UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, DC.  20549
                               FORM 10-K/A
                             Amendment No. 2


(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, 2003
                         ---------------------------------------------
                                  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, 2003 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. 2 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, but includes corrections to Amendment No. 1
which inadvertently omitted the Independent Auditor's Report.

<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, 2003, 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 interest  therein.   Three
properties have been lost due to foreclosure and one property was
sold.   See  Item 2. Properties, for a description  thereof.   It
currently  owns one property interest.  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  property  in  which   the
Registrant  has  an  interest  is  held  for  rental  operations.
Registrant anticipates that the property will continue to be held
for   this  purpose.  As  real  property  values  increase,   the
Registrant will re-evaluate its investment strategy regarding the
property.

                As  of  December  31, 2003, Registrant  owned  an
interest in one property located in Pennsylvania. The property is
an  apartment building which contains 58 apartment units.  As  of
December 31, 2003, 47 apartment units were under lease at monthly
rental  rates  ranging  from  $495  to  $1,800.  Rental  of   the
apartments  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  real  estate
industries. The competition for residential tenants in the  local
market  where  the Registrant's property is 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 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.  At
this  location,  the competition for tenants  remains  stiff  and
several  similar  buildings exist. The apartment  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 an interest
in  one property.  A summary description of the property held  at
December 31, 2003 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 80%  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, 2003).  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, a $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. The permanent financing closed
on January 31, 2003.

              The property is managed by BCMI. As of December 31,
2003,  47  residential units (81%) were under  lease  at  monthly
rents ranging from $495 to $1,800.  All leases are renewable, one-
year  leases.  The occupancy for the previous four years was  95%
for  2002,  98%  for 2001, 86% for 2000, and 88%  for  1999.  The
monthly  rental ranges for the previous four years were  $475  to
$1,800  during 2002, $471 to $1,700 during 2001, $460  to  $1,700
during  2000  and $460 to $1,565 during 1999. For  tax  purposes,
this  property  has  a federal tax basis of  $3,481,292  and  the
building and improvements are depreciated using the straight-line
method  with a useful life of 27.5 years.  The annual real estate
taxes are $38,452 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.


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  82  Units  of
record were sold or exchanged in 2003.

             b.     As  of  December 31, 2003,  there  were 1,584
record  holders  of Units.

             c.   Registrant did not declare any cash dividends in
2003 or 2002.


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

              The  following selected financial data are for  the
five  years ended December 31, 2003.  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.


                    2003        2002       2001        2000         1999
                    ----        ----       ----        ----         ----
Rental income  $  600,842  $  907,392  $  931,137  $  936,392   $1,257,195
Interest income       849       2,629       2,414       4,397        3,866
Net income
 (loss)         6,233,861     353,288  (3,444,268) (2,006,951)  (1,070,903)
Net income (loss)
 per Unit          441.41       25.01     (243.88)    (142.11)      (75.83)
Total assets
 (net of
 depreciation
 and
 amortization)  2,085,831   2,309,559   3,348,854   6,024,042    7,307,432
Debt
 obligations    3,030,680   7,365,328   8,996,269   8,972,599    8,966,573



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, 2003, Registrant  had  cash  of
approximately  $22,932.   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 three properties. 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, 2003, Registrant had restricted
cash  of  $140,141 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 remaining property until it can no longer meet the debt
service  requirements  and the property  is  foreclosed,  or  the
market value of the property increases to a point where it 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.

          (3)       Results of Operations

                During 2003, Registrant recognized net income  of
$6,233,861 ($441.41 per limited partnership unit) compared  to  a
net  income of $353,288 ($25.01 per limited partnership unit)  in
2002   and  a  net  loss  of  $3,444,268  ($243.88  per   limited
partnership unit) in 2001. Included in net income for 2003 is  an
extraordinary  gain  on  extinguishment of  debt  of  $6,582,981.
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 $600,842 in 2003, $907,392  in
2002,  and  $931,137 in 2001. The decrease in rental income  from
2002 to 2003 is due to the foreclosure of Green Street Apartments
and  the Loewy Building. This decrease is partially offset by  an
increase in rental income at Lincoln Court due to an increase  in
average monthly rental rates. The decrease in rental income  from
2001  to  2002  is due to a decrease at Lincoln Court  due  to  a
decrease in average occupancy (98% to 95%).

