ITEM 1. BUSINESS:
Real Estate Associates Limited III ("REAL III" or the "Partnership") is a limited partnership which was formed under the laws of the State of California on July 25, 1980. On January 5, 1981, Real Estate Associates Limited 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 Lehman Brothers Inc.
The general partners of Real Estate Associates Limited III are National Partnership Investments Corp. ("NAPICO"), a California Corporation (the "Corporate General Partner"), and Coast Housing Investments Associates, a Limited Partnership formed under the California Limited Partnership Act and consisting of Messrs. Nicholas G. Ciriello, an unrelated individual, as general partner, and Charles H. Boxenbaum as limited partner. The business of REAL III is conducted primarily by its general partners as REAL III has no employees of its own.
Casden Investment Corporation ("CIC") owns 100 percent of NAPICO's stock. The current members of NAPICO's Board of Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden, Henry C. Casden and Brian D. Goldberg.
REAL III holds limited partnership interests in 26 local limited partnerships as of December 31, 1996, and a general partner interest in Real Estate Associates ("REA") which in turn holds limited partnership interests in an additional 6 limited partnerships; therefore, REAL III holds directly or indirectly through REA, investments in thirty-two local limited partnerships. The general partners of REA are REAL III and NAPICO. Each of the limited partnerships 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.
In order to stimulate private investment in low income housing, the federal government and certain state and local agencies have provided significant ownership incentives, including among others, interest subsidies, rent supplements, and mortgage insurance, with the intent of reducing certain market risks and providing investors with certain tax benefits, plus limited cash distributions and the possibility of long-term capital gains. There remain, however, significant risks. The long-term nature of investments in government assisted housing limits the ability of REAL III to vary its portfolio in response to changing economic, financial and investment conditions; such investments are also subject to changes in local economic circumstances and housing patterns, as well as rising operating costs, vacancies, rent collection difficulties, energy shortages and other factors which have an impact on real estate values. These projects also require greater management expertise and may have higher operating expenses than conventional housing projects.
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 limited 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 limited partnership is limited to its investment. The local general partner of the local limited partnership retains responsibility for developing, constructing, maintaining, operating and managing the Project. Under certain circumstances, REAL III has the right to replace the general partner of the local limited partnerships.
Although each of the partnerships in which REAL III has invested generally owns a project which must compete in the market place 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.
During 1996, the projects in which REAL III had invested were substantially rented. The following is a schedule of the status as of December 31, 1996, of the projects owned by local limited partnerships in which REAL III is a limited partner.
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS AN INVESTMENT DECEMBER 31, 1996
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS AN INVESTMENT DECEMBER 31, 1996 (CONTINUED)
SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS AN INVESTMENT DECEMBER 31, 1996 (CONTINUED)
ITEM 2.

ITEM 2. PROPERTIES:
Through its investment in local limited partnerships, REAL III holds interests in real estate properties. See Item 1 and Schedule XI for information pertaining to these properties.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS:
As of December 31, 1996, REAL III's Corporate General Partner was plaintiff or defendant in several lawsuits. None of these suits were related to REAL III.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
PART II.
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
The Limited Partnership Interests are not traded on a public exchange but were sold through a public offering managed by Lehman Brothers Inc. It is not anticipated that any public market will develop for the purchase and sale of any Partnership interest. Limited Partnership Interests may be transferred only if certain requirements are satisfied. At December 31, 1996 there were 2,086 registered holders of units in REAL III. One distribution in the aggregate amount of $3,345,000 (or $584 per unit) was made in 1989. This represented the proceeds from the sale of one of the Partnership's real estate investments. 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 limited partnerships.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA:
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
LIQUIDITY
The Partnership's primary sources of funds include interest income on money market investments and certificates of deposit and distributions from local partnerships in which the Partnership has invested.
CAPITAL RESOURCES
REAL III received $14,320,000 in subscriptions for units of Limited Partnership Interests (at $5,000 per unit) during the period March 31, l981 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.
RESULTS OF OPERATIONS
The Partnership was formed to provide various benefits to its partners as discussed in Item 1. It is anticipated that the local limited partnerships in which REAL III has invested could produce tax losses for as long as 20 years. The Partnership will seek to defer income taxes from capital gains by not selling any projects or project interests within 10 years, except to qualified tenant cooperatives, or when proceeds of the sale would supply sufficient cash to enable the partners to pay applicable taxes.
Tax benefits will decline over time as the advantages of accelerated depreciation are greatest in the earlier years, as deductions for interest expense decrease as mortgage principal is amortized, and as the Tax Reform Act of 1986 limits the deductions available.
The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership investment account is reduced to zero are not recognized.
Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Overall distributions from limited partnerships continue to be favorable. This primarily due, to improved operating results at several of the properties.
Except for certificates of deposit and money market funds, the Partnership's investments are entirely interests in other limited partnerships owning government assisted projects. Funds temporarily not required for such investments in projects are invested in certificates of deposit and money market funds which provide substantial amounts of interest as reflected in the statements of operations. These investments are converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner.
A recurring Partnership expense is the annual management fee. The fee is payable to the Corporate General Partner of the Partnership and is calculated as a percentage of the Partnership's invested assets. The management fee is paid to the corporate general partner for its continuing management of Partnership affairs. The fee is payable beginning with the month following the Partnership's initial investment in a local limited partnership.
Operating expenses, exclusive of management fees and interest of the Partnership, consist substantially of professional fees for services rendered to the Partnership. Operating expenses did not vary significantly for the years presented.
The Partnership, as a Limited Partner in the local limited partnerships in which it has invested, is subject to the risks incident to the construction, 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 economy, including substantial unemployment and concurrent inflation, could increase vacancy levels, rental payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
The Financial Statements and Supplementary Data are listed under Item 14.
ITEM 9.

