<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                Annual Report Pursuant to Section 13 or 15(d) of
                         Securities Exchange Act of 1934


For the year ended December 31, 2002             Commission  File Number 2-81033
                   -----------------                                     -------


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
        (Exact name of small business issuer as specified in its charter)


       Maryland                                                       04-2782016
-----------------------                                     --------------------
(State of Organization)                               (I.R.S. Employer I.D. No.)


7 Bulfinch Place, Suite 500, P.O. Box 9507, Boston, Massachusetts          02114
-----------------------------------------------------------------          -----
      (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number including area code:                (617) 570-4600
                                                                  --------------

        Securities registered pursuant to Section 12(b) of the Act: None
                                                                    ----

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


                      Units of Limited Partnership Interest
                      -------------------------------------
                                (Title of Class)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the 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-B 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-KSB or any amendment to
this Form 10-KSB. [ ]

Registrant's revenues for its most recent fiscal year were $1,536,000.

No market exists for the limited partnership interests of the Registrant, and
therefore, no aggregate market value can be computed.


                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None
<PAGE>

     Certain matters discussed herein are forward-looking statements. We have
based these forward-looking statements on our current expectations and
projections about future events. Certain, but not necessarily all, of such
forward-looking statements can be identified by the use of forward-looking
terminology, such as "believes," "expects," "may," "will," "should,"
"estimates," or "anticipates," or the negative thereof or other variations
thereof or comparable terminology. All forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause our actual
transactions, results, performance or achievements to be materially different
from any future transactions, results, performance or achievements expressed or
implied by such forward- looking statements. Although we believe the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, we can give no assurance that our expectations will be
attained or that any deviations will not be material. We disclaim any
obligations or undertaking to publicly release any updates or revisions to any
forward-looking statement contained in this annual report on Form 10-KSB to
reflect any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

                                     PART I
                                     ------

Item 1. Description of Business.
        ------------------------

Development
-----------

     Winthrop Residential Associates III ("WRA III"), a limited partnership, was
originally organized under the Uniform Limited Partnership Act of the State of
Maryland on June 28, 1982, for the purpose of investing, as a limited partner,
in other limited partnerships which would develop, manage, own, operate and
otherwise deal with apartment complexes which would be assisted by federal,
state and local government agencies ("Local Limited Partnerships") pursuant to
programs which would not significantly restrict distributions to owners or the
rates of return on investments in such complexes. On December 15, 1982, WRA III
elected to comply with and be governed by the Maryland Revised Uniform Limited
Partnership Act (the "Act") and filed its Agreement and Certificate of Limited
Partnership (the "Partnership Agreement") with the Maryland State Department of
Assessments and Taxation. In accordance with, and upon filing its certificate of
Limited Partnership pursuant to, the Act, WRA III changed its name to Winthrop
Residential Associates III, A Limited Partnership (the "Partnership").

     The General Partners of the Partnership are Two Winthrop Properties, Inc.
("Two Winthrop") and Linnaeus-Oxford Associates Limited Partnership
("Linnaeus-Oxford"). The Initial Limited Partner is WFC Realty Co., Inc.
("WFC"). Two Winthrop and WFC are Massachusetts corporations which are wholly
owned subsidiaries of First Winthrop Corporation ("First Winthrop"), a Delaware
corporation, which in turn is wholly-owned by Winthrop Financial Associates, A
Limited Partnership ("WFA"), a Maryland limited partnership. Linnaeus-Oxford is
a Massachusetts limited partnership. Two Winthrop is the Partnership's Managing
General Partner. See "Employees" below.

                                       2
<PAGE>

     In 1983, the Partnership sold, pursuant to a Registration Statement filed
with the Securities and Exchange Commission, 25,000 Units of limited partnership
interest ("Units") at a purchase price of $1,000 per Unit (an aggregate of
$25,000,000). Capital contributions net of selling commissions, sales and
registration costs, were utilized to purchase investments in Local Limited
Partnerships and temporary short-term investments.

     The Partnership invests as a limited partner in other limited partnerships
that own, operate and otherwise deal with apartment properties with original
financing insured by the U.S. Department of Housing and Urban Development
("HUD").

     Pursuant to the terms of the Partnership Agreement, the term of the
Partnership is scheduled to expire on December 31, 2003. Two Winthrop believes
it is in the Partnership's best interest to continue its existence as a limited
partnership instead of placing its assets in a liquidating trust while it
attempts to liquidate. If the Partnership were to dissolve and its assets placed
in a liquidating trust, it would restrict the Limited Partners ability to
transfer their interest and take certain actions. Further, Two Winthrop believes
that the maximum value of the Partnership's assets would not be achieved by a
present sale or in connection with a forced liquidation. In this regard, the
consent of Limited Partners will be sough to extend the term of the Partnership.

Local Limited Partnerships
--------------------------

     The Partnership initially acquired equity interests in the form of limited
partnership interests in 12 Local Limited Partnerships owning and operating
apartment properties. The Partnership continues to hold an interest in 6 Local
Limited Partnerships. In addition, the Partnership reduced its residual interest
in two Local Limited Partnerships, those owning Maple Manor and The Groves,
during 1988 to 50%. See Item 2, "Description of Properties" for information
relating to the Local Limited Partnerships' properties.

Defaults
--------

     The Partnership holds limited partnership interests in Local Limited
Partnerships which own apartment properties, all of which were originally
financed with HUD-insured first mortgages. If a Local Limited Partnership
defaults on a HUD-insured mortgage, the mortgagee can assign the defaulted
mortgage to HUD and recover the principal owed on its first mortgage from HUD.
HUD, in its discretion, may then either (i) negotiate a workout agreement with
the Local Limited Partnership, (ii) sell the mortgage to another lender, or
(iii) pursue its right to transfer the ownership of the property from the Local
Limited Partnership to HUD or a new lender if HUD sells its mortgage
(collectively, the "Lender") through a foreclosure action. The objective of a
workout agreement between an owner and the Lender is to secure the Lender`s
sanction of a plan which, over time, will cure any mortgage delinquencies. While
a workout agreement is effective and its terms are being met, the Lender agrees
not to pursue any remedies available to it as a result of the default. If the
owner does default under the terms of the workout

                                       3
<PAGE>

agreement or if the Lender concludes that a property in default lacks the
ability to generate sufficient revenue to cure its default, it may pursue its
right to assume ownership of the property through foreclosure.

     Clear Creek - The loan encumbering Clear Creek was in default and was
operating under a Provisional Workout Agreement with HUD. HUD sold the mortgage
and under the terms of the Agreement, the new lender had the option to terminate
such agreement on November 1, 1996. In order to reinstate the loan to current
status and to protect the Partnership's interest in the property, in October
1996 the Partnership loaned approximately $412,000 to the Local Limited
Partnership which owns Clear Creek. In connection with this loan, the interests
of the general partners in the Local Limited Partnership owning Clear Creek were
converted into Class B Limited Partner interests and an affiliate of the
Partnership was appointed as the general partner of Clear Creek, Ltd.

