<PAGE>   1


                                                            Total # of Pages: 42


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

                                   FORM 10-K

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

       For the fiscal year ended  September 30, 1996

                                       OR

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

       For the transition period from    None    to    None
                                       ---------     ---------- 
       Commission file number                 0-11502
                                       ------------------------ 

                     BOETTCHER WESTERN PROPERTIES III LTD.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        COLORADO                                                 84-0911344
------------------------------                            ----------------------
(State or other jurisdiction of                            (I.R.S.Employer      
incorporation or organization)                             Identification No.)  



 77 West Wacker Drive, Chicago, Illinois                           60601
-------------------------------------------               ----------------------
 (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code            (312) 574-6000
                                                         ---------------------- 

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)

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

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.   X   Yes        No
                                           ----        ----             
<PAGE>   2





                                     INDEX


                                   PART I                                   Page
        

Item 1.  Business                                                             3
Item 2.  Properties                                                           6
Item 3.  Legal Proceedings                                                    7
Item 4.  Submission of Matters to a Vote of Holders                     
         of Limited Partnership Interests                                     7


                                   PART II


Item 5.  Market of the Registrant's Limited Partnership Interests and
         Related Limited Partner Matters                                      8
Item 6.  Selected Financial Data                                              9
Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                           10
Item 8.  Financial Statements and Supplementary Data                         15
Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure                                            31


                                   PART III


Item 10.  Directors and Executive Officers of the Registrant                 31
Item 11.  Executive Compensation                                             33
Item 12.  Security Ownership of Certain Beneficial Owners and Management     33
Item 13.  Certain Relationship and Related Transactions                      34


                                    PART IV

Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K      35

SIGNATURES                                                                   40


                                      2


<PAGE>   3




                                     PART I

Item 1. BUSINESS

General

Boettcher Western Properties III Ltd. (the "Partnership") was organized in
March 1983 as a Colorado limited partnership.  The Partnership's primary
business is to own and operate income-producing properties.  At September 30,
1996, the Partnership owned and operated one shopping center located in
California ("Venetian Square Shopping Center"), which is being held for sale
(the "Remaining Property").  The Remaining Property is more fully described in
Item 2 of this report.

The Partnership, as of September 30, 1996, did not directly employ any persons;
it is however, a party to a Management Agreement with Boettcher Properties,
Ltd.  Under the terms of the Management Agreement, Boettcher Properties, Ltd.
is responsible for the day-to-day operations of the Partnership, and operating
and managing its investments.  All regular employees rendering service on
behalf of the Partnership are employees of Boettcher Properties, Ltd. or its
affiliates.  The Remaining Property is owned directly by the Partnership and is
managed by an independent, third-party property manager who performs daily
property management services.

The General Partners of the Partnership are Boettcher Properties, Ltd. and
Boettcher 1983 Associates, Ltd. (the "General Partners"), both Colorado limited
partnerships.  The Managing General Partner of the Partnership is Boettcher
Properties, Ltd. (the "Managing General Partner") and the Associate General
Partner is Boettcher 1983 Associates, Ltd. (the "Associate General Partner").
With limited exceptions, the General Partners of the Partnership have exclusive
control over the business of the Partnership, which powers are exercised only
by the Managing General Partner.

For the fiscal year ended September 30, 1996, gross rents and tenant
reimbursements generated by the Partnership's income-producing properties
represented 95% of total Partnership revenue.  Monthly rental income is derived
from tenant leases at the properties.  Commercial leases for Venetian Square
Shopping Center contain longer lease terms, which vary from one year up to five
years for most tenants and up to twenty-five years for major anchor tenants.
Commercial leases permit the pass through by the owner of taxes, insurance and
common area operating costs to the tenants.





                                      3
<PAGE>   4




Competition

The Partnership faces active competition in all aspects of its business.  The
Partnership competes with entities which own properties similar in type to the
one owned by the Partnership.  The ability of the Partnership to compete with
these entities depends on many factors, including the location, size, condition
of its facilities and the availability of similar facilities.  When comparable
space is available in a general location, the Partnership competes through
rental rates and lease terms, among other variables.  Now that the Remaining
Property is held for sale, the Partnership is competing with other
income-producing properties for prospective purchasers.  While no statistical
information is currently available to delineate the Partnership's competitive
position, many of its competitors are believed to have assets and revenues
greater than those of the Partnership.

Cash Reserves and Debt Maturities

The Partnership is required under its Partnership Agreement to maintain cash
reserves of not less than 3% of aggregate capital contributions for normal
repairs, replacements, working capital and other contingencies.  As of
September 30, 1996, the Partnership had cash reserves of $1,240,077, while the
required minimum amount was $660,000.  The Partnership intends to apply cash
flow generated from Partnership operations in fiscal 1997, if any, to maintain
minimum required cash reserves, including any additional reserves deemed
necessary by the Managing General Partner to cover potential remediation costs
of the petroleum contamination at Venetian Square Shopping Center discussed
below under "Other Factors" and in Note 7 to the Financial Statements contained
in Item 8 of this report.  Thereafter, the Partnership intends to pay the
Managing General Partner all unpaid cash advances made to the Partnership, all
unpaid administrative reimbursements, all unpaid property management fees and
all deferred fees earned by the Managing General Partner, which total $22,961,
$8,640, $1,228 and $569,494, respectively, as of September 30, 1996.

The Managing General Partner is attempting to sell the Partnership's remaining
real estate investment in fiscal 1997.  However, there can be no assurances
that the Partnership will sell the Remaining Property in 1997.  The Managing
General Partner believes that the sale will provide net proceeds to the
Partnership after the payment of sales costs, closing costs and mortgages
payable; however, the sale transaction may include both cash at closing and
deferred payments to the Partnership.  The ability of the Partnership to sell
Venetian Square Shopping Center may be adversely affected by the potential
remediation costs of the petroleum contamination at the property as described
below under "Other Factors". The Partnership intends to apply net sales
proceeds to establish and maintain the Partnership's minimum required cash
reserves, as necessary, including any additional reserves to cover potential
remediation costs.  Thereafter, the Partnership intends to pay amounts owed to
the Managing General Partner, and to make distributions to limited partners.
The Partnership has entered into a listing agreement with unrelated real estate
brokerage firm to act as the exclusive selling agent for the Remaining
Property.  This investment is classified as property held for sale at September
30, 1996.



                                      4
<PAGE>   5




Other Factors

Seasonal weather conditions do not have a material impact on the operations of
the Remaining Property, although the usage of water, gas, electricity and the
attendant expense may vary according to the particular season and geographic
location.

Federal, state and local laws and regulations, which have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment do not presently have a material
effect on the operations of the Remaining Property nor on the capital
expenditures, earnings or competitive position of the Partnership and no
material effect is anticipated in the future, subject to the environmental
assessment which is currently underway at Venetian Square Shopping Center and
the potential remediation costs payable by the Partnership.

Environmental site assessments have been and are currently being performed on a
parcel of land adjacent to and part of Venetian Square Shopping Center.  This
parcel of land had previously been operated as a card-lock fueling station
containing underground fuel storage tanks.  In fiscal 1992, these underground
fuel storage tanks were excavated and removed from this parcel of land, at
which time leakage of petroleum contaminants was discovered.  The Partnership
has been advised that groundwater contamination has also occurred and the
Partnership is in the process of determining the method, cost and timing of
required soil and groundwater remediation measures.  For additional discussion
of this matter, refer to Note 7 to the Financial Statements as contained in
Item 8 of this report.

Other federal, state and local laws and regulations, including requirements of
the Americans with Disabilities Act, may require that the Partnership incur
capital expenditures to ensure compliance.  At this time, it is not anticipated
that these capital expenditures will materially affect the Partnership's cash
flows.

The Tax Reform Act of 1986 resulted in reduced tax benefits for purchasers of
real estate.  To offset the loss of such benefits, purchasers may negotiate
lower prices when acquiring properties to achieve yields comparable to those
that resulted from the combination of cash flow and tax benefits available
prior to the Tax Reform Act of 1986.  In addition, the value of tax losses
allocated to individual limited partners has been significantly reduced due to
passive loss limitations and reduced tax rates.

The business of the Partnership to date has involved only one industry segment;
accordingly, all information required by Item 101(b) of Regulation S-K is
included in the Financial Statements as contained in Item 8 of this report.
The Partnership has no foreign operations.




                                      5
<PAGE>   6





Item 2. PROPERTIES

At September 30, 1996, the Partnership owned and operated one shopping center,
which is being held for sale, as more fully described below:

<TABLE>
<CAPTION>
Name and Location                              General Character of Property        
-----------------                         -------------------------------------
<S>                                       <C>
Venetian Square Shopping Center           3-building shopping center containing
4555 North Pershing Avenue                approximately 117,107 square feet of net
Stockton, California                      rentable area on approximately 9.2 acres
                                          of land.
</TABLE>

As stated above, at September 30, 1996, the Partnership has classified the
Remaining Property as property held for sale.

For information regarding the indebtedness to which the Remaining Property is
subject, see Notes 3 and 6 to the Financial Statements as contained in Item 8
of this report.

On February 29, 1996, the Partnership sold the land, related improvements and
personal property of La Risa Apartments ("La Risa") as described in more detail
in Management's Discussion and Analysis of Financial Condition and Results of
Operations as contained in Item 7 of this report and Note 2 to the Financial
Statements as contained in Item 8 of this report.




                                      6
<PAGE>   7




      Average and weighted average occupancies and weighted average effective
      rental rates generated by the Properties in fiscal 1996, 1995, and 1994
      were as follows:


<TABLE>
<CAPTION>
                                   1st    2nd    3rd    4th
                                   Qtr    Qtr    Qtr    Qtr     Fiscal   Fiscal   Fiscal
Apartments                         1996   1996   1996   1996     1996     1995     1994     
----------                         -----  -----  -----  ------  -------  ------  ---------
<S>                                 <C>    <C>    <C>    <C>     <C>      <C>     <C>
La Risa                              93%    92%    N/A    N/A     93%(3)   94%     96%
Los Compadres                        N/A    N/A    N/A    N/A     N/A      N/A     97%(3)
La Paz                               N/A    N/A    N/A    N/A     N/A      N/A     96%(3)
Maryland Villa                       N/A    N/A    N/A    N/A     N/A      N/A     96%(3)

Weighted average
 occupancy                           93%    92%    N/A    N/A     93%(3)   94%     95%(3)

Weighted average
 effective rental
 rate per unit
 per month                           $425   $424   N/A    N/A     $425(3)  $436    $500(3)

Commercial                      
----------
Venetian Square
 Shopping Center
Weighted average occupancy           91%    90%    87%    84%     88%      91%     95%
Average effective rental rate(1)     $8.12  $7.96  $7.76  $8.10   $7.99    $8.54   $8.57

SouthCenter Plaza
Weighted average occupancy           N/A    N/A    N/A    N/A     N/A      N/A     37%(4)
Average effective rental rate(2)     N/A    N/A    N/A    N/A     N/A      N/A     $12.16(4)
</TABLE>


(1)  These rates are "triple net".  In addition to this base rent, tenants pay
     their pro rata share of taxes, insurance and common area maintenance
     expenses at the property.

