LIBERTY TAX CREDIT PLUS III LP - 10-K Annual Report

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

FORM 10-K
(Mark One)

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

For the fiscal year ended March 31, 1999
OR

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

Commission File Number 0-24656

LIBERTY TAX CREDIT PLUS III L.P.
(Exact name of registrant as specified in its charter)

Delaware 13-3491408
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 421-5333

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

None

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

Limited Partnership Interests and Beneficial Assignment Certificates
(Title of Class)

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

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

DOCUMENTS INCORPORATED BY REFERENCE
None

Index to exhibits may be found on page 209

Page 1 of 225

PART I

Item 1. Business.

General

Liberty Tax Credit Plus III L.P. (the "Partnership") is a limited partnership
which was formed under the laws of the State of Delaware on November 17,
1988. The General Partners of the Partnership are Related Credit Properties
III L.P., a Delaware limited partnership (the "Related General Partner"), and
Liberty GP III Inc., a Delaware corporation (the "Liberty General Partner").
The general partner of the Related General Partner is Related Credit Proper-
ties III Inc., a Delaware corporation. On November 25, 1997, an affiliate of
the Related General Partner, purchased 100% of the stock of the Liberty Gen-
eral Partner (the "Transfer"). In addition to the Transfer, by acquiring the
stock of the Liberty General Partner, an affiliate of the Related General
Partner also acquired the Liberty General Partner's general partner interest
in Liberty Associates IV L.P., the special limited partner of the Partner-
ship. Pursuant to the Partnership's Amended and Restated Partnership Agree-
ment, the consent of the limited partners was not required to approve the
Transfer. In connection with the Transfer, the Partnership paid to the Lib-
erty General Partner the accrued asset management fees owed to the Liberty
General Partner in the aggregate amount of $737,750.

On May 2, 1989, the Partnership commenced a public offering (the "Offering")
of Beneficial Assignment Certificates ("BACs") representing assignments of
limited partnership interests in the Partnership ("Limited Partnership Inter-
ests").

As of March 30, 1990, (the date on which the Partnership held the final clos-
ing of the sale of BACs and on which the Offering was terminated), the Part-
nership had received $139,101,500 of gross proceeds of the Offering from
9,082 investors.

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships" or "Subsidiary Part-
nerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the low-
income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform
Act of 1986, some of which are eligible for the historic rehabilitation tax
credit ("Historic Rehabilitation Tax Credit") ("Rehabilitation Projects"; and
together with the Apartment Complexes, the"Properties"). Some of the Apart-
ment Complexes benefit from one or more other forms of federal or state hous-
ing assistance. The Partnership's investment in each Local Partnership rep-
resents from 27% to 98% of the Partnership's interests in the Local Partner-
ship. As of March 31, 1999, approximately $109,000,000 (not including acqui-
sition fees) of net proceeds have been invested in 62 Local Partnerships.
The Partnership does not anticipate making any additional investments. See
Item 2, Properties, below.

Liberty Associates IV, L.P. ("Liberty Associates") is the Special Limited
Partner in all 62 Local Partnerships. Liberty Associates has certain rights
and obligations in its role as Special Limited Partner which permit this af-
filiate of the registrant to exercise control over the management and poli-
cies of the subsidiaries.

The Partnership has been formed to invest primarily in low-income Apartment
Complexes that are eligible for the Housing Tax Credit enacted in the Tax Re-
form Act of 1986. Some Apartment Complexes may also be eligible for Historic
Rehabilitation Tax Credits ("Historic Complexes"). The investment objectives
of the Partnership are to:

1. Entitle qualified BACs holders to substantial Housing Tax Credits over
the period of the Partnership's entitlement to claim such Tax Credits (for
each Property, generally ten years from the date of investment or, if later,
the date the Property is placed in service; referred to herein as the "Credit
Period") with respect to each Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the Properties
and provide distributions of sale or refinancing proceeds upon the disposi-
tion of the Properties.

4. Provide cash distributions when available from the operations of the
Properties, current taxes on which are expected to be substantially deferred.

5. Allocate passive losses to individual BACs holders to offset passive in-
come that they may realize from rental real estate investments and other pas-
sive activities, and allocate passive losses to corporate BACs holders to
offset business income.

One of the Partnership's objectives is to entitle qualified BACs holders to
Housing Tax Credits over the Credit Period. Each of the Local Partnerships
in which the Partnership has acquired an interest has been allocated by the
relevant state credit agency the authority to recognize Tax Credits during
the Credit Period provided that the Local Partnership satisfies the rent re-
striction, minimum set-aside and other requirements for recognition of the
Tax Credits at all times during the 15-year period commencing at the begin-
ning of the Credit Period. Once a Local Partnership has become eligible to
recognize Tax Credits, it may lose such eligibility and suffer an event of
"recapture" if (1) the Partnership ceases to meet qualification requirements
, (2) there is a decrease in the qualified basis of the Projects, or (3)
there is a reduction in the taxpayer's interest in the Project at any time
during the 15-year Compliance Period that began with the first tax year of
the Credit Period. None of the Local Partnerships in which the Partnership
has acquired an interest has suffered an event of recapture.

The Partnership continues to meet its primary objective of generating Housing
Tax Credits; approximately $19,584,000, $19,632,000 and $19,673,000, during
the years ended March 31, 1999, 1998, and 1997, respectively.

The Partnership also continues to meet its objective of allocating passive
losses to individual BACs holders to offset passive income that they may re-
alize from rental real estate investments and other passive activities, and
allocating passive losses to corporate BACs holders to offset business in-
come.

Cash distributions received from the Local Partnerships have been relatively
immaterial. Management does not expect that the distributions received from
the Local Partnerships will be sufficient to permit cash distributions to
BACs holders. The Partnership does not anticipate providing cash distribu-
tions to BACs holders in circumstances other than refinancings or sales.

There can be no assurance that the Partnership will achieve its investment
objectives.

Certain subsidiaries are subject to HUD restrictions which limit annual cash
distributions to partners and restrict the subsidiaries from selling or oth-
erwise liquidating their assets during the period that the agreement with HUD
is in existence, without HUD's approval.

In order for certain subsidiaries to qualify for the Section 421A Program,
and the Inclusionary Zoning Program they are subject to certain requirements
by local authorities as to the level of rent that may be charged to tenants,
the tenants' incomes, the obligation to operate the property in accordance
with rent stabilization guidelines, and restrictions on the rate at which
housing units may be released from such guidelines.

Also, certain subsidiary partnerships obtain grants from local authorities to
fund construction costs of the properties and in order to qualify must main-
tain the low-income nature of the property, among other provisions.

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership
can also be affected by poor economic conditions generally; however, no more
than 20% of the properties are located in any single state. There are also
substantial risks associated with owning properties receiving government as-
sistance, for example the possibility that Congress may not appropriate funds
to enable the U.S. Department of Housing and Urban Development ("HUD") to
make rental assistance payments. HUD also restricts annual cash distribu-
tions to partners based on operating results and a percentage of the owner's
equity contribution. The Partnership cannot sell or substantially liquidate
its investments in subsidiary partnerships during the period that the subsidy
agreements are in existence, without HUD's approval. Furthermore, there may
not be market demand for apartments at full market rents when the rental as-
sistance contracts expire.

Competition
The real estate business is highly competitive and substantially all of the
Properties acquired and to be acquired by the Partnership are subject to ac-
tive competition from similar properties in their respective vicinities. In
addition, various other limited partnerships may, in the future, be formed by
the General Partners and/or their affiliates to engage in businesses which
may be competitive with the Partnership.

Employees
The Partnership does not have any direct employees. All services are per-
formed for the Partnership by its General Partners and their affiliates. The
General Partners receive compensation in connection with such activities as
set forth in Items 11 and 13. In addition, the Partnership reimburses the
General Partners and certain of their affiliates for expenses incurred in con-
nection with the performance by their employees of services for the Partner-
ship in accordance with the Partnership's Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement").

Item 2. Properties.

The Partnership holds a 98% limited partnership interest in 61 Local Partner-
ships and a 26.46% limited partnership interest in 1 Local Partnership (the
other 71.54% limited partnership interest is held by an affiliate of the
Partnership with the same management); together these 62 Local Partnerships
own 66 apartment complexes. Set forth below is a schedule of these Local
Partnerships including certain information concerning their respective Apart-
ment Complexes (the "Local Partnership Schedule"). Further information con-
cerning these Local Partnerships and their Properties, including any encum-
brances affecting the properties, may be found in Item 14. Schedule III.

Local Partnership Schedule

Name and Location % of Units Occupied at May 1,
(Number of Units) Date Acquired 1999 1998 1997 1996 1995

C.V. Bronx Associates, L.P./
Gerald Gardens
Bronx, NY (121) June 1989 98 97 97 97 95
Michigan Rural Housing
Limited Partnership
Michigan (192)(*) September 1989 94 98 97 89 90
Jefferson Limited Partnership
Schreveport, LA (69) December 1989 93 100 94 99 96
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI (36) October 1989 100 97 94 100 100
RBM Associates/Spring Garden
Philadelphia, PA (8) December 1989 100 100 100 100 100
Glenbrook Associates
Atglen, PA (35) November 1989 97 100 100 100 100
Affordable Flatbush Associates
Brooklyn, NY (30) December 1989 93 100 97 100 97
Barclay Village II, LTD.
Chambersburg, PA (87) November 1989 98 95 100 100 100
1850 Second Avenue Associates, L.P.
New York, NY (48) October 1989 100 100 100 100 100
R.P.P. Limited Dividend Housing/
River Place
Detroit, MI (301) November 1989 98 98 95 97 99
Williamsburg Residential II, L.P.
Wichita, KS (50) November 1989 90 76 74 92 96
West 104th Street Associates L.P.
New York, NY (56) December 1989 100 100 98 100 98
Meredith Apartments, LTD.
Salt Lake City, UT (22) August 1989 100 100 100 100 100
Ritz Apartments, LTD.
Salt Lake City, UT (30) August 1989 100 100 93 100 100
Ashby Apartments, LTD.
Salt Lake City, UT (27) August 1989 96 93 96 96 100
South Toledo Associates, LTD.
Toledo, OH (18) January 1990 94 94 94 100 100
Dunlap School Venture
Philadelphia, PA (35) January 1990 97 97 100 92 98
Philipsburg Elderly Housing
Associates
Philipsburg, PA (103) February 1990 97 97 98 99 98
Franklin Elderly Housing
Associates
Franklin, PA (89) February 1990 100 99 99 99 99
Wade D. Mertz Elderly Housing
Associates
Sharpsville, PA (103) February 1990 100 98 98 99 99
Lancashire Towers Associates
Limited Partnership
Cleveland, OH (240) February 1990 96 100 98 100 100
Northwood Associates Limited
Partnership
Toledo, OH (176) February 1990 94 95 96 97 92
Brewery Renaissance Associates
Middletown, NY (53) February 1990 98 94 98 98 98
Brandywine Court Associates, L.P.
Jacksonville, FL (52) November 1989 92 94 98 94 90
Art Apartments Associates
Philadelphia, PA (30) March 1990 100 100 97 83 94
The Village at Carriage Hills, LTD.
Clinton, TN (48) March 1990 96 100 100 100 100
Mountainview Apartments, LTD.
Newport, TN (34) March 1990 97 100 100 100 100
The Park Village, Limited
Jackson, MS (24) March 1990 100 100 100 100 100
River Oaks Apartments, LTD.
Oneonta, AL (35) March 1990 97 94 100 100 100
Forrest Ridge Apartments, LTD.
Forrest City, AR (25) March 1990 100 100 100 100 100
The Hearthside Limited Dividend
Housing Association Limited
Partnership
Portage, MI (101) March 1990 100 97 99 98 100
Redemptorist Limited Partnership
New Orleans, LA (126) March 1990 94 95 95 98 95
Manhattan A Associates
New York, NY (99) April 1990 98 99 97 97 98
Broadhurst Willows, L.P.
New York, NY (129) April 1990 97 97 92 96 97
Weidler Associates Limited
Partnership
Portland, OR (52) May 1990 100 100 100 98 98
Gentle Pines-West Columbia
Associates, L.P.
Columbia, SC (150) June 1990 98 97 100 99 97
Lake Forest Estates II, LTD.
Livingston, AL (32) June 1990 100 97 100 100 97
Las Camelias Limited Partnership
Rio Piedras, PR (166) June 1990 97 97 100 100 98
WPL Associates XXIII
Portland, OR (48) July 1990 97 96 92 97 98
Broadway Townhouses L.P.
Camden, NJ (175) July 1990 100 100 100 100 100
Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR (67) August 1990 100 96 100 100 100
Citrus Meadows Apartments, LTD.
Brandenton, FL (200) July 1990 88 94 96 94 96
Sartain School Venture
Philadelphia, PA (35) August 1990 91 100 98 89 98
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL (176) September 1990 100 100 100 100 99
Holly Hill, LTD.
Greenville, TN (46) October 1990 98 100 100 100 96
Mayfair Apartments LTD.
Morristown, TN (48) October 1990 96 100 100 100 100
Foxcroft Apartments LTD.
Troy, AL (48) October 1990 98 100 98 98 100
Canterbury Apartments, LTD.
Indianola, MS (48) October 1990 98 90 90 100 100
Cutler Canal III Associates, LTD.
Miami, FL (262) October 1990 98 96 94 95 97
Jefferson Place L.P.
Olathe, KS (352) October 1990 97 95 96 93 99
Callaway Village, LTD.
Clinton, TN (46) November 1990 93 100 100 100 100
Commerce Square Apartments
Associates L.P.
Smyrna, DE (80) December 1990 96 95 100 95 98
West 132nd Development
Partnership
New York, NY (40) December 1990 100 100 95 88 95
Site H Development Co.
Brooklyn, NY (11) December 1990 93 100 100 100 100
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA (78) December 1990 97 96 94 97 85
Diamond Phase II Venture
Philadelphia, PA (32) December 1990 100 100 97 91 97
Bookbindery Associates
Philadelphia, PA (41) December 1990 100 93 98 98 93
The Hamlet, LTD.
Boynton Beach, FL (240) December 1990 89 97 93 98 92
Stop 22 Limited Partnership
Santurce, PR (153) December 1990 99 99 100 100 99
Knob Hill Apartments, LTD.
Greenville, TN (48) December 1990 100 100 100 100 100
Conifer James Street Associates
Syracuse, NY (73) December 1990 79 91 92 92 79
Longfellow Heights Apartments, L.P.
Kansas City, MO (104) March 1991 94 95 98 98 86

(*) Consists of five apartment complexes located throughout Michigan.

Generally, the General Partners required in connection with investments in
Local Partnerships that the general partners of the Local Partnerships ("Lo-
cal General Partners") undertake an obligation to fund operating deficits (up
to a stated maximum amount) of the Local Partnership during a limited period
of time following rent stabilization, the Partnership's investment ("Guaran-
tee Period"). In each case, the operating deficits have been funded by Oper-
ating Loans which will not bear interest and will be repaid only out of 50%
of available cash flow or out of available net sale or refinancing proceeds.
The gross amount of the Operating Deficit Guarantees aggregate approximately
$18,700,000, of which approximately $17,300,000 have expired as of March 31,
1999. In cases where the General Partners deem it appropriate, the obliga-
tions of a Local General Partner under the Operating Deficit and/or Rent-Up
Guarantees are secured by letters of credit and/or cash escrow deposits.

