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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, 1996

OR

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

Commission File Number 0-24650

INDEPENDENCE TAX CREDIT PLUS L.P. III
-------------------------------------
(Exact name of registrant as specified in their charter)

Delaware 13-3746339
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

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:

Title of Class
--------------
Limited Partnership Interests and Beneficial Assignment Certificates

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

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

DOCUMENTS INCORPORATED BY REFERENCE

None


Page 1 of 65



PART I

Item 1. Business.

General

Independence Tax Credit Plus L.P. III (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on December
23, 1993. The General Partner of the Partnership is Related Independence
Associates III L.P., a Delaware limited partnership (the "General Partner"). The
general partner of the General Partner is Related Independence Associates III
Inc., a Delaware corporation.

On June 7, 1994 the Partnership commenced a public offering (the
"Offering") of Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership ("Limited
Partnership Interests"), managed by Related Equities Corporation (the "Dealer
Manager"), pursuant to a prospectus dated June 7, 1994, (the "Prospectus").

As of March 31, 1996 the Partnership has received $43,440,000 of Gross
Proceeds of the Offering from 2,811 investors ("BACs holders"). The Offering was
terminated on May 9, 1995. (Item 8, "Financial Statements and Supplementary
Data," Note 10).

The Partnership's business is primarily to invest in other partnerships
("Local Partnerships") owning apartment complexes ("Apartment Complexes" or
"Properties") that are eligible for the low-income housing tax credit ("Housing
Tax Credit") enacted in the Tax Reform Act of 1986, some of which may also be
eligible for the historic rehabilitation tax credit ("Historic Tax Credit";
together with Housing Tax Credits, "Tax Credits"). The Partnership's investment
in each Local Partnership represents 98.99% of the partnership interests in the
Local Partnership. As of March 31, 1996 the Partnership acquired interests in
fifteen Local Partnerships. As of March 31, 1996, approximately $20,730,000
(including approximately $2,950,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the Contribution Agreement and not
including acquisition fees of approximately $1,502,000) of net proceeds has been
invested in fifteen Local Partnerships of which approximately $5,484,000 remains
to be paid to the Local Partnerships, as certain benchmarks such as occupancy
levels must be attained prior to the release of such funds. The Partnership has
approximately $13,805,000 available for future investments.

The Partnership has been formed to invest in low income Apartment Complexes
that are eligible for the Housing Tax Credit enacted in the Tax Reform Act of
1986. Some Apartment Complexes may also be eligible for Historic Rehabilitation
Tax Credits ("Historic Complexes"). The investment objects of the Partnership
are described below.

1. Entitle qualified BACs holders to Housing Tax Credits over 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 disposition
of the Properties.

4. Allocate passive losses to individual BACs holders to offset passive
income that they may realize from rental real estate investments and other
passive 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 period of the Partnership's entitlement to claim
Tax Credits (for each Property, generally ten years from the date of investment
or, if later, the date the Property is leased to qualified tenants; referred to
herein as the "Credit Period"). Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by the relevant state
credit agencies the authority to recognize Tax Credits during the Credit Period
provided that the Local Partnership


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satisfies the rent restriction, minimum set-aside and other requirements for
recognition of the Tax Credits at all times during such period. Once a Local
Partnership has become eligible to recognize Tax Credits, it may lose such
eligibility and suffer an event of "recapture" if its Property fails to remain
in compliance with the Tax Credit requirements. None of the Local Partnerships
in which the Partnership has acquired an interest has suffered an event of
recapture.

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

Competition

The real estate business is highly competitive and substantially all of the
properties acquired and to be acquired by the Partnership are expected to have
active competition from similar properties in their respective vicinities. The
Partnership will compete in the acquisition of properties with many other
entities engaged in real estate investment activities, some of which have
greater assets than the Partnership. In addition, the number of entities and the
amount available for investment in properties of a type suitable for investment
by the Partnership may increase, resulting in increased competition for such
investments and possible increases in the prices to be paid. In addition,
various other limited partnerships may, in the future, be formed by the General
Partner and/or its affiliates to engage in businesses which may be competitive
with the Partnership.

Employees

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

Item 2. Properties.

The Partnership holds a 98.99% limited partnership interest in fifteen
Local Partnerships as of March 31, 1996. Set forth below is a schedule of the
Local Partnerships including certain information concerning their respective
Apartment Complexes (the "Local Partnership Schedule"). Further information
concerning these Local Partnerships and their properties may be found in
Schedule III to the financial statements which are included herein.

Local Partnership Schedule

Name and Location Percentage of Units
(Number of Units) Date Acquired Occupied at May 1,
- - ----------------- ------------- --------------------
1996 1995
---- ----
Edward Hotel
Limited Partnership
Los Angeles, CA (47) November 1994 98% 0%*

Pacific-East L.P.
Brooklyn, NY (39) December 1994 100% 97%

Overtown Development
Group, Ltd.
Miami, FL (65) December 1994 90% 86% (1)

Sumpter Commons
Associates, L.P. April 1995 100% N/A
Brooklyn, NY (21)

-3-


Local Partnership Schedule
(continued)

Name and Location Percentage of Units
(Number of Units) Date Acquired Occupied at May 1,
- - ----------------- ------------- --------------------
Park Housing
Limited Partnership May 1995 86% N/A
Hartford, CT (30)

Livingston Manor Urban
Renewal Associates, L.P. June 1995 34% (1) N/A
New Brunswick, NJ (50)

Jefferis Square Housing
Partnership L.P. June 1995 0%* N/A
Chester, PA (36)

2301 First Avenue
Limited Partnership August 1995 96% N/A
New York, NY (92)

Lewis Street
Limited Partnership October 1995 0%* N/A
Buffalo, NY (32)

Savannah Park Housing
Limited Partnership October 1995 92% N/A
Washington, DC (64)

Brannon Group, L.C. December 1995 96% N/A
Leisure City, FL (80)

Mansion Court Phase II
Venture December 1995 0%* N/A
Philadelphia, PA (19)

Primm Place Partners, L.P. December 1995 0%* N/A
St. Louis, MI (128)

BK-9-A Partners L.P. December 1995 100% N/A
Brooklyn, NY (23)

BK-10K Partners L.P. December 1995 100% N/A
Brooklyn, NY (21)

*Properties still in construction phase

(1) Properties are in rent-up phase.

The Partnership invested in Local Partnerships owning existing Apartment
Complexes which receive either Federal or state subsidies. HUD through FHA,
administers a variety of subsidies for low- and moderate-income housing. FmHA
administers similar housing programs for non-urban areas. The Federal programs
generally provide one or a combination of the following forms of assistance: (i)
mortgage loan insurance, (ii) rental subsidies, (iii) reduction of mortgage
interest payments.

-4-


i) HUD provides mortgage insurance for rental housing projects pursuant to
a number of sections of Title II of the National Housing Act ("NHA"), including
Section 236, Section 221(d)(4), Section 221(d)(3) and Section 220. Under all of
these programs, HUD will generally provide insurance equal to 100% of the total
replacement cost of the project to non-profit owners and 90% of the total
replacement cost to limited-distribution owners. Mortgages are provided by
institutions approved by HUD, including banks, savings and loan companies and
local housing authorities. Section 221(d)(4) of NHA provides for federal
insurance of private construction and permanent mortgage loans to finance new
construction of rental apartment complexes containing five or more units. The
most significant difference between the 221(d)(4) program and the 221(d)(3)
program is the maximum amount of the loan which may be obtained. Under the
221(d)(3) program, non-profit sponsors may obtain a permanent mortgage equal to
100% of the total replacement cost; no equity contribution is required of a
non-profit sponsor. In all other respects the 221(d)(3) program is substantially
similar to the 221(d)(4) program.

ii) Many of the tenants in HUD insured projects receive some form of rental
assistance payments, primarily through the Section 8 Housing Assistance Payments
Program (the "Section 8 Program"). Apartment Complexes not receiving assistance
through the Section 8 Program ("Section 8 Payments") will generally have
limitations on the amounts of rent which may be charged. One requirement imposed
by HUD regulations effective for apartment complexes initially approved for
Section 8 payments on or after November 5, 1979 is to limit the amount of the
owner's annual cash distributions from operations to 10% of the owner's equity
investment in an apartment complex if the apartment complex is intended for
occupancy by families and to 6% of the owner's equity investment in an apartment
complex intended for occupancy by elderly persons. The owner's equity investment
in the apartment complex is 10% of the project's replacement cost as determined
by HUD.

iii) Section 236 Program. As well as providing mortgage insurance, the
Section 236 program also provides an interest credit subsidy which reduces the
cost of debt service on a project mortgage, thereby enabling the owner to charge
the tenants lower rents for their apartments. Interest credit subsidy payments
are made monthly by HUD directly to the mortgagee of the project. Each payment
is in an amount equal to the difference between (i) the monthly interest payment
required by the terms of the mortgage to pay principal, interest and the annual
mortgage insurance premium and (ii) the monthly payment which would have been
required for principal and interest if the mortgage loan bore interest at the
rate of 1%. These payments are credited against the amounts otherwise due from
the owner of the project, who makes monthly payments of the balance.

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

Commercial tenants (to which average rental per square foot applies)
comprise less than 5% of the rental revenues of the Partnership. Rents for the
residential units are determined annually by HUD and reflect increases in
consumer price indices in various geographic areas.

Management continuously reviews the physical state of the properties and
budgets improvements when required which are generally funded from cash flow
from operations or release of replacement reserve escrows. No improvements are
expected to require additional financing.

Management continuously reviews the insurance coverage of the properties
and believes 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
determined 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 included herein.