(2)  These rates are "full service".  In addition to this base rent, tenants
     pay only their pro rata share of taxes, insurance and common area
     maintenance expenses at the property in excess of the expenses incurred at
     the property during the tenant's initial year of occupancy.

(3)  These computations give effect to the sale of the Arizona Properties on
     June 6, 1994 and the sale of La Risa Apartments on February 29, 1996.

(4)  Averages computed through date of foreclosure.

Item 3. LEGAL PROCEEDINGS

     The Partnership is not a party to, nor is the Remaining Property the
     subject of, any material pending legal proceedings.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF HOLDERS OF LIMITED
        PARTNERSHIP INTERESTS

     There have been no matters submitted to a vote of holders of Limited
Partnership.  Interests (the "Units") during the fiscal year which is covered
by this report.



                                      7
<PAGE>   8





                                    PART II

Item 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED
        LIMITED PARTNER MATTERS

        At September 30, 1996, 22,000 Units were outstanding and held by
approximately 2,070 limited partners.

        The Units have limited transferability.  There is no public market for
the Units and it is not expected that any will develop.  There are significant
restrictions relating to the transferability of Units, including the
requirement that the Managing General Partner consent to any transfer and to
any transferee becoming a substituted limited partner, which consent may be
granted or withheld at the sole discretion of the Managing General Partner.  In
addition, restrictions on transfers may be imposed by federal and state
securities laws.

        On March 21, 1996, a distribution of $999,900 ($45.45/Unit) was made to
limited partners from the net proceeds of the sale of the La Risa Apartments.
The Managing General Partner intends to apply cash flow generated from
Partnership operations in fiscal 1997, if any, to maintain the Partnership's
minimum required cash reserves, as necessary, including any additional reserves
to cover potential remediation costs.  Thereafter, the Partnership intends to
pay amounts owed to the Managing General Partner and make a final distribution
to the limited partners.

        The Managing General Partner is attempting to sell the Partnership's
remaining real estate investment in fiscal 1997.  However, there can be no
assurances that the Partnership will sell the Remaining Property in 1997.  The
Managing General Partner believes that this sale will provide net proceeds to
the Partnership after the payment of sales costs, closing costs and mortgages
payable; however, the sale transaction may include both cash at closing and
deferred payments to the Partnership.  The ability of the Partnership to sell
Venetian Square Shopping Center ("Venetian") may be adversely affected by the
potential remediation costs of the petroleum contamination at the property.
The Partnership intends to apply net sales proceeds to pay all remaining
liabilities identified by the Managing General Partner arising out of or in
connection with the operations of the Partnership and the sale of Venetian,
including amounts owed to the Managing General Partner.  Thereafter, all
remaining cash reserves of the Partnership will be utilized to first pay the
costs of liquidation and dissolution of the Partnership, and then to make a
final distribution to limited partners.



                                      8
<PAGE>   9



Item 6.  SELECTED FINANCIAL DATA

                     BOETTCHER WESTERN PROPERTIES III LTD.
                           SELECTED FINANCIAL DATA(a)

                   As of or for the year ended September 30,



<TABLE>
<CAPTION>
                             1996        1995         1994          1993          1992    
                          ----------  -----------  -----------  ------------  ------------
<S>                       <C>         <C>          <C>          <C>           <C>       
Total revenue             $1,631,685   $2,508,536   $4,521,349   $ 5,191,770    $5,446,898

Operating loss(c)            (85,603)    (146,895)    (492,317)   (1,391,737)   (1,156,958)

Gain (loss) on sale
 or disposition of
 real estate investments   1,329,705          -0-    1,441,887       (154,921)          -0-
                          ----------  -----------  -----------  -------------  ------------

Net earnings (loss)       $1,244,102  $ (146,895)   $   949,570  $ (1,546,658) $(1,156,958)
                          ==========  ===========   ===========  ============  ===========              

Per Unit:(b)
 Earnings (loss)          $    55.98  $    (6.61)   $     42.73   $    (69.60) $    (52.06)
 Cash distribution             45.45          -0-        125.00            -0-          -0-

Total assets              $6,910,619  $11,665,669   $11,895,397   $25,694,558   $26,406,983

Mortgages payable         $3,303,685  $ 7,153,781   $ 7,339,842   $18,075,625   $18,135,094
</TABLE>


(a)  The above selected financial data should be read in conjunction with the
     Financial Statements and related Notes as contained in Item 8 of this
     report.

(b)  Per Unit data is based upon the 22,000 weighted average Units outstanding
     during each fiscal year.

(c)  The Partnership is evaluating the remediation of petroleum contaminated
     soil and groundwater on a parcel of land adjacent to and part of the
     Venetian Square Shopping Center.  The contamination resulted from a
     leaking underground storage tank which was part of a card-lock fueling
     station operated at Venetian Square Shopping Center from 1979 through
     1990.  The Partnership has spent approximately $300,000 to date in
     connection with the remediation program and since fiscal 1993 has
     maintained an accrual of approximately $250,000 as a provision for
     possible additional remediation expenses.  Amounts expended to date have
     been for the evaluation and monitoring of the contamination in order to
     determine the method, cost and timing of required soil and groundwater
     remediation measures to be implemented in the future.  Management is
     unable at this time to estimate the amount of additional remediation
     expense that may be incurred.  Due to groundwater contamination, the
     Partnership may incur significant additional remediation costs.
     Accordingly, the Financial Statements contained in Item 8 of this report
     do not include any further adjustments that reflect the results of the
     ultimate resolution of this uncertainty.  For additional information,
     refer to Note 7 to the Financial Statements contained in Item 8 of this
     report.




                                      9
<PAGE>   10





Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Results of Operations

September 30, 1996 marked the close of the Partnership's thirteenth year of
operations.  The Partnership currently owns and operates one shopping center
located in California (Venetian Square Shopping Center), which is being held
for sale as of September 30, 1996.

For the fiscal year ended September 30, 1996, the Partnership generated total
revenue of $1,631,685, and incurred total expenses of $1,717,288, resulting in
an operating loss of $85,603.  The Partnership's fiscal 1996 operating loss
decreased $61,292 (42%) when compared with fiscal 1995.  A gain on the sale of
real estate investment LaRisa Apartments, ("LaRisa") in the amount $1,329,705,
was recorded in the second quarter of fiscal 1996 as more fully discussed in
Note 2 to the Financial Statements as contained in Item 8 of this report.  Due
to the gain on sale of real estate investments, the Partnership generated net
earnings of $1,244,102.  Total revenue decreased, primarily rental and other
income, and total expenses decreased in all categories, primarily due to the
sale of LaRisa.  A summary of the Partnership's operations and period-to-period
comparisons is presented below.

When making period-to-period comparisons, the exclusion of LaRisa's operations
from the current and prior fiscal year's results allows for a more meaningful
analysis of the operations of the Partnership's remaining investment.  For
comparison purposes only, LaRisa's results of operations have been excluded in
both fiscal 1996 and 1995 in the table below.


<TABLE>
<CAPTION>
                                          September 30
                                         (In Thousands)  
                                         ---------------
                                Pro      Pro      Amount
                                Forma    Forma    of       %
                                1996     1995     Change   Change
                                ------  -------  -------  ------
<S>                            <C>      <C>       <C>     <C>
Total revenue                   $1,111   1,218    (107)    (9%)
Total expenses                   1,179   1,324      145     11%
                                ------   -----    -----        

Operating loss                  $ (68)   (106)       38
                                ======   =====    =====
</TABLE>


Based upon the pro forma amounts presented above, total revenue generated by
the Partnership, excluding LaRisa, amounted to $1,110,096, representing a
decrease of $107,929 (9%) compared with fiscal 1995.  The Partnership's
remaining property generated rental income of $823,790 in fiscal 1996, which
represents a decrease of $86,809 (10%) when compared with fiscal 1995.
Venetian Square Shopping Center achieved an average occupancy of 88% and an
average effective rental rate per square foot of $7.99, representing decreases
of 3% and $.55, respectively, when compared with fiscal 1995.  For additional
information on the average occupancies and average effective rental rates for
the Partnership's Properties, refer to the table provided in Item 2 of this
report.  Tenant reimbursement income generated by Venetian Square Shopping
Center decreased $41,459 (15%) in fiscal 1996 when compared with fiscal 1995
due to increased



                                      10
<PAGE>   11





vacancies in the current fiscal year.  Other income increased $20,339 (56%) in
fiscal 1996 when compared with fiscal 1995 primarily as a result of increased
interest earned by the Partnership due to the maintenance of larger cash
reserve balances.

Based upon the pro forma amounts provided above, total expenses, excluding
LaRisa incurred by the Partnership amounted to $1,179,189 in fiscal 1996, a
decrease of  $144,983 (11%) when compared with fiscal 1995.  The largest
component of this decrease is the $55,540 decrease in environmental expense
associated with the remediation of petroleum contamination at Venetian Square
Shopping Center as more fully discussed below and in Note 7 to the Financial
Statements contained in Item 8 of this report.  Property tax expense decreased
$22,211 (22%) in fiscal 1996 primarily the result of a successful appeal
related to the property's assessed value and subsequent reduction in property
tax assessments at Venetian.  Fees and reimbursements to the Managing General
Partner decreased $53,363 (29%) in fiscal 1996 when compared with fiscal 1995.
This decrease is the result of the elimination of the accrual of deferred
acquisition fees related to LaRisa beginning February 29, 1996.  Repairs and
maintenance decreased $11,644 (9%) in fiscal 1996.  This decrease is primarily
the result of underground water leak repairs and parking lot repairs done in
fiscal 1995 at Venetian Square Shopping Center.  Other administrative expense
increased $15,862 (10%) in fiscal 1996 when compared to fiscal 1995, primarily
the result of the write off of approximately $20,000 of past due rents deemed
uncollectible.

1995 as compared to 1994:

For the fiscal year ended September 30, 1995, the Partnership generated total
revenue of $2,508,536, and incurred total expenses of $2,655,431, resulting in
an operating loss of $146,895.  The Partnership's fiscal 1995 operating loss
decreased $345,422 (70%) when compared with fiscal 1994.  Due to the gain on
sale of Los Compadres, La Paz and Maryland Villa Apartments (the "Arizona
Properties"), the Partnership generated net earnings of $949,570 in fiscal
1994.  Total revenue decreased, primarily rental and other income, and total
expenses decreased in all categories, primarily due to the sale of the Arizona
Properties.  A summary of the Partnership's operations and period-to-period
comparisons is presented below.

