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July 16, 2007


Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC.  20549


        Boston Financial Qualified Housing Tax Credits L.P. III
        Annual Report on Form 10-KSB for Year Ended March 31, 2007
        File Number 01-18462


Dear Sir/Madam:

Pursuant to the requirements of section 15(d) of the Securities Exchange Act of
1934, filed herewith is one copy of subject report.


Very truly yours,


/s/Patricia Olsen-Goldberg
Patricia Olsen-Goldberg
Controller

QH310K-K



<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)

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

For the fiscal year ended March 31, 2007

                                       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 01-18462

          Boston Financial Qualified Housing Tax Credits L.P. III
              (Exact name of registrant as specified in its charter)

                   Delaware                         04-3032106
      (State or other jurisdiction of      (I.R.S. Employer Identification No.)
     incorporation or organization)

     101 Arch Street, Boston, Massachusetts
                                                     02110-1106
    (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code  (617)439-3911

Securities registered pursuant to Section 12(b) of the Act:
                                                      Name of each exchange on
          Title of each class                               which registered
                 None                                           None

Securities registered pursuant to Section 12(g) of the Act:

                      UNITS OF LIMITED PARTNERSHIP INTEREST
                                (Title of Class)
                                     100,000

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 X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]

State the aggregate sales price of partnership units held by nonaffiliates
of the registrant.
                                $99,610,000 as of March 31, 2007


<PAGE>



DOCUMENTS INCORPORATED BY REFERENCE:  LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-KSB INTO WHICH THE
DOCUMENT IS INCORPORATED:  (1) ANY ANNUAL REPORT TO SECURITY HOLDERS;
(2) ANY PROXY OR INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO
RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933.
<TABLE>
<CAPTION>


                                                                        Part of Report on
                                                                        Form 10-KSB into
                                                                        Which the Document
Documents incorporated by reference                                     is Incorporated

Post-effective Amendment No. 1 to the Form S-11
<S>                                                                     <C>
  Registration Statement, File # 33-24175                               Part I, Item 1

Supplement No. 4 to the Prospectus dated May 9, 1989                    Part I, Item 1

Report on Form 8-K dated November 21, 1989                              Part I, Item 1

Acquisition Reports                                                     Part I, Item 1

Prospectus - Sections Entitled:

  "Investment Objectives and Policies -
   Principal Investment Policies"                                       Part I, Item 1

  "Estimated Use of Proceeds"                                           Part III, Item 12

  "Management Compensation and Fees"                                    Part III, Item 12

  "Profits and Losses for Tax Purposes, Tax
   Credits and Cash Distributions"                                      Part III, Item 12


</TABLE>


<PAGE>


                       BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (a Limited Partnership)

                          ANNUAL REPORT ON FORM 10-KSB
                        FOR THE YEAR ENDED MARCH 31, 2007


                                TABLE OF CONTENTS


PART I                                                               Page No.

   Item 1    Business                                                  K-4
   Item 2    Properties                                                K-7
   Item 3    Legal Proceedings                                         K-11
   Item 4    Submission of Matters to a
             Vote of Security Holders                                  K-11

PART II

   Item 5     Market for the Registrant's Units
              and Related Security Holder Matters                      K-11
   Item 6     Management's Discussion and Analysis of
              Financial Condition and Results of Operations            K-12
   Item 7     Financial Statements and Supplementary Data              K-18
   Item 8     Changes in and Disagreements with
              Accountants on Accounting and Financial
              Disclosure                                               K-18
   Item 8A    Controls and Procedures                                  K-18
   Item 8B    Other Information                                        K-19

PART III

   Item 9     Directors and Executive Officers
              of the Registrant                                        K-19
   Item 10    Management Remuneration                                  K-20
   Item 11    Security Ownership of Certain Beneficial
              Owners and Management                                    K-20
   Item 12    Certain Relationships and Related
              Transactions                                             K-20
   Item 13    Exhibits, Financial Statement Schedules and
              Reports on Form 8-K                                      K-22
   Item 14.   Principal Accountant Fees and Services                   K-22

SIGNATURES                                                             K-23

CERTIFICATIONS                                                         K-24


<PAGE>


                                     PART I

Item 1.  Business

Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") is a
limited partnership formed on August 9, 1988 under the Uniform Limited
Partnership Act of the State of Delaware. The Certificate and Agreement of
Limited Partnership ("Partnership Agreement") authorized the sale of up to
100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit
(Gross Proceeds is $100,000,000), adjusted for certain discounts. The
Partnership raised $99,610,000, net of discounts of $390,000, through the sale
of 100,000 Units. Such amounts exclude five unregistered Units previously
acquired for $5,000 by the Initial Limited Partner, which is also one of the
General Partners. The offering of Units terminated on May 30, 1989. No further
sale of Units is expected.

The Partnership is engaged solely in the business of real estate investment.
Accordingly, a presentation of information about industry segments is not
applicable and would not be material to an understanding of the Partnership's
business taken as a whole.

The Partnership originally invested as a limited partner in sixty-nine other
limited partnerships ("Local Limited Partnerships") which own and operate
residential apartment complexes ("Properties"), some of which benefit from some
form of federal, state or local assistance programs and all of which qualify for
the low-income housing tax credits ("Tax Credits") that were added to the
Internal Revenue Code by the Tax Reform Act of 1986 (the "Code"). The investment
objectives of the Partnership include the following: (i) to provide current tax
benefits in the form of Tax Credits which qualified Limited Partners may use to
offset their federal income tax liability; (ii) to preserve and protect the
Partnership's capital; (iii) to provide limited cash distributions from Property
operations which are not expected to constitute taxable income during the
expected duration of the Partnership's operations; and (iv) to provide cash
distributions from sale or refinancing transactions. There cannot be any
assurance that the Partnership will attain any or all of these investment
objectives. A more detailed discussion of these investment objectives, along
with the risks in achieving them, is contained in the section of the prospectus
entitled "Investment Objectives and Policies - Principal Investment Policies"
which is herein incorporated by this reference.

Table A on the following pages lists the Properties originally acquired by Local
Limited Partnerships in which the Partnership has invested. Item 6 of this
Report contains other significant information with respect to such Local Limited
Partnerships. As required by applicable rules, the terms of the acquisition of
Local Limited Partnership interests have been described in supplements to the
Prospectus and collected in one post-effective amendment to the Registration
Statement and in another supplement to the Prospectus and in a report on Form
8-K (collectively, the "Acquisition Reports"); such descriptions are
incorporated herein by this reference.


<PAGE>

<TABLE>
<CAPTION>

                                     TABLE A

                             SELECTED LOCAL LIMITED
                                PARTNERSHIP DATA


                                                                                                      Date
   Properties owned by                                                                              Interest
  Local Limited Partnerships                              Location                                   Acquired

<S>                                                      <C>                                        <C>
West Dade (1)                                            Miami, FL                                  12/31/88
West Dade II (1)                                         Miami, FL                                  12/31/88
Regency Square (1)                                       Dayton, OH                                 03/13/89
Westwood Manor (1)                                       Flint, MI                                  02/21/89
Rolling Hills (1)                                        Dayton, OH                                 03/13/89
Boulevard Commons II (1)                                 Chicago, IL                                04/04/89
Boulevard Commons IIA (1)                                Chicago, IL                                04/04/89
Fox Run Housing  (1)                                     Victoria, TX                               04/07/89
Waterfront                                               Buffalo, NY                                04/28/89
Shoreline                                                Buffalo, NY                                04/28/89
Colony Apartments (1)                                    Columbia, SC                               05/19/89
Admiral Court (1)                                        Philadelphia, PA                           06/07/89
Crestwood (1)                                            Bridgeport, TX                             06/05/89
Elmwood Delmar (1)                                       Aurora, CO                                 05/16/89
El Jardin (1)                                            Davie, FL                                  06/14/89
Ashley Place (1)                                         Orlando, FL                                06/23/89
Willowick (1)                                            Gainesville, TX                            06/30/89
Kirkendall Heights (1)                                   Ellsworth, KS                              07/19/89
Bentley Hill (1)                                         Syracuse, KS                               06/30/89
Columbia Townhouses (1)                                  Burlington, IA                             07/28/89
Quartermill (1)                                          Richmond, VA                               08/02/89
Ponca Manor (1)                                          Satanta, KS                                07/28/89
Pearl Place (1)                                          Rossville, KS                              07/28/89
Crown Point (1)                                          Venus, TX                                  08/22/89
Godley Arms (1)                                          Godley, TX                                 08/25/89
Pilot Point (1)                                          Pilot Point, TX                            08/22/89
Sherwood Arms (1)                                        Keene, TX                                  08/22/89
South Holyoke (1)                                        Holyoke, MA                                08/29/89
Walker Woods                                             Dover, DE                                  08/30/89
Lakeway Colony (1)                                       Lake Dallas, TX                            08/30/89
One Main Place (1)                                       Little Elm, TX                             08/22/89
Eaglewood (1)                                            Covington, TN                              09/06/89
Harbour View (1)                                         Staten Island, NY                          09/29/89
Georgetown II (1)                                        Georgetown, DE                             09/28/89
Granite V (1)                                            Boston, MA                                 09/29/89
Garden Plain (1)                                         Garden Plain, KS                           08/09/89
Fulton (1)                                               Fulton, KY                                 10/05/89
Lone Oak (1)                                             Graham, TX                                 10/06/89
Hallet West (1)                                          Hallettsville, TX                          11/20/89
Glenbrook (1)                                            St. Jo, TX                                 10/06/89
Eagles Nest (1)                                          Decatur, TN                                10/06/89
Billings Family (1)                                      Billings, MO                               08/09/89

</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                                                                      Date
 Properties owned by                                                                                Interest
Local Limited Partnerships                                Location                                  Acquired

<S>                                                          <C>                                       <C>
Brownsville (1)                                          Brownsville, TN                            08/09/89
Sunnyhill Villa (1)                                      Wayne, NE                                  08/09/89
Longview (1)                                             Humboldt, KS                               10/13/89
Horseshoe Bend (1)                                       Horseshoe Bend, AR                         08/09/89
Briarwood II (1)                                         Lake Havasua, AZ                           10/04/89
Quail Run (1)                                            Iowa Park, TX                              10/06/89
Smithville (1)                                           Smithville, MO                             08/09/89
Aurora East Apartments (1)                               Denver, CO                                 11/06/89
Elver Park II (1)                                        Madison, WI                                11/09/89
Elver Park III (1)                                       Madison, WI                                11/09/89
Tucson Trails I (1)                                      Madison, WI                                11/22/89
Tucson Trails II (1)                                     Madison, WI                                11/23/89
Pleasant Plaza (1)                                       Malden, MA                                 12/01/89
241 Pine Street (1)                                      Manchester, NH                             12/04/89
Heather Oaks (1)                                         Oak Grove, MO                              11/24/89
Riverfront                                               Sunbury, PA                                12/26/89
Susquehanna View                                         Camp Hill, PA                              12/26/89
Breckenridge (1)                                         Duluth, GA                                 12/19/89
Wood Creek                                               Calcium, NY                                12/15/89
Willow Lake (1)                                          Kansas City, MO                            12/20/89
Ashton Heights (1)                                       Bolivar, MO                                12/15/89
Fouche Valley                                            Perryville, AR                             05/01/90
Altheimer (1)                                            Altheimer, AR                              04/18/90
Kyle Hotel (1)                                           Temple, TX                                 06/12/90
Diversey Square (1)                                      Chicago, IL                                12/01/90
Poplar Village (1)                                       Cumberland, KY                             12/30/90
Lexington (1)                                            Lexington, TN                              12/29/90


(1)   The Partnership no longer has an interest in the Local Limited Partnership which owns this Property.

