June 30, 2004


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, 2004
        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/Stephen Guilmette
Stephen Guilmette
Assistant 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, 2004
                         ------------------------------------------------------

                                                         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, 2004
                            --------------------------------


<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, 2004


                                TABLE OF CONTENTS
<TABLE>
<CAPTION>


PART I                                                               Page No.

   <S>       <C>                                                       <C>
   Item 1    Business                                                  K-4
   Item 2    Properties                                                K-8
   Item 3    Legal Proceedings                                         K-20
   Item 4    Submission of Matters to a
             Vote of Security Holders                                  K-20

PART II

   Item 5     Market for the Registrant's Units
              and Related Security Holder Matters                      K-21
   Item 6     Management's Discussion and Analysis of
              Financial Condition and Results of Operations            K-21
   Item 7     Financial Statements and Supplementary Data              K-27
   Item 8     Changes in and Disagreements with
              Accountants on Accounting and Financial
              Disclosure                                               K-27

PART III

   Item 9     Directors and Executive Officers
              of the Registrant                                        K-27
   Item 10    Management Remuneration                                  K-28
   Item 11    Security Ownership of Certain Beneficial
              Owners and Management                                    K-28
   Item 12    Certain Relationships and Related
              Transactions                                             K-29
   Item 13    Exhibits, Financial Statement Schedules and
              Reports on Form 8-K                                      K-30

CONTROLS AND PROCEDURES                                                K-31
-----------------------

SIGNATURES                                                             K-32
----------

CERTIFICATIONS                                                         K-33
--------------
</TABLE>


<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,
adjusted for certain discounts. The Partnership raised $99,610,000 ("Gross
Proceeds"), 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 has invested as a limited partner in thirty-six 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                                                 Miami, FL                                        12/31/88
West Dade II                                              Miami, FL                                        12/31/88
Regency Square (1)                                        Dayton, OH                                       03/13/89
Westwood Manor                                            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                                           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                                             Philadelphia, PA                                 06/07/89
Crestwood (1)                                             Bridgeport, TX                                   06/05/89
Elmwood Delmar                                            Aurora, CO                                       05/16/89
El Jardin                                                 Davie, FL                                        06/14/89
Ashley Place                                              Orlando, FL                                      06/23/89
Willowick (1)                                             Gainesville, TX                                  06/30/89
Kirkendall Heights                                        Ellsworth, KS                                    07/19/89
Bentley Hill (1)                                          Syracuse, KS                                     06/30/89
Columbia Townhouses                                       Burlington, IA                                   07/28/89
Quartermill                                               Richmond, VA                                     08/02/89
Ponca Manor                                               Satanta, KS                                      07/28/89
Pearl Place                                               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                                                 Covington, TN                                    09/06/89
Harbour View(1)                                           Staten Island, NY                                09/29/89
Georgetown II                                             Georgetown, DE                                   09/28/89
Granite V                                                 Boston, MA                                       09/29/89
Garden Plain (1)                                          Garden Plain, KS                                 08/09/89
Fulton                                                    Fulton, KY                                       10/05/89
Lone Oak (1)                                              Graham, TX                                       10/06/89
Hallet West (1)                                           Hallettsville, TX                                11/20/89
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                                                                            Date
Properties owned by                                                                                        Interest
Local Limited Partnerships                        Location                                                 Acquired

<S>                                               <C>                                                      <C>
Glenbrook (1)                                     St. Jo, TX                                               10/06/89
Eagles Nest (1)                                   Decatur, TN                                              10/06/89
Billings Family (1)                               Billings, MO                                             08/09/89
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                                     Madison, WI                                              11/09/89
Elver Park III                                    Madison, WI                                              11/09/89
Tucson Trails I                                   Madison, WI                                              11/22/89
Tucson Trails II                                  Madison, WI                                              11/23/89
Pleasant Plaza (1)                                Malden, MA                                               12/01/89
241 Pine Street (1)                               Manchester, NH                                           12/04/89
Heather Oaks                                      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                                       Kansas City, MO                                          12/20/89
Ashton Heights                                    Bolivar, MO                                              12/15/89
Fouche Valley                                     Perryville, AR                                           05/01/90
Altheimer                                         Altheimer, AR                                            04/18/90
Kyle Hotel                                        Temple, TX                                               06/12/90
Diversey Square                                   Chicago, IL                                              12/01/90
Poplar Village                                    Cumberland, KY                                           12/30/90
Lexington                                         Lexington, TN                                            12/29/90
</TABLE>

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


<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.

With the exception of The Temple-Kyle, L.P. and Willow Lake, 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, 2004, 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) Ellsworth Senior Housing L.P., Prairieland
Properties of Satanta, L.P., Rossville Senior Housing, L.P., Bolivar Senior
Housing, L.P., Missouri Rural Housing of Oak Grove, L.P., Westgate Associates I,
L.P. and Altheimer Associates I, L.P., representing 1.24%, have The Lockwood
Group as Local General Partner; (ii) Elver Park Limited Partnership II, Elver
Park Limited Partnership III, Tucson Trails Limited Partnership I and Tucson
Trails Limited Partnership II, representing 8.33%, have Gorman Associates as
Local General Partner; (iii) Riverfront Apartments, L.P. and Susquehanna View,
L.P., representing 7.93%, have NCHP as Local General Partner; (iv) West Dade
LTD, A Limited Partnership and West Dade LTD II, A Limited Partnership,
representing 8.64%, have Romat, Inc. and Arbor, Inc., as Local General Partner,
respectively, both of which have Aristedes Martinez as principal; (v) EDM
Housing Associates, LTD a Limited Partnership and Fox Run Housing, representing
5.14%, have Delwood Ventures, Inc. and R.S.F. Ventures, Inc. as Local General
Partners, respectively, both of which have Raymond Baker as principal; (vi)
Eaglewood VIII, L.P. A Limited Partnership, Lexington Associates I L.P. A
Limited Partnership and Fulton Associates I, L.P. A Limited Partnership,
representing 1.01%, have Tommy Harper, Jerry Blurt and Chris Turskey as Local
General Partners; and (vii) Waterfront Limited Partnership and Shoreline Limited
Partnership, representing 8.88%, 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, LLC ("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 owns limited partnership interests in thirty-six 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%,
except for Granite V where the Partnership's ownership interest is 97%.

Each of the Local Limited Partnerships has received an allocation of Tax Credits
from its relevant state tax credit agency. In general, the Tax Credit runs 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 Internal
Revenue Code, in order to maintain eligibility for the Tax Credit 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           Total        Mtge. Loans
Property Name                              Number of     Committed at     Paid through     payable at       Type of   Occupancy at
Property Location                          Apt. Units   March 31, 2004   March 31, 2004  December 31, 2003  Subsidy*  March 31, 2004
--------------------------------------- --------------- ----------------- -------------- ------------------ --------- -------------


West Dade LTD, A Limited Partnership
West Dade
<S>                                              <C>        <C>              <C>             <C>             <C>          <C>
Miami, FL                                        122        $1,513,936       $1,513,936      $4,069,058      Section 8    98%


West Dade LTD II, A Limited Partnership
West Dade II
Miami, FL                                        209         3,039,442        3,039,442        7,951,565     Section 8    98%


Westwood Manor Limited Dividend
    Housing Association L.P.
Westwood Manor
Flint, MI                                        144         1,165,925         1,165,925        3,074,974     Section 8   92%


Rolling Hills Associates L.P. (1)
Rolling Hills
Dayton, OH

Regency Square Limited Partnership (1)
Regency Square
Dayton, OH

Shoreline Limited Partnership
Shoreline
Buffalo, NY                                      142         1,079,318          1,079,318        9,026,199      None      70%


Waterfront Limited Partnership
Waterfront
Buffalo, NY                                      472         3,597,307          3,597,307       31,273,655      None      69%