When making period-to-period comparisons, the exclusion of the Arizona
Properties and SouthCenter Plaza's operations from the prior fiscal year's
results allows for a more meaningful analysis of the operations of the
Partnership's remaining investments.  For comparison purposes only, the Arizona
Properties and SouthCenter Plaza's results of operations have been excluded
from fiscal 1994 results of operations in the table below.


<TABLE>
<CAPTION>
                           Pro    Amount
                  Actual   Forma    of      %
                   1995    1994   Change  Change
                  ------   -----  ------  ------
                 <S>      <C>     <C>     <C>
Total revenue     $2,509   2,493    16       1%
Total expenses     2,656   2,814  (158)    (6)%
                  ------   -----  -----        

Operating loss    $(147)   (321)    174
                  ======   =====  ===== 
</TABLE>




                                      11
<PAGE>   12





Based upon the actual and pro forma amounts presented above, total revenue
generated by the Partnership, excluding the Arizona Properties and SouthCenter
Plaza, amounted to $2,508,536 in fiscal 1995, representing an increase of
$15,761 (1%) compared with fiscal 1994.  The Partnership's properties generated
rental income of $2,145,948 in fiscal 1995, which represents a decrease of
$8,055 when compared with fiscal 1994.  La Risa Apartments achieved a weighted
average occupancy of 94% and a weighted average effective rental rate per unit
per month of $436, representing a decrease of 2% and an increase of $11,
respectively, when compared with fiscal 1994.  Rental income from Venetian
Square Shopping Center decreased $37,803 (4%) in fiscal 1995 when compared with
fiscal 1994.  At Venetian Square Shopping Center, average occupancy decreased
4% in fiscal 1995 and the average effective rental rate decreased $.03 when
compared with fiscal 1994.  For additional information on the average
occupancies and average effective rental rates for the Partnership's
Properties, refer to the table provided in Item 2 as contained in this report.
Other income increased $19,220 (27%) in fiscal 1995 when compared with fiscal
1994, primarily the result of increased interest earned by the Partnership.

Based upon the actual and pro forma amounts provided above, total expenses,
incurred by the Partnership amounted to $2,655,431 in fiscal 1995, a decrease
of $158,270 (6%) when compared with fiscal 1994.  The largest component of this
decrease is the $113,308 (38%) decrease in fees and reimbursements to the
managing general partner in fiscal 1995 when compared with fiscal 1994.  This
decrease is primarily the result of the elimination of the accrual of deferred
acquisition fees related to the Arizona Properties in June 1994.  Property tax
expense decreased $15,296 (6%) in fiscal 1995 when compared to fiscal 1994,
primarily due to lower taxes assessed in 1995 on La Risa Apartments.  Repairs
and maintenance expense decreased $21,003 (7%) in fiscal 1995 when compared to
fiscal 1994 mainly due to roof and parking lot repairs completed at Venetian
Square Shopping Center in fiscal 1994.  Environmental expense was $72,136 for
fiscal 1995, an increase of $24,405 (51%) over fiscal 1994, representing costs
associated with the continued evaluation of the soil and groundwater
remediation at Venetian Square Shopping Center.

Liquidity and Capital Resources

Combined cash and cash equivalent balances, which represent Partnership
reserves, were $1,240,077 at September 30, 1996, representing an increase of
$403,937 when compared with fiscal 1995 year-end balances.  Net cash used by
operating activities in fiscal 1996 amounted to $616,410.  The most significant
change in assets and liabilities in fiscal 1996 relates to a decrease in
payable to managing general partner relating to operations of $914,384.  This
decrease represents the payment of past due fees and reimbursements to the
Managing General Partner in fiscal 1996.  At September 30, 1996 the payable to
managing general partner totaled $602,323.  Other significant changes in assets
and liabilities included accounts receivable and other assets, property taxes
payable, interest payable, tenant security deposits and accounts payable and
accrued expenses, all of which decreased as a result of the payment of all
liabilities related to LaRisa.

Net cash provided by investing activities in fiscal 1996 amounted to $5,880,938
primarily the result of  proceeds from the sale of LaRisa in the amount of
$6,053,468 reduced by additions to real estate investments of $113,257 and
deferred leasing costs of $59,273.  The Partnership's fiscal 1996 deferred
leasing costs include costs related to tenant finish

                                      12
<PAGE>   13





and lease commissions associated with new tenants and the renewal of existing
tenants at Venetian Square Shopping Center.

Net cash used by financing activities amounted to $4,860,591 in fiscal 1996,
primarily comprised of reductions in mortgage principal of $3,852,733 and a
distribution to limited partners of $999,900.  The reduction in mortgage
principal is primarily the payoff of the loan balance secured by LaRisa.  The
distribution of $999,900 ($45.45/unit) was made to limited partners in the
second quarter of fiscal 1996.

The Partnership is required under its Partnership Agreement to maintain cash
reserves of not less than 3% of aggregate capital contributions (or $660,000)
for normal repairs, replacements, working capital and other contingencies.  As
of September 30, 1996, the Partnership had $1,240,077 in cash reserves.  The
Partnership intends to apply cash flow generated from Partnership operations in
fiscal 1997, if any, to maintain minimum required cash reserves, including any
additional reserves deemed necessary by the Managing General Partner to cover
potential remediation costs of the petroleum contamination at Venetian Square
Shopping Center as discussed below.  Thereafter, the Partnership intends to pay
the Managing General Partner all unpaid cash advances made to the Partnership,
all unpaid administrative reimbursements, all unpaid property management fees
and all deferred fees earned by the Managing General Partner, which total
$22,961, $8,640, $1,228 and $569,494 respectively, as of September 30, 1996.

To the knowledge of the Managing General Partner, the Remaining Property is in
good physical condition.  In fiscal 1997, other than tenant finish costs
associated with ongoing additional leasing efforts at Venetian Square Shopping
Center, there are no other material expenditures planned at the Partnership's
Remaining Property in fiscal 1997.

The Managing General Partner is attempting to sell the Partnership's remaining
real estate investment in fiscal 1997.  However, there can be no assurances
that the Partnership will sell the Remaining Property in 1997.  The Partnership
has entered into a listing agreement with an unrelated real estate brokerage
firm to act as exclusive selling agent for the Remaining Property.  The
Managing General Partner believes that this sale will provide net proceeds to
the Partnership after the payment of sales costs, closing costs and mortgages
payable; however, this sales transaction may include both cash at closing and
deferred payments to the Partnership.  The ability of the Partnership to sell
Venetian Square Shopping Center may be adversely affected by the potential
remediation costs of the petroleum contamination at the property.  The
Partnership intends to apply net sales proceeds to pay all remaining
liabilities identified by the Managing General Partner arising out of or in
connection with the operations of the Partnership and the sale of Venetian,
including amounts owed to the Managing General Partner.  Thereafter, all
remaining cash reserves of the Partnership will be utilized to first pay the
costs of liquidation and dissolution of the Partnership and then to make a
final distribution to limited partners.

On February 29, 1996 the Partnership sold the land, related improvements and
personal property of LaRisa Apartments ("LaRisa").  The purchaser, ALT
Affordable Housing Service, Inc. is not affiliated with the Partnership, its
Managing General Partner or any affiliate, director, officer or associate of
the foregoing, and the sales price was determined by arm's length negotiations.


                                      13
<PAGE>   14




The net proceeds to the Partnership, before proration of operating income and
expenses related to the property, were as follows:


<TABLE>
<S>                                                                      <C>
Sales Price                                                               $6,440,000

  Less:
      Costs of sale:
         Sales commissions                              (223,453)
         Closing costs (title fees, legal and other)     (74,400)
      Tenant security deposit liability                  (33,040)
      Mortgage payoff                                 (3,692,414)         (4,023,307)
                                                                          -----------

Net Proceeds                                                              $ 2,416,693
                                                                          ===========     

The net proceeds were utilized as follows:
Distribution to limited partners ($45.45/unit)                            $   999,900
Partial repayment of cash advances, reimbursement and
  deferred fees to the Managing General Partner                             1,000,000
Addition to Partnership cash reserves                                         416,793
                                                                          -----------
                                                                          $ 2,416,693
                                                                          =========== 
</TABLE>

The Partnership recorded a net gain on sale of real estate investment of
$1,329,705 related to this transaction, resulting from the excess of the net
sales proceeds over the Partnership's net carrying value of La Risa.

In October 1995, the Partnership entered into an agreement with Great West Life
Assurance Company (Great West) to extend the maturity date of the first
mortgage payable secured by Venetian Square Shopping Center to October 1, 1997.
Under the agreement, the Partnership paid an extension fee of $20,000.  The
interest rate on the loan was increased from 9 1/2% to 10 1/2% and the monthly
principal and interest payment was increased from $37,683 to $39,098.

The Partnership is evaluating the remediation of petroleum contaminated soil
and groundwater on a parcel of land adjacent to and part of the Venetian Square
Shopping Center.  The contamination resulted from a leaking underground storage
tank which was part of a card-lock fueling station operated on the site.  The
Partnership has been advised that groundwater contamination has also occurred
and the Partnership is in the process of determining the method, cost and
timing of required soil and groundwater remediation measures.  The Partnership
has spent approximately $300,000 to date in connection with the remediation
program and since fiscal 1993 has maintained an accrual of approximately
$250,000 as a provision for possible additional remediation expenses.
Management is unable at this time to estimate the extent of additional expenses
that may be incurred.  Due to groundwater contamination, the Partnership may
incur significant additional remediation costs.  Accordingly, the Financial
Statements contained in Item 8 of this report do not include any further
adjustments that reflect the results of the ultimate resolution of this
uncertainty.  See Note 7 to the Financial Statements contained in Item 8 of
this report for a more detailed discussion of this situation.


                                      14
<PAGE>   15





Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  

<TABLE>
        <S>                                                                              <C>     
         The following Financial Statements of the Partnership are included herein:

         Independent Auditors' Report                                                      16

         Balance Sheets - September 30, 1996 and 1995                                      17

         Statements of Operations -
         Years ended September 30, 1996, 1995 and 1994                                     18

         Statements of Partners' Capital (Deficit)
         Years ended September 30, 1996, 1995 and 1994                                     19

         Statements of Cash Flows -
         Years ended September 30, 1996, 1995 and 1994                                     20

         Notes to Financial Statements                                                     21
</TABLE>



                                      15
<PAGE>   16





                          INDEPENDENT AUDITORS' REPORT

THE PARTNERS
BOETTCHER WESTERN PROPERTIES III LTD.:

We have audited the accompanying balance sheets of Boettcher Western Properties
III Ltd. (a limited partnership) as of September 30, 1996 and 1995, and the
related statements of operations, partners' capital (deficit), and cash flows
for each of the years in the three-year period ended September 30, 1996.  These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Boettcher Western Properties
III Ltd. as of September 30, 1996 and 1995, and the results of its operations
and its cash flows for each of the years in the three-year period ended
September 30, 1996, in conformity with generally accepted accounting
principles.