Employees
---------

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

     On December 16, 1997, the Managing General Partner and certain of its
affiliates entered into a Services Agreement with Coordinated Services of
Valdosta, LLC ("Coordinated Services"), an affiliate of the general partner of
the Local Limited Partnerships which own The Groves and Maple Manor Apartments,
pursuant to which Coordinated Services was retained to provide asset management
and investor services to the Partnership and certain affiliated partnerships. As
a result of this agreement, Coordinated Services has the right to direct the day
to day affairs of the Partnership, including, without limitation, reviewing and
analyzing potential sale, refinancing or restructuring proposals by Local
Limited Partnerships, preparation of all Partnership reports, maintaining
Partnership records and maintaining bank accounts of the Partnership.
Coordinated Services is not permitted, however, without the consent of the
Managing General Partner, or as otherwise required under the terms of the
Partnership's Agreement of Limited Partnership (the "Partnership Agreement") to,
among other things, cause the Partnership to consent to a sale of an asset or
cause the Partnership to file for bankruptcy. As compensation for providing
these services, the Managing General Partner and its affiliates assigned to
Coordinated Services all of their right to receive fees from the Partnership as
provided in the Partnership Agreement. See "Item 12, Certain Relationships and
Related Transactions."




                                       4
<PAGE>

Item 2. Description of Properties.
        --------------------------

     The following table sets forth certain information regarding the properties
owned by the six Local Limited Partnerships in which the Partnership has
retained an interest and which continue to own apartment properties as of March
15, 2003:

<TABLE>
<CAPTION>
Property Name                          Location                     Date of Acquisition(1)        Number of Units
-------------                          --------                     ----------------------        ---------------
<S>                                   <C>                           <C>                          <C>
Clear Creek Landing Apartments         Houston, TX                          4-28-83                     200

Village Square Apartments              Manassas, VA                         4-28-83                     285

Dunhaven Apartments,                   Baltimore, MD                        6-24-83                      72
  Section 2, Phase 1

The Groves Apartments                  North Augusta, SC                    7-29-83                     132

Autumn Chase Apartments                Mobile, AL                           9-19-83                     120

Maple Manor Apartments                 Fayetteville, AR                    10-30-83                     128
</TABLE>

--------------------
(1) Represents the date on which the Partnership made its initial investment in
the Local Limited Partnership

     The following table sets forth information relating to the first mortgage
encumbering each of the Local Limited Partnership's properties:

<TABLE>
<CAPTION>
                                                                                                        Principal
                           Principal Balance at                        Period                         Balance Due at
        Property           December 31, 2002       Interest Rate      Amortized      Maturity Date       Maturity
        --------           -----------------       -------------      ---------      -------------       --------
<S>                       <C>                      <C>               <C>             <C>               <C>
Clear Creek                       $2,273,000           7.5%           36 years         10/1/2018                  (1)
Village Square                   $10,281,000          7.64%           30 years          6/1/2011           $8,900,000
Dunhaven
 Apartments,
 Section 2,
 Phase 1                          $1,922,000           7.5%           36 years          2/1/2022                  (1)
The Groves
 Apartments                       $1,718,000           7.5%           36 years          2/1/2019                  (1)
Autumn Chase                      $2,891,000           7.5%           40 years         11/1/2024                  (1)
Maple Manor                       $1,768,000          7.08%           30 years          7/1/2008           $1,630,000
</TABLE>


(1)  Loan is a self-amortizing loan.

     During the third quarter of 2001, a flood occurred at the Partnership's
Clear Creek property. The flood damaged approximately 100 units of the 200 unit
complex. The insurance settlement was $1,013,000, which approximated the amount
of costs incurred to repair the damaged units. As of December 31, 2002, Clear
Creek had received insurance proceeds of approximately $1,013,000 and had paid
expenses of approximately $1,013,000 related to the

                                       5
<PAGE>

flood. Clear Creek has completed all of the repair work and residents have
re-occupied the damaged units.

     The following table sets forth the Partnership's ownership interest in each
of the Local Limited Partnerships:

           Local Limited Partnership                    Ownership Interest
           -------------------------                    ------------------

    Clear Creek Landing Apartments                              88.5%
    Village Square Apartments                                    50%
    Dunhaven Apartments, Section 2, Phase 1                      95%
    The Groves Apartments                                        50%
    Autumn Chase Apartments                                      99%
    Maple Manor Apartments                                       50%

     The following chart provides comparative data for each property owned by
the Local Limited Partnerships regarding occupancy rates and average market
rental rates per apartment unit, for the last two years:

                                                            Average Monthly
                                  Average Monthly               Rental
                                  Occupancy Rate             Rate per Unit
                                  --------------             -------------
            Property             2002         2001         2002         2001
            --------             ----         ----         ----         ----

Clear Creek Landing              89%           82%         $560         $544
Village Square                   93%           97%         $863         $842
Dunhaven Apartments,
  Section 2, Phase 1             97%           96%         $730         $670
The Groves                       91%           93%         $449         $438
Autumn Chase                     96%           98%         $484         $476
Maple Manor                      94%           88%         $398         $391


     Set forth below is a table showing the gross carrying value and accumulated
depreciation and federal tax basis of each of the Partnership's properties as of
December 31, 2002 (in thousands):

<TABLE>
<CAPTION>

                             Gross                                                     Federal
                            Carrying      Accumulated                                    Tax
        Property             Value        Depreciation          Rate        Method      Basis
        --------             -----        ------------          ----        ------      -----
<S>                       <C>            <C>                <C>            <C>        <C>
Clear Creek Landing           $5,332         $3,749          3-25 yrs.        S/L        $ 700
Village Square               $10,362         $7,185          10-25 yrs.       S/L       $2,864
Dunhaven Apartments,
 Section 2, Phase 1           $2,413         $1,859         5-33.3 yrs.     S/L,DD       $ 283
The Groves                    $3,579         $2,531          10-25 yrs.       S/L        $ 376
Autumn Chase                  $3,460         $2,463          7-30 yrs.        S/L        $ 219
Maple Manor                   $3,120         $2,073          10-25 yrs.       S/L        $ 452
</TABLE>


                                       6
<PAGE>

Item 3. Legal Proceedings.
        ------------------

     The Partnership is not a party, nor to the Partnership's knowledge are any
of the Local Limited Partnerships, subject to any material pending legal
proceedings.


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

     No matter was submitted to a vote of security holders during the period
covered by this report.












                                       7
<PAGE>

                                     PART II
                                     -------

Item 5. Market for the Registrant's Common Stock and Related Stockholders
        -----------------------------------------------------------------
        Matters.
        --------

     The Partnership is a partnership and thus has no common stock. There is no
active market for the Units. Trading in the Units is sporadic and occurs solely
through private transactions.

     As of March 1, 2003, there were 2,027 holders of the 25,000 Units.