The Tax Credits are available for a ten-year period which commences when the
property is occupied by qualified tenants. However, the annual Tax Credit
available in the year in which the Apartment Complex was first occupied by
qualified tenants must be prorated based upon the months remaining in the
year after the Apartment Complex was placed in service. The amount of the
annual Tax Credit not available in the first year will be available in the
eleventh year. In certain cases, the Partnership acquired its interest in a
Local Partnership after the Local Partnership had placed its Apartment Com-
plex in service. In these cases, the Partnership was allocated Tax Credits
only beginning in the month following the month in which the Partnership ac-
quired its interest. In addition, Tax Credits allocated in any prior period
may not be claimed by the Partnership. The Partnership has also acquired Lo-
cal Partnership Interests in which some of the Local Partnerships owning his-
toric complexes qualifies for the Historic Rehabilitation Tax Credit. The
amount of the Historic Rehabilitation Tax Credit is generally 20% of quali-
fied rehabilitation expenditures and is available in its entirety in the year
the rehabilitated building is placed in service or, under certain circum-
stances, in the year in which the rehabilitation expenditure is made.

All leases are generally for periods not exceeding one to two years and no
tenant occupies more than 10% of the rentable square footage.

Rent from commercial tenants (to which average rental per square foot ap-
plies) comprise less than 5% of the rental revenues of the Partnership.
Maximum rents for the residential units are determined annually by HUD and
reflect increases/decreases in consumer price indexes in various geographic
areas. Market conditions, however determine the amount of rent actually
charged.

Management continuously reviews the physical state of the properties and sug-
gests to the respective Local General Partner budget improvements, which are
generally funded from cash flow from operations or release of replacement re-
serve escrows.

Management annually reviews the insurance coverage of the properties and be-
lieves such coverage is adequate.

See Item 1, Business, above for the general competitive conditions to which
the properties described above are subject.

Real estate taxes are calculated using rates and assessed valuations deter-
mined by the township or city in which the property is located. Such taxes
have approximated 1% of the aggregate cost of the properties as shown in
Schedule III to the financial statements.

Item 3. Legal Proceedings.

None.

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

None.

PART II

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

The Partnership has issued 27,820.3 Limited Partnership Interests, each rep-
resenting a $5,000 capital contribution to the Partnership, for aggregate
Gross Proceeds of $139,101,500. All of the issued and outstanding Limited
Partnership Interests have been issued to Liberty Credit Assignor III Inc.
(the "Assignor Limited Partner"), which has in turn issued 139,101.5 BACs to
the purchasers thereof for an aggregate purchase price of $139,101,500. Each
BAC represents all of the economic and virtually all of the ownership rights
attributable to one-fifth of a Limited Partnership Interest held by the As-
signor Limited Partner. BACs may be converted into Limited Partnership In-
terests at no cost to the holder (other than the payment of transfer costs
not to exceed $100), but Limited Partnership Interests so acquired are not
thereafter convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on any es-
tablished trading market. The Partnership does not intend to include the
BACs for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partners have imposed limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restric-
tions should prevent a public trading market from developing and may ad-
versely affect the ability of an investor to liquidate his or her investment
quickly. It is expected that such procedures will remain in effect until
such time, if ever, as further revision of the Revenue Act of 1987 may permit
the Partnership to lessen the scope of the restrictions.

As of May 1, 1999, the Partnership has approximately 9,022 registered holders
of an aggregate of 139,101.5 BACs.

All of the Partnership's general partnership interests, representing an ag-
gregate capital contribution of $2,000, are held by the two General Partners.

Certain subsidiaries are subject to HUD restrictions which limit annual cash
distributions to partners and restrict the subsidiaries from selling or oth-
erwise liquidating their assets during the period that the agreement with HUD
is in existence, without HUD's approval.

Pursuant to the terms of the Partnership Agreement there are no material re-
strictions that restrict the ability of the Partnership to make distribu-
tions.

However, the Partnership has made no distributions to the BACs holders as of
March 31, 1999. The Partnership does not anticipate providing cash distribu-
tions to its BACs holders other than from net refinancing or sales proceeds.

Item 6. Selected Financial Data.

The information set forth below presents selected financial data of the Part-
nership from the last five fiscal years. Additional financial information
is set forth in the audited financial statements in Item 8 hereof.

Year Ended March 31,
OPERATIONS
1999 1998 1997 1996 1995

Revenues $36,122,840 $33,735,906 $33,542,935 $33,211,908 $32,437,587
Operating
expenses (51,078,523) (50,778,124) (48,902,130) (49,134,034) (47,897,186)
Loss on
impairment
of assets 0 0 (20,083,101) 0 0
Loss before
minority
interest and
extraordinary
gain (14,955,683) (17,042,218) (35,442,296) (15,922,126) (15,459,599)
Minority
interest in
income of
subsidiary
partnerships 259,094 154,367 156,523 153,662 158,671
Extraordinary
item-
forgiveness on
indebtedness
income 0 1,045,627 0 0 0
Net
loss $(14,696,589) $(15,842,224) $(35,285,773) $(15,768,464) $(15,300,928)
Net
loss -
limited
partners $(14,549,623) $(15,683,802) $(34,932,915) $(15,610,779) $(15,147,919)
Net
loss
per
BAC $ (104.60) $ (112.75) $ (251.13) $ (112.23) $ (108.90)

Year Ended March 31,
FINANCIAL POSITION
1999 1998 1997 1996 1995

Total
assets $245,335,047 $256,800,296 $268,870,640 $302,121,868 $314,010,691

Total
liabili-
ties $266,334,183 $262,594,185 $258,746,588 $257,205,366 $252,803,110

Minority
interest $1,672,679 $ 2,181,337 $ 2,257,054 $ 1,763,731 $ 2,286,346

Total
partners'
(deficit)
capital$(22,671,815) $ (7,975,226) $ 7,866,998 $ 43,152,771 $ 58,921,235

During the years ended March 31, 1995 through 1999, total assets decreased
primarily due to depreciation and loss on impairment of assets (for the year
ended March 31, 1997), partially offset by net addition to property and
equipment. During the years ended March 31, 1998 through 1999, total li-
abilities increased primarily due to the accrual of principal and interest
payments at one of the Local Partnerships along with the increase in obliga-
tions at the remaining Local Partnerships. During the year ended March 31,
1997, total liabilities decreased primarily due to payment of obligations.
During the years ended March 31, 1995 through 1996, total liabilities in-
creased primarily due to the accrual of principal and interest payments at
one of the Local Partnerships, partially offset by payments of obligations at
the remaining Local Partnerships.

CASH DISTRIBUTION
The Partnership has made no distributions to the BACs holders as of March 31,
1999.

Item 7. Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations.

Liquidity and Capital Resources

Through March 31, 1999, the Partnership has invested approximately
$109,000,000 (not including acquisition fees) of net proceeds in 62 Local
Partnerships of which approximately $1,229,000 remains to be paid (which in-
cludes approximately $939,000 held in escrow).

During the year ended March 31, 1999, the Partnership's primary source of
funds included (i) working capital reserves and (ii) cash distributions from
the operations of the Local Partnerships.

For the year ended March 31, 1999, cash and cash equivalents of the Partner-
ship and its 62 consolidated subsidiary partnerships decreased by approxi-
mately $33,000. This decrease was primarily attributable to acquisition of
property and equipment ($1,226,000), repayments on mortgage notes
($1,563,000), a decrease in capitalization of consolidated subsidiaries at-
tributable to minority interest ($250,000) and a net decrease in due to local
general partners and affiliates ($530,000) which exceeded cash flow provided
by operations ($3,559,000). Included in the adjustments to reconcile the net
loss to cash flow provided by operations is depreciation and amortization in
the amount of $11,659,000 and an increase in due to debt guarantor in the
amount of $2,621,000.

The Partnership has a working capital reserve of approximately $57,000 at
March 31, 1999.

The Partnership is not expected to have access to additional sources of fi-
nancing, and in particular will not have the ability to assess BAC holders
for additional capital contributions to provide capital if needed by the
Partnership. Accordingly, if circumstances arise that cause a Local Partner-
ship to require capital in addition to that contributed by the Partnership
and any equity of the Local General Partner, the only sources from which such
capital needs will be able to be satisfied (other than the limited reserves
available at the partnership level) will be additional third party debt fi-
nancing (which may not be available if, as expected, the property owned by
the Local Partnership is already substantially leveraged or, as in the case
of the New York program properties, the incurrence of third party debt is not
permitted) or additional equity contributions of the Local General Partner or
other equity sources (which could adversely affect the Partnership's interest
in operating cash flow and/or proceeds of sale or refinancing of the property
and result in adverse tax consequences to the BAC holders). There can be no
assurance that any of such sources would be readily available in sufficient
proportions to fund the capital requirements of the Local Partnerships in
question, particularly if the residual value of a property is uncertain. If
sources are not available, the Local Partnership would risk foreclosure on
its property if it were unable to renegotiate the terms of its first mortgage
and any other debt with the lenders thereof. The risks associated with the
need of the Local Partnership to refinance their underlying first mortgage
debt are exacerbated by the probability that the term of certain favorable
assistance programs from which a Local Partnership may benefit will expire
prior to the end of the compliance period with respect to such Local Partner-
ship's property.

Cash distributions received from the Local Partnerships remain relatively im-
material. These distributions, as well as the working capital reserves re-
ferred to above, will be used towards the future operating expenses of the
Partnership.

During the years ended March 31, 1999, 1998 and 1997, the amounts received
from operations of the Local Partnerships approximated $161,000, $226,000,
and $112,000, respectively.

The Partnership has negotiated Operating Deficit Guarantee Agreements with
all Local Partnerships, in which the Local General Partners have agreed to
fund operating deficits for a specified period of time. The terms of the Op-
erating Deficit Guarantee Agreements vary for each Local Partnership, with
the maximum dollar amounts to be funded for a specified period of time, gen-
erally three years, commencing at rent stabilization. The gross amount of
the Operating Deficit Guarantees aggregate approximately $18,700,000 of which
approximately $17,300,000, $17,300,000, and $16,100,000 had expired as of
March 31, 1999, 1998 and 1997, respectively. As of March 31, 1999 and 1998,
approximately $4,709,000 and $4,284,000, respectively, has been funded by the
Local General Partners to meet such obligations. All operating deficit guar-
antees expire within the next year. Management does not expect their expira-
tion to have a material impact on liquidity, based on prior years' fundings.

In addition, several Local Partnerships were initially subject to Rent-Up
Guarantee Agreements, in which the general partners of the Local General
Partner agree to pay liquidated damages if predetermined occupancy rates are
not achieved. As of March 31, 1999, all such guarantees have expired.

Partnership management fees owed to the General Partners amounted to approxi-
mately $2,758,000 and $1,374,000 were accrued and unpaid at March 31, 1999
and 1998. Without the General Partners' continued accrual and without pay-
ment of certain fees and expense reimbursements, the Partnership will not be
in a position to meet its obligations. The General Partners have continued
allowing the accrual without payment of these amounts but are under no obli-
gation to continue to do so.

For a discussion of contingencies affecting certain Local Partnerships, see
Results of Operations of Certain Local Partnerships below. Since the maxi-
mum loss the Partnership would be liable for is its net investment in the re-
spective Local Partnerships, the resolution of the existing contingencies is
not anticipated to impact future results of operations, liquidity or finan-
cial condition in a material way. However, the Partnership's loss of its in-
vestment in a Local Partnership will eliminate the ability to generate future
Tax Credits from such Local Partnership and may also result in recapture of
Tax Credits if the investment is lost before the expiration of the Credit Pe-
riod.

Except as described above, management is not aware of any trends or events,
commitments or uncertainties, which have not otherwise been disclosed, that
will or are likely to impact liquidity in a material way. Management be-
lieves the only impact would be for laws that have not yet been adopted. The
portfolio is diversified by the location of the properties around the United
States so that if one area of the country is experiencing downturns in the
economy, the remaining properties in the portfolio may be experiencing up-
swings. However, the geographic diversifications of the portfolio may not
protect against a general downturn in the national economy. The Partnership
has fully invested the proceeds of its offering in 62 Local Partnerships, all
of which fully have their Tax Credits in place. The Tax Credits are attached
to the project for a period of ten years and are transferable with the prop-
erty during the remainder of the ten-year period. If trends in the real es-
tate market warranted the sale of a property, the remaining Tax Credits would
transfer to the new owner; thereby adding significant value to the property
on the market, which are not included in the financial statement carrying
amount.

Results of Operations

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period inter-
est and any other costs incurred in acquiring the properties. The cost of
property and equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs and mainte-
nance are charged to expense as incurred; major renewals and betterments are
capitalized. At the time property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are eliminated from the
assets and accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. A loss on impairment of assets is re-
corded when management estimates amounts recoverable through future opera-
tions and sale of the property on an undiscounted basis are below depreciated
cost. At that time property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is con-
sidered to be impaired and the depreciated cost exceeds estimated fair value.
Through March 31, 1999, the Partnership has recorded approximately
$20,083,000 as a loss on impairment of assets.

At the time management commits to a plan to dispose of assets, said assets
are adjusted to the lower of carrying amount or fair value less costs to
sell. These assets are classified as property and equipment-held for sale
and are not depreciated. There are no assets classified as property and
equipment-held for sale through March 31, 1999.

The following is a summary of the results of operations of the Partnership
for the years ended March 31, 1999, 1998 and 1997 (the "Fiscal 1998", "Fiscal
1997" and "Fiscal 1996", respectively).

The majority of the Local Partnerships' income continues to be in the form of
rental income, with the corresponding expenses (excluding loss on impairment
of assets) being divided among operations, depreciation, and mortgage inter-
est.

The net loss for the 1998, 1997 and 1996 Fiscal Years totaled $14,696,589,
$15,842,224, and $35,285,773, respectively.

1998 vs. 1997

Rental income increased approximately 3% for the year ended March 31, 1999 as
compared to the corresponding period in 1998 primarily due to rental rate in-
creases.

Other income increased approximately $1,355,000 for the year ended March 31,
1999 as compared to the corresponding period in 1998 primarily due to the
following increases at four Local Partnerships. There was an increase at one
Local Partnership due to the receipt of insurance proceeds resulting from a
roof warranty. The increase at the second Local Partnership is due to a re-
bate from signing a new cable contract and termination fees resulting from
early cancellation of rental leases. The increase at the third Local Part-
nership resulted from a real estate tax settlement which reduced the accrued
interest owed on prior year delinquent taxes. The increase at the fourth Lo-
cal Partnership resulted from the reversal of the excess reserve established
to cover the maximum exposure of disputed property tax assessments.

Total expenses, excluding real estate taxes, remained fairly consistent with
an increase of approximately 3% for the year ended March 31, 1999 as compared
to the corresponding period in 1998.

Real estates taxes decreased approximately $1,236,000 for the year ended
March 31, 1999 as compared to the corresponding period in 1998 primarily due
to the write-off of accrued real estate taxes due to a settlement of prior
year taxes owed at one Local Partnership.

1997 vs. 1996
Rental income increased approximately 1% for the year ended March 31, 1998 as
compared to the corresponding period in 1997 primarily due to rental rate in-
creases.

Total expenses, excluding repairs and maintenance, real estate taxes and loss
on impairment of assets, remained fairly consistent with a decrease of ap-
proximately 1% for the year ended March 31, 1998 as compared to the corre-
sponding period in 1997.

General and administrative-related parties increased approximately $381,000
for the year ended March 31, 1998 as compared to the corresponding period in
1997 primarily due to an increase in expense reimbursements payable to the
General Partners, the change at three Local Partnerships from an unaffiliated
property manager to one which is an affiliate and an increase in administra-
tive fees received from the Local Partnerships.