                                                   KPMG PEAT MARWICK LLP


Denver, Colorado
December 16, 1996



                                      16
<PAGE>   17





                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                                 Balance Sheets
                          September 30, 1996 and 1995


<TABLE>
<CAPTION>

    Assets                                                   1996            1995    
    ------                                                -----------     -----------
<S>                                                      <C>             <C>
Real estate investments, at gross cost
    Properties held for sale                              $8,771,101      $16,346,743
    Less discount on related debt                           (778,407)      (1,192,518)
                                                          -----------     ------------
                                                           7,992,694       15,154,225
    Less accumulated depreciation                         (2,599,948)      (4,833,753)
                                                          -----------     ------------
                                                           5,392,746       10,320,472

Cash and cash equivalents at cost,
    which approximates market value                        1,240,077          836,140
Accounts receivable and other assets                          90,146          187,545
Property tax and other escrow deposits                             -          111,511
Debt issuance costs, net of accumulated
    amortization of $33,446 and $154,874, respectively        13,637           35,647
Deferred leasing costs, net of accumulated
    amortization of $464,022 and $427,988, respectively      174,013          174,354
                                                         -----------      -----------
                                                         $ 6,910,619      $11,665,669
                                                         ===========      ===========   

Liabilities and Partners' Capital                     
---------------------------------
Mortgages payable, net of unamortized debt
    discount of $4,525 and $7,162, respectively          $ 3,303,685      $ 7,153,781
Payable to managing general partner                          602,323        1,527,391
Accounts payable and accrued expenses                        296,557          322,420
Property taxes payable                                        21,238          140,902
Tenants' deposits                                             39,339           70,533
Unearned rental income                                         5,556           19,728
Accrued interest payable                                         490           33,685
                                                         -----------      -----------

    Total liabilities                                      4,269,188        9,268,440

Commitments and contingencies

Partners' capital (deficit):
    General partners                                        (113,869)        (126,310)
    Limited partners                                       2,755,300        2,523,539
                                                         -----------      -----------
    Total partners' capital                                2,641,431        2,397,229
                                                         -----------      -----------
                                                         $ 6,910,619      $11,665,669
                                                         ===========      ===========
</TABLE>


See accompanying notes to financial statements.



                                      17

<PAGE>   18





                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)
                            Statements of Operations
                 Years ended September 30, 1996, 1995 and 1994


<TABLE>
<CAPTION>
                                            1996        1995        1994   
                                         ----------  ----------  ----------
  <S>                                      <C>                    <C>
Revenue:
 Rental income                           $1,323,274  $2,145,948  $4,086,966
 Tenant reimbursements for
  common area charges,
    insurance and taxes                     229,628     271,087     266,507
Other income                                 78,783      91,501     167,876
                                         ----------  ----------  ----------
                                          1,631,685   2,508,536   4,521,349
                                         ----------  ----------  ----------
Expenses:
 Interest, including amortization
  of debt discount and debt
    issuance costs                          526,180     807,298   1,573,953
Depreciation                                317,221     451,174     743,200
Property taxes                              143,570     255,633     405,541
Fees and reimbursements to
  managing general partner                  133,530     186,893     300,201
Other management fees                        72,928     108,667     186,873
Salaries of on-site property
   managers                                  62,888     156,975     325,533
Repairs and maintenance                     170,148     260,913     544,863
Utilities                                    71,245     121,150     487,701
Other administrative                        202,982     234,592     398,069
Environmental costs                          16,596      72,136      47,732
                                         ----------  ----------  ----------

                                          1,717,288   2,655,431   5,013,666
                                         ----------  ----------  ----------

  Operating loss                           (85,603)   (146,895)   (492,317)

Gain on sale of real estate investments   1,329,705           -   1,441,887
                                         ----------  ----------  ----------

  Net earnings (loss)                    $1,244,102  $(146,895)    $949,570
                                         ==========  ==========  ==========

Net earnings (loss)
 per limited partnership unit                $55.98     $(6.61)      $42.73
                                         ==========  ==========  ==========

Weighted average number of limited
 partnership units outstanding               22,000      22,000      22,000
                                         ==========  ==========  ==========
</TABLE>


See accompanying notes to financial statements.



                                      18



<PAGE>   19





                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                   Statements of Partners' Capital (Deficit)
                 Years ended September 30, 1996, 1995 and 1994


<TABLE>
<CAPTION>
                                                                      Total
                                           General      Limited     Partners'
                                           partners    partners      capital  
                                          ----------  -----------  -----------
 <S>                                      <C>         <C>          <C>
 Capital (deficit) at
      October 1, 1993                     $(134,337)   $4,478,891   $4,344,554

 Distribution to limited partners                  -  (2,750,000)  (2,750,000)

 Net earnings                                  9,496      940,074      949,570
                                          ----------  -----------  -----------

 Capital (deficit) at
      September 30, 1994                   (124,841)    2,668,965    2,544,124

 Net loss                                    (1,469)    (145,426)    (146,895)
                                          ----------  -----------  -----------

 Capital (deficit) at
      September 30, 1995                   (126,310)    2,523,539    2,397,229

 Distribution to limited partners                  -    (999,900)    (999,900)

 Net earnings                                 12,441    1,231,661    1,244,102
                                          ----------  -----------  -----------

 Capital (deficit) at September 30, 1996  $(113,869)  $ 2,755,300  $ 2,641,431
                                          ==========  ===========  ===========
</TABLE>


See accompanying notes to financial statements.






                                      19

<PAGE>   20




                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                            Statements of Cash Flows
                 Years ended September 30, 1996, 1995 and 1994


<TABLE>
<CAPTION>
                                                                      1996         1995         1994    
                                                                   -----------  ----------   -----------
<S>                                                              <C>            <C>          <C>
Cash flows from operating activities:
 Net earnings (loss)                                              $  1,244,102   $(146,895)   $  949,570
    Adjustments to reconcile
    net earnings (loss)
    to net cash provided (used) by
    operating activities:
       Depreciation and amortization                                   398,755      566,109     1,011,424
       Gain on sale of real estate
        investments                                                (1,329,705)            -   (1,441,887)
    Change in operating assets and liabilities:
      (Increase) decrease in accounts receivable and other assets       97,399       42,186      (26,670)
      (Increase) decrease in property tax and
       other escrow deposits                                           111,511     (23,193)       (2,513)
      Increase (decrease) in payable to
       managing general partner
       relating to operations                                        (914,384)       92,977     (618,152)
      Decrease in accounts payable
       and accrued expenses                                           (25,863)     (13,307)     (135,110)
      Decrease in property taxes payable                             (119,664)        (344)      (74,205)
      Decrease in tenants' deposits                                   (31,194)      (7,177)      (36,041)
      Decrease in unearned rental income                              (14,172)      (2,949)      (23,025)
      Decrease in accrued interest payable                            (33,195)        (157)         (488)
                                                                   -----------   ----------   -----------
Net cash provided (used) by
  operating activities                                               (616,410)      507,250     (397,097)
                                                                   -----------   ----------   -----------

Cash flows from investing activities:
      Additions to real estate investments                           (113,257)    (113,549)     (196,960)
      Deferred leasing costs                                          (59,273)     (12,724)     (167,729)
      Net proceeds from sale of real
       estate investments                                            6,053,468           -     11,658,327
      Cash loss relating to foreclosing of
       SouthCenter Plaza                                                     -           -       (11,674)
                                                                   -----------  ----------    -----------
Net cash provided (used) by investing activities                     5,880,938   (126,273)     11,281,964
                                                                   -----------  ----------    -----------

Cash flows from financing activities:
    Advances from (payments to)
     managing general partner                                         (10,684)      33,645       (30,900)
    Payments of mortgage principal                                 (3,852,733)   (194,912)    (7,762,052)
    (Increase) decrease in debt issuance costs                           2,726    (78,398)      (128,594)
    Distributions to limited partners                                (999,900)           -    (2,750,000)
                                                                   -----------  ----------    -----------
Net cash provided (used) by
  financing activities                                             (4,860,591)   (239,665)    (10,671,546)
                                                                   -----------  ----------    -----------

Net increase in cash and equivalents                                   403,937     141,312        213,321

Cash and cash equivalents at beginning of year                         836,140     694,828        481,507
                                                                   -----------  ----------    -----------
Cash and cash equivalents at end of year                           $ 1,240,077  $  836,140    $   694,828
                                                                   ===========  ==========    ===========

Supplemental disclosure of cash flow information:
    Interest paid in cash during the year                          $  537,454   $ 736,630     $ 1,349,719
                                                                   ==========   =========     ===========
</TABLE>


See  accompanying notes to financial statements.


                                      20


<PAGE>   21
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994




(1)   Significant Accounting Principles

      Organization and Allocation of Income and Losses
      Boettcher Western Properties III Ltd. (the Partnership) is a limited
      partnership formed on March 18, 1983 for the purpose of investing in
      improved and unimproved real property.  Limited Partnership Interests
      (Units) were sold through a public offering and currently 22,000 Units at
      $1,000 per Unit are outstanding.

      The managing general partner of the Partnership is Boettcher Properties,
      Ltd. (BPL), and the associate general partner is Boettcher 1983
      Associates, Ltd.

      The Partnership Agreement provides for the net operating income of the
      Partnership to be allocated as follows:  (i) to the limited partners to
      the extent necessary to satisfy the 8% Current Distribution Preference,
      as defined (an amount equal to 8% of the daily average aggregate adjusted
      capital contributions of the limited partners) and (ii) 1% of the
      remainder to the General Partners and 99% to the limited partners.  Net
      operating losses are allocated 1% to the General Partners and 99% to the
      limited partners.

      The Partnership Agreement provides for net capital income from the sale
      or other disposition of Partnership properties to be allocated on a
      cumulative basis as follows:  (i) 1% to the General Partner and 99% to
      the limited partners to the extent of depreciation deductions taken from
      the inception of the Partnership, (ii) to the limited partners to the
      extent necessary to satisfy the Net Proceeds Distribution Preference, as
      defined (an amount equal to the sum of limited partner capital
      contributions not yet returned and any unsatisfied 8% current
      Distribution Preference from prior periods) and (iii) 25% of the
      remainder to the General Partners and 75% to the limited partners.  Net
      capital loss is allocated 1% to the General Partners and 99% to the
      limited partners.

