense was $1,264,379 in 2002, $1,068,080
in 2001, and $1,068,425 in 2000. The increase in interest expense
from  2001 to 2002 is due to the prepayment penalty incurred upon
the refinancing of the Lincoln Court first mortgage.

              Depreciation and amortization was $299,952 in 2002,
$495,581 in 2001 and $522,814 in 2000.  The decrease from 2001 to
2002 is due to the impairment loss incurred at the Loewy Building
in 2001 and the foreclosure of Green Street in 2002. The decrease
from  2000 to 2001 is due to the impairment loss incurred at  the
Loewy Building in 2000.

              During  2001 the Registrant incurred an  impairment
loss  of $2,264,000. The Loewy Building was deemed to be impaired
and  was written down to its fair market value. Fair value, which
was determined by reference to the present value of the estimated
future  cash  inflows, exceeded the carrying value by $2,264,000,
therefore  an  impairment  loss of that  amount  was  charged  to
operations in 2001.

               During 2000, the Registrant incurred an impairment
loss  of  $820,000. The Loewy Building was deemed to be  impaired
and  was written down to its fair market value. Fair value, which
was determined by reference to the present value of the estimated
future  cash  inflows exceeded the carrying  value  by  $820,000,
therefore  an  impairment  loss of that  amount  was  charged  to
operations in 2000.

                In  2002,  a  loss of approximately  $99,000  was
incurred at the Registrant's three properties compared to a  loss
of  $1,140,000  in  2001  and a loss of  $1,115,000  in  2000.  A
discussion of property operations/activities follows:

              During  2002,  the Registrant incurred  a  loss  of
$624,000 at Lincoln Court including $223,000 of depreciation  and
amortization  expense  compared to a loss of  $269,000  including
$165,000  of  depreciation  and  amortization  expense  in  2001,
compared to a loss of $349,000 including $163,000 of depreciation
expense in 2000. The increase in loss from 2001 to 2002 is due to
a decrease in rental income and an increase in utilities expense,
insurance  expense,  real  estate tax  expense  and  depreciation
expense,  partially offset by a decrease in maintenance  expense.
The  decrease  in rental income is due to a decrease  in  average
occupancy (98% to 95%). The increase in utilities expense is  due
to  an increase in electricity charges. The increase in insurance
expense  is  due to insurance market conditions. The increase  in
real  estate  tax expense is due to an increase in  the  assessed
value  of  the property. The increase in depreciation expense  is
due  to capital expenditures. The decrease in maintenance expense
is due to a decrease in plumbing and electrical and alarm service
expenses.  The decrease in loss from 2000 to 2001 is  due  to  an
increase  in rental income and a decrease in maintenance expense,
partially  offset  by  an  increase in  commission  expense.  The
increase  in  rental  income is due to  an  increase  in  average
occupancy  (86% to 98%). The decrease in maintenance  expense  is
due to a decrease in maintenance service expense. The increase in
commission  expense  is due to an increase  in  the  turnover  of
apartment units.

              On  June  30, 1992 Diversified Historic Properties,
Inc.  ("DHP"),  a  partner of the Registrant's  general  partner,
assigned to Dover Limited (D, LTD), its parent, a note receivable
from  the  Registrant  in  the amount  of  $432,103  which  bears
interest  at  10% with the entire principal and accrued  interest
due  on June 30, 1997.  Interest accrued was $45,703 during  both
2002  and  2001.   Payments  on the note  are  to  be  made  from
available  cash flow and before any distribution can be  made  to
the  Registrant's  limited partners.  The  balance  of  the  note
(including accrued but unpaid interest) at December 31, 2002  was
$753,120.

                In  2002  the Green Street Apartments  recognized
income  of  $1,289,000 including $42,000 in depreciation  expense
compared  to a loss of $145,000 including $59,000 of depreciation
expense  in  2001,  and a loss of $132,000 including  $59,000  of
depreciation  expense in 2000.  The property  was  foreclosed  on
October  1, 2002. Included in income for 2002 is an extraordinary
gain on the extinguishment of debt of $1,423,902. The increase in
loss from 2000 to 2001 is due to a decrease in rental income  and
an  increase in commission expense. The decrease in rental income
is  due  to  a  decrease in average occupancy (98% to  86%).  The
increase  in  commission expense is due to  an  increase  in  the
turnover of apartment units.

              In  2002,  the Loewy Building sustained a  loss  of
$566,000  including  $21,000  of  depreciation  and  amortization
expenses compared to a loss (exclusive of the impairment loss) of
$745,000  including  $290,000  of depreciation  and  amortization
expense during 2001 and a loss of $650,000 including $286,000  of
depreciation and amortization expense in 2000.  Exclusive of  the
impairment loss, the decrease in loss from 2001 to 2002 is due to
a  decrease  in  depreciation expense,  partially  offset  by  an
increase in insurance expense and real estate taxes. Depreciation
expense  decreased due to the impairment losses  incurred  during
2000  and  2001.  The increase in insurance  expense  is  due  to
insurance  market  conditions. The increase in  real  estate  tax
expense  is due to an increase in the property's assessed  value.
The  increase in the loss from 2000 to 2001 is due to a  decrease
in  rental  income  and an increase in maintenance  expense.  The
decrease  in  rental  income is due  to  a  decrease  in  average
occupancy  (38% to 36%). The increase in maintenance  expense  is
due to an increase in cleaning and maintenance service.

           Summary of Minority Interests

             In 2002, the Registrant recognized income of $12,532
at Magazine Place compared to an income of $18,000 in 2001 and an
income  $16,000 in 2000. This investment is accounted for by  the
equity method. The decrease in income from 2001 to 2002 is due to
the  sale of the property during the second quarter of 2002.  The
increase in net income from 2000 to 2001 is due to a decrease  in
rental and operating expenses.

              Magazine  Place was sold on June  26,  2002.  As  a
result, the Registrant recognized a gain on sale of $271,576. The
net  proceeds  received from the sale were used  to  pay  accrued
expenses of the Registrant.


Item 7A.  Quantitative and Qualitative Disclosures
          About Market Risk
          ----------------------------------------

             All of our assets and liabilities are denominated in
U.S.  dollars,  and  as  a result, we do  not  have  exposure  to
currency exchange risks.

              We  do  not  engage in any interest  rate,  foreign
currency  exchange rate or commodity price-hedging  transactions,
and as a result, we do not have exposure to derivatives risk.