-5-



In connection with investments in development-stage Apartment Complexes,
the General Partner generally requires that the general partners of the Local
Partnerships ("Local General Partners") provide completion guarantees and/or
undertake to repurchase the Partnership's interest in the Local Partnership if
construction or rehabilitation is not completed substantially on time or on
budget ("Development Deficit Guarantees"). The Development Deficit Guarantees
generally also require the Local General Partner to provide any funds necessary
to cover net operating deficits of the Local Partnership until such time as the
Apartment Complex has achieved break-even operations. The General Partner
generally requires that the Local General Partners undertake an obligation to
fund operating deficits of the Local Partnership (up to a stated maximum amount)
during a limited period of time (typically three to five years) following the
achievement of break-even operations ("Operating Deficit Guarantees"). Under the
terms of the Development and Operating Deficit Guarantees, amount funded will be
treated as Operating Loans which will not bear interest and which will be repaid
only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. In some instances, the Local General Partners are required
to undertake an obligation to comply with a Rent-Up Guaranty Agreement, whereby
the Local General Partner agrees to pay liquidating damages if predetermined
occupancy rates are not achieved. These payments are made without right of
repayment. In cases where the General Partner deems it appropriate, the
obligations of a Local General Partner under the Development Deficit, Operating
Deficit and/or Rent-Up Guarantees are secured by letters of credit and/or cash
escrow deposits.

Housing Tax Credits with respect to a given Apartment Complex are available
for a ten-year period that commences when the property is placed into service.
However, the annual Tax Credits available in the year in which the Apartment
Complex is placed in service, must be prorated based upon the months remaining
in the year. 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 Complex in service. In these cases, the Partnership may be
allocated Tax Credits only beginning in the month following the month in which
it acquired its interest and Tax Credits allocated in any prior period are not
available to the Partnership.

Item 3. Legal Proceedings.

None.

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

None.


-6-


PART II

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

As of March 31, 1996, the Partnership had issued and outstanding 43,440
Limited Partnership Interests, each representing a $1,000 capital contribution
to the Partnership, or an aggregate capital contribution of $43,440,000. All of
the issued and outstanding Limited Partnership Interests have been issued to
Independence Assignor Inc. (the "Assignor Limited Partner"), which has in turn
issued 43,440 BACs to the purchasers thereof for an aggregate purchase price of
$43,440,000. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to a Limited Partnership Interest held by the
Assignor Limited Partner. BACs may be converted into Limited Partnership
Interests 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
established 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 Partner plans to impose limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely 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 March 31, 1996 the Partnership has approximately 2,811 registered
holders of an aggregate of 43,440 BACs.

All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $1,000 are held by the General Partner.

There are no material legal restrictions in the Partnership's Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement") on the
ability of the Partnership to make distributions.

The Partnership has made no distributions to the BACs holders as of March
31, 1996. The Partnership does not anticipate providing cash distributions to
its BACs holders other than from net refinancing or sales proceeds.


-7-



Item 6. Selected Financial Data.

The information set forth below presents selected financial data of the
Partnership. There were no operations prior to commencement of the Offering of
BACs on June 7, 1994. Additional financial information is set forth in the
audited financial statements in Item 8 hereof.



Year Ended March 31
--------------------------------
OPERATIONS 1996 1995
--------------- ---------------

Revenues $ 2,289,930 $ 489,375
Operating expenses 2,573,212 465,423
--------------- ---------------

(Loss) income before minority interest (283,282) 23,952

Minority interest in loss of subsidiary partnerships 415 383
--------------- ---------------

Net (loss) income $ (282,867) $ 24,335
=============== ===============
Net (loss) income per weighted average BAC $ (6.60) $ 1.79
=============== ===============



March 31
-------------------------------------------
FINANCIAL POSITION 1996 1995 1994
----------- ----------- -----------

Total assets $74,448,444 $35,005,729 $ 51,010
=========== =========== ===========
Total liabilities $34,647,450 $ 6,862,014 $ 125,423
=========== =========== ===========
Minority interest $ 1,346,916 $ 95,670 $ 0
=========== =========== ===========
Total partners' capital $38,454,078 $28,048,045 $ (74,413)
=========== =========== ===========

During the years ended March 31, 1996 and 1995 and the period December 23,
1993 (inception) through March 31, 1994, total assets and liabilities increased
primarily due to the continued acquisition of Local Partnerships. For the years
ended March 31, 1996 and 1995 property and equipment increased approximately
$28,600,000 and $6,800,000, respectively, construction in progress increased
approximately $4,700,000 and $800,000, respectively, mortgage notes increased
approximately $16,000,000 and $2,800,000, respectively, and construction notes
increased approximately $6,000,000 and $2,200,000, respectively. For the years
ended March 31, 1996 and 1995, there were increases in assets due to capital
contributions which were not fully expended. For the years ended March 31, 1996
and 1995, minority interest increased due to capital contributions from local
general partners.

Cash Distributions

The Partnership has made no distributions to the BACs holders as of March
31, 1996.

-8-


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

Liquidity and Capital Resources

The Partnership's primary source of funds include (i) gross proceeds from
the sale of BAC's and (ii) interest earned on Gross Proceeds which are invested
in tax-exempt money market instruments pending final payments to the Local
Partnerships and (iii) working capital reserves in the original amount of 2.5%
of gross proceeds raised and interest earned thereon. All these sources of funds
are available to meet obligations of the Partnership.

The Partnership has received $43,440,000 in gross proceeds (of which
$12,010,000 was raised during the year ended March 31, 1996) for BACs pursuant
to a public offering resulting in net proceeds available for investment of
approximately $34,535,000 after volume discounts, payment of sales commissions,
acquisition fees and expenses, organization and offering expenses and
establishment of a working capital reserve.

As of March 31, 1996, the Partnership has invested approximately
$20,730,000 (including approximately $2,950,000 classified as a loan repayable
from sale/refinancing proceeds in accordance with the Contribution Agreement and
not including acquisition fees of approximately $1,502,000) of net proceeds in
fifteen Local Partnerships of which approximately $5,484,000 remains to be paid
to the Local Partnerships (including approximately $2,746,000 being held in
escrow) as certain benchmarks, such as occupancy level, must be attained prior
to the release of the funds. Twelve of the Local Partnerships were acquired
during the year ended March 31, 1996 for a combined purchase price of
approximately $17,067,000 (including approximately $1,934,000 classified as a
loan repayable from sale/refinancing proceeds in accordance with the
Contribution Agreement and not including acquisition fees of approximately
$1,226,000), of which approximately $5,261,000 remains to be paid. The
Partnership has approximately $13,805,000 available for future investments.
During the year ended March 31, 1996, approximately $13,374,000 was paid to
Local Partnerships, including purchase price adjustments (of which approximately
$2,468,000 was released from escrow). An additional $4,576,000 was placed into
escrow for purchase price payments during the year ended March 31, 1996. The
Partnership will be acquiring additional properties, and the Partnership may be
required to fund potential purchase price adjustments based on tax credit
adjustor clauses. Such adjustments resulted in a net increase in purchase price
of approximately $274,000 during the year ended March 31, 1996.

During the year ended march 31, 1996, cash and cash equivalents increased
approximately $4,655,000. This increase is primarily due to capital
contributions received of $12,010,000, proceeds from mortgage notes of
$11,086,000, a decrease in investments available for sale of $8,498,000,
proceeds from construction loans of $8,262,000 and cash provided by operations
of $1,313,000 which exceeded construction in progress of $17,921,000,
acquisition of property and equipment of $11,553,000, an increase in cash held
in escrow for investing purposes of $3,733,000, an increase in offering costs of
$1,321,000 an increase in deferred costs of $917,000 and an increase in deferred
financing costs of $898,000. Included in the adjustments to reconcile the net
income to cash flow from operations is depreciation and amortization in the
amount of approximately $656,000.

A working capital reserve of approximately $1,086,000 has been established
from the Partnership's funds available for investment, which includes amounts
which may be required for potential purchase price adjustments based on tax
credit adjustor clauses. At March 31, 1996, approximately $888,000 of this
reserve remains unused. During the fiscal year ended March 31, 1996 part of this
reserve was used to pay net upward price adjustments of approximately $274,000.
The General Partners believe that these reserves, plus any cash distributions
received from the operations of the Local Partnerships will be sufficient to
fund the Partnership's ongoing operations for the foreseeable future.

The Partnership has negotiated development deficit guarantees with the
Local Partnerships in which it has invested. The Local General Partners have
agreed to fund development deficit through the breakeven dates of each of the
Local Partnerships. As of March 31, 1996, the gross amount of Development
Deficit Guarantees for twelve Local Partnerships aggregated approximately
$2,782,000, none of which have expired as of March 31, 1996. The gross amount of
Development Deficit Guarantees for the remaining three Local Partnerships is not
presently determinable. Such guarantees are defined in their respective
agreements. As of March 31, 1996, $0 has been


-9-


funded under the Development Deficit Guaranty Agreements. All current
development deficit guarantees expire within the next three years. Management
does not expect a material impact on liquidity, based on prior years' fundings.

The Partnership has negotiated Operating Deficit Guaranty Agreements with
all Local Partnerships by which the general partners of the Local Partnerships
have agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guaranty Agreements vary for each Local Partnership,
with maximum dollar amounts to be funded for a specified period of time,
generally three years, commencing on the break-even date. The gross amount of
the Operating Deficit Guarantees aggregates approximately $2,991,000, none of
which have expired as of March 31, 1996. All current operating deficit
guarantees expire within the next three years. As of March 31, 1996, $62,500 has
been funded under the Operating Deficit Guaranty agreements. Amounts funded
under such agreements are treated as non-interest bearing loans, which will be
paid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. Management does not expect a material impact on liquidity,
based on prior years' fundings.

In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each Local Partnership, with maximum dollar amounts
to be funded for a specified period of time. The gross amount of these Rent-Up
Guarantees for the Local Partnerships aggregate approximately $1,326,000 of
which approximately $542,000 have expired as of March 31, 1996. All current
rent-up deficit guarantees expire within the next three years. There has not
been any funding under these guaranty agreements. Amounts received under rental
guaranty from the sellers of the properties purchased by the Partnership will be
treated as a reduction of the asset. Management does not expect a material
impact on liquidity, based on prior years' fundings.

The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements, and
Development Deficit Guaranty Agreements are 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.

HUD recently released the American Community Partnerships Act (the "ACPA").
The ACPA is HUD's blueprint for providing for the nation's housing needs in an
era of static or decreasing budget authority.

Two key proposals in the ACPA that could affect the Local Partnerships are:
a discontinuation of project based Section 8 subsidy payments and an attendant
reduction in debt on properties that were supported by the Section 8 payments.