      Environmental Remediation Liabilities
      Liabilities for loss contingencies, including environmental remediation
      costs, arising from claims, assessments, litigation, fines and penalties,
      and other sources are recorded when it is probable that a liability has
      been incurred and the amount of the assessment and/or remediation can be
      reasonably estimated.  The costs of site clean-up are recorded in the
      amount of the cash payments made or for future estimated costs for that
      site when fixed or reliably determinable based upon information derived
      from the remediation plan for that site.  Recoveries from third parties
      which are probable of realization are separately recorded, and are not
      offset against the related environmental liability.

      In October 1996, the American Institute of Certified Public Accountants
      issued Statement of Position ("SOP") 96-1, Environmental Remediation
      Liabilities.  SOP 96-1 will be adopted by the Partnership during fiscal
      1997 and will require, among other things, environmental remediation
      liabilities to be accrued when the criteria of SFAS No. 5, Accounting for
      Contingencies, have been met.  The SOP also provides guidance with




                                      21
<PAGE>   22
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994



      respect to the measurement of the remediation liabilities.  Such
      accounting is consistent with the Partnership's current method of
      accounting for environmental remediation costs and therefore, adoption of
      this new Statement will not have a material impact on the Partnership's
      financial position, results of operations, or liquidity.

      Deferred Leasing Costs
      Costs associated with the leasing of the Partnership's shopping center
      are deferred and amortized over the life of the related leases.  These
      costs are comprised of lease commissions and construction costs related
      to the buildout of tenant space.

      Financial Instruments
      The fair value of the Partnership's financial instruments approximate
      their carrying values due to the short maturities of those instruments or
      due to the interest rates of those instruments approximating interest
      rates for similar issues.

      Income Taxes
      No provision has been made for federal income taxes, as the taxable
      income (loss) is reported by the partners rather than the Partnership.
      The Partnership reports certain transactions differently for tax and
      financial statement purposes, primarily depreciation and debt discount.

      A reconciliation of net earnings (loss) per the accompanying financial
      statements and Partnership's tax return is shown in the table below.
      Results of operations for the year ended September 30, 1996 as shown in
      the financial statements is actual.  However, the Partnership's tax
      return for December 31, 1996 has not been prepared; therefore, the
      reconciling items for 1996 are estimates by management.


<TABLE>
<CAPTION>
                                                   1996          1995         1994   
                                                ----------    -----------   ---------
                                                             (unaudited)
<S>                                             <C>
Net earnings (loss) per financial statements    $1,244,102   $(146,895)    $  949,570
Fiscal to calendar year net difference              96,949        6,343       143,901
Tax depreciation in excess of depreciation
 for financial statement purposes                 (225,000)   (288,639)     (655,164)
Debt discount amortization not deducted for
 tax purposes                                        3,000        2,594        64,851
Rental revenue reported in different years
 for tax and financial statement purposes           (2,000)      14,573       (2,520)
Environmental costs not deducted for
 tax purposes                                          -0-          -0-      (11,030)
Difference in net gain on sale of real estate
 investments for tax and financial statements    2,000,000    1,233,006     3,370,263
                                                ----------   ----------    ----------
Net earnings (loss) for income tax purposes     $3,117,051   $  820,982     3,859,871
                                                ==========   ==========    ==========
</TABLE>




                                       22
<PAGE>   23
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994




      Real Estate Investments
      Properties held for sale are recorded at the lower of cost or fair value
      based upon independent appraised values less estimated selling costs.

      Buildings and improvements are depreciated using the straight-line method
      over an estimated useful life of 30 years.  Equipment and furnishings are
      depreciated using the straight-line method over an estimated useful life
      of 5 years.  Renewals and betterment's are capitalized, and repairs and
      maintenance are charged to operations as incurred.  

      Cash and Cash Equivalents 
      For purposes of the Statement of Cash Flows, cash and cash equivalents
      include highly liquid debt instruments purchased with an original
      maturity of three months or less.  Cash and cash equivalents are
      comprised of the following as of September 30:


<TABLE>
<CAPTION>
                                        1996           1995  
                                     ----------     ---------
     <S>                            <C>             <C>
      Money market fund              $1,120,644      $721,050
      Operating cash                    119,433       115,090
                                     ----------      --------
      Cash and cash equivalents      $1,240,077      $836,140
                                     ==========      ========
</TABLE>


      Debt Issuance Costs and Debt Discount
      Costs incurred in arranging financing, such as loan origination fees,
      commitment fees and extension fees, are deferred and amortized using the
      level-interest-yield method over the term of the related debt or the
      extension period.

      Debt discount is amortized to interest expense using the
      level-interest-yield method over the term of the related debt.

      Use of Estimates
      Management of the Partnership has made a number of estimates and
      assumptions relating to the reporting of assets and liabilities and the
      disclosure of contingent assets and liabilities to prepare these
      financial statements in conformity with generally accepted accounting
      principles.  Actual results could differ from those estimates.

      Reclassification
      Certain prior year amounts have been reclassified to conform with fiscal
      1996 financial statement presentation.

(2)   Real Estate Investments

      Mortgages assumed in connection with the acquisition of the Partnership's
      properties were discounted using an equivalent market rate of interest as
      of the date of acquisition. For financial statement purposes, the
      resulting discount is deducted from the original cost basis



                                       23

<PAGE>   24

                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994





      of the related real estate investment property, thereby resulting in a
      reduction of depreciation expense over the life of the assets.

      As of September 30, 1996, the fair value of the Partnership's properties
      held for sale exceeds cost, based upon independent appraised values or
      preliminary offers to purchase the properties less estimated selling
      costs.

      The cost of the Partnership's real estate investments and related
      accumulated depreciation, debt discount and allowance for loss are as
      follows:

                               September 30, 1996


<TABLE>
<CAPTION>
      Property            Land and       Buildings and
      held for sale     improvements     improvements        Total   
      -------------     ------------     -------------       -----
     <S>                 <C>           <C>                <C>
      Venetian Square     $1,802,853      $6,968,248       $ 8,771,101

      Less discount on
       related debt        (167,901)       (610,506)         (778,407)
                          ----------     -----------       -----------
                           1,634,952       6,357,742         7,992,694
      Less accumulated
       depreciation         (43,591)     (2,556,357)       (2,599,948)
                          ----------     -----------       -----------
                          $1,591,361     $ 3,801,385       $ 5,392,746
                          ==========     ===========       ===========
</TABLE>



                               September 30, 1995


<TABLE>
<CAPTION>
                           Land and     Buildings and   Equipment and                   Less discount   Property balance,
                         improvements   improvements     furnishings      Total        on related debt   net of discount 
                        ------------   -------------   -------------  -------------   ---------------  ------------------ 
     <S>               <C>              <C>               <C>            <C>              <C>                 <C>
      La Risa Apts       $1,620,095       5,277,131        761,940        7,659,166        (414,111)          7,245,055
      Venetian Square     1,802,853       6,884,724              -        8,687,577        (778,407)          7,909,170
                         ----------     -----------      ---------       -----------       ---------         ----------
                          3,422,948      12,161,855        761,940       16,346,743      (1,192,518)         15,154,225
                         ----------     -----------      ---------      -----------      ===========         ==========
      Less discount on
       related debt       (266,170)       (915,373)       (10,975)      (1,192,518)
                         ----------     -----------      ---------      -----------
                          3,156,778      11,246,482        750,965       15,154,225
                         ----------     -----------      ---------      -----------
      Less accumulated
       depreciation        (42,470)     (4,277,520)      (513,763)      (4,833,753)
                         ----------     -----------      ---------      -----------
                         $3,114,308      6,968,962         237,202       10,320,472
                         ==========     ==========       =========       ==========
</TABLE>


      Sale of Real Estate Investment
      On February 29, 1996 the Partnership sold the land, related improvements
      and personal property of La Risa Apartments ("La Risa").  The purchaser,
      ALT Affordable Housing Service, Inc. is not affiliated with the
      Partnership, its Managing General Partner or any affiliate, director,
      officer or associate of the foregoing, and the sales price was determined
      by arm's length negotiations.

      The net proceeds to the Partnership, before proration of operating income
      and expenses related to the property, were as follows:



                                       24
<PAGE>   25
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994
    
<TABLE>
<S>                                                      <C>          <C>
Sales Price                                                            $ 6,440,000  
     Less:                                                                           
        Costs of sale:                                                               
            Sales commissions                              (223,453)                 
            Closing costs (title fees, legal and other)     (74,400)                 
        Tenant security deposit liability                   (33,040)                 
        Mortgage payoff                                  (3,692,414)    (4,023,307)  
                                                                       -----------  
                                                                                     
Net Proceeds                                                           $ 2,416,693  
                                                                       ===========   
                                                                                     
The net proceeds were utilized as follows:                                           
                                                                                     
Distribution to limited partners ($45.45/unit)                         $   999,900  
                                                                                     
Partial repayment of cash advances, reimbursement and                                
 deferred fees to the Managing General Partner                           1,000,000  
                                                                                     
Addition to Partnership cash reserves                                      416,793  
                                                                       -----------   
                                                                       $ 2,416,693   
                                                                       =========== 
</TABLE>                                                                    

The Partnership recorded a net gain on sale of real estate investment of
$1,329,705 related to this transaction, resulting from the excess of the net
sales proceeds over the Partnership's net carrying value of La Risa.

<PAGE>   26
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994

(3) Mortgages Payable

      Mortgages payable at September 30 are secured by real estate investment
      properties and are comprised of the following:

<TABLE>
<CAPTION>

1996:          
-----
                             Unamortized     Balance
                                debt          net of    Interest      Monthly       Due
Property         Principal    discount       discount     rate        payment       date 
---------------  ----------   --------      ---------   --------      -------       -----
<S>              <C>          <C>           <C>         <C>          <C>          <C>  
Venetian Square                           
  First          $3,285,221         -       3,285,221    10.50%        39,098       10/97 (e)
  Second             22,989    (4,525)         18,464     6.75% (c)     1,062 (d)    4/98
                 ----------   -------       ---------                                      
                 $3,308,210    (4,525)      3,303,685
                 ----------   -------       ---------

<CAPTION>


1995:          
-----
                             Unamortized     Balance
                                debt          net of    Interest      Monthly       Due
Property         Principal    discount       discount     rate        payment       date 
---------------  ----------   --------      ----------  --------      -------       -----
<S>              <C>          <C>           <C>         <C>          <C>          <C>  
LaRisa           $3,682,141         -       3,682,141    10.625%       35,698        1/96 (b)
                                            
Venetian Square                             
                                            
  First           3,445,069         -       3,445,069    10.50%        39,098       10/97 (e)
  Second             33,733    (7,162) (a)     26,571     6.75% (c)     1,144 (d)    4/98
                 ----------   -------       ---------                                       
                 $7,160,943    (7,162)      7,153,781
                 ----------   -------       ---------
</TABLE>                                    


All mortgages payable are secured solely by the respective properties and are
nonrecourse to the Partnership.