</TABLE>

<PAGE>


Although the Partnership's investments in Local Limited Partnerships are not
subject to seasonal fluctuations, the Partnership's equity in losses of Local
Limited Partnerships, to the extent they reflect the operations of individual
Properties, may vary from quarter to quarter based upon changes in occupancy and
operating expenses as a result of seasonal factors.

Each Local Limited Partnership has as its general partners ("Local General
Partners") one or more individuals or entities not affiliated with the
Partnership or its General Partners. In accordance with the partnership
agreements under which such entities are organized ("Local Limited Partnership
Agreements"), the Partnership depends on the Local General Partners for the
management of each Local Limited Partnership. As of March 31, 2007, the
following Local Limited Partnerships have a common Local General Partner or
affiliated group of Local General Partners accounting for the specified
percentage of the total capital contributions made to Local Limited
Partnerships: (i) Riverfront Apartments, L.P. and Susquehanna View, L.P.,
representing 34.00%, have AIMCO Properties as Local General Partner; (ii)
Waterfront Limited Partnership and Shoreline Limited Partnership, representing
38.05%, have M.B. Associates as Local General Partner. The Local General
Partners of the remaining Local Limited Partnerships are identified in the
Acquisition Reports, which are incorporated herein by reference.

The Properties owned by Local Limited Partnerships in which the Partnership has
invested are and will continue to be subject to competition from existing and
future properties in the same areas. The continued success of the Partnership
will depend on many factors, most of which are beyond the control of the
Partnership and cannot be predicted at this time. Such factors include general
economic and real estate market conditions, both on a national basis and in
those areas where the Properties are located, the availability and cost of
borrowed funds, real estate tax rates, operating expenses, energy costs and
government regulations. In addition, other risks inherent in real estate
investment may influence the ultimate success of the Partnership, including: (i)
possible reduction in rental income due to an inability to maintain high
occupancy levels or adequate rental levels; (ii) possible adverse changes in
general economic conditions and adverse local conditions, such as competitive
overbuilding, a decrease in employment rates or adverse changes in real estate
laws, including building codes; and (iii) possible future adoption of rent
control legislation which would not permit increased costs to be passed on to
the tenants in the form of rent increases or which would suppress the ability of
the Local Limited Partnership to generate operating cash flow. Since most of the
Properties benefit from some form of government assistance, the Partnership is
subject to the risks inherent in that area including decreased subsidies,
difficulties in finding suitable tenants and obtaining permission for rent
increases. In addition, any Tax Credits allocated to investors with respect to a
Property are subject to recapture to the extent that the Property or any portion
thereof ceases to qualify for the Tax Credits. Other future changes in federal
and state income tax laws affecting real estate ownership or limited
partnerships could have a material and adverse affect on the business of the
Partnership.

The Partnership is managed by Arch Street III, Inc., the Managing General
Partner of the Partnership. The other General Partner of the Partnership is Arch
Street III Limited Partnership. The Partnership, which does not have any
employees, reimburses MMA Financial, Inc. ("MMA"), an affiliate of the General
Partners, for certain expenses and overhead costs. A complete discussion of the
management of the Partnership is set forth in Item 9 of this Report.

Item 2.  Properties

The Partnership currently owns limited partnership interests in seven Local
Limited Partnerships which own and operate Properties, some of which benefit
from some form of federal, state or local assistance programs and all of which
qualify for the Tax Credits added to the Code by the Tax Reform Act of 1986. The
Partnership's ownership interest in each Local Limited Partnership is 99%.

Each of the Local Limited Partnerships has received an allocation of Tax Credits
from its relevant state tax credit agency. In general, the Tax Credits run for
ten years from the date the Property is placed in service. The required holding
period (the "Compliance Period") of the Properties is fifteen years. During
these fifteen years, the Properties must satisfy rent restrictions, tenant
income limitations and other requirements, as promulgated by the Code, in order
to maintain eligibility for the Tax Credits, at all times during the Compliance
Period. Once a Local Limited Partnership has become eligible for the Tax
Credits, it may lose such eligibility and suffer an event of recapture if its
Property fails to remain in compliance with the requirements.

In addition, some of the Local Limited Partnerships have obtained one or a
combination of different types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the Property is located at favorable terms; and iii) loans which have repayment
terms that are based on a percentage of cash flow.

The schedule on the following pages provides certain key information on the
Local Limited Partnership interests acquired by the Partnership.


<PAGE>
<TABLE>
<CAPTION>


                                                          Capital Contributions
Local Limited Partnership                         Total              Paid             Mtge. Loans                      Occupancy at
Property Name                  Number of      Committed at         Through           Payable at          Type of          March 31,
Property Location              Apts Units    March 31, 2007     March 31, 2007     December 31, 2006    Subsidy *            2007

Shoreline Limited Partnership
Shoreline
<S>                                <C>               <C>                  <C>               <C>           <C>                 <C>
Buffalo, NY                        142            1,079,318            1,079,318        9,475,509         None                  44%

Waterfront Limited Partnership
Waterfront
Buffalo, NY                        472            3,597,307            3,597,307        32,863,612        None                 60%

Walker Woods Partners, L.P.
Walker Woods
Dover, DE                           52            1,452,380            1,452,380         2,797,101        None                  87%

Wood Creek Associates
     (A New York Limited Partnership)
Wood Creek
Calcium, NY                         104            1,850,000           1,850,000         2,428,128         None                 94%

Riverfront Apartments, L.P.
Riverfront
Sunbury, PA                         199            1,984,908           1,984,908          5,540,646       Section 8            100%
Susquehanna View, L.P.

Susquehanna View. L.P.
Camp Hill, PA                       201            2,194,314           2,194,314          7,887,599       Section 8             99%

Westgate Associates I, L.P.
Fouche Valley
Perryville, AR                       20              131,865            131,865           1,086,932        FmHA                 95%

                                   1,190       $  12,290,092      $  12,290,092 $        62,079,527


</TABLE>

<PAGE>



*FmHA      This subsidy, which is authorized under Section 515 of the Housing
           Act of 1949, can be one or a combination of different types of
           financing. For instance, FmHA may provide: 1) direct
           below-market-rate mortgage loans for rural rental housing; 2)
           mortgage interest subsidies which effectively lower the interest rate
           of the loan to 1%; 3) a rental assistance subsidy to tenants which
           allows them to pay no more than 30% of their monthly income as rent
           with the balance paid by the federal government; or 4) a combination
           of any of the above.

 Section   8 This subsidy, which is authorized under Section 8 of Title II of
           the Housing and Community Development Act of 1974, allows qualified
           low-income tenants to pay 30% of their monthly income as rent with
           the balance paid by the federal government.








<PAGE>




The Partnership does not guarantee any of the mortgages or other debt of the
Local Limited Partnerships.

Duration of leases for occupancy in the Properties described above is generally
six to twelve months. The Managing General Partner believes the Properties
described herein are adequately covered by insurance.

Additional information required under this item, as it pertains to the
Partnership, is contained in Items 1, 6 and 7 of this Report.

Item 3.  Legal Proceedings

As previously reported, for the past several years the following three
litigation proceedings had been pending between certain investors and various
affiliates of the General Partners, including the Partnership, concerning, among
other things, those investors' requests to inspect certain alleged "books and
records" of the Partnership and the affiliates: Park G.P., Inc. ("Park") brought
a lawsuit against the Partnership and various affiliates of the General Partner
and their purported general partners (collectively, the "Fund Parties") in state
court in Missouri (the "Missouri Lawsuit"); the Fund Parties brought a
declaratory judgment lawsuit against Everest Housing Investors 2, LLC and
several other Everest-related entities (collectively, the "Everest Entities") in
Massachusetts state court (the "Everest Massachusetts Lawsuit"); and Boston
Financial Qualified Housing Tax Credits L.P. IV ("Partnership IV") and its
general partners brought a lawsuit against Park and its affiliate Bond Purchase,
L.L.C. ("Bond") in Massachusetts state court (the "Park and Bond Massachusetts
Lawsuit").

As of April 21, 2007, the Fund Parties and Partnership IV reached an agreement
with Park, Bond and the Everest Entities to resolve these lawsuits (the
"Settlement Agreement"). Under the terms of the Settlement Agreement, the claims
and counterclaims asserted in the Everest Massachusetts Lawsuit have been
dismissed with prejudice and the claims in the Missouri Lawsuit and the Park and
Bond Massachusetts Lawsuit have been dismissed without prejudice, all in
exchange for options, subject to various conditions, to purchase certain Local
Limited Partnership interests held by Partnership IV, Boston Financial Qualified
Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits
L.P. V and Boston Financial Tax Credit Fund VII, A Limited Partnership at
specified prices.

With respect to the Partnership, the Settlement Agreement provides options,
subject to various conditions, to purchase the Partnership's interests in River
Front Apartments, L.P., located in Sunbury, PA, and Susquehanna View, L.P.,
located in Camp Hill, PA, for an aggregate price of $1,500,000.

Except as noted above, the Partnership is not a party to any pending legal or
administrate proceeding, and to the best of its knowledge, no legal or
administrative proceeding is threatened or contemplated against it.