</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                                           Capital Contributions
Local Limited Partnership                                   Total            Total       Mtge. Loans
Property Name                              Number of    Committed at     Paid through     payable at     Type of      Occupancy at
Property Location                         Apt. Units  March 31, 2004  March 31, 2004  December 31, 2003  Subsidy*    March 31, 2004
----------------------------------------- ------------ --------------- --------------- ----------------- ----------- --------------


Fox Run Housing
Fox Run
<S>                                            <C>        <C>             <C>             <C>             <C>             <C>
Victoria, TX                                   150        1,605,775       1,605,775       4,033,118       Section 8       89%


Boulevard Commons Limited
    Partnership II (1)
Boulevard Commons II
Chicago, IL

The Colony Apartments, L.P. (1)
    A Limited Partnership
Colony Apartments
Columbia, SC

Boulevard Commons Limited
    Partnership IIA (1)
Boulevard Commons IIA
Chicago, IL

Ashley Place, LTD
    A Florida Limited Partnership
Ashley Place
Orlando, FL                                     96        2,002,560       2,002,560       2,814,618       None            93%


Admiral Housing Limited Partnership
Admiral Court
Philadelphia, PA                                46        1,900,000       1,900,000       2,018,589       Section 8       80%



</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                                           Capital Contributions
Local Limited Partnership                                      Total            Total       Mtge. Loans
Property Name                                 Number of    Committed at     Paid through     payable at     Type of   Occupancy at
Property Location                             Apt. Units  March 31, 2004  March 31, 2004 December 31, 2003  Subsidy* March 31, 2004
-------------------------------------------  ----------- --------------- --------------- ------------------- --------- ------------


Prarieland Property of Syracuse, L.P. (1)
Bentley Hill
Syracuse, KS

El Jardin of Davie, Ltd.
El Jardin
<S>                                               <C>        <C>             <C>              <C>        <C>         <C>
Davie, FL                                         236        2,022,100       2,022,100        6,264,845  Section 8   98%


EDM Housing Associates LTD
    (A Limited Partnership)
Elmwood Delmar
Aurora, CO                                         95        1,102,025       1,102,025        3,077,439  Section 8   99%


Bridgeport Housing Associates, LTD (1)
Crestwood
Bridgeport, TX

Willowick Housing Associates, LTD (1)
Willowick
Gainesville, FL

Ellsworth Senior Housing, L.P.
Kirkendall Heights
Ellsworth, KS                                      12           69,658          69,658          323,773   FmHA       83%


Prairieland Properties of Satanta, L.P.
Ponca Manor
Satanta, KS                                         8           49,915          49,915          220,393   FmHA      100%


</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                                           Capital Contributions
Local Limited Partnership                                      Total           Total        Mtge. Loans
Property Name                                  Number of   Committed at    Paid through     payable at     Type of   Occupancy at
Property Location                              Apt. Units March 31, 2004 March 31, 2004 December 31, 2003  Subsidy*  March 31, 2004
-------------------------------------        ------------- -------------- -------------- ------------------ --------- --------------


Rossville Senior Housing, L.P.
Pearl Place
<S>                                                   <C>         <C>           <C>           <C>             <c>         <C>
Rossville, KS                                         10          58,855        58,855        274,400         FmHA        70%


Columbia Townhouse Associates, L.P.
Columbia Townhouses
Burlington, IA                                        56         837,450       837,450        675,982        Section 8    66%


Quartermill Associates, L.P.
    (A Virginia Limited Partnership)
Quartermill
Richmond, VA                                         266       7,705,500     7,705,500      6,880,697         None        94%


One Main Place Housing
    Associates, LTD (1)
One Main Place
Little Elm, TX

Pilot Point Housing Associates, LTD (1)
Pilot Point
Pilot Point, TX

Sherwood Arms Housing
    Associates, LTD (1)
Sherwood Arms
Keene, TX


</TABLE>


<PAGE>


<TABLE>
<CAPTION>


                                                                           Capital Contributions
Local Limited Partnership                                      Total         Total        Mtge. Loans
Property Name                                 Number of    Committed at    Paid through      payable at     Type of   Occupancy at
Property Location                             Apt. Units  March 31, 2004 March 31, 2004  December 31, 2003  Subsidy* March 31, 2004
-------------------------------------------  ----------- --------------- --------------- -------------- ------- --------------


Crown Point Housing
    Associates, LTD
    A Texas Limited Partnership (1)
Crown Point
Venus, TX

Godley Arms Housing
    Associates, LTD (1)
Godley Arms
Godley, TX

South Holyoke Limited Partnership (1)
South Holyoke
Holyoke, MA

Harbour View
    (A Limited Partnership) (1)
Harbour View
Staten Island, NY

Walker Woods Partners, L.P.
Walker Woods
<S>                                               <C>     <C>              <C>               <C>             <c>        <C>
Dover, DE                                         51      1,452,380        1,452,380         2,235,972       None       92%


Lakeway Colony Housing
    Associates, LTD (1)
Lakeway Colony
Lake Dallas, TX


</TABLE>


<PAGE>

<TABLE>
<CAPTION>



                                                                           Capital Contributions
Local Limited Partnership                                      Total           Total       Mtge. Loans
Property Name                                  Number of   Committed at    Paid through     payable at     Type of    Occupancy at
Property Location                              Apt. Units March 31, 2004 March 31, 2004 December 31, 2003  Subsidy*  March 31, 2004
-------------------------------------------    ---------- -------------- -------------- ------------------ --------- --------------


Eaglewood VIII, L.P.
    (A Limited Partnership)
Eaglewood
<S>                                                   <C>        <C>            <C>          <C>              <c>        <C>
Covington, TN                                         40         255,000        255,000      1,100,289        FmHA       100%


Georgetown Associates II, L.P.
Georgetown II
Georgetown, DE                                        50       1,200,000      1,200,000      1,700,952        None        100%


Blue Mountain Associates, L.P.
    (A Massachusetts Limited Partnership)
Granite V
Boston, MA                                           217       5,774,113      5,774,113      9,400,000        Section 8    98%


Garden Plain Senior Apts., LTD (1)
Garden Plain
Garden Plain, KS

Fulton Associates I, L.P.
    (A Limited Partnership)
Fulton
Fulton, KY                                            24         180,000        180,000        785,917        FmHA         100%


Lone Oak Housing Associates, LTD (1)
Lone Oak
Graham, TX


</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                                                                           Capital Contributions
Local Limited Partnership                                Total           Total       Mtge. Loans
<S>                                       <C>         <C>             <C>             <C>                <C>        <C>
Property Name                             Number of   Committed at    Paid through    payable at         Type of     Occupancy at
Property Location                         Apt. Units March 31, 2004  March 31, 2004 December 31, 2003   Subsidy*    March 31, 2004
-----------------------------------------------------------------------------------------------------------------------------------


West Hallettsville Housing
    Associates, LTD (1)
Hallet West
Hallettsville, TX

Glenbrook Housing Associates, LTD (1)
Glenbrook
St. Jo, TX

Eagles Nest Housing
    Associates, LTD (1)
Eagles Nest
Decatur, TX

Billings Family Housing, L.P. (1)
Cedar Tree
Billings, MO

Brownsville Associates, L.P. (1)
Brownsville
Brownsville, TN

Wayne Senior Housing, L.P. (1)
Sunnyhill Villa
Wayne, NE

Longview Apartments, L.P. (1)
Longview
Humbolt, KS

</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                                                                           Capital Contributions
Local Limited Partnership                                Total          Total         Mtge. Loans
Property Name                          Number of     Committed at    Paid through      payable at        Type of     Occupancy at
Property Location                      Apt. Units   March 31, 2004  March 31, 2004  December 31, 2003    Subsidy*   March 31, 2004
-----------------------------------------------------------------------------------------------------------------------------------


Horseshoe Bend Associates I, L.P. (1)
Horseshoe Bend
Horseshoe Bend, AR

Briarwood Associates II, L.P. (1)
Briarwood II
Lake Havasua, AZ

North Quail Run Housing
    Associates, LTD (1)
Quail Run
Iowa Park, TX

Smithville Rural Housing
    (A Limited Partnership) (1)
Smithville
Smithville, MO