<PAGE>

                  Independent Auditor's Report
                  ----------------------------


To the Partners of
Diversified Historic Investors III

We  have  audited the accompanying consolidated balance sheet  of
Diversified  Historic  Investors  III  (a  Pennsylvania   Limited
Partnership)  and subsidiaries as of December 31,  2002  and  the
related statements of operations, changes in partners' equity and
cash  flows  for  the  years  ended  December  31,  2002.   These
consolidated financial statements are the responsibility  of  the
Partnership's  management.  Our responsibility is to  express  an
opinion on these consolidated financial statements based  on  our
audit.

We conducted our audit in accordance with standards of the Public
Company  Accounting Oversight Board (United States  of  America).
Those  standards require that we plan and perform  the  audit  to
obtain   reasonable  assurance  about  whether  the  consolidated
financial statements are free of material misstatement.  An audit
includes  examining,  on  a test basis, evidence  supporting  the
amounts   and   disclosures   in  the   consolidated   financials
statements.   An  audit  also includes assessing  the  accounting
principles used and significant estimates made by management,  as
well  as evaluating the overall financial statement presentation.
We  believe  that our audit provides a reasonable basis  for  our
opinion.

In our opinion, the consolidated financial statements referred to
above  present  fairly, in all material respects,  the  financial
position of Diversified Historic Investors III as of December 31,
2002  and  the results of operations and cash flows for the  year
ended  December 31, 2002 in conformity with accounting principles
generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the
basic  financial  statements taken as a whole.  The  Schedule  of
Real  Estate and Accumulated Depreciation on Page 27 is presented
for  the  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/ Russell Bedford Stefanou Mirchandani, LLP
---------------------------------------------
Russell Bedford Stefanou Mirchandani, LLP
Certified Public Accounts

New York, New York
November 16, 2006

<PAGE>


Item 8.   Financial Statements and Supplementary Data
          -------------------------------------------


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)


           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
           ------------------------------------------

                AND FINANCIAL STATEMENT SCHEDULES
                ---------------------------------


Consolidated financial statements:                          Page
----------------------------------                          ----

   Consolidated Balance Sheets at December 31, 2002  and
2001                                                         13

   Consolidated Statements of Operations for  the  Years
Ended December 31, 2002, 2001, and 2000                      14

   Consolidated  Statements  of  Changes  in   Partners'
Equity  for the Years Ended December 31, 2002,  2001,
and 2000                                                     15

   Consolidated Statements of Cash Flows for  the  Years
Ended December 31, 2002, 2001, and 2000                      16

   Notes to consolidated financial statements               17-24



Financial statement schedules:

   Schedule   XI   -   Real   Estate   and   Accumulated
Depreciation                                                 26

   Notes to Schedule XI -                                    27





All  other  schedules are omitted because they are not applicable
or   the  required  information  is  shown  in  the  consolidated
financial statements or notes thereto.


<PAGE>


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)

                   CONSOLIDATED BALANCE SHEETS
                   ---------------------------
                   December 31, 2002 and 2001

                             Assets
                             ------

                                          2002             2001
                                          ----             ----
                                      (Restated)

Rental properties at cost:
 Land                                 $   274,690     $   465,454
 Buildings and improvements             7,654,091       8,941,775
 Furniture and fixtures                   124,762         170,548
                                      -----------     -----------
                                        8,053,543       9,577,777
  Less - accumulated depreciation      (6,160,425)     (6,891,195)
                                      -----------     -----------
                                        1,893,118       2,686,582
Cash and cash equivalents                  24,207          24,568
Restricted cash                           118,080         125,703
Accounts receivable                        29,374         103,775
Investment in affiliate                         0         181,003
Other assets (net of accumulated
 amortization  of  $160,716  and
 $259,565)                                244,780         227,223
                                      -----------     -----------
          Total                       $ 2,309,559     $ 3,348,854
                                      ===========     ===========

                Liabilities and Partners' Equity
                --------------------------------

Liabilities:
 Debt obligations                     $ 7,365,328     $ 8,996,269
 Trade                                    974,166       1,208,816
 Related parties                          819,270         873,567
 Real estate tax                                0          21,174
 Interest payable                       2,211,324       2,994,518
 Tenant security deposits                  43,588          62,468
 Advances                                  13,657               0
 Other liabilities                         33,342          30,681
                                      -----------     -----------
          Total liabilities            11,460,675      14,187,493
                                      -----------     -----------
Minority interest                       1,334,234               0
Partners' deficit                     (10,485,350)    (10,838,639)
                                      -----------     -----------
          Total                       $ 2,309,559     $ 3,348,854
                                      ===========     ===========


The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)

              CONSOLIDATED STATEMENTS OF OPERATIONS
              -------------------------------------
      For the years ended December 31, 2002, 2001 and 2000

                                      2002         2001         2000
                                      ----         ----         ----
                                   (Restated)

Revenues:
 Rental income                    $  907,392  $  931,137     $  936,392
 Interest income                       2,629       2,414          4,397
 Gain on sale of investment          271,576           0              0
                                  ----------  ----------     ----------
    Total revenues                 1,181,597     933,551        940,789
                                  ----------  ----------     ----------
Costs and expenses:
 Rental operations                   635,660     567,915        552,505
 Interest                          1,264,379   1,068,080      1,068,425
 Depreciation and amortization       299,952     495,581        522,814
 Bad debt                             66,876           0              0
 Impairment loss                           0   2,264,000        820,000
                                  ----------  ----------     ----------
     Total  costs and expenses     2,266,867   4,395,576      2,963,744
                                  ----------  ----------     ----------

Net loss before minority interest
 and equity in affiliate          (1,085,270) (3,462,025)    (2,022,955)
Minority interest                      2,124           0              0
Equity in income of affiliate         12,532      17,757         16,004
                                  ----------  ----------     ----------
Net loss before extraordinary
 item                             (1,070,614) (3,444,268)    (2,006,951)
Extraordinary gain on
 extinguishment of debt            1,423,902           0              0
                                  ----------  ----------     ----------
Net income (loss)                 $  353,288 ($3,444,268)   ($2,006,951)
                                  ==========  ==========     ==========

Net  loss per limited partnership
 unit:
 Net loss before minority interest
  and equity in affiliate            ($76.85)   ($245.14)      ($143.24)
 Minority interest
                                         .15           0              0
 Equity in income of affiliate           .89        1.26           1.13
                                  ----------  ----------     ----------
 Net   loss  before
  extraordinary item                  (75.81)    (243.88)       (142.11)
Extraordinary gain on
 extinguishment of debt               100.82           0              0
                                  ----------  ----------     ----------
Net income (loss) per limited
 partnership unit                     $25.01    ($243.88)      ($142.11)
                                  ==========  ==========     ==========