(a)  Discount was based on market interest rate at the time of purchase of
     12.5%.
(b)  The Partnership extended  the mortgage payable to January 1, 1996.  See
     note 6 for additional information.
(c)  Average rate of bond issue.
(d)  Paid semiannually in April and December.
(e)  The Partnership extended the mortgage payable to October 1, 1997.  See
     note 6 for additional information.

The fair value of the mortgages attributable to the Partnership is estimated to
be approximated by its carrying value.


                                      26
<PAGE>   27
                    BOETTCHER WESTERN PROPERTIES III LTD.
                           (A Limited Partnership)
                                      
                        Notes to Financial Statements
                      September 30, 1996, 1995 and 1994
    



      Aggregate maturities of principal payments for the five fiscal years
      ending September 30, 2001 and thereafter are as follows:


      1997        $  171,173
      1998         3,137,037
      1999                 -
      2000                 -
      2001                 -
      Thereafter           -
                  ----------      
                  $3,308,210
                  ==========

      For additional discussion of the Partnership's mortgages payable refer to
      note 6.

(4)   Transactions with Related Parties

      BPL is the Managing Agent of the Partnership and is paid an annual fee
      for its services.  The annual fee is comprised of a property management
      fee and a deferred acquisition fee.  The property management fee is equal
      to 5% of gross receipts from the Properties, less management fees paid to
      others.  The property management fee earned by BPL amounted to $6,255,
      $15,734 and $38,635 for the years ended September 30, 1996, 1995, and
      1994, respectively.  The deferred acquisition fee is an annual fee equal
      to the sum of 2% of average daily invested capital plus 1/2 of 1% of
      average daily liquid capital, as defined.  The deferred acquisition fee
      is payable for a maximum of 15 years and is limited in the aggregate to
      payments having a discounted value equal to 14% of gross limited partner
      capital contributions.  Payments made over the 15-year period will be
      discounted at 10% per year from the date of payment to May 2, 1983 in
      determining whether the limit has been reached. Payments are limited in
      the aggregate to $3,080,000.  Since inception, the total discounted
      deferred acquisition fee earned by the Managing General Partner is
      approximately $2,329,000.  The annual deferred acquisition fee earned by
      BPL amounted to $104,335, $140,364 and $230,978 for the years ended
      September 30, 1996, 1995, and 1994, respectively.

      The Partnership also reimburses BPL for its allocable share of salaries
      of nonmanagement and nonsupervisory personnel providing accounting,
      investor reporting and communications, and legal services to the
      Partnership and allowable expenses related to the maintenance and repair
      of data processing equipment used for or by the Partnership.  The amount
      due to BPL for such reimbursements for the years ended September 30,
      1996, 1995, and 1994 amounted to $22,940, $30,795 and $30,588,
      respectively.



                                       27
<PAGE>   28
                      BOETTCHER WESTERN PROPERTIES III LTD
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994




(5)  Future Rental Income
     Aggregate base rental income relating to long-term noncancelable leases
     for the Venetian Square Shopping Center for the five fiscal years ending
     September 30, 2001 and thereafter is as follows:


     1997         $  781,920
     1998            626,347
     1999            528,910
     2000            469,263
     2001            431,272
     Thereafter    1,015,220
                  ----------                     
                  $3,852,932
                  ==========      

(6)  Liquidity and Debt Maturities

     The Partnership is required under its Partnership Agreement to maintain
     cash reserves of not less than 3% of aggregate capital contributions for
     normal repairs, replacements, working capital and other contingencies.
     As of September 30, 1996, the Partnership had cash reserves of
     $1,240,077, while the required minimum amount was $660,000.

     During fiscal 1996, the payable to managing general partner decreased
     $925,068 to a total of $602,323 as of September 30, 1996.  This decrease
     is the result of the accrual of fees and reimbursements earned by the
     Managing General Partner in fiscal 1996 and cash advances received from
     the Managing General Partner during fiscal 1996 totaling $133,530 and
     $141,402, respectively, and payments to the Managing General Partner of
     $1,200,000, primarily from the proceeds of the sale of LaRisa Apartments.
     The Managing General Partner intends to apply cash flow generated from
     Partnership operations in fiscal 1997, if any, to maintain the minimum
     required cash reserves, as necessary, including any additional reserves
     to cover remediation costs at Venetian Square Shopping Center.
     Thereafter, the Partnership intends to pay the Managing General Partner
     all unpaid cash advances made to the Partnership, all unpaid
     administrative reimbursements and all deferred fees earned by the
     Managing General Partner.

     The Managing General Partner is attempting to sell the Partnership's
     remaining real estate investment in fiscal 1997.  However, there can be
     no assurances that the Partnership will sell such Property in 1997.  As
     of September 30, 1996 and 1995, the remaining real estate investments are
     classified as properties held for sale.  The Partnership has entered into
     a listing agreement with an unrelated real estate brokerage firm to act
     as the exclusive selling agent for the Remaining Property.  The Managing
     General Partner believes that this sale will provide net proceeds to the
     Partnership after the payment of sales costs, closing costs and mortgages
     payable; however, this sale transaction may include both cash at closing
     and deferred payments to the Partnership.  The ability of the Partnership
     to sell



                                       28
<PAGE>   29
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994


      Venetian Square Shopping Center may be adversely affected by the
      potential remediation costs of the petroleum contamination of the
      property.  The Partnership intends to apply net sales proceeds to pay all
      remaining liabilities identified by the Managing General Partner arising
      out of or in connection with the operations of the Partnership and the
      sale of Venetian, including amounts owed to the Managing General Partner.
      Thereafter, all remaining cash reserves of the Partnership will be
      utilized to first pay the costs of liquidation and dissolution of the
      Partnership and then to make a final distribution to limited partners.

      On October 24, 1995, the Partnership entered into a letter agreement with
      Great West Life Assurance Company (Great West) to extend the maturity
      date of the first mortgage payable secured by Venetian Square Shopping
      Center to October 1, 1997.  Under the agreement, the Partnership was
      obligated to pay a $20,000 fee, the interest rate was increased to 10.5%
      and the monthly payment was increased to $39,098 effective October 1,
      1995.

(7)   Environmental Remediation Costs

      From approximately 1979 through 1990 a card-lock fueling station had been
      operated on a parcel of land adjacent to and a part of Venetian Square
      Shopping Center.  In 1990, operation of the fueling station ceased, and
      in fiscal 1991 the Partnership determined that it would be permanently
      closed.  In compliance with the California and San Joaquin County
      environmental regulatory requirements, the Partnership contracted with an
      environmental engineering firm to perform Phase I and Phase II
      environmental site assessments on this specific parcel of land.  The
      results of those site assessments suggested that the site may contain
      petroleum contaminants.  In fiscal 1992, the Partnership contracted for
      the excavation and removal of the three underground fuel storage tanks
      located on this parcel of land.  Upon excavation and removal of those
      underground fuel storage tanks, leakage of petroleum contaminants was
      discovered through performance of soil and groundwater tests.  The
      Partnership retained California legal counsel and contracted with an
      environmental engineering firm (EEF) to perform further site analysis and
      to determine the proximate cause and extent of any contaminants.  In the
      first quarter of fiscal 1993, the Partnership received the Preliminary
      Site Assessment report (the PSA) from the EEF detailing the results of
      its Phase II soil and groundwater sampling and analysis, as well as the
      EEF's recommendation for  further action.  In working with the San
      Joaquin County Public Health Services/Environmental Health Division (San
      Joaquin), the Partnership received approval to proceed with quarterly
      groundwater monitoring of the site for a term of one year which was
      completed as of December 31, 1993.  An Evaluation of Remedial
      Alternatives For Petroleum Hydrocarbon Impacted Soil (the Report) was
      submitted to San Joaquin for further review and comments.  San Joaquin
      notified the Partnership that the remedial alternative consisting
      primarily of soil vapor extraction complies with regulatory requirements
      and requested that the Partnership submit a work plan to the regulatory




                                       29
<PAGE>   30
                     BOETTCHER WESTERN PROPERTIES III LTD.
                            (A Limited Partnership)

                         Notes to Financial Statements
                       September 30, 1996, 1995 and 1994



      agency which will include the proposed actions and proposed schedule for
      implementation and operation of the soil vapor extraction system.
      However, the Partnership has been advised that groundwater contamination
      has also occurred and the Partnership is in the process of determining
      the method, cost and timing of required soil and groundwater remediation
      measures.  The Partnership has spent approximately $300,000 to date in
      connection with the remediation program and since fiscal 1993 has
      maintained an accrual of approximately $250,000 as a provision for
      possible additional remediation expenses.  Management is unable at this
      time to estimate the full extent of additional expenses that may be
      incurred.  Due to groundwater contamination, the Partnership may incur
      significant additional remediation costs.  The estimate of costs and
      their timing of payment could change as a result of (1) changes to a
      remediation plan required by the State Environmental Agency, (2) changes
      in technology available to treat the site, (3) unforeseen circumstances
      existing at the site and (4) differences between actual inflation rates
      and rates assumed in preparing the estimate.  As a result of these
      factors, it is not possible for the Partnership to reasonably estimate
      the amount by which remediation costs may exceed amounts that the
      Partnership has accrued.  The ultimate resolution of this matter and its
      impact on the Partnership's financial statements is uncertain.














                                       30
<PAGE>   31
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        There have been no changes in accountants or disagreements with
accountants on any matter of accounting principles or practices on financial
statement disclosure or auditing scope or procedure.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

             The Partnership does not have directors or executive officers.  The
general partner of the Partnership's Managing General Partner and Associate
General Partner is BPL Holdings, Inc. (BPL Holdings), a Delaware corporation.
During fiscal 1995, the ultimate parent company of BPL Holdings (Kemper
Securities Holdings, Inc.) experienced a change in ownership, whereby it became
a wholly-owned subsidiary of EVEREN Capital Corporation and changed its name to
EVEREN Securities Holdings, Inc. (ESHI).  EVEREN Securities, Inc. is a
wholly-owned subsidiary of ESHI.  These changes had no impact on the day-to-day
operations of BPL Holdings.   The following is a list of the directors and
officers of BPL Holdings.