ITEM 9. CHANGES WITH AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
Not applicable.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND INDEPENDENT PUBLIC ACCOUNTANTS' REPORT DECEMBER 31, 1996 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Real Estate Associates Limited III (A California limited partnership)
We have audited the accompanying balance sheets of Real Estate Associates Limited III (a California limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' equity (deficiency) and cash flows for each of the three years in period ended December 31, 1996. Our audits also included the financial statement schedules listed in the index on item 14. These financial statements and financial statement schedules are the responsibility of the management of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We did not audit the financial statements of certain limited partnerships, the investments in which are reflected in the accompanying financial statements using the equity method of accounting. The investments in these limited partnerships represent 4 percent and 3 percent of total assets as of December 31, 1996 and 1995, respectively, and the equity in income of these limited partnerships represents 23 percent, 33 percent and 34 percent of the total net income of the Partnership for the years ended December 31, 1996, 1995 and 1994, respectively, and represent a substantial portion of the investee information in Note 2 and the financial statement schedules. The financial statements of these limited partnerships are audited by other auditors. Their reports have been furnished to us and our opinion, insofar as it relates to the amounts included for these limited partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Real Estate Associates Limited III as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, based on our audits and the reports of other auditors, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Los Angeles, California March 26, 1997
[LOGO] [COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Partners of Bowin Place Associates Limited Dividend Housing Association
We have audited the accompanying balance sheets of Bowin Place Associates Limited Dividend Housing Association (A Michigan Limited Partnership, MSHDA Development Number 551), as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bowin Place Associates Limited Dividend Housing Association, MSHDA No. 551, as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information of Bowin Place Associates Limited Dividend Housing Association, MSHDA No. 551, on pages 8 through 16 is presented for purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the Partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a report dated January 27, 1997 on our consideration of Bowin Place Associates Limited Dividend Housing Association's internal control structure and a report dated January 27, 1997 on its compliance with laws and regulations.
/s/ COOPERS & LYBRAND
Cleveland, Ohio January 27, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Casa De Las Hermanitas Apartments Culver City, California
We have audited the accompanying balance sheets of Casa De Las Hermanitas Apartments (a California partnership), CHFA Project No. 78-30-S, as of December 31, 1996 and 1995 and the related statements of operations, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits Provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Casa De Las Hermanitas Apartments as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated January 30, 1997, on our consideration of Casa De Las Hermanitas Apartments' Internal Control Structure and on its compliance with laws and regulations applicable to the California Housing Finance Agency's financial assistance programs.
/s/ NANAS STERN, BIERS, NEINSTEIN AND CO. LLP
January 30, 1997
[LOGO] [REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Charlotte Lake River Associates
We have audited the accompanying balance sheets of Charlotte Lake River Associates as of December 31, 1996 and 1995, and the related statements of operations, partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Charlotte Lake River Associates as of December 31, 1996 and 1995, and the results of its operations, the changes in its partners' equity (deficit) and its cash flows for the years then ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 19 through 49 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 21, 1997 on our consideration of Charlotte Lake River Associates' internal control structure and on its compliance with specific requirements applicable to major HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements.
Boston, Massachusetts Federal Identification Number February 21, 1997 52-1088612
Audit Principal: Philip A. Weitzel
[LOGO] [PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners Creekview Associates:
We have audited the accompanying balance sheets of Creekview Associates (a limited partnership), FHA Project No. 034-35150-LD, as of December 31, 1996 and 1995, and the related statements of income, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Creekview Associates (a limited partnership) as of December 31, 1996 and 1995, and the results of its operations, changes in partners' deficit and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 29, 1997 on our consideration of Creekview Associates' (a limited partnership) internal control structure, and reports dated January 29, 1997, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Affirmative Fair Housing.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 14 to 22 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Creekview Associates (a limited partnership). Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ PARENTE, RANDOLPH, ORLANDO, CAREY & ASSOCIATES
Wilkes-Barre, Pennsylvania January 29, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTE1N AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Foothill Gardens Culver City, California
We have audited the accompanying balance sheet of Foothlil Gardens (a California partnership), Project No. 122-35515-PM-L8, as of December 31, 1996 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Foothill Gardens as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated January 31, 1997 on our consideration of Foothill Gardensl Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial assistance programs.
/s/ NANAS, STERN, BIERS, NEINSTE1N AND CO. LLP
January 31, 1997
[LOGO] [NANAS, STERN. BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Frazier Park Apartments Culver City, California
We have audited the accompanying balance sheet of Frazier Park Apartments (a California partnership), Project No. 122-35513-PM-L8, as of December 31, 1996 and the related statement of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Frazier Park Apartments as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued a report dated January 27, 1997 on our consideration of Frazier Park Apartments' Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial assistance programs.
/s/ NANAS, STERN, BIERS, NEINSTE1N AND CO. LLP
January 27, 1997
[LOGO] [COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Partners of Gary Manor Associate
We have audited the accompanying balance sheets of Gary Manor Associates (An Indiana Limited Partnership, FHA Project Number 073-35322-PM-L8) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnershipls management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Gary Manor Associates as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 5, 1997 on our consideration of Gary Manor Associates internal control structure and a report dated February 5, 1997 on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information indexed on page 9 is presented for purposes of additional analysis, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ COOPERS & LYBRAND
Cleveland, Ohio February 5, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Grandview Homes Culver City, California
We have audited the accompanying balance sheet of Grandview Homes (a California partnership), Project No. 122-35502-PM-L8, as of December 31, 1996 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Grandview Homes as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated January 30, 1997 on our consideration of Grandview Homes' Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial;assistance programs.