     The Partnership Agreement requires that if the Partnership has Cash
Available for Distribution it be distributed quarterly to the Partners in
specified proportions. The Partnership Agreement defines Cash Available for
Distribution as Cash Flow less cash designated by the Managing General Partner
to be held for restoration or creation of reserves. Cash Flow, in turn, is
defined as cash derived from the Local Limited Partnerships (but excluding sale
or refinancing proceeds) and all cash derived from Partnership operations, less
cash used to pay operating expenses of the Partnership. During the years ended
December 31, 2002 and 2001, the Partnership has made the following cash
distributions with respect to the Units to holders thereof as of the dates set
forth below in the amounts set forth opposite such dates:


                                                Amount of
        Distribution with                 Distribution Per Unit
            Respect to                    ---------------------
          Quarter Ended                   2002             2001
          -------------                   ----             ----
      March 31                            $1.00            $1.00
      June 30                             $1.00            $4.00
      September 30                        $1.00            $1.00
      December 31                         $1.00            $1.00

     Over the past few years many companies have begun making "mini-tenders"
(offers to purchase an aggregate of less than 5% of the total outstanding units)
for limited partnership interests in the Partnership. Pursuant to the rules of
the Securities and Exchange Commission, when a tender offer is commenced for
Units the Partnership is required to provide limited partners with a statement
setting forth whether it believes limited partners should tender or whether it
is remaining neutral with respect to the offer. Unfortunately, although the
Securities and Exchange Commission has stated that a copy of any offer should be
sent by the bidder to the Partnership, the rules of the Securities and Exchange
Commission do not require that the bidders in certain tender offers provide the
Partnership with a copy of their offer. As a result, the Managing General
Partner often does not become aware of such offers until shortly before they are
scheduled to expire or even after they have expired. Accordingly, the Managing
General Partner does not have sufficient time to advise you of its position on
the tender. In this regard, please be advised that pursuant to the discretionary
right granted to the Managing General Partner of your partnership in the
Partnership Agreement to reject any transfers of units, the Managing General
Partner will not permit the transfer of any Unit in connection with a tender
offer unless: (i) the Partnership is provided with a copy of the bidder's
offering materials, including amendments thereto, simultaneously with their
distribution to the limited partners; (ii)

                                       8
<PAGE>

the offer provides for withdrawal rights at any time prior to the expiration
date of the offer and, if payment is not made by the bidder within 60 days of
the date of the offer, after such 60 day period; and (iii) the offer must be
open for at least 20 business days and, if a material change is made to the
offer, for at least 10 business days following such change.






















                                       9
<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation
        ---------------------------------------------------------

     This Item should be read in conjunction with the financial statements and
other items contained elsewhere in the report.

Liquidity and Capital Resources
-------------------------------

     As of December 31, 2002 the Partnership retained an equity interest in five
Local Limited Partnerships, each of which owns a single apartment complex. The
Partnership also owns an 88.5% interest in Clear Creek Ltd. ("Clear Creek"), a
partnership in which an affiliate of the Partnership is the managing general
partner. The Partnership's primary sources of income are distributions from the
Local Limited Partnerships and rental income from Clear Creek Apartments. The
Partnership requires cash to pay the operating expenses and mortgage note of
Clear Creek, for general and administrative expenses and to make capital
contributions and/or loans to any of the Local Limited Partnerships which the
Managing General Partner deems to be in the Partnership's best interest.

     To date, all cash requirements have been satisfied by interest income
earned on short-term investments, rental income from Clear Creek and cash
distributed to the Partnership by the Local Limited Partnerships. If the
Partnership funds any operating deficits, it will use monies from its operating
reserves. As of December 31, 2002, the Partnership had cash and cash equivalents
of $3,038,000 as compared to $2,902,000 at December 31, 2001. The Managing
General Partner's current policy is to maintain a reserve balance sufficient to
provide the Partnership the flexibility to preserve its economic interest in the
Local Limited Partnerships. Therefore, a lack of cash distributed by the Local
Limited Partnerships to the Partnership in the future should not deplete the
reserves, though it may restrict the Partnership from making distributions. The
Partnership did not fund any operating deficits to Local Limited Partnerships in
2002.

     The level of liquidity based on cash and cash equivalents experienced a
$136,000 increase at December 31, 2002, as compared to December 31, 2001. The
Partnership's $354,000 of net cash provided by investing activities was
partially offset by $37,000 of net cash used in operating activities and
$181,000 of net cash used in financing activities. Cash provided by investing
activities consisted of $386,000 of distributions received from Local Limited
Partnerships which was partially offset by $32,000 of property improvements.
Cash used in financing activities consisted of $108,000 of distributions to
partners and $73,000 of mortgage principal payments. For the year ended December
31, 2002, Partnership distributions, paid or accrued, aggregated $100,000 ($4.00
per Unit) to its limited partners and $8,000 to the general partners. The
Partnership's present policy is to accrue distributions on a quarterly basis and
to pay them on an annual basis.

     The Partnership is not obligated to provide any additional funds to the
Local Limited Partnerships to fund operating deficits. The Partnership
determines on a case by case basis whether to fund any operating deficits. If a
Local Limited Partnership sustains continuing operating deficits and has no
other sources of funding, it is likely that it will eventually default on its
mortgage obligations and risk a foreclosure on its property by the lender. If a
foreclosure were

                                       10
<PAGE>

to occur, the Local Limited Partnership would lose its investment in the
property and would incur a tax liability due to the recapture of tax benefits
taken in prior years. The Partnership, as an owner of the Local Limited
Partnership, would share these consequences in proportion to its ownership
interest in the Local Limited Partnership.

     The mortgage note payable encumbering Clear Creek in the amount of
$2,273,000 is self amortizing and is payable in monthly installments of
approximately $20,000, including interest at 7.5% per annum, through October
2018, the date of maturity. The mortgage is collateralized by the rental
property.

     The subordinated loan, in the amount of $133,000, is due to the former
general partner of Clear Creek who also manages the property. The subordinated
loan accrues interest at 10% and is due upon sale of the property.

     The Partnership's only significant critical accounting policy relates to
the evaluation of the fair value of real estate and its investments in Local
Limited Partnerships. The Partnership evaluates the need for an impairment loss
on its real estate assets and investments when indicators of impairment are
present and the undiscounted cash flows are not sufficient to recover the
asset's carrying amount. The impairment loss is measured by comparing the fair
value of the asset to its carrying amount. The evaluation of the fair value of
real estate and its investments is an estimate that is susceptible to change and
actual results could differ from those estimates.

Results of Operations
---------------------

     The Partnership's net income for the year ended December 31, 2002 was
$195,000, as compared to net income of $142,000 for the year ended December 31,
2001. The increase is due to a decrease in expenses of $96,000 which was
partially offset by a decrease in income of $43,000. The decrease in income is
primarily due to an increase of $107,000 in the equity in losses of Local
Limited Partnerships and a decrease of $71,000 of interest income, which were
partially offset by increases of $116,000 of rental income and $20,000 of cash
received from Local Limited Partnerships. Interest income decreased due to
declining interest rates. The increase in rental income is a result of the
repair of apartment units at the Clear Creek property which were damaged by a
flood in 2001 that were able to be re-occupied in 2002. During the year ended
December 31, 2002, the Local Limited Partnership owning Village Square
Apartments distributed $375,000 to the Partnership. During the year ended
December 31, 2001, the Local Limited Partnerships owning Village Square
Apartments and Maple Manor Apartments distributed to the Partnership $335,000
and $20,000, respectively. The decrease in expenses is primarily due to a
decrease in various operating expenses of $90,000 at Clear Creek. All other
expenses remained relatively constant.