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)

     CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
     ------------------------------------------------------

      For the years ended December 31, 2002, 2001 and 2000


                                      Dover
                                    Historic
                                    Advisors     Limited
                                     II (I)    Partners (2)    Total
                                    --------   ------------    -----

Percentage participation in
 profit or loss                       1%           99%          100%
                                      ==           ===          ====

Balance at December 31, 1999       ($166,913) ($ 5,220,508) ($ 5,387,421)
Net loss                             (20,070)   (1,986,881)   (2,006,951)
                                    --------   -----------   -----------
Balance at December 31, 2000        (186,983)   (7,207,389)   (7,394,372)
Net loss                             (34,443)   (3,409,825)   (3,444,267)
                                    --------   -----------   -----------
Balance at December 31, 2001        (221,426)  (10,617,214)  (10,838,639)
Net income                             3,533       349,755       353,288
                                    --------   -----------   -----------
Balance at December 31, 2002       ($217,893) ($10,267,459) ($10,485,351)
                                    ========   ===========   ===========


 (1)      General Partner.

 (2) 13,981.5  limited partnership units outstanding at  December
     31, 2002, 2001, and 2000.



The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)

              CONSOLIDATED STATEMENTS OF CASH FLOWS
              -------------------------------------

      For the years ended December 31, 2002, 2001 and 2000


                                          2002      2001         2000
                                          ----      ----         ----
                                        (Restated)

Cash flows from operating
 activities:
  Net income (loss)                  $  353,288  ($3,444,268)($2,006,951)
 Adjustments to reconcile net loss
  to net cash
 Depreciation and amortization          299,952      495,581     522,814
 Impairment loss                              0    2,264,000     820,000
 Gain on sale of investment            (271,576)           0           0
 Equity in income of affiliate          (12,532)     (17,757)    (16,004)
 Extraordinary gain on extinguishment
  of debt                            (1,423,902)           0           0
 Minority interest                       (2,124)           0           0
 Changes in assets and liabilities:
 Decrease (increase) in restricted
  cash                                    7,624       55,852      (9,546)
 Decrease (increase) in accounts
  receivable                             74,401      (13,087)    (28,449)
   Increase in other assets             (29,067)     (64,530)     (8,585)
 (Decrease) increase in accounts
  payable - trade                      (234,651)      28,536      18,658
 (Decrease) increase in accounts
  payable - related parties             (54,297)      45,707      45,703
 (Decrease) increase in
  accounts payable - real estate        (21,174)      21,174           0
 (Decrease) increase in interest
  payable                              (126,734)     649,457     662,100
 (Decrease) increase in tenant
  security deposits                     (18,880)       4,584       2,001
 Increase in advances                    13,657            0           0
 Increase (decrease) in other
  liabilities                             2,669       (4,049)    (10,927)
                                     ----------   ----------  ----------
Net cash (used in) provided by
 operating activities                (1,443,346)      21,200      (9,186)
                                     ----------   ----------  ----------
Cash flows from investing
 activities:
 Cash proceeds - sale of
  investment                            465,111            0           0
Capital expenditures                    (45,663)     (48,641)    (22,744)
                                     ----------   ----------  ----------
Net cash provided by (used in)
 investing activities                   419,448      (48,641)    (22,744)
                                     ----------   ----------  ----------
Cash flows from financing
 activities:
 Proceeds from debt obligations       3,135,464       40,487      21,437
 Payments of principal under
  debt obligations                   (2,105,427)     (16,816)    (15,411)
 Distributions                           (6,500)           0           0
                                     ----------   ----------  ----------
Net cash (used in) provided by
 financing activities                 1,023,537       23,671       6,026
                                     ----------   ----------  ----------
Decrease in cash and cash
 equivalents                               (361)      (3,770)    (25,904)
Cash and cash equivalents at
 beginning of year                       24,568       28,338      54,242
                                     ----------   ----------  ----------
Cash and cash equivalents at end
 of year                             $   24,207   $   24,568  $   28,338
                                     ==========   ==========  ==========

Supplemental Disclosure of Cash
 Flow:
 Cash paid during the year for
  interest                           $1,336,459   $  418,623  $  406,325


The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE>


               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)


           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           ------------------------------------------


NOTE A - ORGANIZATION
---------------------

Diversified Historic Investors III (the "Partnership") was formed
in   February  1986  under  the  laws  of  the  Commonwealth   of
Pennsylvania.    The   Partnership   was   formed   to   acquire,
rehabilitate,  and  manage real properties which  were  certified
historic  structures as defined in the Internal Revenue  Code  of
1986  (the  "Code"),  or which were eligible for  designation  as
such, utilizing mortgage financing and the net proceeds from  the
sale   of   limited   partnership  units.   Any   rehabilitations
undertaken by the Partnership were done with a view to  obtaining
certification    of   expenditures   therefore   as    "qualified
rehabilitations expenditures" as defined in the Code.


NOTE B - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------

A  summary of the significant accounting policies applied in  the
preparation of the accompanying consolidated financial statements
follows:

1.        Principles of Consolidation

The  accompanying financial statements of the Partnership include
the  accounts  of three subsidiary partnerships (the "Ventures"),
in   which  the  Partnership  has  a  controlling  interest  with
appropriate  elimination  of inter-partnership  transactions  and
balances.  In addition, the Partnership owns a minority  interest
of  40%  in  one partnership which it accounts for on the  equity
method.   These  financial  statements  reflect  all  adjustments
(consisting only of normal recurring adjustments) which,  in  the
opinion of the Partnership's General Partner, are necessary for a
fair statement of the results for those years.

2.        Depreciation

Depreciation is computed using the straight-line method over  the
estimated useful lives of the assets.  Buildings and improvements
are  depreciated  over 25 years and furniture and  fixtures  over
five years.

3.        Costs of Issuance

Costs  incurred  in  connection with the  offering  and  sale  of
limited  partnership units were charged against partners'  equity
as incurred.

4.        Cash and Cash Equivalents

The Partnership considers all highly liquid instruments purchased
with a maturity of less than three months to be cash equivalents.

5.        Interest Payable

Interest payable includes all accrued and unpaid interest on  the
debt obligations, as well as interest in arrears.

6.        Net Loss Per Limited Partnership Unit

The  net  loss  per  limited partnership unit  is  based  on  the
weighted  average number of limited partnership units outstanding
during the period (13,981.5 in 2002, 2001, and 2000).