Repairs and maintenance expense increased approximately $547,000 for the year
ended March 31, 1998 as compared to the corresponding period in 1997 primar-
ily due to increases at six Local Partnerships. There was an increase at one
Local Partnership due to the replacement of floor coverings and carpets in
certain apartments and the hiring of additional security. The increase at
the second Local Partnership was due to the cycle painting of apartments.
The increase at the third Local Partnership was due to the new management
company hiring outside contractors to do maintenance repairs rather than hav-
ing the work done by in-house employees. The increase at the fourth Local
Partnership was due to parking lot repairs and the painting of vacant units.
The increase at the fifth Local Partnership was due to the repainting of cer-
tain units, the replacement of carpets, roof repairs and landscaping improve-
ments. The increase at the sixth Local Partnership was due to the painting
of the exterior of the buildings.

Real estate taxes increased approximately $1,581,000 for the year ended March
31, 1998 as compared to the corresponding period in 1997 primarily due to an
accrual of the expected tax liability resulting from the probable outcome of
a pending tax exemption application at one Local Partnership.

Results of Operations of Certain Local Partnerships

R.P.P. Limited Dividend Housing Association Limited Partnership ("River
Place")
River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $30,040,000 at December 31, 1998. The Partnership has been
unable to generate sufficient cash flows to meet a majority of its required
principal and interest payments under the loans. River Place's debt guaran-
tor, General Retirement System of the City of Detroit ("GRS"), entered into an
agreement with the Authority to purchase these loans upon occurrence of cer-
tain events. GRS has declared River Place in default under its obligation to
make the required payments. During 1996, GRS agreed to waive its right of
foreclosure under the mortgages, unless certain events occur, through February
1, 2006. GRS has made advances for debt service and has incurred certain fees
relating to these loans totaling $30,855,866 including accrued interest on
such advances at a rate of 15%. Such amount is included in the amount due to
debt guarantor on the balance sheet.

Management anticipates that River Place will be unable to make all of the re-
quired debt service payments during 1999. However, there is no guarantee that
GRS, or any other persons, will continue to make these payments on behalf of
River Place. These items raise substantial doubt about River Place's ability
to continue as a going concern.

The financial statements of River Place have been prepared assuming that
River Place will continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this uncer-
tainty. The Partnership's investment in River Place has been written down to
zero by prior years' losses and the minority interest balance was $882,750 at
both March 31, 1999 and 1998. The net loss after minority interest for River
Place amounted to approximately $3,185,000, $3,648,000 and $22,373,000 (after
loss on impairment of assets of approximately $18,803,000) for the years
ended March 31, 1999, 1998 and 1997, respectively.

L.I.H. Chestnut Associates, L.P. ("Chestnut")
Chestnut has sustained recurring losses from operations. At December 31,
1998, Chestnut had not made certain payments required under the terms of the
mortgage loan and, as a result, is in default. Chestnut's continued exis-
tence is dependent on its resolution of the default under the mortgage loan.
These items raise substantial doubt about Chestnut's ability to continue as a
going concern. The financial statements for Chestnut do not include any ad-
justments that might result from the outcome of this uncertainty. The Gen-
eral Partner of Chestnut is in discussion with the first mortgagee and Chest-
nut's limited partners in an attempt to resolve the default. The Partner-
ship's investment in Chestnut was approximately $0 and $348,000 and the mi-
nority interest balance was $1,147,092 at March 31, 1999 and 1998, respec-
tively. The net loss after minority interest for Chestnut amounted to ap-
proximately $463,000, $476,000 and $348,000 for the years ended March 31,
1999, 1998 and 1997, respectively.

Williamsburg Residential II, L.P. ("Williamsburg II")
In November 1996, the general partner of Williamsburg II stopped making the
mortgage note payments which constituted an event of default. On January 1,
1997, the general partner was replaced.

A Reinstatement and Modification Agreement dated July 24, 1997, and effective
March 1, 1997 was entered into between Williamsburg II and Federal National
Mortgage Association ("FNMA"). Terms of the agreement include: 1. Interest
only on the loan for 36 months. 2. Replacement reserve escrow payments
waived during 1997. 3. Net operating income is to be turned over to the
loan servicer monthly. 4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 to be deposited into a debt service escrow account for the mutual
benefit of Williamsburg II and Williamsburg Residential, L.P. (an adjoining
and affiliated project). If the monthly net operating income turned over to
the loan servicer is less than the required mortgage and escrow payment, the
debt service escrow account is drawn upon. At December 31, 1998 and 1997,
balances in the two entities accounts totaled $0 and $97,653, respectively.

In 1997, the Partnership advanced Williamsburg II funds to pay legal costs,
delinquent mortgage payments, and to set up a debt service escrow account,
all of which were required as part of the Reinstatement and Modification
Agreement dated July 24, 1997 with FNMA. Additional advances were made by
the limited partner during 1998 to keep the mortgage and escrow payments cur-
rent. As of March 31, 1999, the Partnership has advanced approximately
$351,000 to Williamsburg II. The advances do not bear interest and are
short-term in nature.

The Partnership's investment in Williamsburg II had been written down to zero
by prior years' losses and the minority interest balance was approximately
$332,000 and $334,000 at March 31, 1999 and 1998, respectively. Williamsburg
II's net loss after minority interest amounted to approximately $213,000,
$172,000 and $1,368,000 (after loss on impairment of assets of approximately
$1,280,000) for the years ended March 31, 1999, 1998 and 1997, respectively.

Jefferson Limited Partnership ("Jefferson")
At December 31, 1998 and 1997, Jefferson's current liabilities exceeded its
current assets by over $25,000 and $40,000, respectively. Although this con-
dition could raise substantial doubt about Jefferson's ability to continue as
a going concern, such doubt is alleviated by the fact that $21,220 and
$34,690 of current liabilities at December 31, 1998 and 1997, respectively,
are to related parties which do not intend to pursue payment beyond Jeffer-
son's ability to pay.

Accordingly, management believes that Jefferson has the ability to continue
as a going concern for at least one year from December 31, 1998. The Part-
nership's investment in Jefferson was approximately $668,000 and $800,000 at
March 31, 1999 and 1998, respectively, and the minority interest balance was
$0 at each date. The net loss after minority interest for Jefferson amounted
to approximately $132,000, $140,000, and $133,000 for the years ended March
31, 1999, 1998 and 1997, respectively.

1850 Second Avenue Associates, L.P. ("1850 Second Ave.")
1850 Second Avenue has an application for an exemption from current real es-
tate taxes pending before the New York City Department of Finance and an ap-
plication for the cancellation of prior year taxes is pending before the of-
fice of the Comptroller of the City of New York. As of December 31, 1997,
approximately $1,033,964 in outstanding real estate taxes and $509,112 in ac-
crued interest thereon would have to be paid if 1850 Second Ave.'s applica-
tions are denied. Management and Counsel have advised that this is the
likely outcome. Accordingly, 1850 Second Ave. has recorded a liability of
$1,543,076, of which $60,000 was accrued in prior years.

On January 8, 1999, 1850 Second Ave. and the City of New York entered into a
settlement agreement, which in turn, resulted in a reduction of delinquent
taxes and accrued interest thereon. Such aggregate reduction of $749,022 has
been shown as a reduction in real estate taxes for financial statement pur-
poses at December 31, 1998.

On February 9, 1999, 1850 Second Ave. paid off its real estate tax obligation
along with accrued interest from the funds borrowed from its general partner
and affiliates.

Other Subsidiary Partnerships

Four of the subsidiary partnerships are leasing the land on which the Proj-
ects are located for terms ranging from 28 to 99 years. At December 31,
1998, the subsidiary partnerships were committed to minimum annual rentals on
the noncancelable leases aggregating $155,130 for each of the next five
years, and $4,099,253 in total, thereafter.

Year 2000 Compliance

The Partnership utilizes the computer services of an affiliate of the General
Partners. The affiliate of the General Partners have upgraded their computer
information systems to be year 2000 compliant and beyond. The year 2000 com-
pliance issue concerns the inability of a computerized system to accurately
record dates after December 31, 1999. The affiliate of the General Partners
converted their financial systems applications and upgraded all of their non-
compliant in-house software and hardware inventory. The work stations that
experienced problems from the testing process were corrected with an upgrade
patch. The costs incurred by the affiliates of the General Partners are not
being charged to the Partnership. The most likely worst case scenario that
the General Partners face is that computer operations will be suspended for a
few days to a week commencing on January 1, 2000. The Partnership contingency
plan is to (i) have a complete backup done on December 31, 1999 and (ii) both
electronic and printed reports generated for all critical data up to and in-
cluding December 31, 1999.

In regard to third parties, the General Partners are in the process of evalu-
ating the potential adverse impact that could result from the failure of ma-
terial service providers to be year 2000 compliant. A detailed survey and
assessment was sent to material third parties in the fourth quarter of 1998.
The Partnership has received assurances from a majority of the material serv-
ice providers with which it interacts that they have addressed the year 2000
issues and is evaluating these assurances for their adequacy and accuracy.
In cases where the Partnership has not received assurances from third par-
ties, it is initiating further mail and/or phone correspondence. The Part-
nership relies heavily on third parties and is vulnerable to the failures of
third parties to address their year 2000 issues. There can be no assurance
given that the third parties will adequately address their year 2000 issues.

Other

The Partnership's investment in the Local Partnerships is subject to the
risks incident to management and ownership of improved real estate. The
Partnership's investments also could be adversely affected by poor economic
conditions, which, could increase vacancy levels, rental payment defaults,
and operating expenses, any or all of which could threaten the financial vi-
ability of one or more of the Local Partnerships.

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These risks stem from governmen-
tal regulations concerning tenant eligibility, which may make it more diffi-
cult to rent apartments in the complexes; difficulties in obtaining govern-
ment approval for rent increases; limitations on the percentage of income
which low and moderate-income tenants may pay as rent; the possibility that
Congress may not appropriate funds to enable HUD to make the rental assis-
tance payments it has contracted to make; and that when the rental assistance
contracts expire there may not be market demand for apartments at full market
rents in a Local Partnership's Apartment Complex.

The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of
higher operating and replacement costs. Inflation also affects the Local
Partnerships adversely by increasing operating costs, for example, for such
items as fuel, utilities and labor. However, continued inflation should al-
low for appreciated values of the Local Partnerships' Apartment Complexes
over a period of time as rental revenues and replacement costs continue to
increase.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.
Sequential
Page
(a) 1. Consolidated Financial Statements

Independent Auditors' Report 20

Consolidated Balance Sheets at March 31, 1999 and 1998 183

Consolidated Statements of Operations for the Years Ended March
31, 1999, 1998 and 1997 184

Consolidated Statements of Changes in Partners' (Deficit) Capi-
tal for the Years Ended March 31, 1999, 1998 and 1997 185

Consolidated Statements of Cash Flows for the Years Ended March
31, 1999, 1998 and 1997 186

Notes to Consolidated Financial Statements 188

INDEPENDENT AUDITORS' REPORT

To the Partners of
Liberty Tax Credit Plus III L.P. and Subsidiaries
(A Delaware Limited Partnership)

We have audited the consolidated balance sheets of Liberty Tax Credit Plus
III L.P. and Subsidiaries (a Delaware Limited Partnership) (the "Partner-
ship") as of March 31, 1999 and 1998, and the related consolidated statements
of operations, changes in partners' (deficit) capital, and cash flows for the
years ended March 31, 1999, 1998 and 1997 (the 1998, 1997 and 1996 Fiscal
Years, respectively). 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 did not audit the finan-
cial statements of 61 (Fiscal 1998, 1997 and 1996) subsidiary partnerships
whose losses aggregated $11,808,044, $48,514,709 and $33,407,170 (including a
provision for impairment of assets of $20,083,101) of the Partnership's net
loss for the 1998, 1997 and 1996 Fiscal Years, respectively, and whose assets
constituted 95% of the Partnership's assets at March 31, 1999 and 1998, pre-
sented in the accompanying consolidated financial statements. The financial
statements of these 61 subsidiary partnerships were audited by other auditors
whose reports thereon have been furnished to us and our opinion expressed
herein, insofar as it relates to the amounts included for these subsidiary
partnerships, is based solely upon the reports of the other auditors.

We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of mate-
rial 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 esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, based upon our audits, and the reports of the other auditors
referred to above, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial posi-
tion of Liberty Tax Credit Plus III L.P. and Subsidiaries at March 31, 1999
and 1998, and the results of their operations and their cash flows for the
years ended March 31, 1999, 1998 and 1997, in conformity with generally ac-
cepted accounting principles.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant contin-
gencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going con-
cern. These subsidiary partnerships have been unable to generate sufficient
cash flow to pay their mortgage obligations. The two subsidiary partner-
ships' net losses aggregated $3,647,759 (Fiscal 1998), $4,124,102 (Fiscal
1997) and $23,519,749 (Fiscal 1996), and their assets aggregated $23,096,175
and $24,701,855 at March 31, 1999 and 1998, respectively. Management's plans
in regard to these matters are also described in Note 10(a). The accompany-
ing consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI, LLP

New York, New York
June 22, 1999

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS

March 31,
1999 1998

Property and equipment -
at cost, less accumulated
depreciation (Notes 2, 4 and 10) $220,262,429 $230,502,450
Cash and cash equivalents
(Notes 2 and 10) 4,261,662 4,294,917
Cash held in escrow (Note 5) 15,170,739 15,878,119
Deferred costs - less accumulated
amortization (Notes 2 and 6) 3,415,694 3,608,177
Other assets 2,224,523 2,516,633

Total assets $245,335,047 $256,800,296

LIABILITIES AND PARTNERS' DEFICIT

Liabilities:
Mortgage notes payable (Note 7) $196,503,570 $198,396,239
Due to debt guarantor
(Notes 7 and 10(a)) 30,855,866 27,574,312
Accounts payable and other
liabilities 21,561,937 20,494,884
Due to local general partners and
affiliates (Note 8) 13,731,640 14,152,837
Due to general partners and
affiliates (Note 8) 3,681,170 1,975,913

Total liabilities 266,334,183 262,594,185

Minority interest (Note 2) 1,672,679 2,181,337

Commitments and contingencies
(Notes 7, 8 and 10)

Partners' deficit
Limited partners (139,101.5 BACs
issued and outstanding) (Note 1) (21,209,640) (6,660,017)
General partners (1,462,175) (1,315,209)

Total partners' deficit (22,671,815) (7,975,226)

Total liabilities and
partners' deficit $245,335,047 $256,800,296

See accompanying notes to consolidated financial statements.