Aurora Properties, LTD
    (A Limited Partnership) (1)
Aurora East Apartments
Denver, CO

Elver Park Limited Partnership II
Elver Park II
<S>                                       <C>       <C>            <C>               <C>              <c>                <C>
Madison, WI                               56        1,246,385      1,246,385         1,920,000        None               84%




<PAGE>

</TABLE>

<TABLE>
<CAPTION>

                                                                           Capital Contributions
Local Limited Partnership                                 Total           Total        Mtge. Loans
Property Name                           Number of     Committed at    Paid through      payable at       Type of      Occupancy at
Property Location                       Apt. Units   March 31, 2004  March 31, 2004  December 31, 2003   Subsidy*    March 31, 2004
-----------------------------------------------------------------------------------------------------------------------------------


Elver Park Limited Partnership III
Elver Park III
<S>                                          <C>        <C>             <C>               <C>              <c>         <C>
Madison, WI                                  48         1,047,470       1,047,470         1,632,000        None        88%

Tuscon Trails Limited Partnership I
Tuscon Trails I
Madison, WI                                  48         1,047,470       1,047,470         1,558,008        None        94%


Tuscon Trails Limited Partnership II
Tuscon Trails II
Madison, WI                                  48         1,047,470       1,047,470         1,558,008        None        98%


Pleasant Plaza Housing L.P. (1)
Pleasant Plaza
Malden, MA

241 Pine Street Associates, L.P. (1)
241 Pine Street
Manchester, NH

Missouri Rural Housing of
    Oak Grove, L.P.
Heather Oaks
Oak Grove, MO                                24           118,828         118,828           557,200        FmHA       100%


Wood Creek Associates
    (A New York Limited Partnership)
Wood Creek
Calcium, NY                                 104         1,850,000       1,850,000         2,736,957        None       100%



</TABLE>


<PAGE>

<TABLE>
<CAPTION>



                                                                           Capital Contributions
Local Limited Partnership                                 Total          Total         Mtge. Loans
Property Name                             Number of    Committed at   Paid through      payable at       Type of      Occupancy at
Property Location                         Apt. Units  March 31, 2004  March 31, 2004  December 31, 2003   Subsidy*   March 31, 2004
---------------------------------------------------- --------------- ---------------- ----------------- ----------- ---------------


Breckenridge Creste Apartments, L.P. (1)
Breckenridge
Duluth, GA

Willow Lake Partners II, L.P.
    (A Limited Partnership)
Willow Lake
<S>                                        <C>       <C>              <C>              <C>                 <c>              <C>
Kansas City, MO                            132       2,130,700        2,130,700        2,542,638           None             73%


Bolivar Senior Housing, L.P.
Ashton Heights
Bolivar, MO                                 20          95,360         95,360            460,467           FmHA             100%


Lexington Associates I L.P.
    (A Limited Partnership)
Lexington Civic                             24          95,000         95,000            880,004           FmHA             92%

Lexington, TN

Riverfront Apartments, L.P.
Riverfront
Sunbury, PA                                200       1,984,908        1,984,908         6,011,162          Section 8         98%


Susquehanna View, L.P.
Susquehanna View
Camp Hill, PA                              201       2,194,314            2,194,314     8,361,710          Section 8        99%


Westgate Associates I, L.P.
Fouche Valley
Perryville, AR                              20         131,865              131,865       631,758           FmHA             90%


</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                               Capital Contributions
Local Limited Partnership                     Total             Total            Mtge. Loans
Property Name            Number of           Committed at      Paid through       payable at            Type of    Occupancy at
Property Location        Apt. Units         March 31, 2004   March 31, 2004     December 31, 2003      Subsidy*   March 31, 2004
--------------------------------------------------------    ----------------      --------------- ------------------ -------------


Altheimer Associates I, L.P.
Altheimer
<S>                       <C>                <C>                  <C>              <C>               <C>             <C>
Altheimer, AR             20                 130,375              130,375          588,602           FmHA            100%


The Temple-Kyle L.P.
Kyle Hotel
Temple, TX                64               1,624,100            1,624,100        1,388,829           Section 8       100%


Diversey Square Associates II
Diversey Square II
Chicago, IL               48               1,031,825            1,031,825        2,591,141           Section 8       100%


Poplar Village, LTD
Poplar Village
Cumberland, KY            36                 283,945              283,945        1,183,800           None            94%
                         ------           -------------         ------------     ---------------

                        3,539           $  52,671,274         $ 52,671,274      $ 131,804,719
                        ======           =============         ============     ===============
</TABLE>

*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.

(1) The Partnership no longer has an interest in this Local Limited Partnership.



<PAGE>


Two Local  Limited  Partnerships  invested in by the  Partnership,  Quartermill
Associates  L.P. and Blue Mountain  Associates,  L.P., represent more than 10%
of the total capital contributions made to Local Limited Partnerships by the
Partnership.

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, Pleasant Plaza, located in Malden, Massachusetts, and
South Holyoke, located in Holyoke, Massachusetts, receive a subsidy under the
State Housing Assistance Rental Program ("SHARP"), which is an important part of
their annual income. As originally conceived, the SHARP subsidy was scheduled to
decline over time to match increases in net operating income. However, increases
in net operating income failed to keep pace with the decline in the SHARP
subsidy. Many of the SHARP properties (including Pleasant Plaza and South
Holyoke) structured workouts that included additional subsidies in the form of
Operating Deficit Loans ("ODL's"). Effective October 1, 1997, the Massachusetts
Housing Finance Agency ("MHFA"), which provided the SHARP subsidies, withdrew
funding of the ODL's from its portfolio of seventy-seven subsidized properties.
Properties unable to make full debt service payments were declared in default by
MHFA. The Managing General Partner has joined a group of SHARP property owners
called the Responsible SHARP Owners, Inc. ("RSO") and is negotiating with MHFA
and the Local General Partners of Pleasant Plaza and South Holyoke to find a
solution to the problems that will result from the withdrawn subsidies. On
September 16, 1998, the Partnership joined with the RSO and about twenty other
SHARP property owners and filed suit against the MHFA (Mass. Sup. Court Civil
Action #98-4720). Among other things, the suit seeks to enforce the MHFA's
previous financial commitments to the SHARP properties. The lawsuit is complex,
so no predications can be made at this time as to the ultimate outcome. In the
meantime, the Managing General Partner intends to continue to participate in the
RSO's efforts to negotiate a resolution of this matter with MHFA. Due to the
existing operating deficits and the dependence on these subsidies, Pleasant
Plaza and South Holyoke have been declared in default on their mortgage
obligations.

Pleasant Plaza was included in a "Dilution Pool" composed of approximately
twenty of the seventy-seven SHARP properties. MHFA made an offering to Wall
Street that consisted primarily of an effort to sell the tax losses generated by
the 20 partnerships, assuming restructured mortgages. As a result, a new limited
partner was admitted to the Local Limited Partnership that owns Pleasant Plaza,
and the Partnership's interest in the Local Limited Partnership was diluted to
4%. The Partnership had the right to put the Partnership's remaining interest in
the Local Limited Partnership to the Local General Partner one-year from the
effective date of admitting the new investor limited partner. Effective October
8, 2001 the Partnership transferred its remaining interest in the Property.
Therefore, the Partnership no longer has an interest in Pleasant Plaza.

Except as noted above, the Partnership is not a party to any pending legal or
administrative 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.


<PAGE>


                                     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, 2004, there were 5,479 record holders of Units of the
Partnership.

Cash distributions, when made, are paid annually. No cash distribution was paid
in the years ended March 31, 2004 and 2003.

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

Executive Level Overview

Boston Financial Qualified Housing Tax Credits L.P. III 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, 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.

The Partnership's investment portfolio consists of limited partnership interests
in thirty-six 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 has generated Tax Credits, net of recapture, of
approximately $1,340 per Limited Partner Unit, with an immaterial amount of Tax
Credits expected to be generated during 2004. The aggregate amount of net Tax
Credits generated by the Partnership is consistent with the objective specified
in the Partnership's prospectus.

