UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

~~For~~ANNUAL ~~the~~REPORT ~~fiscal~~PURSUANT ~~year~~TO ~~ended~~SECTION ~~December~~13 ~~31,~~OR ~~2012~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

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

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

For the transition period from _________to _________

Commission file number 0-10673

REAL ESTATE ASSOCIATES LIMITED III

(Exact name of registrant as specified in its charter)


California	95-3547611
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

80PO ~~International~~Box ~~Drive~~91274 Los Angeles, California 90009 (Address of principal executive offices) (720) 387-8135 (Registrant’s telephone number, including area code)

Greenville, South Carolina 29615

(Address of principal executive offices)

Registrant's telephone number, including area code (864) 239-1000

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

None

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

Units of Limited Partnership Interests

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £ Accelerated filer £ Non-accelerated filer £ (Do not check if a smaller reporting company) Smaller reporting company S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

State the aggregate market value of the voting and non-voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were last sold, or the average bid and asked price of such partnership interests as of the last business day of the registrant’s most recently completed second fiscal quarter. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE

None

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking within the meaning of the federal securities laws. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect the Partnership and its investment in limited partnerships and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the limited partnerships in which the Partnership has invested. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

PART I

Item 1. Business

Real Estate Associates Limited III (“REAL III” or the “Partnership”) is a limited partnership formed under the laws of the State of California on July 25, 1980. On January 5, 1981, REAL III offered 3,000 units consisting of 6,000 Limited Partnership Interests and Warrants to purchase a maximum of 6,000 additional Limited Partnership Interests through a public offering managed by E.F. Hutton Inc. REAL III received $14,320,000 in subscriptions for units of Limited Partnership Interests (at $5,000 per unit) during the period March 31, 1981 to October 30, 1981, pursuant to a registration statement on Form S-11. As of March 10, 1982, REAL III received an additional $14,320,000 in subscriptions pursuant to the exercise of warrants and the sale of Additional Limited Partnership Interests. Since these two transactions, REAL III has not received, nor are limited partners required to make, additional capital contributions. The Partnership shall be dissolved only upon the expiration of 52 complete calendar years (December 31, 2032) from the date of the formation of the Partnership or the occurrence of other events as specified in the terms of the Partnership Agreement.

The general partners of REAL III are National Partnership Investments, LLC (“NAPICO” or the “General Partner”), a California limited liability company and National Partnership Investment Associates, a limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). Bethesda acquired the General Partner on December 19, 2012, pursuant to an option agreement with Aimco/Bethesda Holdings, Inc., a subsidiary of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust. The business of REAL III is conducted primarily by NAPICO.

REAL III holds limited partnership interests in ~~four~~one local ~~partnerships~~partnership ~~(the “Local Partnerships”)~~ as of December 31, ~~2012~~2014. During the year ended December 31, ~~2012,~~2013 the Partnership ~~assigned~~sold its ~~limited partnership~~ interest in one Local Partnership, tosold anthe ~~affiliate~~property of ~~the~~one ~~operating~~Local ~~general~~Partnership ~~partner~~and ofassigned ~~the~~its interest in one Local Partnership. During the year ended December 31, ~~2011~~2012, the Partnership assigned its limited partnership interest in one Local Partnership to an affiliate of the operating general partner of the Local Partnership. Prior to ~~2011~~2012, the Partnership sold its interest in 24 Local Partnerships, ~~and~~ two Local Partnerships sold their investment properties. ~~Each~~and ofone ~~the~~local ~~remaining~~Partnership ~~four~~assigned its interest. The remaining Local ~~Partnerships~~Partnership owns a low income housing project which is subsidized and/or has a mortgage note payable to or insured by agencies of the federal or local government.

The partnerships in which REAL III has invested were, at least initially, organized by private developers who acquired the sites, or options thereon, and applied for applicable mortgage insurance and subsidies. REAL III became the principal limited partner in these Local Partnerships pursuant to arm’s-length negotiations with these developers, or others, who act as general partners. As a limited partner, REAL III’s liability for obligations of the Local Partnerships is limited to its investment. The local general partner of the Local Partnerships retains responsibility for developing, constructing, maintaining, operating and managing the project. Under certain circumstances of default, REAL III has the right to replace the general partner of the Local Partnerships, but otherwise does not exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships.

the sites, or options thereon, and applied for applicable mortgage insurance and subsidies. REAL III became the principal limited partner in these Local Partnerships pursuant to arm’s-length negotiations with these developers, or others, who act as general partners. As a limited partner, REAL III’s liability for obligations of the Local Partnerships is limited to its investment. The local general partner of the Local Partnerships retains responsibility for developing, constructing, maintaining, operating and managing the project. Under certain circumstances of default, REAL III has the right to replace the general partner of the Local Partnerships, but otherwise does not exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships.

Although each of the Local Partnerships in which REAL III has invested generally owns a project which must compete in the marketplace for tenants, interest subsidies and rent supplements from governmental agencies make it possible to offer these dwelling units to eligible “low income” tenants at a cost significantly below the market rate for comparable conventionally financed dwelling units in the area.

The Partnership does not have any employees. Services are performed for the Partnership by the General Partner and agents retained by the General Partner.

A further description of the Partnership's business is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Form 10-K.

Item 1A. Risk Factors

Not applicable.

Item 2. Properties

During ~~2012~~2014, the ~~projects~~project in which REAL III had invested ~~were~~was substantially rented ~~except for Lakeside Apartments and Ramblewood Apartments~~. ~~The~~ ~~Partnership believes that the low occupancy for Lakeside Apartments is due to the difficulty in renting the apartment units which do not receive full subsidies.~~ The ~~Partnership believes that the low occupancy for Ramblewood Apartments is primarily due to the rural location of the property as well as the increase in unemployment in the area. The~~ following is a schedule of the occupancy status as of December 31, ~~2012~~2014 and 2013, respectively, of the ~~projects~~project owned by the Local ~~Partnerships~~Partnership in which REAL III is a limited partner.

~~SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS~~2

INSCHEDULE ~~WHICH~~OF ~~REAL~~PROJECTS ~~III~~OWNED ~~HAS~~BY ANLOCAL ~~INVESTMENT~~PARTNERSHIPS

~~DECEMBER~~IN ~~31,~~WHICH ~~2012~~REAL III HAS AN INVESTMENT

			Units
			Authorized
			For Rental
		Financed	Assistance Under
		Insured	Section 8	Percentage of	Percentage of
		And	Or Other Rent	Total Units	Total Units
	No. of	Subsidized	Supplement	Occupied	Occupied
Name and Location	Units	Under	Program	2012	2011
LakesideApts.	32	(A)	23	71%	76%
Stuart, FL
Ramblewood Apts.	64	(A)	13	74%	80%
Fort Payne, AL
Santa MariaApts.	86	(A)	86	99%	99%
San German, Puerto Rico
Vincente Geigel	80	(A)	80	99%	100%
Polanco Apts
Isabela, Puerto Rico
	___		___
TOTALS	262		202

DECEMBER 31, 2014

(A) The mortgage is insured by USDA, Rural Development.


			Units
			Authorized
			For Rental
		Financed	Assistance Under
		Insured	Section 8	Percentage of	Percentage of
		And	Or Other Rent	Total Units	Total Units
	No. of	Subsidized	Supplement	Occupied	Occupied
Name and Location	Units	Under	Program	2014	2013

Vincente Geigel	80	(A)	80	99%	99%
Polanco Apts
Isabela, Puerto Rico

The following table details the Partnership's ownership percentages of the Local Partnerships and the cost of acquisition of such ownership. All interests are limited partner interests. Also included is the total mortgage encumbrance on each property for each of the Local Partnerships as of December 31, 2012. (A)

	REAL III	Original Cost
	Percentage	of Ownership	Mortgage
Partnership	Interest	Interest	Note
		(in thousands)	(in thousands)
Alabama Properties Ltd. V	99%	$ 205	$ 1,331
Lakeside Apartments Ltd.	95%	65	843
Santa Maria Limited Dividend
Partnership Assoc.	99%	420	2,111
Marina Del Rey Limited
Dividend Partnership Assoc.	99%	395	2,129
		$ 1,085	$ 6,414

The mortgage is insured by USDA, Rural Development.

~~Although~~The ~~each~~following ~~Local~~table ~~Partnership~~details ~~in which~~ the Partnership's ~~has~~ownership ~~invested~~percentages ~~owns~~of anthe ~~apartment~~Local ~~complex~~Partnerships ~~which~~and ~~must~~the ~~compete~~cost ~~with~~of ~~other~~acquisition ~~apartment~~of ~~complexes~~such ~~for~~ownership. ~~tenants,~~All ~~government~~interests ~~mortgage~~are ~~interest~~limited ~~and~~partner ~~rent~~interests. ~~subsidies~~Also ~~make~~included itis ~~possible~~the tototal ~~rent~~mortgage ~~units~~encumbrance toon ~~eligible~~each ~~tenants~~property atfor ~~below~~each ~~market~~of ~~rates. In general,~~ the ~~Partnership~~Local ~~believes~~Partnerships ~~this~~as ~~insulates~~of ~~the~~December ~~properties~~31, ~~from market competition~~2014.


	REAL III	Original Cost
	Percentage	of Ownership	Mortgage
Partnership	Interest	Interest	Note
		(in thousands)	(in thousands)
Marina Del Rey Limited
Dividend Partnership Assoc.	99%	$ 395	$ 2,006

Although each Local Partnership in which the Partnership has invested owns an apartment complex which must compete with other apartment complexes for tenants, government mortgage interest and rent subsidies make it possible to rent units to eligible tenants at below market rates. In general, the Partnership believes this insulates the properties from market competition.

Item 3. Legal Proceedings

The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

The Limited Partnership Interests are not traded on a public exchange but were sold through a public offering managed by E.F. Hutton Inc. It is not anticipated that any public market will develop for the purchase and sale of any Partnership interest; therefore, an investor may be unable to sell or otherwise dispose of his or her interest in the Partnership. Limited Partnership Interests may be transferred only if certain requirements are satisfied. At December 31, ~~2012~~2014, there were 1,~~829~~759 registered holders of interests in the Partnership owning a total of 11,~~320~~292 limited partnership interests. The Partnership has invested in certain government assisted projects under programs which in many instances restrict the cash return available to project owners. The Partnership was not designed to provide cash distributions to investors in circumstances other than refinancing or disposition of its investment in the Local Partnerships. A distribution in the aggregate amount of $3,345,000 (or $584 per interest) was made in 1989. This represented the proceeds from the sale of one of the Partnership's real estate investments. In March 1999, the Partnership made distributions of approximately $6,881,000 to the limited partners and approximately $70,000 to the general partners, which included using proceeds from the sale of the partnership interests. In 2001, the Partnership paid a distribution of $3,000,000 to the limited partners. In 2003, the Partnership made distributions of approximately $1,295,000 to the limited partners, which involved using proceeds from the sale of partnership interests of approximately $210,000 and excess reserves of approximately $1,085,000 to the limited partners. In October 2007, the Partnership made distributions of approximately $2,800,000 (or $245.18 per interest) to the limited partners from the proceeds of the sale of the Partnership’s interest in 300 Broadway Associates. In December 2009, the Partnership made a distribution of approximately $500,000 (or $43.78 per interest) to the limited partners from excess reserves.

In addition to its indirect ownership of the general partnership interest in the Partnership, Bethesda and its affiliates owned ~~984~~1,154 limited partnership interests in the Partnership representing 810.6922% of the outstanding limited partnership interests in the Partnership at December 31, ~~2012~~2014. It is possible that Bethesda or its affiliates will acquire additional limited partnership interests in the Partnership either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the limited partnership interests are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Bethesda as its sole stockholder.

Item 6. Selected Financial Data

Not applicable.

~~Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations~~4

~~This~~Item ~~item~~7. ~~should~~Management's beDiscussion ~~read~~and inAnalysis ~~conjunction~~of ~~with~~Financial ~~the~~Condition ~~financial statements~~ and ~~other~~Results ~~items~~of ~~contained elsewhere in this document.~~Operations

~~The~~This ~~General~~item ~~Partner~~should ~~monitors~~be ~~developments~~read in ~~the~~conjunction ~~area~~with ofthe ~~legal~~financial statements and ~~regulatory~~other ~~compliance~~items contained elsewhere in this document.

~~Liquidity~~The General Partner monitors developments in the area of legal and ~~Capital~~regulatory ~~Resources~~compliance.

~~The~~Liquidity Partnership's primary source of funds includes the receipt of distributions from the Local Partnerships in which the Partnership has invested. It is not expected that any of the Local Partnerships in which the Partnership has invested will generate cash flow from operations sufficient to provide for distributions to the Partnership's limited partners in any material amount. An infrequent source of funds would be funds received by the Partnership as its share of any proceeds from the sale of a property owned by a Local Partnership or the Partnership’s sale of its interest in a Local Partnership. There were no distributions made by the Partnership to its limited partners during the years ended December 31, 2012 and ~~2011.~~Capital Resources

The ~~properties~~Partnership's primary source of funds includes the receipt of distributions from the Local Partnerships in which the Partnership has invested,. ~~through~~It ~~the~~is ~~Partnership’s~~not ~~investments~~expected inthat any of the Local Partnerships, ~~receive~~in ~~one~~which orthe ~~more~~Partnership ~~forms~~has ofinvested ~~assistance~~will generate cash flow from ~~the~~operations ~~Federal~~sufficient ~~Government.~~to Asprovide afor ~~result,~~distributions to the ~~Local Partnerships~~Partnership's ~~ability~~limited topartners ~~transfer~~in any material amount. An infrequent source of funds ~~either~~would tobe funds received by the Partnership oras ~~among~~its ~~the~~share ~~Local~~of ~~Partnerships~~any inproceeds from the ~~form~~sale of ~~cash~~a ~~distributions,~~property ~~loans~~owned by a Local Partnership or ~~advances~~the isPartnership’s ~~generally~~sale ~~restricted~~of byits ~~these~~interest ~~government~~in ~~assistance~~a ~~programs~~Local Partnership. ~~These~~There ~~restrictions,~~were ~~however,~~no ~~are~~distributions ~~not~~made ~~expected~~by the Partnership to ~~impact~~its limited partners during the ~~Partnership's~~years ~~ability~~ended toDecember ~~meet~~31, ~~its~~2014 ~~cash~~and ~~obligations~~2013.