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended March 31,
1999 1998 1997

Revenues
Rental income $ 33,282,554 $ 32,250,396 $ 31,997,180
Other 2,840,286 1,485,510 1,545,755
36,122,840 33,735,906 33,542,935
Expenses
General and
administrative 6,143,062 5,843,674 5,605,944
General and
administrative-
related parties
(Note 8) 3,592,742 3,742,383 3,361,278
Repairs and
maintenance 5,848,011 5,332,720 4,785,295
Operating and
other 4,072,781 4,080,561 4,384,824
Real estate taxes 2,333,761 3,569,388 1,988,029
Insurance 1,308,342 1,429,941 1,534,903
Interest 16,121,311 15,878,695 15,768,603
Depreciation and
amortization 11,658,513 10,900,762 11,473,254
Loss on impairment
of assets 0 0 20,083,101

Total expenses 51,078,523 50,778,124 68,985,231
Loss before minority
interest and
extraordinary gain (14,955,683) (17,042,218) (35,442,296)
Minority interest
in loss of subsidiary
partnerships 259,094 154,367 156,523

Loss before
extraordinary item (14,696,589) (16,887,851) (35,285,773)
Extraordinary item -
forgiveness of
indebtedness income
(Note 7) 0 1,045,627 0

Net loss $ (14,696,589) $ (15,842,224) $ (35,285,773)

Loss before
extraordinary item -
limited partners $ (14,549,623) $ (16,718,973) $ (34,932,915)

Extraordinary item -
limited partners 0 1,035,171 0

Net loss -
limited partners $ (14,549,623) $ (15,683,802) $ (34,932,915)

Number of BACs
outstanding 139,101.5 139,101.5 139,101.5

Loss before
extraordinary
item per BAC $ (104.60) $ (120.19) $ (251.13)

Extraordinary item
per BAC 0 7.44 0

Net loss per BAC $ (104.60) $ (112.75) $ (251.13)

See accompanying notes to consolidated financial statements.

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL

Limited General
Total Partners Partners

Partners' capital (deficit) -
April 1, 1996 $ 43,152,771 $ 43,956,700 $ (803,929)

Net loss, year ended
March 31, 1997 (35,285,773) (34,932,915) (352,858)

Partners' capital (deficit) -
March 31, 1997 7,866,998 9,023,785 (1,156,787)

Net loss, year ended
March 31, 1998 (15,842,224) (15,683,802) (158,422)

Partners' deficit -
March 31, 1998 (7,975,226) (6,660,017) (1,315,209)

Net loss, year ended
March 31, 1999 (14,696,589) (14,549,623) (146,966)

Partners' deficit -
March 31, 1999 $(22,671,815) $(21,209,640) $ (1,462,175)

See accompanying notes to consolidated financial statements.

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

Year Ended March 31,
1999 1998 1997*

Cash flows from operating activities:

Net loss $(14,696,589) $(15,842,224) $(35,285,773)

Adjustments to
reconcile net
loss to net cash
provided by
(used in)
operating activities:
Depreciation and
amortization 11,658,513 10,900,762 11,473,254
Forgiveness of
indebtedness income 0 (1,045,627) 0
Loss on sale of property
and equipment 0 18,012 170
Loss on impairment of assets 0 0 20,083,101
Minority interest in
loss of subsidiary
partnerships (259,094) (154,367) (156,523)
(Increase) decrease
in assets:
Cash held in escrow 730,975 172,177 906,997
Other assets 292,110 236,450 (445,349)
Increase (decrease)
in liabilities:
Due to debt guarantor 2,620,949 2,467,333 2,306,775
Accounts payable and
other liabilities 1,397,788 3,494,029 202,033
Due to local general
partners and affiliates 834,215 136,032 84,308
Due to local general
partners and affiliates (725,357) (237,443) (444,256)
Due to general partners
and affiliates 1,705,257 (329,617) (10,539)

Total adjustments 18,255,356 15,657,741 33,999,971

Net cash provided by
(used in)
operating activities 3,558,767 (184,483) (1,285,802)

Cash flows from
investing activities:

Acquisition of property
and equipment (1,226,009) (890,758) (819,881)
Increase in cash held
in escrow (26,095) (402,787) (667,023)
Decrease in cash held in
escrow for
real estate investments 2,500 130,089 814,871
Increase in due to local
general partners
and affiliates 90,434 124,570 60,000
Decrease in due to local
general partners
and affiliates (592,148) (217,741) (954,282)

Net cash used in
investing activities (1,751,318) (1,256,627) (1,566,315)

Cash flows from
financing activities:
Decrease in deferred costs 0 0 162,464
Increase in deferred costs 0 (25,115) (159,673)
Repayments on mortgage
notes (1,562,799) (13,579,877) (5,461,313)
Borrowings on mortgage
notes 0 12,200,000 4,754,359
Advances from debt guarantor 0 637,531 1,926,006
Increase in due to
local general partners
and affiliates 70,135 0 0
Decrease in due to
local general partners
and affiliates (98,476) (93,824) (39,119)
(Decrease) increase in
capitalization of consolidated
subsidiaries attributable
to minority interest (249,564) 78,650 (232,904)

Net cash (used in)
provided by
financing activities (1,840,704) (782,635) 949,820

Net decrease in cash
and cash equivalents (33,255) (2,223,745) (1,902,297)

Cash and cash equivalents
at beginning of year 4,294,917 6,518,662 8,420,959

Cash and cash equivalents
at end of year $ 4,261,662 $ 4,294,917 $ 6,518,662

Supplemental disclosure
of cash flows information:
Cash paid during the
year for interest $11,307,707 $11,009,605 $10,619,520

Supplemental disclosures
of noncash investing
and financing activities:
Repayment of mortgage
notes advanced by
debt guarantor $ 660,605 $ 655,000 $ 610,000
Net increase in
mortgage notes
reclassified from
accounts payable
and other liabilities 330,735 230,984 512,992
Reclassification of
development fees payable
to contribution by
minority interest
shareholders 0 0 882,750

Forgiveness of indebtedness
income and
debt restructuring:
Increase in deferred costs 0 (292,231) 0
Decrease in mortgage
notes payable 0 (600,000) 0
Decrease in accounts
payable and
other liabilities 0 (3,653,396) 0
Increase in due to
local general
partners and affiliates 0 3,500,000 0

*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999

NOTE 1 - General

Liberty Tax Credit Plus III L.P., a Delaware limited partnership (the "Part-
nership"), was organized on November 17, 1988. The Partnership had no opera-
tions until commencement of the public offering on May 2, 1989. The general
partners of the Partnership are Related Credit Properties III L.P., a Dela-
ware limited partnership (the "Related General Partner"), and Liberty GP III
Inc., a Delaware corporation (the "Liberty General Partner"). The general
partner of the Related General Partner is Related Credit Properties III Inc.,
a Delaware corporation.

The Partnership's business is to invest in other limited partnerships ("Local
Partnerships" or "Subsidiaries" or "Subsidiary Partnerships") owning lever-
aged apartment complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Re-
form Act of 1986, and to a lesser extent in Local Partnerships owning proper-
ties that are eligible for the historic rehabilitation tax credit ("Historic
Rehabilitation Tax Credit").

The Partnership has acquired interests in 62 Local Partnerships as of March
31, 1999 and no further acquisitions are anticipated.

The Partnership is authorized to issue a total of 150,000 Beneficial Assign-
ment Certificates ("BACs"), which have been registered with the Securities
and Exchange Commission for sale to the public. Each BAC represents all of
the economic and virtually all of the ownership rights attributable to one-
fifth of a limited partnership interest. As of March 31, 1999, 139,101.5
have been issued, and no further issuance of BACs is anticipated. The offer-
ing was completed on March 30, 1990.

The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that
net profits or losses and distributions of cash flow are, in general, allo-
cated 99% to the limited partners and BACs holders and 1% to the general
partners.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and 62 subsidiary partnerships in which the Partnership is the principal lim-
ited partner. Through the rights of the Partnership and/or an affiliate of
the General Partners, which affiliate has a contractual obligation to act on
behalf of the Partnership, to remove the general partner of the subsidiary
partnerships and to approve certain major operating and financial decisions,
the Partnership has a controlling financial interest in the subsidiary part-
nerships.

For financial reporting purposes, the Partnership's fiscal year ends on March
31. All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31. The Partnership's fiscal year ends March 31 in order to
allow adequate time for the subsidiaries financial statements to be prepared
and consolidated. The books and records of the Partnership are maintained on
the accrual basis of accounting, in accordance with generally accepted ac-
counting principles.

All intercompany accounts and transactions with the subsidiary partnerships
have been eliminated in consolidation.

Increases (decreases) in the capitalization of consolidated subsidiaries at-
tributable to minority interest arises from cash contributions and cash dis-
tributions to the minority interest partners.

Losses attributable to minority interest which exceed the minority interest's
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $247,000, $271,000 and $659,000 for the years ended
March 31, 1999, 1998 and 1997, respectively (the 1998, 1997 and 1996 fiscal
years, respectively). The Partnership's investment in each subsidiary is
equal to the respective subsidiary partners' equity less minority interest
capital, if any. In consolidation, all subsidiary partnerships' losses are
included in the Partnership's capital account except for losses allocated to
minority interest capital.

b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks and investments
in short-term highly liquid instruments purchased with original maturities of
three months or less. Cash held in escrow has various use restrictions and
is not considered a cash equivalent.

c) Property and Equipment

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period inter-
est and any other costs incurred in acquiring the properties. The cost of
property and equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs and mainte-
nance are charged to expense as incurred; major renewals and betterments are
capitalized. At the time property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are eliminated from the
assets and accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. A loss on impairment of assets is re-
corded when management estimates amounts recoverable through future opera-
tions and sale of the property on an undiscounted basis are below depreciated
cost. At that time, property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is con-
sidered to be impaired and the depreciated cost exceeds estimated fair value.
Through March 31, 1999, the Partnership has recorded approximately
$20,083,000 as a loss on impairment of assets.

At the time management commits to a plan to dispose of assets, said assets
are adjusted to the lower of carrying amount or fair value less costs to
sell. These assets are classified as property and equipment-held for sale
and are not depreciated. There are no assets classified as property and
equipment-held for sale through March 31, 1999.

d) Income Taxes

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to
the partners and is required to be reported by them. The Partnership may be
subject to state and local taxes in jurisdictions in which it operates. For
income tax purposes, the Partnership has a fiscal year ending December 31
(see Note 9).

e) Organization and Offering Costs

Costs incurred to organize the Partnership, including but not limited to le-
gal, accounting, and registration fees, are considered deferred organization
expenses. These costs have been capitalized and are being amortized over a
60-month period. Costs incurred to sell BACs, including brokerage and the
nonaccountable expense allowance, are considered selling and offering ex-
penses. These costs are charged directly to limited partners' capital. (See
Note 8).

f) Loss Contingencies

The Partnership records loss contingencies as a charge to income when infor-
mation becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the fi-
nancial statements and the amount of loss can be reasonably estimated.

g) Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.

NOTE 3 - Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (all of which are held for non-trading
purposes) for which it is practicable to estimate that value:

Cash and Cash Equivalents and Cash Held in Escrow
The carrying amount approximates fair value.

Mortgage Notes Payable
The fair value of mortgage notes payable is estimated, where practicable,
based on the borrowing rate currently available for similar loans.

The estimated fair values of the Partnership's mortgage note payable are as
follows:

March 31, 1999 March 31, 1998
Carrying Carrying
Amount Fair Value Amount Fair Value

Mortgage Notes Payable
for which it is:
Practicable to
estimate fair
value $125,498,520 $125,285,699 $109,703,309 $110,801,816
Not
Practicable 71,005,050 (*) 88,692,930 (*)

(*) Management believes it is not practical to estimate the fair value of
the mortgage notes payable because mortgage programs with similar character-
istics are not currently available to the partnerships.

Due to local general partners and affiliates

The estimated fair value of the Partnership's due to local general partners
and affiliates are as follows:

March 31, 1999 March 31, 1998
Carrying Carrying
Amount Fair Value Amount Fair Value

Due to local
general partners
and affiliates
for which it is:
Practicable to
estimate fair
value $ 33,332 0 $29,981 0
Not practicable $13,698,308 (*) $14,122,856 (*)

(*) Management believes it is not practical to estimate the fair value of
due to local general partners and affiliates, because market information on
such unique loans are not currently available to the partnership.

The carrying amount of other financial instruments that require such disclo-
sure approximates fair value.

NOTE 4 - Property and Equipment

The components of property and equipment are as follows:

Estimated
March 31, Useful Lives
1999 1998 (Years)

Land $ 12,894,634 $ 12,894,634
Building and
improvements 286,063,924 285,415,910 15 to 40 years
Other 6,912,921 6,340,343 5 to 10 years
305,871,479 304,650,887
Less: Accumulated
depreciation (85,609,050) (74,148,437)

$220,262,429 $230,502,450

Included in property and equipment is $8,346,089 of acquisition fees paid to
the general partners and $2,908,694 of acquisition expenses as of March 31,
1999 and 1998. In addition, as of March 31, 1999 and 1998, buildings and im-
provements include $14,677,111 of capitalized interest.

Depreciation expense for the years ended March 31, 1999, 1998 and 1997
amounted to $11,466,030, $10,713,309, and $11,108,603, respectively.

In connection with the rehabilitation of the properties, the subsidiary part-
nerships have incurred developers' fees of $25,440,729 as of March 31, 1999
and 1998 to the Local General Partner and affiliates. Such fees have been
included in the cost of property and equipment.

During the 1998 and 1997 Fiscal Years, there was a decrease in accumulated
depreciation in the amount of $5,417 and $17,979, respectively, due to write-
offs on dispositions.

As a result of R.P.P. Limited Dividend Housing Association Limited Partner-
ship's ("River Place") recurring losses and operating cash shortfalls (see
Note 10), management of River Place determined that an evaluation of the on-
going value of the real estate held for lease was necessary at December 31,
1996. Based upon this evaluation, management of River Place determined that
the real estate held for lease was impaired and wrote it down by $18,803,127
to its fair value. Fair value was determined based on estimated future dis-
counted cash flows over a projected holding period including estimated sales
proceeds, net of disposition costs, at the end of the holding period.

Williamsburg Residential II, L.P. has experienced significant losses and cash
flow problems and is presently in default on the mortgage note. As a result
of the operating losses and cash flow problems, management of Williamsburg II
determined that an impairment of the property existed at December 31, 1996.
The impairment loss was determined to be $1,279,974. The amount of the im-
pairment loss was determined based on the difference in the carrying value of
the property and the valuation of the property based on capitalized cash
flows.

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

March 31,
1999 1998

Purchase price payments* $ 939,308 $ 941,808
Real estate taxes, insurance
and other (Note 10(a)) 7,111,227 7,828,240
Reserve for replacements 5,803,964 5,777,869
Tenants' security deposits 1,316,240 1,330,202

$15,170,739 $15,878,119

*Represents amounts to be paid to seller upon meeting specified rental
achievement criteria.

NOTE 6 - Deferred Costs

The components of deferred costs and their periods of amortization are as
follows:

March 31,
1999 1998 Period

Financing expenses $ 4,843,609 $ 4,896,785 *
Organization expenses 787,164 807,664 60 months
5,630,773 5,704,449
Less: Accumulated
amortization (2,215,079) (2,096,272)

$ 3,415,694 $ 3,608,177
*Over the life of the related mortgages.

Amortization of deferred costs for the years ended March 31, 1999, 1998 and
1997 amounted to $192,483, $187,453 and $364,651, respectively. During the
years ended March 31, 1999 and 1998 there was a decrease in accumulated amor-
tization due to the write-off of fully amortized costs in the amount of
$73,676 and $22,257, respectively.

NOTE 7 - Mortgage Notes Payable

The mortgage and construction notes, which are collateralized by land and
buildings, are payable in aggregate monthly installments of approximately
$928,000, including principal and interest at rates varying from 0% to 11.5%
per annum, through the year 2042. Each subsidiary partnership's mortgage
note payable is without further recourse and is collateralized by the land
and buildings of the respective subsidiary partnership and the assignment of
certain subsidiary partnership's rent and leases.

Annual principal payment requirements as of March 31, 1999 for each of the
next five fiscal years and thereafter are as follows:

Fiscal Year Ending Amount

1999 $ 3,308,100
2000 3,667,239
2001 4,052,342
2002 4,448,245
2003 5,017,758
Thereafter 176,009,886
$196,503,570

No adjustment has been made in the table above for the events of default and
other matters described in Note 10(a).