7.        Income Taxes

Federal  and  state  income taxes are payable by  the  individual
partners; accordingly, no provision or liability for income taxes
is reflected in the financial statements.

8.        Restricted Cash

Restricted  cash  includes  amounts  held  for  tenant   security
deposits,  real estate tax reserves and other cash restricted  as
to use.

9.        Revenue Recognition

Revenues  are  recognized  when rental  payments  are  due  on  a
straight-line  basis.  Rental payments received  in  advance  are
deferred until earned.

10.       Rental Properties

Rental properties are stated at cost.  A provision for impairment
of  value  is  recorded when a decline in value of a property  is
determined to be other than temporary as a result of one or  more
of  the following: (1) a property is offered for sale at a  price
below  its  current  carrying value, (2) a  mortgage  loan  on  a
property   has  significant  balloon  payments  due  within   the
foreseeable  future  which  the Partnership  does  not  have  the
resources  to meet, and anticipates it will be unable  to  obtain
replacement financing or debt modification sufficient to allow it
to  continue  to  hold the property over a reasonable  period  of
time,  (3)  a  property  has been, and is expected  to  continue,
generating significant operating deficits and the Partnership  is
unable  or  unwilling  to  sustain such deficits,  and  has  been
unable,  or  anticipates  it  will  be  unable,  to  obtain  debt
modification, financing or refinancing sufficient to allow it  to
continue to hold the property for a reasonable period of time  or
(4)  a  property's  value  has  declined  based  on  management's
expectations  with respect to projected future  operational  cash
flows and prevailing economic conditions.  An impairment loss  is
indicated  when  the  undiscounted sum of estimated  future  cash
flows  from  an  asset, including estimated sales  proceeds,  and
assuming a reasonable period of ownership up to 5 years, is  less
than  the carrying amount of the asset.  The impairment  loss  is
measured  as the difference between the estimated fair value  and
the  carrying  amount of the asset. In the absence of  the  above
circumstances,  properties and improvements are stated  at  cost.
An  analysis is done on an annual basis at December  31  of  each
year.


11.  Use of Estimates

The  preparation  of the financial statements in conformity  with
generally  accepted accounting principles requires management  to
make  estimates and assumptions that affect the amounts  reported
in  the  financial  statements and  accompanying  notes.   Actual
results could differ from those estimates.


NOTE C - GOING CONCERN
----------------------

In  recent years the Partnership has realized significant losses,
including  the  foreclosure  of  two  properties,  due   to   the
properties'  inability to generate sufficient cash  flow  to  pay
their  operating expenses and debt service. At the present  time,
the  Partnership  has  feasible loan modifications  in  place  at
Lincoln  Court. However, in both properties, Lincoln  Court,  and
Loewy  Building, the mortgages are cash-flow mortgages, requiring
all available cash after payment of operating expenses to be paid
to  the first mortgage holder. Therefore, it is unlikely that any
cash will be available to the Partnership to pay its general  and
administrative expenses.

It  is  the  Partnership's  intention to  continue  to  hold  the
properties  until  they  can  no longer  meet  the  debt  service
requirements  and the properties are foreclosed,  or  the  market
value of the properties increases to the point where they can  be
sold  at  a  price  which is sufficient to repay  the  underlying
indebtedness (principal plus accrued interest).

Since  the  lenders  have  agreed to  forebear  from  taking  any
foreclosure  action as long as cash flow payments are  made,  the
Partnership believes it is appropriate to continue presenting the
financial statements on a going concern basis.


NOTE D - IMPAIRMENT LOSS
------------------------

During 2001, the Loewy Building was deemed to be impaired and was
written  down to its fair value. The value, which was  determined
by  reference to the present value of the estimated  future  cash
inflows, exceeded the carrying value by $2,264,000. An impairment
loss of that amount has been charged to operations in 2001.

During  2000,  the  Registrant incurred  an  impairment  loss  of
$820,000.  The Loewy Building was deemed to be impaired  and  was
written  down  to  its fair market value. Fair value,  which  was
determined  by  reference to the present value of  the  estimated
future cash inflows, exceeded the carrying value by $820,000.  An
impairment loss of that amount has been charged to operations  in
2000.


NOTE E - PARTNERSHIP AGREEMENT
------------------------------

The significant terms of the Agreement of Limited Partnership, as
they relate to the financial statements, follow:

All  distributable  cash  from  operations  (as  defined  in  the
Agreement of Limited Partnership) will be distributed 90% to  the
limited partners and 10% to the General Partner.

All  distributable cash from sales or dispositions  (as  defined)
will  be distributed to the limited partners up to their adjusted
invested capital (as defined) plus an amount equal to the sum  of
the  greater of a 6% cumulative, noncompounded annual  return  on
the   average   after-credit  invested  capital,   less   amounts
previously distributed (as defined); thereafter, after receipt by
the  General Partner or its affiliates of any accrued but  unpaid
real   estate   brokerage  commissions,  the  balance   will   be
distributed  15% to the General Partner and 85%  to  the  limited
partners.

Net  income  or  loss  from  operations  of  the  Partnership  is
allocated  1%  to  the General Partner and  99%  to  the  limited
partners.


NOTE F - ACQUISITIONS
---------------------

The  Partnership acquired five controlling or limited partnership
interests  in  Ventures during the period October  1986  to  July
1987, as discussed below.

In October 1986, the Partnership was admitted, with a 60% general
partnership  interest, to a Louisiana limited  partnership  which
owns a building located in Louisiana consisting of 57 residential
units, for a cash capital contribution of $600,000.  Pursuant  to
the Amended and Restated Partnership Agreement, the Partnership's
interest  was  reduced  to 40% effective January  1,  1995.  This
investment was sold on June 26, 2002.

In  November  1986,  the Partnership was  admitted,  with  a  99%
general   partnership   interest,  to  a   Pennsylvania   general
partnership  which  owns  a building located  in  North  Carolina
consisting of 64,000 square feet of commercial space, for a  cash
contribution of $2,450,000.

In  December  1986,  the Partnership was  admitted,  with  a  99%
general  partnership interest, to a Maryland general  partnership
which  owned  a  property located in Maryland  consisting  of  55
residential units and 14,800 square feet of commercial space, for
a  cash  contribution of $3,508,700.  The lender on the  property
foreclosed in January 1996.

In March 1987, the Partnership purchased a property consisting of
three  buildings  (58 residential units) located in  Pennsylvania
for a cash capital contribution of $500,000.