AsThe ofproperties ~~December~~in ~~31,~~which ~~2012~~the ~~and~~Partnership ~~2011~~has invested, through the Partnership’s ~~had~~investments ~~cash~~in ~~and~~the ~~cash~~Local ~~equivalents~~Partnerships, ofreceive ~~approximately~~one ~~$138,000~~or ~~and~~more ~~$327,000,~~forms ~~respectively.~~of ~~The~~assistance ~~decrease~~from inthe ~~cash~~Federal ~~and~~Government. ~~cash~~As ~~equivalents~~a ofresult, ~~approximately~~the ~~$189,000~~Local isPartnerships' ~~due~~ability to ~~cash~~transfer ~~used~~funds ineither ~~operating~~to ~~and~~the ~~investing~~Partnership ~~activities~~or ofamong ~~approximately~~the ~~$164,000~~Local ~~and~~Partnerships ~~$25,000,~~in ~~respectively. Cash~~the ~~used~~form inof ~~investing~~cash ~~activities~~distributions, ~~consisted~~loans ofor advances ~~made~~is togenerally ~~Local~~restricted ~~Partnerships,~~by ~~partially~~these ~~offset~~government byassistance ~~proceeds~~programs. ~~received~~These ~~from~~restrictions, ~~the~~however, ~~sale~~are ofnot expected to impact the Partnership’'s ~~interest~~ability into ~~one~~meet ~~Local~~its ~~Partnership~~cash obligations.

~~Results~~As of ~~Operations~~December 31, 2014 and 2013, the Partnership had cash and cash equivalents of approximately $65,000 and $522,000, respectively. The decrease in cash and cash equivalents of approximately $457,000 is primarily due to advances made to Local Partnerships.

AtDuring ~~December 31~~2013, ~~2012,~~ the ~~Partnership~~sale ~~has investments in four Local Partnerships, all~~ of ~~which~~Santa ~~own~~Maria ~~housing~~resulted ~~projects that were substantially rented except for Lakeside Apartments and Ramblewood Apartments. The Partnership believes that the low occupancy for Lakeside Apartments is due to the difficulty~~ in ~~renting~~withholding ~~the~~tax ~~apartment units which do not receive full subsidies. The Partnership believes that the low occupancy for Ramblewood Apartments is primarily~~ due to ~~the~~Puerto ~~rural~~Rico ~~location~~ of ~~the~~approximately ~~property as well as the increase in unemployment in the area. The Partnership~~$307, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships that would require or allow for consolidation000. ~~Accordingly,~~Santa ~~the~~Maria ~~Partnership~~paid ~~accounts for its investment in~~ the ~~Local~~withholding ~~Partnerships~~on ~~using~~behalf ~~the equity method. Thus the individual investments are carried at cost plus the Partnership’s share~~ of the ~~Local~~ Partnership’s ~~profits~~which ~~less~~flowed the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. However, since the Partnership is not legally liable for the obligations of the Local Partnerships, or is not otherwise committed to ~~provide~~its ~~additional support to them, it does not recognize losses once the Partnership’s investment in each of the Local Partnerships reaches zero~~partners. ~~Distributions~~ ~~from~~This ~~the~~payment ~~Local~~was ~~Partnerships~~recorded ~~are accounted for~~ as adistributions ~~reduction of the investment balance until the investment balance is reduced~~ to ~~zero. Subsequent distributions received are recognized as income in~~ the ~~statements of operations. For those investments where the~~ Partnership ~~has determined that the carrying value of the Partnership’~~'s investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received, and amortization of acquisition costs from those Local Partnershipspartners. Therefore, the Partnership limits its recognition of equity earnings to the amount the Partnership expects to ultimately realize. The Partnership did not recognize any equity in income or loss from Local Partnerships during the years ended December 31, 2012 and 2011. The Partnership did not receive any distributions from Local Partnerships during the years ended December 31, 2012 or 2011.

~~Two~~Results Local Partnerships, Santa Maria Limited Dividend Partnership Assoc. (“Santa Maria”) and Marina Del Rey Limited Dividend Partnership Assoc. (“Marina Del Rey”), have been marketing their properties for sale. On October 26, 2011, Santa Maria and Marina Del Rey each entered into separate purchase and sale contracts to sell their respective investment properties to a third party for a gross sales price of $2,600,000 and $2,750,000, respectively. After payment of closing costs and repayment of the notes payable encumbering the properties, the Partnership expects to receive approximately $330,000 and $500,000 from Santa Maria and Marina Del Rey, respectively, for advance repayments and distributions. The sales are expected to close during 2013. The Partnership has no investment balances remaining in these two Local Partnerships at December 31, 2012 and 2011.Operations

InAt December ~~2012~~31, 2014, the Partnership ~~assigned~~had ~~its~~investments in one Local Partnership, which owned a housing project that was substantially rented. The Partnership, as a limited ~~partnership~~partner, ~~interest~~does not have a contractual relationship with the Local Partnership or exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in ~~Vista~~the ~~Housing~~Local ~~Associates~~Partnership ~~(“Vista~~using ~~Housing”)~~the toequity amethod. Thus ~~third~~the ~~party~~individual investment is carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. However, since the Partnership is not legally liable for ~~approximately~~the ~~$22~~obligations of the Local Partnership,~~000~~ or is not otherwise committed to provide additional support to them, ~~which~~it ~~was~~does not recognize losses once the Partnership’s investment in the Local Partnership reaches zero. Distributions from the Local Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. Subsequent distributions received are recognized as ~~gain~~income onin ~~sale~~the statements of ~~interest~~operations. For those investments where the Partnership has determined that the carrying value of the Partnership’s investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnership only to the extent of distributions received, and amortization of acquisition costs from the Local Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount the Partnership expects to ultimately realize. The Partnership’s ~~investment~~did ~~balance~~not recognize any equity in ~~Vista~~income ~~Housing~~or ~~was~~loss ~~zero~~from atLocal Partnerships during the ~~date~~years ofended ~~assignment~~December 31, 2014 and 2013. The Partnership did not receive any operating distributions from Local Partnerships during the years ended December 31, ~~2011~~2014 or 2013.

In May 2011, the Partnership assigned its limited partnership interest in Village Apartments (“Village”) to an affiliate of the operating general partner of Village. The Partnership believed that Village’s liabilities exceeded the fair value of the property. In addition, Village faced foreclosure as the lender had issued an acceleration notice on Village’s mortgage. The Partnership did not receive any proceeds for the assignment. The Partnership’s investment balance in Village was zero at the date of the assignment.5

AtIn ~~December~~July 312013, ~~2012~~the ~~and~~Partnership ~~2011,~~sold ~~the~~its ~~investment~~limited ~~balance~~partnership interest in Lakeside Apartments, Ltd. to an affiliate of the ~~four~~operating ~~and~~General ~~five~~Partner ~~Local~~for ~~Partnerships,~~no ~~respectively,~~consideration. ~~had~~The ~~been~~Partnership's ~~reduced~~investment tobalance in this local partnership was zero. at the time of sale.

AnIn ~~annual~~August ~~management~~2013, ~~fee~~the isPartnership ~~payable~~sold to the ~~General~~real ~~Partner~~estate of ~~the~~Santa ~~Partnership~~Maria ~~and~~Limited isDividend ~~calculated~~Partnership ~~at 0~~Assoc.4 ~~percent~~and ofreceived ~~the~~approximately ~~Partnership's~~$407,000 ~~original~~in ~~remaining~~proceeds ~~invested~~from ~~assets of~~ the ~~Local Partnership at the beginning of each year~~sale. ~~The~~Subsequent ~~management fee is paid~~ to the ~~General~~closing, ~~Partner for~~ the ~~General Partner’s management of the~~ Partnership’s ~~affairs.~~received ~~The~~an ~~fee~~additional isamount ~~payable~~of ~~beginning~~$404,000 ~~with~~from ~~the~~release ~~month~~of ~~following~~reserves. ~~the~~The Partnership's ~~initial~~ investment balance in athis ~~Local~~local ~~Partnership.~~partnership ~~Management~~was ~~fees~~zero ~~were~~at ~~approximately $49,000 and $55,000 for~~ the ~~years~~time ~~ended December 31, 2012 and 2011, respectively. The decrease in management fees is due to the assignment~~ of ~~interest in one Local Partnership during 2011~~sale.

~~Operating~~In ~~expenses~~October, ~~other than management fees~~2013, ~~consist of legal and accounting fees for services rendered to~~ the Partnership ~~and~~assigned ~~general~~its ~~and~~limited ~~administrative~~partnership ~~expenses.~~interest ~~Legal~~in ~~and~~Alabama ~~accounting fees were approximately $107~~Properties,~~000~~ ~~and $53~~Ltd.,~~000~~ ~~for~~V ~~the~~(Ramblewood ~~years~~I) ~~ended December 31, 2012 and 2011, respectively. The increase in legal and accounting fees is primarily due~~ to an ~~increase~~affiliate ~~in legal and professional costs incurred in 2012 associated with the expected sales~~ of the ~~investment~~operating ~~properties of the two Local Partnerships, Santa Maria and Marina Del Rey.~~ General ~~and~~Partner ~~administrative~~for ~~expenses~~a ~~were~~total ~~approximately~~of $1817,~~000 and $14,000 for the years ended December 31, 2012 and 2011, respectively~~600. The ~~increase~~Partnership inhad ~~general~~no ~~and~~investment ~~administrative~~balance ~~expenses~~remaining isat ~~primarily due to administrative costs incurred in 2012 associated with~~ the ~~expected~~date ~~sales~~ of the ~~investment properties of the two Local Partnerships, Santa Maria and Marina Del Rey~~assignment.

At times, advances are made to the Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in the Local Partnerships. Advances to Local Partnerships for which the investment has been reduced to zero are charged to expense. During the years ended December 31, ~~2012~~2014 and ~~2011~~2013, the ~~Partnership~~investment ~~advanced~~balance ~~approximately~~in ~~$47,000~~the ~~and~~one ~~$69,000, respectively, to two~~ Local ~~Partnerships, Santa Maria Ltd. and Marina Del Rey Limited Dividend~~ Partnership ~~Assoc.,~~had ~~for~~been ~~entity~~reduced ~~taxes, which was recognized as expense for advances. While not obligated~~ to ~~make advances to any of the Local Partnerships, the Partnership may make future advances in order to protect its economic investment in the Local Partnerships~~zero.

~~Total~~An ~~revenues~~annual ~~from~~management ~~continuing~~fee ~~operations~~is payable to the General Partner of the Partnership and is calculated at 0.4 percent of the Partnership's original remaining invested assets of the Local Partnership at the beginning of each year. The management fee is paid to the General Partner for the General Partner’s management of the Partnership’s affairs. The fee is payable beginning with the month following the Partnership's initial investment in a Local ~~Partnerships~~Partnership. Management fees were approximately $112,~~860,~~000 and $136,~~821,~~000 for the years ended December 31, ~~2012~~2014 and ~~2011~~2013, respectively.

~~Total~~Operating expenses, ~~from~~other ~~continuing~~than ~~operations~~management fees, consist of legal and accounting fees for services rendered to the ~~Local~~Partnership ~~Partnerships~~and general and administrative expenses. Legal and accounting fees were approximately $1118,~~753~~000 and $78,000 for the years ended December 31, 2014 and 2013, respectively. General and administrative expenses were approximately $143,~~850~~000 and $17,000 for the years ended December 31, ~~2012~~2014 and ~~2011~~2013, respectively. The increase in general and administrative expenses is primarily due to administrative costs increase associated with investors reporting.

~~Total~~At ~~income~~times, ~~from~~advances ~~continuing~~are ~~operations~~made ~~for~~to the Local Partnerships. ~~for~~Advances ~~2012~~made ~~totaled~~by ~~approximately~~the ~~$107,000,~~Partnership ~~compared~~ to athe ~~loss~~individual ~~from~~Local ~~continuing~~Partnerships ~~operations~~are considered part of ~~approximately~~the ~~$29,000~~Partnership’s ~~for~~investment ~~2011~~in the Local Partnerships. ~~The~~Advances ~~net~~to ~~income~~Local ~~(loss)~~Partnerships ~~allocated~~for which the investment has been reduced to zero are charged to expense. During the ~~Partnership~~years ~~was~~ended ~~approximately~~December ~~$107~~31,~~000~~ ~~and~~2014 (the Partnership advanced $29372,000) to Marina Del Ray Limited Dividend Partnership Associates for capital improvements. During 2013, the ~~years~~Partnership ~~2012~~advanced ~~and~~approximately ~~2011~~$67,000 ~~respectively.~~to ~~However~~two Local Partnerships, ~~none~~Santa ofMaria ~~the~~Ltd. ~~net~~and ~~income~~Marina orDel ~~loss~~Rey Limited Dividend Partnership Assoc., for ~~2012~~entity ortaxes, ~~2011~~which was recognized byas expense for advances. While not obligated to make advances to any of the ~~Partnership~~Local asPartnerships, the ~~investment~~Partnership ~~balance~~may ~~had~~make ~~already~~future ~~been~~advances ~~reduced~~in order to ~~zero~~protect ~~for~~its ~~all~~economic ofinvestment in the Local Partnerships.

~~The~~Total ~~Partnership,~~revenues asfrom acontinuing ~~limited~~operations ~~partner~~for in the Local ~~Partnerships in which it has invested, is subject to the risks incident to the management and ownership of improved real estate. The~~ Partnership ~~investments~~were ~~are~~approximately ~~also subject to adverse general economic conditions~~$688,000 and, ~~accordingly~~$616,000 ~~the~~for ~~status of~~ the ~~national~~years ~~legislation~~ended ~~which~~December ~~could increase vacancy levels~~31, ~~rental~~2014 ~~payment defaults,~~ and ~~operating expenses~~2013, ~~which in turn, could substantially increase the risk of operating losses for the projects~~respectively.