The mortgage agreements require monthly deposits to replacement reserves of
approximately $102,000 and monthly deposits to escrow accounts for real es-
tate taxes, hazard and mortgage insurance and other (Note 5).

R.P.P. Limited Dividend Housing Association Limited Partnership ("River
Place")
During 1998 and 1997, a Local Partnership, River Place, was unable to make
the required principal and interest payments on its debt. These payments of
$660,605 and $1,292,531 in 1998 and 1997, respectively, were paid by The Gen-
eral Retirement System of the City of Detroit ("GRS"), the debt guarantor, on
behalf of the Local Partnership. The Local Partnership accrues interest on
payments made by the Guarantor at an interest rate of 15% per annum. The
debt payments and accrued interest thereon are included in due to debt guar-
antor.

Jefferson Place, L.P.
Jefferson Place, L.P. ("Jefferson Place") refinanced its existing indebted-
ness by borrowing $12,200,000 from the City of Olathe, Kansas, as of July 1,
1997. The loan bears interest at the rate of 8.5% per annum, and matures on
July 1, 2023. Jefferson Place's prior indebtedness in the principal amount
of $12,800,000 and related accrued interest of approximately $3,700,000 was
repaid from proceeds of the new loan, a new subordinated loan of $3,500,000
and $1,045,627 of former mortgage debt and accrued interest was forgiven.

NOTE 8 - Related Party Transactions

Liberty Associates IV L.P. ("Liberty Associates"), an affiliate of the Gen-
eral Partners, has a 1% and .998% (see Note 10 with respect to River Place)
interest as a Special Limited Partner in 61 and 1 of the Local Partnerships,
respectively.

The General Partners and their affiliates perform services for the Partner-
ship. The costs incurred for the years ended March 31, 1999, 1998 and 1997
are as follows:

A) Related Party Fees

As of March 31, 1999, the excess organization and offering costs totaled
$245,465 and is included in other assets.

Liberty Associates received cash distributions from the Local Partnerships of
$1,106, $1,854 and $15,473 during the years ended March 31, 1999, 1998 and
1997, respectively.

Pursuant to the Partnership Agreement and the Local Partnership Agreements,
the General Partners and Liberty Associates received their allocable pro rata
share of profits, losses and tax credits from the Partnership and the Local
Partnerships, respectively.

B) Guarantees

The Partnership negotiated Operating Deficit Guarantee Agreements with all
Local Partnerships in which the General Partners of the Local Partnerships
agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guarantee Agreements vary for each Local Partner-
ship, with the maximum dollar amounts to be funded for a specified period of
time, generally three years, commencing at stabilization. The gross amount
of the Operating Deficit Guarantees aggregate approximately $18,700,000 of
which approximately $17,300,000, $17,300,000, and $16,100,000 had expired as
of March 31, 1999, 1998 and 1997, respectively. As of March 31, 1999 and
1998, approximately $4,655,000 and $ 4,284,000, respectively, has been funded
by the Local General Partners to meet such obligations. Amounts funded under
such agreements are treated as noninterest bearing loans, which will be re-
paid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds.

The Operating Deficit Guarantee Agreements were negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to
the Local General Partners to generate positive cash flow.

C) Other Related Parties Expenses

The costs incurred to related parties for the years ended March 31, 1999,
1998 and 1997 were as follows:

Year Ended March 31,
1999 1998 1997

Partnership management
fees (i) $1,434,000 $1,434,000 $1,434,000
Expense reimbursement (ii) 239,390 258,111 172,345
Property management fees
incurred to
affiliates of the
General Partners(iii) 11,420 177,825 73,927
Local administrative
fee (iv) 196,796 189,966 110,432

Total general and
administrative
- General Partners 1,881,606 2,059,902 1,790,704

Property management
fees incurred to
affiliates of the
subsidiary partnerships'
general partners 1,711,136 1,682,481 1,570,574

Total general and
administrative
- related parties $3,592,742 $3,742,383 $3,361,278

(i) The General Partners are entitled to receive a partnership management
fee after payment of all Partnership expenses, which together with the local
annual administrative fees will not exceed a maximum of 0.5% per annum of in-
vested assets (as defined in the Partnership Agreement), for administering
the affairs of the Partnership. The partnership management fee subject to
the foregoing limitation, will be determined by the General Partners in their
sole discretion based upon their review of the Partnership's investments.
Unpaid partnership management fees for any year will be accrued without in-
terest and will be payable only to the extent of available funds after the
Partnership has made the distributions to the limited partners of sale or re-
financing proceeds equal to their original capital contributions plus a 10%
priority return thereon (to the extent not theretofore paid out of cash
flow). Partnership management fees owed to the General Partners amounting to
approximately $2,758,000 and $1,374,000 were accrued and unpaid at March 31,
1999 and 1998. Without the General Partners' continued accrual without pay-
ment of certain fees and expense reimbursements, the Partnership will not be
in a position to meet its obligations. The General Partners have continued
allowing the accrual without payment of these amounts but are under no obli-
gation to continue to do so.

(ii) The Partnership reimburses the General Partners and their affiliates
for actual Partnership operating expenses incurred by the General Partners
and their affiliates on the Partnership's behalf. The amount of reimburse-
ment from the Partnership is limited by the provisions of the Partnership
Agreement. Another affiliate of the General Partners performs asset monitor-
ing for the Partnership. These services include site visits and evaluations
of the subsidiary partnerships' performance.

(iii) The subsidiary partnerships incurred property management fees amount-
ing to $2,230,323, $2,157,696, and $2,056,191 for the years ended March 31,
1999, 1998 and 1997, respectively, of which $1,722,556, $1,860,306, and
$1,644,501, respectively, was incurred to affiliates of the subsidiary part-
nerships' general partners. Included in amounts incurred to affiliates of
the subsidiary partnerships' general partners was $11,420, $177,825, and
$73,927 for the years ended March 31, 1999, 1998 and 1997, respectively,
which was also incurred to an affiliate of the Related General Partner.

(iv) Liberty Associates, a special limited partner of the subsidiary part-
nerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.

D) Due to Local General Partners and Affiliates

Due to local general partners and affiliates at March 31, 1999 and 1998 con-
sists of the following:

March 31,
1999 1998

Operating deficit advances $ 2,983,992 $ 2,149,777
Development fees 1,284,728 1,876,876
Operating advances 2,565,639 2,946,757
Due to contractor 106,155 93,290
General Partner distributions 470,307 568,783
Developer loans (i) 1,435,308 1,417,739
Land note payable (ii) 1,145,096 1,085,096
Long-term note payable (iii) 3,570,135 3,500,000
Management and other
operating fees 170,280 514,519

$13,731,640 $14,152,837

(i) Developer loans consist of the following:
March 31,
1999 1998

Jefferson Limited Partnership - $ 100,000 $ 100,000
This loan is unsecured, bears
interest at an annually adjusted
rate (5.63% at March 31, 1999 and
5.85% at March 31, 1998) and has
no predetermined due date.

This note is unsecured, bears
interest at 9.25% per annum 75,000 75,000
and is due in the event of sale
or refinancing of the
property.

Northwood Associates
Limited Partnership - 274,524 256,955
This loan bears interest at 12%
per annum and is payable
only out of available surplus cash.

Citrus Meadows Apartments, Ltd. - 985,784 985,784
This loan bears no interest and
can only be repaid with
the proceeds from a sale or
refinancing. $1,435,308 $1,417,739
Interest expense incurred on
developer loans amounted to
$30,357, $30,276, and $32,312
for the years ended March
31, 1999, 1998 and 1997, respectively.

(ii) Land note payable consists of the following:

Citrus Meadows
Apartments, Ltd. - $1,145,096 $1,085,096
The land for this subsidiary
partnership was purchased
from the local general partner
for a $600,000 note which
accrues interest at 10% per annum.
The principal balance, together
with the accrued interest, is
payable upon the sale of the
property or in December 2004,
whichever event occurs first.

Interest expense incurred on
land note payable amounted
to $60,000 for each of the
three years ended March 31,
1999, 1998 and 1997.

(iii) Long-term note payable
consists of the following

Jefferson Place L.P. $3,500,000 $3,500,000
On July 30, 1997, the local general partner, issued a
note payable in the sum of $3,500,000 to the subsidiary
partnership. Interest on this note, at the rate of 8.5%
annually, is payable monthly solely out of excess cash
flow generated by the subsidiary partnership. The prin-
cipal plus all outstanding interest is due July 1, 2023.
All payments under this $3,500,000 note are subordinate
to payments due under the $12,200,000 tax-exempt mortgage
bonds.

For the years ended December 31, 1998, 1997 and 1996,
mortgage interest included interest from this note in the
amount of $353,367, $126,592 and $0, respectively. On
the December 31, 1998 and 1997 amounts, $23,024 and
$2,634 was interest calculated on past accrued base in-
terest.

NOTE 9 - Income Taxes

A reconciliation of the financial statement net loss to the income tax loss
for the Partnership and its consolidated subsidiaries follows:

Year Ended December 31,
1998 1997 1996

Financial statement
Net loss $(14,696,589) $(15,842,224) $(35,285,773)

Difference resulting from
parent company having a
different fiscal year for
income tax and financial
reporting purposes 56,193 (509,800) 637,510

Difference between
depreciation and amortization
expense recorded for financial
statement and income
tax reporting
purposes (2,622,146) (1,348,092) (1,137,185)

Tax-exempt interest
income (27,455) (133,755) (133,699)

Loss on impairment of assets 0 0 20,083,101

Other 672,690 (28,494) (5,861)

Net loss as shown on the
Partnership's income tax
return $(16,617,307) $(17,862,365) $(15,841,907)

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships - Going Concerns

Results of Operations of Certain Local Partnerships

R.P.P. Limited Dividend Housing Association Limited Partnership ("River
Place")
River Place's long-term debt consists of borrowings under two loan agreements
with the Michigan State Housing Authority (the "Authority") with outstanding
balances totaling $30,040,000 at December 31, 1998. The Partnership has been
unable to generate sufficient cash flows to meet a majority of its required
principal and interest payments under the loans. River Place's debt guaran-
tor, General Retirement System of the City of Detroit ("GRS"), entered into an
agreement with the Authority to purchase these loans upon occurrence of cer-
tain events. GRS has declared River Place in default under its obligation to
make the required payments. During 1996, GRS agreed to waive its right of
foreclosure under the mortgages, unless certain events occur, through February
1, 2006. GRS has made advances for debt service and has incurred certain fees
relating to these loans totaling $30,855,866 including accrued interest on
such advances at a rate of 15%. Such amount is included in the amount due to
debt guarantor on the balance sheet.

Management anticipates that River Place will be unable to make all of the re-
quired debt service payments during 1999. However, there is no guarantee that
GRS, or any other persons, will continue to make these payments on behalf of
River Place. These items raise substantial doubt about River Place's ability
to continue as a going concern.

The financial statements of River Place have been prepared assuming that
River Place will continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this uncer-
tainty. The Partnership's investment in River Place has been written down to
zero by prior years' losses and the minority interest balance was $882,750 at
both March 31, 1999 and 1998. The net loss after minority interest for River
Place amounted to approximately $3,185,000, $3,648,000 and $22,373,000 (after
loss on impairment of assets of approximately $18,803,000) for the years
ended March 31, 1999, 1998 and 1997, respectively.

L.I.H. Chestnut Associates, L.P. ("Chestnut")
Chestnut has sustained recurring losses from operations. At December 31,
1998, Chestnut had not made certain payments required under the terms of the
mortgage loan and, as a result, is in default. Chestnut's continued exis-
tence is dependent on its resolution of the default under the mortgage loan.
These items raise substantial doubt about Chestnut's ability to continue as a
going concern. The financial statements for Chestnut do not include any ad-
justments that might result from the outcome of this uncertainty. The Gen-
eral Partner of Chestnut is in discussion with the first mortgagee and Chest-
nut's limited partners in an attempt to resolve the default. The Partner-
ship's investment in Chestnut was approximately $0 and $348,000 and the mi-
nority interest balance was $1,147,092 at March 31, 1999 and 1998, respec-
tively. The net loss after minority interest for Chestnut amounted to ap-
proximately $463,000, $476,000 and $348,000 for the years ended March 31,
1999, 1998 and 1997, respectively.

b) Subsidiary Partnerships - Other

Williamsburg Residential II, L.P. ("Williamsburg II")
In November 1996, the general partner of Williamsburg II stopped making the
mortgage note payments which constituted an event of default. On January 1,
1997, the general partner was replaced.

A Reinstatement and Modification Agreement dated July 24, 1997, and effective
March 1, 1997 was entered into between Williamsburg II and Federal National
Mortgage Association ("FNMA"). Terms of the agreement include: 1. Interest
only on the loan for 36 months. 2. Replacement reserve escrow payments
waived during 1997. 3. Net operating income is to be turned over to the
loan servicer monthly. 4. Execution of a Debt Service Reserve Agreement.

The Debt Service Agreement, also dated July 24, 1997, called for a total of
$275,000 to be deposited into a debt service escrow account for the mutual
benefit of Williamsburg II and Williamsburg Residential, L.P. (an adjoining
and affiliated project). If the monthly net operating income turned over to
the loan servicer is less than the required mortgage and escrow payment, the
debt service escrow account is drawn upon. At December 31, 1998 and 1997,
balances in the two entities accounts totaled $0 and $97,653, respectively.

In 1997, the Partnership advanced Williamsburg II funds to pay legal costs,
delinquent mortgage payments, and to set up a debt service escrow account,
all of which were required as part of the Reinstatement and Modification
Agreement dated July 24, 1997 with FNMA. Additional advances were made by
the limited partner during 1998 to keep the mortgage and escrow payments cur-
rent. As of March 31, 1999, the Partnership has advanced approximately
$351,000 to Williamsburg II. The advances do not bear interest and are
short-term in nature.

The Partnership's investment in Williamsburg II had been written down to zero
by prior years' losses and the minority interest balance was approximately
$332,000 and $334,000 at March 31, 1999 and 1998, respectively. Williamsburg
II's net loss after minority interest amounted to approximately $213,000,
$172,000 and $1,368,000 (after loss on impairment of assets of approximately
$1,280,000) for the years ended March 31, 1999, 1998 and 1997, respectively.

Jefferson Limited Partnership ("Jefferson")
At December 31, 1998 and 1997, Jefferson's current liabilities exceeded its
current assets by over $25,000 and $40,000, respectively. Although this con-
dition could raise substantial doubt about Jefferson's ability to continue as
a going concern, such doubt is alleviated by the fact that $21,220 and
$34,690 of current liabilities at December 31, 1998 and 1997, respectively,
are to related parties which do not intend to pursue payment beyond Jeffer-
son's ability to pay.

Accordingly, management believes that Jefferson has the ability to continue
as a going concern for at least one year from December 31, 1998. The Part-
nership's investment in Jefferson was approximately $668,000 and $800,000 at
March 31, 1999 and 1998, respectively, and the minority interest balance was
$0 at each date. The net loss after minority interest for Jefferson amounted
to approximately $132,000, $140,000, and $133,000 for the years ended March
31, 1999, 1998 and 1997, respectively.