Item 4.  Submission of Matters to a Vote of Security Holders

None.
                                     PART II

Item 5.  Market for the Registrant's Units and Related Security Holder Matters

There is no public market for the Units, and it is not expected that a public
market will develop. If a Limited Partner desires to sell Units, the buyer of
those Units will be required to comply with the minimum purchase and retention
requirements and investor suitability standards imposed by applicable federal or
state securities laws and the minimum purchase and retention requirements
imposed by the Partnership. The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers, will be subject
to negotiation by the Limited Partner seeking to sell his Units. Units will not
be redeemed or repurchased by the Partnership.

The Partnership Agreement does not impose on the Partnership or its General
Partners any obligation to obtain periodic appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units.

As of March 31, 2007, there were 5,015 record holders of Units of the
Partnership.
<PAGE>
Cash distributions, when made, are paid annually. No cash distribution was paid
in the years ended March 31, 2007 and 2006.

Item 6.Management's Discussion and Analysis of Financial Condition and Results
       of Operations

Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and are including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions and interest rates.

Executive Level Overview

The Partnership was formed on August 9, 1988 under the laws of the State of
Delaware for the primary purpose of investing, as a limited partner, in Local
Limited Partnerships, which own and operate apartment complexes, most of which
benefit from some form of federal, state or local assistance program and each of
which qualify for low-income housing tax credits. The Partnership's objectives
are to: (i) provide current tax benefits in the form of tax credits which
qualified investors may use to offset their federal income tax liability; ii)
preserve and protect the Partnership's capital; iii) provide limited cash
distributions which are not expected to constitute taxable income during
Partnership operations; and iv) provide cash distributions from sale or
refinancing transactions. The General Partners of the Partnership are Arch
Street III, Inc., which serves as the Managing General Partner, and Arch Street
III L.P., which also serves as the Initial Limited Partner. Both of the General
Partners are affiliates of MMA. The fiscal year of the Partnership ends on March
31.

As of March 31, 2007, the Partnership's investment portfolio consisted of
limited partnership interests in seven Local Limited Partnerships, each of which
owns and operates a multi-family apartment complex and each of which has
generated Tax Credits. Since inception, the Partnership generated Tax Credits,
net of recapture, of approximately $1,342 per Limited Partner Unit. The
aggregate amount of Tax Credits generated by the Partnership was consistent with
the objective specified in the Partnership's prospectus.

Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 calendar years
from the date the Property is placed in service. Failure to do so would result
in recapture of a portion of the Property's Tax Credits. The Compliance Period
of the seven Properties in which the Partnership has an interest expired by
December 31, 2004. The Managing General Partner has negotiated agreements that
will ultimately allow the Partnership to dispose of its interest in four Local
Limited Partnerships. Four of the Local Limited Partnerships in which the
Partnership had an interest were disposed of during the twelve months ended
March 31, 2007.

The Managing General Partner will continue to pursue the disposition of the
Partnership's remaining Local Limited Partnership interests. The Partnership
shall dissolve and its affairs shall be wound up upon the disposition of the
final Local Limited Partnership interest and other assets of the Partnership.
Investors will continue to be Limited Partners, receiving K-1s and quarterly and
annual reports, until the Partnership is dissolved.

Critical Accounting Policies

The Partnership's accounting policies include those that relate to its
recognition of investments in Local Limited Partnerships using the equity method
of accounting. The Partnership's policy is as follows:
<PAGE>
The Local Limited Partnerships in which the Partnership invests are Variable
Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a
non-controlling limited partner equity holder. Because the Partnership is not
the primary beneficiary of these VIEs, it accounts for its investments in the
Local Limited Partnerships using the equity method of accounting. As a result of
its involvement with the VIEs, the Partnership's exposure to economic and
financial statement losses is limited to its investments in the VIEs ($1,158,609
at March 31, 2007). The Partnership may be subject to additional losses to the
extent of any financial support that the Partnership voluntarily provides in the
future. Under the equity method, the investment is carried at cost, adjusted for
the Partnership's share of net income or loss and for cash distributions from
the Local Limited Partnerships; equity in income or loss of the Local Limited
Partnerships is included currently in the Partnership's operations. Under the
equity method, a Local Limited Partnership investment will not be carried below
zero. To the extent that equity in losses are incurred when the Partnership's
carrying value of the respective Local Limited Partnership has been reduced to a
zero balance, the losses will be suspended and offset against future income.
Income from Local Limited Partnerships, where cumulative equity in losses plus
cumulative distributions have exceeded the total investment in Local Limited
Partnerships, will not be recorded until all of the related unrecorded losses
have been offset. To the extent that a Local Limited Partnership with a carrying
value of zero distributes cash to the Partnership, that distribution is recorded
as income on the books of the Partnership and is included in "other revenue" in
the accompanying financial statements.

The Partnership has implemented policies and practices for assessing
other-than-temporary declines in values of its investments in Local Limited
Partnerships. Periodically, the carrying values of the investments are compared
to their respective fair values. If an other-than-temporary decline in carrying
value exists, a provision to reduce the asset to fair value, as calculated based
primarily on remaining tax benefits, will be recorded in the Partnership's
financial statements. Generally, the carrying value of most Local Limited
Partnerships will decline through losses and distributions in amounts sufficient
to prevent other-than-temporary impairments. However, the Partnership may record
similar impairment losses in the future if the expiration of tax credits
outpaces losses and distributions from any of the Local Limited Partnerships.

Liquidity and Capital Resources

At March 31, 2007, the Partnership has cash and cash equivalents of $10,969,239,
as compared with $8,394,272 at March 31, 2006. The increase is attributable to
proceeds received from sale of investments in Local Limited Partnerships and
proceeds from maturities of investments. These increases are partially offset by
cash used for operations. Cash used for operations includes $110,163 paid to the
Managing General Partner for accrued asset management fees.

The Managing General Partner initially designated 3.00% of the Gross Proceeds as
Reserves as defined in the Partnership Agreement. The Reserves were established
to be used for working capital of the Partnership and contingencies related to
the ownership of Local Limited Partnership interests. The Managing General
Partner may increase or decrease such Reserves from time to time, as it deems
appropriate. During the year ended March 31, 1993, the Managing General Partner
increased the Reserve level to 3.75%. At March 31, 2007, $10,969,239 has been
designated as Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,378,000 have been paid from Reserves. To date, Reserve funds in
the amount of approximately $534,000 also have been used to make additional
capital contributions to four Local Limited Partnerships and the Partnership has
paid approximately $452,000 (net of paydowns) to purchase the mortgage of The
Kyle Hotel. In the event a Local Limited Partnership encounters operating
difficulties requiring additional funds, the Partnership's management might deem
it in its best interest to voluntarily provide such funds in order to protect
its investment. As of March 31, 2007, the Partnership has advanced approximately
$1,578,000 to Local Limited Partnerships to fund operating deficits.

The Managing General Partner believes that the investment income earned on the
Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the
Partnership's ongoing operations. Reserves may be used to fund Partnership
operating deficits, if the Managing General Partner deems funding appropriate.
If Reserves are not adequate to cover the Partnership's operations, the
Partnership will seek other financing sources including, but not limited to, the
deferral of Asset Management Fees paid to an affiliate of the Managing General
Partner or working with Local Limited Partnerships to increase cash
distributions. To date, the Partnership has used approximately $12,161,000 of
operating funds and proceeds from sales of investments in Local Limited
Partnerships to replenish Reserves.
<PAGE>
Since the Partnership invests as a limited partner, the Partnership has no
contractual duty to provide additional funds to Local Limited Partnerships
beyond its specified investment. Thus, as of March 31, 2007, the Partnership had
no contractual or other obligation to any Local Limited Partnership which had
not been paid or provided for.

Cash Distributions

No cash distributions were made to Limited Partners in the two years ended March
31, 2007. The Partnership is currently working on disposing of its interest in
certain Local Limited Partnerships during the next twelve months. These
dispositions may result in cash available for distribution, but due to the
uncertainty of the sales, no guarantees can be made as to the extent of their
outcome on distributions to Limited Partners. Based on the results of 2006
Property operations, the Local Limited Partnerships are not expected to
distribute significant amounts of cash to the Partnership because such amounts
will be needed to fund Property operating costs. In addition, many of the
Properties benefit from some type of federal or state subsidy and, as a
consequence, are subject to restrictions on cash distributions.

Results of Operations

The Partnership's results of operations for the year ended March 31, 2007
resulted in net income of $1,995,791 compared to net income of $5,224,089 for
the year ended March 31, 2006. The decrease in net income is primarily due to a
decrease in gain on sale of investments in Local Limited Partnerships, offset by
a decrease in equity in losses of Local Limited Partnerships, a decrease in
general and administrative expenses and an increase in investment revenue. The
decrease in gain on sale of investments in Local Limited Partnerships is due to
the transfer of four Local Limited Partnerships during the current year compared
to twelve Local Limited Partnerships in the prior year. The decrease in equity
in losses of Local Limited Partnerships is primarily due to the Partnership not
recognizing losses relating to Local Limited Partnerships where cumulative
equity in losses and cumulative distributions have exceeded its total
investment. General and administrative costs decreased primarily due to a
decrease in charges due to an affiliate of the Managing General Partner for
operational and administrative expenses necessary for the operations of the
Partnership, partially offset by increased legal expenses associated with
litigation in which the Partnership is involved and increased expenses
associated with auditing the Partnership's financial statements. The increase in
investment revenue is primarily due to the Partnership having higher cash
balance in the current year from proceeds received from sale of investments in
Local Limited Partnerships.

Low-Income Housing Tax Credits

The 2006 and 2005 Tax Credits per Unit for individuals were $0.00 and $0.04,
respectively. The Tax Credits per Limited Partner stabilized in 1991. The
credits have ended as all Properties have reached the end of the ten year credit
period.

Property Discussions

Four Properties in which the Partnership has an interest have stabilized
operations and operated above break-even as of December 31, 2006. Three
Properties generate cash flow deficits that the Local General Partner funds
through project expense loans, subordinated loans or operating escrows. However,
some Properties have had persistent operating difficulties that could either: i)
have an adverse impact on the Partnership's liquidity; ii) result in their
foreclosure; or iii) result in the Managing General Partner deeming it
appropriate for the Partnership to dispose of its interest in the Local Limited
Partnership. Also, the Managing General Partner, in the normal course of the
Partnership's business, may arrange for the future disposition of its interest
in certain Local Limited Partnerships. The following Property discussions focus
only on such Properties.