~~The~~Total ~~current~~expenses ~~policy~~from ofcontinuing ~~the~~operations ~~United~~for ~~States Department of Housing and Urban Development (“HUD”) is to not renew~~ the ~~Housing~~Local ~~Assistance~~Partnership ~~Payment~~were ~~(“HAP”)~~approximately ~~Contracts~~$585,000 ~~on a long term basis on the existing terms. In connection with renewals of the HAP Contracts under current law~~ and ~~policy~~$599,000 the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD (“FHA”) unless such mortgage loans are restructured. In order to address the reduction in payments under HAP Contracts as a result of current policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 (“MAHRAA”) provides for the ~~restructuring~~years ofended ~~mortgage~~December ~~loans insured by the FHA with respect to properties subject to the Section 8 program. Under MAHRAA~~31, an2014 ~~FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis~~ and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable to the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount. MAHRAA also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply2013, ~~converting such subsidies to a tenant-based subsidy~~respectively.

~~When~~Total ~~the~~income ~~HAP~~from ~~Contracts~~continuing ~~are~~operations ~~subject~~for ~~to renewal, there can be no assurance that~~ the Local ~~Partnerships~~Partnership infor ~~which~~2014 ~~the~~and ~~Partnership~~2013 ~~has~~totaled anapproximately ~~investment~~$103,000 ~~will~~and be$17,000, ~~permitted~~respectively, toThe ~~restructure~~net ~~its~~income ~~mortgage~~for ~~indebtedness~~2014 ~~under~~and ~~MAHRAA. In~~2013 ~~addition,~~was ~~the~~not ~~economic~~recognized ~~impact~~by on the Partnership ofas the ~~combination~~investment ofbalance ~~the~~had ~~reduced~~already ~~payments~~been ~~under~~reduced ~~the~~to ~~HAP~~zero ~~Contracts~~for ~~and~~all ~~the restructuring~~ of the ~~existing~~Local ~~FHA-insured mortgage loans under MAHRAA is uncertain~~Partnerships.

~~Off-Balance~~The ~~Sheet~~Partnership, ~~Arrangements~~as a limited partner in the Local Partnerships in which it has invested, is subject to the risks incident to the management and ownership of improved real estate. The Partnership investments are also subject to adverse general economic conditions, and, accordingly, the status of the national legislation which could increase vacancy

The Partnership owns limited partnership interests in unconsolidated Local Partnerships, in which the Partnership’s ownership percentage ranges from 95% to 99%. However, based on the provisions of the relevant partnership agreements, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Partnerships that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and Summary of Significant Accounting Policies” of the financial statements in “Item 8. Financial Statements and Supplementary Data”). There are no lines of credit, side agreements or any other derivative financial instruments between the Local Partnerships and the Partnership. Accordingly the Partnership’s maximum risk of loss related to these unconsolidated Local Partnerships is limited to the recorded investments in and receivables from the Local Partnerships. See “Note 2 – Investments in and Advances to Local Partnerships” of the financial statements in “Item 8. Financial Statements and Supplementary Data” for additional information about the Partnership’s investments in unconsolidated Local Partnerships.6

~~Variable~~levels, ~~Interest~~rental ~~Entities~~payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects.

The ~~Partnership~~current ~~consolidates~~policy ~~any~~of ~~variable~~the ~~interest~~United ~~entities~~States inDepartment ~~which~~of Housing and Urban Development (“HUD”) is to not renew the ~~Partnership~~Housing ~~holds~~Assistance Payment (“HAP”) Contracts on a ~~variable~~long ~~interest~~term ~~and~~basis ison the ~~primary~~existing ~~beneficiary~~terms. In ~~Generally,~~connection awith ~~variable~~renewals ~~interest~~of ~~entity,~~the orHAP ~~VIE~~Contracts under current law and policy, isthe anamount ~~entity~~of ~~with~~rental ~~one~~assistance orpayments ~~more~~under renewed HAP Contracts will be based on market rentals instead of ~~the~~above ~~following~~market ~~characteristics: (a)~~rentals, which may be the ~~total~~case ~~equity~~under ~~investment~~existing atHAP ~~risk~~Contracts. The ispayments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit ~~the~~owners ~~entity~~of toproperties ~~finance~~subject ~~its~~to ~~activities~~HAP ~~without~~Contracts ~~additional~~to ~~subordinated~~meet ~~financial~~the ~~support;~~debt ~~(b)~~service asrequirements aof ~~group~~existing ~~the~~loans ~~holders~~insured ofby the ~~equity~~Federal ~~investment~~Housing atAdministration ~~risk~~of ~~lack~~HUD (i“FHA”) ~~the~~unless ~~ability~~such mortgage loans are restructured. In order to ~~make~~address ~~decisions~~the ~~about~~reduction anin ~~entity’s~~payments ~~activities~~under ~~through~~HAP ~~voting~~Contracts oras ~~similar~~a ~~rights,~~result ~~(ii)~~of current policy, the ~~obligation~~Multi-family toAssisted ~~absorb~~Housing ~~the~~Reform ~~expected~~and ~~losses~~Affordability Act of 1997 (“MAHRAA”) provides for the ~~entity,~~restructuring orof ~~(iii)~~mortgage loans insured by the ~~right~~FHA with respect to ~~receive~~properties subject to the Section ~~expected~~8 ~~residual~~program. Under ~~returns~~MAHRAA, ofan ~~the~~FHA-insured ~~entity;~~mortgage orloan ~~(c)~~can ~~the~~be ~~equity~~restructured ~~investors~~into ~~have~~a ~~voting~~first ~~rights~~mortgage ~~that~~loan ~~are~~which ~~not~~will ~~proportional~~be toamortized ~~their~~on ~~economic~~a ~~interests~~current basis and ~~substantially~~a ~~all~~low ofinterest ~~the~~second ~~entity’s~~mortgage ~~activities~~loan ~~either~~payable ~~involve,~~to orFHA ~~are~~which ~~conducted~~will only be payable on ~~behalf~~maturity of, anthe ~~investor~~first ~~that~~mortgage ~~has~~loan. This ~~disproportionately~~restructuring ~~few~~results ~~voting~~in ~~rights. The~~a ~~primary~~reduction ~~beneficiary~~in ofannual adebt ~~VIE~~service ispayable ~~generally~~to the ~~entity~~owner ~~that~~of ~~has~~the ~~(a)~~FHA-insured ~~the~~mortgage ~~power~~loan and is expected to ~~direct~~result in an insurance payment from FHA to the ~~activities~~holder of the ~~VIE~~FHA-insured ~~that~~loan ~~most~~due ~~significantly~~to ~~impact~~the reduction in the ~~VIE’s~~principal ~~economic~~amount. MAHRAA ~~performance,~~also ~~and~~phases ~~(b)~~out ~~the~~project-based ~~obligation~~subsidies toon ~~absorb~~selected ~~losses~~properties orserving ~~the~~families ~~right~~not tolocated ~~receive~~in ~~benefits~~rental ~~that~~markets ~~could~~with ~~potentially~~limited besupply, ~~significant~~converting such subsidies to ~~the~~a ~~VIE~~tenant-based subsidy.

InWhen ~~determining whether it is~~ the ~~primary~~HAP ~~beneficiary~~Contracts ofare asubject ~~VIE,~~to ~~the Partnership considers qualitative and quantitative factors~~renewal, ~~including,~~there ~~but~~can ~~not~~be ~~limited~~no ~~to:~~assurance ~~which~~that ~~activities most significantly impact~~ the ~~VIE’s~~Local ~~economic~~Partnerships ~~performance~~in ~~and~~ which ~~party controls such activities;~~ the ~~amount~~Partnership ~~and~~has ~~characteristics~~an ~~of the Partnership’s~~ investment; ~~the~~will ~~obligation~~be orpermitted ~~likelihood~~to ~~for~~restructure ~~the~~its ~~Partnership~~mortgage orindebtedness ~~other~~under ~~investors~~MAHRAA. In toaddition, ~~provide financial support; and~~ the ~~similarity~~economic ~~with~~impact ~~and~~on ~~significance to~~ the ~~business~~Partnership ~~activities~~ of the ~~Partnership~~combination ~~and~~of the ~~other~~reduced ~~investors. Significant~~payments ~~judgments~~under ~~related to these determinations include estimates about~~ the ~~current~~HAP ~~and~~Contracts ~~future fair values~~ and ~~performance~~the restructuring of ~~real~~the ~~estate~~existing ~~held~~FHA-insured bymortgage ~~these~~loans ~~VIEs~~under ~~and~~MAHRAA ~~general~~is ~~market conditions~~uncertain.

AtOff-Balance ~~December~~Sheet 31, 2012 and 2011, the Partnership holds variable interests in four and five VIEs, respectively, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:Arrangements

· The Partnership owns limited partnership interests in an unconsolidated Local Partnership, in which the ~~general~~Partnership’s ~~partners~~ownership ~~conduct~~percentage is 99%. However, based on the provisions of the relevant partnership agreement, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Partnership that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and ~~manage~~Summary of Significant Accounting Policies” of the ~~business~~financial statements in “Item 8. Financial Statements and Supplementary Data”). There are no lines of credit, side agreements or any other derivative financial instruments between the Local Partnership and the Partnership. Accordingly the Partnership’s maximum risk of loss related to this unconsolidated Local Partnership is limited to the recorded investment in and receivables from the Local Partnership. See “Note 2 – Investments in and Advances to Local Partnerships;” of the financial statements in “Item 8. Financial Statements and Supplementary Data” for additional information about the Partnership’s investment in this unconsolidated Local Partnership.

~~· the~~Variable ~~general~~Interest ~~partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;~~Entities

· The Partnership consolidates any variable interest entities in which the ~~general~~Partnership ~~partners~~holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are ~~responsible~~not ~~for~~proportional ~~approving~~to ~~operating~~their economic interests and ~~capital~~substantially ~~budgets~~all ~~for~~of the ~~properties~~entity’s ~~owned~~activities byeither involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the ~~Local~~entity ~~Partnerships;~~that has (a) the power to direct the activities of the VIE that most

~~· the general partners are obligated to fund any recourse obligations of the Local Partnerships;~~ 7

· significantly impact the ~~general~~VIE’s ~~partners~~economic ~~are~~performance, ~~authorized~~and to(b) ~~borrow~~the ~~funds~~obligation onto ~~behalf~~absorb oflosses or the ~~Local~~right ~~Partnerships;~~to ~~and~~receive benefits that could potentially be significant to the VIE.

· In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, asincluding, abut not limited ~~partner~~to: inwhich ~~each~~activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the ~~Local~~Partnership’s ~~Partnerships,~~investment; ~~does~~the ~~not~~obligation ~~have~~or likelihood for the ~~ability~~Partnership or other investors to ~~direct~~provide orfinancial ~~otherwise~~support; ~~significantly~~and ~~influence~~the similarity with and significance to the business activities of the ~~Local~~Partnership ~~Partnerships~~and ~~that~~the ~~most~~other ~~significantly~~investors. Significant ~~impact~~judgments ~~such~~related ~~entities’~~to ~~economic~~these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

~~The~~At ~~four VIEs at~~ December 31, ~~2012~~2014 ~~consist~~and of2013, ~~Local~~the ~~Partnerships~~Partnership ~~that~~held ~~are~~variable ~~directly~~interests ~~engaged~~ in ~~the~~one ~~ownership~~VIE ~~and~~for ~~management~~which ofthe ~~four apartment properties with a total of 262 units. The~~ Partnership iswas ~~involved~~not ~~with~~the ~~those~~primary ~~VIEs as a non-controlling limited partner equity holder~~beneficiary. The Partnership’s ~~maximum~~has ~~exposure~~concluded, tobased ~~loss~~on asits aqualitative ~~result~~consideration of ~~its~~the ~~involvement~~partnership ~~with~~agreement, the ~~unconsolidated~~partnership ~~VIEs~~structure isand ~~limited~~the torole of the ~~Partnership’s~~general ~~recorded~~partner ~~investments~~ in ~~and~~the ~~receivables~~Local ~~from these VIEs~~Partnership, ~~which~~that ~~were~~the ~~zero~~general atpartner ~~December~~of ~~31,~~the ~~2012~~Local ~~and 2011. The~~ Partnership ~~may~~is bethe ~~subject~~primary tobeneficiary ~~additional~~of ~~losses to~~ the ~~extent~~Local ofPartnership. In ~~any~~making ~~financial~~this ~~support~~determination, ~~that~~ the Partnership ~~voluntarily~~considered ~~provides in~~ the ~~future.~~following factors:

~~Critical Accounting Policies and Estimates~~·

~~A summary of~~ the ~~Partnership’s~~general ~~significant~~partner ~~accounting~~conducts ~~policies is included in "Note 1 – Organization~~ and ~~Summary~~manages ~~of Significant Accounting Policies" which is included in~~ the ~~financial~~business ~~statements in "Item 8. Financial Statements and Supplementary Data". The General Partner believes that the consistent application~~ of ~~these policies enables~~ the ~~Partnership~~Local ~~to provide readers of the financial statements with useful and reliable information about the~~ Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.;

~~Method of Accounting for Investments in Local Partnerships~~·

~~The~~the ~~Partnership,~~general ~~as a limited~~ partner, ~~does~~has ~~not have a contractual relationship with~~ the ~~Local~~responsibility ~~Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow~~ for ~~consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits~~ and ~~losses~~sole ofdiscretion ~~the~~over ~~Local~~selecting Partnerships based upon its respective ownership percentage (between 95% and 99%). Distributions of surplus cash from operations from most of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a ~~portion,~~property ~~generally~~management ~~less~~agent ~~than~~for ~~10%, of~~ the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership~~. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships~~’ ~~partnership agreements. These agreements usually limit the Partnership’~~s ~~distributions~~underlying toreal anestate ~~amount substantially less than its ownership percentage in the Local Partnership.~~ properties;

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the statements of operations. ·

~~For those investments where~~ the ~~Partnership~~general ~~has~~partner ~~determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy~~ is toresponsible ~~recognize~~for ~~equity~~approving inoperating ~~income of the Local Partnerships only to the extent of distributions received~~ and ~~amortization~~capital ofbudgets ~~acquisition~~for ~~costs from those Local Partnerships. Therefore,~~ the ~~Partnership~~properties ~~limits~~owned ~~its~~by ~~recognition of equity earnings to~~ the ~~amount~~Local ~~it expects to ultimately realize.~~Partnership;

the general partner is obligated to fund any recourse obligations of the Local Partnership;

the general partner is authorized to borrow funds on behalf of the Local Partnership; and

the Partnership, as a limited partner in the Local Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnership that most significantly impact such entity’s economic performance.