The ACPA calls for a transition during which the project based Section 8
would be converted to a tenant based voucher system. Any FHA insured debt would
then be "marked-to-market", that is revalued in light of the reduced income
stream, if any.

Several industry sources have already commented to HUD and Congress that in
the event the ACPA were fully enacted in its present form the reduction in
mortgage indebtedness would be considered taxable income to limited partners in
the Partnership. Legislative relief has been proposed to exempt
"marked-to-market" debt from cancellation of indebtedness income treatment.
Though HUD initially backed away from the "marked-to-market" proposal, it has
now been re-introduced as "Portfolio Restructuring".

For discussion of contingencies affecting certain subsidiary partnerships,
see Results of Operations of Certain Local Partnerships, below. Since the
maximum loss the Partnership would be liable for is its net investment in the
respective subsidiary partnerships, the resolution of the existing contingencies
is not anticipated to impact future results of operations, liquidity or
financial condition in a material way.

Since the maximum loss the Partnership would be liable for is its net
investments in the respective local partnerships, the resolution of the existing
contingencies is not anticipated to impact future results of operations,
liquidity or financial condition in a material way.

-10-


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 believes 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 upswings. However the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy. The Partnership has invested the proceeds of its offering
in fifteen 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 property during the remainder of the ten-year
period. If trends in the real estate 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 are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties. A provision
for loss on impairment of assets is recorded when estimated amounts recoverable
through future operations and sale of the property on an undiscounted basis are
below depreciated cost. However, depreciated cost, adjusted for such reductions
in value, if any, may be greater than the fair value. Property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows) when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through March 31, 1996, the Partnership has not
recorded any provisions for loss on impairment of assets or reduction to
estimated fair value.

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.

Effective April 1, 1996, the Partnership intends to adopt SFAS No. 121,
consistent with the required adoption period. The Partnership does not expect
the implementation to have a material impact on its financial condition or its
future results of operations.

The following is a summary of the results of operations of the Partnership
for the years ended March 31, 1996 (the 1995 Fiscal Year) and March 31, 1995
(the 1994 Fiscal Year).

The net loss for the 1995 Fiscal Year totaled $282,867. The net income for
the 1994 Fiscal Year totaled $24,335.

The Partnership and BACs holders will begin to recognize Housing Tax
Credits with respect to a Property when the Credit Period for such Property
commences. Because of the time required for the acquisition, completion and
rent-up of Properties, it is expected that the amount of Tax Credits per BAC
will gradually increase over the first three years of the Partnership. Housing
Tax Credits not recognized in the first three years will be recognized in the
11th through 13th years. The Partnership generated $920,294 and $105,155 Housing
Tax Credits and $7,256,680 and $0 Historic Tax Credits during the 1995 and 1994
tax year, respectively.

As of March 31, 1996 and 1995, the Partnership had acquired an interest in
fifteen and three Local Partnerships, respectively. The Partnership intends to
utilize the net proceeds of the offering to acquire additional interests in
Local Partnerships.

-11-


The Partnership's results of operations for the years ended March 31, 1996
and 1995 consisted primarily of (1) approximately $910,000 and $372,000,
respectively, of tax-exempt interest income earned on funds not currently
invested in Local Partnerships and (2) the results of the Partnership's
investment in fifteen and three consolidated Local Partnerships, respectively.

During the year ended March 31, 1996, all categories of income and expenses
increased and the results of operations are not comparable due to the continued
acquisition and rent up of properties and are not reflective of future
operations of the Partnership due to uncompleted property construction and
rent-up of properties. In addition, interest income will continue to decrease in
future periods since a substantial portion of the proceeds from the Offering
will be invested in Local Partnerships. For the year ended March 31, 1996 and
1995, five and two of the Partnership's fifteen and three consolidated
properties, respectively, completed construction and were in various stages of
rent up. One and zero of the properties, respectively, had completed
construction in a previous fiscal year, but were in various stages of rent up
for the year ended March 31, 1996 and 1995. In addition, one and zero of the
properties had completed construction and were rented up in a previous fiscal
year. Eight and one of the Partnership's fifteen and three properties,
respectively, were still under construction as of March 31, 1996 and 1995,
respectively.

As of December 31, 1995, five of the fifteen consolidated properties had
construction loans with a commitment for permanent financing. As of May 1, 1996,
construction has been completed on seven of the Partnership's fifteen
properties. Occupancy rates as of May 1, 1996 varied from 0% to 100%.

Results of Operations of Certain Local Partnerships

2301 First Avenue Limited Partnership

2301 First Avenue Limited Partnership ("2301 First Avenue") is a defendant
in a lawsuit alleging personal injury. The amount of the claim may exceed 2301
First Avenue's insurance coverage limits. The property intends to compel the
general contractor's insurance company to assume defense of the case under the
contractor's insurance policy, which has larger limits. However, the building's
insurance carrier does not believe that any claim paid will exceed the insurance
coverage. Since it is premature to make an evaluation of the amount of 2301
First Avenue's potential loss, it is management's opinion that no accrual for
potential losses is currently warranted in the financial statements. The maximum
loss which the Partnership would be liable for is its net investment in 2301
First Avenue amounting to approximately $584,000.

Other

The Partnership's investment as a limited partner in the Local Partnerships
is subject to the risks of potential losses arising from management and
ownership of improved real estate. The Partnership's investments also could be
adversely affected by poor economic conditions generally, which could increase
vacancy levels and rental payment defaults and by increased operating expenses,
any or all of which could threaten the financing viability of one or more of the
Local Partnerships.

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government 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 the Department of Housing and Urban Development to
make the rental assistance 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 as, for example, for such items as fuel,
utilities and labor.

-12-




Item 8. Financial Statements and Supplementary Data.

Sequential
Page
----

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 14

Consolidated Balance Sheets at March 31,
1996 and 1995 33

Consolidated Statements of Operations for the years
ended March 31, 1996 and 1995 34

Consolidated Statements of Changes in Partners' Capital
for the years ended March 31, 1996 and 1995 and the
period December 23, 1993 (Inception) through March 31,
1994 35

Consolidated Statements of Cash Flows for the years
ended March 31, 1996 and 1995. 36

Notes to Consolidated Financial Statements 38



-13-



[Letterhead of Trien, Rosenberg, Felix, Rosenberg, Barr & Weinberg, LLP]


INDEPENDENT AUDITORS' REPORT

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

We have audited the consolidated balance sheets of Independence Tax Credit Plus
L.P. III and Subsidiaries (A Delaware Limited Partnership) as of March 31, 1996
and 1995 and the related consolidated statements of operations, changes in
partners capital and cash flows for the years ended March 31, 1996 and 1995 (the
1995 and 1994 Fiscal Years). 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 financial
statements for fifteen (1995 Fiscal Year) and three (1994 Fiscal Year)
subsidiary partnerships whose losses aggregated $573,825 and $201,377 for the
years ended March 31, 1996 and 1995, respectively and whose assets constituted
70% and 25% of the Partnership's assets at March 31, 1996 and 1995, respectively
presented in the accompanying consolidated financial statements. The financial
statements of these 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 audit in accordance with generally accepted auditing standards.
Those standards require we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements 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 position
of Independence Tax Credit Plus L.P. III at March 31, 1996 and 1995, and its
results of operations, changes in partners' capital and cash flows for the years
ended March 31, 1996 and 1995 in conformity with generally accepted accounting
principles.



/s/ Trien, Rosenberg, Felix,
Rosenberg, Barr & Weinstein, LLP


TRIEN, ROSENBERG, FELIX,
ROSENBERG, BARR & WEINSTEIN, LLP


New York, New York
June 24, 1996



[HOLTHOUSE CARLIN & VAN TRIGT LLP LETTERHEAD]

INDEPENDENT AUDITORS' REPORT


To the Partners of the
Edward Hotel Limited Partnership:

We have audited the accompanying balance sheets of the Edward Hotel Limited
Partnership as of December 31, l995 and 1994, and the related statements of
operations, changes in partners' capital (deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Edward Hotel Limited
Partnership as of December 31, l995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.


/s/ HOLTHOUSE CARLIN & VAN TRIGT LLP

February 5, 1996



[REZNICK FEDDER & SILVERMAN LETTERHEAD]

INDEPENDENT AUDITORS' REPORT

To the Partners
Pacific-East L.P.

We have audited the accompanying balance sheet of Pacific-East L.P. as of
December 31, 1995, and the related statements of operations, changes in
partners' deficit and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific-East L.P. as of
December 31, 1995, and the results of its operations, the changes in partners'
deficit and cash flows for the year then ended, in conformity with generally
accepted accounting principles.

/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
January 23, 1996



[REZNICK FEDDER & SILVERMAN LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners
Pacific-East L.P.


We have audited the accompanying balance sheet of Pacific-East L.P. as of
December 31, 1994, and the related statements of operations, changes in
partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacific-East L.P. as of
December 31, 1994, and the results of its operations, the changes in partners'
capital and cash flows for the year then ended, in conformity with generally
accepted accounting principles.


/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
February 2, 1995



[BDO SEIDMAN, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


Overtown Development Group, Ltd.
(A Limited Partnership)
Miami Beach, Florida

We have audited the accompanying balance sheet of Overtown Development Group,
Ltd. (A Limited Partnership) as of December 31, 1995, and the related statements
of profit and loss, changes in partners' capital accounts, and cash flows for
the year then ended. These financial statements are the responsibility of the
management of the partnership. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Overtown Development Group,
Ltd. at December 31, 1995, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.

/s/ BDO SEIDMAN, LLP
Certified Public Accountants

Miami, Florida
January 25, 1996, except as to Note 3
which is as of March 28, 1996



[BDO SEIDMAN LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


Overtown Development Group, Ltd.
(A Limited Partnership)
Miami Beach, Florida

We have audited the accompanying balance sheet of Overtown Development Group,
Ltd. (A Limited Partnership) as of December 31, 1994, and the related statements
of profit and loss, changes in partners' capital accounts, and cash flows for
the period from September 1, 1994 (commencement of operations) to December 31,
1994. These financial statements are the responsibility of the management of the
partnership. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Overtown Development Group,
Ltd. at December 31, 1994, and the results of its operations and its cash flows
for the period from September 1, 1994 (commencement of operations) to December
31, 1994, in conformity with generally accepted accounting principles.