In  July  1987, the Partnership was admitted, with a 99%  general
partnership interest, to a Pennsylvania general partnership which
owns  a  building  located  in  Pennsylvania  consisting  of   18
residential  units, for a cash capital contribution of  $800,000.
The lender on the property foreclosed in October 2002.


NOTE G - DEBT OBLIGATIONS
-------------------------

Debt obligations are as follows:                     December 31,
                                                  2002          2001
                                                  ----          ----
Mortgage loan, interest accrues at 11 1/2%,   $3,916,716    $3,873,752
interest  only  payable  monthly  to  the
extent of net operating income; principal
due  January 2012; collateralized by  the
related rental property

Note,  interest payable monthly at prime,        200,000      200,000
with a minimum of 6% and a maximum of 8%,
adjusting annually on January  2  (6%  at
December 31, 2002 and 2001); due in 1997;
collateralized  by  the  related   rental
property (A)

Allowed unsecured claims in the amount of       158,612      158,612
$268,042; non-interest bearing

Note   payable,  interest  only  at  10%,        10,000       10,000
payable quarterly;  principal due in 1994
(A)

Mortgage loan, interest at 6.83%, payable     3,080,000    1,493,105
in   monthly   principal   and   interest
installments  of $10,070;  principal  due
November  2008;  collateralized  by   the
related rental property

Mortgage loan, interest accrues  at  15%,            0     1,942,681
interest  only  payable  monthly  to  the
extent of net operating income; principal
due  December 2008; collateralized by the
related rental property (B)

Mortgage  loan, interest at 12%; interest
only   payable  to  the  extent  of   net
operating  income with a minimum  monthly
payment of $5,750; principal due in  July
2009;   collateralized  by  the   related
rental property (B)                                  0      1,318,119
                                            ----------     ----------
                                            $7,365,328     $8,996,269
                                            ==========     ==========

(A)  Although  this obligation has matured, the lenders have  not
     made any demand for payment.
(B)  The  Green Street Apartments was foreclosed by the  mortgage
     holder on October 1, 2002.

Approximate  maturities  of  the  mortgage  loan  obligations  at
December 31, 2002, (for each of the succeeding five years are  as
follows:

                 2003              $  368,612
                 2004                  20,408
                 2005                  22,159
                 2006                  23,743
                 2007                  25,440
                 Thereafter         6,904,966
                                   ----------
                                   $7,365,328
                                   ==========


NOTE H - COMMITMENTS AND CONTINGENCIES
--------------------------------------

Pursuant  to certain agreements, the developers of the properties
and limited partners in the Ventures are entitled to share in the
following:

           a.  15% to 50% of net cash flow from operations  above
certain specified amounts (two properties)

           b.  30% of the net proceeds, as defined, from the sale
or refinancing of one property.  The Partnership is entitled to a
priority  distribution of such proceeds prior to any  payment  to
the developer.


NOTE I - TRANSACTIONS WITH RELATED PARTIES
------------------------------------------

On  June  30, 1992 DHP, Inc. assigned to D, LTD a note receivable
from  the  Partnership  in  the amount of  $432,103  which  bears
interest  at  10% with the entire principal and accrued  interest
due  on June 30, 1997.  Interest accrued was $45,703 during  both
2001  and  2002.   Payments  on the note  are  to  be  made  from
available  cash flow and before any distribution can be  made  to
the  Partnership's limited partners. The balance of the  note  at
December  31,  2002  was $753,120. Although this  obligation  has
matured, the lender has made no demand for payment.

In  June  1998,  the  General Partner  advanced  the  Partnership
$66,150   to   pay   certain  outstanding  liabilities   of   the
Partnership.   The advance is non-interest bearing  and  will  be
paid out of available cash flow.


NOTE J - INCOME TAX BASIS RECONCILIATION
----------------------------------------

Certain  items  enter into the determination of  the  results  of
operations  in  different  time periods for  financial  reporting
("book")   purposes   and  for  income  tax   ("tax")   purposes.
Reconciliations of net loss and partners' equity follow:


                                      For the Years Ended December 31,

                                      2002          2001          2000
                                      ----          ----          ----

Net income (loss) - book          $  353,288  ($ 3,444,268) ($ 2,006,951)
Minority interest - affiliate          2,124             0             0
Minority interest - Magazine Place   (12,532)            0             0
Excess of tax over book - gain on
 sale of investment                  466,470             0             0
Excess of book over tax -
 extraordinary gain on
  extinguishment of debt            (737,736)            0             0
Excess of book over tax
 depreciation                       (183,976)       67,753        98,882
Minority interest - tax               10,658         7,047         6,078
Impairment loss adjustment                 0     2,264,000       820,000
                                  ----------   -----------   -----------
Net loss - tax                   ($  101,704) ($ 1,105,468) ($ 1,081,991)
                                  ==========   ===========   ===========

Partners' equity - book         ($10,485,350) ($10,838,639) ($ 7,394,371)
1987 distribution of interest
 on escrow deposits to limited
 partners                            (39,576)      (39,576)      (39,576)
Costs of issuance                  1,697,342     1,697,342     1,697,342
Cumulative tax under book loss     3,316,623     3,771,616     1,432,816
Magazine Place adjustment           (108,983)            0             0
                                  ----------   -----------   -----------
Partners' equity - tax          ($ 5,619,944) ($ 5,409,257) ($ 4,303,789)
                                 ===========   ===========   ===========

NOTE K - GAIN ON SALE
---------------------

On  June  26,  2002  Magazine Place was sold. As  a  result,  the
Registrant  recognized a gain on sale in the amount of  $271,576.
The  net proceeds from the sale were used to pay accrued expenses
of the Registrant.


NOTE L - EXTRAORDINARY GAIN
---------------------------

On October 1, 2002 the Green Street Apartments were foreclosed by
the  mortgage  holder. As a result, the Registrant recognized  an
extraordinary  gain  on foreclosure in the amount  of  $1,423,902
which is the excess of the debt on the property over the net book
value of the assets.


NOTE M - MINORITY INTEREST IN LINCOLN COURT
-------------------------------------------

On  September  26,  2002, the Lincoln Court  first  mortgage  was
refinanced and the net proceeds were used to partially repay  the
second  mortgage on the property. In exchange for a 20% ownership
interest  in Lincoln Court, the second mortgagee contributed  the
balance of the second mortgage to capital and cancelled its loan.