Beginning in 2003 and continuing through 2006, the Compliance Period of the
thirty-six Properties in which the Partnership has an interest will expire. The
Managing General Partner has negotiated agreements that will ultimately allow
the Partnership to dispose of its interest in fifteen Local Limited
Partnerships. It is unlikely that the disposition of any of these Local Limited
Partnership interests will generate any material cash distributions to the
Partnership. Eleven of the Properties in which the Partnership had an investment
were sold during the year ended March 31, 2004.

The Managing General Partner will continue to pursue the disposition of the
Partnership's remaining Local Limited Partnership interests. It is unlikely that
the Managing General Partner's efforts will result in the Partnership disposing
of all of its remaining Local Limited Partnership interests concurrently with
the expiration of each Property's Compliance Period. 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.

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 is 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.

Other Development

During the year ended March 31, 2004, Lend Lease Real Estate Investments, Inc.
sold its interest in, and association with, the General Partner and its
affiliated business unit, Housing and Community Investing ("HCI"), to Municipal
Mortgage and Equity, LLC ("Muni Mae"). Muni Mae is in the business of
originating, servicing and investing in multi-family housing. HCI was combined
with Muni Mae's Midland subsidiary to operate under the name MMA Financial, LLC.

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:

The Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. 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 potential
impairment of its investments in Local Limited Partnerships. Real estate experts
analyze the investments to determine if impairment indicators exist. If so, the
investment is analyzed to consider the Partnership's ability to recover its
carrying value. If an other than temporary impairment in carrying value exists,
a provision to write down the asset to fair value will be recorded in the
Partnership's financial statements.

Accounting Standard Update

In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"),
"Consolidation of Variable Interest Entities", which provides new criteria for
determining whether or not consolidation accounting is required. The
Interpretation, which was modified in December 2003 by FIN46R in order to
address certain technical and implementation issues, requires the Partnership to
consider consolidation or provide additional disclosures of financial
information for Local Limited Partnerships meeting the definition of a Variable
Interest Entity ("VIE"). The Partnership is required to apply the Interpretation
to the Local Limited Partnerships meeting the definition of a VIE on December
31, 2004.

This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary". Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and preliminarily concluded that it
is not the Primary Beneficiary of any of the Local Limited Partnerships that
meet the definition of a VIE. Prior to the effective date of FIN 46, the
Partnership is required to disclose its maximum exposure to economic and
financial statement losses as a result of its involvement with the VIEs. The
Partnership's exposure to economic and financial statement losses from the VIEs
is limited to its investment in the VIEs ($4,651,071 at March 31, 2004).

Liquidity and capital resources

The Partnership had a decrease in cash and cash equivalents of $566,678 for the
year ended March 31, 2004. This decrease is attributable to cash used for
operations and the repayment of a note payable. These decreases are partially
offset by proceeds from sales and maturities of marketable securities and cash
distributions received from Local Limited Partnerships.

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, 2004, $366,997 of cash and
cash equivalents has been designated as Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,185,000 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 $734,000 (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, 2004, the Partnership has advanced approximately
$2,076,000 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 $2,146,000 of
operating funds and proceeds from sales of investments in Local Limited
Partnerships to replenish Reserves.

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, 2004, 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, 2004. It is not expected that cash available for distribution, if any, will
be significant during the 2004 calendar year. Based on the results of 2003
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, 2004
resulted in a net loss of $2,553,356 as compared to a net loss of $3,251,213 for
the same period in 2003. The decrease in net loss is primarily due to decreases
in general and administrative expense and provision for valuation of investments
in Local Limited Partnerships. These decreases are partially offset by a
decrease in other income. The decrease in general and administrative expenses is
due to decreased charges from an affiliate of the General Partner for
administrative expenses necessary for the operation of the Partnership. The
decrease in provision for valuation of investments in Local Limited Partnerships
is a result of the Partnership recognizing non-temporary declines in the
carrying value of its investments in certain Local Limited Partnership in the
year ended March 31, 2003.

Low-income housing tax credits

The 2003 and 2002 Tax Credits per Unit for individuals were $0.19 and $0.18,
respectively. The Tax Credits per Limited Partner stabilized in 1991. The
credits have decreased significantly as several Properties have reached the end
of the ten year credit period. However, because the Compliance Periods generally
extend significantly beyond the Tax Credit periods, the Partnership intends to
hold its Local Limited Partnership investments for the foreseeable future.

Property discussions

A majority of the Properties in which the Partnership has an interest have
stabilized operations and operate above break-even. A few Properties generate
cash flow deficits that the Local General Partners of those Properties fund
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 prior to the expiration of the Compliance Period. 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.

As previously reported, the Managing General Partner negotiated an agreement
with an unaffiliated entity to have the ability to transfer the Partnership's
interest to the unaffiliated entity or its designee with respect to the
following Properties: Briarwood II, located in Lake Havasua, Arizona, Eaglewood,
located in Covington, Tennessee, Fulton, located in Fulton, Kentucky, Lexington
Civic, located in Lexington, Tennessee, Kirkendall Heights, located in
Ellsworth, Kansas and Poplar Village, located in Cumberland, Kentucky. Although
these Properties do not share a common Local General Partner, they are all Rural
Housing Section 515 ("FMHA") properties. The Managing General Partner has the
right to put its interest in any of the Properties at any time in exchange for a
Contingent Note that grants the Partnership 50% of all future net cash receipts
from such Local Limited Partnership interest. Effective January 2, 2004, the
Managing General Partner exercised the Briarwood II put option. The Partnership
no longer has an interest in this property. This sale resulted in taxable income
projected to be approximately $316,000, or $3 per Unit.

As previously reported, the Managing General Partner negotiated an agreement
with the Local General Partner to have the ability to transfer the Partnership's
interest to the Local General Partner with respect to the following Properties:
Ashton Heights, located in Bolivar, Missouri, Bentley Hill, located in Syracuse,
Kansas, Brownsville, located in Brownsville, Tennessee, Cedar Tree, located in
Billings, Missouri, Garden Plain, located in Garden Plain, Kansas, Horseshoe
Bend, located in Horseshoe Bend, Arizona, Longview, located in Humboldt, Kansas,
Pearl Place, located in Rossville, Kansas, Ponca Manor, located in Satanta,
Kansas, Smithville, located in Smithville, Missouri and Sunnyhill Villa, located
in Wayne, Nebraska. These Properties share a common Local General Partner and
they are all Rural Housing Section 515 ("FMHA") properties. The Managing General
Partner has the right to put its interest in any of the Properties for $5,000
subsequent to the expiration of each Property's Compliance Period. The
Compliance Period expires on or before December 31, 2004 for all eleven of these
Properties. Effective January 2, 2004, the Managing General Partner exercised
the put options on Bentley Hill, Brownsville, Cedar Tree, Garden Plain,
Horseshoe Bend, Longview, Smithville and Sunnyhill Villa. The Partnership
received a total of $40,000 for its interests in these eight Local Limited
Partnerships. The Partnership no longer has an interest in these eight
properties. These sales resulted in taxable income projected to be approximately
$1,430,000, or $14 per Unit.

As previously reported, the Managing General Partner reached an agreement to
transfer the Partnership's interest in Aurora East Apartments, located in
Denver, Colorado, to the Local General Partner of the Property. On January 2,
2003, the Managing General Partner transferred its interest in the Property to
the Local General Partner for $150,000. The Managing General Partner, in
accordance with and as permitted by the Partnership Agreement, retained the
entire amount of net proceeds in Reserves. The sale resulted in taxable income
of approximately $880,000, or $9 per Unit.