                   Present Position and Principal Occupation and Affiliation 
Name and Age       During the Last 5 years or More

Janet L. Reali     Director, President and Principal Executive Officer of BPL
                   Holdings, Inc.
Age:  45           Ms. Reali was elected Executive Vice President and Secretary
                   of EVEREN Capital Corporation in May 1995.  Since December
                   1993 she has been Executive Vice President, Corporate
                   Counsel and Corporate Secretary of EVEREN Securities, Inc.
                   She was became a Director and the President of BPL Holdings,
                   Inc. in May 1995.  She was Senior Vice President and
                   Associate General Counsel of EVEREN Securities, Inc. from
                   July 1991 to December 1993.  Before joining EVEREN
                   Securities, Inc. she was a partner in the Chicago law firm
                   of Keck, Mahin & Cate.

Stanley R. Fallis  Director of BPL Holdings, Inc.                               
Age: 55            Mr. Fallis graduated from the University of Idaho with a BS
                   degree in accounting.  Mr. Fallis also obtained an MBA
                   degree from the University of Utah.  Mr. Fallis is a
                   Certified Public Accountant and practiced public accounting
                   for six years.  Mr. Fallis has been associated with
                   Boettcher & Co. for 18 years and is currently Senior
                   Executive Vice President and Chief Financial Officer as well
                   as Director of Administration of EVEREN Securities, Inc.


                                      31
<PAGE>   32
Daniel D. Williams            Director and Vice President of BPL Holdings, Inc.
Age: 45                       Mr. Williams became a Director and Vice President
                              of BPL Holdings, Inc. in May 1995. Mr. Williams
                              was elected Senior Executive Vice President,
                              Treasurer and Chief Financial Officer of
                              EVEREN Capital Corporation in May 1995.  Since
                              April 1995 he has been Senior Executive Vice
                              President and Chief Financial Officer of EVEREN
                              Securities, Inc.  From January 1994 to April
                              1995, Mr. Williams was Executive Vice President
                              and Director of Finance and Administration and
                              from January 1991 to January 1994 he was Senior
                              Vice President and Director of Accounting of
                              EVEREN Securities, Inc.  Prior thereto, he was
                              Executive Vice President, Treasurer and Chief
                              Financial Officer of Boettcher & Co.

Kelly J. Stradinger           Vice President and Secretary of BPL Holdings, Inc.
Age: 37                       Mr. Stradinger joined BPL in 1983 as Assistant
                              Controller for the syndicated  public real estate 
                              partnerships.  Mr. Stradinger is currently in
                              charge of asset management for all syndicated
                              partnerships where BPL or an affiliate is the
                              general partner.  He is also a  Vice President of
                              EVEREN Securities, Inc. and Director of Leasing
                              for the facilities management department.  Mr.
                              Stradinger graduated from Western Michigan
                              University with a Bachelor of Business
                              Administration in Accounting and successfully
                              completed the Certified Public Accountant exam.

Thomas M. Mansheim            Director and Treasurer of BPL Holdings, Inc. 
                              (Principal Financial and Accounting Officer of the
                              Partnership)
Age: 39                       Mr. Mansheim joined BPL in 1984 and is currently
                              a Senior Vice President with EVEREN Securities,
                              Inc.  He became a Director and and the Treasurer
                              of BPL Holdings, Inc.  Mr. Mansheim is a
                              Certified Public Accountant and from 1980 to
                              1984 was employed with KPMG Peat Marwick.  Mr.
                              Mansheim graduated from the University of
                              Colorado with a Bachelor of Science degree in
                              business administration. 


There is no family relationship among the officers or directors of BPL Holdings
or any of its affiliates.


                                      32

<PAGE>   33




Item 11. EXECUTIVE COMPENSATION

     The Partnership, as an entity, does not have any directors or executive
officers.  The information required by Item 402 of Regulation S-K relating to
amounts owed by the Partnership to the Managing General Partner and its
affiliates for services rendered during the fiscal year ended September 30,
1996 is presented below.  Reference is also made to Note 4 to Financial
Statements as contained in Item 8 of this report for a description of related
parties.


<TABLE>
<CAPTION>

                                                                                      Total      
                          Capacities in Which              Cash          Deferral     Fees       
Name of Entity        Compensation was Earned              Paid (a)       of Fees    Earned      
-----------------     -----------------------             -------        --------    -------     
<S>                   <C>                                    <C>       <C>            <C>         
Boettcher                                                                                        
 Properties, Ltd.     Deferred Acquisition Fee            $     -        104,335     104,335     
                                                                                                 
Boettcher                                                                                        
 Properties, Ltd.     Property Management Fee             $ 5,027          1,228       6,255     
                                                                                                 
Boettcher             Reimbursement of direct general                                            
 Properties, Ltd.      and administrative expenses        $14,300          8,640      22,940     
</TABLE>      


(a)  During the fiscal year ended September 30, 1996, the Partnership made cash
     payments to the Managing General Partner totaling $1,200,000 which were
     applied as follows:


<TABLE>
<CAPTION>
                                        Current     Prior
                                          Year      Years       Total   
                                        --------  ----------  ----------
<S>                                   <C>        <C>         <C>
Deferred acquisition fee                $      -  $  990,406  $  990,406
Property management fee                    5,027      15,033      20,060
Reimbursement of direct general       
 and administrative expenses              14,300      23,148      37,448
Repayment of cash advances               118,441      33,645     152,086
                                        --------  ----------  ----------
                                        $137,768  $1,062,232  $1,200,000
                                        ========  ==========  ==========
</TABLE>


     No form of non-cash remuneration was paid by the Partnership.  See Item 13
below with respect to a description of certain transactions of the General
Partners and their affiliates with the Partnership.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     To the knowledge of the Partnership, no person or group owns of record or
beneficially more than 5% of the outstanding Units.

     The Partnership has no directors or executive officers. To the knowledge
of the Partnership, no directors or officers of the Managing General Partner or
its affiliates own any Units.  There exists no arrangement, known to the
Partnership, the operation of which may at a subsequent date result in a change
in control of the Partnership.


                                      33
<PAGE>   34





Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Partnership has no directors or executive officers.  The
information required by Item 404 of Regulation S-K is set forth in Item 11.
Executive Compensation as contained in this report.

         The Partnership has a Management Agreement with the Managing General
Partner pursuant to which the Managing General Partner is responsible for
performing the day-to-day investment and administrative operations of the
Partnership and supervising the management and operation of the Partnership's
properties.  For such services and for services rendered in connection with the
acquisition of the Partnership's properties, the Managing General Partner is
entitled to receive annual fees comprised of a Deferred Acquisition Fee and a
Property Management Fee as more fully discussed in Note 4 to the Financial
Statements as contained in Item 8 of this report.  The Managing General Partner
earns such fees for services provided to the Partnership pursuant to the
Management Agreement and not by reason of its Partnership interest.  The
Managing General Partner earned a Deferred Acquisition Fee of $104,335 and a
Property Management Fee of $6,255 for the fiscal year ended September 30, 1996.

         Pursuant to the Partnership Agreement, the Managing General Partner
may be reimbursed by the Partnership for certain of its costs, including
reimbursements for its allocable share of salaries of nonmanagement and
nonsupervisory personnel providing accounting, investor reporting and
communications and legal services to the Partnership, and the maintenance and
repair of data processing equipment used for or by the Partnership.  Pursuant
to such provision, for services provided during the fiscal year ended September
30, 1996, the Managing General Partner is entitled to receive reimbursements
aggregating $22,940.

         The Partnership Agreement provides for the net operating income or
loss of the Partnership to be allocated as follows:  (i) to the limited
partners to the extent necessary to satisfy the 8% Current Distribution
Preference, as defined (an amount equal to 8% of the daily average aggregate
adjusted capital contributions of the limited partners) and (ii) 1% of the
remainder to the General Partners and 99% to the limited partners.  Net
operating losses are allocated 1% to the General Partners and 99% to the limited
partners.

         The Partnership Agreement provides for net capital income from the
sale or other disposition of Partnership properties to be allocated on a
cumulative basis as follows:  (i) 1% to the General Partners and 99% to the
limited partners to the extent of depreciation deductions taken from the
inception of the partnership, (ii) to the limited partners to the extent
necessary to satisfy the Net Proceeds Distribution Preference, as defined (an
amount equal to the sum of limited partner capital contributions not yet
returned and any unsatisfied 8% current Distribution Preference from prior
periods) and (iii) 25% of the remainder to the General Partners and 75% to the
limited partners. Net capital loss is allocated 1% to the General Partners and
99% to the limited partners.





                                       34
<PAGE>   35





                                    PART IV


Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K

          (a)  (1)   Financial Statements


                     The following Financial Statements of the Partnership
                     are included herein:

                     Independent Auditors' Report

                     Balance Sheets - September 30, 1996 and 1995

                     Statements of Operations
                     Years ended September 30, 1996, 1995 and 1994

                     Statements of Partners' Capital (Deficit)
                     Years ended September 30, 1996, 1995 and 1994

                     Statements of Cash Flows
                     Years ended September 30, 1996, 1995 and 1994

                     Notes to Financial Statements

               (2)   Financial Statement Schedule

                     Independent Auditor's Report

                     Schedule-III Real Estate and Accumulated Depreciation as of
                     September 30, 1996

                     Schedules, other than the one listed, are omitted for the
                     reason that they are inapplicable or equivalent
                     information has been included elsewhere herein.

          (b)  Reports on Form 8-K

               No reports on Form 8-K were filed by the Registrant during the
               last quarter of the fiscal year covered by this report.





                                       35
<PAGE>   36





     (c) Exhibits


         Number  Exhibit                                           
         4       Limited Partnership Agreement of Registrant(1)

         10.1    Management Agreement (1)

         10.2    La Risa Apartments Purchase and Sale Agreement (2)

         10.3    Venetian Square Shopping Center Purchase and
                 Sale Agreement (2)

         10.4    Southcenter Office Building Purchase and Sale
                 Agreement (2)

         10.5    La Paz Apartments Purchase and Sale Agreement (3)

         10.6    Maryland Villa Apartments Purchase and Sale
                 Agreement (3)

         10.7    Los Compadres Apartments Purchase and Sale
                 Agreement (3)

         10.8    Loan Extension Agreement for Los Compadres
                 Apartments dated August 27, 1993 (5)

         10.9    Letter Agreement for Loan Extension for Los
                 Compadres Apartments dated as of December 17,
                 1993 (5)

         10.10   Loan Extension Agreement for La Paz Apartments
                 dated August 27, 1993 (5)

         10.11   Letter Agreement for Loan Extension for La Paz
                 Apartments dated as of December 17, 1993 (5)

         10.12   Loan Extension Agreement for Maryland Villa
                 Apartments dated August 27, 1993 (5)

         10.13   Letter Agreement for Loan Extension for 
                 Maryland Villa Apartments dated as of December
                 17, 1993 (5)
         10.14   Los Compadres Apartments Purchase and Sale
                 Agreement dated January 11, 1994  (6)

         10.15   La Paz Apartments Purchase and Sale Agreement
                 dated January 11, 1994 (6)

         10.16   Maryland Villa Apartments Purchase and Sale
                 Agreement dated January 11, 1994 (6)




                                       36
<PAGE>   37

      (c)    Exhibits (continued)

             Number   Exhibit

             10.17    First Amendment to Purchase and Sale Agreements
                      for Los Compadres, La Paz and Maryland Villa
                      Apartments dated February 18, 1994 (6)

             10.18    Loan extension agreement for Venetian Square
                      Shopping Center dated October 24, 1995 (8)

             27       Financial Data Schedule

             28.1     Complaint for Judicial Foreclosure of Mortgage
                      Dated May 27, 1993 (4)

             28.2     Motion for Appointment of Receiver Dated May
                      27, 1993 ( 4)

             28.3     Objection to Order to Show Cause Dated June 3,
                      1993 (4)

             28.4     Order Appointing Receiver in Aid of Foreclosure
                      Dated June 7, 1993(4)

             28.5     Motion for Order of Default, Order of Summary
                      Judgment, and Entry of Judgment of Foreclosure 
                      of Mortgage Dated August 10, 1993 (5)

             28.6     Second Extension and Modification Agreement dated 
                      December 28, 1994 (7)

             (1)      Incorporated by reference to Exhibit No. 3.1 and
                      Exhibit 10 to Amendment No. 2 to Form S-11
                      Registration Statement filed May 2, 1983 - File
                      No. 2-82570.