The VIE at December 31, 2014 consists of a Local Partnership that is directly engaged in the ownership and management of one apartment property with a total of 80 units. The Partnership is involved with the VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from the VIE, which was zero at December 31, 2014 and 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Critical Accounting Policies and Estimates

A summary of the Partnership’s significant accounting policies is included in "Note 1 – Organization and Summary of Significant Accounting Policies" which is included in the financial statements in "Item 8. Financial Statements and Supplementary Data". The General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Method of Accounting for Investments in the Local Partnership

The Partnership, as a limited partner, does not have a contractual relationship with the Local Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnership using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage of 99%. Distributions of surplus cash from operations from the Local Partnership are restricted by the Local Partnership’s Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distributions to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of a Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnership’s partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership.

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Partnership and is not otherwise committed to provide additional support to it. Therefore, it does not recognize losses once its investment in the Local Partnership reaches zero. Distributions from the Local Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the statements of operations.

For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnership only to the extent of distributions received and amortization of acquisition costs from the Local Partnership. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

~~Item 8. Financial Statements and Supplementary Data~~9

~~REAL~~Item ~~ESTATE~~8. ~~ASSOCIATES~~Financial ~~LIMITED~~Statements ~~III~~and Supplementary Data

~~LIST~~REAL OFESTATE ~~FINANCIAL~~ASSOCIATES ~~STATEMENTS~~LIMITED III

~~Report~~LIST ofOF ~~Independent~~FINANCIAL ~~Registered Public Accounting Firm~~STATEMENTS

~~Balance~~Report ~~Sheets~~of –Independent ~~December~~Registered ~~31,~~Public ~~2012~~Accounting ~~and 2011~~Firm

~~Statements~~Balance ofSheets ~~Operations~~– ~~- Years ended~~ December 31, ~~2012~~2014 and ~~2011~~2013

Statements of ~~Changes~~Operations ~~in Partners' (Deficiency) Capital~~ - Years ended December 31, ~~2012~~2014 and ~~2011~~2013

Statements of ~~Cash~~Changes ~~Flows~~in Partners' (Deficiency) Capital - Years ended December 31, ~~2012~~2014 and ~~2011~~2013

~~Notes~~Statements toof ~~Financial~~Cash ~~Statements~~Flows - Years ended December 31, 2014 and 2013

~~Report~~Notes ofto ~~Independent~~Financial ~~Registered Public Accounting Firm~~Statements

~~The Partners~~ 10

~~Real~~Report ~~Estate~~of ~~Associates~~Independent ~~Limited~~Registered ~~III~~Public Accounting Firm

WeThe ~~have~~Partners audited the accompanying balance sheets of Real Estate Associates Limited III as of December 31, 2012 and 2011, and the related statements of operations, changes in partners' (deficiency) capital, and cash flows for each of the two years in the period ended December 31, 2012. 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.

WeReal ~~conducted~~Estate ~~our~~Associates ~~audits~~Limited in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.III

InWe ~~our~~have ~~opinion,~~audited the ~~financial~~accompanying ~~statements~~balance ~~referred~~sheet ~~to above present fairly, in all material respects, the financial position~~ of Real Estate Associates Limited III atas of December 31, ~~2012~~2014 and ~~2011~~2013, and the ~~results~~related statements of ~~its~~ operations, ~~and~~changes ~~its~~in partners’ capital (deficiency) and cash flows for ~~each of~~ the ~~two~~ years ~~in the period~~ ended December 31, ~~2012,~~2014 inand ~~conformity~~2013. ~~with~~These U.financial Sstatements are the responsibility of the Partnership’s management. ~~generally~~Our ~~accepted~~responsibility ~~accounting~~is ~~principles~~to express an opinion on these financial statements based on our audits.

/We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s~~/Ernst~~ &internal ~~Young~~control ~~LLP~~over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

~~Greenville~~In our opinion, ~~South~~the ~~Carolina~~financial statements referred to above present fairly, in all material respects, the financial position of Real Estate Associates Limited III at December 31, 2014 and 2013, and the results of its operations and its cash flows for the years ended December 31, 2014 and 2013, in conformity with U.S. generally accepted accounting principles.

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~~April 1~~Destin, ~~2013~~Florida

~~REAL~~March ~~ESTATE~~31, ~~ASSOCIATES LIMITED III~~2015

~~BALANCE SHEETS~~11

~~(In~~REAL ~~thousands)~~ESTATE ASSOCIATES LIMITED III

	December 31,
	2012	2011
ASSETS
Investments in and advances to Local Partnerships	$ --	$ --
Cash and cash equivalents	138	327
Total assets	$ 138	$ 327
LIABILITIES AND PARTNERS' (DEFICIENCY) CAPITAL
Liabilities:
Accounts payable and accrued expenses	$ 36	$ 26
Contingencies	--	--
Partners' (deficiency) capital:
General partners	(120)	(118)
Limited partners	222	419
Total partners’ (deficiency) capital	102	301
Total liabilities and partners' (deficiency)
capital	$ 138	$ 327

BALANCE SHEETS

~~See~~ (In ~~Accompanying Notes to Financial Statements~~thousands)

REAL ESTATE ASSOCIATES LIMITED III


	December 31,
	2014	2013

ASSETS
Investments in and advances to Local Limited Partnership	$ 298	$ --
Accounts Receivable – limited partners	74	--
Cash and cash equivalents	65	522
Total assets	$ 437	$ 522

LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)

Liabilities:
Accounts payable and accrued expenses	$ 28	$ 25

Advance from affiliates	100	--

Partners' capital (deficiency):
General partners	(118)	(116)
Limited partners	427	613
Total partners’ capital(deficiency)	309	497
Total liabilities and partners’ capital
(deficiency)	$ 437	$ 522

~~STATEMENTS~~See OFAccompanying ~~OPERATIONS~~Notes to Financial Statements

~~(In thousands, except per interest data)~~12

	Years Ended
	December 31,
	2012	2011
Revenues	$ --	$ --
Operating expenses:
Management fees – General Partner	49	55
General and administrative	18	14
Legal and accounting	107	53
Total operating expenses	174	122
Loss from partnership operations	(174)	(122)
Gain on sale of interest in Local Partnership	22	--
Advances made to Local Partnerships recognized as expense	(47)	(69)
Net loss	$ (199)	$ (191)
Net loss allocated to general partners (1%)	$ (2)	$ (2)
Net loss allocated to limited partners (99%)	$ (197)	$ (189)
Net loss per limited partnership interest	$ (17.34)	$ (16.58)

REAL ESTATE ASSOCIATES LIMITED III

~~See~~STATEMENTS ~~Accompanying~~OF ~~Notes to Financial Statements~~OPERATIONS

~~REAL~~(In ~~ESTATE~~thousands, ~~ASSOCIATES~~except ~~LIMITED~~per ~~III~~interest data)

STATEMENTS OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL


	Years Ended
	December 31,
	2014	2013

Revenues	$ --	$ --

Operating expenses:
Management fees – General Partner	12	36
General and administrative	43	17
Legal and accounting	118	78
Total operating expenses	173	131

Loss from partnership operations	(173)	(131)
Gain on sale of interest in Local Partnership	--	18
Distribution in excess of investment	--	719

Advances made to Local Partnerships recognized as income (expense)	(15)	96

Net income (loss)	$ (188)	$ 702

Net income (loss) allocated to general partners (1%)	$ (2)	$ 7
Net income (loss) allocated to limited partners (99%)	$ (186)	$ 695

Net income (loss) per limited partnership interest	$ (16.47)	$ 61.40
Distribution per limited partnership interest	$ --	$ 26.85

~~(In~~See ~~thousands)~~Accompanying Notes to Financial Statements

	General	Limited
	Partners	Partners	Total
Partners' (deficiency) capital,
December 31, 2010	$ (116)	$ 608	$ 492
Net loss for the year ended
December 31, 2011	(2)	(189)	(191)
Partners' (deficiency) capital,
December 31, 2011	(118)	419	301
Net loss for the year ended
December 31, 2012	(2)	(197)	(199)
Partners’ (deficiency) capital,
December 31, 2012	$ (120)	$ 222	$ 102

~~See~~REAL ~~Accompanying~~ESTATE ~~Notes~~ASSOCIATES toLIMITED ~~Financial Statements~~III

~~REAL~~STATEMENTS ~~ESTATE~~OF ~~ASSOCIATES~~CHANGES ~~LIMITED~~IN ~~III~~PARTNERS' CAPITAL (DEFICIENCY)

~~STATEMENTS~~(In ~~OF CASH FLOWS~~thousands)

(In thousands)



	General	Limited
	Partners	Partners	Total

Partners' capital (deficiency),
December 31, 2013	$ (120)	$ 222	$ 102

Distributions	(3)	(304)	(307)

Net income (loss) for the year ended
December 31, 2013	7	695	702

Partners' capital (deficiency),
December 31, 2013	(116)	613	497

Net income (loss) for the year ended
December 31, 2014	(2)	(186)	(188)

Partners’ capital (deficiency),
December 31, 2014	$ (118)	$ 427	$ 309

	Years Ended
	December 31,
	2012	2011
Cash flows from operating activities:
Net loss	$ (199)	$ (191)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of interest in Local Partnership	(22)	--
Advances made to Local Partnerships
recognized as expense	47	69
Change in accounts:
Accounts payable and accrued expenses	10	2
Net cash used in operating activities	(164)	(120)
Cash flows from investing activities:
Proceeds received from sale of interest in Local Partnership	22	--
Advances to Local Partnerships	(47)	(69)
Net cash used in investing activities	(25)	(69)
Net decrease in cash and cash equivalents	(189)	(189)
Cash and cash equivalents, beginning of year	327	516
Cash and cash equivalents, end of year	$ 138	$ 327

See Accompanying Notes to Financial Statements

~~See Accompanying Notes to Financial Statements~~14

REAL ESTATE ASSOCIATES LIMITED III

~~NOTES~~STATEMENTS TOOF ~~FINANCIAL~~CASH ~~STATEMENTS~~FLOWS

~~December~~(In ~~31, 2012~~thousands)

Note 1. Organization and Summary of Significant Accounting Policies


	Years Ended
	December 31,
	2014	2013
Cash flows from operating activities:
Net income (loss)	$ (188)	$ 702
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of interest in Local Partnership	--	(18)
Distribution in excess of investment	--	(719)
Advances made to Local Partnerships recognized as (income) expense	15	(96)
Change in accounts:
Accounts receivable – limited partners	(74)	--
Accounts payable and accrued expenses	3	(11)
Net cash provided by (used in) operating activities	(244)	(142)

Cash flows from investing activities:
Advance from affiliate	100	--
Proceeds received from sale of interest in Local Partnership	--	18
Distribution in excess of investment	--	719
Advances to Local Partnerships	(313)	96

Cash flows from financing activities:
Distributions to partners	--	(307)
Net cash provided by (used in) Investing activities	(213)	833

Net increase (decrease) in cash and cash equivalents	(457)	384
Cash and cash equivalents, beginning of year	522	138

Cash and cash equivalents, end of year	$ 65	$ 522

~~Organization~~See Accompanying Notes to Financial Statements

Real Estate Associates Limited III (the “Partnership”, or “Registrant”) was formed under the California Limited Partnership Act on July 25, 1980. The Partnership was formed to invest either directly or indirectly in other partnerships which own and operate primarily federal, state and local government-assisted housing projects. The general partners are National Partnership Investments, LLC (“NAPICO” or the “General Partner”), a California limited liability company, and National Partnership Investment Associates, a limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). Bethesda acquired the General Partner on December 19, 2012, pursuant to an option agreement with Aimco/Bethesda Holdings, Inc., a subsidiary of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust. The business of the Partnership is conducted primarily by NAPICO.15

~~The~~REAL ~~general~~ESTATE ~~partners~~ASSOCIATES ~~share~~LIMITED ~~a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest in proportion to their respective investments.~~III

~~The~~NOTES ~~Partnership~~TO ~~shall~~FINANCIAL be dissolved only upon the expiration of 52 complete calendar years (December 31, 2032) from the date of the formation of the Partnership or the occurrence of other events as specified in the terms of the Partnership Agreement.STATEMENTS

Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the general partners will be entitled to a liquidation fee as stipulated in the Partnership agreement. The limited partners will have a priority return equal to their invested capital attributable to the project(s) or project interest(s) sold and shall receive from the sale of the project(s) or project interest(s) an amount sufficient to pay state and federal income taxes, if any, calculated at the maximum rate then in effect. The general partners' liquidation fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions. No such fees were accrued or paid during the years ended December 31, ~~2012 and 2011.~~ 2014

~~Basis~~Note 1. Organization and Summary of ~~Presentation~~Significant Accounting Policies

~~The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States.~~Organization

~~The~~Real Estate Associates Limited III (the “Partnership’s”, ~~management~~or ~~evaluated~~“Registrant”) ~~subsequent~~was ~~events~~formed ~~through~~under the ~~time~~California ~~this~~Limited ~~Annual~~Partnership ~~Report~~Act on ~~Form~~July ~~10-K~~25, 1980. The Partnership was ~~filed~~formed to invest either directly or indirectly in other partnerships which own and operate primarily federal, state and local government-assisted housing projects. The general partners are National Partnership Investments, LLC (“NAPICO” or the “General Partner”), a California limited liability company, and National Partnership Investment Associates, a limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). Bethesda acquired the General Partner on December 19, 2012, pursuant to an option agreement with Aimco/Bethesda Holdings, Inc., a subsidiary of Apartment Investment and Management Company (“Aimco”), a publicly traded real estate investment trust. The business of the Partnership is conducted primarily by NAPICO.