              Rental  operations expense was  $389,559  in  2003,
$635,660 in 2002, and $567,915 in 2001. The decrease from 2002 to
2003 is due to the foreclosure of the Green Street Apartments and
the Loewy Building and a decrease in rental operations expense at
Lincoln Court due to a decrease in maintenance expense, partially
offset  by  an  increase in utilities expense.  The  decrease  in
maintenance expense is due to a decrease in maintenance  service,
trash  collections  and  plumbing and  electrical  expenses.  The
increase  in  utilities  expense is due to  an  increase  in  gas
charges. 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.

             Interest expense was $390,338 in 2003, $1,264,379 in
2002,  and  $1,068,080 in 2001. The decrease in interest  expense
from  2002 to 2003 is due to the foreclosure of the Green  Street
Apartments  and  the  Loewy Building. The  decrease  in  interest
expense  at  Lincoln Court is due to the conversion  of  debt  to
equity  and the refinance of the first mortgage. 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 $175,209 in 2003,
$299,952 in 2002, and $495,581 in 2001. The decrease from 2002 to
2003 is due to the foreclosure of the Green Street Apartments and
the  Loewy  Building  and a decrease in amortization  expense  at
Lincoln  Court,  partially offset by an increase in  depreciation
expense.  The  decrease in amortization expense  is  due  to  the
additional expenses incurred during 2002 due to the refinance  of
the first mortgage loan. The increase in depreciation expense  is
due  to  capital expenditures. 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.

              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.

              In  2003,  a  loss  of approximately  $457,000  was
incurred  at the Registrant's properties, compared to a  loss  of
$1,085,000  in  2002 and $1,198,000 (exclusive of the  impairment
loss   discussed  above)  in  2001.  A  discussion  of   property
operations/activities follows:

              During  2003,  the Registrant incurred  a  loss  of
$100,000 at Lincoln Court including $171,000 of depreciation  and
amortization  expense, compared to a loss of  $624,000  including
$223,000 of depreciation and amortization expense in 2002, and  a
loss   of   $269,000  including  $165,000  of  depreciation   and
amortization expense in 2001. The decrease in loss from  2002  to
2003  is  due  to an increase in rental income and  decreases  in
maintenance  expense, interest expense and amortization  expense,
partially  offset  by  an increase in depreciation  expense.  The
increase  in  rental  income is due to  an  increase  in  average
monthly rental rates. The decrease in maintenance expense is  due
to  a decrease in maintenance service, trash collection services,
and  plumbing and electrical expenses. The decrease  in  interest
expense  and amortization expense are due to additional  expenses
incurred  during  the  second  half  of  2002  due  to  the  loan
refinance. The increase in depreciation expense is due to capital
expenditures. 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.

              On  June  30, 1992 Dover Historic Properties,  Inc.
("DHP,  Inc."),  a  partner of the Registrant's general  partner,
assigned to The Dover Group, Ltd. ("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 2003 and 2002. Payments on the note are to  be  made
from  available cash flow 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, 2003  was
$798,823.

                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.  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.

                In 2003, the Loewy Building recognized income  of
$6,320,000 including $87,000 of amortization expense compared  to
a   loss  of  $566,000  including  $21,000  of  depreciation  and
amortization  expenses  in 2002, and a  loss  (exclusive  of  the
impairment  loss) of $745,000 including $290,000 of  depreciation
and amortization expense during 2001. The property was foreclosed
on   April  29,  2003.  Included  in  income  for  2003   is   an
extraordinary gain on the extinguishment of debt of $6,665,959.

           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. 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.

              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,  2003  and  the
related statements of operations, changes in partners' equity and
cash  flows  for  the  years  ended  December  31,  2003.   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,
2003  and  the results of operations and cash flows for the  year
ended  December 31, 2003 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.