             (2)      Incorporated by reference to Registrant's Reports on
                      Form 8-K dated October 18, 1983, December 9, 1983
                      and April 27, 1984, respectively.

             (3)      Incorporated by reference to Registrant's Report on
                      Form 8-K dated October 16, 1984.

             (4)      Incorporated by reference to Registrant's Report on
                      Form 8-K dated June 7, 1993.

             (5)      Incorporated by reference to Registrant's Report on
                      Form 10-K dated September 30, 1993.

             (6)      Incorporated by reference to Registrant's Report on
                      Form 8-K dated February 18, 1994.

             (7)      Incorporated by reference to Registrant's Report on
                      Form 10-Q dated February 13, 1995.

             (8)      Incorporated by reference to Registrant's Report of
                      Form 10-Q dated February 14, 1996.

                                       37


<PAGE>   38





                          INDEPENDENT AUDITORS' REPORT

THE PARTNERS
BOETTCHER WESTERN PROPERTIES III LTD.:

Under date of December 16, 1996, we reported on the balance sheets of Boettcher
Western Properties III Ltd. (a limited partnership) as of September 30, 1996
and 1995, and the related statements of operations, partners' capital
(deficit), and cash flows for each of the years in the three-year period ended
September 30, 1996, as contained in the Partnership's annual report on Form
10-K for the year 1996.  In connection with our audits of the aforementioned
financial statements, we also audited the related financial statement Schedule
III - Real Estate and Accumulated Depreciation.  This financial statement
schedule is the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on this financial statement schedule
based on our audit.

In our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.

                                         KPMG PEAT MARWICK LLP

Denver, Colorado
December 16, 1996






                                       38
<PAGE>   39
                   BOETTCHER WESTERN PROPERTIES III, LTD.
                           (A Limited Partnership)
            SCHEDULE III - Real Estate and Accumulated Depreciation
                             September 30, 1996

<TABLE>
<CAPTION>
                                                                                                   Costs capitalized              
PROPERTIES                                           Initial cost (a) and (b)                   Subsequent to acquisition         
------------------------------------------------------------------------------------------------------------------------------------
                                            Land and       Buildings       Equipment    Land and      Buildings       Equipment   
                              Mortgage      improve-         and             and        improve-         and             and     
                             Payable (b)     ments        Improvements    Furnishings     ments      Improvements    Furnishings  
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>             <C>          <C>             <C>             <C>         <C>               <C>          
    APARTMENTS:                                                                                                                   
La Risa  (c)                                                                                                                      
   San Antonio, Texas        $        -     1,521,826     4,972,263        750,966            -         29,733              -     
                                                                                                                                  
  SHOPPING CENTER:                                                                                                                
Venetian Square                                                                                                                   
   Stockton, California       3,303,685     1,591,361     6,274,218              -       43,591         83,524              -     
                              ----------    ---------    ----------       --------      -------       --------          -----  
Balances at                                                                                                                       
  September 30, 1996         $3,303,685     3,113,187    11,246,481        750,966       43,591        113,257              0    
                              =========     =========    ==========       ========      =======       ========          =====
<CAPTION>
                                      Gross amount at close                                                                  
PROPERTIES                            of period (a) and (b)                                                                  
------------------------------------------------------------------------------------------------------------------------------------
                              Land and      Buildings       Equipment                                   Date of     Date of  
                              improve-         and            and                      Accumulated      construc-   acquisi- 
                               ments       Improvements    Furnishings     Total       depreciation      tion        tion    
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>             <C>             <C>            <C>         <C>              <C>       <C>          
    APARTMENTS:                                                                                                              
La Risa  (c)                                                                                                                 
   San Antonio, Texas         1,521,826     5,001,996       750,966       7,274,788     (2,551,025)      1972      18-Oct-83 
                                                                                                                             
  SHOPPING CENTER:                                                                                                           
Venetian Square                                                                                                              
   Stockton, California       1,634,952     6,357,742             -       7,992,694     (2,599,948)      1979      09-Dec-83 
                             ----------    ----------      --------      ----------     ----------                              
Balances at                                                                                                                  
  September 30, 1996          3,156,778    11,359,737       750,966      15,267,482     (5,150,974)                          
                             ==========    ==========      ========      ==========     ==========
<CAPTION>

                                              Life on which
PROPERTIES                                depr. is computed
-----------------------------------------------------------         
                                 Buildings       Equipment
                                    and            and
                                Improvements    Furnishings
-----------------------------------------------------------         
<C>                             <C>              <C>
    APARTMENTS:             
La Risa  (c)                
   San Antonio, Texas              30 years        5 years
                            
  SHOPPING CENTER:          
Venetian Square             
   Stockton, California            30 years        5 years
                            
Balances at                 
  September 30, 1996        
</TABLE>                    

Notes:
  (a) La Risa and Venetian Square were purchased during the period ended
      September 30, 1984.  
                                                                            
  (b) Net of debt discount.                                                 
                                                                            
  (c) La Risa was sold on February 29, 1996.                                
                                                                            
  (d) Reconciliation of the total amount at which real estate was carried:  


<TABLE>
<CAPTION>
                                                                              Balance at September 30,              
                                                                              ------------------------
                                                                         1996                         1995             
                                                                         ----                         ----
 <S>                                                   <C>              <C>        <C>           <C>                  
 Balance at beginning of period . . . . . . . . . . . . . . . . . . .  $15,154,225               $15,040,676               
   Additions during period:                                                                                         
     Acquistions through foreclosure . . . . . . . . .         0                          0                      
     Other acquisitions. . . . . . . . . . . . . . . .         0                          0
     Improvements, etc.. . . . . . . . . . . . . . . . $ 113,257                   $113,549                      
     Other (describe). . . . . . . . . . . . . . . . .         0                          0
                                                       ---------                   --------
                                                                          113,257                    113,549 
                                                                       ----------                 ----------
                                                                       15,267,482                 15,154,225              
   Deductions during period:                                                                                              
     Cost of real estate sold. . . . . . . . . . . . . 7,274,788                          0                               
     Other (describe). . . . . . . . . . . . . . . . .         0                          0                               
                                                       ---------                   --------
                                                                        7,274,788                          0              
                                                                       ----------                 ----------
                                                                                                                          
 Balance at close of period. . . . . . . . . . . . . .                 $7,992,694                $15,154,225              
                                                                       ==========                ===========
 
  (d) Reconciliation (continued)      
       Reconciliation of the total amount of accumulated depreciation:  
                                                                              Balance at September 30, 
                                                                              ------------------------
                                                                         1996                         1995  
                                                                         ----                         ----
 Balance at beginning of period . . . . . . . . . . . . . . . . . . . ($4,833,753)               ($4,382,580)   
  Additions during period:                                                                                
    Depreciation expense . . . . . . . . . . . . . . . ($317,221)                 ($451,173)  
    Other (describe) . . . . . . . . . . . . . . . . .         0                          0   
                                                       ---------                   --------
                                                                         (317,221)                  (451,173) 
                                                                       ----------                 ----------
                                                                       (5,150,974)                (4,833,753)
                                                                                
 Deductions during period:
  Cost of real estate sold. . . . . . . . . . . . . . (2,551,025)                        0                       
  Other (describe). . . . . . . . . . . . . . . . . .          0                         0
                                                       ---------                   --------
                                                                       (2,551,025)                         0
                                                                       ----------                 ----------
 Balance at close of period. . . . . . . . . . . . . . . . . . . . . .($2,599,948)               ($4,833,753)
                                                                       ==========                ===========
</TABLE>

(e) No item of real estate investment has been written down or reserved 
    against.              
                                                                             
(f) The aggregate cost for Federal income tax purposes at September 30, 1996 
    is $9,124,075. 

(g) No intercompany profits are included in the total of column E.   
                                                                     
See accompanying independent auditors' report.                       
<PAGE>   40




                                   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.

                             BOETTCHER WESTERN PROPERTIES III LTD.
                                       (Registrant)

                             By:  Boettcher Properties, Ltd.,
                                   Managing General Partner

                                  By:  BPL Holdings, Inc.,
                                        General Partner

                                       By:  /s/Thomas M. Mansheim    
                                            ---------------------      
                                            Treasurer

                                            Dated:  December 27, 1996


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons (constituting a majority
of the Directors of the corporate general partner of the Registrant's Managing
General Partner) on the 27th day of December, 1996 in the capacities indicated
below.

Name                           Capacities                                    
----                           ----------

JANET L. REALI                 Director and President of BPL Holdings, Inc.;
                               Principal Executive Officer of the
                               Partnership


By:  /s/Janet L. Reali         Dated:  December 27, 1996
     ------------------                           
     Janet L. Reali


DANIEL D. WILLIAMS             Director and Vice President of BPL Holdings,
                               Inc.


By:  /s/Daniel D. Williams     Dated:  December 27, 1996
     ---------------------                           
     Daniel D. Williams


THOMAS M. MANSHEIM             Director and Treasurer of BPL Holdings, Inc.;
                               Principal Financial and Accounting Officer of
                               the Partnership

By:  /s/Thomas M. Mansheim     Dated:  December 27, 1996
     ---------------------                           
     Thomas M. Mansheim




                                       40
<PAGE>   41


     No annual report or proxy material has been sent to the limited partners
of the Partnership.  An annual report will be sent to the limited partners
subsequent to this filing and the Partnership will furnish copies of such
report to the Commission when it is sent to the limited partners.


















                                       41