Willow Lake, located in Kansas City, had experienced operating difficulties for
many years. The original Local General Partner was replaced shortly after
construction completion with an affiliate of the Managing General Partner and
the Property's first mortgage was modified several times to avoid foreclosure.
The Partnership had advanced approximately $695,000 from Partnership Reserves.
Since the Compliance Period ended on December 31, 2004, and to eliminate any
future risk to the Partnership, the Managing General Partner commenced attempts
to sell the Property. On January 10, 2005, a sale of the Property to a third
party was consummated. After payment on Property debts, expenses and closing
costs, the Partnership received approximately $1,467,000 or $14.67 per Unit in
net sales proceeds. This sale resulted in 2005 taxable income of $1,037,563, or
$10.38 per Unit. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Partnership no longer has an interest in this Local
Limited Partnership.
<PAGE>
As previously reported, in 2003 the Local General Partner of El Jardin, located
in Davie, Florida, expressed its desire to sell the Property to a third party
buyer. In April 2003, a realtor was hired to appraise the Property. In September
2004, the Local General Partner received an offer from a third party buyer that
was higher than the 2003 appraisal as a result of an updated market valuation.
On March 8, 2005, the Property was sold, and the Partnership received
approximately $2,900,000 in sales proceeds during the six months ended September
30, 2005. This sale resulted in 2005 taxable income of $4,135,820, or $41.36 per
Unit. The Managing General Partner, in accordance with and as permitted by the
Partnership Agreement, retained the entire amount of net proceeds in Reserves.
The Partnership no longer has an interest in this Local Limited Partnership.

As previously reported, due to operating deficits in 2002 and 2003 at Tucson
Trails I and Tucson Trails II, located in Madison, Wisconsin, the Local General
Partner proposed a refinancing of the Properties. At the same time, the same
Local General Partner proposed a refinancing of the first mortgages of two other
Properties, Elver Park II and Elver Park III, also located in Madison,
Wisconsin, in which the Partnership had an interest but had enjoyed stable
operations. The Managing General Partner agreed to the refinancing of all four
Properties, and all four Properties closed on their new first mortgages in
November 2003 with the Partnership receiving a total of $954,098 in cash from
refinancing proceeds. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Managing General Partner and the Local General Partner
also entered into call and put options whereby the Local General Partner
received call options at the end of the Compliance Period of the Local Limited
Partnerships for a nominal amount. If the calls were not exercised within a
six-month period, the Partnership had the option to put its interests to the
Local General Partner. The expiration of the Compliance Periods was no later
than December 31, 2004 for any of the four Properties. Effective May 31, 2005,
the Partnership's interests in all four Local Limited Partnerships were
transferred to the Local General Partner. These sales resulted in 2005 taxable
income of $834,815, or $8.35 per Unit. The Partnership no longer has an interest
in these four Local Limited Partnerships.

As previously reported, Fox Run Housing, located in Victoria, Texas, experienced
operating deficits in 2003 and the first half of 2004 due to decreased revenues
and increased expenses. The Property also suffered from deferred maintenance and
failed two consecutive HUD physical inspections in February and July 2004. In
addition, the Property defaulted on its HUD-insured mortgage loan in December
2003. Since the Property generated its last Tax Credits in 1999 and in order to
minimize risk to the Partnership, the Managing General Partner decided in late
August 2004 to transfer the Partnership's interest to an unaffiliated third
party in exchange for a Contingent Note that granted the Partnership 50% of all
future net cash receipts from such Local Limited Partnership interest. On
September 15, 2005, the Partnership, in exchange for the sale of the Contingent
Note, received $2,083 from the previously mentioned unaffiliated third party.
The Managing General Partner, in accordance with and as permitted by the
Partnership Agreement, retained the entire amount of net proceeds from this sale
in Reserves. The Partnership no longer has an interest in this Local Limited
Partnership, as HUD approved the transfer effective July 15, 2005. This sale
resulted in 2005 taxable income of $810,644, or $8.11 per Unit. The Partnership
no longer has an interest in this Local Limited Partnership.

As previously reported, the Managing General Partner negotiated an agreement in
the form of a Contingent Note with an unaffiliated entity in exchange for the
Partnership's interest in five Local Limited Partnerships: Lexington, Fulton,
Eaglewood, Kirkendall Heights and Briarwood II. The put option agreements that
were exercised on the five Properties effecting the transfer of the
Partnership's interests resulted in the Partnership acquiring a contingent note
which provided for 50% of all future net cash receipts from such Local Limited
Partnership interests. On September 15, 2005 the Partnership received $10,415 in
exchange for the sale of the Contingent Notes, as the Managing General Partner
deemed the potential value of 50% of all future net cash receipts to be
immaterial. This transaction resulted in 2005 taxable income of $745,534 or
$7.46 per Unit. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Partnership no longer has an interest in these five
Local Limited Partnerships.


<PAGE>
As previously reported, operations at Westwood Manor, located in Flint,
Michigan, have suffered in recent quarters. Poor site management caused deferred
maintenance and curb appeal issues. The Partnership also advanced $50,000 from
Reserves to address the deferred maintenance issues at the Property during 2001.
The advance was to be repaid through operations, if available, with the Local
General Partner obligated to pay back 50% of the remaining balance should the
entire amount of the advance not be repaid by December 31, 2001. The Property
did not generate sufficient cash from operations to repay any of the
Partnership's advances. The Partnership has not yet made a demand from the Local
General Partner to meet its obligation to repay 50% of the advance. However, the
Managing General Partner and the Local General Partner have reached agreement on
an exit strategy on this Local Limited Partnership. The Local General Partner
received approval for a refinancing of the Property from the U.S. Department of
Housing and Urban Development ("HUD") and the refinanced mortgage was closed on
July 31, 2003. The Managing General Partner, in providing its approval of the
refinancing, received agreement from the Local General Partner to a put option
whereby the Partnership can dispose of its interest in the Local Limited
Partnership any time after December 31, 2003, when the Property's Compliance
Period expired. The Partnership executed its put option, effectively disposing
of its interest on November 4, 2005. This disposition resulted in 2005 taxable
income of $967,498, or $9.67 per Unit. Part of the agreement includes repayment
of the Partnership's $50,000 loan, the repayment of which would be waived by the
Managing General Partner if the Local General Partner were successful in
obtaining HUD approval of the Transfer of Physical Asset application. The
Partnership no longer has an interest in this Local Limited Partnership.

As previously reported, the Managing General Partner negotiated an agreement
with an unaffiliated entity to have the ability to transfer the Partnership's
interest in Poplar Village, located in Cumberland, Kentucky, to the unaffiliated
entity or its designee. The Managing General Partner had the right to put its
interest in the Local Limited Partnership at any time in exchange for a
Contingent Note that granted the Partnership 50% of all future net cash receipts
from such Local Limited Partnership interest. However, on September 15, 2005,
the Partnership renegotiated the put option entered into with the previously
mentioned unaffiliated third party instead. Effective January 1, 2006, the
Partnership put its interest in Poplar Village to an unaffiliated entity for
approximately $2,100 in lieu of the Partnership carrying a Contingent Note
interest. This transfer resulted in 2006 taxable income of $336,945 or $3.37 per
Unit. Based on the operating performance of the Property, the Managing General
Partner determined that there was very little value above debt in the Property.
The Managing General Partner, in accordance with and as permitted by the
Partnership Agreement, retained the entire amount of net proceeds in Reserves.
The Partnership no longer has an interest in this Local Limited Partnership.

As previously reported, during 1995 Kyle Hotel, located in Temple, Texas,
defaulted on its mortgage and the lender placed the Local Limited Partnership in
bankruptcy. Under the subsequent reorganization, the Local General Partner was
replaced by an affiliate of the Managing General Partner, and the Partnership
purchased the outstanding debt on the Property. The Property makes mortgage
payments in the amount of available cash flow to the Partnership. The Property
has consistently enjoyed high occupancy over the past several months. However,
commercial rental revenue has been eliminated by the inability to lease the
commercial space due to its odd configuration. On December 30, 2004, the
Managing General Partner transferred the Local General Partner interest in the
Local Limited Partnership from an affiliate of the Managing General Partner to
an affiliate of the Temple Housing Authority, and the Partnership received net
proceeds of $208,000 for this Local General Partner interest. At that time, a
put option agreement was entered into between the Partnership and the Temple
Housing Authority that could be exercised any time subsequent to the end of the
Property's Compliance Period, which ended on December 31, 2005. The Partnership
exercised its put option, transferring its interest in the Local Limited
Partnership on January 1, 2006. The Partnership received approximately $206,000
for this interest in January 2006. The Managing General Partner, in accordance
with and as permitted by the Partnership Agreement, retained the entire amount
of net proceeds in Reserves. This transfer resulted in a 2006 taxable loss of
$1,995,938 or $19.96 per Unit. The Partnership no longer has an interest in this
Local Limited Partnership.

As previously reported, effective January 1, 2006, the Partnership put its
interest to an unaffiliated party in Altheimer, located in Altheimer, Arizona
and Heather Oaks, located in Oak Grove, Missouri, for approximately $2,100 each.
The Managing General Partner determined that these Properties had no residual
value in excess of the Properties' debt and putting the Partnership's interests
in the Local Limited Partnerships for $2,100 per property was in the best
interest of the Partnership. These transfers resulted in 2006 taxable income of
$179,030 and $140,821 for Altheimer and Heather Oaks, respectively, or a
combined $3.20 per Unit. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Partnership no longer has an interest in these two
Local Limited Partnerships.
<PAGE>
As previously reported, Quartermill, located in Richmond, Virginia, and was sold
in January 2006, resulting in net sales proceeds to the Partnership of
$7,291,096 or $72.91 per Unit. In October 2006, the Partnership received
additional sales proceeds of $536,594 or $5.37 per Unit. This sale resulted in
2006 taxable income of $11,464,667 or $114.65 per Unit. The Managing General
Partner, in accordance with and as permitted by the Partnership Agreement,
retained the entire amount of net proceeds in Reserves. The Partnership no
longer has an interest in this Local Limited Partnership.

As previously reported, an agreement had been reached, between the Managing
General Partner and the Local General Partner of Diversey Square, located in
Chicago, Illinois on the disposition of the Partnership's interest during the
first half of 2006. This disposition occurred on February 15, 2006 upon receipt
of HUD's approval of the Transfer of Physical Asset application. The Partnership
received approximately $300,000 or $3 per Unit, for its interest in this Local
Limited Partnership. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. This transfer of Partnership interest resulted in 2006
taxable income of $1,138,692, or $11.39 per Unit. The Partnership no longer has
an interest in this Local Limited Partnership.