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

/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, 2003, and
2002                                                           11

   Consolidated Statements of Operations for  the  Years
Ended December 31, 2003, 2002, and 2001                        12

   Consolidated  Statements  of  Changes  in   Partners'
Equity  for the Years Ended December 31, 2003,  2002,
and 2001                                                       13

   Consolidated Statements of Cash Flows for  the  Years
Ended December 31, 2003, 2002, and 2001                        14

   Notes to consolidated financial statements                15-22


Financial statement schedules:

   Schedule   XI   -   Real   Estate   and   Accumulated
Depreciation                                                   24

   Notes to Schedule XI                                        25








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, 2003 and 2002

                             Assets
                             ------

                                          2003        2002
                                          ----        ----
                                       (Restated)

Rental properties at cost:
 Land                                 $  123,794  $  274,690
 Buildings and improvements            4,008,630   7,654,091
 Furniture and fixtures                  158,958     124,762
                                      ----------  ----------
                                       4,291,382   8,053,543
 Less - accumulated depreciation      (2,496,860) (6,160,425)
                                      ----------  ----------
                                       1,794,522   1,893,118
Cash and cash equivalents                 22,933      24,207
Restricted cash                          140,141     118,080
Accounts receivable                       10,007      29,374
Other assets (net of accumulated
 amortization of $10,858 and $160,716)   118,228     244,780
                                      ----------  ----------
          Total                       $2,085,831  $2,309,559
                                      ==========  ==========

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

Liabilities:
 Debt obligations                     $3,030,680   $ 7,365,328
 Trade                                   908,952       974,166
 Related parties                         864,973       819,270
 Interest payable                         15,698     2,211,324
 Tenant security deposits                 39,797        43,588
 Advances                                200,584        13,657
 Other liabilities                        26,257        33,342
                                      ----------   -----------
          Total liabilities            5,086,941    11,460,675
Minority interest                      1,250,379     1,334,234
Partners' deficit                     (4,251,489)  (10,485,350)
                                      ----------   -----------
          Total                       $2,085,831   $ 2,309,559
                                      ==========   ===========

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, 2003, 2002 and 2001

                                      2003         2002         2001
                                      ----         ----         ----
                                   (Restated)

Revenues:
 Rental income                    $  600,842  $  907,392     $  931,137
 Interest income                         849       2,629          2,414
 Gain on sale of investment                0     271,576              0
                                  ----------  ----------     ----------
  Total revenues                     601,691   1,181,597        933,551
                                  ----------  ----------     ----------
Costs and expenses:
 Rental operations                   389,559     635,660        567,915
 Interest                            390,338   1,264,379      1,068,080
 Depreciation  and amortization      175,209     299,952        495,581
 Bad debt                             20,636      66,876              0
 Impairment loss                           0           0      2,264,000
                                  ----------  ----------     ----------
  Total costs and  expenses          975,742   2,266,867      4,395,576
                                  ----------  ----------     ----------
Net loss before minority interest
 and equity in affiliate            (374,051) (1,085,270)    (3,462,025)
Minority interest                     24,931       2,124              0
Equity in income of affiliate              0      12,532         17,757
                                  ----------  ----------     ----------
Net loss before extraordinary
 item                               (349,120) (1,070,614)    (3,444,268)
Extraordinary gain on
 extinguishment of debt            6,582,981   1,423,902              0
                                  ----------  ----------     ----------
Net income (loss)                 $6,233,861  $  353,288    ($3,444,268)
                                  ==========  ==========    ============


Net  income  (loss)  per  limited
 partnership unit:
 Net loss before minority interest
  and equity in affiliate           ($ 26.49)   ($ 76.85)      ($245.14)
 Minority interest
                                        1.77         .15              0
 Equity in income of affiliate
                                           0         .89           1.26
                                     -------     -------        -------
Net loss before extraordinary item    (24.72)     (75.81)       (243.88)
Extraordinary gain on
 extinguishment of debt               466.13      100.82              0
                                     -------     -------        -------
Net income (loss) per limited
 partnership unit                    $441.41     $ 25.01       ($243.88)
                                     =======     =======        =======

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

<PAGE>


<PAGE>



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


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

      For the years ended December 31, 2003, 2002 and 2001


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

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

Balance at December 31, 2000       ($186,983)  ($7,207,389)  ($7,394,372)
Net loss                             (34,443)   (3,409,823)   (3,444,266)
                                    --------   -----------   -----------
Balance at December 31, 2001        (221,426)  (10,617,212)  (10,838,638)
Net income                             3,533       349,755       353,288
                                    --------   -----------   -----------
Balance at December 31, 2002        (217,893)  (10,267,457)  (10,485,350)
Net income                            62,339     6,171,522     6,233,861
                                    --------   -----------   -----------
Balance at December 31, 2003       ($155,554)  ($4,095,936)  ($4,251,489)
                                    ========   ===========   ===========
 (1)      General Partner.