/s/ BDO SEIDMAN
Certified Public Accountants

Miami, Florida
February 28, 1995



[LAWLOR, O'BRIEN & LESKOWICZ LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners
Sumpter Commons Associates, L.P.

We have audited the accompanying balance sheet of Sumpter Commons Associates,
L.P. as of December 31, 1995, and the related statements of operations for the
period (from commencement of operations) August 1, 1995 through December 31,
1995, changes in partners' capital and cash flows for the year ended December
31, 1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sumpter Commons Associates,
L.P. as of December 31, 1995, and the results of its operations for the period
(from commencement of operations) August 1, 1995 through December 31, 1995,
changes in partners' equity and its cash flows for the year ended December 31,
1995 in conformity with generally accepted accounting principles.


/s/ LAWLOR, O'BRIEN & LESKOWICZ

West Paterson, New
February 27, 1996




[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]


INDEPENDENT AUDITORS' REPORT

To The Partners
Park Housing Limited Partnership

We have audited the accompanying balance sheet of Park Housing Limited
Partnership as of December 31, 1995, and the related statements of income and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Park Housing Limited
Partnership as of December 31, 1995 and the results of its operations and cash
flows for the year then ended, in accordance with generally accepted accounting
principles.


/s/ KOSTIN, RUFFKESS & COMPANY, LLC

West Hartford, Connecticut
January 19, 1996



[J. H. WILLIAMS & CO., LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners of
Livingston Manor Urban Renewal Associates, L.P.
Marlton, New Jersey

We have audited the accompanying balance sheet of Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 1995, and the related statements of income,
changes in partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's general
partner. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. at December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.


/s/ J. H. WILLIAMS & CO., LLP

Kingston, Pennsylvania
February 29, 1996



[J. H. WILLIAMS & CO., LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners of
Jefferis Square Housing Partnership, L.P.
Philadelphia, Pennsylvania

We have audited the accompanying balance sheet of Jefferis Square Housing
Partnership, L.P. as of December 31, 1995, and the related statements of changes
in partners' equity and cash flows for the year then ended as more fully
described in Note 1. These financial statements are the responsibility of the
Partnership's general partner. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jefferis Square Housing
Partnership, L.P. at December 31, 1995, and the changes in its partners' equity
and its cash flows for the year then ended as more fully described in Note 1 in
conformity with generally accepted accounting principles.


/s/ J. H. WILLIAMS & CO., LLP

Kingston, Pennsylvania
March 13, 1996



[LESHKOWITZ & COMPANY, LLP LETTERHEAD]

Independent Auditor's Report

To the Partners of
2301 First Avenue Limited Partnership:

We have audited the accompanying balance sheet of 2301 First Avenue
Limited Partnership as of December 31, 1995, and the related statements of
operations, changes in partners' capital, and cash flows for the period from
April 1, 1995 (date of investor entry) through December 31, 1995. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of 2301 First Avenue Limited
Partnership at December 31, 1995, and the results of its operations, changes
in partners' capital and its cash flows for the period from April 1, 1995
(date of investor entry) through December 31, 1995, in conformity with
generally accepted accounting principles.

/s/ LESHKOWITZ & COMPANY

March 7, 1996


[TOSKI, SCHAEFER & CO., P.C. LETTERHEAD]


INDEPENDENT AUDITOR'S REPORT


The Partners
Lewis Street Limited Partnership:

We have audited the accompanying balance sheet of Lewis Street Limited
Partnership as of December 31, 1995 and the related statement of partners'
equity for the year then ended. These financial statements are the
responsibility of the general partners. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lewis Street Limited
Partnership as of December 31, 1995, in conformity with generally
accepted accounting principles.


/s/ TOSKI, SCHAEFER & CO., P.C.

Williamsville, New York
February 26, 1996



[REZNICK FEDDER & SILVERMAN LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners
Savannah Park Housing
Limited Partnership

We have audited the accompanying balance sheet of Savannah Park Housing
Limited Partnership as of December 31, 1995, and the related statements of
operations, changes in partners' capital and cash flows for the period from
October 18, 1995 (date of investor entry) through December 31, 1995. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Savannah Park Housing
Limited Partnership as of December 31, 1995, and the results of its operations,
the changes in partners' capital and cash flows for the period from October 18,
1995 (date of investor entry) through December 31, 1995, in conformity with
generally accepted accounting principles.


/s/ REZNICK FEDDER & SILVERMAN

Bethesda, Maryland
January 31, 1996




[BDO SEIDMAN, LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


Brannon Group, L.C.
(A Limited Liability Company)
Coral Gables, Florida

We have audited the accompanying balance sheet of Brannon Group, L.C. (A Limited
Liability Company) as of December 31, 1995, and the related statements of profit
and loss, changes in members' capital accounts, and cash flows for the period
from November 1, 1995 (commencement of operations) to December 31, 1995. These
financial statements are the responsibility of the management of the company.
Our responsibility is to express an opinion on these financial statements based
on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brannon Group, L.C. at December
31, 1995, and the results of its operations and its cash flows for the period
from November 1, 1995 (commencement of operations) to December 31, 1995, in
conformity with generally accepted accounting principles.


/s/ BDO SEIDMAN, LLP
Certified Public Accountants

Miami, Florida
April 10, 1996



[J. H. WILLIAMS & CO., LLP LETTERHEAD]


To the Partners of
Mansion Court Phase II Venture
Philadelphia, Pennsylvania

We have audited the accompanying balance sheet of Mansion Court Phase II Venture
as of December 31, 1995, and the related statements of changes in partners'
equity, and cash flows for the three months then ended as more fully explained
in Note 1 to the financial statements. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mansion Court Phase II Venture
at December 31, 1995, and changes in partners' equity and its cash flows for the
three months then ended as more fully explained in Note 1 to the financial
statements in conformity with generally accepted accounting principles.


J. H. WILLIAMS & CO., LLP

Kingston, Pennsylvania
March 6, 1996



[RUBIN, BROWN, GORNSTEIN & CO. LLP LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


Partners
Primm Place Partners, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Primm Place Partners, L.P., a
Missouri limited partnership, as of December 31, 1995 and the related statements
of partners' equity and cash flows for the month then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Primm Place Partners, L.P., as
of December 31, 1995 and its cash flows for the month then ended in conformity
with generally accepted accounting principles;


/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

February 14, 1995

[RAINES AND FISCHER LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners of BK-9-A Partners, L.P.:

We have audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 1995 and the related statements of
operations, changes in partners' capital, and cash flows for the nine months
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 1995, and the results of its
operations, changes in its partners' capital and its cash flows for the nine
months then ended in conformity with generally accepted accounting principles.


/s/ RAINES AND FISCHER

New York, New York
February 26, 1996



[RAINES AND FISCHER LETTERHEAD]


INDEPENDENT AUDITORS' REPORT


To the Partners of BK-1OK Partners, L.P.:

We have audited the accompanying balance sheet of BK-1OK Partners, L.P. (A New
York Limited Partnership) as of December 31, 1995 and the related statements of
operations, changes in partners' capital, and cash flows for the nine months
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 1995, and the results of its
operations, changes in its partners' capital and its cash flows for the nine
months then ended in conformity with generally accepted accounting principles.


/s/ RAINES AND FISCHER

New York, New York
February 26, 1996



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

March 31
---------------------------
1996 1995
------------ ------------
ASSETS

Property and equipment - at cost,
less accumulated depreciation (Notes 2 and 4) $ 35,436,367 $ 6,808,654
Construction in progress 5,532,919 819,291
Cash and cash equivalents (Notes 2 and 10) 9,333,536 4,678,955
Investments available for sale (Note 2) 11,502,412 20,000,000
Cash held in escrow (Note 5) 9,406,563 784,705
Deferred costs, less accumulated
amortization (Notes 2 and 6) 2,302,208 1,801,454
Other assets 934,439 112,670
------------ ------------

$ 74,448,444 $ 35,005,729
============ ============

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Mortgage notes payable (Note 7) $ 18,790,300 $ 2,806,313
Construction loan payable (Note 7) 8,261,957 2,214,890
Accounts payable and other liabilities 3,070,015 339,781
Due to local general partners and
affiliates (Note 8) 4,496,145 1,216,833
Due to general partner and affiliates (Note 8) 29,033 284,197
------------ ------------

34,647,450 6,862,014
------------ ------------
Minority interest 1,346,916 95,670
------------ ------------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' capital:
Limited partners (100,000 BACs authorized;
and 43,440 and 31,430 issued and outstanding in
1996 and 1995, respectively) (Notes 1 and 2) 38,455,664 28,046,802
General Partner (1,586) 1,243
------------ ------------

Total partners' capital 38,454,078 28,048,045
------------ ------------

Total liabilities and partners' capital $ 74,448,444 $ 35,005,729
============ ============




See accompanying notes to consolidated financial statements.

-15-


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

Year Ended March 31
--------------------------
1996 1995
----------- -----------

Revenues
Rental income $ 1,315,538 $ 113,536
Other income (principally interest
on capital contributions) 974,392 375,839
----------- -----------
2,289,930 489,375
----------- -----------

Expenses
General and administrative 676,153 117,249
General and administrative-related
parties (Note 8) 417,432 102,753
Repairs and maintenance 96,978 21,770
Operating and other 196,438 36,266
Real estate taxes 26,095 23,803
Insurance 80,571 15,552
Financial, principally interest 423,277 102,454
Depreciation and amortization 656,268 45,576
----------- -----------
2,573,212 465,423
----------- -----------

(Loss) income before minority interest (283,282) 23,952
Minority interest in loss of subsidiary partnerships 415 383
----------- -----------
Net (loss) income $ (282,867) $ 24,335
=========== ===========
Net (loss) income per limited partnership interest $ (280,038) $ 24,092
=========== ===========
Weighted average number of BACs outstanding 42,407 13,470
=========== ===========
Net (loss) income per weighted average BAC $ (6.60) $ 1.79
=========== ===========




See accompanying notes to consolidated financial statements.