As previously reported, Elmwood Delmar, located in Aurora, Colorado, has a first
mortgage with a prohibition of prepayment prior to December 2008. Given this
major impediment to sale and the Partnership's desire to transfer its interest
in the Local Limited Partnership since the Property's Compliance Period ended on
December 31, 2003, the Managing General Partner entered into a put option
agreement with an unaffiliated entity that would allow for the transfer of the
Partnership's interest in the Local Limited Partnership to the unaffiliated
entity for a nominal amount. On September 15, 2005, the Partnership effectively
disposed of its interest in Elmwood Delmar when the fund received $2,083 in
exchange for the sale of a Contingent Note that was created in conjunction with
the put option entered into with the unaffiliated third party. Based on the
operating performance of the Property, the Managing General Partner determined
that there was very little value above debt in the Property. The Managing
General Partner, in accordance with and as permitted by the Partnership
Agreement, retained the entire amount of net proceeds from this transfer in
Reserves. HUD's June 6, 2006 approval to a Transfer of Physical Assets
application completed the transfer of the Partnership's interest in this Local
Limited Partnership to the third party. This transfer of Partnership interest
will result in 2006 taxable income projected to be approximately $829,245, or
$8.29 per Unit. The Partnership no longer has an interest in this Local Limited
Partnership.

As previously reported, the Managing General Partner had reached an agreement
with the Local General Partner of West Dade and West Dade II, located in Miami,
Florida, to sell the Partnership's interests in both Local Limited Partnerships,
pending HUD's approval to a Modified Transfer of Physical Assets application.
Upon further review, HUD's approval was not required. In June 2006, the
Partnership received $1,502,777, or $15 per Unit, in exchange for the
Partnership's interest in these Local Limited Partnerships. The proceeds from
this transfer have been retained in Reserves in accordance with and as permitted
by the Partnership Agreement. These transfer of interests resulted in 2006
taxable income of $3,040,190, or $30.40 per Unit. The Partnership no longer has
an interest in these two Local Limited Partnerships.

As previously reported, increased competition for Georgetown II, located in
Georgetown, Delaware, negatively impacted the Property's operations. Although
the Property maintained a high level of occupancy, the Property's chronic below
breakeven status was attributable to stagnant rental rates and high maintenance
expenses. In 2003, the non-profit affiliate of the state housing finance agency
that holds the Property's long-term ground lease offered to transfer the land at
little cost to the Partnership. The Managing General Partner gave its consent to
the transfer and, in order to reduce potential risk to the Partnership and
provide an exit strategy, concurrently executed a put agreement for the
Partnership's interest in the Local Limited Partnership with the Local General
Partner. The Partnership executed its put option on August 18, 2006, effectively
transferring its interest to the Local General Partner for $5,000. This transfer
resulted in a 2006 taxable loss of $1,340,871 or $13.41 per Unit. The Compliance
Period expired on December 31, 2004. The Partnership no longer has an interest
in this Local Limited Partnership.

<PAGE>
As previously reported, Waterfront and Shoreline, both located in Buffalo, New
York, continue to have operating deficits as a result of a soft rental market,
low occupancy and deferred maintenance, which impacts the marketability of the
developments. The mortgage loans on both Properties are payable only out of
available cash flow and neither Property has made mortgage payments in several
years. The Managing General Partner and the Local General Partner commenced
discussions regarding the options available to improve operations at, or dispose
of, the Properties. An agreement was reached whereby the Managing General
Partner would allow the Local General Partner to transfer its Local General
Partner interest to a developer that will re-syndicate the Properties. In
return, the Partnership obtained both a put option allowing the Partnership to
transfer its interest in the Local Limited Partnerships for a nominal sum and a
pledge by the incoming Local General Partner to pay any Tax Credit recapture
incurred due to the transfer of the Local Limited Partnerships prior to the end
of the Compliance Period. These transfers of the Local General Partner interests
occurred during April 2005. The transfer of the Partnership's interest is
currently expected to occur in the fiscal years ending March 31, 2008 and 2009
for Shoreline and Waterfront, respectively.

As previously reported, the Managing General Partner and Local General Partner
of Wood Creek, located in Calcium, New York, continue to explore an exit
strategy that will result in the disposal of the Partnership's interest in the
Local Limited Partnership. Net sales proceeds, if any, and taxable income
resulting from the eventual sale of this property are inestimable at this time.

The Managing General Partner anticipates that the Partnership's interest in the
Local Limited Partnership that owns Walker Woods, located in Dover, Delaware,
will be terminated upon the sale of the Property in early 2008. Under the
current terms, this sale is expected to result in net proceeds to the
Partnership of approximately $366,000, or $3.66 per Unit. This sale would result
in taxable income projected to be approximately $843,000, or $8.43 per Unit.

In connection with the Settlement Agreement described in the "Legal Proceedings"
section above, the Partnership has granted an option, subject to various
conditions, to sell its interests in River Front Apartments, L.P., located in
Sunbury, PA, and Susquehanna View, L.P., located in Camp Hill, PA, for a price
of $1,500,000 specified in the Settlement Agreement.

Inflation and Other Economic Factors

Inflation had no material impact on the Partnership's operations or financial
condition for the years ended March 31, 2007 and 2006.

Since most Properties benefit from some form of government assistance, the
Partnership is subject to the risks inherent in that area including decreased
subsidies, difficulties in finding suitable tenants and obtaining permission for
rent increases. In addition, the Tax Credits allocated to investors with respect
to a Property are subject to recapture to the extent that a Property or any
portion thereof ceases to qualify for Tax Credits.

Certain Properties in which the Partnership has invested are located in areas
suffering from poor economic conditions. Such conditions could have an adverse
effect on the rent or occupancy levels at such Properties. Nevertheless, the
Managing General Partner believes that the generally high demand for below
market rate housing will tend to negate such factors. However, no assurance can
be given in this regard.

Item 7.  Financial Statements and Supplementary Data

Information required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None.

Item 8A.  Controls and Procedures

Based on their evaluation, required by the Securities Exchange Act Rules
13a-15(d) and 15d-15(d), the Partnership's principal executive officer and
principal financial officer have concluded that the Partnership's disclosure
controls and procedures (as defined in Securities Exchange Act Rules 13a-15(d)
and 15d-15(d)) were effective as of March 31, 2007 to ensure that information
required to be disclosed by the Partnership in reports that it files or submits
under the Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms and were effective as of March 31, 2007 to ensure
that information required to be disclosed by the Partnership issuer in the
reports that it files or submits under the Securities Exchange Act is
accumulated and communicated to the Partnership's management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.

There were no other changes in the Partnership's internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
of the Securities and Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred
during the quarter ended March 31,2007 that affected, or were reasonably likely
to affect, the Partnership's internal control over financial reporting.



Item 8B.  Other Information

The  following reports on Form 8-K were filed during the fourth quarter of the
     year ended March 31, 2007: Form 8-K dated February 27, 2007

                                    PART III

Item 9.  Directors and Executive Officers of the Registrant

The Managing  General  Partner of the  Partnership  is Arch Street III,  Inc.,
a  Massachusetts  corporation  (the"Managing  General  Partner"), an affiliate
of MMA. The Managing  General Partner was incorporated in August 1988.
The Investment Committee of the Managing  General  Partner  approved all
investments. The names and positions of the principal officers and the directors
of the Managing General Partner are set forth below.

     Name                                           Position

Gary Mentesana                                   Executive Vice President
Michael H. Gladstone                             Principal, Member

The other General  Partner of the  Partnership is Arch Street III Limited
Partnership,  a  Massachusetts  limited partnership  ("Arch  Street III L.P.")
that was  organized in August 1988.  The General  Partner of Arch Street III
L.P. is Arch Street III, Inc.

The Managing General Partner provides day-to-day management of the Partnership.
Compensation is discussed in Item 10 of this report. Such day-to-day management
does not include the management of the Properties.

The business experience of each of the persons listed above is described below.
There is no family relationship between any of the persons listed in this
section.

Gary A. Mentesana, age 42, Executive Vice President, Head of the Affordable
Housing Group - Mr. Mentesana has been Executive Vice President of MuniMae (the
"Company") since July 2003. He is the head of the Company's Affordable Housing
Group and is responsible for both the affordable tax exempt and taxable lending
and equity businesses. Prior to his appointment as EVP, Mr. Mentesana served as
the Company's Chief Capital Officer as well as the Company's Chief Financial
Officer. Mr. Mentesana's tenure with the Company began with the Company's
predecessor, the SCA Tax-Exempt Fund Limited Partnership, in 1988. Prior to
joining the Company, Mr. Mentesana worked for Coopers and Lybrand and was a
Certified Public Accountant. Mr. Mentesana graduated from the University of
Rhode Island.

Michael H. Gladstone, age 50, Principal, Member - Mr. Gladstone is responsible
for capital transactions work in the Asset Management group of MMA. He joined
MMA as a result of the Boston Financial and Lend Lease HCI acquisitions,
starting with Boston Financial in 1985 as the firm's General Counsel. Prior to
joining Boston Financial, Mr. Gladstone was associated with the law firm of
Herrick & Smith and served on the advisory board of the Housing and Development
Reporter. Mr. Gladstone has lectured at Harvard University on affordable housing
matters and is a member of the National Realty Committee, Cornell Real Estate
Council, National Association of Real Estate Investment Managers and
Massachusetts Bar. Mr. Gladstone is a graduate of Emory University (BA) and
Cornell University (J.D. & MBA).
<PAGE>
The Partnership is organized as a Limited Partnership solely for the purpose of
real estate investment and does not have any employees. Therefore the
Partnership has not adopted a Code of Ethics.

The Partnership is structured as a Limited Partnership that was formed
principally for real estate investment and is not a "listed" issuer as defined
by Rule 10A-3 of the Securities Exchange Act of 1934. Accordingly, neither an
audit committee nor a financial expert to serve on such a committee has been
established by the Partnership.

Item 10.  Management Remuneration

Neither the directors nor officers of Arch Street III, Inc., the partners of
Arch Street III L.P. nor any other individual with significant involvement in
the business of the Partnership receives any current or proposed remuneration
from the Partnership.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

As of March 31, 2007, the following is the only entity known to the Partnership
to be the beneficial owner of more than 5% of the total number of Units
outstanding:

                                              Amount
 Title of         Name and Address of      Beneficially
  Class            Beneficial Owner            Owned          Percent of Class

 Limited          Danford M. Baker          10,005 Units             10.01%
 Partner          600 Orange Grove Circle
                  Pasadena, CA 91105

The equity securities registered by the Partnership under Section 12(g) of the
Act of 1934 consist of 100,000 Units, all of which have been sold to the public
as of March 31, 2007. Holders of Units are permitted to vote on matters
affecting the Partnership only in certain unusual circumstances and do not
generally have the right to vote on the operation or management of the
Partnership.