                                       11
<PAGE>

Recently Issued Accounting Standards
------------------------------------

     The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standard ("SFAS") No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses accounting and reporting for intangible assets
acquired, except for those acquired in a business combination. SFAS No. 142
presumes that goodwill and certain intangible assets have indefinite useful
lives. Accordingly, goodwill and certain intangibles will not be amortized but
rather will be tested at least annually for impairment. SFAS No. 142 also
addresses accounting and reporting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. This statement had no effect on the
Partnership's consolidated financial statements.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations -Reporting the Effects of a Disposal of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business. This statement also amends ARB No. 51,
"Consolidated Financial Statements," to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001, and interim
periods within those fiscal years. The provisions of this Statement generally
are to be applied prospectively. There was no effect from this statement on the
Partnership's consolidated financial statements, although in future periods the
sale of its property would be presented in a manner similar to discontinued
operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections," which updates, clarifies and simplifies existing accounting
pronouncements. This statement rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt. FASB No. 145 will be effective for fiscal years
beginning after May 15, 2002. Upon adoption, enterprises must reclassify prior
period items that do not meet the extraordinary item classification criteria in
APB 30. The Partnership does not expect that this statement will have a material
effect on the Partnership's consolidated financial statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing or other exit or disposal activity. SFAS
No. 146 is effective prospectively for exit and disposal activities initiated
after December 31, 2002, with earlier adoption encouraged. The Partnership does
not expect that this statement will have a material effect on the Partnership's
consolidated financial statements.

                                       12
<PAGE>

     In November 2002, the FASB issued Interpretation No. 45, Guarantors'
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This Interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. The disclosure provisions of this Interpretation are
effective for the Partnership's December 31, 2002 consolidated financial
statements. The initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. This Interpretation had no effect on the
Partnership's consolidated financial statements.

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
the Interpretation will be immediately effective for all variable interests in
variable interest entities created after January 31, 2003, and the Partnership
will need to apply its provisions to any existing variable interests in variable
interest entities no later than December 31, 2004. The Partnership does not
expect that this will have an impact on the Partnership's consolidated financial
statements.

Quantitative and Qualitative Disclosures of Market Risk
-------------------------------------------------------

     The Partnership does not have any financial instruments that would expose
it to market risk associated with the risk of loss arising from adverse changes
in market rates and prices. The Partnership's mortgage note payable at December
31, 2002 is at a fixed rate of interest.






                                       13
<PAGE>

Item 7. Financial Statements
        --------------------


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                        CONSOLIDATED FINANCIAL STATEMENTS
                        ---------------------------------

                     YEARS ENDED DECEMBER 31, 2002 and 2001
                     --------------------------------------

                                      INDEX
                                      -----

                                                                         Page
                                                                         ----

Independent Auditors' Report                                               15

Financial Statements:

Consolidated Balance Sheets as of December 31, 2002 and 2001               16

Consolidated Statements of Income for the Years Ended
     December 31, 2002 and 2001                                            17

Consolidated Statements of Partners' Capital for the Years Ended
     December 31, 2002 and 2001                                            18

Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2002 and 2001                                            19

Notes to Consolidated Financial Statements                                 20






                                       14
<PAGE>

                          Independent Auditors' Report
                          ----------------------------

To the Partners
Winthrop Residential Associates III, A Limited Partnership

We have audited the accompanying consolidated balance sheets of Winthrop
Residential Associates III, A Limited Partnership (a Maryland limited
partnership) and its subsidiary as of December 31, 2002 and 2001, and the
related consolidated statements of income, partners' capital and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the financial statements of certain Local Limited Partnerships,
the investments in which are reflected in the accompanying financial statements
using the equity method of accounting. Those statements were audited by other
auditors whose reports have been furnished to us, and in our opinion, insofar as
it relates to the amounts included for those Local Limited Partnerships, is
based solely on the reports of other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Winthrop Residential
Associates III, A Limited Partnership, and its subsidiary as of December 31,
2002 and 2001, and the consolidated results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.



                                                   /s/ Imowitz Koenig & Co., LLP


New York, New York
March 5, 2003


                                       15
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                   ----------------------------------------
                                                                         2002                  2001
                                                                   -----------------     ------------------
<S>                                                                <C>                   <C>
ASSETS
------

Cash and Cash Equivalents                                          $           3,038     $            2,902
Investments in Local Limited Partnerships                                        365                    497
Other Assets                                                                     133                    108
Real Estate, net                                                               1,582                  1,775
                                                                   -----------------     ------------------

       Total Assets                                                $           5,118     $            5,282
                                                                   =================     ==================

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Liabilities:

Accounts Payable and Accrued Expenses                              $             147     $              339
Distributions Payable                                                            108                    108
Mortgage Payable                                                               2,273                  2,346
Accrued Interest - Subordinated Loan Payable                                     114                    100
Subordinated Loan Payable                                                        133                    133
                                                                   -----------------     ------------------

       Total Liabilities                                                       2,775                  3,026
                                                                   -----------------     ------------------

Partners' Capital:

Limited Partners -
       Units of Limited Partnership Interest,
       $1,000 stated value per unit; 25,005
       units authorized, issued and outstanding                                3,509                  3,429
General Partners' Deficit                                                     (1,166)                (1,173)
                                                                   -----------------     ------------------

       Total Partners' Capital                                                 2,343                  2,256
                                                                   -----------------     ------------------

       Total Liabilities and Partners' Capital                     $           5,118     $            5,282
                                                                   =================     ==================
</TABLE>

                See notes to consolidated financial statements.

                                       16
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                                               ----------------------------------------
                                                                      2002                  2001
                                                               -----------------     ------------------
<S>                                                            <C>                   <C>
Income:

Rental Income                                                  $           1,186     $            1,070
Income from Local Limited Partnerships'
  Cash Distributions                                                         375                    355
Equity in Losses of Local Limited Partnerships                              (121)                   (14)
Interest                                                                      49                    120
Other Income                                                                  47                     48
                                                               -----------------     ------------------

       Total Income                                                        1,536                  1,579
                                                               -----------------     ------------------

Expenses:

Operating                                                                    831                    921
Interest                                                                     186                    192
Depreciation                                                                 225                    231
General and Administrative                                                    99                     93
                                                               -----------------     ------------------

       Total Expenses                                                      1,341                  1,437
                                                               -----------------     ------------------

Net Income                                                     $             195     $              142
                                                               =================     ==================

Net  Income Allocated to General Partners                      $              15     $               11
                                                               =================     ==================

Net Income Allocated to Limited Partners                       $             180     $              131
                                                               =================     ==================

Net Income per Unit of Limited Partnership Interest            $            7.20     $             5.24
                                                               =================     ==================

Distributions per Unit of Limited Partnership Interest         $            4.00     $             7.00
                                                               =================     ==================
</TABLE>


                 See notes to consolidated financial statements.