As previously reported, during the third quarter of 2002, the Massachusetts
Housing Finance Agency ("MHFA") issued a report that gave Granite V, located in
Boston, Massachusetts, a below average physical condition rating. Site
management addressed the issues listed in the report, and MHFA subsequently
rated the Property in satisfactory condition. Unfortunately, current replacement
reserve levels are inadequate to meet future needs. During the first quarter of
2003, the Managing General Partner approved a transfer of the Local General
Partner interest to a new Local General Partner. Since the Property's mortgage,
which accrues interest at a rate of 12.2%, may be prepaid without a premium
beginning in 2002, the new Local General Partner refinanced the Property's first
mortgage in December 2003 by obtaining an eighteen-month loan that reduced the
interest rate from 12% to 6.5%, and provided proceeds to pay outstanding
obligations. To pay down current obligations, the Local General Partner also
liquidated the replacement reserves account held by the previous lender. The
Compliance Period for the Property ended in 2003, and the Managing General
Partner has begun to identify possible disposition options for the Partnership's
interest in the Property.

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 have commenced
discussions regarding the options available to improve operations at or dispose
of the Properties.

As previously reported, several years ago Willow Lake, located in Kansas City,
Missouri, entered into a loan workout agreement that allowed the Property to
defer the payment of some of the interest on the loan. The loan workout
agreement expired on May 31, 2001, and the Property was unable to make the
payment required under the loan workout agreement of approximately $227,000.
After a long negotiating period, a mutually acceptable workout plan was agreed
upon, whereby the Property used its Operating Deficit Escrow of approximately
$75,000 plus approximately $78,000 from its Replacement Reserve Account to pay
down the loan. In addition, the Property was required to make monthly payments
on the loan until the outstanding balance was fully repaid in September 2003.
The Managing General Partner advanced Partnership Reserves to the Property in
order to make the required payments. Occupancy at the Property has remained
depressed during recent months due to a slow economy, the property's inferior
appearance compared to new affordable housing developments in the area and an
excess of supply over demand for rental units. Rental rates are declining as a
result. A new management agent took over in March 2003.

As previously reported, during 1994, the Local General Partner at Admiral Court,
located in Philadelphia, Pennsylvania, transferred its interest in the Local
Limited Partnership. The IRS subsequently conducted a compliance audit at the
Property and took the position that the Property is subject to recapture due to
non-compliance issues. The Managing General Partner disagrees with the IRS and
is working to resolve the matter. In the opinion of the Managing General
Partner, there is a risk that the Local Limited Partnership and, consequently,
the Partnership could suffer significant Tax Credit recapture or Tax Credit
disallowance. However, it is not possible to quantify the potential amount at
this time. The Property's Tax Credit stream ended in 1999. Further, the Property
suffers from poor location and security issues. Vandalism caused an increase in
maintenance and repair expenses and negatively affected the Property's occupancy
levels and tenant profile. In 2003, the Managing General Partner and the Local
General Partner began to pursue disposition options of the Partnership's
interest in the Property. In the fall of 2003, a put option agreement was
entered into that allowed the Partnership to transfer its interest in the Local
Partnership to the Local General Partner after the expiration of the Compliance
Period on December 31, 2003.

As previously reported, increased competition for Georgetown II, located in
Georgetown, Delaware, has negatively impacted the Property's operations.
Although the Property has maintained a high level of occupancy, rental rates
have stagnated while expenses have continued to increase. In an effort to reduce
fixed expenses to improve cash flow, the Local General Partner refinanced the
Property's first mortgage during the first quarter 2004, reducing the interest
rate from 8% to 6%, which should significantly improve the Property's future
operating performance. The Property no longer generates Tax Credits and the
Compliance Period expires on December 31, 2004. 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
concurrently executed a Put Agreement for the Partnership's interest in the
Property to the Local General Partner. The Put Agreement gives the Partnership
the right to transfer its interest to the Local General Partner. It is unlikely
the Partnership will transfer its interest until the end of the Compliance
Period.

As previously reported, operations at Westwood Manor, located in Flint,
Michigan, have suffered in recent quarters. Poor site management caused
occupancy, 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 his 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 Property. The Local General
Partner received approval for a refinancing of the Property from 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 Property anytime after December 31, 2003 when the Compliance
Period expires. Part of the agreement also includes repayment of the
Partnership's $50,000 loan.

As previously reported, during 1995, the 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. The Managing General Partner will
continue in its attempts to dispose of the Partnership's interest in the
Property.

As previously reported, South Holyoke, located in Holyoke, Massachusetts,
received a subsidy under the State Housing Assistance Rental Program ("SHARP"),
which was an important part of its annual income. As of March 1, 2003, MHFA
cancelled SHARP payments for the rest of the State's fiscal year (June 30,
2003). The State did not reinstate payments for FY 2004 (July 1, 2003 to June
30, 2004). Properties unable to make full debt service payments were declared in
default by MHFA. Due to the existing operating deficits and the dependence on
these subsidies, South Holyoke has been declared in default on its mortgage
obligations. The Local General Partner of South Holyoke negotiated an agreement
with MHFA to restructure the SHARP debt as well as the mortgage on the Property.
As part of the restructuring, the Partnership contributed additional capital of
$100,000 to the Property in exchange for the right to put its interest to the
Local General Partner at the end of the Property's Compliance Period, January 1,
2004. Effective January 4, 2004, the Managing General Partner exercised the put
option. The Partnership no longer has an interest in this property. This sale
resulted in taxable income projected to be approximately $5,329,000, or $53 per
Unit.


As previously reported, operations at Breckenridge, located in Duluth, Georgia,
which historically operated at a deficit, slightly improved during 2002 as a
result of ongoing capital improvements made to the Property. However, the
Property continued to experience occupancy fluctuations. Based upon the
Property's persistent operating challenges, the Managing General Partner
expressed concerns regarding the long-term viability of the Property and
believed it was in the best interest of the Partnership to dispose of its
interest. Effective December 31, 2000, the Managing General Partner, on behalf
of the Partnership, entered into an agreement to transfer the Partnership's
interest in the Local Limited Partnership to an unaffiliated entity. The
agreement includes provisions to minimize the risk of recapture. As of December
31, 2002, the Partnership had transferred 99% its interest in the Property, and
on January 3, 2003 the Partnership transferred its remaining 1% interest in the
Property. The Partnership no longer has an interest in this Property.

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, in which the Partnership had an
interest but had enjoyed stable operations for the last several quarters. 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 and the Local General Partner also entered into a
call and put option whereby the Local General Partner received a call option at
the end of the Compliance Period for a nominal amount. If the call is not
exercised within a 6-month period, the Partnership has the option to put its
interest to the Local General Partner. The expiration of the Compliance Period
will be no later than December 31, 2004 for any of the four Properties.

As previously reported, the Compliance Period for The Colony, located in
Columbia, South Carolina ended on December 31, 2003. In anticipation of that,
the Managing General Partner and the Local General Partner executed a put option
agreement that would allow the Partnership to transfer its interest in the Local
Partnership to the Local General Partner for $1. The Managing General Partner
determined that there was no likelihood of any realizable cash distributable to
the Partnership from a sale of the property. As a result, on January 2, 2004,
the put option was exercised and the Partnership transferred its entire interest
in the Local Partnership to the Local General Partner for $1. The Partnership no
longer has an interest in this property. This sale resulted in taxable income
projected to be approximately $1,403,000, or $14 per Unit.

Inflation and other economic factors

Inflation had no material impact on the Partnership's operations or financial
condition for the years ended March 31, 2004 and 2003.

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.

                                    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
Financial, LLC. 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

Jenny Netzer             Executive Vice President, Tax Credit Equity Group
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.

Jenny Netzer, age 48, Executive Vice President, Tax Credit Equity Group - Ms.
Netzer is responsible for tax credit investment programs to institutional
clients. She joined MMA Financial, LLC as a result of the Boston Financial and
subsequent Lend Lease HCI acquisitions, starting with Boston Financial in 1987
and leading Boston Financial's new business initiatives and managing the firm's
Asset Management division. Prior to joining Boston Financial, Ms. Netzer served
as Deputy Budget Director for the Commonwealth of Massachusetts where she was
responsible for the Commonwealth's health care and public pension program's
budgets. Ms. Netzer also served as Assistant Controller at Yale University, was
a former member of Watertown Zoning Board of Appeals, the Officer of Affordable
Housing Tax Credit Coalition and a frequent speaker on affordable housing and
tax credit industry issues. Ms. Netzer is a graduate of Harvard University (BA)
and Harvard's Kennedy School of Government (MPP).