 (2) 13,981.5 limited partnership units outstanding at December 31,
     2003, 2002, and 2001.


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, 2003, 2002 and 2001

                                         2003        2002         2001
                                         ----        ----         ----
                                      (Restated)
Cash flows from operating activities:
 Net income (loss)                   $6,233,861  $  353,288  ($3,444,268)
 Adjustments to reconcile net loss
   to net cash:
  Depreciation and amortization         175,209     299,952      495,581
  Impairment loss                             0           0    2,264,000
  Gain on sale of investment                  0    (271,576)           0
 Equity in income of affiliate                0     (12,532)     (17,757)
 Extraordinary gain on extinguishment
  of debt                               (92,365) (1,423,902)           0
 Extraordinary gain on foreclosure of
  property                           (3,712,111)          0            0
 Extraordinary gain on foreclosure -
  impairment loss                    (2,778,505)          0            0
 Minority interest                      (24,931)     (2,124)           0
 Changes in assets and liabilities:
  (Increase) decrease in restricted
   cash                                 (22,061)      7,624       55,852
  Decrease (increase) in accounts
   receivable                            19,367      74,401      (13,087)
  Increase in other assets              (28,519)    (29,067)     (64,530)
  (Decrease) increase in accounts
   payable - trade                      (12,953)   (234,651)      28,536
  Increase (decrease) in accounts
   payable - related parties             45,703     (54,297)      45,707
  (Decrease) increase in
   accounts payable - real estate             0     (21,174)      21,174
  Increase (decrease) in interest
   payable                              151,243    (126,734)     649,457
  Increase (decrease) in tenant
   security deposits                      1,209     (18,880)       4,584
  Increase in advances                  186,927      13,657            0
  (Decrease) increase in other
   liabilities                           (2,016)      2,669       (4,049)
                                     ----------  ----------   ----------
  Net cash provided by (used in)
   operating activities                 140,058  (1,443,346)      21,200
                                     ----------  ----------   ----------
Cash flows from investing
 activities:
 Cash proceeds - sale of investment           0     465,111            0
 Capital expenditures                   (34,195)    (45,663)     (48,641)
                                     ----------  ----------   ----------
  Net cash (used in) provided by
   investing activities                 (34,195)    419,448      (48,641)
                                     ----------  ----------   ----------
Cash flows from financing
 activities:
 Proceeds from debt obligations       3,061,632   3,135,464       40,487
 Payments of principal under debt
  obligations                        (3,109,843) (2,105,427)     (16,816)
 Distributions                          (58,926)     (6,500)           0
                                     ----------  ----------   ----------
  Net cash (used in) provided by
   financing activities                (107,137)  1,023,537       23,671
                                     ----------  ----------   ----------
Decrease in cash and cash
 equivalents                             (1,274)       (361)      (3,770)
Cash and cash equivalents at
 beginning of year                       24,207      24,568       28,338
                                     ----------  ----------   ----------
Cash and cash equivalents at end of
 year                                $   22,933  $  24,207    $   24,568
                                     ==========  =========    ==========

Cash paid during the year for
 interest                            $  175,784  $1,336,459   $  418,623

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 owned 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
of 13,981.5 for the years ended December 31, 2003, 2002 and 2001,
respectively.

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
operating  losses, including the foreclosure of three 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, 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 Partnership  to
pay its general and administrative expenses.

It  is  the  Partnership's  intention to  continue  to  hold  the
property   until  it  can  no  longer  meet  the   debt   service
requirements and the property is foreclosed, or the market  value
of the property increases to the point where it 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.


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
owned   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  owned a building located  in  North  Carolina
consisting of 64,000 square feet of commercial space, for a  cash
contribution of $2,450,000. The lender on the property foreclosed
in April 2003.

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. The Partnership's
interest in the property was reduced to 80% in September of  2002
when  the  second mortgage lender exchanged its debt  for  a  20%
equity interest in the property.