~~Use~~The general partners share a one percent interest in profits and losses of ~~Estimates~~the Partnership. The limited partners share the remaining 99 percent interest in proportion to their respective investments.

The ~~preparation~~Partnership ofshall ~~financial~~be ~~statements~~dissolved inonly ~~conformity~~upon ~~with accounting principles generally accepted in~~ the ~~United~~expiration ~~States~~of ~~requires~~52 ~~management~~complete tocalendar ~~make~~years ~~estimates~~(December ~~and~~31, ~~assumptions~~2032) ~~that~~from ~~affect~~ the ~~reported~~date ~~amounts~~ of ~~assets~~the ~~and~~formation ~~liabilities and disclosure~~ of ~~contingent~~the ~~assets~~Partnership ~~and~~or ~~liabilities at~~ the ~~date~~occurrence of ~~the~~other ~~financial~~events ~~statements~~as ~~and~~specified ~~reported~~in ~~amounts~~the terms of ~~revenues and expenses during~~ the ~~reporting~~Partnership ~~period~~Agreement. ~~Actual results could differ from those estimates.~~

~~Method~~Upon total or partial liquidation of ~~Accounting~~the ~~for~~Partnership ~~Investments~~or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the general partners will be entitled to a liquidation fee as stipulated in ~~Local~~the ~~Partnerships~~Partnership agreement. The limited partners will have a priority return equal to their invested capital attributable to the project(s) or project interest(s) sold and shall receive from the sale of the project(s) or project interest(s) an amount sufficient to pay state and federal income taxes, if any, calculated at the maximum rate then in effect. The general partners' liquidation fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions. No such fees were accrued or paid during the years ended December 31, 2014 and 2013.

~~The~~Basis ~~investment~~of ~~in local limited partnerships (the “Local Partnerships”) is accounted for using the equity method.~~ Presentation

~~Abandoned~~The ~~Units~~accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States.

~~During~~Use ~~the years ended December 31, 2012 and 2011, the number~~ of limited partnership interests decreased by 38 and 40 interests, respectively, due to limited partners abandoning their interests. At December 31, 2012 and 2011, the Partnership had outstanding 11,320 and 11,358 limited partnership interests, respectively. In abandoning his or her Limited Partnership Interest(s), a limited partner relinquishes all rights, title, and interest in the Partnership as of the date of abandonment. However, the limited partner is allocated his or her share of net income or loss for that year. Estimates

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

Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 11,358 and 11,398 for the years ended December 31, 2012 and 2011, respectively. 16

~~Cash~~REAL ~~and~~ESTATE ~~Cash~~ASSOCIATES ~~Equivalents~~LIMITED III

~~Cash~~NOTES ~~and~~TO ~~cash~~FINANCIAL ~~equivalents~~STATEMENTS ~~include~~- cash in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. The entire cash balances at both December 31, 2012 and 2011 are maintained by an affiliated management company on behalf of affiliated entities in a cash concentration account. CONTINUED

~~Impairment~~Note 1. Organization and Summary of ~~Long-Lived~~Significant ~~Assets~~Accounting Policies (continued)

~~The~~Method ~~Partnership~~of ~~reviews~~Accounting ~~its~~for ~~investments~~Investments in ~~long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that~~ the ~~carrying~~Local ~~amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the~~ Partnership ~~recognizes an impairment loss. There were no impairment losses recorded during the years ended December 31, 2012 and 2011.~~

~~Segment~~The ~~Reporting~~investment in the local limited partnership (the “Local Partnership”) is accounted for using the equity method.

~~Financial~~Abandoned Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 280-10, "Segment Reporting”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. ASC Topic 280-10 also establishes standards for related disclosures about products and services, geographic areas, and major customers. As defined in ASC Topic 280-10, the Partnership has only one reportable segment. Units

~~Fair~~During ~~Value~~the years ended December 31, 2014 and 2013, the number of ~~Financial~~limited ~~Instruments~~partnership interests decreased by 2 and 26 interests, respectively, due to limited partners abandoning their interests. At December 31, 2014 and 2013, the Partnership had outstanding 11,292 and 11,294 limited partnership interests, respectively. In abandoning his or her Limited Partnership Interest(s), a limited partner relinquishes all rights, title, and interest in the Partnership as of the date of abandonment. However, the limited partner is allocated his or her share of net income or loss for that year.

~~ASC~~Net ~~Topic~~Income ~~825,~~(Loss) ~~“Financial~~and ~~Instruments”,~~Distribution ~~requires~~Per ~~disclosure~~Limited of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. At December 31, 2012, the Partnership ~~believes that the carrying amount of liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments.~~ Interest

~~Variable~~Net ~~Interest~~income ~~Entities~~(loss) per limited partnership interest and distribution per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) and distributions by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 11,294 and 11,320 for the years ended December 31, 2014 and 2013, respectively.

~~The~~Cash ~~Partnership consolidates any variable interest entities in which the Partnership holds a variable interest~~ and isCash the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.Equivalents

InCash ~~determining~~and ~~whether~~cash itequivalents isinclude ~~the~~cash ~~primary~~in ~~beneficiary~~banks. ofAt acertain ~~VIE~~times, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount ~~and characteristics~~ of ~~the~~cash ~~Partnership’s~~deposited ~~investment;~~at ~~the~~a ~~obligation~~bank ormay ~~likelihood~~exceed ~~for~~ the ~~Partnership~~limit oron ~~other~~insured ~~investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors~~deposits. ~~Significant~~ ~~judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.~~

AtImpairment December 31, 2012 and 2011, the Partnership holds variable interests in 4 and 5 VIEs, respectively, for which the Partnership is not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of ~~the~~Long-Lived partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:Assets

· The Partnership reviews its investments in long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the ~~general~~carrying ~~partners~~amount ~~conduct~~of ~~and~~the ~~manage~~asset may not be recoverable. If the ~~business~~sum of the ~~Local~~expected ~~Partnerships;~~future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. There were no impairment losses recorded during the years ended December 31, 2014 and 2013.

~~· the~~Segment ~~general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;~~Reporting

~~· the~~Financial ~~general~~Accounting ~~partners~~Standards ~~are~~Board ~~responsible~~Accounting Standards Codification (“ASC”) Topic 280-10, "Segment Reporting”, established standards for ~~approving~~the way that public business enterprises report information about operating segments in annual financial statements and ~~capital~~requires ~~budgets~~that those enterprises report selected information about operating segments in interim financial reports. ASC Topic 280-10 also establishes standards for ~~the~~related ~~properties~~disclosures ~~owned~~about byproducts and services, geographic areas, and major customers. As defined in ASC Topic 280-10, the ~~Local~~Partnership ~~Partnerships;~~has only one reportable segment.

~~· the general partners are obligated to fund any recourse obligations of the Local Partnerships;~~ 17

~~· the~~REAL ~~general~~ESTATE ~~partners~~ASSOCIATES ~~are~~LIMITED ~~authorized to borrow funds on behalf of the Local Partnerships; and~~III

~~· the~~NOTES ~~Partnership,~~TO asFINANCIAL aSTATEMENTS ~~limited~~- partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.CONTINUED

~~The~~Note ~~4 VIEs at December 31, 2012 consist of Local Partnerships that are directly engaged in the ownership and management of 4 apartment properties with a total of 262 units~~1. Organization The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and ~~receivables~~Summary ~~from these VIEs, which were zero at December 31, 2012 and 2011. The Partnership may be subject to additional losses to the extent~~ of ~~any~~Significant ~~financial~~Accounting ~~support~~Policies ~~that the Partnership voluntarily provides in the future.~~ (continued)

~~Note~~Fair ~~2. Investments~~Value inof ~~and~~Financial ~~Advances to Local Partnerships~~Instruments

AsASC Topic 825, “Financial Instruments”, requires disclosure of ~~December~~fair 31value information about financial instruments, ~~2012~~whether ~~and~~or ~~2011~~not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the ~~Partnership~~amount ~~holds~~at ~~limited~~which ~~partnership~~the ~~interests~~instruments could be exchanged in 4a ~~and~~current 5transaction ~~Local~~between ~~Partnerships,~~willing ~~respectively~~parties, ~~located~~other than in ~~two~~a ~~states~~forced ~~and~~or ~~Puerto~~liquidation ~~Rico~~sale. At December 31, ~~that~~2014, ~~own~~the ~~residential~~Partnership ~~low~~believes ~~income~~that ~~rental~~the ~~projects~~carrying ~~consisting~~amount of ~~262~~liabilities ~~and~~reported ~~335~~on ~~apartment~~the ~~units,~~balance ~~respectively. The~~sheet ~~mortgage~~that ~~loans~~require ofsuch ~~these~~disclosure ~~projects~~approximated ~~are~~their ~~payable~~fair value due to orthe ~~insured~~short-term bymaturity ~~various~~of ~~governmental~~these ~~agencies~~instruments.

~~The~~Variable ~~Partnership,~~Interest as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 95% and 99%). Distributions of surplus cash from operations from most of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership. Entities

The ~~individual~~Partnership ~~investments~~consolidates ~~are~~any ~~carried~~variable atinterest ~~cost~~entities ~~plus~~in which the Partnership’s ~~share~~holds ofa variable interest and is the ~~Local~~primary ~~Partnership’s~~beneficiary. ~~profits~~Generally, ~~less~~a ~~the~~variable ~~Partnership’s~~interest ~~share~~entity, or VIE, is an entity with one or more of the ~~Local~~following ~~Partnership’s~~characteristics: ~~losses,~~(a) ~~distributions~~the ~~and~~total ~~impairment~~equity ~~charges.~~investment ~~The~~at ~~Partnership~~risk is not ~~legally~~sufficient ~~liable~~to ~~for~~permit the ~~obligations~~entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the ~~Local~~equity ~~Partnerships~~investment ~~and~~at isrisk ~~not~~lack ~~otherwise~~(i) ~~committed~~the ability to ~~provide~~make ~~additional~~decisions ~~support~~about toan ~~them.~~entity’s ~~Therefore~~activities through voting or similar rights, it(ii) ~~does~~the ~~not~~obligation ~~recognize~~to absorb the expected losses ~~once~~of ~~its~~the ~~investment~~entity, inor ~~each~~(iii) ofthe right to receive the ~~Local~~expected ~~Partnerships~~residual ~~reaches~~returns ~~zero.~~of ~~Distributions~~the ~~from~~entity; or (c) the ~~Local~~equity ~~Partnerships~~investors have voting rights that are ~~accounted~~not ~~for~~proportional asto atheir ~~reduction~~economic interests and substantially all of the ~~investment~~entity’s ~~balance~~activities ~~until~~either ~~the~~involve, ~~investment~~or ~~balance~~are isconducted ~~reduced~~on tobehalf ~~zero~~of, an investor that has disproportionately few voting rights. ~~When~~The primary beneficiary of a VIE is generally the ~~investment~~entity ~~balance~~that has ~~been~~(a) ~~reduced~~the power to ~~zero~~direct the activities of the VIE that most significantly impact the VIE’s economic performance, ~~subsequent~~and ~~distributions~~(b) ~~received~~the ~~are~~obligation ~~recognized~~to asabsorb ~~income~~losses inor the ~~accompanying~~right ~~statements~~to ofreceive ~~operations~~benefits that could potentially be significant to the VIE.

~~For~~In ~~those~~determining ~~investments~~whether ~~where~~it is the ~~Partnership~~primary ~~has~~beneficiary ~~determined~~of ~~that~~a VIE, the ~~carrying~~Partnership ~~value~~considers ofqualitative ~~its~~and ~~investments~~quantitative ~~approximates~~factors, including, but not limited to: which activities most significantly impact the ~~estimated~~VIE’s ~~fair~~economic ~~value~~performance ofand ~~those~~which ~~investments,~~party controls such activities; the amount and characteristics of the Partnership’s ~~policy~~investment; isthe toobligation ~~recognize~~or ~~equity~~likelihood infor ~~income~~the ofPartnership or other investors to provide financial support; and the ~~Local~~similarity ~~Partnerships~~with ~~only~~and significance to the ~~extent~~business activities of ~~distributions~~the ~~received~~Partnership and ~~amortization~~the ofother ~~acquisition~~investors. Significant ~~costs~~judgments ~~from~~related ~~those~~to ~~Local~~these ~~Partnerships.~~determinations ~~Therefore,~~include estimates about the ~~Partnership~~current ~~limits~~and ~~its~~future ~~recognition~~fair values and performance of ~~equity~~real ~~earnings~~estate toheld ~~the~~by ~~amount~~these itVIEs ~~expects~~and togeneral ~~ultimately~~market ~~realize~~conditions.