/s/ NANAS, STERN, BIERS, NEINSTE1N AND CO. LLP
January 30, 1997
[LOGO] [MANER, COSTERISAN & ELLIS, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Hidden Pines, A Limited Partnership Lansing, Michigan
January 10, 1997
We have audited the accompanying balance sheets of Hidden Pines, A Limited Partnership as of December 31, 1996 and 1995, and the related statements of net loss, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Partnership depreciates its buildings using the accelerated cost recovery method which provides for the depreciation of real property over a fifteen year life. Generally accepted accounting principles require that depreciation be computed over the estimated useful life of the asset. As a result of this departure from generally accepted accounting principles, property and equipment, less accumulated depreciation, is understated and partners' deficit is overstated by $679,536 and $668,926 at December 31, 1996 and 1995, respectively. Additionally, depreciation expense and net loss are overstated by $10,610 and $19,714 for the years ended December 31, 1996 and 1995, respectively.
In our opinion, except for the effects of understating the useful life of real property as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Hidden Pines, A Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated January 10, 1997 on our consideration of the Partnership's internal control structure and a report dated January 10, 1997 on its compliance with laws and regulations.
/s/ MANER COSTERISAN & ELLIS, P.C. [LOGO [COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Partners of Highlawn Place Limited Partnership
We have audited the accompanying balance sheets of Highlawn Place Limited Partnership (A West Virginia Limited Partnership, FHA Project Number 045-35076-PM-WAH-R-L8) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Highlawn Place Limited Partnership as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note E to the financial statements, the Partnership's rental income subsidy agreement expires December 6, 1997. This agreement provided approximately 71% of the Partnership's gross potential rent in 1996. There are no assurances that this agreement will be renewed, or renewed under comparable terms to the Partnership upon the expiration of the current agreement. This uncertainty raises substantial doubt about the Partnership's ability to continue as a going concern. The Partnership's management plans in regards to this matter are also described in Note E. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In accordance with Government Auditing Standards, we have also issued a report dated January 28, 1997 on our consideration of Highlawn Place Limited Partnership's internal control structure and a report dated January 28, 1997 on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information indexed on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ COOPERS & LYBRAND
Cleveland, Ohio January 28, 1997
[LOGO] [D'AMBRA & ASSOCIATES, P.C. LETTERHEAD]
Independent Auditors' Report
To the Partners of 300 Broadway Associates (a Limited Partnership)
We have audited the accompanying balance sheet of 300 Broadway Associates (a Limited Partnership), HUD Project No. RI-43-H023-110, as of December 31, 1996, and the related statements of income, partners' equity (deficiency) and cash flow for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 300 Broadway Associates (a Limited Partnership) as of December 31, 3996, and the results of its operations, the changes in partners' equity deficiency) and its cash flow for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 3, 1997, on our consideration of 300 Broadway Associates' internal control structure and reports dated February 3, 1997, on its compliance with specific requirements applicable to major HUD program and specific requirements applicable to Affirmative Fair Housing.
/s/ D'AMBRA & ASSOCIATES, P.C.
January 23, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Kern Villa Culver City, California
We have audited the accompanying balance sheet of Kern Villa (a California partnership), Project No. 122-35510-PM-L8, as of December 31, 1996 and the related statement of operations, partners' equity statement of cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kern Villa as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated January 28, 1997 on our consideration of Kern Villa's Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial assistance programs.
/s/ NANA, STERN BIERS, NEINSTEIN AND CO. LLP
January 28, 1997
[LOGO] [COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Partners of New Baltimore Towers
We have audited the accompanying balance sheets of New Baltimore Towers (A Michigan Limited Partnership, Project Number MI-28-0010-008) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnerships management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of New Baltimore Towers as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 7, 1997 on our consideration of New Baltimore Towers' internal control structure and a report dated February 7, 1997 on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information of New Baltimore Towers on page 9, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ COOPERS & LYBRAND
Cleveland, Ohio February 7, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Panorama Park Apartments Culver City, California
We have audited the accompanying balance sheet of Panorama Park Apartments (a California partnership), Project No. 122-35496-PM-L8, as of December 31, 1996 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Panorama Park Apartments as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Govemment Auditing Standards we have also issued reports dated January 30, 1997 on our consideration of Panorama Park Apartments' Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Developrpent financial assistance programs.
/s/ DONALD W. CASEY, CPA, P.C.
January 30, 1997
[LOGO] [DONALD W. CAUSEY, CPA, P.C.]
INDEPENDENT AUDITOR'S REPORT
To the Partners Alabama Properties, Ltd. V Fort Payne, Alabama
I have audited the accompanying balance sheets of Alabama Properties, Ltd. V, a limited partnership, RHS Project No.: 01-025-630792246 as of December 31, 1996 and 1995, and the related statements of operations, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted the audits in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States, and the U.S. Department of Agriculture, Farmers Home Administration Audit Program. Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that the audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alabama Properties, Ltd. V, RHS Project No.: 01-025-630792246 as of December 31. 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
The audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 10 through 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplemental information presented in the Year End Report and Analysis (Form FmHA 1930-8) Parts I through III for the year ended December 31, 1996 and 1995, is presented for purposes of complying with the requirements of the Rural Housing Services and is also not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in my opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, I have also issued a report dated January 27, 1997 on my consideration of Alabama Properties, Ltd. V, internal control structure and a report dated January 27, 1997 on its compliance with laws and regulations.
/s/ DONALD W. CAUSEY, CPA, P.C.
January 27, 1997 [LOGO] [SANTIAGO, RILEY & REZNICK LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Santa Maria Limited Dividend Partnership Associates
We have audited the accompanying balance sheets of Santa Maria Limited Dividend Partnership Associates (the Partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' deficit and cash flows for the years then ended. 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.
Except as discussed in the following paragraph, we conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The Partnership has not maintained certain customary accounting records and supporting documents relating to transactions with a general partner as discussed in Note F. We were unable to satisfy ourselves by other auditing procedures as to the possible effects of transactions with the general partner.