                                       17
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                  --------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                       Units of
                                       Limited            General            Limited             Total
                                     Partnership         Partners'          Partners'          Partners'
                                       Interest           Deficit            Capital            Capital
                                    ---------------  ------------------  ----------------   ----------------

<S>                                <C>               <C>                 <C>                <C>
Balance - January 1, 2001                   25,005   $          (1,170)  $         3,473    $         2,303

     Net Income                                                     11               131                142

     Distributions                                                 (14)             (175)              (189)
                                    ---------------  ------------------  ----------------   ----------------

Balance - December 31, 2001                 25,005              (1,173)            3,429              2,256

     Net Income                                                     15               180                195

     Distributions                                                  (8)             (100)              (108)
                                    ---------------  ------------------  ----------------   ----------------

Balance - December 31, 2002                 25,005   $          (1,166)  $         3,509    $         2,343
                                    ===============  ==================  ================   ================
</TABLE>


                 See notes to consolidated financial statements.

                                       18
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                        (In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                                   ----------------------------------------
                                                                                          2002                  2001
                                                                                   -----------------     ------------------
<S>                                                                                <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income                                                                         $             195     $              142
Adjustments to reconcile net income to net cash (used in)
  provided by operating activities:
       Depreciation                                                                              225                    231
       Income from Local Limited Partnerships' cash distributions                               (375)                  (355)
       Equity in losses of Local Limited Partnerships                                            121                     14
Changes in assets and liabilities:
       Increase in other assets                                                                  (25)                   (10)
       (Decrease) increase in accounts payable and
          accrued expenses                                                                      (192)                   229
       Increase in accrued interest payable on subordinated loan                                  14                     13
                                                                                   -----------------     ------------------

Net cash (used in) provided by operating activities                                              (37)                   264
                                                                                   -----------------     ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------

       Distributions received from Local Limited Partnerships                                    386                    355
       Property improvements                                                                     (32)                   (29)
       Investments in Local Limited Partnerships                                                   -                   (511)
                                                                                   -----------------     ------------------

       Net cash provided by (used in) investing activities                                       354                   (185)
                                                                                   -----------------     ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------

       Mortgage principal payments                                                               (73)                   (67)
       Distributions to partners                                                                (108)                  (162)
                                                                                   -----------------     ------------------

Cash used in financing activities                                                               (181)                  (229)
                                                                                   -----------------     ------------------

Net increase (decrease) in Cash and Cash Equivalents                                             136                   (150)

Cash and Cash Equivalents, Beginning of Year                                                   2,902                  3,052
                                                                                   -----------------     ------------------

Cash and Cash Equivalents, End of Year                                             $           3,038     $            2,902
                                                                                   =================     ==================

Supplemental Disclosure of Cash Flow Information
------------------------------------------------

       Cash paid for interest                                                      $             172     $              179
                                                                                   =================     ==================

Supplemental Disclosure of Non-Cash Financing Activities
--------------------------------------------------------

       Accrued distributions to partners                                           $             108     $              108
                                                                                   =================     ==================
</TABLE>


                 See notes to consolidated financial statements.

                                       19
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     -----------------------------------------------------------

     Organization
     ------------

     Winthrop Residential Associates III, A Limited Partnership (the
     "Partnership") was organized on June 28, 1982 under the Uniform Limited
     Partnership Act of the State of Maryland to invest in limited partnerships
     (the "Local Limited Partnerships") which develop, manage, operate and
     otherwise deal in government assisted apartment complexes which do not
     significantly restrict distributions to owners or the rate of return on
     investments in such properties. The Partnership has investments in five
     Local Limited Partnerships each owning an apartment complex. Additionally,
     the Partnership owns an 88.5% limited partnership interest in Clear Creek
     Ltd. ("Clear Creek"), a partnership in which an affiliate of the
     Partnership is the managing general partner. The properties are located in
     Alabama, Arkansas, Maryland, South Carolina, Texas and Virginia.

     The Partnership was capitalized with $25,000,000 of contributions
     representing 25,000 investor limited partnership units. The offering closed
     in July, 1983. The general partners and the initial limited partner (5
     units) contributed $8,000. At December 31, 2002 and 2001, there were 25,005
     limited partnership units issued and outstanding.

     Consolidation
     -------------

     The consolidated financial statements include all of the accounts of the
     Partnership and Clear Creek. All significant intercompany transactions and
     balances have been eliminated. Losses of Clear Creek have not been
     allocated to its minority interests since there is no obligation on the
     part of the minority partners to fund such losses.

     Real Estate
     -----------

     Real estate is stated at cost, adjusted for depreciation and impairment of
     value. The Partnership records impairment losses on long-lived assets used
     in operations when events and circumstances indicate that the assets might
     be impaired and the undiscounted cash flows estimated to be generated by
     those assets are less than the carrying amounts of those assets. The
     impairment loss is measured by comparing the fair value of the asset to its
     carrying amount.

                                       20
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
     -----------------------------------------------------------------------

     Cash and Cash Equivalents
     -------------------------

     The Partnership considers all highly liquid investments with an original
     maturity of three months or less at the time of purchase to be cash
     equivalents. The carrying amount of cash and cash equivalents approximates
     its fair value due to its short term nature.

     Use of Estimates
     ----------------

     The preparation of consolidated financial statements in conformity with
     accounting principles generally accepted in the United States of America
     requires management to make estimates and assumptions that affect the
     amounts and disclosures in the consolidated financial statements and
     accompanying notes. Such estimates that are particularly susceptible to
     change relate to the Partnership's estimate of the fair value of real
     estate. Actual results could differ from those estimates.

     Investments in Local Limited Partnerships
     -----------------------------------------

     The Partnership accounts for its investment in five of the Local Limited
     Partnerships using the equity method of accounting. Under the equity method
     of accounting, the investment cost is subsequently adjusted by the
     Partnership's share of the Local Limited Partnership's results of
     operations and by distributions received. Costs relating to the acquisition
     and selection of the investment in the Local Limited Partnerships are
     capitalized to the investment account and amortized over the life of the
     investment or until the investment balance has been written down to zero.
     Equity in loss of Local Limited Partnerships and amortization of investment
     costs are not recognized to the extent that the investment balance would
     become negative since the Partnership is not obligated to advance funds to
     the Local Limited Partnerships. Distributions received from Local Limited
     Partnerships whose investment balance has been written down to zero, are
     recorded as income in the consolidated statement of income.

     Depreciation
     ------------

     Depreciation is computed by the straight-line method over an estimated
     useful life of 25 years for buildings and improvements and 3 to 5 years for
     furnishings.


                                       21
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
     -----------------------------------------------------------------------

     Net Income Per Limited Partnership Unit
     ---------------------------------------

     The net income per limited partnership unit is computed by dividing net
     income allocated to the limited partners by the 25,005 units outstanding.