NOTE N - QUARTERLY FINANCIAL DATA
---------------------------------

The  following represents summarized quarterly financial data  of
the  Registrant which, in the opinion of management, reflects all
adjustments,  consisting  only of normal  recurring  adjustments,
necessary for a fair presentation of the Registrant's results  of
operations:


                                 For The Three Months Ended
                    ---------------------------------------------------
                    December 31,   September 30,   June 30,   March 31,
                    ---------------------------------------------------
                                              2002
                    ---------------------------------------------------
Revenues:
 Rental income       $  217,784        $216,268   $239,383     $233,957
 Interest income          1,320             667        352          290
 Gain on sale of
  investment                  0               0    271,576            0
                     ----------        --------   --------     --------
  Total revenues        219,104         216,935    511,311      234,247
                     ----------        --------   --------     --------
Costs and expenses:
 Rental operations      120,728         207,190    131,861      175,881
 Bad debt                 1,838               0          0       65,038
 Interest               172,625         557,461    269,093      265,200
 Depreciation and
  amortization           46,624         124,772     64,282       64,275
                     ----------        --------   --------     --------
  Total costs
   and expenses         341,815         889,423    465,236      570,394
                     ----------        --------   --------     --------
Net (loss) income
 before equity in
 affiliate/
 minority int.         (122,711)       (672,488)    46,075     (336,147)
Minority Interest          (199)          2,323          0       11,491
Equity in income
 of  affiliate                0               0      1,041            0
Extraordinary
 gain on
 extinguishment
  of debt             1,423,902               0          0            0
                     ----------        --------   --------     --------
Net income (loss)    $1,300,992       ($670,165)  $ 47,116    ($324,656)
                     ==========        ========   ========     ========

Net income (loss)
 per limited
 partnership unit:   $    92.11       ($  47.45)  $   3.34    ($  22.99)
                     ==========        ========   ========     ========


NOTE O - SUBSEQUENT EVENTS
--------------------------

Effective as of April 23, 2003, the Loewy Building was foreclosed
by the mortgage holder.

On July 11th, 2005 the Securities and Exchange Commission ("SEC")
notified   the  Registrant  of  its  non-compliance  in   meeting
reporting  requirements  under Section  13(a)  or  15(d)  of  the
Securities  and Exchange Act of 1934. The Registrant's  inability
to  meet its reporting requirements is due to the dissolution  of
its  former auditor, Gross Kreger & Passio, LLC. This  event  was
discussed in Item 4.01 of the Registrant's Form 8-K filed on June
27th, 2005.

The  Registrant  recently  engaged a new  firm,  Russell  Bedford
Stefanou  Mirchandani, LLP to audit and review  the  Registrants'
outstanding  consolidated financial statements. Accordingly,  the
Company is re-filing the Original Filing in its entirety with  an
updated Item 8 and 14 of the Original Filing. The Company has not
made any other changes to the Original Filing. This Amendment No.
1  on  Form  10-K/A  continues to speak as of  the  date  of  the
Original  Filing, and the Company has not updated the disclosures
contained therein to reflect any events that occurred at a  later
date.

The amendment has no financial statement disclosure changes.

<PAGE>









                    SUPPLEMENTAL INFORMATION



<PAGE>

                  DIVERSIFIED HISTORIC INVESTORS III
                  ----------------------------------
                        (a limited partnership)



          SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 2002
          ------------------------------------------------------

                                                      Costs
                                                   Capitalized
                                                   Subsequent
                            Initial Cost to            to
                            Partnership (b)        Acquisition
                            ---------------        -----------


                                         Buildings
                                            and              Date of
                 Encumbrances            Improve-  Improve-   Contr.   Date
Description (a)      (c)         Land     ments      ments     (a)   Acquired
---------------  ------------    ----    --------- --------  ------- --------
64,000
square feet
of
commercial
space in
Winston
Salem, NC       $4,275,328   $188,503  $3,951,731 $270,093 1986-1988 11/14/86
Impairment loss

58 apartment
units in
Philadelphia,PA  3,090,000     86,187   3,524,715   32,314 1986-1987  9/9/86
                ----------   --------  ---------- --------
TOTAL           $7,365,328   $274,690  $7,476,446 $302,407
                ==========   ========  ========== ========

                             Gross Amount at which Carried at
                                    December 31, 2002
                             --------------------------------


                               Buildings                Accumu-
                                  and                    lated
                                Improv-      Total       Depr.
Description           Land       ments      (d) (e)     (e) (f)
-----------           ----     ---------    -------    --------
64,000
square feet
of
commercial
space
in Winston-
Salem, NC         $188,503   $3,984,045  $4,172,548  $3,823,456

58 apartment
units in
Philadelphia,PA     86,187    3,794,808   3,880,995   2,336,969
                  --------   ----------  ----------  ----------
TOTAL             $274,690   $7,778,853  $8,053,543  $6,160,425
                  ========   ==========  ==========  ==========

<PAGE>

               DIVERSIFIED HISTORIC INVESTORS III
               ----------------------------------
                     (a limited partnership)

                      NOTES TO SCHEDULE XI
                      --------------------

                        December 31, 2002

(A)  All  properties are certified historic structures as defined
     in  the  Internal  Revenue Code. The "date of  construction"
     refers   to  the  period  in  which  such  properties   were
     rehabilitated.

(B)  Includes  development/rehabilitation costs incurred pursuant
     to  turnkey  development agreements entered  into  when  the
     properties were acquired.

(C)  See   Note  E  to  the  financial  statements  for   further
     information

(D)  The  aggregate  cost of real estate owned  at  December  31,
     2002,  for  federal  income  tax purposes  is  approximately
     $9,168,734.   The   depreciable  basis  of   buildings   and
     improvements is reduced for Federal income tax  purposes  by
     the  investment  tax credit and the historic  rehabilitation
     credit obtained.

(E)  Reconciliation of real estate:

                                             2002         2001
                                             ----         ----

Balance at beginning of year:            $9,577,777  $11,793,136
 Additions during the year:
  Improvements                               45,663       48,641
 Impairment loss - Loewy Building                 0   (2,264,000)
 Subtractions during the year:
  Foreclosure of Green Street            (1,569,897)           0
                                         ----------  -----------
Balance at end of year                   $8,053,543  $ 9,577,777
                                         ==========  ===========

Reconciliation of accumulated depreciation:

                                             2002         2001
                                             ----         ----

Balance at beginning of year             $6,891,195   $6,424,759
Depreciation expense for the year           211,765      466,436
Foreclosure of Green Street                (942,535)           0
                                         ----------   ----------
Balance at end of year                   $6,160,425   $6,891,195
                                         ==========   ==========

(F)  See  Note  B  to  the financial statements for  depreciation
     method and lives.



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

          None.