~~Two~~At ~~Local~~December ~~Partnerships~~31, ~~Santa~~2014 ~~Maria~~and ~~Limited~~2013, ~~Dividend~~the Partnership ~~Assoc.~~held ~~(“Santa~~variable ~~Maria”)~~interests ~~and~~in ~~Marina~~one ~~Del~~VIE ~~Rey~~for ~~Limited~~which ~~Dividend~~the Partnership ~~Assoc.~~was ~~(“Marina~~not ~~Del~~the ~~Rey”),~~primary ~~have been marketing their properties for sale~~beneficiary. OnThe ~~October~~Partnership ~~26,~~has ~~2011~~concluded, ~~Santa~~based ~~Maria~~on ~~and~~its ~~Marina~~qualitative ~~Del~~consideration ~~Rey each entered into separate purchase and sale contracts to sell their respective investment properties to a third party for a gross sales price~~ of ~~$2,600,000~~the ~~and~~partnership $2agreement,~~750,000,~~ ~~respectively.~~the ~~After~~partnership ~~payment~~structure ~~of closing costs~~ and ~~repayment~~the role of the ~~notes~~general ~~payable~~partner ~~encumbering~~in the ~~properties,~~Local ~~the~~ Partnership, ~~expects~~that tothe ~~receive~~general ~~approximately~~partner ~~$330,000~~of ~~and~~the ~~$500,000~~Local ~~from~~Partnership ~~Santa~~is ~~Maria~~the ~~and~~primary ~~Marina~~beneficiary ~~Del~~of ~~Rey,~~the ~~respectively,~~respective ~~for~~Local ~~advance repayments and distributions~~Partnership. In ~~The~~making ~~sales~~this ~~are~~determination, ~~expected~~the ~~to close during 2013. The~~ Partnership ~~has~~considered nothe ~~investment~~following ~~balances remaining in these two Local Partnerships at December 31, 2012 and 2011.~~factors:

~~At December 31, 2012 and 2011, the investment balance in the four and five Local Partnerships, respectively, had been reduced to zero.~~·

~~In December 2012,~~ the ~~Partnership~~general ~~assigned~~partner ~~its~~conducts ~~limited~~and ~~partnership~~manages ~~interest~~the inbusiness ~~Vista Housing Associates (“Vista Housing”) to a third party, for approximately $22,000, which was recognized as gain on sale~~ of ~~interest~~the in Local Partnership~~. The Partnership’s investment balance in Vista Housing was zero at the date of assignment and December 31, 2011.~~;

~~At times, advances are made to~~ the ~~Local~~general ~~Partnerships.~~partner Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in the Local Partnerships. Advances to Local Partnerships for which the investment has ~~been reduced to zero are charged to expense. During~~ the ~~years~~responsibility ~~ended December 31, 2012 and 2011, the Partnership advanced approximately $47,000 and $69,000, respectively, to two Local Partnerships, Santa Maria and Marina Del Rey,~~ for ~~entity taxes. During the years ended December 31, 2012~~ and ~~2011,~~sole ~~the~~discretion ~~Partnership~~over ~~recognized~~selecting ~~approximately~~a ~~$47,000~~property ~~and~~management ~~$69,000~~agent ~~as expense~~ for ~~advances, respectively. While not obligated to make advances to any of~~ the Local ~~Partnerships, the~~ Partnership’s ~~may~~underlying ~~make~~real ~~future~~estate ~~advances in order to protect its economic investment in the Local Partnerships.~~properties;

Although the Partnership’s recorded value of its investments and its equity in losses/income and/or distributions from the Local Partnerships are individually not material to the overall financial position of the Partnership, the following are summaries of the unaudited condensed combined balance sheets of the aforementioned Local Partnerships as of December 31, 2012 and 2011 and the unaudited condensed combined results of operations for each of the two years in the period ended December 31, 2012.18

~~The~~REAL ~~2012~~ESTATE ~~and~~ASSOCIATES ~~2011~~LIMITED amounts exclude the operations of Vista Housing for which the Partnership assigned its interest in December 2012 and the 2011 amounts also exclude Village Apartments for which the Partnership assigned its interest in May 2011:III

Condensed Combined Balance Sheets of the Local Partnerships
(In thousands)
	December 31,
	2012	2011
	(unaudited)	(unaudited)
Assets
Land	$ 356	$ 356
Building and improvements	10,116	10,091
Accumulated depreciation	(8,889)	(8,699)
Other assets	842	598
Total assets	$ 2,425	$ 2,346
Liabilities and Partners’ Deficit:
Liabilities:
Mortgage notes payable	$ 6,414	$ 6,557
Other liabilities	461	344
Total liabilities	6,875	6,901
Partners' deficit	(4,450)	(4,555)
Total Liabilities and Partners' Deficit	$ 2,425	$ 2,346

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Condensed Combined Results of Operations of the Local Partnerships (In thousands)
	Year Ended December 31, 2012	Year Ended December 31, 2011
	(unaudited)	(unaudited)
Rental and other income	$ 1,860	$ 1,821
Expenses:
Operating expenses	879	954
Financial expenses	684	704
Depreciation and amortization	190	192
Total expenses	1,753	1,850
Income (loss) from continuing operations	$ 107	$ (29)

Note 1. Organization and Summary of Significant Accounting Policies (continued)

~~Real Estate and Accumulated Depreciation of Local Partnerships~~·

~~The~~the ~~following~~general partner is anresponsible ~~unaudited~~for ~~summary~~approving ofoperating ~~real~~and ~~estate,~~capital ~~accumulated~~budgets ~~depreciation~~for ~~and~~the ~~encumbrances~~properties ofowned by the Local ~~Partnerships (in thousands-unaudited):~~Partnership;

Description	Encumbrances	Land	Buildings and Related PersonalProperty	Total(1)	Accumulated Depreciation (1)	Date of Construction
Alabama Properties Ltd. V	$ 1,331	$ 53	$ 2,258	$ 2,311	$ 1,746	1980-1981
Lakeside Apts. Ltd.	843	72	1,036	1,108	924	1980-1981
Santa Maria Ltd. Dividend Partnership Assoc.	2,111	107	3,604	3,711	3,373	1981-1982
Marina Del Rey Ltd. Dividend Partnership Assoc.	2,129	124	3,218	3,342	2,846	1981-1982
Totals	$ 6,414	$ 356	$ 10,116	$10,472	$ 8,889

~~(1) Reconciliation~~the general partner is obligated to fund any recourse obligations of ~~real~~the ~~estate~~Local ~~(unaudited)~~Partnership;

	Year Ended December 31, 2012	Year Ended December 31, 2011
	(in thousands)
Balance at beginning of year	$ 10,447	$ 10,433
Improvements	25	18
Disposals of assets	--	(4)
Balance at end of year	$ 10,472	$ 10,447

~~Reconciliation~~the general partner is authorized to borrow funds on behalf of ~~accumulated~~the ~~depreciation~~Local ~~(unaudited)~~Partnership; and

	Year Ended December 31, 2012	Year Ended December 31, 2011
	(in thousands)
Balance at beginning of year	$ 8,699	$ 8,512
Depreciation expense	190	191
Disposals of assets	--	(4)
Balance at end of year	$ 8,889	$ 8,699

Inthe ~~addition~~Partnership, toas ~~being~~a ~~the~~limited ~~General~~partner ~~Partner~~in of the Local Partnership, ~~NAPICO~~does ornot ~~one~~have ofthe ~~its~~ability ~~affiliates~~to isdirect ~~the~~or ~~local~~otherwise ~~operating~~significantly ~~general~~influence ~~partner~~the ~~for~~activities ~~two~~ of the Local ~~Partnerships~~Partnership ~~included~~that ~~above~~most significantly impact such entity’s economic performance.

The ~~current~~VIE ~~policy~~at ofDecember ~~the~~31, ~~United~~2014 ~~States~~consists ~~Department~~ of ~~Housing~~a ~~and~~Local ~~Urban~~Partnership ~~Development~~that ~~(“HUD”)~~ is todirectly ~~not~~engaged ~~renew~~in the ~~Housing~~ownership ~~Assistance Payment (“HAP”) Contracts on a long-term basis on the existing terms. In connection with renewals of the HAP Contracts under current law~~ and ~~policy,~~management ~~the amount~~ of ~~rental~~one ~~assistance~~apartment ~~payments~~property ~~under~~with ~~renewed~~a ~~HAP~~total ~~Contracts will be based on market rentals instead~~ of ~~above~~80 ~~market rentals, which may be the case under existing HAP Contracts~~units. The ~~payments~~Partnership ~~under~~is ~~the~~involved ~~renewed~~with ~~HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet~~ the ~~debt~~VIE ~~service~~as ~~requirements~~a ofnon-controlling ~~existing~~limited ~~loans~~partner ~~insured~~equity byholder. ~~the~~The ~~Federal~~Partnership’s ~~Housing~~maximum ~~Administration~~exposure ~~of HUD (“FHA”) unless such mortgage loans are restructured. In order~~ to ~~address~~loss ~~the reduction in payments under HAP Contracts~~ as a result of ~~current~~its ~~policy,~~involvement ~~the~~with ~~Multi- family Assisted Housing Reform and Affordability Act of 1997 (“MAHRAA”) provides for~~ the ~~restructuring~~unconsolidated ofVIE ~~mortgage~~is ~~loans~~limited ~~insured~~to by the ~~FHA~~Partnership’s ~~with~~recorded ~~respect~~investments toin ~~properties~~and ~~subject~~receivables tofrom the ~~Section 8 program. Under MAHRAA~~VIE, ~~an FHA-insured mortgage loan can be restructured into a first mortgage loan~~ which ~~will~~was bezero ~~amortized~~at onDecember a31, ~~current~~2014 ~~basis~~ and a2013. ~~low~~The ~~interest~~Partnership ~~second~~may ~~mortgage~~be ~~loan~~subject ~~payable~~ to ~~FHA~~additional ~~which~~losses ~~will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable~~ to the ~~owner~~extent of ~~the~~any ~~FHA-insured~~financial ~~mortgage~~support ~~loan~~that ~~and is expected to result in an insurance payment from FHA to~~ the ~~holder~~Partnership ofvoluntarily ~~the~~provides ~~FHA-insured loan due to the reduction~~ in the ~~principal amount~~future. ~~MAHRAA~~ ~~also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy.~~

~~When~~Note ~~the~~2. Investments ~~HAP~~in ~~Contracts~~and ~~are~~Advances ~~subject~~ to ~~renewal, there can be no assurance that the~~ Local Partnerships in which the Partnership has an investment will be permitted to restructure their mortgage indebtedness under MAHRAA. In addition, the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA is uncertain.

~~Note~~As 3of –December ~~Transactions~~31, ~~with~~2014 ~~Affiliated~~and ~~Parties~~2013, the Partnership holds limited partnership interests in one Local Partnership located in Puerto Rico. As of December 31, 2014, the Local Limited Partnership owns a residential low income rental project consisting of 80 apartment units. The mortgage loans of the project are payable to or insured by various governmental agencies.

~~Under~~The ~~the~~Partnership, ~~terms~~as ofa limited partner, does not have a contractual relationship with the ~~Restated~~Local ~~Certificate~~Partnership or exercise control over the activities and ~~Agreement~~operations, including refinancing or selling decisions, of ~~Limited~~the Local Partnership that would require or allow for consolidation. Accordingly, the Partnership isaccounts ~~obligated~~for toits ~~NAPICO~~investment ~~for~~in anthe ~~annual~~Local ~~management~~Partnership ~~fee~~using ~~equal~~the toequity 0method.4 ~~percent~~The Partnership is allocated profits and losses of the Local Partnership’s ~~original~~based ~~remaining~~upon ~~invested~~its ~~assets~~respective ownership percentage of 99%. Distributions of surplus cash from operations from the Local ~~Partnerships~~Partnership ~~and~~are isrestricted ~~calculated~~by atthe Local Partnership’s Regulatory Agreements with the ~~beginning~~United States Department of ~~each~~Housing ~~year.~~and ~~Invested~~Urban ~~assets~~Development ~~are~~(“HUD”). ~~defined~~These asrestrictions limit the ~~costs~~distribution ofto ~~acquiring~~a ~~project~~portion, ~~interests~~generally less than 10%, ~~including~~of the ~~proportionate~~initial ~~amount~~invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ~~mortgage~~ultimate ~~loans~~realization ~~related~~by to the Partnership's ~~interest~~is inuncertain ~~the~~as ~~capital~~HUD ~~accounts~~frequently retains it upon sale or dissolution of the ~~respective~~Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. ~~The~~ ~~management~~These ~~fee~~agreements ~~incurred~~usually ~~for~~limit the ~~years~~Partnership’s ~~ended~~distributions ~~December~~to ~~31,~~an ~~2012~~amount ~~and~~substantially ~~2011~~less ~~was~~than ~~approximately~~its ~~$49,000~~ownership ~~and~~percentage ~~$55,000,~~in ~~respectively~~the Local Partnership.

InThe ~~addition~~individual toinvestments ~~being~~are carried at cost plus the ~~General~~Partnership’s ~~Partner~~share of the Local Partnership,’s ~~NAPICO~~profits orless ~~one~~the Partnership’s share of ~~NAPICO~~the Local Partnership’s ~~affiliates~~losses, isdistributions ~~the~~and ~~local~~impairment ~~operating~~charges. ~~general~~The ~~partner~~Partnership is not legally liable for ~~two~~the obligations of the Local ~~Partnerships~~Partnership and is not otherwise committed to provide additional support to it. Therefore, it does not recognize losses once its investment

~~In addition to Bethesda’s indirect ownership of the general partnership interest~~ in the ~~Partnership,~~Local ~~Bethesda and its affiliates owned 984 limited partnership interests in the~~ Partnership ~~representing~~reaches 8zero.69% of the outstanding limited partnership interests in the Partnership at December 31, 2012. It is possible that Bethesda or its affiliates will acquire additional limited partnership interests in the Partnership either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the limited partnership interests are entitled to take action with respect to a variety of matters, that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Bethesda as its sole stockholder.

~~Note 4. Income Taxes~~19

~~The~~REAL ~~Partnership~~ESTATE isASSOCIATES ~~not~~LIMITED taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable income or loss and are allowed the benefits to be derived from off-setting their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Partnerships as discussed below. The tax loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.III

ANOTES ~~reconciliation~~TO ~~between~~FINANCIAL ~~the~~STATEMENTS ~~Partnership’s~~- ~~reported net loss and the net income (loss) per tax return follows (in thousands, except per limited partnership interest):~~CONTINUED

	Years Ended December 31,
	2012	2011
Net loss per financial statements	$ (199)	$ (191)
Gain on assignment of limited partnership interest	1,744	1,150
Other	53	72
Partnership's share of Local Partnerships income	317	261
Net income (loss) per tax return	$ 1,915	$ 1,292
Net income (loss) per limited partnership interest	$ 333.80	$ 224.52

Note 2. Investments in and Advances to Local Partnerships (continued)

~~The~~Distributions ~~following~~from isthe Local Partnership are accounted for as a ~~reconciliation~~reduction ~~between~~of the ~~Partnership’s~~investment ~~reported~~balance ~~amounts~~until ~~and~~the investment balance is reduced to zero. When the ~~federal~~investment ~~tax~~balance ~~basis~~has ofbeen ~~net~~reduced ~~assets~~to ~~and~~zero, ~~liabilities~~subsequent (distributions received are recognized as income in ~~thousands):~~the accompanying statements of operations.