     Income Taxes
     ------------

     Taxable income or loss of the Partnership is reported in the income tax
     returns of its partners. Accordingly, no provision for income taxes is made
     in the financial statements of the Partnership.

     Concentration of Credit Risk
     ----------------------------

     Principally all of the Partnership's cash and cash equivalents consist of
     repurchase agreements and a money market account with original maturity
     dates of three months or less.

     Segment Reporting
     -----------------

     The Partnership has one reportable segment, residential real estate. The
     Partnership evaluates performance based on net operating income, which is
     income before depreciation, amortization, interest and non-operating items.

     Recently Issued Accounting Standards
     ------------------------------------

     In July 2001, the Financial Accounting Standard Board ("FASB") issued
     Statement of Financial Accounting Standard ("SFAS") No. 142 "Goodwill and
     Other Intangible Assets." SFAS No. 142 addresses accounting and reporting
     for intangible assets acquired, except for those acquired in a business
     combination. SFAS No. 142 presumes that goodwill and certain intangible
     assets have indefinite useful lives. Accordingly, goodwill and certain
     intangibles will not be amortized but rather will be tested at least
     annually for impairment. SFAS No. 142 also addresses accounting and
     reporting for goodwill and other intangible assets subsequent to their
     acquisition. SFAS No. 142 is effective for fiscal years beginning after
     December 15, 2001. This statement had no effect on the Partnership's
     consolidated financial statements.

                                       22
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
     -----------------------------------------------------------------------

     Recently Issued Accounting Standards (Continued)
     ------------------------------------------------

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets," which addresses financial
     accounting and reporting for the impairment or disposal of long-lived
     assets. This statement supersedes SFAS No. 121, "Accounting for the
     Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
     Of" and the accounting and reporting provisions of APB Opinion No. 30,
     "Reporting the Results of Operations-Reporting the Effects of a Disposal of
     a Business and Extraordinary, Unusual and Infrequently Occurring Events and
     Transactions," for the disposal of a segment of a business. This statement
     also amends ARB No. 51, "Consolidated Financial Statements," to eliminate
     the exception to consolidation for a subsidiary for which control is likely
     to be temporary. SFAS No. 144 is effective for fiscal years beginning after
     December 15, 2001, and interim periods within those fiscal years. The
     provisions of this statement generally are to be applied prospectively.
     There was no effect from this statement on the Partnership's consolidated
     financial statements, although in future periods the sale of its property
     would be presented in a manner similar to discontinued operations.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
     Corrections," which updates, clarifies and simplifies existing accounting
     pronouncements. In part, this statement rescinds SFAS No. 4, "Reporting
     Gains and Losses from Extinguishment of Debt." FASB No. 145 will be
     effective for fiscal years beginning after May 15, 2002. Upon adoption,
     enterprises must reclassify prior period items that do not meet the
     extraordinary item classification criteria in APB Opinion No. 30. The
     Partnership does not expect that this statement will have a material effect
     on the Partnership's consolidated financial statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
     Associated with Exit or Disposal Activities." SFAS No. 146 requires
     companies to recognize costs associated with exit or disposal activities
     when they are incurred rather than at the date of a commitment to an exit
     or disposal plan. Examples of costs covered by the standard include lease
     termination costs and certain employee severance costs that are associated
     with a restructuring, discontinued operation, plant closing or other exit
     or disposal activity. SFAS No. 146 is effective prospectively for exit and
     disposal activities initiated after December 31, 2002, with earlier
     adoption encouraged. The Partnership does not expect that this statement
     will have a material effect on the Partnership's consolidated financial
     statements.


                                       23
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
     -----------------------------------------------------------------------

     Recently Issued Accounting Standards (Continued)
     ------------------------------------------------

     In November 2002, the FASB issued Interpretation No. 45, Guarantors'
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others. The Interpretation elaborates on the
     disclosures to be made by a guarantor in its financial statements about its
     obligations under certain guarantees that it has issued. It also clarifies
     that a guarantor is required to recognize, at the inception of a guarantee,
     a liability for the fair value of the obligation undertaken in issuing the
     guarantee. This Interpretation does not prescribe a specific approach for
     subsequently measuring the guarantor's recognized liability over the term
     of the related guarantee. The disclosure provisions of this Interpretation
     are effective for the Partnership's December 31, 2002 consolidated
     financial statements. The initial recognition and initial measurement
     provisions of this Interpretation are applicable on a prospective basis to
     guarantees issued or modified after December 31, 2002. This Interpretation
     had no effect on the Partnership's consolidated financial statements.

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
     Variable Interest Entities. This Interpretation clarifies the application
     of existing accounting pronouncements to certain entities in which equity
     investors do not have the characteristics of a controlling financial
     interest or do not have sufficient equity at risk for the entity to finance
     its activities without additional subordinated financial support from other
     parties. The provisions of the Interpretation will be immediately effective
     for all variable interests in variable interest entities created after
     January 31, 2003, and the Partnership will need to apply its provisions to
     any existing variable interests in variable interest entities no later than
     December 31, 2004. The Partnership does not expect that this will have an
     impact on the Partnership's consolidated financial statements.

2.   ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS
     -----------------------------------------------

     In accordance with the partnership agreement, profits and losses and cash
     available for distribution not arising from a sale or refinancing are
     allocated 7.5% to the general partners and 92.5% to the limited partners.
     Distributions of proceeds arising from a sale or refinancing are allocated
     first to the limited partners to the extent of their Adjusted Capital
     Contribution (as defined) and then, in accordance with the partnership
     agreement.

                                       24
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

3.   TRANSACTIONS WITH RELATED PARTIES
     ---------------------------------

     Two Winthrop Properties, Inc. (the "Managing General Partner") is a wholly
     owned subsidiary of First Winthrop Corporation ("First Winthrop"), which in
     turn is controlled by Winthrop Financial Associates, A Limited Partnership.
     A subsidiary of First Winthrop is one of the general partners in a Local
     Limited Partnership.

     The Managing General Partner and certain of its affiliates have a Services
     Agreement with Coordinated Services of Valdosta, LLC ("Coordinated
     Services") pursuant to which Coordinated Services provides asset management
     and investor services to the Partnership and certain affiliated
     partnerships. As a result of this agreement, Coordinated Services has the
     right to direct the day to day affairs of the Partnership. Coordinated
     Services is not permitted, however, without the consent of the Managing
     General Partner, or as otherwise required under the terms of the
     partnership's agreement to, among other things, cause the Partnership to
     consent to a sale of an asset or cause the Partnership to file for
     bankruptcy. As compensation for providing these services, the Managing
     General Partner and its affiliates assigned to Coordinated Services all of
     their rights to receive fees from the Partnership, as provided in the
     partnership agreement. Coordinated Services, which is a related party for
     financial reporting purposes only, is affiliated with the general partner
     and managing agent of certain Local Limited Partnerships, in which the
     Partnership has invested. For the years ended December 31, 2002 and 2001,
     respectively, affiliates of Coordinated Services received $601,000 and
     $712,000 in fees and expense reimbursements for managing these Local
     Limited Partnerships. Included in the amount received for 2002 are $201,000
     for property improvements made at the Fayetteville Apartments Local Limited
     Partnerships. Included in the amount received for 2001 is $327,000 for
     property improvements made at the Fayetteville Apartments and Savannah
     River Associates Local Limited Partnerships.