Michael H. Gladstone, age 47, Principal, Member - Mr. Gladstone is responsible
for capital transactions work in the Asset Management group of MMA Financial,
LLC. He joined MMA Financial, LLC 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 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).

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, 2004, 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:
<TABLE>
<CAPTION>
                                                           Amount
Title of              Name and Address of               Beneficially                 Percent
 Class                 Beneficial Owner                    Owned                    of Class

<S>                                                     <C>                            <C>
Limited               AMP, Incorporated                 10,000 Units                   10%
Partner               P.O. Box 3608
                      Harrisburg, PA
</TABLE>

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, 2004. 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 Financial, LLC 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
was 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.

Information regarding the fees paid and expense reimbursements made in the two
years ended March 31, 2004 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, 2004.

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, 2004.

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, 2004 are as follows:
<TABLE>
<CAPTION>

                                                                 2004             2003
                                                            --------------   --------------

<S>                                                         <C>              <C>
     Asset management fees                                  $   383,316      $   372,895



</TABLE>

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, 2004 are as follows:
<TABLE>
<CAPTION>

                                                                2004             2003
                                                            -----------      -----------

<S>                                                         <C>              <C>
     Salaries and benefits expense reimbursements           $   449,153      $   558,090

Cash distributions paid to the General Partners
</TABLE>

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, 2004.

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 Financial, LLC and its affiliates for the two
years ended March 31, 2004 is presented in Note 5 to the Financial Statements.

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 Jenny Netzer pursuant to section 302 of the
         Sarbanes-Oxley Act of 2002 32.1 Certification of Jenny Netzer pursuant
         to section 906 of the Sarbanes-Oxley Act of 2002

(c) Reports on Form 8-K

      No Reports on Form 8-K were filed during the year ended March 31, 2004.


<PAGE>


                             CONTROLS AND PROCEDURES



Controls and Procedures

Based on the Partnership's evaluation within 120 days prior to filing this Form
10-KSB, the Partnership's director has concluded that the Partnership's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports that the Partnership files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.

There have been no significant changes in the Partnership's internal controls or
in other factors that could significantly affect those controls subsequent to
the date of their evaluation.


<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/Jenny Netzer                          Date:    June 30 , 2004
           --------------------------------------            --------------
           Jenny Netzer
           Executive Vice President
           MMA Financial, LLC



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/Jenny Netzer                           Date:    June 30, 2004
           --------------------------------------             -------------
           Jenny Netzer
           Executive Vice President
           MMA Financial, LLC


     By:   /s/Michael H. Gladstone                   Date:   June 30, 2004
           -----------------------------                     -------------
           Michael H. Gladstone
           Principal
           MMA Financial, LLC








<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, 2004

                                      Index

<TABLE>
<CAPTION>

                                                                             Page No.

Report of Independent Registered Public Accounting Firm
<S>                                                                               <C>
    For the years ended March 31, 2004 and 2003                                   F-2

Financial Statements

     Balance Sheet - March 31, 2004                                               F-3

     Statements of Operations - For the years ended
       March 31, 2004 and 2003                                                    F-4

     Statements of Changes in Partners' Equity
       (Deficiency) - For the years ended March 31, 2004 and 2003                 F-5

     Statements of Cash Flows - For the years ended
       March 31, 2004 and 2003                                                    F-6

     Notes to the Financial Statements                                            F-7

</TABLE>


<PAGE>








Report of Independent Accountants



To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. III


In our opinion, based upon our audits and the reports 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 L.P. III (the "Partnership") at March 31, 2004, and the results of
its operations and its cash flows for each of the two years in the period ended
March 31, 2004 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
investment in 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 the Local Limited Partnerships, investments in
which the Partnership's investment in Local Limited Partnerships is stated at
$4,651,071 at March 31, 2004, and the Partnership's equity in earnings (losses)
of Local Limited Partnerships is stated at $(1,464,878) and $(1,365,063) for the
years ended March 31, 2004 and 2003, respectively. The financial statements of
these Local Limited Partnerships were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to amounts included for Local Limited Partnerships, is based solely
upon the reports of other auditors. We conducted our audits of the Partnership's
financial 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 reports of other auditors provide a
reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
June 24, 2004





<PAGE>


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



                                 BALANCE SHEET
                                 March 31, 2004

<TABLE>
<CAPTION>


Assets

<S>                                                                                              <C>
Cash and cash equivalents                                                                        $     366,997
Investments in Local Limited Partnerships (Note 4)                                                   4,651,071
Accounts receivable (Note 4)                                                                            40,000
Other assets                                                                                               127
                                                                                                 -------------
     Total Assets                                                                                $   5,058,195
                                                                                                 =============

Liabilities and Partners' Equity

Due to affiliate (Note 5)                                                                        $   4,094,245
Accrued expenses                                                                                       407,596
Note payable, affiliate (Note 5)                                                                       101,564
                                                                                                 -------------
     Total Liabilities                                                                               4,603,405

General, Initial and Investor Limited Partners' Equity                                                 454,790
                                                                                                 -------------
     Total Liabilities and Partners' Equity                                                      $   5,058,195
                                                                                                 =============

 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, 2004 and 2003

<TABLE>
<CAPTION>


                                                                                     2004             2003
                                                                                -------------    -------------
Revenue:
<S>                                                                             <C>              <C>
   Investment                                                                   $      10,613    $      33,859
   Other                                                                              109,416          274,376
                                                                                -------------    -------------
     Total Revenue                                                                    120,029          308,235
                                                                                -------------    -------------

Expenses:
   Asset management fees, affiliate  (Note 5)                                         383,316          372,895
   Provision for valuation of advances to Local Limited Partnerships,
     net of recovery (Note 4)                                                         161,748           88,649
   Provision for valuation of impaired note receivable (Note 4)                             -           74,037
   Provision for valuation of investments in Local Limited Partnerships (Note 4)            -          972,711
   General and administrative (includes reimbursements
     to affiliates of $449,153 and $558,090 in 2004 and
     2003, respectively) (Note 5)                                                     651,923          773,103
   Amortization                                                                        45,520           56,990
   Interest                                                                             6,000            6,000
                                                                                -------------    -------------
     Total Expenses                                                                 1,248,507        2,344,385
                                                                                -------------    -------------

Loss before equity in losses of Local Limited Partnerships and
   gain on sale of investments in Local Limited Partnerships                       (1,128,478)      (2,036,150)

Equity in losses of Local Limited Partnerships (Note 4)                            (1,464,878)      (1,365,063)

Gain on sale of investments in Local Limited Partnerships (Note 4)                     40,000          150,000
                                                                                -------------    -------------

Net Loss                                                                        $  (2,553,356)   $  (3,251,213)
                                                                                =============    =============
Net Loss Allocated:
   General Partners                                                             $     (25,534)   $     (32,512)
   Limited Partners                                                                (2,527,822)      (3,218,701)
                                                                                -------------    -------------
                                                                                $  (2,553,356)   $  (3,251,213)
                                                                                =============    =============
Net Loss per Limited Partner Unit
    (100,000 Units)                                                             $      (25.28)   $      (32.19)
                                                                                =============    =============
 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 CHANGES IN PARTNERS' EQUITY (Deficiency)
                   For the Years Ended March 31, 2004 and 2003

<TABLE>
<CAPTION>


                                                           Initial     Investor          Net
                                             General       Limited      Limited      Unrealized
                                            Partners      Partners     Partners         Gains          Total
                                          -----------     --------   -------------   -----------  -------------