Arch Street III L.P. owns five (unregistered) Units not included in the 100,000
Units sold to the public.

Except as described in the preceding paragraph, neither Arch Street III, Inc.,
Arch Street III L.P., MMA nor any of their executive officers, directors,
partners or affiliates is the beneficial owner of any Units. None of the
foregoing persons possesses a right to acquire beneficial ownership of Units.

The Partnership does not know of any existing arrangement that might at a later
date result in a change in control of the Partnership.

Item 12.  Certain Relationships and Related Transactions

The Partnership was required to pay certain fees to and reimburse certain
expenses of the Managing General Partner or its affiliates in connection with
the organization of the Partnership and the offering of Units. The Partnership
is also required to pay certain fees to and reimburse certain expenses of the
Managing General Partner or its affiliates in connection with the administration
of the Partnership and its acquisition and disposition of investments in Local
Limited Partnerships. In addition, the General Partners are entitled to certain
Partnership distributions under the terms of the Partnership Agreement. Also, an
affiliate of the General Partners will receive up to $10,000 from the sale or
refinancing proceeds of each Local Limited Partnership, if it is still a limited
partner at the time of such transaction. All such fees and distributions are
more fully described in the sections entitled "Estimated Use of Proceeds",
"Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax
Credits and Cash Distributions" of the Prospectus. Such sections are
incorporated herein by reference.>

The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement.
<PAGE>
Information regarding the fees paid and expense reimbursements made in the two
years ended March 31, 2007 is presented as follows:

Organizational Fees and Expenses

In accordance with the Partnership Agreement, affiliates of the General Partners
were reimbursed by the Partnership for organizational, offering and selling
expenses advanced on behalf of the Partnership by its affiliates and for
salaries and direct expenses of certain employees of the Managing General
Partner and its affiliates in connection with the registration and organization
of the Partnership. Such expenses include printing expenses and legal,
accounting, escrow agent and depository fees and expenses. Such expenses also
include a non-accountable expense allowance for marketing expenses equal to
1.00% of Gross Proceeds. $11,832,395 of organization fees and expenses and
selling expenses incurred on behalf of the Partnership were paid and reimbursed
to an affiliate of the Managing General Partner. Total organization and offering
expenses did not exceed 5.50% of the Gross Proceeds. There were no organization
fees and offering expenses paid in the two years ended March 31, 2007.

Acquisition Fees and Expenses

In accordance with the Partnership Agreement, the Partnership is required to pay
acquisition fees to and reimburse acquisition expenses of the Managing General
Partner or its affiliates for selecting, evaluating, structuring, negotiating
and closing the Partnership's investments in Local Limited Partnerships.
Acquisition fees totaled 7.50% of the Gross Proceeds. Acquisition expenses,
which include such expenses as legal fees and expenses, travel and
communications expenses, costs of appraisals, accounting fees and expenses did
not exceed 2.00% of the Gross Proceeds. Acquisition fees totaling $7,500,000 for
the closing of the Partnership's Local Limited Partnership investments have been
paid to an affiliate of the Managing General Partner. Acquisition expenses
totaling $1,587,834 were incurred and have been reimbursed to an affiliate of
the Managing General Partner. There were no acquisition fees or expenses paid in
the two years ended March 31, 2007.

Asset Management Fees

In accordance with the Partnership Agreement, an affiliate of the Managing
General Partner is paid an annual fee for services in connection with the
administration of the affairs of the Partnership. The affiliate receives the
base amount of $5,000 (annually adjusted by the CPI factor) per Local Limited
Partnership as the annual Asset Management Fee. Asset Management Fees incurred
in each of the two years ended March 31, 2007 are as follows:

                                                2007                  2006

Asset management fees                       97,824        $        168,911

Salaries and Benefits Expense Reimbursements

An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. The reimbursements are based upon
the size and complexity of the Partnership's operations. Reimbursements paid or
payable in each of the two years ended March 31, 2007 are as follows:

                                                  2007              2006

Salaries and benefits expense reimbursements $  73,537        $   162,164

Cash Distributions Paid to the General Partners

In accordance with the Partnership Agreement, the General Partners of the
Partnership, Arch Street III, Inc. and Arch Street III L.P., receive 1% of cash
distributions paid to partners. No cash distributions were paid to the General
Partners in the two years ended March 31, 2007.

Additional information concerning cash distributions and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to MMA and its affiliates for the two years ended
March 31, 2007 is presented in Note 4 to the Financial Statements.
<PAGE>
Item 13    Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Documents filed as a part of this Report

In response to this portion of Item 13, the financial statements and the
auditors' reports relating thereto are submitted as a separate section of this
Report. See Index to the Financial Statements on page F-1 hereof.

All other financial statement schedules and exhibits for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission are not required under related instructions or are inapplicable and
therefore have been omitted.

(b)   Exhibits

 31.1     Certification of Principal Executive Officer and Principal Financial
          Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
 32.1     Certification of Principal Executive Officer and Principal Financial
          Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002

Item 14.   Principal Accountant Fees and Services

The Partnership paid or accrued fees for services rendered by the principal
accountant for the two years ended March 31, 2007 as follows:

                                         2007                  2006

Audit fees                      $       87,530           $    75,229
Tax fees                        $        2,400           $     2,400

No other fees were paid or accrued to the principal accountants during the two
years ended March 31, 2007.


<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.

      BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III

     By:   Arch Street III, Inc.
           its Managing General Partner


     By:   /s/Gary Mentesana                Date:    July 16, 2007
           Gary Mentesana
           President
           Arch Street III, Inc.



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Managing General
Partner of the Partnership and in the capacities and on the dates indicated:

     By:   /s/ Gary Mentesana               Date:    July 16, 2007
           Gary Mentesana
           President
           Arch Street III, Inc.


     By:   /s/Michael H. Gladstone          Date:   July 16, 2007
           Michael H. Gladstone
           Vice President
           Arch Street III, Inc.











<PAGE>





                        BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                     (A Limited Partnership)

                                 Annual Report on Form 10-KSB
                               For the Year Ended March 31, 2007

                                         Index


                                                                   Page No.

Report of Independent Registered Public Accounting Firm
   for the years ended March 31, 2007 and 2006                     F-2

Report of Independent Registered Public Accounting Firm for the    F-3
year ended December 31, 2005 for Riverfront Apartments Limited
Partnership (A Limited Partnership)


Financial Statements

Balance Sheet - March 31, 2007                                     F-4

     Statements of Operations - For the years ended
       March 31, 2007 and 2006                                     F-5

     Statements of Changes in Partners' Equity
       (Deficiency) - For the years ended March 31, 2007 and 2006  F-6

     Statements of Cash Flows - For the years ended
      March 31, 2007 and 2006                                      F-7

     Notes to the Financial Statements                             F-8



<PAGE>








         Report of Independent Registered Public Accounting Firm

To the Partners of
Boston Financial Qualified Housing Credits Limited Partnership III

In our opinion, based on our audits and the report of other auditors, the
financial statements listed in the accompanying index present fairly, in all
material respects, the financial position of Boston Financial Qualified Housing
Tax Credits Limited Partnership III ("the Partnership") at March 31, 2007, and
the results of its operations and its cash flows for each of the two years in
the period ended March 31, 2007 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. The
Partnership accounts for its investments in the local limited partnerships, as
discussed in Note 2 of the notes to the financial statements, using the equity
method of accounting. We did not audit the financial statements of River Front
Apartments Limited Partnership ("River Front"), investments in which the
Partnership's investment in River Front is stated at $1,366,836 at March 31,
2006, and the Partnership's equity in earnings (losses) of River Front is stated
at ($139,991) for the year ended March 31, 2006. Those statements were audited
by other auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to amounts included for River Front, is
based solely upon the report of the other auditors. We conducted our audits of
these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.


PricewaterhouseCoopers, LLP


Boston, Massachusetts
June 22, 2007

<PAGE>
Carter & Company
Certified Public Accountants, LLC
                                                        543 Highway 98 East,
                                                        Suite 201
                                                        Destin, Florida 32541
                                                        Phone: 850-650-0125
                                                        Fax:  850-650-0126


                          Independent Auditors' Report

To the Partners
River Front Apartments Limited Partnership (A Limited Partnership)

In our opinion, the accompanying balance sheet and the related statement of
profit and loss, changes in partners' equity (deficiency) and cash flows present
fairly, in all material aspects, the financial position of River Front
Apartments Limited Partnership (A Limited Partnership) as of December 31, 2005
and the results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

/s/Carter & Company
Destin, Florida
January 20, 2006


<PAGE>


                       BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                  (A Limited Partnership)



                                 BALANCE SHEET
                                 March 31, 2007

<TABLE>
<CAPTION>



         Assets

<S>                                                                                               <C>
Cash                                                                                              $    10,969,239
Investment in Local Limited Partnerships (Note 3)                                                       1,158,609
   Total Assets                                                                                   $    12,127,848

Liabilities and Partners' Equity

Due to affiliate (Note 4)                                                                                  15,201
Accrued expenses                                                                                           63,645
   Total Liabilities                                                                                       78,846

General, Initial and Investor Limited Partners' Equity                                                 12,049,002
   Total Liabilities and Partners' Equity                                                         $    12,127,848


    The accompanying notes are an integral part of these financial statements.
</TABLE>

<PAGE>


                  BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                 (A Limited Partnership)



                                   STATEMENTS OF OPERATIONS
                           For the Years Ended March 31, 2007 and 2006

<TABLE>
<CAPTION>


                                                                                   2007                   2006
<S>                                                                         <C>                    <C>
   Revenue:
   Investment                                                                $        389,754       $       114,922
   Other                                                                                2,756                20,581
     Total Revenue                                                                    392,510               135,503

Expense:
   Asset management fees, affiliate  (Note 4)                                          97,824               168,911
   General and administrative (includes
     reimbursements to an affiliate in the amount
     of  $73,537 and  $162,164 in 2007 and
     2006, respectively) (Note 4)                                                     119,382               503,293
   Amortization                                                                         2,157                 6,755
     Total Expenses                                                                   219,363               678,959