-16-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD DECEMBER 23, 1993 (INCEPTION) THROUGH
MARCH 31, 1994 AND THE YEARS ENDED MARCH 31, 1995 AND 1996


Limited General
Total Partners Partner
------------ ------------ ------------

Capital contributions $ 1,010 $ 10 $ 1,000

Offering costs (125,423) (125,423) 0
------------ ------------ ------------

Partners' capital -
March 31, 1994 (124,413) (125,413) 1,000
Capital contributions 31,430,000 31,430,000 0

Offering costs (3,281,877) (3,281,877) 0

Net income 24,335 24,092 243
------------ ------------ ------------

Partners' capital -
March 31, 1995 28,048,045 28,046,802 1,243
------------ ------------ ------------

Capital contributions 12,010,000 12,010,000 0

Offering costs (1,321,100) (1,321,100) 0

Net loss (282,867) (280,038) (2,829)
------------ ------------ ------------

Partners' capital -
March 31, 1996 $ 38,454,078 $ 38,455,664 $ (1,586)
============ ============ ============




See accompanying notes to consolidated financial statements.


-17-


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



Years Ended March 31
----------------------------
1996 1995
------------ ------------

Cash flows from operating activities:
Net (loss) income $ (282,867) $ 24,335
------------ ------------
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 656,268 45,576
Minority interest in loss of subsidiary partnerships 415 383
Increase in assets
Cash held in escrow (752,883) (5,278)
Other assets (821,769) (112,670)
Increase (decrease) in liabilities
Accounts payable and other liabilities 2,531,185 318,332
Increase in due to local general partners and affiliates 30,406 34,854
Decrease in due to local general partners and affiliates (79,307) 0
Due to general partners and affiliates 31,950 4,278
------------ ------------
Total adjustments 1,596,265 285,475
------------ ------------
Net cash provided by operating activities 1,313,398 309,810
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (11,552,820) (5,833,185)
Decrease (increase) in investments available for sale 8,497,588 (20,000,000)
Construction in progress (17,921,132) (819,291)
Increase in cash held in escrow (3,733,375) (779,427)
Deferred acquisition costs 0 (1,885,800)
Increase in deferred costs (916,737) (70,865)
Increase in accounts payable and other liabilities 0 21,353
Decrease in due to local general partners and affiliates (335,905) (21,353)
------------ ------------

Net cash used in investing activities (25,962,381) (29,388,568)
------------ ------------

Cash flows from financing activities:
Capital contributions received 12,010,000 31,430,000
Proceeds from mortgage notes 11,085,550 3,135,083
Principal payments of mortgage notes (802,053) (328,770)
Proceeds from construction loans 8,261,957 2,214,890
Decrease (increase) in due to general partner and affiliates (287,114) 154,592
Increase in due to local general partners and affiliates 960,603 462,000
Decrease in due to local general partners and affiliates (306,880) 0
Increase in offering costs (1,321,100) (3,281,877)
Increase in deferred financing costs (898,230) (124,502)
Increase in capitalization of consolidated subsidiaries
attributable to minority interest 600,831 95,287
------------ ------------

Net cash provided by financing activities 29,303,564 33,756,703
============ ============


See accompanying notes to consolidated financial statements.

-18-


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



Years Ended March 31
------------------------------
1996 1995
------------ ------------

Net increase in cash and cash equivalents $ 4,654,581 $ 4,677,945
Cash and cash equivalents at beginning of year 4,678,955 1,010
------------ ------------
Cash and cash equivalents at end of year $ 9,333,536 $ 4,678,955
============ ============

Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 533,435 $ 102,830

Supplemental disclosure of noncash investing and financing activities:
Capitalization of acquisition costs $ 1,225,842 $ 275,710

Development fees and other costs due to local general
partners and affiliates capitalized to property and equipment $ 0 $ 741,332

Construction in progress reclassified to property and equipment $ 13,406,553 $ 0

Increase in property and equipment through increase
in due to local general partners and affiliates $ 3,010,395 $ 0

Increase in construction in progress through
accounts payable and other liabilities $ 199,049 $ 0

Mortage notes payable converted from
construction notes payable $ 2,214,890 $ 0

Increase in escrow deposits funded through
proceeds from mortgage notes payable $ 4,135,600 $ 0

Reduction in mortgage notes payable assumed
by a minority interest partner $ 650,000 $ 0






INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 1 - General

Independence Tax Credit Plus L.P. III (a Delaware Limited Partnership) (the
"Partnership") was organized on December 23, 1993, and commenced the public
offering on June 7, 1994. The general partner of the Partnership is Related
Independence Associates III L.P., a Delaware limited partnership (the "General
Partner").

The Partnership's business is to invest in other partnerships ("Local
Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged
apartment complexes that are eligible for the low-income housing tax credit
("Tax Credit") enacted in the Tax Reform Act of 1986, some of which complexes
may also be eligible for the historic rehabilitation tax credit.

The Partnership has acquired interests in fifteen Local Partnerships as of
March 31, 1996.

The Partnership was authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment 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 a
limited partnership interest. As of March 31, 1996 the Partnership has raised a
total of $43,440,000 representing 43,440 BACs.

The terms of the Amended and Restated Agreement of the Limited Partnership
provide, among other things, that net profits or losses and distributions of
cash flow are, in general, allocated 99% to the limited partners and BACs
holders and 1% to the general partner.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Accounting

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 books and
records of the Partnership are maintained on the accrual basis of accounting, in
accordance with generally accepted accounting principles ("GAAP").

b) Basis of Consolidation

The consolidated financial statements include the accounts of the
Partnership and fifteen and three subsidiary partnerships for the years ended
March 31, 1996 and 1995 (the 1995 and 1994 Fiscal Years), respectively, in which
the Partnership is a limited partner. All intercompany accounts and transactions
with the subsidiary partnerships have been eliminated in consolidation.

Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions and cash
distributions to the minority interest partners.

Losses attributable to minority interest which exceed the minority
interests' investment in a subsidiary have been charged to the Partnership. Such
losses aggregated approximately $5,200 and $1,700 for the years ended March 31,
1996 and 1995, respectively. The Partnership's investment in each subsidiary is
equal to the respective subsidiary's partners' equity less minority interest
capital, if any. In consolidation, all subsidiary partnership losses are
included in the Partnership's capital account except for losses allocated to
minority interest capital.

-20-

INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 2 - Summary of Significant Accounting Policies (continued)

c) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks, and
investments in short-term highly liquid investments purchased with original
maturities of three months or less.

d) Investments Available For Sale

At inception, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
("SFAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities. At March 31, 1996, the Company has classified its securities as
available-for-sale.

Available-for-sale securities are carried at fair value with net unrealized
gain (loss) reported as a separate component of shareholders' equity until
realized. A decline in the market value of any available-for-sale security below
cost that is deemed other than temporary is charged to earnings resulting in the
establishment of a new cost basis for the security.

At March 31, 1996, the Partnership's investments classified as investments
available for sale are carried at cost which approximates fair market value,
have maturities of less than one year and consists of municipal bonds and
municipal bond instruments. As further clarification, the maturities of the
investments are approximately one month and therefore there are no material
unrealized gains or losses.

e) Property and Equipment

Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, 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 maintenance
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 provision for loss on impairment of
assets is recorded when estimated amounts recoverable through future operations
and sale of the property on an undiscounted basis are below depreciated cost.
Property investments themselves are reduced to estimated fair value (generally
using discounted cash flows) when the property is considered to be impaired and
the depreciated cost exceeds estimated fair value. Through March 31, 1996, the
Partnership has not recorded any provisions for loss on impairment of assets or
reduction to estimated fair value.

f) 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 (Note 9).

-21-

INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 2 - Summary of Significant Accounting Policies (continued)

g) Organization and Offering Costs

Costs incurred to organize the Partnership, including but not limited to
legal, accounting and registration fees, are considered deferred organization
expenses. These costs are capitalized and are being amortized over a 60-month
period. Costs incurred in connection with obtaining permanent mortgage financing
are amortized over the lives of the related mortgage notes. Costs incurred to
sell BACs including brokerage and the nonaccountable expense allowance are
considered selling and offering expenses. These costs are charged directly to
limited partners' capital.

h) Deferred Acquisition Costs

Acquisition costs and fees incurred in connection with the proposed
purchase of interests in certain subsidiary partnerships have been deferred. In
the event these partnerships are acquired, these amounts will be capitalized as
property costs. If the subsidiary partnerships are not acquired, these amounts
will be charged to operations.

i) Loss Contingencies

The Partnership records loss contingencies as a charge to income when
information 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
financial statements and the amount of loss can be reasonably estimated.

j) 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.

k) Accounting Pronouncements Not Yet Implemented

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.

Effective April 1, 1996, the Partnership intends to adopt SFAS No. 121,
consistent with the required adoption period. The Partnership does not expect
the implementation to have a material impact on its financial condition or its
future results of operations.

-22-

INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

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 for which it is practicable to estimate
that value:

Cash and Cash Equivalents, Certificates of Deposit, Mortgage Escrow
Deposits and Cash-Restricted for Tenants' Security Deposits

The carrying amount approximates fair value.

Mortgage Notes Payable

The fair value of mortgage notes payable and construction loans 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 and
construction loan payable are as follows:

March 31, 1996
---------------------------
Carrying
Mortgage Notes Payable for which it is: Amount Fair Value
----------- -----------
Practicable to estimate fair value $ 6,831,785 $ 6,814,870
Not Practicable $11,958,515 (a)

Construction Loans Payable for which it is:

Practicable to estimate fair value $ 1,449,527 $ 1,359,215
Not Practicable $ 6,812,430 (a)

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

The carrying amount of other assets and liabilities reported on the
statement of financial position that require such disclosure approximates fair
value.