<S>                                       <C>             <C>        <C>             <C>          <C>
Balance at March 31, 2002                 $  (813,251)    $  5,000   $   7,067,610   $     5,707  $   6,265,066
                                          -----------     --------   -------------   -----------  -------------

Comprehensive Loss:
   Change in net unrealized gains
     on marketable securities
     available for sale                             -            -               -        (3,156)        (3,156)
   Net Loss                                   (32,512)           -      (3,218,701)            -     (3,251,213)
                                          -----------     --------   -------------   -----------  -------------
Comprehensive Loss                            (32,512)           -      (3,218,701)       (3,156)    (3,254,369)
                                          -----------     --------   -------------   -----------  -------------

Balance at March 31, 2003                    (845,763)       5,000       3,848,909         2,551      3,010,697
                                          -----------     --------   -------------   -----------  -------------

Comprehensive Loss:
   Change in net unrealized gains
     on marketable securities
     available for sale                             -            -               -        (2,551)        (2,551)
   Net Loss                                   (25,534)           -      (2,527,822)            -     (2,553,356)
                                          -----------     --------   -------------   -----------  -------------
Comprehensive Loss                            (25,534)           -      (2,527,822)            -     (2,555,907)
                                          -----------     --------   -------------   -----------  -------------

Balance at March 31, 2004                 $  (871,297)    $  5,000   $   1,321,087   $         -  $     454,790
                                          ===========     ========   =============   ===========  =============
</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, 2004 and 2003

<TABLE>
<CAPTION>


                                                                                 2004            2003
                                                                           -------------     -------------
Cash flows from operating activities:
<S>                                                                        <C>               <C>
   Net Loss                                                                $  (2,553,356)    $  (3,251,213)
   Adjustments to reconcile net loss to net
     cash used for operating activities:
     Equity in losses of Local Limited Partnerships                            1,464,878         1,365,063
     Gain on sale of investments in Local Limited Partnerships                   (40,000)         (150,000)
     Provision for valuation of advances to Local Limited Partnerships,
       net of recovery                                                           161,748            88,649
     Provision for valuation of impaired note receivable                               -            74,037
     Provision for valuation of investments in Local Limited Partnerships              -           972,711
     Amortization                                                                 45,520            56,990
     Net loss on sales and maturities of marketable securities                     2,856             2,505
     Cash distributions included in net loss                                    (109,416)         (194,912)
Other non-cash item                                                                    -           (74,037)
Increase (decrease) in cash arising from changes in operating
       assets and liabilities:
       Other assets                                                                4,139             2,683
Due to affiliate                                                                (367,530)          580,985
       Accrued expenses                                                            1,511            19,433
                                                                           -------------     -------------
Net cash used for operating activities                                        (1,389,650)         (507,106)
                                                                           -------------     -------------

Cash flows from investing activities:
   Purchases of marketable securities                                                  -          (871,162)
   Proceeds from sales and maturities of marketable securities                   200,000         1,171,000
   Investments in Local Limited Partnerships                                           -          (100,000)
   Advances to Local Limited Partnerships                                       (163,018)          (88,649)
   Reimbursement of advances to Local Limited Partnerships                         1,270                 -
   Cash distributions received from Local
     Limited Partnerships                                                      1,198,124           374,656
   Proceeds received from sale of investments in Local
     Limited Partnerships                                                              -           150,000
                                                                           -------------     -------------
Net cash provided by investing activities                                      1,236,376           635,845
                                                                           -------------     -------------

Cash flows from financing activities:
   Repayment of note payable, affiliate                                         (413,404)                -
                                                                           -------------     -------------
Net cash used for financing activates                                           (413,404)                -
                                                                           -------------     -------------

Net increase (decrease) in cash and cash equivalents                            (566,678)          128,739

Cash and cash equivalents, beginning                                             933,675           804,936
                                                                           -------------     -------------

Cash and cash equivalents, ending                                          $    366,997       $    933,675
                                                                           ============      =============

Supplemental disclosure of cash flow information:
   Cash paid for interest                                                  $     6,000      $       6,000
                                                                           ============      =============
</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, LLC ("MMA"). The fiscal year of the
Partnership ends on March 31.

During the year ended March 31, 2004, Lend Lease Real Estate Investments, Inc.
sold its interest in, and association with, the General Partner and its
affiliated business unit, Housing and Community Investing ("HCI"), to Municipal
Mortgage and Equity, LLC ("Muni Mae"). Muni Mae is in the business of
originating, servicing and investing in multi-family housing. HCI was combined
with Muni Mae's Midland subsidiary to operate under the name MMA Financial, LLC.

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, adjusted for certain discounts. The Partnership
raised $99,610,000 ("Gross Proceeds"), 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,
2004, $366,997 of cash and cash equivalents has been designated 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 Partner has an obligation to fund deficits in its capital account,
subject to limits set forth in 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. At times, cash and cash equivalents exceed
federally insurable limits. The Partnership mitigates this risk by investing in
major financial institutions.

Marketable Securities

The Partnership's marketable securities are classified as "Available for Sale"
securities and reported at fair value as reported by the brokerage firm at which
the securities are held. All marketable 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 Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting because the Partnership does not have control
over the major operating and financial policies of the Local Limited
Partnerships in which it invests. 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 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, 2003 and 2002.

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 potential
impairment of its investments in Local Limited Partnerships. Real estate experts
analyze the investments to determine if impairment indicators exist. If so, the
investment is analyzed to consider the Partnership's ability to recover its
carrying value. If an other than temporary impairment in carrying value exists,
a provision to write down the asset to fair value 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 sheets.

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.

3.   Marketable Securities

Proceeds from the sales of marketable securities were $871,000 during the year
ended March 31, 2003. Proceeds from the maturities of marketable securities were
$200,000 and $300,000 during the years ended March 31, 2004 and 2003,
respectively. Included in investment income are gross gains of $808 and $277
that were realized on the sales and maturities during the years ended March 31,
2004 and 2003, respectively, and gross losses of $3,664 and $2,782 that were
realized on the sales and maturities during the years ended March 31, 2004 and
2003, respectively.


<PAGE>

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

                  Notes to the Financial Statements (continued)


4.       Investments in Local Limited Partnerships

The Partnership has limited partnership interests in thirty-six 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%,
except for Granite V where the Partnership's ownership interest is 97%. The
Partnership may have negotiated or may negotiate options with the local general
partners to purchase or sell the Partnership's interests in the Properties at
the end of the tax credit compliance period at nominal prices. In the event that
Properties are sold to third parties, 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, 2004:

<TABLE>
<CAPTION>
Capital contributions and advances paid to Local Limited Partnerships
<S>                                                                                              <C>
   and purchase price paid to withdrawing partners of Local Limited Partnerships                 $  54,813,088

Cumulative equity in losses of Local Limited Partnerships
   (excluding cumulative unrecognized losses of $53,978,368)                                       (43,982,120)

Cumulative cash distributions received from Local Limited Partnerships                              (4,656,771)
                                                                                                 -------------     --

Investments in Local Limited Partnerships before adjustments                                         6,174,197

Excess investment costs over the underlying assets acquired:

   Acquisition fees and expenses                                                                     4,813,762

   Cumulative amortization of acquisition fees and expenses                                         (1,587,364)
                                                                                                 -------------

Investments in Local Limited Partnerships before impairment allowance                                9,400,595

Impairment allowance on  investments in Local Limited Partnerships                                  (4,749,524)
                                                                                                 -------------     --

Investments in Local Limited Partnerships                                                        $   4,651,071
                                                                                                 =============
</TABLE>

For the year ended March 31, 2004, the Partnership advanced $163,018 to one of
the Local Limited Partnerships, all of which was impaired. In addition, $1,270
was reimbursed from one Local Limited Partnership relating to advances made in
previous years. The Partnership has recorded an impairment 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)