In our opinion, except for the effects, if any, of the items discussed in the third paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Santa Maria Limited Dividend Partnership Associates as of December 31, 1996 and 1995, and the results of its operations, changes in partners' deficit, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 16 through 19 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplemental information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, except for the effects, if any, of the items discussed in the third paragraph, such information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports dated January 13, 1997, on our consideration of Santa Maria Limited Dividend Partnership Associates' internal control structure and on its compliance with laws and regulations applicable to the financial statements.
/s/ Santiago, Riley & Reznick
San Juan, Puerto Rico January 13, 1997
[LOGO] [COOPERS & LYBRAND LETTERHEAD]
Report of Independent Accountants
To the Partners of Senior Chateau, Ltd.
We have audited the accompanying balance sheets of Senior Chateau, Ltd. (An Ohio Limited Partnership, FHA Project Number 046-3 5471-PM-WAH-L8) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Senior Chateau, Ltd. as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 6, 1997 on our consideration of Senior Chateau, Ltd.'s internal control structure and a report dated February 6, 1997 on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information of Senior Chateau, Ltd., as indexed on page 10 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ COOPERS & LYBRAND
Cleveland, Ohio February 6, 1997
[LOGO] [TURLINGTON AND COMPANY, L.L.P. LETTERHEAD] Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners Sheraton Towers, Ltd.
HUD Field Office Director Greensboro, North Carolina
We have audited the accompanying balance sheet of Sheraton Towers, Ltd., HUD Project No. 053-35278-PM-SR-WAH-L8 (a North Carolina limited partnership), as of December 31, 1996, and the related statements of profit and loss, partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sheraton Towers, Ltd. at December 31, 1996, and the results of its operations, and the changes in partners' equity, and cash flows for the year then ended, in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U. S. Department of Housing and Urban Development, we have also issued a report dated January 10, 1997 on our consideration of Sheraton Towers, Ltd.'s internal control structure, and reports dated January 10, 1997 on its compliance with specific requirements applicable to major HUD programs, and specific requirements applicable to Affirmative Fair Housing.
Our audit was made for the purpose of formulating the opinion stated above. The supplemental information identified in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of Sheraton Towers, Ltd. Such information has been
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION (CONTINUED)
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/s/ TURLINGTON AND COMPANY, L.L.P.
January 10, 1997
[LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners South Bay Villa Culver City, California
We have audited the accompanying balance sheet of South Bay Villa (a California partnership), Project No. 122-35449-PM-L8, as of December 31, 1996 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of South Bay Villa as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated January 30, 1997 on our consideration of South Bay Villa's Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial assistance programs.
/s/ NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP
January 30, 1997 [LOGO] [MANER, COSTERISAN & ELLIS, P.C. LETTERHEAD]
January 10, 1997
To the Partners Sunset Grove, A Limited Partnership Lansing, Michigan
We have compiled the accompanying balance sheets of Sunset Grove, A Limited Partnership, as of December 31, 1996 and 1995, and the related statements of operations, partners' deficit and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. However, we did become aware of a departure from generally accepted accounting principles that is described in the following paragraph.
As discussed in Note 1 to the financial statements, the Partnership depreciates its buildings using the accelerated cost recovery method which provides for the depreciation of real property over a fifteen year life. Generally accepted accounting principles require that depreciation be computed over the estimated useful life of the asset. As a result of this departure from generally accepted accounting principles, property, plant and equipment, less accumulated depreciation is understated and net partners' deficit is overstated by $333,532 at December 31, 1996 ($326,198 at December 31, 1995). Additionally, depreciation expense is overstated, and net income is understated by $7,334 at December 31, 1996 ($10,293 for the year ended December 31, 1995).
/s/ MANER, COSTERISAN & ELLIS, P.C.
[LOGO] [MANER, COSTERISAN & ELLIS, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Sunshine Canyon, A Limited Partnership Lansing, Michigan
January 10, 1997
We have audited the accompanying balance sheets of Sunshine Canyon, A Limited Partnership as of December 31, 1996 and 1995, and the related statements of net loss, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Partnership depreciates its buildings using the accelerated cost recovery method which provides for the depreciation of real property over a fifteen year life. Generally accepted accounting principles require that depreciation be computed over the estimated useful life of the asset. As a result of this departure from generally accepted accounting principles, property, plant and equipment, less accumulated depreciation, is understated and partners' deficit is overstated by $411,690 and $397,957 at December 31, 1996 and 1995, respectively. Additionally, depreciation expense and net loss are overstated by $13,733 and $15,281 for the years ended December 31, 1996 and 1995, respectively.
In our opinion, except for the effects of understating the useful life of real property as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Sunshine Canyon, A Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated January 10, 1997 on our consideration of the Partnership's internal control structure and a report dated January 10, 1997 on its compliance with laws and regulations.
/s/ MANER, COSTERISAN & ELLIS, P.C. [LOGO] [NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners Tujunga Gardens Culver City, California
We have audited the accompanying balance sheet of Tujunga Gardens (a California partnership), Project No. 122-35516-PM-L8, as of December 31, 1996 and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tujunga Gardens as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards we have also issued reports dated February 5, 1997 on our consideration of Tujunga Gardens' Internal Control Structure and on its compliance with requirements applicable to U.S. Department of Housing and Urban Development financial assistance programs.
/s/ NANAS, STERN, BIERS, NEINSTEIN AND CO. LLP
February 5, 1997
[ALTSCHULER, MELVIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED BY FARMERS HOME ADMINISTRATION
To the Partners of The Twentynine Palms Partnership
We have audited the accompanying balance sheets of THE TWENTYNINE PALMS PARTNERSHIP (a limited partnership), FmHA Project No. CA16-R000-010 (the "Partnership") as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Twentynine Palms Partnership as of December 31, 1996 and 1995, and the results of its operations, changes in its partners' deficiency, and its cash flows for the years then ended, in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 17, 1997 on our consideration of the Partnership's internal control structure and a report dated February 17, 1997 on its compliance with laws and regulations.
Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The 1996 supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the 1996 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ ALTSCHULER, MELVIN AND GLASSER LLP
Los Angeles, California February 17, 1997
[LOGO] [SANTIAGO, RILEY & REZNICK LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Marina Del Rey Limited Dividend Partnership Associates
We have audited the accompanying balance sheets of Marina Del Rey Limited Dividend Partnership Associates (the Partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' deficit and cash flows for the years then ended. 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.
Except as discussed in the following paragraph, we conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The Partnership has not maintained certain customary accounting records and supporting documents relating to transactions with a general partner as discussed in Note F. We were unable to satisfy ourselves by other auditing procedures as to the possible effects of transactions with the general partner.
In our opinion, except for the effects, if any, of the items discussed in the third paragraph above, the financial statements referred to above present fairly, in all material respects, the financial position of Marina Del Rey Limited Dividend Partnership Associates as of December 31, 1996 and 1995, and the results of its operations, changes in partners' deficit and its cash flows for the years then ended in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 16 through 19 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplemental information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, except for the effects, if any, of the items discussed in the third paragraph above, such information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports dated January 13, 1997, on our consideration of Marina Del Rey Limited Dividend Partnership Associates' internal control structure and on its compliance with laws and regulations applicable to the financial statements.
/s/ SANTIAGO, RILEY & REZNICK
San Juan, Puerto Rico January 13, 1997 [LOGO] [BORING & GOINS, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Village Apartments, Ltd. LaFollette, TN
We have audited the accompanying balance sheets of Village Apartments, Ltd. (A Limited Partnership) as of December 31, 1996 and 1995, and the related statements of income, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Village Apartments, Ltd. (A Limited Partnership) as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ BORING & GOINS, P.C.
January 31, 1997
[ALTSCHULER, MELVIN AND GLASSER LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of Village Grove, Ltd.
We have audited the accompanying balance sheets of VILLAGE GROVE, LTD. (a limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Village Grove, Ltd. at December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ ALTSCHULER, MELVIN & GLASSER LLP
Los Angeles, California January 29, 1997
[LOGO] [HORWATH VELEZ SEMPRIT & CO. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
Partners Vista Housing Associates (A Limited Partnership) Hato Rey, Puerto Rico
We have audited the accompanying balance sheets of Vista Housing Associates (a limited partnership), HUD Project No. 056-35094-LD-L8, as of December 31, 1996 and 1995 and the related statements of profit and loss (Form HUD-92410), partners' equity deficiency, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vista Housing Associates as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ HORWATH VELEZ SEMPRIT & CO.
January 24, 1997
Stamp number 1411411 was affixed to the original of this report.
[RODNEY L. STEPLETON LETTERHEAD]
Independent Auditor's Report
To the Partners Westgate Apartments, Limited Albertville, Alabama
I have audited the accompanying balance sheets of Westgate Apartments, Limited, (a limited partnership) as of December 31, 1996 and 1995, and the related statements of income, partners equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. My responsibility in to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards and Governmental Auditing Standards issued by the Comptroller General of the United States. Those standards require that I plan and perform my audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westgate Apartments, Limited as of December 31, 1996 and 1995, and the results of operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ RODNEY L. STEPLETON
February 24, 1997
[LOGO] [COOPERS & LYBRAND LETTERHEAD]
Report of Independent
To the Partners of Wilderness Trail, Ltd.
We have audited the accompanying balance sheets of Wilderness Trail, Ltd. (A Kentucky Limited Partnership, FHA Project Number 083-35280-L8-PM-WAH) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wilderness Trail, Ltd. as of December 31, 1996 and 1995, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 7, 1997 on our consideration of Wilderness Trail, Ltd.'s internal control structure and a report dated February 7, 1997 on its compliance with laws and regulations.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The other financial information indexed on page 9 is presented for purposes of additional analysis, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ COOPERS & LYBRAND
Cleveland, Ohio February 7, 1997
[LOGO] [TURLINGTON AND COMPANY, L.L.P. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners Wilkes Towers, Ltd.
HUD Field Office Director Greensboro, North Carolina
We have audited the accompanying balance sheet of Wilkes Towers, Ltd., HUD Project No. 053-35264-PM-SR-WAH-L8 (a North Carolina limited partnership), as of December 31, 1996, and the related statements of profit and loss, partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wilkes Towers, Ltd. at December 31, 1996, and the results of its operations, and the changes in partners' equity, and cash flows for the year then ended, in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U. S. Department of Housing and Urban Development, we have also issued a report dated January 8, 1997 on our consideration of Wilkes Towers, Ltd.'s internal control structure, and reports dated January 8, 1997 on its compliance with specific requirements applicable to major HUD programs, and specific requirements applicable to Affirmative Fair Housing.
Our audit was made for the purpose of formulating the opinion stated above. The supplemental information identified in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wilkes Towers, Ltd. Such information has been subjected
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION (CONTINUED)
to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/s/ TURLINGTON AND COMPANY, L.L.P.
January 8, 1997
REAL ESTATE ASSOCIATES LIMITED III (a California limited partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
The accompanying notes are integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED III (a California limited partnership)
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes are integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED III (a California limited partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes are integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED III (a California limited partnership)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes are integral part of these financial statements.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Real Estate Associates Limited III (the Partnership) 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 Corp. (NAPICO), the corporate general partner, and Coast Housing Investment Associates (CHIA), a limited partnership. Casden Investment Corporation owns 100 percent of NAPICO's stock. The limited partner of CHIA is an officer of NAPICO.
These financial statements include the accounts of Real Estate Associates Limited III and Real Estate Associates ("REA"), a California general partnership in which the Partnership holds a 99.9 percent general partner interest. Losses in excess of the minority interest in equity that would otherwise be attributed to the minority interest are being allocated to the Partnership.