-23-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 4 - Property and Equipment

The components of property and equipment and their estimated useful lives
are as follows:

March 31 Estimated
----------------------------- Useful Lives
1996 1995 (Years)
----------- ----------- ------------

Land $ 1,184,481 $ 338,087 -
Building and improvements 34,509,701 6,292,796 20-40
Furniture and fixtures 351,655 219,344 6-12
----------- -----------

36,045,837 6,850,227
Less: Accumulated depreciation 609,470 41,573
----------- -----------
$35,436,367 $ 6,808,654
=========== ===========

Included in property and equipment for the year ended March 31, 1996 and
1995 was $1,501,552 and $275,710, respectively, of acquisition fees paid to the
General Partner and $845,223 and $177,070 of acquisition expenses as of March
31, 1996 and 1995, respectively. In addition, as of March 31, 1996 and 1995,
building and improvements and construction in progress includes $418,579 and
$127,855, respectively, of capitalized interest.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $5,148,029 and $833,738 to the
local general partners and affiliates as of March 31, 1996 and 1995,
respectively. Such fees have been included in the cost of property and
equipment.

Depreciation expense for the year ended March 31, 1996 and 1995 amounted to
$567,897 and $41,573, respectively.

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:
March 31
--------------------------
1996 1995
---------- ----------
Purchase price payments* $2,745,731 $ 637,500
Construction 5,770,166 131,502
Real estate taxes, insurance and other 758,161 5,278
Reserve for replacements 132,505 10,425
---------- ----------

$9,406,563 $ 784,705
========== ==========

*Represents amounts to be paid to seller upon completion of properties
under construction and upon meeting specified rental achievement criteria.


-24-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 6 - Deferred Costs

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


March 31, March 31,
1996 1995 Period
---------- ---------- -----------
Financing costs $1,022,732 $ 124,502 *
Deferred acquisition costs 1,234,452 1,610,090 **
Organization costs 137,398 70,865 60 months
---------- ----------
2,394,582 1,805,457
Less: Accumulated amortization 92,374 4,003
---------- ----------

$2,302,208 $1,801,454
========== ==========

*Over the life of the related mortgages.

**Will be capitalized as part of the cost of future acquisitions.

Amortization expense for the year ended March 31, 1996 and 1995 amounted to
$88,371 and $4,003, respectively.


NOTE 7 - Mortgage and Construction Notes Payable

The mortgage and construction notes, which are collateralized by land and
buildings, are payable in aggregate monthly installments of approximately
$33,000 including principal and interest at rates varying from 0% to 10.5% per
annum, through the year 2033. Each subsidiary partnership's mortgage note
payable is collateralized by the land and buildings of the respective subsidiary
partnership, the assignment of certain subsidiary partnership's rents and
leases, and is without further recourse.

Annual principal payment requirements, as of March 31, 1996 for each of the
next five fiscal years and thereafter, are as follows:

Fiscal Year Ending Amount
------------------ ------

1995 $ 735,248
1996 1,487,659
1997 183,631
1998 195,146
1999 202,260
Thereafter 15,986,356
-------------
$ 18,790,300
=============

The mortgage agreements require monthly deposits to replacement reserves of
approximately $6,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (Note 5).


-25-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 7 - Mortgage and Construction Notes Payable(continued)

As of December 31, 1995, six subsidiary partnerships have construction loan
commitments totaling approximately $11,683,000. As of December 31, 1995, such
loans have an outstanding balance of approximately $8,262,000.

In addition, the Department of Housing and Urban Development has committed
to provide an Upfront Grant totaling $4,160,000 towards the construction and
development of one Local Partnership, No grant funds were utilized by the Local
Partnership as of December 31, 1995.

NOTE 8 - Related Party Transactions

An affiliate of the General Partner has a .01% interest as a special
limited partner, in each of the Local Partnerships. An affiliate of the General
Partner also has a minority interest in certain local limited partnerships.

The General Partner and its affiliates perform services for the
Partnership. The costs incurred for the year ended March 31, 1996 are as
follows:

A) Acquisition Fees and Expenses

The General Partner is entitled to an acquisition fee equal to 6.0% of the
gross proceeds of the offering paid upon investor closing, for its services in
connection with the selection and evaluation of Local Partnerships. Such fees
are capitalized as a cost of the investments upon closing of subsidiary
partnerships acquisitions. As of March 31, 1996 and 1995, $2,606,400 and
$1,885,800, respectively, of such costs have been incurred.

Pursuant to the Partnership Agreement and the Local Partnership Agreements,
the General Partner and affiliate receives their pro-rata share of profits,
losses and tax credits.

B) Public Offering Costs

Costs incurred to organize the Partnership and certain costs of offering
the BACs including but not limited to legal, accounting, and registration fees
are considered organization and offering expenses. Related Equities Corporation,
the Dealer Manager is entitled to a non-accountable organization and offering
expense allowance equal to 2.5% of Gross Proceeds, in consideration of which it
is obligated to pay all such expenses up to the amount of such allowance. The
Partnership is obligated to pay all such expenses that are in excess of 2.5% of
Gross Proceeds and up to 3.5% of Gross Proceeds. The Dealer Manager is
responsible for all such expenses in excess of 3.5% of Gross Proceeds. The
selling commissions and a non-accountable marketing expense allowance are
considered offering expenses. These costs are charged directly to limited
partners' capital. As of March 31, 1996 and 1995, offering costs totaled
$1,470,400 and $1,050,050, respectively, and along with selling commissions (see
Note 8(c)) were charged directly to limited partner's capital.

C) Selling Commissions and Fees

The Partnership will pay up to 7.5% of the aggregate purchase price of BACs
sold, without regard to quantity discounts, to Related Equities Corporation, an
affiliate of the General Partner. Through March 31, 1996 and 1995, $3,258,000
and $2,357,250, respectively, was paid or incurred to Related Equities
Corporation and then fully reallocated to other broker/dealers.



-26-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 8 - Related Party Transactions (continued)

D) Guarantees

The Partnership has negotiated development deficit guarantees with the
Local Partnerships in which it has invested. The Local General Partners have
agreed to fund development deficit through the breakeven dates of each of the
Local Partnerships. As of March 31, 1996, the gross amount of Development
Deficit Guarantees of twelve Local Partnerships aggregated approximately
$2,782,000, none of which have expired as of March 31, 1996. The gross amount of
Development Deficit Guarantee of the remaining three properties is not presently
determinable. Such guarantees are defined in their respective agreements. As of
March 31, 1996, $0 has been funded under the Development Deficit Guaranty
Agreements. Amounts received under development deficit guarantees from the
developers of the properties purchased by the Partnership are treated as a
reduction of the asset.

The Partnership has negotiated Operating Deficit Guaranty Agreements with
all Local Partnerships by which the general partners of the Local Partnerships
have agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guaranty Agreements vary for each Local Partnership,
with maximum dollar amounts to be funded for a specified period of time,
generally three years, commencing on the break-even date. The gross amount of
the Operating Deficit Guarantees aggregates approximately $2,991,000, none of
which have expired as of March 31, 1996. All current operating deficit
guarantees expire within the next three years. As of March 31, 1996, $62,500 has
been funded under the Operating Deficit Guaranty agreements. Amounts funded
under such agreements are treated as non-interest bearing loans, which will be
paid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds.

In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each Local Partnership, with maximum dollar amounts
to be funded for a specified period of time. The gross amount of these Rent-Up
Guarantees for the Local Partnerships aggregate approximately $1,326,000 of
which approximately $542,000 and $0 have expired as of March 31, 1996 and 1995,
respectively. There has not been any fundings under these guaranty agreements.
Amounts received under rental guarantees from the sellers of the properties
purchased by the Partnership are treated as a reduction of the asset.

The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements and
Development Deficit Guaranty 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.

E) Other Related Party Expenses

The costs incurred to related parties for the year ended March 31, 1996
were as follows:

Year Ended March 31
-----------------------------
1996 1995
----------- ------------
Partnership management fees (a) $ 245,805 $ 43,764
Expense reimbursement (b) 79,409 50,989
Property management fees (c) 75,718 8,000
Local administrative fees (d) 16,500 0
----------- ------------

$ 417,432 $ 102,753
=========== ============


-27-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 8 - Related Party Transactions (continued)

(a) The General Partner is entitled to receive a partnership management
fee, after payment of all Partnership expenses, which together with the annual
local administrative fees will not exceed a maximum of 0.5% per annum of
invested assets (as defined in the Partnership Agreement), for administering the
affairs of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership's investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable only to the extent of available funds after the Partnership has made
distributions to the limited partners of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow).

(b) 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 reimbursement from
the Partnership is limited by the provisions of the Partnership Agreement.
Another affiliate of the General Partners performs asset monitoring for the
Partnership. These services include site visits and evaluations of the
subsidiary partnerships' performance.

(c) Property management fees incurred by Local Partnerships amounted to
$94,682 and $10,678 for the years ended March 31, 1996 and 1995, respectively.
Of these fees $75,718 and $8,000 were incurred to affiliates of the subsidiary
partnerships' General Partner.

(d) Independence SLP III L.P., a limited partner of the subsidiary
partnerships is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.

F) Due to Local General Partners and Affiliates

Due to local general partners and affiliates consists of the following:

December 31,
------------------------------
1995 1994
------------ ------------

Operating advances $ 32,445 $ 174,354
Development fee payable 3,089,099 404,074
Other capitalized costs 155,120 322,500
Construction costs payable 281,061 315,905
General Partner distributions 110,000 0
General Partner loan payable (i) 97,571 0
Construction advances 650,901 0
Management and other operating fees 79,948 0
------------ ------------

$ 4,496,145 $ 1,216,833
============ ============


-28-

INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 8 - Related Party Transactions (continued)

(i) General Partner loan payable consist of the following:

Sumpter Commons Associates, L.P. - $ 97,571
This loan bears interest at 8% per annum and is ============
expected to be paid in 1996.


Interest incurred on General Partner loan payable amounted to approximately
$2,600 for the year ended March 31, 1996.