Item 9A.   Controls and Procedures
           -----------------------

      We  maintain  disclosure controls and procedures  that  are
designed  to ensure that information required to be disclosed  in
our   Securities  Exchange  Act  of  1934  reports  is  recorded,
processed,  summarized and reported and that such information  is
accumulated  and  communicated to our management,  including  our
managing  partner's  principal executive  officer  and  principal
financial  officer,  as  appropriate, to allow  timely  decisions
regarding  required disclosure.  In designing and evaluating  the
disclosure  controls  and procedures, our  management  recognized
that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving  the
desired  control  objectives, and our management necessarily  was
required  to  apply its judgment in evaluating  the  cost-benefit
relationship of possible controls and procedures.

      Under  the supervision of our managing partner's  principal
executive officer and principal financial officer we have carried
out  an evaluation of the effectiveness of our adopted disclosure
controls  and procedures as of the end of the period  covered  by
this  report.  Based upon that evaluation, our managing partner's
president  and  treasurer concluded that our disclosure  controls
and procedures are effective.

      There  have  been no significant changes  in  our  internal
controls  over financial reporting that has materially  affected,
or  is  reasonably  likely  to materially  affect,  our  internal
control  over  financial reporting during our most recent  fiscal
quarter.


<PAGE>

                            PART III
                            --------


Item 10.  Directors and Executive Officers of the Registrant
          --------------------------------------------------

              a.     Identification of Directors - Registrant has
no directors.

              b.     Identification of Executive Officers

                The  General Partner of the Registrant  is  Dover
Historic   Advisors   II   (DoHA-II),   a  Pennsylvania   general
partnership.  The partners of DoHA-II are as follows:

                                  Term of
Name            Age  Position     Office      Period Served
----            ---  --------     -------     -------------

SWDHA, Inc.      --  Partner in   No fixed     Since May 1997
                     DoHA-II      term

EPK, Inc.        --  Partner in   No fixed     Since May 1997
                     DoHA-II      term


             For further description of DoHA-II, see paragraph e.
of  this  Item.  There is no arrangement or understanding between
either person named above and any other person pursuant to  which
any person was or is to be selected as an officer.

              c.       Identification  of  Certain    Significant
Employees.  Registrant has no  employees.Its   administrative and
operational  functions are  carried out  by a property management
and partnership administration firm engaged by the Registrant.

             d.     Family Relationships.  None.

             e           Business  Experience.   DoHA-II   is   a
             general         partnership        formed         in
             February  1986.   The partners of DoHA-II  are  EPK,
             Inc.  and                  SWDHA, Inc.  The  General
             Partner       is      responsible      for       the
             management  and control of the Registrant's  affairs
             and    has   general            responsibility   and
             authority in conducting its operations.

             f.   Involvement in certain legal proceedings. - None.

             g.   Promoters and control persons.  - Not Applicable.

             h.     Audit committee financial expert. - None.


                On  May  13,  1997, SWDHA, Inc.  replaced  Gerald
Katzoff  and EPK, Inc. replaced DHP, Inc. as partners of DoHA-II.
Spencer  Wertheimer, the President of SWDHA, Inc., is an attorney
with extensive experience in real estate activities and ventures.

               EPK, Inc. is a Delaware corporation formed for the
purpose  of managing properties or interests therein.  EPK,  Inc.
is  a wholly-owned subsidiary of D, LTD, an entity formed in 1985
to act as the holding company for various corporations engaged in
the   development   and  management  of  historically   certified
properties and conventional real estate as well as a provider  of
financial (non-banking) services.

                The  officers  and directors  of  EPK,  Inc.  are
described below.

                Spencer Wertheimer was appointed on May 13,  1997
as  President,  Treasurer and Sole Director  of  EPK,  Inc.   Mr.
Wertheimer  is  an  attorney with extensive  experience  in  real
estate activities and ventures.

                Donna M. Zanghi (age 45) was appointed on May 13,
1997 as Vice President and Secretary of EPK, Inc.  Ms. Zanghi had
previously served as Secretary and Treasurer of DHP, Inc.   since
June  14,  1993 and as a Director and Secretary/Treasurer  of  D,
LTD.   She was associated with DHP, Inc. and its affiliates since
1984  except for the period from December 1986 to June  1989  and
the period from November 1, 1992 to June 14, 1993.

               Michele F. Rudoi (age 37) was appointed on May 13,
1997  as  Assistant Secretary of EPK, Inc.  Ms. Rudoi  previously
served  as  Assistant Secretary and Director of both D,  LTD  and
DHP, Inc. since January 27, 1993.


Item 11.  Executive Compensation
          ----------------------

          a.   Cash Compensation - During 2002, Registrant paid no
cash compensation to DoHA-II, any partner therein   or any  person
named in paragraph c. of Item 10.

          b.   Compensation Pursuant to Plans - Registrant has no
plan  pursuant  to  which compensation was  paid  or  distributed
during  2002  or  is  proposed to be paid or distributed  in  the
future,  to DoHA-II, any partner therein, or any person named  in
paragraph c. of Item 10 of this report.

           c.   Other Compensation - No compensation not referred
to  in  paragraph  a. or paragraph b. of this Item  was  paid  or
distributed during 2002 to DoHA-II, any partner therein,  or  any
person named in paragraph c. of Item 10.

           d.    Compensation  of Directors - Registrant  has  no
directors.

           e.    Termination of Employment and Change of  Control
Arrangement - Registrant has no compensatory plan or arrangement,
with respect to any individual, which results or will result from
the   resignation  or  retirement  of  any  individual,  or   any
termination  of such individual's employment with  Registrant  or
from  a  change  in  control of Registrant or a  change  in  such
individual's responsibilities following such a change in control.


Item  12.   Security Ownership of Certain Beneficial  Owners  and
            Management
            -----------------------------------------------------

          a. Security Ownership of Certain Beneficial Owners - No
person is known to Registrant to be the beneficial owner of  more
than five percent of the issued and outstanding Units.

          b.  Security  Ownership  of  Management  -   No  equity
securities  of  Registrant are beneficially owned by  any  person
named in paragraph c. of Item 10.

          c. Changes in Control - Registrant does not know of any
arrangement,  the  operation of which may at  a  subsequent  date
result in a change in control of Registrant.