     Coordinated Services was entitled to receive 25% or approximately $15,000
     for 2002 and $14,000 for 2001 of the Clear Creek management fee for
     supervisory services. The managing agent for Clear Creek is also a limited
     partner of Clear Creek.

     Clear Creek contracted out the repair work on apartment units damaged by a
     flood (see Note 9) to a company owned by a limited partner of Clear Creek.
     As of December 31, 2002, all of the work has been completed and Clear Creek
     had paid a total of $1,013,000 to this company. Clear Creek received
     $1,013,000 of insurance settlement proceeds in 2001 related to the flood
     damage.

                                       25
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------


4.   MORTGAGE PAYABLE
     ----------------

     The mortgage that is secured by the property owned by Clear Creek bears
     interest at 7.5% per annum, requires monthly payments of approximately
     $20,000 and matures in October 2018.

     Principal payments on the mortgage note are due as follows:

                 2003                      $         78,000
                 2004                                84,000
                 2005                                90,000
                 2006                                97,000
                 2007                               105,000
                 Thereafter                       1,819,000
                                          -----------------
                                          $       2,273,000
                                          =================

     The estimated fair value of the Partnership's debt approximates its
     carrying amount.

5.   SUBORDINATED LOAN PAYABLE
     -------------------------

     The subordinated loan, in the amount of $133,000, is due to the former
     general partner of Clear Creek who also manages the property. The
     subordinated loan accrues interest at 10% and is due upon sale of the
     property.

6.   REAL ESTATE
     -----------

     Real estate is comprised of the following:

                                                       December 31,
                                            --------------------------------
                                                 2002               2001
                                            --------------    --------------

     Land                                   $      500,000    $      500,000
     Buildings, improvements and
        furnishings                              4,831,000         4,799,000
                                            --------------    --------------
                                                 5,331,000         5,299,000
     Accumulated Depreciation                   (3,749,000)       (3,524,000)
                                            --------------    --------------

                                            $    1,582,000    $    1,775,000
                                            ==============    ==============


                                       26
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------


7.   INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS
     -----------------------------------------

     As of December 31, 2002, the Partnership has limited partnership equity
     interests in five Local Limited Partnerships each owning one apartment
     complex. Such interests are summarized as follows:

<TABLE>
<CAPTION>
                               Local Limited Partnership                                     Percentage Ownership
     --------------------------------------------------------------------------------     -----------------------------
     <S>                                                                                   <C>
     Village Square Associates Limited Partnership                                                     50
     Walther Limited Partnership (Dunhaven Apartments Phase I)                                         95
     Savannah River Associates Limited Partnership (The Grove Apartments)                              50
     Autumn Chase, Ltd.                                                                                99
     Fayetteville Apartments Limited Partnership (Maple Manor Apartments)                              50
</TABLE>

     In addition, the Partnership also holds an 88.5% limited partnership
     interest in Clear Creek, which was accounted for as a Local Limited
     Partnership prior to being consolidated.

     The above Local Limited Partnerships have outstanding mortgages, as of
     December 31, 2002, totaling $18,580,000 secured by the Local Limited
     Partnerships' real property, security interests, liens and endorsements
     common to first mortgage loans.

     During 2002, the Partnership made no additional investments in the Local
     Limited Partnerships. During 2001, the Partnership made investments in two
     Local Limited Partnerships which amounted to $511,000. The investments were
     for property improvements made at these Local Limited Partnerships. The
     investments were made in Savannah River Associates Limited Partnership in
     the amount of $218,000 and in Fayetteville Apartments Limited Partnership
     in the amount of $293,000. The Local Limited Partnerships have accounted
     for these investments as loans payable. The loans accrue interest at 5.5%
     per annum. Annual payments of interest only are payable no later than March
     31 of each year for the previous year. Principal plus unpaid accrued
     interest is payable upon receipt of any proceeds from a refinance, or upon
     the sale of the property, whichever occurs first.

                                       27
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

7.   INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
     -----------------------------------------------------

     The combined balance sheets of the Local Limited Partnerships are as
     follows (in thousands):

<TABLE>
<CAPTION>
                                                                  December 31,
                                                         ----------------------------
                                                             2002            2001
                                                         -----------      -----------
<S>                                                      <C>              <C>
ASSETS

Real estate, at cost:
  Land                                                   $     1,063      $     1,063
  Buildings, net of accumulated depreciation of
  $16,111 and $15,494 in 2002 and 2001, respectively           5,758            6,165
  Cash and cash equivalents                                      719            1,320
  Other assets, net of accumulated amortization of
  $252 and $221 in 2002 and 2001, respectively                   956              963
                                                         -----------      -----------
  Total Assets                                           $     8,496      $     9,511
                                                         ===========      ===========

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Notes payable                                          $       416              410
  Loans payable                                                  533              533
  Mortgage notes payable                                      18,580           18,857
  Accounts payable and accrued expenses                          485              489
                                                         -----------      -----------
  Total Liabilities                                           20,014           20,289
                                                         -----------      -----------

Partners' Deficit:
  Winthrop Residential Associates III                         (6,272)          (5,827)
  Other partners                                              (5,246)          (4,951)
                                                         -----------      -----------
  Total Deficit                                              (11,518)         (10,778)
                                                         -----------      -----------
Total Liabilities and Partners' Deficit                  $     8,496      $     9,511
                                                         ===========      ===========
</TABLE>


                                       28
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------

7.   INVESTMENTS IN LOCAL LIMITED PARTNERSHIPS (Continued)
     -----------------------------------------------------

     The combined statements of operations of the Local Limited Partnerships are
     as follows (in thousands):


                                                    YEARS ENDED DECEMBER 31,
                                                ------------------------------
                                                     2002             2001
                                                -------------    -------------
Income:

     Rental income                              $       4,998    $       4,925
     Other income                                         173              188
                                                -------------    -------------
     Total income                                       5,171            5,113
                                                -------------    -------------

Expenses:

     Interest                                           1,456            1,444
     Depreciation and amortization                        653              644
     Taxes and insurance                                  501              438
     Management and administrative fees                   366              349
     Repairs, maintenance and utilities                 1,374            1,185
     General and administrative                           783              779
                                                -------------    -------------
     Total expenses                                     5,133            4,839
                                                -------------    -------------
Net Income                                      $          38    $         274
                                                =============    =============

Net (loss) income allocated to
 Winthrop Residential Associates III            $         (52)   $          54
                                                =============    =============

Net income allocated to other partners          $          90    $         220
                                                =============    =============


                                       29
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
                                   (Continued)
                                   -----------


8.   TAXABLE INCOME
     --------------

     The Partnership's taxable income differs from its net income for financial
     reporting purposes, as follows (in thousands):

                                                                2002      2001
                                                               ------    ------
     Net income for financial reporting purposes               $  195    $  142

       Differences in equity in Local Limited Partnership's
       income/loss for financial reporting and tax reporting
       purposes                                                   630       705

       Income from Local Limited Partnership's Cash
       distributions                                             (375)     (355)
                                                               ------    ------
     Taxable income                                            $  450    $  492
                                                               ======    ======

9.   INSURANCE SETTLEMENT -  FLOOD DAMAGE
     ------------------------------------

During the third quarter of 2001, a flood occurred at the Partnership's Clear
Creek property. The flood damaged approximately 100 units of the 200 unit
complex. The insurance settlement was $1,013,000, which approximated the amount
of costs incurred to repair the damaged units. Clear Creek has completed the
repair work and residents were able to re-occupy the damaged units. As of
December 31, 2002, Clear Creek had received the insurance proceeds of $1,013,000
and had paid expenses of approximately $1,013,000 related to the flood.