Income (loss) before equity in losses of Local Limited Partnerships
   and gain on sale of investments in Local Limited Partnerships                      173,147              (543,456)

Equity in losses of Local Limited Partnerships (Note 3)                              (223,810)             (355,989)

Gain on sale of investments in Local Limited Partnerships (Note 3)                  2,046,454             6,123,534

Net Income                                                                   $      1,995,791       $     5,224,089

Net Income allocated:
   General Partners                                                          $         19,958       $       928,045
   Limited Partners                                                                 1,975,833             4,296,044
                                                                             $      1,995,791       $     5,224,089
Net Income per Limited Partner Unit
   (100,000 Units)                                                           $          19.76       $         42.96
</TABLE>




     The accompanying notes are an integral part of these financial statements.
<PAGE>

                       BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                        (A Limited Partnership)

                               STATEMENTS OF CHANGES IN PARTNERS'EQUITY
                              For the Years Ended March 31, 2007 and 2006




<TABLE>
<CAPTION>

                                                                     Initial           Investor              Net
                                                  General            Limited            Limited          Unrealized
                                                 Partners           Partners           Partners            Losses         Total

<S>                                            <C>               <C>                <C>                <C>           <C>
Balance at March 31, 2005                      $    (827,554)    $        5,000     $    5,651,676     $     -         $4,829,122

Comprehensive Income (Loss):
  Change in net unrealized
       losses on investment securities
       available for sale                                                                                (4,135)           (4,135)
  Net Income                                         928,045                  -          4,296,044            -           5,224,089
Comprehensive Income (Loss)                          928,045                  -          4,296,044       (4,135)         5,219,954

Balance at March 31, 2006                            100,491              5,000          9,947,720       (4,135)        10,049,076

Comprehensive Income:
  Change in net unrealized
       losses on investment securities
       available for sale                                  -                  -                  -         4,135             4,135
  Net Income                                          19,958                  -          1,975,833            -          1,995,791
Comprehensive Income                                  19,958                  -          1,975,833         4,135          1,999,926

Balance at March 31, 2007                      $     120,449     $        5,000     $   11,923,553     $     -      $   12,049,002


</TABLE>

    The accompanying notes are an integral part of these financial statements.
<PAGE>



                        BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                       (A Limited Partnership)




                                       STATEMENTS OF CASH FLOWS
                           For the Years Ended March 31, 2007 and 2006
<TABLE>
<CAPTION>



                                                                                 2007                     2006
Cash flows from operating activities:
<S>                                                                        <C>                      <C>
   Net Income                                                              $      1,995,791         $     5,224,089
   Adjustments to reconcile net income to net
     cash used for operating activities:
     Equity in losses of Local Limited Partnerships                                 223,810                 355,989
     Gain on sale of investments in Local Limited
       Partnerships                                                              (2,046,454)             (6,123,534)
     Amortization                                                                     2,157                   6,755
     Cash distribution included in net income                                        (2,756)                (20,581)
     Other non-cash item                                                               (936)                      -
     Accretion                                                                            -                  (3,114)
     Increase (decrease) in cash arising from changes
       in operating assets and liabilities:
       Other assets                                                                   7,128                  (7,128)
       Due to affiliate                                                             (12,339)             (2,222,869)
       Accrued expenses                                                            (363,561)                 57,362
Net cash used for operating activities                                             (197,160)             (2,733,031)

Cash flows from investing activities:
   Purchases of investment securities                                                     -                (720,950)
   Proceeds from maturities of investment securities                                725,000                       -
   Cash distribution received from Local Limited Partnerships                         2,756                 115,205
   Proceeds received from sale of investments in Local
     Limited Partnerships                                                         2,044,371              10,840,236
   Deposit on sale                                                                        -                   2,083
Net cash provided by investing activities                                         2,772,127              10,236,574

Net increase in cash and cash equivalents                                         2,574,967               7,503,543

Cash and cash equivalents, beginning                                              8,394,272                 890,729

Cash and cash equivalents, ending                                          $     10,969,239         $     8,394,272





</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>

                  BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                 (A Limited Partnership)


                        NOTES TO THE FINANCIAL STATEMENTS


1.   Organization

Boston Financial Qualified Housing Tax Credits L.P. III (the "Partnership") was
formed on August 9, 1988 under the laws of the State of Delaware for the primary
purpose of investing, as a limited partner, in other limited partnerships
("Local Limited Partnerships"), which own and operate apartment complexes, most
of which benefit from some form of federal, state or local assistance program
and each of which qualify for low-income housing tax credits. The Partnership's
objectives are to: (i) provide current tax benefits in the form of tax credits
which qualified investors may use to offset their federal income tax liability;
ii) preserve and protect the Partnership's capital; iii) provide limited cash
distributions which are not expected to constitute taxable income during
Partnership operations; and iv) provide cash distributions from sale or
refinancing transactions. The General Partners of the Partnership are Arch
Street III, Inc., which serves as the Managing General Partner, and Arch Street
III L.P., which also serves as the Initial Limited Partner. Both of the General
Partners are affiliates of MMA Financial, Inc. ("MMA"). The fiscal year of the
Partnership ends on March 31.

The Certificate and Agreement of Limited Partnership ("Partnership Agreement")
authorized the sale of up to 100,000 units of Limited Partnership Interest
("Units") at $1,000 per Unit (Gross Proceeds is $100,000,000), adjusted for
certain discounts. The Partnership raised $99,610,000, net of discounts of
$390,000, through the sale of 100,000 Units. Such amounts exclude five
unregistered Units previously acquired for $5,000 by the Initial Limited
Partner, which is also one of the General Partners. The offering of Units
terminated on May 30, 1989. No further sale of Units is expected.

Under the terms of the Partnership Agreement, the Partnership originally
designated 3% of the Gross Proceeds from the sale of Units as a reserve for
working capital of the Partnership and contingencies related to ownership of
Local Limited Partnership interests. During the year ended March 31, 1993, the
Managing General Partner increased the Reserve level to 3.75%. At March 31,
2007, the Managing General Partner has designated $10,969,239 as Reserves.

Generally, profits, losses, tax credits and cash flow from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments. The
General Partners may have an obligation to fund deficits in their capital
accounts, subject to limits set forth in the Partnership Agreement. However, to
the extent that the General Partners' capital accounts are in deficit position,
certain items of net income may be allocated to the General Partners in
accordance with the Partnership Agreement.

2.       Significant Accounting Policies

Cash Equivalents

Cash equivalents represent short-term, highly liquid instruments with original
maturities of 90 days or less.

Concentration of Credit Risk

The Partnership invests its cash primarily in money market funds with commercial
banks. At times, cash balances at a limited number of banks and financial
institutions may exceed federally insured amounts. Management believes it
mitigates its credit risk by investing in major financial institutions.

Investment Securities

The Partnership's investment securities are classified as "Available for Sale"
securities and are reported at fair value as reported by the brokerage firm at
which the securities are held. All investment securities have fixed maturities.
Realized gains and losses from the sales of securities are based on the specific
identification method. Unrealized gains and losses are excluded from earnings
and reported as a separate component of partners' equity.


<PAGE>

                  BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                 (A Limited Partnership)
                     NOTES TO THE FINANCIAL STATEMENTS (continued)


2. Significant Accounting Policies (continued)

Investments in Local Limited Partnerships

The Local Limited Partnerships in which the Partnership invests are Variable
Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a
non-controlling limited partner equity holder. Because the Partnership is not
the primary beneficiary of these VIEs, it accounts for its investments in the
Local Limited Partnerships using the equity method of accounting. As a result of
its involvement with the VIEs, the Partnership's exposure to economic and
financial statement losses is limited to its investments in the VIEs ($1,158,609
at March 31, 2007). The Partnership may be subject to additional losses to the
extent of any financial support that the Partnership voluntarily provides in the
future. Under the equity method, the investment is carried at cost, adjusted for
the Partnership's share of net income or loss and for cash distributions from
the Local Limited Partnerships; equity in income or loss of the Local Limited
Partnerships is included currently in the Partnership's operations. Under the
equity method, a Local Limited Partnership investment will not be carried below
zero. To the extent that equity in losses are incurred when the Partnership's
carrying value of the respective Local Limited Partnership has been reduced to a
zero balance, the losses will be suspended and offset against future income.
Income from Local Limited Partnerships, where cumulative equity in losses plus
cumulative distributions have exceeded the total investment in Local Limited
Partnerships, will not be recorded until all of the related unrecorded losses
have been offset. To the extent that a Local Limited Partnership with a carrying
value of zero distributes cash to the Partnership, that distribution is recorded
as income on the books of the Partnership and is included in "other revenue" in
the accompanying financial statements.

The Tax Credits generated by Local Limited Partnerships are not reflected on the
books of the Partnership as such credits are allocated to partners for use in
offsetting their federal income tax liability.

Excess investment costs over the underlying net assets acquired have arisen from
acquisition fees paid and expenses reimbursed to an affiliate of the
Partnership. These fees and expenses are included in the Partnership's
investment in Local Limited Partnerships and are being amortized on a
straight-line basis over 35 years or until a Local Limited Partnership's
respective investment balance has been reduced to zero.

The Partnership may provide advances to the Local Limited Partnerships to
finance operations or to make debt service payments. The Partnership assesses
the collectibility of any advances at the time the advance is made and records a
reserve if collectibility is not reasonably assured.

The Partnership does not guarantee any of the mortgage or other debt of the
Local Limited Partnerships.

The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90-day lag basis because the Local Limited Partnerships report
their results on a calendar year basis. Accordingly, the financial information
of the Local Limited Partnerships that is included in the accompanying financial
statements is as of December 31, 2006 and 2005 and for the years then ended.

The Partnership, as a limited partner in the Local Limited Partnerships, is
subject to risks inherent in the ownership of property which are beyond its
control, such as fluctuations in occupancy rates and operating expenses,
variations in rental schedules, proper maintenance of facilities and continued
eligibility of tax credits. If the cost of operating a property exceeds the
rental income earned thereon, the Partnership may deem it in its best interest
to voluntarily provide funds in order to protect its investment.

The Partnership has implemented policies and practices for assessing
other-than-temporary declines in values of its investments in Local Limited
Partnerships. Periodically, the carrying values of the investments are compared
to their respective fair values. If an other-than-temporary decline in carrying
value exists, a provision to reduce the asset to fair value, as calculated based
primarily on remaining tax benefits, will be recorded in the Partnership's
financial statements.