1850 Second Avenue Associates, L.P. ("1850 Second Ave.")
1850 Second Avenue has an application for an exemption from current real es-
tate taxes pending before the New York City Department of Finance and an ap-
plication for the cancellation of prior year taxes is pending before the of-
fice of the Comptroller of the City of New York. As of December 31, 1997,
approximately $1,033,964 in outstanding real estate taxes and $509,112 in ac-
crued interest thereon would have to be paid if 1850 Second Ave.'s applica-
tions are denied. Management and Counsel have advised that this is the
likely outcome. Accordingly, 1850 Second Ave. has recorded a liability of
$1,543,076, of which $60,000 was accrued in prior years.

On January 8, 1999, 1850 Second Ave. and the City of New York entered into a
settlement agreement, which in turn, resulted in a reduction of delinquent
taxes and accrued interest thereon. Such aggregate reduction of $749,022 has
been shown as a reduction in real estate taxes for financial statement pur-
poses at December 31, 1998.

On February 9, 1999, 1850 Second Ave. paid off its real estate tax obligation
along with accrued interest from the funds borrowed from its general partner
and affiliates.

Leases

Four of the subsidiary partnerships are leasing the land on which the Proj-
ects are located, for terms ranging from 28 to 99 years. At December 31,
1998, the subsidiary partnerships were committed to minimum future annual
rentals on the noncancelable leases aggregating $155,130 for each of the next
five years, and $4,099,253 in total thereafter.

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
Accounts at each bank are guaranteed by the Federal Deposit Insurance Corpo-
ration ("FDIC") up to $100,000. As of March 31, 1999, uninsured cash and
cash equivalents approximated $2,540,000.

d) Year 2000 Compliance

The Partnership utilizes the computer services of an affiliate of the General
Partners. The affiliate of the General Partners have upgraded their computer
information systems to be year 2000 compliant and beyond. The year 2000 com-
pliance issue concerns the inability of a computerized system to accurately
record dates after December 31, 1999. The affiliate of the General Partners
converted their financial systems applications and upgraded all of their non-
compliant in-house software and hardware inventory. The work stations that
experienced problems from the testing process were corrected with an upgrade
patch. The costs incurred by the affiliates of the General Partners are not
being charged to the Partnership. The most likely worst case scenario that
the General Partners face is that computer operations will be suspended for a
few days to a week commencing on January 1, 2000. The Partnership contingency
plan is to (i) have a complete backup done on December 31, 1999 and (ii) both
electronic and printed reports generated for all critical data up to and in-
cluding December 31, 1999.

In regard to third parties, the General Partners are in the process of evalu-
ating the potential adverse impact that could result from the failure of ma-
terial service providers to be year 2000 compliant. A detailed survey and
assessment was sent to material third parties in the fourth quarter of 1998.
The Partnership has received assurances from a majority of the material serv-
ice providers with which it interacts that they have addressed the year 2000
issues and is evaluating these assurances for their adequacy and accuracy.
In cases where the Partnership has not received assurances from third par-
ties, it is initiating further mail and/or phone correspondence. The Part-
nership relies heavily on third parties and is vulnerable to the failures of
third parties to address their year 2000 issues. There can be no assurance
given that the third parties will adequately address their year 2000 issues.

e) Other

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership
can also be affected by poor economic conditions generally, however no more
than 20% of the properties are located in any single state. There are also
substantial risks associated with owning properties receiving government as-
sistance, for example the possibility that Congress may not appropriate funds
to enable HUD to make rental assistance payments. HUD also restricts annual
cash distributions to partners based on operating results and a percentage of
the owner's equity contribution. The Partnership cannot sell or substan-
tially liquidate its investments in subsidiary partnerships during the period
that the subsidy agreements are in existence, without HUD's approval. Fur-
thermore, there may not be market demand for apartments at full market rents
when the rental assistance contracts expire.

In order for certain subsidiaries to qualify for the Section 421A Program,
and the Inclusionary Zoning Program they are subject to certain requirements
by local authorities as to the level of rent that may be charged to tenants,
the tenants' incomes, the obligation to operate the property in accordance
with rent stabilization guidelines, and restrictions on the rate at which
housing units may be released from such guidelines.

Also, certain subsidiary partnerships obtain grants from local authorities to
fund construction costs of the properties and in order to qualify must main-
tain the low-income nature of the property, among other provisions.

f) Tax Credits

A portion of the low-income housing tax credits are subject to recapture in
future years if (1) the Local Partnership ceases to meet qualification re-
quirements, (2) there is a decrease in the qualified basis of the Projects,
or (3) there is a reduction in the taxpayer's interest in the Project at any
time during the 15-year Compliance Period that began with the first tax year
of the credit period. None of the Local Partnerships in which the Partner-
ship has acquired an interest has suffered an event of recapture.

During the Fiscal Years 1998, 1997 and 1996, the Partnership generated low-
income housing tax credits of approximately $19,584,000, $19,632,000, and
$19,673,000, respectively.

Item 9. Changes in and Disagreements with Accountants on Accounting and Fi-
nancial Disclosure.

None

PART III

Item 10. Directors and Executive Officers of the Registrant.

On November 25, 1997, an affiliate of the Related General Partner, purchased
100% of the stock of the Liberty General Partner (the "Transfer"). In addi-
tion to the Transfer, by acquiring the stock of the Liberty General Partner,
an affiliate of the Related General Partner also acquired the Liberty General
Partner's general partner interest in Liberty Associates IV L.P., the special
limited partner of the Partnership. Pursuant to the Partnership's Amended
and Restated Partnership Agreement, the consent of the limited partners was
not required to approve the Transfer. In connection with the Transfer, the
Partnership paid to the Liberty General Partner the accrued asset management
fees owed to the Liberty General Partner in the aggregate amount of $737,750.

The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by the General Partners. Certain informa-
tion concerning the directors and executive officers of the Liberty General
Partner and of Related Credit Properties III Inc., the general partner of the
Related General Partner, are set forth below.

Related Credit Properties III, L.P.

Name Position

Stephen M. Ross Director

J. Michael Fried President, Chief Executive Officer and Director

Alan P. Hirmes Senior Vice President

Stuart J. Boesky Vice President

Glenn F. Hopps Treasurer and Assistant Vice President

Teresa Wicelinski Secretary

STEPHEN M. ROSS, 59, is President, Director and shareholder of The Related
Realty Group, Inc., the General Partner of The Related Companies, L.P. He
graduated from the University of Michigan School of Business Administration
with a Bachelor of Science degree and from Wayne State University School of
Law with a Juris Doctor degree. Mr. Ross then received a Master of Laws de-
gree in taxation from New York University School of Law. He joined the ac-
counting firm of Coopers & Lybrand in Detroit as a tax specialist and later
moved to New York, where he worked for two large Wall Street investment bank-
ing firms in their real estate and corporate finance departments. Mr. Ross
formed the predecessor of The Related Companies, L.P. in 1972 to develop,
manage, finance and acquire subsidized and conventional apartment develop-
ments.

J. MICHAEL FRIED, 55, is the sole shareholder of one of the general partners
of Related Capital Company ("Capital"), a real estate finance and acquisition
affiliate of the Related General Partner. In that capacity, he is the chief
executive officer of Capital, and is responsible for initiating and directing
all of Capital's syndication, finance, acquisition and investor reporting ac-
tivities. Mr. Fried practiced corporate law in New York City with the law
firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital
in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor
degree, magna cum laude; from Long Island University Graduate School with a
Master of Science degree in Psychology; and from Michigan State University
with a Bachelor of Arts degree in History.

ALAN P. HIRMES, 44, has been a Certified Public Accountant in New York since
1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice Presi-
dent of Capital. Mr. Hirmes graduated from Hofstra University with a Bache-
lor of Arts degree.

STUART J. BOESKY, 43, practiced real estate and tax law in New York City with
the law firm of Shipley & Rothstein from 1984 until February 1986 when he
joined Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston
law firm of Kaye, Fialkow, Richard & Rothstein (which subsequently merged
with Strook & Strook & Lavan) and from 1978 to 1980 was a consultant special-
izing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boe-
sky graduated from Michigan State University with a Bachelor of Arts degree
and from Wayne State School of Law with a Juris Doctor degree. He then re-
ceived a Master of Laws degree in Taxation from Boston University School of
Law.

GLENN F. HOPPS, 36, joined Related in December, 1990, and prior to that date
was employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State Uni-
versity at Albany with a Bachelor of Science Degree in Accounting.

TERESA WICELINSKI, 33, joined Related in June 1992, and prior to that date
was employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.

Liberty GP III Inc.

Name Position

J. Michael Fried President, Chief Executive Officer and Director

Alan P. Hirmes Senior Vice President

Stuart J. Boesky Vice President

Marc D. Schnitzer Vice President

Denise L. Kiley Vice President

Glenn F. Hopps Treasurer

Teresa Wicelinski Secretary

MARC D. SCHNITZER, 38, joined Related in January 1988 after receiving his
Master of Business Administration degree from The Wharton School of The Uni-
versity of Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer
was a Financial Analyst with The First Boston Corporation in New York, an in-
ternational investment banking firm. Mr. Schnitzer received a Bachelor of
Science degree, summa cum laude, in Business Administration, from the School
of Management at Boston University in May 1983.

DENISE L. KILEY, 39, is responsible for overseeing the due diligence and as-
set management of all multifamily residential properties invested in RCC
sponsored corporate, public and private equity and debt funds. Prior to
joining Related in 1990, Ms. Kiley had experience acquiring, financing and
asset managing multifamily residential properties. From 1981 through 1985
she was an auditor with Price Waterhouse. Ms. Kiley holds a Bachelor of Sci-
ence in Accounting from Boston College.

Biographical information with respect to Messrs. Fried, Hirmes, Boesky, Hopps
and Ms. Wicelinski is set forth above.

Item 11. Executive Compensation.

The Partnership has no officers or directors. The Partnership does not pay
or accrue any fees, salaries or other forms of compensation to the directors
or officers of the Liberty General Partner or of the general partner of the
Related General Partner for their services. Certain directors and officers
of the Liberty General Partner and of the general partner of the Related Gen-
eral Partner receive compensation from the General Partners and their affili-
ates for services performed for various affiliated entities which may include
services performed for the Partnership.

Under the terms of the Partnership Agreement, the General Partners and their
affiliates are entitled to receive compensation from the Partnership in con-
sideration of certain services rendered to the partnership by such parties.
In addition, the General Partners are entitled to 1% of all cash distribu-
tions and Tax Credit allocations and a subordinated 15% interest in Net Sales
or Refinancing Proceeds. See Note 8 to the Financial Statements in Item 8
for a presentation of the types and amounts of compensation paid to the Gen-
eral Partners and their affiliates, which information is incorporated herein
by reference thereto. Tabular information concerning salaries, bonuses and
other types of compensation payable to executive officers have not been in-
cluded in this annual report. As noted above, the Partnership has no execu-
tive officers. The levels of compensation payable to the General Partners
and/or their affiliates is limited by the terms of the Partnership Agreement
and may not be increased therefrom on a discretionary basis.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class

General Partnership Related Credit Properties $1,000 capital
contribution - 50%
Interest in the III L.P. directly owned
Partnership 625 Madison Avenue
New York, NY 10022

Liberty GP III Inc. $1,000 capital
contribution - 50%
625 Madison Avenue directly owned
New York, NY 10022

Liberty Associates IV L.P. holds a 1% and .998% (see Item 7. with respect to
River Place) limited partnership interest in 61 and 1 Local Partnerships, re-
spectively.

Except as set forth in the table below, no person is known by the Partnership
to be the beneficial owner of more than 5% of the Limited Partnership Inter-
ests and neither the Liberty General Partner nor any director or executive
officer of the Liberty General Partner owns any Limited Partnership Interests
or BACs. Neither the Related General Partner nor any director or executive
officer of the general partner of the Related General Partner owns any Lim-
ited Partnership Interests. The following table sets forth the number of
BACs beneficially owned, as of June 23, 1999, by (i) each BACs holder known
to the Partnership to be a beneficial owner of more than 5% of the BACs, (ii)
each director and executive officer of the general partner of the Related
General Partner and Liberty General Partner and (iii) the directors and ex-
ecutive officers of the general partner of the Related General Partner and
Liberty General Partner as a group. Unless otherwise noted, all BACs are
owned directly with sole voting and dispositive powers.

Amount and Nature of
Name of Beneficial Owner (1) Beneficial Ownership Percent of Class

Lehigh Tax Credit Partners, Inc. 13,127.66 (2) (3) 9.4%

J. Michael Fried 13,127.66 (2) (3) (4) 9.4%

Alan P. Hirmes 13,127.66 (2) (3) (4) 9.4%

Stuart J. Boesky 13,127.66 (2) (3) (4) 9.4%

Stephen M. Ross - -

Mark D. Schnitzer - -

Denise L. Kiley - -

Glenn F. Hopps - -

Teresa Wicelinski - -

All directors and
executive officers 13,127.66 (2) (3) (4) 9.4%
of the general partner of the
Related General Partner as a group
(eight persons)

(1) The address for each of the persons in the table is 625 Madison Avenue,
New York, New York 10022.

(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
June 10, 1997 with the Securities and Exchange Commission (the "Commission")
and pursuant to a letter agreement dated April 4, 1997 among the Partnership,
Lehigh I and the Related General Partner (the "Standstill Agreement"), Lehigh
I agreed that, prior to April 4, 2007 (the "Standstill Expiration Date"), it
will not and it will cause certain affiliates (including Lehigh II) not to
(i) acquire, attempt to acquire or make a proposal to acquire, directly or
indirectly, more than 45% (including BACs acquired through all other means)
of the outstanding BAC's, (ii) seek to propose to enter into, directly or in-
directly, any merger, consolidation, business combination, sale or acquisi-
tion of assets, liquidation, dissolution or other similar transaction involv-
ing the Partnership, (iii) make, or in any way participate, directly or indi-
rectly, in any "solicitation" of "proxies" or "consents" (as such terms are
used in the proxy rules of the Commission) to vote any voting securities of
the Partnership, (iv) form, join or otherwise participate in a "group"
(within the meaning of Section 13 (d)(3) of the Securities and Exchange Act
of 1934) with respect to any voting securities of the Partnership, except
those affiliates bound by the Standstill Agreement will not be deemed to have
violated it and formed a "group" solely by acting in accordance with the
Standstill Agreement, (v) disclose in writing to any third party any inten-
tion, plan or arrangement inconsistent with the terms of the Standstill
Agreement, or (vi) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Standstill
Agreement. In addition, Lehigh I agreed that until the Standstill Expiration
Date it will not sell any BACs acquired by it unless the buyer of such BACs
agrees to be bound by the Standstill Agreement; provided, however, Lehigh I
may make transfers in the secondary market to any purchaser which represents
that following such sale it will not own three (3%) percent or more of the
BACs outstanding. By the terms of the Standstill Agreement, Lehigh I also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, Lehigh I is entitled to vote its BACs as it de-
termines with regard to any proposal (i) to remove the Related General Part-
ner as a general partner of the Partnership or (ii) concerning the reduction
of any fees, profits, distributions or allocations for the benefit of the Re-
lated General Partner or its affiliates. The addresses of each of the Part-
nership, Lehigh I and the Related General Partner is 625 Madison Avenue, New
York, New York 10022.

(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh
Tax Credit Partners II, L.L.C. ("Lehigh II") for which the Managing Member
serves as managing member. As of June 23, 1999, Lehigh I held 6,458.33 BACs
and Lehigh II held 6,669.33 BACs.

(4) Each such party serves as a director and executive officer of the Manag-
ing Member and owns an equity interest therein.

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with the
General Partners and its affiliates, as discussed in Item 11 and also Note 8
to the Financial Statements in Item 8, which is incorporated herein by refer-
ence thereto. However, there have been no direct financial transactions be-
tween the Partnership and the directors and executive officers of the Liberty
General Partner and of the general partner of the Related General Partner.