	December 31, 2012	December 31, 2011
Net assets as reported	$ 102	$ 301
Add (deduct):
Investment in Local Partnerships	(5,394)	(7,471)
Deferred offering expenses	3,896	3,896
Other	786	733
Net liabilities – federal tax basis	$ (610)	$ (2,541)

~~Note~~At 5December 31, 2014 and 2013, the investment balance in the one Local Partnership had been reduced to zero. ~~Contingencies~~

~~The~~In ~~General~~July ~~Partner~~2013, isthe ~~involved~~Partnership insold ~~various~~its ~~lawsuits~~limited ~~arising~~partnership ~~from~~interest ~~transactions~~ in ~~the~~Lakeside ~~ordinary~~Apartments, ~~course of business~~Ltd. Into ~~the~~an ~~opinion~~affiliate of ~~management~~the ~~and~~operating ~~the~~general ~~General~~partner ~~Partner,~~for ~~the~~no ~~claims~~consideration. ~~will~~The ~~not~~Partnership's ~~result~~investment balance in ~~any~~this ~~material~~local ~~liability~~partnership towas zero at the ~~Partnership.~~time of sale.

~~ITEM~~In 9August 2013, the Partnership sold the real estate of Santa Maria Limited Dividend Partnership Assoc. ~~Changes~~ and received approximately $407,000 in ~~and~~proceeds ~~Disagreements~~from ~~with~~the ~~Accountants~~sale. onSubsequent ~~Accounting~~to ~~and~~the ~~Financial~~closing, ~~Disclosure~~the Partnership received an additional amount of $404,000 from release of reserves. The Partnership's investment balance in this local partnership was zero at at the time of sale.

~~None~~In October 2013, the Partnership assigned its limited partnership interest in Alabama Properties, Ltd., V (Ramblewood I) to an affiliate of the operating general partner for a total of $17,600. The Partnership had no investment balance remaining at the date of the assignment.

~~ITEM~~At 9Atimes, advances are made to the Local Partnership. ~~Controls~~Advances made by the Partnership to the Local Partnership are considered part of the Partnership’s investment in the Local Partnership. During the years ended December 31, 2014 and ~~Procedures~~2013, the Partnership advanced approximately $372,000 and $67,000, respectively, to the Local Partnerships, Santa Maria and Marina Del Rey, for entity taxes and capital improvements. The advances were recognized as expense. While not obligated to make advances to any of the Local Partnerships, the Partnership may make future advances in order to protect its economic investment in the Local Partnerships.

~~(a) Disclosure Controls and Procedures~~20

~~The~~REAL ~~Partnership’s~~ESTATE ~~management,~~ASSOCIATES ~~with~~LIMITED the participation of the Senior Managing Director and Director of Reporting of Bethesda who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Senior Managing Director and Director of Reporting of Bethesda, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective. III

~~Management’s~~NOTES ~~Report~~TO onFINANCIAL ~~Internal~~STATEMENTS ~~Control~~- ~~Over Financial Reporting~~CONTINUED

~~The~~Note ~~Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting~~2. Investments ~~Internal control over financial reporting is defined~~ in ~~Rule 13a-15(f)~~ and ~~15d-15(f)~~Advances under the Exchange Act as a process designed by, or under the supervision of, the Senior Managing Director and Director of Reporting, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel, including third-party public accountants engaged by Bethesda to ~~provide~~Local ~~such~~Partnerships services, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:(continued)

~~pertain~~Although the Partnership’s recorded value of its investments and its equity in losses/income and/or distributions from the Local Partnership are individually not material to the ~~maintenance~~overall financial position of ~~records~~the ~~that~~Partnership, inthe ~~reasonable~~following ~~detail~~are ~~accurately~~summaries ~~and~~of ~~fairly~~the ~~reflect~~unaudited condensed combined balance sheets of the ~~transactions~~aforementioned Local Partnership as of December 31, 2014 and ~~dispositions~~2013 and the unaudited condensed combined results of ~~assets;~~operations for each of the two years ended December 31, 2014 and December 31, 2013.

~~provide~~The ~~reasonable~~2013 ~~assurance~~amounts ~~that~~exclude ~~transactions~~the ~~are~~operations ~~recorded~~of asLakeside ~~necessary~~Apartments, toLtd. ~~permit~~for ~~preparation~~which ofthe ~~financial~~Partnership ~~statements~~sold its limited partnership interest in ~~accordance~~July ~~with~~2013; ~~generally~~exclude ~~accepted~~the ~~accounting~~operations ~~principles,~~of ~~and~~Santa ~~that~~Maria ~~receipts~~Ltd. ~~and~~for ~~expenditures~~which ~~are~~the ~~being~~Partnership ~~made~~sold ~~only~~the property in ~~accordance~~August ~~with~~2013 ~~authorizations~~and ofexclude Alabama Properties Ltd. for which the Partnership’s ~~management;~~assigned ~~and~~its limited partnership interest in October 2013:

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.


Condensed Combined Balance Sheets of the Local Partnerships
(In thousands)
	December 31,
	2014	2013
	(unaudited)	(unaudited)

Assets
Land	$ 124	$ 124
Building and improvements	3,602	3,224
Accumulated depreciation	(2,955)	(2,896)
Other assets	335	290
Total assets	$ 1,106	$ 742

Liabilities and Partners’ Deficit:
Liabilities:
Mortgage notes payable	$ 2,006	$ 2,070
Other liabilities	471	146
Total liabilities	2,477	2,216
Partners' deficit	(1,371)	(1,474)
Total Liabilities and Partners' Deficit	$ 1,106	$ 742

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Condensed Combined Results of Operations of the Local Partnerships (In thousands)
	Year Ended December 31, 2014	Year Ended December 31, 2013
	(unaudited)	(unaudited)

Rental and other income	$ 688	$ 616

Expenses:
Operating expenses	290	305
Financial expenses	237	244
Depreciation and amortization	58	50
Total expenses	585	599
Income (loss) from continuing operations	$ 103	$ 17

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2012. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.21

~~Based~~REAL onESTATE ~~the~~ASSOCIATES ~~Partnership’s~~LIMITED ~~management’s assessment, the Partnership’s management concluded that, as of December 31, 2012, the Partnership’s internal control over financial reporting is effective.~~III

~~This~~NOTES ~~annual~~TO ~~report~~FINANCIAL ~~does~~STATEMENTS ~~not~~- include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.CONTINUED

~~(b) Changes~~Note 2. Investments in ~~Internal~~and ~~Control~~Advances ~~Over~~to ~~Financial~~Local ~~Reporting.~~Partnerships (continued)

~~There~~Real ~~has~~Estate ~~been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f)~~ and ~~15d-15(f)~~Accumulated ~~under~~Depreciation ~~the Exchange Act) during the fourth quarter~~ of ~~2012~~Local ~~that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.~~Partnerships

The following is an unaudited summary of real estate, accumulated depreciation and encumbrances of the Local Partnerships (in thousands-unaudited):



Description	Encumbrances	Land	Buildings and Related Personal Property	Total(1)	Accumulated Depreciation (1)	Date of Construction

Marina Del Rey Ltd. Dividend Partnership Assoc.	$ 2,006	$ 124	$ 3,602	$ 3,726	$ 2,955	1981-1982

(1)

Reconciliation of real estate (unaudited)


	Years Ended December 31,
	2014	2013
	(in thousands)

Balance at beginning of year	$ 3,348	$ 3,341
Improvements	378	7
Disposals of assets	--	0
Balance at end of year	$ 3,726	$ 3,348

Reconciliation of accumulated depreciation (unaudited)


	Years Ended December 31,
	December 31, 2014	December 31, 2013
	(in thousands)

Balance at beginning of year	$ 2,896	$ 2,846
Improvements	59	50
Disposals of assets		0
Balance at end of year	$ 2,955	$ 2,896

In addition to being the General Partner of the Partnership, NAPICO or one of its affiliates is the local operating general partner for the Local Partnership included above.

The current policy of the United States Department of Housing and Urban Development (“HUD”) is to not renew the Housing Assistance Payment (“HAP”) Contracts on a long-term basis on the existing terms. In connection with renewals of the HAP Contracts under.

REAL ESTATE ASSOCIATES LIMITED III

NOTES TO FINANCIAL STATEMENTS - CONTINUED

Note 2. Investments in and Advances to Local Partnerships (continued)

current law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD (“FHA”) unless such mortgage loans are restructured. In order to address the reduction in payments under HAP Contracts as a result of current policy, the Multi- family Assisted Housing Reform and Affordability Act of 1997 (“MAHRAA”) provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to the Section 8 program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable to the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount. MAHRAA also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy.

When the HAP Contracts are subject to renewal, there can be no assurance that the Local Partnerships in which the Partnership has an investment will be permitted to restructure their mortgage indebtedness under MAHRAA. In addition, the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA is uncertain.

Note 3 Transactions with Affiliated Parties

Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee equal to 0.4 percent of the Partnership’s original remaining invested assets of the Local Partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective Local Partnerships. The management fee incurred for the years ended December 31, 2014 and 2013 was approximately $12,000 and $36,000, respectively.

In addition to being the General Partner of the Partnership, NAPICO or one of NAPICO’s affiliates is the local operating general partner for the Local Partnership.

In addition to Bethesda’s indirect ownership of the general partnership interest in the Partnership, Bethesda and its affiliates owned 1,154 limited partnership interests in the Partnership representing 10.22% of the outstanding limited partnership interests in the Partnership at December 31, 2014. It is possible that Bethesda or its affiliates will acquire additional limited partnership interests in the Partnership either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the limited partnership interests are entitled to take action with respect to a variety of matters, that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Bethesda as its sole stockholder.

Note 4. Income Taxes

The Partnership is not taxed on its income. The partners are taxed in their individual capacities based upon their distributive share of the Partnership's taxable income or loss and are allowed the benefits to be derived from off-setting

REAL ESTATE ASSOCIATES LIMITED III

NOTES TO FINANCIAL STATEMENTS - CONTINUED

their distributive share of the tax losses against taxable income from other sources subject to passive loss limitations. The taxable income or loss differs from amounts included in the statements of operations because different methods are used in determining the losses of the Local Partnerships as discussed below. The tax loss is allocated to the partner groups in accordance with Section 704(b) of the Internal Revenue Code and therefore is not necessarily proportionate to the interest percentage owned.

A reconciliation between the Partnership’s reported net loss and the net income (loss) per tax return follows (in thousands, except per limited partnership interest):


	Years Ended December 31,
	2014	2013
	(in thousands)

Net income (loss) per financial statements	$ (188)	$ 702
Gain on assignment of limited partnership interest		18
Other	--	--
Partnership’s share of Local Partnerships income	150	3,021
Net income (loss) per tax return	(38)	$ 3,741
Net income (loss) per limited partnership interest	$ (3.33)	$ 327.17

The following is a reconciliation between the Partnership’s reported amounts and the federal tax basis of net assets and liabilities at December 31, 2014 and 2013 (in thousands):


	2014	2013

Net assets as reported	$ 309	$ 497
Add (deduct):
Investment in Local Partnerships	(2,011)	(2,180)
Deferred offering expenses	4,275	4,275
Other	215	237
Net liabilities – federal tax basis	$ 2,788	$ 2,829

Note 5. Contingencies

Note 6. Distributions

During 2013, the sale of Santa Maria resulted in withholding tax due to Puerto Rico of

approximately $307,000. Santa Maria paid the withholding on behalf of the Partnership which flowed to its partners. This payment was recorded as distributions to the Partnerships partners.

Note 7. Subsequent Event

The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was

REAL ESTATE ASSOCIATES LIMITED III

NOTES TO FINANCIAL STATEMENTS - CONTINUED

filed.

ITEM 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Effective June 7, 2013, the Registrant dismissed its prior independent registered public accounting firm, Ernst & Young LLP and retained as its new independent registered public accounting firm, Carter & Company, CPA, LLC. The reports of Ernst & Young LLP on the financial statements of the Registrant as of and for the years ended December 31, 2012 and 2011 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change independent accountants was approved by the board of directors of the Managing General Partner of the Partnership. During the two fiscal years ended 2012 and through June 7, 2013, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which disagreements if not resolved to the satisfaction of Ernst & Young LLP, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the Partnership's financial statements for the fiscal years ended December 31, 2012 and 2011.

Effective June 7, 2013, the Registrant engaged Carter & Company, CPA, LLC as its independent registered public accounting firm. During the Partnership's two fiscal years ended December 31, 2012 and the subsequent interim period through June 7, 2013, the Registrant did not consult with Carter & Company, CPA, LLC with respect to the application of accounting principles to a specialized transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnership's financial statements, or any other matters or reportable events as set forth in Items 304(a)(2) of Regulation S-K.

ITEM 9A.

Controls and Procedures

(a)

Disclosure Controls and Procedures

The Partnership’s management, with the participation of the Senior Managing Director and VP of Finance/CFO of Bethesda who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Senior Managing Director and VP of Finance/CFO of Bethesda, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

Management’s Report on Internal Control Over Financial Reporting

The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Senior Managing Director and VP of Finance/CFO, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel, including third-party public accountants engaged by Bethesda to provide such services, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or

disposition of assets that could have a material effect on the financial statements.

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2014. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on the Partnership’s management’s assessment, the Partnership’s management concluded that, as of December 31, 2014, the Partnership’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Partnership’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

(b)

Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2014 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

ITEM 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Real Estate Associates Limited III (the “Partnership” or the “Registrant”) has no directors or officers. The general partner responsible for conducting the business of the Partnership is National Partnership Investments, LLC, a California limited liability company (“NAPICO” or the “General Partner”).

The names and ages of, as well as the positions and offices held by, the present officers of NAPICO are set forth below. The General Partner manages and controls substantially all of the Partnership’s affairs and has general responsibility and ultimate authority in all matters affecting its business. There are no family relationships between or among any officers.