The Partnership offered 3,000 units and issued 2,864 units of limited partner interests through a public offering. Each unit was comprised of two limited partner interests and a warrant granting the investor the right to purchase two additional limited partner interests. An additional 5,728 interests were issued from the exercise of the warrants and the sale of interests associated with warrants not exercised. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest in proportion to their respective investments.
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.
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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Method of Accounting for Investments in Limited Partnerships
The investments in limited partnerships are accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects are capitalized as part of the investment account and are being amortized on a straight line basis over the estimated lives of the underlying assets, which is generally 30 years.
Net Income Per Limited Partnership Interest
Net income per limited partnership interest was computed by dividing the limited partners' share of net income by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 11,456 for all years presented.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and bank certificates of deposit with an original maturity of three months or less. The Partnership has its cash and cash equivalents on deposit primarily with one high credit quality financial institution. Such cash and cash equivalents are in excess of the FDIC insurance limit.
Short Term Investments
Short term investments consist of bank certificates of deposit and other securities with original maturities ranging from more than three months to twelve months. The fair value of these securities, which have been classified as held for sale, approximates their carrying value.
Impairment of Long-Lived Assets
The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying 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.
2. INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 26 limited partnerships. In addition, the Partnership holds a general partner interest in REA. NAPICO is also a general partner in REA. REA, in turn, holds limited partner interests in six additional limited partnerships. In total, therefore, the Partnership holds interests, either directly or indirectly through REA, in 32 partnerships which own residential low income rental projects consisting of 3,062 apartment units. The mortgage loans of these projects are payable to or insured by various governmental agencies.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The Partnership, as a limited partner, is entitled to between 75 percent and 99 percent of the profits and losses of the limited partnerships it has invested in directly. The Partnership is also entitled to 99.9 percent of the profits and losses of REA. REA holds a 99 percent interest in each of the limited partnerships in which it has invested.
Equity in losses of limited partnerships is recognized in the financial statements until the limited partnership investment account is reduced to a zero balance. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. The cumulative amount of the unrecognized equity in losses of certain limited partnerships was approximately $20,515,000 and $19,672,000 as of December 31, 1996 and 1995, respectively.
Distributions from limited partnerships are recognized as a reduction of capital until the investment balance has been reduced to zero. Subsequent distributions received are recognized as income.
The following is a summary of the investments in limited partnerships and reconciliation to the limited partnership accounts:
The difference between the investment in the accompanying balance sheets at December 31, 1996 and 1995, and the deficiency per the limited partnerships' combined financial statements is due primarily to the cumulative unrecognized equity in losses of certain limited partnerships, costs capitalized to the investment account and cumulative distributions recognized as income.
Selected financial information from the combined financial statements at December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996, of the limited partnerships in which the Partnership has invested directly or indirectly, is as follows:
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Balance Sheets
Statements of Operations
Land and buildings, above, have been adjusted for the amount by which the investments in the limited partnerships exceed the Partnership's share of the net book value of the underlying net assets of the investee which are recorded at historical costs. Depreciation on the adjustment is provided for over the estimated remaining useful lives of the properties.
An affiliate of NAPICO is the general partner in one of the limited partnerships included above, and another affiliate receives property management fees of 5 percent of its revenue. The affiliate received property management fees of $16,128, $16,128 and $14,976 in 1996, 1995 and 1994, respectively.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The following sets forth the significant data for this partnership, reflected in the accompanying financial statements using the equity method of accounting:
3. NOTES PAYABLE
Certain of the Partnership's investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. The Partnership is obligated on non-recourse notes payable of $1,510,000, bearing interest at 10 percent, to the sellers of the partnership interests. These notes are payable by the Partnership through REA, and have principal maturity dates in June 2020 and March 2024 or upon the sale or refinancing of the underlying partnership properties. These notes and the related interest are collaterized by REA's investment in the respective limited partnerships and are payable only out of cash distributions from the investee partnerships, as defined in the notes. Unpaid interest is due at maturity of the notes.
Maturity dates on the notes payable are as follows:
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
4. FEES AND EXPENSES DUE GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited Partners, the Partnership is liable to NAPICO for an annual management fee equal to .4 percent of the original invested assets of the limited partnerships. Invested assets is 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 partnerships.
The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was $32,176, $29,927 and $28,835 in 1996, 1995 and 1994, respectively, and is included in operating expenses.
5. CONTINGENCIES
The corporate general partner of the Partnership is a plaintiff in various lawsuits and has also been named a defendant in other lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the corporate general partner, the claims will not result in any material liability to the Partnership.
6. INCOME TAXES
No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the individual partners. The major differences in tax and financial reporting result from the use of different bases and depreciation methods for the properties held by the limited partnerships. Differences in tax and financial losses also arise as losses are not recognized for financial reporting purposes when the investment balance has been reduced to zero.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. The notes payable are collateralized by the Partnership's investments in the investee limited partnerships and are payable only out of cash distributions from the investee partnerships. The operations generated by the investee limited partnerships are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity.
REAL ESTATE ASSOCIATES LIMITED III (A California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996
8. FOURTH QUARTER ADJUSTMENT
The Partnership's policy is to record its equity in income of limited partnerships on a quarterly basis, using estimated financial information furnished by the various local operating general partners. The equity in income reflected in the accompanying annual financial statements is based primarily upon audited financial statements of the investee limited partnerships. The decrease of approximately $42,000, between the estimated nine-month equity in income and the actual total for 1996 equity in income has been recorded in the fourth quarter.