PART IV

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

(a) 1. Financial Statements

Independent Auditors' Report 20

Consolidated Balance Sheets at March 31, 1999 and 1998 183

Consolidated Statements of Operations for the Years Ended March
31, 1999, 1998 and 1997 184

Consolidated Statements of Changes in Partners' (Deficit) Capital
for the Years Ended March 31, 1999, 1998 and 1997 185

Consolidated Statements of Cash Flows for the Years Ended March
31, 1999, 1998 and 1997 186

Notes to Consolidated Financial Statements 188

(a) 2. Financial Statement Schedules

Independent Auditors' Report 215

Schedule I - Condensed Financial Information of Registrant 216

Schedule III - Real Estate and Accumulated Depreciation 219

All other schedules have been omitted because they are not re-
quired or because the required information is contained in the
financial statements or notes thereto.

(a) 3. Exhibits

(3A) Form of Amended and Restated Agreement of Limited Partnership
of Liberty Tax Credit Plus III L.P. (attached to Prospectus as
Exhibit A)**

(3B) Certificate of Limited Partnership of Liberty Tax Credit Plus
III L.P., together with amendments filed on November 17, 1988**

(4) Form of Subscription Agreement (attached to Prospectus as Ex-
hibit B)

(10A) Escrow Agreement between Registrant and Bankers Trust Com-
pany**

(10B) Forms of Purchase Agreements for purchase of Local Partner-
ship Interests**

(21) Subsidiaries of the Registrant 211

(27) Financial Data Schedule (filed herewith) 224

** Incorporated herein by reference to exhibits filed with
Pre-Effective Amendment No. 1 to Liberty Tax Credit Plus III
L.P.'s Registration Statement on Form S-11 (Registration No.
33-25732)

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)

Jurisdiction
(c) Subsidiaries of the Registrant (Exhibit 21) of Organization

C.V. Bronx Associates, L.P. NY
Michigan Rural Housing Limited Partnership MI
Jefferson Limited Partnership LA
Inter-Tribal Indian Village Housing Development Associates, L.P. RI
RBM Associates PA
Glenbrook Associates PA
Affordable Flatbush Associates NY
Barclay Village II, LTD. PA
1850 Second Avenue Associates, L.P. NY
R.P.P. Limited Dividend Housing MI
Williamsburg Residential II, L.P. KS
West 104th Street Associates L.P. NY
Meredith Apartments, LTD. UT
Ritz Apartments, LTD. UT
Ashby Apartments, LTD. UT
South Toledo Associates, LTD. OH
Dunlap School Venture PA
Philipsburg Elderly Housing Associates PA
Franklin Elderly Housing Associates PA
Wade D. Mertz Elderly Housing Associates PA
Lancashire Towers Associates Limited Partnership OH
Northwood Associates Limited Partnership OH
Brewery Renaissance Associates NY
Brandywine Court Associates, L.P. FL
Art Apartments Associates PA
The Village at Carriage Hills, LTD. TN
Mountainview Apartments, LTD. TN
The Park Village, Limited MS
River Oaks Apartments, LTD. AL
Forrest Ridge Apartments, LTD. AR
The Hearthside Limited Dividend Housing Association
Limited Partnership MI
Redemptorist Limited Partnership LA
Manhattan A Associates NY
Broadhurst Willows, L.P. NY
Weidler Associates Limited Partnership OR
Gentle Pines-West Columbia Associates, L.P. SC
Lake Forest Estates II, LTD. AL
Las Camelias Limited Partnership PR
WPL Associates XXIII OR
Broadway Townhouses L.P. NJ
Puerto Rico Historic Zone Limited Dividend Partnership PR
Citrus Meadows Apartments, LTD. FL
Sartain School Venture PA
Driftwood Terrace Associates, LTD. FL
Holly Hill, LTD. TN
Mayfair Apartments LTD. TN
Foxcroft Apartments LTD. AL
Canterbury Apartments, LTD. MS
Cutler Canal III Associates, LTD. FL
Jefferson Place L.P. KS
Callaway Village, LTD. TN
Commerce Square Apartments Associates L.P. DE
West 132nd Development Partnership NY
Site H Development Co. NY
L.I.H. Chestnut Associates, L.P. PA
Diamond Phase II Venture PA
Bookbindery Associates PA
The Hamlet, LTD. FL
Stop 22 Limited Partnership PR
Knob Hill Apartments, LTD. TN
Conifer James Street Associates NY
Longfellow Heights Apartments, L.P. MO

(d) Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Ex-
change Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

LIBERTY TAX CREDIT PLUS III L.P.
(Registrant)

By: RELATED CREDIT PROPERTIES III L.P.,
a General Partner

By: Related Credit Properties III Inc.,
its general partner

Date: June 22, 1999
By: /s/ J. Michael Fried
J. Michael Fried
President, Chief Executive Officer and
Director (principal executive officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 22, 1999
By: /s/ J. Michael Fried
J. Michael Fried
President, Chief Executive Officer and
Director (principal executive officer)

and

By: LIBERTY ASSOCIATES III, L.P.,
a General Partner

By: Related Credit Properties III L.P.,
its general partner

Date: June 22, 1999
By: /s/ J. Michael Fried
J. Michael Fried
President, Chief Executive Officer and
Director (principal executive officer)

By: Liberty GP III Inc.,
a General Partner

Date: June 22, 1999
By: /s/ J. Michael Fried
J. Michael Fried
President, Chief Executive Officer and
Director (principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this re-
port has been signed below by the following persons on behalf of the regis-
trant and in the capacities and on the dates indicated:

Signature Title Date

President, Chief Executive Officer
(principal executive officer) and
Director of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ J. Michael Fried and Liberty GP III, Inc.
J. Michael Fried (a General Partner of Registrant) June 22, 1999

Senior Vice President
(principal financial officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ Alan P. Hirmes and Liberty GP III, Inc.
Alan P. Hirmes (a General Partner of Registrant) June 22, 1999

Treasurer (principal accounting officer)
of Related Credit Properties
III Inc., (general partner
of Related Credit Properties III L.P.
and Liberty Associates IV, L.P.)
(a General Partner of Registrant)
/s/ Glenn F. Hopps and Liberty GP III, Inc.
Glenn F. Hopps (a General Partner of Registrant) June 22, 1999

Director of Related Credit Properties
III Inc., general partner
of Related Credit Properties III L.P.
/s/ Stephen M. Ross and Liberty Associates IV, L.P.
Stephen M. Ross (General Partners of Registrant) June 22, 1999

INDEPENDENT AUDITORS' REPORT

To the Partners of
Liberty Tax Credit Plus III L.P. and Subsidiaries
(A Delaware Limited Partnership)

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus III L.P. and Subsidiaries (a Delaware Limited Part-
nership) included in the Form 10-K as presented in our opinion dated June 22,
1999 on page 20, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 1998, 1997 and 1996 Fiscal Years and
Schedule III at March 31, 1999. In our opinion, and based on the reports of
the other auditors, these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of two subsidiary partnerships with significant contin-
gencies and uncertainties. The financial statements of these subsidiary
partnerships were prepared assuming that each will continue as a going con-
cern. These subsidiary partnerships have been unable to generate sufficient
cash flow to pay their mortgage obligations. The two subsidiary partner-
ships' net losses aggregated $3,647,759 (Fiscal 1998), $4,124,102, (Fiscal
1997) and $23,519,749 (Fiscal 1996), and their assets aggregated $23,096,175
and $24,701,855 at March 31, 1999 and 1998, respectively. Management's plans
in regard to these matters are also described in Note 10(a). The accompany-
ing consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI, LLP

New York, New York
June 22, 1999

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Summarized condensed financial information of registrant (not including con-
solidated subsidiary partnerships)

CONDENSED BALANCE SHEETS

ASSETS

March 31,
1999 1998

Cash and cash equivalents $ 346,731 $ 563,893
Cash held in escrow 939,308 941,808
Investment and advances in
subsidiary partnerships 40,888,006 46,427,627
Other assets 245,466 245,466

Total assets $42,419,511 $48,178,794

LIABILITIES AND PARTNERS' EQUITY

Due to general partner and affiliates $ 3,219,479 $ 1,594,411
Other liabilities 24,486 0

Total liabilities 3,243,965 1,594,411

Partners' equity 39,175,546 46,584,383

Total liabilities and partners' equity $42,419,511 $48,178,794

Investments in sudsidiary partnerships are recorded in accordance with the
equity method of accounting, under which investments are not reduced below
zero. Accordingly, partners' equity on the consolidated balance sheet will
differ from partners' equity shown above.

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS

Year Ended March 31,
1999 1998 1997

Revenues

Other income $ 14,494 $ 51,210 $ 131,606

Total revenues 14,194 51,210 131,606

Expenses

General and administrative 215,957 315,341 248,865
General and administrative-
related parties 1,673,390 1,692,111 1,606,344

Total expenses 1,889,347 2,007,452 1,855,209

Loss from operations (1,875,153) (1,956,242) (1,723,603)

Distribution income of
subsidiary partnerships
in excess of investments 39,203 0 12,956

Equity in loss of
subsidiary
partnerships (*) (5,572,887) (8,797,585) (8,435,002)

Net loss $(7,408,837) $(10,753,827) $(10,145,649)

(*) Includes suspended prior year losses of investment in accordance with
equity method of accounting amounting to $0, $89,989, and $0, for the years
ended March 31, 1999, 1998 and 1997.

LIBERTY TAX CREDIT PLUS III L.P.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS

Year Ended March 31,
1999 1998 1997

Cash flows from operating activities:

Net loss $(7,408,837) $(10,753,827) $(10,145,649)
Adjustments to reconcile
net loss to net cash
used in operating activities:

Increase (decrease)
in liabilities:

Due to general partners
and affiliates 1,625,068 (322,660) (41,512)
Other liabilities 24,486 0 (2,893)

Total adjustments 1,649,554 (322,660) (44,405)

Net cash used in
operating activities (5,759,283) (11,076,487) (10,190,054)

Cash flows from
investing activities:

Equity in loss of
subsidiary partnerships 5,572,887 8,797,585 8,435,002
Distributions from
subsidiary partnerships 121,383 226,182 99,473
Investments and advances
in subsidiary partnerships (154,649) (408,580) (814,871)
Decrease in cash held in escrow-
purchase price payments 2,500 188,170 814,871

Net cash provided by
investing activities 5,542,121 8,803,357 8,534,475

Net decrease in cash and
cash equivalents (217,162) (2,273,130) (1,655,579)

Cash and cash equivalents,
beginning of year 563,893 2,837,023 4,492,602

Cash and cash equivalents,
end of year $ 346,731 $ 563,893 $2,837,023

LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1999

Subsidiary Cost Capitalized
Partnerships' Initial Cost to Partnership Subsequent to
Residential Buildings and Acquisition:
Property Encumbrances Land Improvements Improvements

C.V. Bronx Associates, L.P.
Bronx, NY $ 0 $ 1,705,800 $ 0 $ 4,279,915
Michigan Rural Housing Limited Partnership
Michigan 4,678,919 141,930 4,013,207 2,073,310
Jefferson Limited Partnership
Schreveport, LA 1,385,591 65,000 3,289,429 50,806
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 1,639,413 36,643 3,290,524 110,464
RBM Associates
Philadelphia, PA 975,000 0 1,590,733 72,853
Glenbrook Associates
Atglen, PA 1,649,232 137,000 2,833,081 123,724
Affordable Flatbush Associates
Brooklyn, NY 1,592,487 0 2,551,365 194,120
Barclay Village II, LTD.
Chambersburg, PA 2,525,295 204,825 3,249,918 667,620
1850 Second Avenue Associates, L.P.
New York, NY 0 920,472 6,262,968 (54,340)
R.P.P. Limited Dividend Housing
Detroit, MI 30,040,000 0 29,051,380 (13,032,240)
Williamsburg Residential II, L.P.
Witchita, KS 1,511,112 358,305 2,713,872 (1,211,361)
West 104th Street Associates, L.P.
New York, NY 0 0 0 3,011,826
Meredith Apartments, LTD.
Salt Lake City, UT 624,662 40,000 1,500,117 20,962
Ritz Apartments, LTD.
Salt Lake City, UT 316,069 59,760 592,704 88,299
Ashby Apartments, LTD.
Salt Lake City, UT 316,077 50,850 549,611 128,546
South Toledo Associates, LTD.
Toledo, OH 826,948 47,571 1,411,386 44,416
Dunlap School Venture
Philadelphia, PA 2,475,153 5,352 4,522,721 147,783
Philipsburg Elderly Housing Associates
Philipsburg, PA 3,139,011 45,000 4,092,500 449,527
Franklin Elderly Housing Associates
Franklin, PA 2,259,158 165,000 2,594,447 135,748
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 3,397,301 65,000 4,234,049 610,632
Lancashire Towers Associates L.P.
Cleveland, OH 3,153,107 265,000 6,871,575 372,566
Northwood Associates Limited Partnership
Toledo, OH 1,988,150 200,000 4,065,856 641,993
Brewery Renaissance Associates
Middletown, NY 3,375,000 77,220 102,780 6,149,166
Brandywine Court Associates, L.P.
Jacksonville, FL 1,421,011 78,000 1,960,262 78,416
Art Apartments Associates
Philadelphia, PA 1,126,908 13,695 2,713,615 56,237
The Village at Carriage Hills, LTD.
Clinton, TN 1,466,771 86,663 1,753,799 60,303
Mountainview Apartments, LTD,
Newport, TN 1,040,802 49,918 1,254,182 86,614
The Park Village, Limited
Jackson, MS 368,714 44,102 749,940 83,183
River Oaks Apartments, LTD.
Oneonta, AL 1,068,805 80,340 1,221,336 67,714
Forrest Ridge Apartments, LTD.
Forrest City, AR 820,177 36,000 1,016,647 66,769
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 2,903,018 242,550 4,667,594 108,987
Redemptorist L.P.
New Orleans, LA 2,762,520 0 6,497,259 56,462
Manhattan A Associates
New York, NY 3,960,752 1,092,959 5,991,888 361,470
Broadhurst Willows, L.P.
New York, NY 0 102,324 5,151,039 62,644
Weidler Associates Limited Partnership
Portland, OR 1,261,000 225,000 0 2,164,756
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 3,615,660 327,650 4,276,739 163,252
Lake Forest Estates II, LTD.
Livingston, AL 965,684 21,623 1,182,480 62,019
Las Camelias L.P.
Rio Piedras, PR 6,435,866 249,000 6,400 9,361,735
WPL Associates XIIII
Portland, OR 2,211,259 0 3,721,763 173,781
Broadway Townhouses L.P.
Camden, NJ 10,695,865 163,000 5,120,066 14,424,001
Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 4,025,000 0 0 6,505,549
Citrus Meadows Apartments, LTD.
Brandenton, FL 7,262,531 610,073 0 9,378,419
Sartain School Venture
Philadelphia, PA 1,941,805 3,883 3,486,875 123,086
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 6,936,741 270,000 7,753,765 309,674
Holly Hill, LTD.
Greenville, TN 1,388,014 50,000 1,631,820 136,568
Mayfair Apartments LTD.
Morristown, TN 1,372,456 50,000 1,614,861 96,408
Foxcroft Apartments
LTD. Troy, AL 1,243,856 75,000 1,382,973 137,462
Canterbury Apartments, LTD.
Indianola, MS 1,426,965 33,000 1,738,871 92,758
Cutler Canal III Associates, LTD.
Miami, FL 7,795,016 1,269,265 0 11,933,201
Jefferson Place L.P.
Olathe, KS 11,985,000 531,063 13,477,553 44,416
Callaway Village, LTD.
Clinton, TN 1,400,844 66,000 1,613,920 121,493
Commerce Square Apartments Associates L.P.
Smyrna, DE 2,851,920 303,837 0 4,792,365
West 132nd Development Partnership
New York, NY 1,663,364 0 0 2,636,852
Site H Development Co.
Brooklyn, NY 738,127 0 1,346,000 44,416
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 6,027,269 752,000 693,995 6,370,083
Diamond Phase II Venture
Philadelphia, PA 1,865,869 0 0 4,005,040
Bookbindery Associates
Philadelphia, PA 1,521,851 0 0 3,843,720
The Hamlet, LTD.
Boynton, FL 8,283,750 1,180,482 0 13,345,845
Stop 22 Limited Partnership
Santurce, PR 8,791,188 0 4,025,481 7,003,611
Knob Hill Apartments, LTD.
Greenville, TN 1,475,379 75,085 0 1,837,332
Conifer James Street Associates
Syracuse, NY 2,440,555 57,034 0 4,465,268
Longfellow Heights Apartments, L.P.
Kansas City, MO 4,073,573 0 7,739,692 227,923