4.       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, 2003 and 2002 (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>
                                                                                  2003                2002
                                                                           ---------------     ---------------
Assets:
<S>                                                                        <C>                 <C>
   Investment property, net                                                $    86,714,637     $   108,620,735
   Other assets                                                                 12,139,087          14,062,354
                                                                           ---------------     ---------------
       Total Assets                                                        $    98,853,724     $   122,683,089
                                                                           ===============     ===============

Liabilities and Partners' Deficiency:
   Mortgage notes payable                                                  $   135,033,966     $   153,861,736
   Other liabilities                                                            21,088,894          21,360,949
                                                                           ---------------     ---------------
       Total Liabilities                                                       156,122,860         175,222,685
                                                                           ---------------     ---------------

Partnership's deficiency                                                       (56,916,075)        (52,198,427)
Other partners' deficiency                                                        (353,061)           (341,169)
                                                                           ---------------     ---------------
       Total Partners' Deficiency                                              (57,269,136)        (52,539,596)
                                                                           ---------------     ---------------
       Total Liabilities and Partners' Deficiency                         $     98,853,724    $     122,683,089
                                                                          ================    =================

Summarized Income Statements - for
the year ended December 31,
                                                                                  2003                2002
                                                                           ---------------     ---------------

Rental and other revenue                                                   $    24,693,421     $    28,830,572
                                                                           ---------------     ---------------

Expenses:
   Operating                                                                    16,710,801          18,745,804
   Interest                                                                      9,351,009          11,369,026
   Depreciation and amortization                                                 5,848,969           6,525,213
                                                                           ---------------     ---------------
     Total Expenses                                                             31,910,779          36,640,043
                                                                           ---------------     ---------------

Net Loss                                                                   $    (7,217,358)    $    (7,809,471)
                                                                           ===============     ===============

Partnership's share of Net Loss (include adjustments from prior years)     $    (6,865,190)    $    (7,249,115)
                                                                           ===============     ===============
Other partners' share of Net Loss                                          $      (354,688)    $      (465,633)
                                                                           ===============     ===============
</TABLE>

<PAGE>



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



                  Notes to the Financial Statements (continued)


4. Investments in Local Limited Partnerships (continued)

For the years ended March 31, 2004 and 2003, the Partnership has not recognized
$5,409,349 and $5,944,039, 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 $9,037 and $59,987 were included in losses
recognized in the years ended March 31, 2004 and 2003, respectively.

The Partnership's deficiency as reflected by the Local Limited Partnerships of
($56,916,075) differs from the Partnership's investments in Local Limited
Partnerships before adjustments of $6,174,197 primarily because of cumulative
unrecognized losses as described above, advances and notes receivable to Local
Limited Partnerships which the Partnership included in investments in Local
Limited Partnerships and eleven Local Limited Partnerships whose investments
were sold in the quarter ended March 31, 2004 are included in the summarized
balance sheets of the Local Limited Partnerships at December 31, 2003.

The Partnership's interests in eleven of its investments in Local Limited
Partnerships were sold during the year ended March 31, 2004, resulting in a gain
of $40,000. Proceeds relating to these transactions in the amounts of $40,000
remain outstanding at March 31, 2004.

5.   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 $383,316
and $372,895 for the years ended March 31, 2004 and 2003, respectively. As of
March 31, 2004, $2,859,360 is payable for Asset Management Fees. During the
years ended March 31, 2004 and 2003, $800,000 and $200,000, 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, 2004 and 2003 is $449,153
and $558,090, respectively, that the Partnership has incurred for these
expenses. As of March 31, 2004, $1,234,885 is payable to an affiliate of the
Managing General Partner for salaries and benefits.

An affiliate of the Managing General Partner advanced the Partnership amounts to
cover operating deficits and, in return, a non-interest bearing note was
executed. As of March 31, 2004, $101,564 is due to an affiliate of the Managing
General Partner for this note.

This affiliate of the Managing General Partner has made a commitment to defer
collection of past or future Asset Management Fees, reimbursement of operating
expenses and to defer collection of the $101,564 note described above, to the
extent necessary to cover operating deficits of the Partnership.


<PAGE>

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

                  Notes to the Financial Statements (continued)


6.   Federal Income Taxes

The following schedule reconciles the reported financial statement net loss for
the fiscal years ended March 31, 2004 and 2003 to the net loss reported on the
Form 1065, U.S. Partnership Return of Income for the years ended December 31,
2003 and 2002:
<TABLE>
<CAPTION>

                                                                                     2004              2003
                                                                                --------------   --------------

<S>                                                                             <C>             <C>
Net Loss per financial statements                                               $(2,553,356)    $ (3,251,213)


Equity in losses of Local Limited Partnerships for financial
   reporting (tax) purposes in excess of equity in losses
   for tax (financial reporting) purposes                                              182,363         (769,545)

Equity in losses of Local Limited Partnerships not recognized
   for financial reporting purposes                                                 (5,400,312)      (5,884,052)

Adjustment to reflect March 31 fiscal year end to December 31
   taxable year end                                                                   (104,387)         257,987

Amortization not deductible for tax purposes                                            45,520           56,990

Provision for valuation of advances to Local Limited Partnerships,
   net of recovery not deductible for tax purposes                                     161,748           88,649

Provision for valuation of impaired note receivable not deductible
   for tax purposes                                                                          -           74,037

Provision for valuation of investments in Local Limited Partnerships
   not deductible for tax purposes                                                           -          972,711

Gain (loss) on sale of investments in Local Limited Partnerships for tax
   purposes in excess of gain on sale for financial reporting purposes                 839,605       (1,472,515)
Cash distributions included in net loss for financial reporting purposes               (36,471)        (295,195)
                                                                                --------------   --------------

Net Loss per tax return                                                         $   (6,865,290)  $  (10,222,146)
                                                                                ==============   ==============
</TABLE>

<PAGE>


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




                  Notes to the Financial Statements (continued)


6. 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, 2004 and December 31, 2003,
respectively are as follows:

<TABLE>
<CAPTION>
                                                          Financial
                                                          Reporting              Tax
                                                          Purposes            Purposes            Differences
                                                       ------------        --------------      -----------------

<S>                                                    <C>                 <C>                 <C>
   Investments in Local Limited Partnerships           $  4,651,071        $  (40,185,140)     $   44,836,211
                                                       ============        ==============      ==============
   Other assets                                        $    407,124        $   12,839,392      $  (12,432,268)
                                                       ============        ==============      ==============
   Liabilities                                         $  4,603,405        $    4,973,687      $      370,282
                                                       ============        ==============      ==============
</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
$55,472,000 greater than for financial reporting purposes, including
approximately $53,978,000 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 an impairment allowance of approximately $4,750,000
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 $1,587,000; (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; and (v) the sale of investments in eleven Local Limited Partnerships
during the quarter ended March 31, 2004 resulted in their removal from
investments in Local Limited Partnerships for financial reporting purposes.

7.   Accounting Standard Update

In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"),
"Consolidation of Variable Interest Entities", which provides new criteria for
determining whether or not consolidation accounting is required. The
Interpretation, which was modified in December 2003 by FIN46R in order to
address certain technical and implementation issues, requires the Partnership to
consider consolidation or provide additional disclosures of financial
information for Local Limited Partnerships meeting the definition of a Variable
Interest Entity ("VIE"). The Partnership is required to apply the Interpretation
to the Local Limited Partnerships meeting the definition of a VIE on December
31, 2004.

This Interpretation would require consolidation by the Partnership of certain
Local Limited Partnerships' assets and liabilities and results of operations if
the Partnership determined that the Local Limited Partnership was a VIE and that
the Partnership was the "Primary Beneficiary". Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has assessed the potential
consolidation effects of the Interpretation and preliminarily concluded that it
is not the Primary Beneficiary of any of the Local Limited Partnerships that
meet the definition of a VIE. Prior to the effective date of FIN 46, the
Partnership is required to disclose its maximum exposure to economic and
financial statement losses as a result of its involvement with the VIEs. The
Partnership's exposure to economic and financial statement losses from the VIEs
is limited to its investment in the VIEs ($4,651,071 at March 31, 2004).


<PAGE>