NOTE 9 - Income Taxes

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



For the Year Ended For the Year Ended
December 31, 1995 December 31, 1994
------------- -----------

Financial statement
net (loss) income $ (282,867) $ 24,335

Differences between depreciation and amortization
expense records for financial reporting
purposes and the accelerated costs recovery
system utilized for income tax purposes (37,001) 497

Differences resulting from parent
company having a different fiscal
year for income tax and financial
reporting purposes 78,935 (124,879)

Tax exempt interest income (937,526) (171,485)

Other, including accruals for financial reporting not
deductible for tax purposes until paid 94,112 5,116
------------- -----------

Net loss as shown on the income tax return
for the calendar year ended $ (1,084,347) $ (266,416)
============= ===========




-29-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996


NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships - Litigation

2301 First Avenue Limited Partnership

2301 First Avenue Limited Partnership ("2301 First Avenue") is a defendant
in a lawsuit alleging personal injury. The amount of the claim may exceed 2301
First Avenue's insurance coverage limits. The subsidiary partnership intends to
compel the general contractor's insurance company to assume defense of the case
under the contractor's insurance policy, which has larger limits. However, the
building's insurance carrier does not believe that any claim paid will exceed
the insurance coverage. Since it is premature to make an evaluation of the
amount of 2301 First Avenue's potential loss, it is management's opinion that no
accrual for potential losses is currently warranted in the financial statements.
The maximum loss which the Partnership would be liable for is its net investment
in 2301 First Avenue amounting to approximately $584,000.

b) Leases

One of the subsidiary partnerships is leasing the land on which the Project
is located, for a term of 50 years and monthly rent payments of $1,449.

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
The accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation up to $100,000. Uninsured cash and cash equivalents approximated
$8,151,000 at March 31, 1996.

d) 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 40% of the properties are located in any single state. The
Partnership intends to purchase additional properties which may further
diversify its portfolio. There are also substantial risks associated with owning
properties receiving government assistance, 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 owners 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 assistance contracts expire.

The Partnership and BACs holders will begin to recognize Housing Tax
Credits with respect to a Property when the Credit Period for such Property
commences. Because of the time required for the acquisition, completion and
rent-up of Properties, it is expected that the amount of Tax Credits per BAC
will gradually increase over the first three years of the Partnership. Housing
Tax Credits not recognized in the first three years will be recognized in the
11th through 13th years. The Partnership generated $920,294 and $105,155 Housing
Tax Credits and $7,256,680 and $0 Historic Tax Credits during the 1995 and 1994
tax year, respectively.




-30-


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None

PART III

Item 10. Directors and Executive Officers of the Registrant.

The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by Related Independence Associates III L.P.,
the General Partner. Certain information concerning the directors and executive
officers of Related Independence Associates III Inc. ("RIAI III"), the sole
general partner of the General Partner, is set forth below.

Name Position
---- --------

Stephen M. Ross Director

J. Michael Fried President and Director

Alan P. Hirmes Senior Vice President

Stuart J. Boesky Vice President

Ryne A. Nishimi Vice President

Marc D. Schnitzer Vice President

Lawrence J. Lipton Assistant Vice President and Treasurer

Robert Bordonaro Assistant Vice President

Lynn A. McMahon Secretary

Susan J. McGuire Assistant Secretary

STEPHEN M. ROSS, 56, is a Director of RIAI III. Mr. Ross is also 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 degree in taxation from New York University School of
Law. He joined the accounting 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 banking 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 developments.

J. MICHAEL FRIED, 52, is President of RIAI III. Mr. Fried 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 responsible for all of Capital's
syndication, finance, acquisition and investor reporting activities. 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.


-31-


ALAN P. HIRMES, 41, is a Senior Vice President of RIAI III. Mr. Hirmes has
been a Certified Public Accountant in New York since 1978. Prior to joining
Related in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified
Public Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes
graduated from Hofstra University with a Bachelor of Arts degree.

STUART J. BOESKY,40, is a Vice President of RIAI III. Mr. Boesky 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 and from 1978 to 1980 was a consultant specializing in real estate at
the accounting firm of Laventhol & Horwath. Mr. Boesky 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 received a Master of Laws degree in
Taxation from Boston University School of Law.

RYNE A. NISHIMI, 37, is a Vice President of RIAI III. Mr. Nishimi is a
Senior Vice President of and serves as the National Sales Manager for Related
Capital Corporation and has held other positions in marketing since joining
Capital in 1983. From 1981 to 1983, Mr. Nishimi worked for Fox & Carskadon
Financial Corporation as a Marketing Manager in their real estate syndication
operation. Mr. Nishimi graduated from Santa Clara University School of Business
Administration with a Bachelor of Science degree.

MARC D. SCHNITZER, 35, is a Vice President of RIAI III. He is responsible
both for financial restructurings of real estate properties and directing
Related's acquisitions of properties generating Housing Tax Credits. Mr.
Schnitzer received a Masters of Business Administration from The Wharton School
of the University of Pennsylvania in December 1987 before joining Related in
January 1988. From 1983 to January 1986, he was a financial analyst for the
First Boston Corporation in New York. Mr. Schnitzer graduated summa cum laude
with a Bachelor of Science in Business Administration from the School of
Management at Boston University in May 1983.

LAWRENCE J. LIPTON, 40, is Treasurer and an Assistant Vice President of
RIAI III. Mr. Lipton is also a controller of The Related Companies, L.P. Mr.
Lipton has been a Certified Public Accountant in New York since 1989. Prior to
joining Related, Mr. Lipton was employed by Deloitte & Touche from 1987-1991.
Mr. Lipton graduated from Rutgers College with a Bachelor of Arts degree and
from Baruch College with a Masters of Business Administration degree.

ROBERT BORDONARO, 42, is an Assistant Vice President of RIAI III. Mr.
Bordonaro is also a controller of The Related Companies, L.P. Mr. Bordonaro has
been a Certified Public Accountant in New York since 1977. Prior to joining
Related, Mr. Bordonaro was employed by the accounting firms of Weiner & Co. from
1982-1985 and Arthur Young from 1975-1981. Mr. Bordonaro graduated from New York
University with a Bachelor of Science degree in 1974 and with a Masters of
Business Administration degree in 1975.

LYNN A. McMAHON, 40, is Secretary of RIAI III. Since 1983, she has served
as Assistant to the President of Capital. From 1978 to 1983 she was employed at
Sony Corporation of America in the Government Relations Department.

SUSAN J. McGUIRE, 49, is Assistant Secretary of RIAI III. Since January
1977 she has served as Assistant to the President and Office Manager at Capital.
From May 1973 to January 1977, she was employed as an administrative assistant
with Condren, Walker & Co., Inc., an investment banking firm in New York City.
Ms. McGuire attended Queensboro Community College.


-32-


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 directors or
officers of the General Partners for their services. However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance, an accountable expense
reimbursement and Subordinated Disposition Fees to the General Partners and/or
their affiliates. In addition, the General Partner is entitled to a subordinated
interest in Cash from Sales or Financings and a 1% interest in Net Income, Net
Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or
Financings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
Partner is 0.5% of invested assets. See Note 8 to the Financial Statements in
Item 8 above, which is incorporated herein by reference.

Tabular information concerning salaries, bonuses and other types of
compensation payable to executive officers has not been included in this annual
report. As noted above, the Partnership has no executive officers. The levels of
compensation payable to the General Partner and/or its 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 Independence $1,000 capital contribution 98%
Interest in the Partnership Associates III L.P. -directly owned
625 Madison Avenue
New York, NY 10022

Independence SLP III L.P. $10 capital contribution 2%
625 Madison Avenue -directly owned
New York, NY 10022


Independence SLP III L.P., a limited partnership whose general partner is
the General Partner of the Partnership and which acts as the special limited
partner of each Partnership, holds a .01% limited partnership interest in each
Local Partnership. See Note 8 to the Financial Statements in Item 8 above, which
information is incorporated herein by reference thereto.

No person is known by the Partnership to be the beneficial owner of more
than five percent of the Limited Partnership Interests and/or BACs; and neither
the General Partner nor any director or officer of the General Partner
beneficially owns any Limited Partnership Interests or BACs.

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with
the General Partner and its affiliates, as discussed in Item 11 and also Note 8
to the Financial Statements in Item 8 above, which is incorporated herein by
reference thereto. However, there have been no direct financial transactions
between the Partnership and the directors and officers of the General Partner.

The firm of Battle Fowler renders legal services to the Partnership. Martin
L. Edelman, a former director, is counsel to Battle Fowler.


-33-



PART IV

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

Sequential
Page
----------

(a) 1. Consolidated Financial Statements

Independent Auditors' Report 14

Consolidated Balance Sheets at March 31, 1996 and 1995 33

Consolidated Statements of Operations for the
years ended March 31, 1996 and 1995 34

Consolidated Statements of Changes in Partners' Capital for
the years ended March 31, 1996 and 1995 and the period
December 23, 1993 (Inception) through March 31, 1994 35

Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1995 36

Notes to Consolidated Financial Statements 38

(a) 2. Consolidated Financial Statement Schedules

Independent Auditors' Report 57

Schedule I - Condensed Financial Information of Registrant 58
Schedule III - Real Estate and Accumulated Depreciation 61

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


-34-


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

Sequential
Page
----------

(a) 3. Exhibits

(3A) Agreement of Limited Partnership of
Independence Tax Credit Plus L.P. III as
adopted on December 23, 1993*

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

(3C) Certificate of Limited Partnership of
Independence Tax Credit Plus L.P. III as
filed on December 23, 1993*

(10A) Form of Subscription Agreement attached
to the Prospectus as Exhibit B**

(10B) Escrow Agreement between Independence
Tax Credit Plus L.P. III and Bankers
Trust Company*

(10C) Form of Purchase and Sales Agreement
pertaining to the Partnership's
acquisition of Local Partnership
Interests*

(10D) Form of Amended and Restated Agreement
of Limited Partnership of Local
Partnerships*

(22A) Subsidiaries of the Registrant 64

(27) Financial Data Schedule (filed herewith) 65


*Incorporated herein as an exhibit by
reference to exhibits filed with
Post-Effective Amendment No. 4 to the
Registration Statement on Form S-11
Registration No. 33-37704

**Incorporated herein as an exhibit by
reference to exhibits filed with
Post-Effective Amendment No. 8 to the
Registration Statement on Form S-11
Registration No. 33-37704

(b) Reports on Form 8-K

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


-35-



Supplemental Information to be furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants which have Not Registered Securities
Pursuant to Section 12 of the Act.