Name	Age	Position
Brian Flaherty	4446	Senior Managing Director
Edward Schmidt	28	Director of Reporting
Joseph Dryden	53	VP of Finance/CFO

Brian Flaherty is the Senior Managing Director of the General Partner and Bethesda Holdings II, LLC and has served as the equivalent of the chief executive officer of the Partnership since December 19, 2012. In February 2012, Mr. Flaherty was appointed to Senior Managing Director with McGrath Investment Management, LLC with responsibilities for asset management and transactions. Previously, Mr. Flaherty served in various positions at Aimco, which he joined in 2002, most recently serving as Senior Vice President with responsibilities for asset management and transactions, from January 2009 to February 2012, and in various acquisition, asset management, and disposition functions within Aimco covering both conventional and affordable portfolios from 2002 through 2012. Prior to joining Aimco, Mr. Flaherty was Vice President of Acquisitions for NAPICO, responsible for originating, structuring, and underwriting equity investments in multi-family Low Income Housing Tax Credit Projects.

~~Edward~~Mr. ~~Schmidt~~Joseph Dryden is the ~~Director~~VP of ~~Reporting~~Finance/CFO of the ~~General~~general ~~Partner~~partner of the Partnership and of Bethesda Holdings, II, LLC, and ~~has served as~~ the ~~equivalent~~Chief ofFinancial ~~the~~Officer ~~chief financial officer~~ of the Partnership since ~~February~~October 283, 2013. Since ~~February~~August ~~2012~~2013, Mr. ~~Schmidt~~Dryden has worked with McGrath Investment Management, LLC, most recently as aCFO. Mr. ~~Director~~Dryden ~~with~~joins ~~responsibilities~~the ~~for~~Partnership ~~fund~~from ~~management~~Republic-Financial, a multinational finance and ~~investor~~private ~~reporting. From~~equity ~~2010~~firm ~~through~~he ~~2012~~joined in March 2010, ~~Mr.~~where ~~Schmidt~~he served as aRepublic’s ~~senior~~Corporate ~~analyst~~Controller. ~~for~~As ~~Aimco,~~the aCorporate ~~public~~Controller, ~~reporting~~Mr. ~~real~~Dryden ~~estate~~was ~~investment~~responsible ~~trust,~~for ~~working~~the indevelopment ~~various~~and management ~~capacities~~of highly complex multi-level consolidated audited financial statements. Prior to Republic, ~~including~~Mr. ~~within~~Dryden was the ~~finance~~CFO ~~function~~for Decision Display, ~~the~~a ~~transaction~~Denver ~~finance~~based audio visual company specializing in high tech command centers and ~~analytics~~control ~~department~~rooms he joined in 2005. In this role Mr. Dryden was responsible for all accounting and ~~the~~finance ~~fund~~functions ~~management~~including ~~department~~all financial reporting, ~~which~~detailed ~~handled~~cash ~~the~~management ~~internal~~and ~~investor~~forecasting ~~reporting~~and ~~for~~also ~~Aimco~~managed the company’s banking relationships. ~~Prior~~ Additionally, from 2007 to ~~that,~~2010 Mr. ~~Schmidt~~Dryden ~~worked~~was inthe ~~public~~President of Dryden Consulting, an accounting ~~with~~and ~~Clifton~~management ~~Gunderson,~~consulting ~~LLP,~~firm ~~now~~specializing ~~known~~in asGAAP ~~Clifton~~and ~~Larson~~SEC ~~Allen~~reporting, ~~LLP,~~internal ~~where~~and heexternal ~~served~~audit asassistance aand ~~financial~~Sarbanes-Oxley ~~accountant~~compliance. Dryden ~~for~~Consulting’s ~~Special~~client ~~District~~list ~~Services~~included 1st Data, ~~local~~AIMCO, ~~government~~Crocs, ~~consultant~~Woodward Governor, ~~and~~McData, ~~from~~and ~~2008~~several toother ~~2010~~large publicly traded companies. Mr. Dryden’s expertise in GAAP financial reporting, asSEC ~~auditor~~reporting, ~~for~~cash ~~the~~management ~~California~~and ~~State~~process ~~Revolving~~improvement ~~Fund.~~will enable him to create immediate value for the company. Mr. ~~Schmidt~~Dryden received a Bachelor of ~~Science~~Arts Degree ~~with a double concentration~~ in ~~Finance and~~ Accounting from ~~Colorado~~Clarke ~~State~~ University in 1984.

The Registrant is not aware of the involvement in any legal proceedings with respect to the executive officers listed in this Item 10.

The General Partner does not have a separate audit committee. As such, the officers of the General Partner fulfill the functions of an audit committee. The General Partner has determined that ~~Edward~~Joseph ~~Schmidt~~Dryden meets the requirement of an "audit committee financial expert".

The Partnership has adopted a code of ethics that is attached hereto as Exhibit 14.

Item 11. Executive Compensation

None of the officers of the General Partner received any remuneration from the Partnership during the year ended December 31, ~~2012~~2014.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a) ~~Security Ownership of Certain Beneficial Owners~~

Security Ownership of Certain Beneficial Owners

The general partners own all of the outstanding general partnership interests of the Partnership; except as noted below, no person or entity is known to own beneficially in excess of 5% of the outstanding limited partnership interests.

Entity ~~Number of Interests Percentage~~

~~Bethesda Holdings II, LLC 984 8.69%~~ Units

Percentage

Bethesda Holdings II, LLC

1,154

10.22%

(b) None of the officers of the General Partner own directly or beneficially any limited partnership interests in the Partnership.

Under the terms of the Restated Certificate and Agreement of Limited Partners, the Partnership is obligated to NAPICO for an annual management fee equal to 0.4 percent of the Partnership’s original remaining invested assets of the Local Partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective Local Partnerships. The management fee incurred for the years ended December 31, ~~2012~~2014 and ~~2011~~2013 was approximately $4912,000 and $5536,000, respectively.

In addition to ~~being~~Bethesda’s indirect ownership of the ~~General~~general ~~Partner~~partnership ofinterest in the Partnership, ~~NAPICO~~Bethesda and its affiliates owned 1,154 orlimited ~~one~~partnership interests in the Partnership representing 10.22% of ~~NAPICO’s~~the ~~affiliates~~outstanding limited partnership interests in the Partnership at December 31, 2014. It is possible that Bethesda or its affiliates will acquire additional limited partnership interests in the ~~local~~Partnership ~~operating~~either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the limited partnership interests are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, ~~for~~to ~~two~~the Partnership and its limited partners may come into conflict with the duties of the ~~Local~~General ~~Partnerships~~Partner to Bethesda as its sole stockholder.

In addition to Bethesda’s indirect ownership of the general partnership interest in the Partnership, Bethesda and its affiliates owned 984 limited partnership interests in the Partnership representing 8.69% of the outstanding limited partnership interests in the Partnership at December 31, 2012. It is possible that Bethesda or its affiliates will acquire additional limited partnership interests in the Partnership either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the limited partnership interests are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to Bethesda as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to Bethesda as its sole stockholder.

The General Partner has no directors.

~~Item14~~Item 14. Principal Accounting Fees and Services

Ernst & Young LLP was previously the independent registered public accounting firm for the Partnership. On June 7, 2013, that firm was dismissed and Carter & Company CPA, LLC was engaged as independent auditors for the year ended December 31, 2013. The managing General Partner has reappointed ~~Ernst~~Carter & ~~Young~~Company, ~~LLP~~CPA, LLC as independent auditors to audit the financial statements of the Partnership for ~~2013~~2014. The aggregate fees billed for services rendered ~~by Ernst & Young LLP~~ for ~~2012~~2014 and ~~2011~~2013 are described below. :

Audit Fees. Fees for audit services totaled approximately $3014,~~000~~500 and $2619,000 for ~~2012~~2014 and ~~2011~~2013, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.

~~Tax Fees. Fees for tax services totaled approximately $17,000 and $14,000 for 2012 and 2011, respectively.~~29

~~PART~~Tax IVFees. Fees for tax services totaled approximately $10,000 and $10,000 for 2014 and 2013, respectively.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) ~~The following financial statements are included in Item 8:~~

~~Balance~~The ~~Sheets~~following –financial ~~December~~statements ~~31,~~are ~~2012~~included ~~and~~in ~~2011~~Item 8:

~~Statements~~Balance ofSheets ~~Operations~~– ~~- Years ended~~ December 31, ~~2012~~2014 and ~~2011~~ 2013

Statements of ~~Changes~~Operations ~~in Partners' (Deficiency) Capital~~ - Years ended December 31, ~~2012~~2014 and ~~2011~~2013

Statements of ~~Cash~~Changes ~~Flows~~in Partners' (Deficiency) Capital - Years ended December 31, ~~2012~~2014 and ~~2011~~2013

Statements of Cash Flows - Years ended December 31, 2014 and 2013

Notes to Financial Statements

Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.

(b) ~~Exhibits:~~

Exhibits:

See Exhibit Index.

The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to each applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, such representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

SIGNATURES

Pursuant to the requirements of Section 13 or Section 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.

	REAL ESTATE ASSOCIATES LIMITED III
	(a California Limited Partnership)
	By: National Partnership Investments, LLC
	General Partner
Date: April 1, 2013	By: /s/Brian Flaherty
Date: March 31, 2015	By: /s/Brian Flaherty
	Brian Flaherty
	Senior Managing Director
Date: April 1, 2013	By: /s/Edward Schmidt
Date: March 31, 2015	By: /s/Joseph Dryden
	Edward Schmidt
	Joseph Dryden
	Director of Reporting
	VP of Finance/CFO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/Brian Flaherty	Senior Managing Director	Date: ~~April~~March 131, ~~2013~~2015
Brian Flaherty
/s/Edward Schmidt	Director of Reporting	Date: April 1, 2013
/s/Joseph Dryden	VP of Finance/CFO	Date: March 31, 2015
Edward Schmidt
Joseph Dryden

REAL ESTATE ASSOCIATES LIMITED III

EXHIBIT INDEX

Exhibit ~~Description of Exhibit~~

~~3 Restated~~Description ~~Certificate and Agreement~~ of ~~Limited Partnership herein dated January 5, 1981 incorporated by reference to the Partnership's Form S-11 No. 268983.~~Exhibit

3~~.1 Amendments to Restated Certificate and Agreement of Limited Partnership, incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 24, 2005.~~

~~3.2~~ Restated Certificate and Agreement of Limited Partnership herein dated January 5, 1981 incorporated by reference to the ~~Registrant’~~Partnership's ~~Current Report on~~ Form 8S-K11 ~~dated~~No. ~~January 24, 2005~~268983.

103.2 Second Amendment to Amended and Restated Agreement and Certificate of Limited Partnership of Village Apartment, Ltd., dated May 18, 2011, by and between R. L. Ayers, an individual; Village Apartment Limited, Inc., a Tennessee corporation; Real Estate Associates Limited III, a California limited partnership; and Helen Ayers, an individual. (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2011.)1

~~10.3 Assignment~~Amendments ~~and~~to ~~Assumption~~Restated ofCertificate ~~Limited Partner Interests~~ and ~~Second Amendment to the~~ Agreement ~~and Amended Certificate~~ of Limited Partnership ~~of Vista Housing Associates~~, aincorporated California limited partnership, Real Estate Associates Limited III, a California limited partnership, Alvarez Bracero LP, LLC, a Delaware limited liability company and Bucare Development Corporation, a Puerto Rico corporation, dated December 14, 2012. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated ~~December~~January 1424, ~~2012)~~2005.

~~14 Code of Ethics of Real Estates Associates Limited III~~3.2

~~31.1 Certification~~Restated ofCertificate ~~equivalent~~and Agreement of ~~Chief~~Limited ~~Executive~~Partnership ~~Officer~~incorporated ~~pursuant~~by reference to ~~Securities~~the ~~Exchange~~Registrant’s ~~Act~~Current ~~Rules~~Report ~~13a-14(a)/15d-14(a),~~on asForm ~~Adopted Pursuant to Section 302 of the Sarbanes~~8-~~Oxley~~K ~~Act~~dated ofJanuary ~~2002~~24, 2005.

3110.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.1

~~32.1 Certification~~Assignment and Assumption of ~~equivalent~~Limited Partner Interests and Second Amendment to the Agreement and Amended Certificate of ~~Chief~~Limited ~~Executive~~Partnership ~~Officer~~of Vista Housing Associates, a California limited partnership, Real Estate Associates Limited III, a California limited partnership, Alvarez Bracero LP, LLC, a Delaware limited liability company and ~~Chief~~Bucare ~~Financial~~Development ~~Officer~~Corporation, ~~pursuant~~a toPuerto 18Rico ~~U.S.C.~~corporation, ~~Section~~dated ~~1350~~December 14, as2012. ~~Adopted~~(Incorporated ~~Pursuant~~by reference to ~~Section~~the ~~906~~Registrant’s ofCurrent ~~the~~Report ~~Sarbanes~~on Form 8-~~Oxley~~K ~~Act~~dated ofDecember ~~2002~~14, 2012).

101 XBRL (Extensible Business Reporting Language). The following materials from Real Estate Associates Limited III’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, formatted in XBRL: (i) balance sheets, (ii) statements of operations, (iii) statements of changes in partners’ (deficiency) capital, (iv) statements of cash flows, and (v) notes to financial statements. (1)14

~~(1) As~~Code ~~provided~~of inEthics ~~Rule 406T~~ of ~~Regulation~~Real ~~S-T,~~Estates ~~this~~Associates ~~information~~Limited isIII. ~~furnished~~(Incorporated ~~and~~by ~~not~~reference ~~filed~~to ~~for purposes of Sections 11 and 12 of~~ the ~~Securities~~Registrant's ~~Act~~Annual ofReport ~~1933~~on ~~and~~Form ~~Section~~10-K 18dated ofApril ~~the~~1, ~~Securities Exchange Act of 1934~~2013).

31.1

Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

XBRL (Extensible Business Reporting Language). The following materials from Real Estate Associates Limited III’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, formatted in XBRL: (i) balance sheets, (ii) statements of operations, (iii) statements of changes in partners’ (deficiency) capital, (iv) statements of cash flows, and (v) notes to financial statements. (1)

(1)

As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

Filing Compare · REAL ESTATE ASSOCIATES LTD III