<PAGE>
                   BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                            (A Limited Partnership)

                 NOTES TO THE FINANCIAL STATEMENTS (continued)


2. Significant Accounting Policies (continued)

Use of Estimates

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

Fair Value of Financial Instruments

Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments, requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is practicable to estimate that value. The scope of SFAS No. 107 excludes
certain financial instruments, such as trade receivables and payables when the
carrying value approximates the fair value and investments accounted for under
the equity method, and all nonfinancial assets, such as real property. Unless
otherwise described, the fair values of the Partnership's assets and liabilities
which qualify as financial instruments under SFAS No. 107 approximate their
carrying amounts in the accompanying balance sheet.

Income Taxes

No provision for income taxes has been made as the liability for such taxes is
the obligation of the partners of the Partnership.

Effect of New Accounting Principle

In June 2006, the FASB issued Interpretation No. 48 "Accounting for Uncertainty
in Income Taxes" ("FIN 48"), which is effective for financial statements for
fiscal years beginning after December 15, 2006. FIN 48 provides guidance to all
enterprises, including pass-through entities, for how uncertain tax provisions
should be recognized, measured, presented and disclosed in the financial
statements. The General Partner will adopt FIN 48 as of April 1, 2007. The
General Partner is currently assessing the impact of FIN 48 but believes that
FIN 48 will not have a material impact on the financial position or operating
results of the Partnership.


<PAGE>

                BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
                   NOTES TO THE FINANCIAL STATEMENTS (continued)


3.Investments in Local Limited Partnerships

The Partnership currently owns limited partnership interests in seven Local
Limited Partnerships which were organized for the purpose of owning and
operating multi-family housing complexes, all of which are government-assisted.
The Partnership's ownership interest in each Local Limited Partnership is 99%.
The Partnership may have negotiated or may negotiate options with the local
general partners to purchase or sell the Partnership's interests in the Local
Limited Partnerships at the end of the Compliance Period at nominal prices. In
the event that Properties are sold to third parties, or upon dissolution of the
Local Limited Partnerships, proceeds will be distributed according to the terms
of each Local Limited Partnership agreement.

The following is a summary of investments in Local Limited Partnerships at March
31, 2007:
<TABLE>
<CAPTION>

<S>                                                                                                <C>
Capital contributions paid to Local Limited Partnerships and purchase
   price paid to withdrawing partners of Local Limited Partnerships                                 $    12,290,092

Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
   unrecognized losses of $53,591,921)                                                                   (8,801,795)

Cumulative cash distributions received from Local Limited Partnerships                                   (1,174,471)

Investments in Local Limited Partnerships before adjustments                                              2,313,826

Excess investment costs over the underlying assets acquired:

   Acquisition fees and expenses                                                                            638,496

   Cumulative amortization of acquisition fees and expenses                                                (210,002)

Investments in Local Limited Partnerships before valuation allowance                                      2,742,320

Valuation allowance on investments in Local Limited Partnerships                                         (1,583,711)

Investments in Local Limited Partnerships                                                           $     1,158,609
</TABLE>

The Partnership has recorded a valuation allowance for its investments in
certain Local Limited Partnerships in order to appropriately reflect the
estimated net realizable value of these investments.


<PAGE>

                BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)
                NOTES TO THE FINANCIAL STATEMENTS (continued)


3. Investments in Local Limited Partnerships (continued)

Summarized combined financial information of the Local Limited Partnerships in
which the Partnership has invested as of December 31, 2006 and 2005 (due to the
Partnership's policy of reporting the financial information of its Local Limited
Partnership interests on a 90 day lag basis) is as follows:

Summarized Balance Sheets - as of December 31,
<TABLE>
<CAPTION>

                                                                                   2006                2005
Assets:
<S>                                                                          <C>                 <C>
   Investment property, net                                                  $     20,587,018    $    45,233,305
   Other assets                                                                     3,280,506          7,517,536
     Total Assets                                                            $     23,867,524    $    52,750,841

Liabilities and Partners' Deficiency:
   Mortgage notes payable                                                    $     62,079,527    $    90,762,360
   Other liabilities                                                               12,927,320         16,468,037
     Total Liabilities                                                             75,006,847        107,230,397

Partnership's deficiency                                                          (51,330,889)       (54,039,883)
Other partners' equity (deficiency)                                                   191,566           (439,673)
     Total Partners' Deficiency                                                   (51,139,323)       (54,479,556)
     Total Liabilities and Partners' Deficiency                              $     23,867,524    $    52,750,841

Summarized Statements of Operations - for
the year ended December 31,

                                                                                   2006                2005

Rental and other income                                                      $      7,537,984    $    15,338,273

Expenses:
   Operating                                                                        5,735,175         11,185,696
   Interest                                                                         3,696,730          6,377,993
   Depreciation and amortization                                                    1,446,828          3,288,455
     Total Expenses                                                                10,878,733         20,852,144

Net Loss                                                                     $     (3,340,749)   $    (5,513,871)

Partnership's share of Net Loss                                              $     (3,307,833)   $    (5,487,694)
Other partners' share of Net Loss                                            $        (33,407)   $      (495,776)
</TABLE>

For the years ended March 31, 2007 and 2006, the Partnership has not recognized
$3,346,705 and $5,160,705, respectively, of equity in losses relating to certain
Local Limited Partnerships in which cumulative equity in losses and
distributions exceeded its total investment in these Local Limited Partnerships.
Previously unrecognized losses of $346 and $29,000 were included in losses
recognized in the years ended March 31, 2007 and 2006, respectively.

The Partnership's deficiency as reflected by the Local Limited Partnerships of
($51,330,889) differs from the Partnership's investments in Local Limited
Partnerships before adjustments of $2,313,826 primarily due to cumulative
unrecognized losses as described above and differences in the accounting
treatment of miscellaneous items.

The Partnership's investments in four Local Limited Partnerships were sold
during the year ended March 31, 2007 resulting in a gain of $1,509,860. For the
year ended March 31, 2007, the Partnership recognized $262,336 of equity in
losses from Local Limited Partnerships whose financial information is not
included in the above financial information.

Also, additional proceeds of $536,594 related to the prior sale of an investment
in a Local Limited Partnerships which took place during the year ended March 31,
2006, were received in October, 2006.


<PAGE>
                 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)

                 NOTES TO THE FINANCIAL STATEMENTS (continued)


4.   Transactions with Affiliates

An affiliate of the Managing General Partner receives the base amount of $5,000
(annually adjusted by the CPI factor) per Local Limited Partnership as the
annual Asset Management Fee for administering the affairs of the Partnership.
Included in the Statements of Operations are Asset Management Fees of $97,824
and $168,911 for the years ended March 31, 2007 and 2006, respectively. As of
March 31, 2007, $15,201 is payable for Asset Management Fees. During the years
ended March 31, 2007 and 2006, $110,163 and $736,285, respectively, were paid
out of available cash flow for Asset Management Fees.

An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. Included in general and
administrative expenses for the years ended March 31, 2007 and 2006 is $73,537
and $162,164, respectively, that the Partnership has incurred for these
expenses. During the years ended March 31, 2007 and 2006, salaries and benefits
of $73,537 and $1,818,000, respectively, were paid to the affiliate of the
Managing General Partner. As of March 31, 2007, all reimbursements to the
affiliate of the Managing General Partner for these expenses have been paid.


In December 2006, Partnership cash was invested in below-market interest bearing
accounts as part of a banking arrangement which resulted in financial benefits
to affiliates of MMA Financial. MMA Financial subsequently determined that this
arrangement was inconsistent with the terms of the Partnership Agreement and
terminated the arrangement. MMA intends to pay the interest lost by the
Partnership (approximately $251,000) to the Partnership in July 2007.


5.   Federal Income Taxes

The following schedule reconciles the reported financial statement net income
for the fiscal years ended March 31, 2007 and 2006 to the net income reported on
the Form 1065, U.S. Partnership Return of Income for the years ended December
31, 2006 and 2005:
<TABLE>
<CAPTION>

                                                                                    2007                  2006

<S>                                                                            <C>                    <C>
Net Income per financial statements                                            $    1,995,791         $   5,224,089

Equity in losses of Local Limited Partnerships for financial
   reporting (tax) purposes in excess of equity in
    losses for tax (financial reporting) purposes                                  (3,851,977)               75,272

Equity in losses of Local Limited Partnerships not recognized
   for financial reporting purposes                                                (3,346,359)           (5,131,705)

Adjustment to reflect March 31 fiscal year end to
   December 31 taxable year end                                                       (15,805)             (154,834)

Amortization not deductible for tax purposes                                            2,157                 6,755

Gain on sale of investments in Local Limited Partnership for tax
   purposes in excess of gain on sale for financial reporting purposes             11,760,999             2,764,254

Cash distributions included in net income for financial
   reporting purposes                                                                  (2,756)              (20,581)

Net Income per tax return                                                      $    6,542,050         $   2,763,250

</TABLE>

<PAGE>


                     BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                   (A Limited Partnership)

                    NOTES TO THE FINANCIAL STATEMENTS (continued)


5. Federal Income Taxes (continued)


The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax purposes as of March 31, 2007 and December 31, 2006,
respectively are as follows:
<TABLE>
<CAPTION>

                                                                Financial
                                                                Reporting            Tax
                                                                Purposes          Purposes           Differences

<S>                                                         <C>                <C>                 <C>
Investments in Local Limited Partnerships                   $    1,158,609     $  (44,160,611)     $   45,319,220
Other assets                                                $   10,969,239     $   22,857,346      $  (11,888,107)
Liabilities                                                 $       78,846     $       37,613      $       41,233
</TABLE>

The differences in the assets and liabilities of the Partnership for financial
reporting and tax purposes are primarily attributable to: (i) the cumulative
equity in losses of Local Limited Partnerships for tax purposes is approximately
$47,113,000 greater than for financial reporting purposes, including
approximately $53,592,000 of losses the Partnership has not recognized for
financial reporting purposes relating to Local Limited Partnerships whose
cumulative equity in losses exceeded their total investments; (ii) the
Partnership has provided a valuation allowance of approximately $1,584,000
against its investments in Local Limited Partnerships for financial reporting
purposes; (iii) the cumulative amortization of acquisition fees and expenses for
financial reporting purposes is approximately $210,000; and (iv) organizational
and offering costs of approximately $11,832,000 that have been capitalized for
tax purposes are charged to Limited Partners' equity for financial reporting
purposes.




<PAGE>