No annual report to security holders covering the Registrant's last fiscal
year nor any proxy statement, form of proxy or other proxy soliciting material
with respect to any annual or other meeting of security holders has been sent to
security holders.


-36-



SIGNATURES



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


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



By: RELATED INDEPENDENCE ASSOCIATES III L.P.
a General Partner


By: RELATED INDEPENDENCE ASSOCIATES III INC.
a General Partner



Date: June 28, 1996 By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President and Director
(principal executive officer)




-39-


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



Signature Title Date
- - ----------------------- ------------------------------------- -------------


President and Chief Executive Officer
/s/ J. Michael Fried (principal executive officer) and
- - ----------------------- Director of Related Independence
J. Michael Fried Associates III Inc. June 28, 1996



/s/ Lawrence J. Lipton Treasurer (principal financial and
- - ----------------------- accounting officer) of Related
Lawrence J. Lipton Independence Associates III Inc. June 28, 1996



/s/ Stephen M. Ross Director of Related Independence
- - ----------------------- Associates III Inc. June 28, 1996
Stephen M. Ross


-40-


[Letterhead of Trien, Rosenberg, Felix, Rosenberg, Barr & Weinberg, LLP]


INDEPENDENT AUDITORS' REPORT

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

In connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. III and Subsidiaries included in the Form 10-K
as presented in our opinion dated June 24, 1996 on pages 14 and 15, and based
on the reports of other auditors, we have also audited supporting Schedules I
and III for the 1995 and 1994 Fiscal Years. 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 statements, the financial data
required to be set forth therein.



/s/ Trien, Rosenberg, Felix,
Rosenberg, Barr & Weinberg, LLP


TRIEN, ROSENBERG, FELIX,
ROSENBERG, BARR & WEINSTEIN, LLP


New York, New York
June 24, 1996



INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)


CONDENSED BALANCE SHEETS


ASSETS

March 31,
----------------------------
1996 1995
----------- -----------

Cash and cash equivalents $ 5,928,019 $ 3,808,610
Investments available for sale 11,502,412 20,000,000
Investment in subsidiary partnerships 14,335,128 1,563,994
Cash held in escrow 2,745,731 637,500
Due from subsidiary partnerships 2,531,814 701,321
Other assets 1,423,107 1,657,590
----------- -----------

Total assets $38,466,211 $28,369,015
=========== ===========



LIABILITIES AND PARTNERS' CAPITAL

Due to general partner and affiliates $ 10,033 $ 284,197
Other liabilities 2,100 36,773
----------- -----------

Total liabilities 12,133 320,970


Partners' capital 38,454,078 28,048,045
----------- -----------

Total liabilities and partners' capital $38,466,211 $28,369,015
=========== ===========



-1-


INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)


CONDENSED STATEMENTS OF OPERATIONS


Year Ended March 31,
-----------------------
1996 1995
--------- ---------
Revenues

Interest income $ 927,746 $ 373,756
Other 50 0
--------- ---------

Total revenues 927,796 373,756
========= =========

Expenses

Administrative and management 284,381 51,174
Administrative and management-related parties 325,214 94,753
Amortization 10,000 2,500
--------- ---------

Total Expenses 619,595 148,427
--------- ---------

Income from operations 308,201 225,329

Equity in loss of subsidiary partnerships (591,068) (200,994)
--------- ---------

Net (loss) income $(282,867) $ 24,335
========= =========


-2-


INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS



CONDENSED STATEMENTS OF CASH FLOWS


Year Ended March 31,
----------------------------
1996 1995
------------ ------------
Cash flows from operating activities:

Net (loss) income $ (282,867) $ 24,335
------------ ------------

Adjustments to reconcile net loss to net cash
(used in) operating activities:

Equity in loss of subsidiary partnerships 591,068 200,994
Due from subsidiary partnerships (1,830,493) (701,321)
Decrease (increase) in other assets 234,483 (1,657,590)
Increase (decrease) in liabilities
Due to general partners and affiliates (274,164) 158,870
Other liabilities (34,673) 36,677
------------ ------------

Total adjustments (1,313,779) (1,962,370)
------------ ------------

Net cash used in operating activities (1,596,646) (1,938,035)
------------ ------------

Cash flows from investing activities:

(Increase) decrease in investments
available for sale 8,497,588 (20,000,000)
Capital contributions 12,010,000 31,430,000
Offering costs (1,321,100) (3,281,877)
Investments in subsidiary partnerships (13,362,202) (1,764,988)
Cash held in escrow (2,108,231) (637,500)
------------ ------------

Net cash provided by investing activities 3,716,055 5,745,635
------------ ------------

Net increase in cash and cash equivalents 2,119,409 3,807,600

Cash and cash equivalents, beginning of year 3,808,610 1,010
------------ ------------

Cash and cash equivalents, end of year $ 5,928,019 $ 3,808,610
============ ============





-3-


INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1996



Cost
Initial Cost to Partnership Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------ ------------

Apartment Complexes

Edward Hotel Limited $2,281,959 $ 275,000 $ 591,240 $2,544,394
Partnership
Los Angeles, CA
Pacific East, L.P. 2,182,930 1,950 3,125,584 137,117
Brooklyn, NY
Overtown Development 1,503,146 52,284 2,627,099 128,568
Group, Ltd.
Miami, FL
Sumpter Commons 1,253,898 500 1,862,916 44,544
Associates, L.P.
Park Housing Limited 766,131 5,000 2,343,351 44,544
Partnership
Livingston Manor Urban 2,859,817 119,988 7,047,532 44,544
Renewal Associates, L.P.
Jefferis Square Housing 817,403 55,158 0 44,544
Partnership, L.P.
2301 First Avenue Limited 5,558,532 64,350 5,818,269 44,544
Partnership
Lewis Street Limited 109,918 7,000 0 44,544
Partnership
Savannah Park Housing 1,171,546 0 2,049,888 44,544
Limited Partnership






Life on which
Gross Amount at which Carried At Close of Period Year of Depreciation in
-------------------------------------------------- Con- Latest Income
Buildings and Accumulated struction/ Date Statement is
Description Land Improvements Total Depreciation Renovation Acquired Computed(a)(b)
----------- ---- ------------ ----- ------------ ---------- -------- --------------

Apartment Complexes

Edward Hotel Limited $280,178 $3,130,456 $3,410,634 $44,055 1994-95 November 40
Partnership 1994
Los Angeles, CA
Pacific East, L.P. 7,128 3,257,523 3,264,651 169,016 1994-95 December 27.5
Brooklyn, NY 1994
Overtown Development 57,462 2,750,489 2,807,951 90,600 1994-95 December 40
Group, Ltd. 1994
Miami, FL
Sumpter Commons 2,727 1,905,233 1,907,960 26,358 1995-96 April 1995 27.5
Associates, L.P.
Park Housing Limited 7,227 2,385,668 2,392,895 5,561 1995-96 May 1995 27.5
Partnership
Livingston Manor Urban 122,215 7,089,849 7,212,064 1,177 1995-96 June 1995 40
Renewal Associates, L.P.
Jefferis Square Housing 57,385 42,317 99,702 1,177 1995-96 June 1995 27.5
Partnership, L.P.
2301 First Avenue Limited 66,577 5,860,586 5,927,163 167,102 1995-96 August 1995 27.5
Partnership
Lewis Street Limited 9,227 42,317 51,544 1,177 1995-96 October 1995 27.5
Partnership
Savannah Park Housing 2,227 2,092,205 2,094,432 17,042 1995-96 October 1995 27.5
Limited Partnership




INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1996




Cost
Initial Cost to Partnership Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------ ------------

Apartment Complexes

Brannon Group, L.C. 1,500,000 380,000 2,598,402 44,544

Mansion Court Phase II 0 1,732 339,661 44,544
Venture
Primm Place Partners, L.P. 4,450,787 168,258 0 44,544

BK-9-A Partners L.P. 1,247,996 0 1,517,313 44,544

BK-10K Partnres L.P. 1,348,194 11,000 1,637,762 44,537

----------- ----------- ----------- -----------

$27,052,257 $ 1,142,220 $31,559,017 $ 3,344,600
=========== =========== =========== ===========





Life on which
Gross Amount at which Carried At Close of Period Year of Depreciation in
-------------------------------------------------- Con- Latest Income
Buildings and Accumulated struction/ Date Statement is
Description Land Improvements Total Depreciation Renovation Acquired Computed(a)(b)
----------- ---- ------------ ----- ------------ ---------- -------- --------------

Apartment Complexes

Brannon Group, L.C. 382,227 2,640,719 3,022,946 12,429 1995-96 December 20 - 40
1995
Mansion Court Phase II 3,959 381,978 385,937 1,177 1995-96 December 27.5
Venture 1995
Primm Place Partners, L.P. 170,485 42,317 212,802 1,177 1995-96 December 27.5
1995
BK-9-A Partners L.P. 2,227 1,559,630 1,561,857 33,624 1995-96 December 27.5
1995
BK-10K Partnres L.P. 13,230 1,680,069 1,693,299 37,798 1995-96 December 27.5
1995
----------- ----------- ----------- -----------

$ 1,184,481 $34,861,356 $36,045,837 $ 609,470
=========== =========== =========== ===========



(a) Depreciation is computed using primarily the straight line method over the
estimated useful lives determined by the Partnership date of acquisition.

(b) Personal property is depreciated primarily by the straight line method over
the estimated useful lives of 6 - 12 years.


INDEPENDENCE TAX CREDIT PLUS L.P. III

AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral (Continued)
MARCH 31, 1996




Cost of
Property and Equipment Accumulated Depreciation
---------------------- ------------------------
Year Ended March 31
-----------------------------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------

Balance at beginning of period $ 6,850,227 $ 0 $ 41,573 $ 0
Additions during period:
Improvements 29,206,145 6,850,227
Depreciation expense 567,897 41,573
Reductions during period:
Dispositions 0 0 0 0
----------- ----------- ----------- -----------
Balance at end of period $36,056,372 $ 6,850,227 $ 609,470 $ 41,573
=========== =========== =========== ===========


At the time the local partnerships were acquired by Independence Tax Credit Plus
III Limited Partnership, the entire purchase price paid by Independence Tax
Credit Plus III Limited Partnership 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.