SCHEDULE
REAL ESTATE ASSOCIATES LIMITED III INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SCHEDULE (Continued)
REAL ESTATE ASSOCIATES LIMITED III INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SCHEDULE (Continued)
REAL ESTATE ASSOCIATES LIMITED III INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SCHEDULE (Continued) REAL ESTATE ASSOCIATES LIMITED III INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SCHEDULE (Continued)
REAL ESTATE ASSOCIATES LIMITED III
INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
SCHEDULE III
REAL ESTATE ASSOCIATES LIMITED III REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS INVESTMENTS DECEMBER 31, 1996
SCHEDULE III (CONTINUED)
REAL ESTATE ASSOCIATES LIMITED III REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS INVESTMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTES: 1. Each local limited partnership has developed, owns and operates the housing project. Substantially all project costs, including construction period interest expense, were capitalized by the limited partnerships.
2. Depreciation is provided for by various methods over the estimated useful lives of the Projects. The estimated composite useful lives of the buildings are generally from 25 to 40 years.
3. Investments in property and equipment:
SCHEDULE III (Continued)
REAL ESTATE ASSOCIATES LIMITED III REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH REAL III HAS INVESTMENTS DECEMBER 31, 1996
SCHEDULE (CONTINUED)
REAL ESTATE ASSOCIATES LIMITED III INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM AFFILIATES AND OTHER PERSONS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTES: 1. Equity in losses of the limited partnerships represents the Partnership's allocable share of the net loss from the limited partnerships for the year. Equity in losses of the limited partnerships will be recognized until the investment balance is reduced to zero or below zero to an amount equal to future capital contributions to be made by the Partnership.
2. Cash distributions from the local limited partnerships will be treated as a return on the investment and will reduce the investment balance until such time as the investment is reduced to an amount equal to additional contributions. Distributions subsequently received will be recognized as income.
PART III.
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
REAL ESTATE ASSOCIATES LIMITED III (the "Partnership") has no directors or executive officers of its own.
National Partnership Investment Corp. ("NAPICO" or "the Managing General Partner") is a wholly-owned subsidiary of Casden Investment Company, an affiliate of The Casden Company. The following biographical information is presented for the directors and executive officers of NAPICO with principal responsibility for the Partnership's affairs.
CHARLES H. BOXENBAUM, 67, Chairman of the Board of Directors and Chief Executive Officer of NAPICO.
Mr. Boxenbaum has been associated with the NAPICO since its inception. He has been active in the real estate industry since 1960, and prior to joining NAPICO was a real estate broker with the Beverly Hills firm of Carl Rhodes Company.
Mr. Boxenbaum has been a guest lecturer at national and state realty conventions, certified properties exchanger's seminars, Los Angeles Town Hall, National Association of Home Builders, International Council of Shopping Centers, Society of Conventional Appraisers, California Real Estate Association, National Institute of Real Estate Brokers, Appraisal Institute, various mortgage banking seminars, and the North American Property Forum held in London, England. In 1963, he was the winner of the Snyder Award, the highest annual award offered by the National Association of Real Estate Boards for Best Exchange. He is one of the founders and a past director of the First Los Angeles Bank, organized in November 1974. Mr. Boxenbaum was a member of the Board of Directors of the National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree from the University of Chicago.
BRUCE E. NELSON, 45, President and a director of NAPICO.
Mr. Nelson joined the NAPICO in 1980 and became President in February 1989. He is responsible for the operations of all NAPICO sponsored limited partnerships. Prior to that he was primarily responsible for the securities aspects of the publicly offered real estate investment programs. Mr. Nelson is also involved in the identification, analysis, and negotiation of real estate investments.
From February 1979 to October 1980, Mr. Nelson held the position of Associate General Counsel at Western Consulting Group, Inc., private residential and commercial real estate syndicators. Prior to that time Mr. Nelson was engaged in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor of Arts degree from the University of Wisconsin and is a graduate of the University of Colorado School of Law. He is a member of the State Bar of California and is a licensed real estate broker in California and Texas.
ALAN I. CASDEN, 51, Chairman of The Casden Company, an affiliate of Casden Properties (formerly CoastFed Properties), a director and member of the audit committee of NAPICO, and chairman of the Executive Committee of NAPICO.
Mr. Casden is Chairman of the Board, Chief Executive Officer and sole shareholder of The Casden Company and Casden Investment Company. Prior to that, he was the president and chairman of Mayer Group, Inc., which he joined in 1975. He is also chairman of Mayer Management, Inc., a real estate management firm. Mr. Casden has been involved in approximately $3 billion of real estate financings and sales and has been responsible for the development and construction of more than 12,000 apartment units and 5,000 single-family homes and condominiums.
Mr. Casden is a member of the American Institute of Certified Public Accountants and of the California Society of Certified Public Accountants. Mr. Casden is a member of the advisory board of the National Multi-Family Housing Conference, the Multi- Family Housing Council, and the President's Council of the California Building Industry Association. He also serves on the advisory board to the School of Accounting of the University of Southern California. He holds a Bachelor of Science and a Masters in Business Administration degree from the University of Southern California.
HENRY C. CASDEN, 53, President, Chief Operating Officer and Secretary of The Casden Company and a director and secretary of NAPICO.
Mr. Casden has been President and Chief Operating Officer of The Casden Company, as well as a director of NAPICO since February 1988. He became secretary of both companies in late 1994. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr. Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional Corporation.
Mr. Casden received his Bachelor of Arts degree from the University of California at Los Angeles, and is a graduate of the University of San Diego Law School. Mr. Casden is a member of the State Bar of California and has numerous professional affiliations.
BRIAN D. GOLDBERG, 33, Chief Financial Officer of The Casden Company and a director of NAPICO.
Mr. Goldberg joined The Casden Company in 1990 as Vice President of Finance and became Chief Financial Officer in March 1991. Prior to joining The Casden Company, Mr. Goldberg was with Arthur Andersen & Co., an international public accounting firm, from August 1985 until July 1990 in their Los Angeles office. He received his bachelor of science degree in Accounting from the University of Denver. Mr. Goldberg is a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.
SHAWN HORWITZ, 37, Executive Vice President and Chief Financial Officer.