Item 13.  Certain Relationships and Related Transactions
          ----------------------------------------------

               Pursuant  to  Registrant's  Amended  and  Restated
Agreement of Limited Partnership, DoHA-II is entitled to  10%  of
Registrant's  distributable cash from operations  in  each  year.
There  was  no  such share allocable to DoHA-II for fiscal  years
2000 through 2002.

          a. Certain Business Relationships - Registrant  has  no
directors.

          b. Indebtedness of Management - No executive officer or
significant employee of Registrant, Registrant's general  partner
(or  any  employee thereof), or any affiliate of any such person,
is or has at any time been indebted to Registrant.


Item 14.  Principal Accountant Fees and Services
          --------------------------------------

           The following table presents the aggregate fees billed
for   each  of  the  services  listed  below  for  each  of   the
Registrant's last two fiscal years.



                                             2002        2001
                                             ----        ----


Audit Fees (1) .........................   $ 6,250     $ 5,000
Audit - Related Fees (2) ...............      -           -
Tax Fees (3) ...........................    11,000      11,000
All Other Fees (4) .....................      -           -
                                           -------     -------
Total...................................   $17,250     $16,000
                                           =======     =======


       1. Audit Fees - Audit fees for the year ended December 31, 2002
          were for professional services rendered by RBSM, LLP. Audit fees
          for the year ended December 31, 2001 were for professional
          services rendered by Gross Kreger & Passio, L.L.C. The fees
          represent audits of the consolidated financial statements of the
          Registrant, statutory audits and subsidiary audits, issuance of
          comfort letters related to financing transactions; and with
          review of documents filed with the SEC.

       2. Audit-Related Fees - Audit-related fees as of the years
          ended December 31, 2002 and 2001, respectively, would consist of
          the aggregate fees billed for assurance and related services that
          are reasonably related to the performance of the audit or review
          of the unaudited consolidated financial services and are not
          disclosed under "Audit Fees" above, however, no such assurance or
          services e;were provided in the relevant periods.

       3. Tax Fees - Tax fees as of the years ended December 31, 2002
          and 2001, respectively, were for services related to tax
          compliance, rendered by Brandywine Construction and Management
          Inc. including preparation of tax returns and claims for refund,
          tax planning and tax advice, including assistance with and
          representation in tax audits.

       4. All Other Fees - All other fees as of the years ended
          December 31, 2002 and 2001, respectively, would consist of the
          aggregate fees billed for products and services described under
          audit fees, audit - related fees and tax fees, however, no such
          products and services were provided in the relevant periods.



Item 15.  2001 Report of Prior Independent Auditors
          -----------------------------------------

                  Independent Auditor's Report

To the Partners of
Diversified Historic Investors III

We  have  audited the accompanying consolidated balance sheet  of
Diversified  Historic  Investors  III  (a  Pennsylvania   Limited
Partnership)  and subsidiaries as of December 31, 2001  and  2000
and  the  related statements of operations, changes in  partners'
equity and cash flows for the years ended December 31, 2001, 2000
and  1999.   These consolidated statements are the responsibility
of  the  Partnership's  management.   Our  responsibility  is  to
express  an  opinion  on these consolidated financial  statements
based on our audits.

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  consolidated  financial
statements are free of material misstatement.  An audit  includes
examining,  on a test basis, evidence supporting the amounts  and
disclosures in the consolidated financial statements.   An  audit
also  includes  assessing  the  accounting  principles  used  and
significant  estimates made by management, as well as  evaluating
the  overall  financial statement presentation.  We believe  that
our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above  presents fairly, in all material respects,  the  financial
position  of  Diversified Historic Investors III and subsidiaries
as  of  December 31, 2001 and 2000, and the results of operations
and  cash  flows for the years ended December 31, 2001, 2000  and
1999, in conformity with accounting principles generally accepted
in the United States of America.

Our audits were made for the purpose of forming an opinion on the
basic  financial  statements taken as a whole.  The  Schedule  of
Real  Estate and Accumulated Depreciation on page 26 is presented
for  the  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.

The accompanying financial statements have been prepared assuming
that  the partnership will continue as a going concern. In recent
years,  the  partnership  had incurred  significant  losses  from
operations,  which raise substantial doubt about its  ability  to
continue  as  a  going concern. The financial statements  do  not
include  any  adjustments that might result from the  outcome  of
this uncertainty.




Gross, Kreger & Passio, L.L.C.
Philadelphia, Pennsylvania
March 20, 2002




<PAGE>
                             PART IV
                             -------

Item 15. (A) Exhibits, Financial Statement Schedules

          1. Financial Statements:

             a.  Consolidated Balance Sheets at December 31, 2002 and 2001.

             b.  Consolidated Statements of Operations
                 for  the Years Ended December 31, 2002, 2001 and
                 2000.

             c.  Consolidated Statements of Changes in
                 Partners'  Equity for the Years  Ended  December
                 31, 2002, 2001 and 2000.

             d.  Consolidated Statements of Cash Flows
                 for  the Years Ended December 31, 2002, 2001 and
                 2000.

             e.  Notes  to  consolidated  financial statements.


        2.   Financial statement schedules:

             a.  Schedule XI- Real Estate and Accumulated Depreciation.

             b.  Notes to Schedule XI.


        3.   Exhibits:

             (a) Exhibit Number     Document
                 --------------     --------

                    3               Registrant's  Amended   and
                                    Restated   Certificate   of
                                    Limited   Partnership   and
                                    Agreement    of     Limited
                                    Partnership,     previously
                                    filed  as part of Amendment
                                    No.   2   of   Registrant's
                                    Registration  Statement  on
                                    Form       S-11,        are
                                    incorporated   herein    by
                                    reference

                  21                Subsidiaries     of     the
                                    Registrant  are  listed  in
                                    Item  2. Properties of this
                                    Form 10-K.

                  31                General Partners Opinion
                                    Certification

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

              (c) Exhibits:  See Item 15(A)(3) above.


<PAGE>

                           SIGNATURES
                           ----------


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

Date:  March 21, 2007      DIVERSIFIED HISTORIC INVESTORS III
       --------------
                           By: Dover Historic Advisors II, its
                                general partner

                                By: EPK, Inc., managing partner

                                    By: /s/ Spencer Wertheimer
                                        ----------------------
                                        SPENCER WERTHEIMER
                                        President (principal
                                         executive officer,
                                         principal
                                         financial officer)



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


                         DIVERSIFIED HISTORIC INVESTORS III

                          By: Dover Historic Advisors II, its
                              general partner

                               By: EPK, Inc., managing partner


Date: March 21, 2007                By: /s/ Spencer Wertheimer
      --------------                    ----------------------
                                        SPENCER WERTHEIMER
                                        President (principal
                                         executive officer,
                                         principal
                                         financial officer)
<PAGE>