In  July  1987, the Partnership was admitted, with a 99%  general
partnership interest, to a Pennsylvania general partnership which
owned  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,
                                                 2003          2002
                                                 ----          ----
Mortgage loan, interest accrues at 11 1/2%, $       0      $3,916,716
interest  only  payable  monthly  to  the
extent of net operating income; principal
due  January 2012; collateralized by  the
related rental property. (B)

Note,  interest payable monthly at prime,           0         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) (B)

Allowed unsecured claims in the amount of           0         158,612
$268,042; non-interest bearing (B)

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

Mortgage   loan,  interest   at   6.035%,
payable in monthly principal and interest
installments  of $18,355;  principal  due
February  2013;  collateralized  by   the
related rental property                     3,020,680       3,080,000
                                           ----------      ----------
                                           $3,030,680      $7,365,328
                                           ==========      ==========

(A)  Although  this obligation has matured, the lenders have  not
     made any demand for payment.

(B)  The Loewy Building was foreclosed by the mortgage holder  on
     April 29, 2003.


Approximate  maturities  of  the  mortgage  loan  obligations  at
December 31, 2003, for each of the succeeding five years  are  as
follows:
                 2004              $   36,106
                 2005                  38,385
                 2006                  40,807
                 2007                  43,383
                 2008                  46,121
                 Thereafter         2,825,878
                                   ----------
                                   $3,030,680
                                   ==========

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
2002  and  2003.   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,  2003  was $798,823. 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,

                                      2003          2002          2001
                                      ----          ----          ----
Net income (loss) - book          $6,233,861      $353,288   ($3,444,268)
Minority interest - affiliate              0         2,124             0
Minority interest - Magazine Place         0       (12,532)            0
Excess of tax over book - gain on
 sale of investment                        0       466,470             0
Excess of book over tax -
 extraordinary gain on
 extinguishment of debt           (3,473,922)     (737,736)            0
Excess of book over tax (tax over
 book) depreciation                  337,989      (183,976)       67,753
Other                                 50,000             0             0
Minority interest - tax             (120,285)       10,658         7,047
Impairment loss adjustment                 0             0     2,264,000
                                  ----------      --------    ----------
Net loss - tax                    $3,027,643     ($101,704)  ($1,105,468)
                                  ==========      ========    ==========

Partners' equity - book          ($4,251,489) ($10,485,350)  ($10,838,639)
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         1,422     3,316,623      3,771,616
Magazine Place adjustment                  0      (108,983)             0
                                  ----------   -----------    -----------
Partners' equity - tax           ($2,592,301) ($ 5,619,944)  ($ 5,409,257)
                                  ==========   ===========    ===========


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  April  29,  2003  the Loewy Building was  foreclosed  by  the
mortgage  holder.  As  a  result, the  Registrant  recognized  an
extraordinary  gain  on foreclosure in the amount  of  $6,665,959
which is the excess of the debt on the property over the net book
value of the assets.

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 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. The permanent financing closed
January 31, 2003.


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,
                    ---------------------------------------------------
                                              2003
                    ---------------------------------------------------
Revenues:
 Rental income         $122,888      $119,802   $  152,609     $205,543
 Interest income            111           292          166          280
                       --------      --------   ----------     --------
Total revenues          122,999       120,094      152,775      205,823
                       --------      --------   ----------     --------
Costs and expenses:
 Rental operations       38,616        53,480       89,214      208,249
 Interest                73,295        58,232      108,005      150,806
 Bad debt                15,400             0        5,236            0
 Depreciation and
  amortization           46,886        41,287       41,284       45,752
                       --------      --------   ----------     --------
Total costs and
 expenses               174,197       152,999      243,739      404,807
                       --------      --------   ----------     --------
Loss before minority
 interest and equity
 in affiliate           (51,198)      (32,905)     (90,964)    (198,984)
Minority interest         7,320         3,732        1,024       12,855
                       --------      --------   ----------     --------
Net loss before
 extraordinary item     (43,878)      (29,173)     (89,940)    (186,129)
Extraordinary gain on
 extinguishment of debt       0             0    6,582,981            0
                       --------      --------   ----------     --------
Net (loss) income      ($43,878)    ($ 29,173)  $6,493,041    ($186,129)
                        =======      ========   ==========     ========