$196,503,570 $12,730,274 $183,175,038 $109,966,167

Gross Amount at which Carried At Close of Period
Subsidiary Partnerships' Buildings and
Residential Property Land Improvements Total

C.V. Bronx Associates, L.P.
Bronx, NY $ 1,439,504 $ 4,546,211 $ 5,985,715
Michigan Rural Housing Limited Partnership
Michigan 148,716 6,079,731 6,228,447
Jefferson Limited Partnership
Schreveport, LA 71,786 3,333,449 3,405,235
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 43,429 3,394,202 3,437,631
RBM Associates
Philadelphia, PA 6,786 1,656,800 1,663,586
Glenbrook Associates
Atglen, PA 143,786 2,950,019 3,093,805
Affordable Flatbush Associates
Brooklyn, NY 6,787 2,738,698 2,745,485
Barclay Village II, LTD.
Chambersburg, PA 211,611 3,910,752 4,122,363
1850 Second Avenue Associates, L.P.
New York, NY 392,457 6,736,643 7,129,100
R.P.P. Limited Dividend Housing
Detroit, MI 6,786 16,012,354 16,019,140
Williamsburg Residential II, L.P.
Witchita, KS 362,484 1,498,332 1,860,816
West 104th Street Associates, L.P.
New York, NY 6,787 3,005,039 3,011,826
Meredith Apartments, LTD.
Salt Lake City, UT 46,787 1,514,292 1,561,079
Ritz Apartments, LTD.
Salt Lake City, UT 66,547 674,216 740,763
Ashby Apartments, LTD.
Salt Lake City, UT 57,637 671,370 729,007
South Toledo Associates, LTD.
Toledo, OH 51,677 1,451,696 1,503,373
Dunlap School Venture
Philadelphia, PA 9,458 4,666,398 4,675,856
Philipsburg Elderly Housing Associates
Philipsburg, PA 68,101 4,518,926 4,587,027
Franklin Elderly Housing Associates
Franklin, PA 169,106 2,726,089 2,895,195
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 69,106 4,840,575 4,909,681
Lancashire Towers Associates L.P.
Cleveland, OH 269,106 7,240,035 7,509,141
Northwood Associates Limited Partnership
Toledo, OH 204,106 4,703,743 4,907,849
Brewery Renaissance Associates
Middletown, NY 81,326 6,247,840 6,329,166
Brandywine Court Associates, L.P.
Jacksonville, FL 82,106 2,034,572 2,116,678
Art Apartments Associates
Philadelphia, PA 17,801 2,765,746 2,783,547
The Village at Carriage Hills, LTD.
Clinton, TN 90,769 1,809,996 1,900,765
Mountainview Apartments, LTD,
Newport, TN 54,024 1,336,690 1,390,714
The Park Village, Limited
Jackson, MS 48,208 829,017 877,225
River Oaks Apartments, LTD.
Oneonta, AL 84,446 1,284,944 1,369,390
Forrest Ridge Apartments, LTD.
Forrest City, AR 40,106 1,079,310 1,119,416
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 246,656 4,772,475 5,019,131
Redemptorist L.P.
New Orleans, LA 4,106 6,549,615 6,553,721
Manhattan A Associates
New York, NY 1,097,065 6,349,252 7,446,317
Broadhurst Willows, L.P.
New York, NY 106,430 5,209,577 5,316,007
Weidler Associates Limited Partnership
Portland, OR 229,106 2,160,650 2,389,756
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 331,756 4,435,885 4,767,641
Lake Forest Estates II, LTD.
Livingston, AL 25,729 1,240,393 1,266,122
Las Camelias L.P.
Rio Piedras, PR 298,878 9,318,257 9,617,135
WPL Associates XIIII
Portland, OR 4,106 3,891,438 3,895,544
Broadway Townhouses L.P.
Camden, NJ 167,106 19,539,961 19,707,067
Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 156,842 6,348,707 6,505,549
Citrus Meadows Apartments, LTD.
Brandenton, FL 812,609 9,175,883 9,988,492
Sartain School Venture
Philadelphia, PA 7,989 3,605,855 3,613,844
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 274,106 8,059,333 8,333,439
Holly Hill, LTD.
Greenville, TN 54,106 1,764,282 1,818,388
Mayfair Apartments LTD.
Morristown, TN 54,106 1,707,163 1,761,269
Foxcroft Apartments
LTD. Troy, AL 79,106 1,516,329 1,595,435
Canterbury Apartments, LTD.
Indianola, MS 37,106 1,827,523 1,864,629
Cutler Canal III Associates, LTD.
Miami, FL 1,273,507 11,928,959 13,202,466
Jefferson Place L.P.
Olathe, KS 535,169 13,517,863 14,053,032
Callaway Village, LTD.
Clinton, TN 70,106 1,731,307 1,801,413
Commerce Square Apartments Associates L.P.
Smyrna, DE 307,943 4,788,259 5,096,202
West 132nd Development Partnership
New York, NY 13,106 2,623,746 2,636,852
Site H Development Co.
Brooklyn, NY 4,106 1,386,310 1,390,416
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 759,229 7,056,849 7,816,078
Diamond Phase II Venture
Philadelphia, PA 22,081 3,982,959 4,005,040
Bookbindery Associates
Philadelphia, PA 29,105 3,814,615 3,843,720
The Hamlet, LTD.
Boynton, FL 1,184,587 13,341,740 14,526,327
Stop 22 Limited Partnership
Santurce, PR 216,918 10,812,174 11,029,092
Knob Hill Apartments, LTD.
Greenville, TN 79,190 1,833,227 1,912,417
Conifer James Street Associates
Syracuse, NY 61,139 4,461,163 4,522,302
Longfellow Heights Apartments, L.P.
Kansas City, MO 204 7,967,411 7,967,615

$12,894,634 $292,976,845 $305,871,479

Life on which
Depreciation in
Subsidiary Year of Latest Income
Partnerships' Accumulated Construction/ Date Statements is
Residential Property Depreciation Renovation Acquired Computed(a)(b)

C.V. Bronx Associates, L.P.
Bronx, NY $ 1,272,216 1990 June 1989 15-27.5 years
Michigan Rural Housing Limited Partnership
Michigan 1,995,911 1989 Sept. 1989 27.5 years
Jefferson Limited Partnership
Schreveport, LA 1,002,608 1990 Dec. 1989 27.5 years
Inter-Tribal Indian Village Housing
Development Associates, L.P.
Providence, RI 1,118,038 1989 Oct. 1989 27.5 years
RBM Associates
Philadelphia, PA 345,385 1989 Dec. 1989 40 years
Glenbrook Associates
Atglen, PA 938,878 1989 Nov. 1989 3-27.5 years
Affordable Flatbush Associates
Brooklyn, NY 929,317 1989 Dec. 1989 27.5 years
Barclay Village II, LTD.
Chambersburg, PA 1,308,617 1989 Nov. 1989 5-27.5 years
1850 Second Avenue Associates, L.P.
New York, NY 2,148,951 1989 Nov. 1989 27.5 years
R.P.P. Limited Dividend Housing
Detroit, MI 2,554,908 1989 Nov. 1989 27-31.5 years
Williamsburg Residential II, L.P.
Witchita, KS 519,452 1989 Nov. 1989 40 years
West 104th Street Associates, L.P.
New York, NY 818,034 1990 Dec. 1989 27.5 years
Meredith Apartments, LTD.
Salt Lake City, UT 536,532 1989 Aug. 1989 27.5 years
Ritz Apartments, LTD.
Salt Lake City, UT 232,967 1989 Aug. 1989 27.5 years
Ashby Apartments, LTD.
Salt Lake City, UT 215,504 1989 Aug. 1989 27.5 years
South Toledo Associates, LTD.
Toledo, OH 329,673 1988 Jan. 1990 40 years
Dunlap School Venture
Philadelphia, PA 1,007,407 1989 Jan. 1990 40 years
Philipsburg Elderly Housing Associates
Philipsburg, PA 1,658,871 1990 Feb. 1990 15-27.5 years
Franklin Elderly Housing Associates
Franklin, PA 1,083,832 1989 Feb. 1990 7-24 years
Wade D. Mertz Elderly Housing Associates
Sharpsville, PA 1,892,859 1989 Feb. 1990 27.5 years
Lancashire Towers Associates L.P.
Cleveland, OH 2,347,228 1989 Feb. 1990 27.5 years
Northwood Associates Limited Partnership
Toledo, OH 1,445,489 1989 Feb. 1990 27.5 years
Brewery Renaissance Associates
Middletown, NY 1,799,035 1990 Feb. 1990 27.5 years
Brandywine Court Associates, L.P.
Jacksonville, FL 766,873 1988 Nov. 1989 7-27.5 years
Art Apartments Associates
Philadelphia, PA 876,479 1990 Mar. 1990 27.5 years
The Village at Carriage Hills, LTD.
Clinton, TN 595,452 1990 Mar. 1990 25-40 years
Mountainview Apartments, LTD,
Newport, TN 456,890 1990 Mar. 1990 25-40 years
The Park Village, Limited
Jackson, MS 279,159 1990 Mar. 1990 25-40 years
River Oaks Apartments, LTD.
Oneonta, AL 322,865 1990 Mar. 1990 25-40 years
Forrest Ridge Apartments, LTD.
Forrest City, AR 263,607 1990 Mar. 1990 25-40 years
The Hearthside Limited Dividend Housing
Associates Limited Partnership
Portage, MI 1,888,657 1990 Mar. 1990 15-27.5 years
Redemptorist L.P.
New Orleans, LA 1,992,498 1990 Mar. 1990 27.5 years
Manhattan A Associates
New York, NY 2,029,237 1990 Apr. 1990 27.5 years
Broadhurst Willows, L.P.
New York, NY 2,157,297 1990 Apr. 1990 10-25 years
Weidler Associates Limited Partnership
Portland, OR 635,850 1990 May 1990 15-27.5 years
Gentle Pines/West Columbia Associates, L.P.
Columbia, SC 1,762,500 1990 June 1990 27.5 years
Lake Forest Estates II, LTD.
Livingston, AL 291,349 1990 June 1990 25-40 years
Las Camelias L.P.
Rio Piedras, PR 2,667,588 1990 June 1990 27.5 years
WPL Associates XIIII
Portland, OR 1,314,589 1990 July 1990 27.5 years
Broadway Townhouses L.P.
Camden, NJ 5,691,261 1990 July 1990 27.5 years
Puerto Rico Historic Zone Limited
Dividend Partnership
San Juan, PR 1,724,140 1990 Aug. 1990 27.5 years
Citrus Meadows Apartments, LTD.
Brandenton, FL 2,878,171 1990 July 1990 27.5 years
Sartain School Venture
Philadelphia, PA 774,921 1990 Aug. 1990 15-40 years
Driftwood Terrace Associates, LTD.
Ft. Lauderdale, FL 3,534,096 1989 Sept. 1990 27.5 years
Holly Hill, LTD.
Greenville, TN 547,510 1990 Oct. 1990 25-40 years
Mayfair Apartments LTD.
Morristown, TN 405,467 1990 Oct. 1990 25-40 years
Foxcroft Apartments
LTD. Troy, AL 357,191 1990 Oct. 1990 25-40 years
Canterbury Apartments, LTD.
Indianola, MS 438,958 1990 Oct. 1990 25-40 years
Cutler Canal III Associates, LTD.
Miami, FL 2,054,362 1990 Oct. 1990 40 years
Jefferson Place L.P.
Olathe, KS 6,181,707 1990 Oct. 1990 19 years
Callaway Village, LTD.
Clinton, TN 408,449 1990 Nov. 1990 25-40 years
Commerce Square Apartments Associates L.P.
Smyrna, DE 871,659 1990 Dec. 1990 40 years
West 132nd Development Partnership
New York, NY 550,355 1990 Dec. 1990 40 years
Site H Development Co.
Brooklyn, NY 452,598 1990 Dec. 1990 27.5 years
L.I.H. Chestnut Associates, L.P.
Philadelphia, PA 1,573,544 1990 Dec. 1990 35 years
Diamond Phase II Venture
Philadelphia, PA 737,187 1990 Dec. 1990 40 years
Bookbindery Associates
Philadelphia, PA 716,317 1990 Dec. 1990 40 years
The Hamlet, LTD.
Boynton, FL 3,581,898 1990 Dec. 1990 27.5 years
Stop 22 Limited Partnership
Santurce, PR 2,951,944 1990 Dec. 1990 27.5-31.5 years
Knob Hill Apartments, LTD.
Greenville, TN 405,013 1990 Dec. 1990 25-40 years
Conifer James Street Associates
Syracuse, NY 1,314,902 1990 Dec. 1990 15-27.5 years
Longfellow Heights Apartments, L.P.
Kansas City, MO 1,654,798 1991 Mar. 1991 15-40 years

$85,609,050

(a) Personal property is depreciated primarily by the straight-line
method over the estimated useful life ranging from 5 to 10 years
(b) Since all properties were acquired as operating properties,
depreciation is computed using primarily the straight-line method over
the estimated useful life determined by the Partnership date of acquisition.

Cost of Property and Equipment
Year Ended March 31,
1999 1998 1997

Balance at beginning of
period $304,650,887 $303,796,120 $332,529,029
Additions during period:
Improvements 1,342,989 999,886 819,881
Depreciation expense
Deductions during period:
Loss on impairment 0 0 (29,552,315)
Dispositions (122,397) (145,119) (475)
Balance at close of
period $305,871,479 $304,650,887 $303,796,120

Accumulated Depreciation
Year Ended March 31,
1999 1998 1997

Balance at beginning of
period $74,148,437 $63,453,107 $61,814,023
Additions during period:
Improvements
Depreciation expense 11,466,030 10,713,309 11,108,603
Deductions during period:
Loss on impairment 0 0 (9,469,214)
Dispositions (5,417) (17,979) (305)
Balance at close of
period $85,609,050 $74,148,437 $63,453,107

At the time the local partnerships were acquired by Liberty Tax Credit
Plus III L.P., the entire purchase price paid by Liberty Tax Credit Plus III
L.P. was pushed down to the local partnerships as property and equipment with
an offsetting credit to capital. Since the projects were in the construction
phase at the time of acquisition, the capital accounts were insignificant at
the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.