Mr. Horwitz joined NAPICO in 1990 and is responsible for the financial affairs of NAPICO and the limited partnerships sponsored by NAPICO. Prior to joining NAPICO, Mr. Horwitz was President of Star Sub Shops, Inc., a corporation engaged in the business of selling fast food franchises, for approximately one year, was an audit manager in the real estate industry group for Altschuler, Melvin & Glasser for six years, and was an auditor with Arthur Young & Co. for 3 years.
Mr. Horwitz received his Bachelor of Commerce degree in accounting from Rhodes University in South Africa and is a member of the Illinois Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the South African Institute of Chartered Accountants.
BOB SCHAFER, 55, Senior Vice President and Corporate Controller.
Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible for the financial reporting function of the Company. Prior to this, he was a Group and Division Controller at Bergen Brunswig for over eight years, Controller at a Flintkote subsidiary for over four years, and Assistant Controller at an electronics subsidiary of General Electric for two years.
Mr. Schafer is a member of the California Society of Certified Public Accountants. He holds a Bachelor of Science degree in accounting from Woodbury University, Los Angeles.
PATRICIA W. TOY, 67, Senior Vice President - Communications and Assistant Secretary.
Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a U.S. Naval Officer in communications and personnel assignments. She holds a Bachelor of Arts Degree from the University of Nebraska.
MARK L. WALTHER, 36, Executive Vice President, General Counsel and Assistant Secretary.
Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther worked in the San Francisco law firm of Browne and Kahn which specialized in construction litigation. Mr. Walther received his Bachelor of Arts Degree in Political Science from the University of California, Santa Barbara and is a graduate of the University of California, Davis, School of Law. He is a member of the State Bar of Hawaii.
ITEM 11.

ITEM 11. MANAGEMENT RENUMERATION AND TRANSACTIONS
Real Estate Associates Limited III has no officers, employees or directors. However, under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to pay the Corporate General Partner an annual management fee The annual management fee is approximately equal to .4 percent of the invested assets, including the Partnership's allocable share of the mortgages related to real estate properties held by local limited partnerships is to be paid to the general partners. The fee is earned beginning in the month the Partnership makes its initial contribution to the limited partnership. In addition, the Partnership reimburses the Corporate General Partner for certain expenses.
An affiliate of the Corporate General Partner is responsible for the on-site property management for a property owned by a limited partnership in which the Partnership has invested.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
(a) Security Ownership of Certain Beneficial Owners
The general partners own all of the outstanding general partnership interests of REAL III; no person is known to own beneficially in excess of 5% of the outstanding limited partnership interests.
(b) At December 31, 1996, security ownership of management is as listed:
* Cumulative Limited Partnership interests owned by corporate officers or the general partner is less than 1% interest of total outstanding Limited Partnership interests.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
The Partnership has no officers, directors or employees of its own. All of its affairs are managed by the Corporate General Partner, National Partnership Investments Corp. The transactions with the Corporate General Partner are primarily in the form of fees paid by the Partnership to the general partner for services rendered to the Partnership, as discussed in Item 11 and in the notes to the accompanying financial statements.
ITEM 14.

ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORT ON FORM 8-K:
FINANCIAL STATEMENTS
Report of Independent Public Accountants.
Balance Sheets as of December 31, 1996 and 1995.
Statements of Operations for the years ended December 31, 1996, 1995 and 1994.
Statements of Partners' Equity (Deficiency) for the years ended December 31, 1996, 1995 and 1994.
Statements of Cash Flow for the years ended December 31, 1996, 1995 and 1994.
Notes to Financial Statements.
FINANCIAL STATEMENT SCHEDULES APPLICABLE TO REAL ESTATE ASSOCIATES LIMITED III, REAL ESTATE ASSOCIATES AND THE LIMITED PARTNERSHIPS IN WHICH REAL ESTATE ASSOCIATES LIMITED III AND REAL ESTATE ASSOCIATES HAVE INVESTMENTS:
Schedule - Investments in Limited Partnerships, December 31, 1996, 1995 and 1994.
Schedule III - Real estate and accumulated depreciation, December 31, 1996.
The remaining schedules are omitted because the required information is included in the financial statements and notes thereto or they are not applicable or not required.
EXHIBITS
(3) Articles of incorporation and bylaws: The registrant is not incorporated. The Partnership Agreement was filed with Form S-11 #268983 incorporated herein by reference.
(10) Material contracts: The registrant is not party to any material contracts, other than the Restated Certificate and Agreement of Limited Partnership dated January 5, 1981, and the thirty-three contracts representing the Partnership investment directly or indirectly in local limited partnerships as previously filed at the Securities Exchange Commission, File 268983 which is hereby incorporated by reference.
(13) Annual report to security holders: page 10.
REPORTS ON FORM 8-K
A report on Form 8-K dated February 14, 1997, was filed with the Securities and Exchange Commission. This Form 8-K disclosed that the registrant became aware of an entity conducting a tender offer for units in the registrant. The general partners on behalf of the registrant, by letter, transmitted on or about February 14, 1997, advised the limited partners that the general partners expressed no opinion regarding this offer, but urged the limited partners to consult with their tax advisors about the tax consequences that could result from a sale of their units.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Los Angeles, State of California.
REAL ESTATE ASSOCIATES LIMITED III
By: NATIONAL PARTNERSHIP INVESTMENTS CORP. The General Partner
______________________________________________ Charles H. Boxenbaum Chairman of the Board of Directors and Chief Executive Officer
______________________________________________ Bruce E. Nelson Director and President
______________________________________________ Alan I. Casden Director
______________________________________________ Henry C. Casden Director
______________________________________________ Brian D. Goldberg Director
______________________________________________ Shawn D. Horwitz Executive Vice President and Chief Financial Officer
______________________________________________ Bob E. Schafer Senior Vice President and Corporate Controller