Net (loss) income per
 limited partnership
 unit:
Loss before minority
 interest and equity
 in affiliate         ($   3.63)    ($   2.33)  ($    6.44)   ($  14.09)

Minority interest           .52           .26          .07          .91
Extraordinary gain            0             0       466.13            0
                       --------      --------    ---------     --------
Net (loss) income     ($  3.11)     ($   2.07)  ($  459.76    ($  13.18)
                       =======       ========    =========     ========

<PAGE>





                    SUPPLEMENTAL INFORMATION



<PAGE>


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



          SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                DECEMBER 31, 2003
          ------------------------------------------------------

                                                      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
---------------  ------------    ----    --------- --------  ------- --------
58 apartment
units in
Philadelphia,PA $3,030,680   $123,794  $3,524,715 $642,873 1986-1987  9/9/86


                             Gross Amount at which Carried at
                                    December 31, 2003
                             --------------------------------


                               Buildings                Accumu-
                                  and                    lated
                                Improv-      Total       Depr.
Description           Land       ments      (d) (e)     (e) (f)
-----------           ----     ---------    -------    --------
58 apartment
units in
Philadelphia,PA   $123,794   $4,167,588  $4,291,382  $2,496,860


<PAGE>

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

                      NOTES TO SCHEDULE XI
                      --------------------
                      December 31, 2003





(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,
     2003,  for  federal  income  tax purposes  is  approximately
     $3,481,292.   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:
                                     2003        2002        2001
                                     ----        ----        ----

Balance at beginning of year:     $8,053,544  $9,577,777  $11,793,136
 Additions during the year:
  Improvements                        34,196      45,663       48,641
 Subtractions during the year:
  Foreclosure of Green Street              0  (1,569,896)           0
  Impairment Loss - Loewy Building         0           0   (2,264,000)
  Foreclosure of Loewy Building   (3,796,358)          0            0
                                  ----------  ----------  -----------
Balance at end of year            $4,291,382  $8,053,544  $ 9,577,777
                                  ==========  ==========  ===========

Reconciliation of accumulated depreciation:
                                     2003        2002        2001
                                     ----        ----        ----
Balance at beginning of year      $6,160,425  $6,891,196   $6,424,759
Depreciation expense for the year    258,186     211,765      466,437
Foreclosure of Green Street                0    (942,536)           0
Foreclosure of Loewy Building     (3,921,751)          0            0
                                  ----------  ----------   ----------
Balance at end of year            $2,496,860  $6,160,425   $6,891,196
                                  ==========  ==========   ==========



(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,   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 46) 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 38) 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 2003, 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  2003  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 2003 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 2003.

          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.


                                             2003        2002
                                             ----        ----


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


1.  Audit Fees - Audit fees for the year ended December 31,  2003
and  2002  were for professional services rendered by RBSM,  LLP.
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, 2003 and 2002, 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 were provided in the relevant periods.

3.  Tax  Fees - Tax fees as of the years ended December 31,  2003
and   2002,  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,  2003  and 2002, 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 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 16. (A) Exhibits, Financial Statement Schedules and Reports
         -------------------------------------------------------

          1. Financial Statements:

             a.  Consolidated Balance Sheets at December 31, 2003
                 and 2002.

             b.  Consolidated Statements of Operations  for   the
                 Years Ended December 31,  2003,  2002, and 2001.

             c.  Consolidated Statements of Changes in Partners'
                 Equity for the Years  Ended  December 31, 2003,
                 2002, and 2001.

             d.  Consolidated Statements of Cash Flows
                 for  the  Years Ended December 31,  2003,  2002,
                 and 2001.

             c.   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
                                   (To be filed with amended
                                    10-K/A)

                  32                Certification  Pursuant  to
                                    18  U.S.C. Section 1350, As
                                    Adopted     Pursuant     to
                                    Section    906    of    the
                                    Sarbanes-Oxley Act of 2002
                                    (To  be  filed with amended
                                    10-K/A)

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



                           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:  June 19, 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: June 19, 2007                By: /s/ Spencer Wertheimer
      -------------                    ----------------------
                                       SPENCER WERTHEIMER
                                       President
                                       (principal executive officer,
                                        principal financial officer)

<PAGE>