                                       30
<PAGE>

Item 8. Changes in and Disagreements on Accounting and Financial Disclosure.
        --------------------------------------------------------------------

     There were no disagreements with Imowitz Koenig & Co., LLP regarding the
2002 or 2001 audits of the Partnership's financial statements.






















                                       31
<PAGE>

                                    PART III
                                    --------

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        ------------------------------------------------------------------------
        With Section 16(a) of the Exchange Act.
        ---------------------------------------

     The Partnership has no officers or directors. Two Winthrop Properties,
Inc., the managing partner of the Partnership (the "Managing General Partner"),
manages and controls substantially all of the Partnership's affairs and has
general responsibility and ultimate authority in all matters affecting its
business. As of March 1, 2003, the names of the directors and executive officers
of the Managing General Partner and the position held by each of them, are as
follows:

<TABLE>
<CAPTION>
                                  Position Held with the                             Has Served as a Director
Name                              Managing General Partner                               or Officer Since
----                              ------------------------                               ----------------
<S>                               <C>                                                  <C>
Michael L. Ashner                 Chief Executive Officer and Director                         1-96

Thomas C. Staples                 Chief Financial Officer                                      1-99

Peter Braverman                   Executive Vice President and Director                        1-96

Patrick J. Foye                   Vice President - Residential and Director                   10-98

Carolyn Tiffany                   Chief Operating Officer and Clerk                           10-95
</TABLE>

     Michael L. Ashner, age 50, has been the Chief Executive Officer of Winthrop
Financial Associates, A Limited Partnership ("WFA") and the Managing General
Partner since January 15, 1996. Since August 19, 2002, Mr. Ashner has also
served as the Chief Executive Officer of Shelbourne Properties I Inc.,
Shelbourne Properties II Inc. and Shelbourne Properties III Inc. (collectively,
the "Shelbourne REITs"), three publicly traded real estate investment trusts.
Mr. Ashner also currently serves as a Director of each of the Shelbourne REITs,
Great Bay Hotel and Casino Inc., and NBTY, Inc.

     Thomas C. Staples, age 47, has been the Chief Financial Officer of WFA
since January 1, 1999. From March 1996 through December 1998, Mr. Staples was
Vice President/Corporate Controller of WFA. From May 1994 through February 1996,
Mr. Staples was the Controller of the Residential Division of Winthrop
Management.


                                       32
<PAGE>

     Peter Braverman, age 51, has been a Vice President of WFA and the Managing
General Partner since January 1996. Since August 19, 2002, Mr. Braverman has
also served as the Executive Vice President of each of the Shelbourne REITs. Mr.
Braverman serves as a director of the Shelbourne REITs.

     Patrick J. Foye, age 45, has been Vice President-Residential and Director
of the Managing General Partner since October 1, 1998. Mr. Foye has served as
Executive Vice President and director of Apartment Investment and Management
Company ("AIMCO") since May 1998. Prior to joining AIMCO, Mr. Foye was a partner
in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998
and was Managing Partner of the firm's Brussels, Budapest and Moscow offices
from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island
Power Authority and serves as a member of the New York State Privatization
Council. He received a B.A. from Fordham College and a J.D. from Fordham
University Law School.

     Carolyn Tiffany, age 36, has been employed with WFA since January 1993.
Since December 1997, Ms. Tiffany has served as the Chief Operating Officer of
WFA. In addition, since August 19, 2002, Ms. Tiffany has served as the Chief
Financial Officer of each of the Shelbourne REITs.

     One or more of the above persons are also directors or officers of a
general partner (or general partner of a general partner) of the following
limited partnerships which either have a class of securities registered pursuant
to Section 12(g) of the Securities and Exchange Act of 1934, or are subject to
the reporting requirements of Section 15(d) of such Act: Winthrop Partners 79
Limited Partnership; Winthrop Partners 80 Limited Partnership; Winthrop
Residential Associates I, A Limited Partnership; Winthrop Residential Associates
II, A Limited Partnership; 1999 Broadway Associates Limited Partnership;
Nantucket Island Associates Limited Partnership; Presidential Associates I
Limited Partnership; Riverside Park Associates Limited Partnership; Springhill
Lake Investors Limited Partnership; Twelve AMH Associates Limited Partnership;
Winthrop California Investors Limited Partnership; Winthrop Growth Investors I
Limited Partnership; and Fairfield Inn by Marriott Limited Partnership.

     In addition, each of the foregoing officers and directors other than Mr.
Foye hold similar positions with Newkirk MLP Corp., GFB-AS Manager Corp. and
AP-PCC III, L.P., entities that through one or more subsidiaries manage over 200
limited partnerships that hold title to real property including, commercial
properties, residential properties and assisted living facilities.

     Except as indicated above, neither the Partnership nor the Managing General
Partner has any significant employees within the meaning of Item 401(b) of
Regulation S-B. There are no family relationships among the officers and
directors of the Managing General Partner.

     Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the

                                       33
<PAGE>

Partnership is not aware of any director, officer or beneficial owner of more
than ten percent of the units of limited partnership interest in the Partnership
that failed to file on a timely basis, as disclosed in the above Forms, reports
required by section 16(a) of the Exchange Act during the most recent fiscal year
or prior fiscal years.

     Effective December 16, 1997, the Managing General Partner and certain of
its affiliates entered into an agreement with Coordinated Services of Valdosta,
LLC ("Coordinated Services") to provide for the daily asset and property
management services and investor services for the Partnership. See "Item 11,
Security Ownership of Certain Beneficial Owners and Management." Coordinated
Services of Valdosta LLC is a Georgia limited liability corporation with
headquarters in Valdosta, Georgia. Founded in 1997, its managing member is
Investor Service Group, Inc., a Georgia Corporation. The principals of Investor
Service Group are Mary T. Johnson and James L. Dewar, Jr.

     Mary T. Johnson is the Manager of Coordinated Services. Ms. Johnson is also
Executive Vice President of Dewar Realty, Inc. and Dewar Properties, Inc. Ms.
Johnson is a graduate of Valdosta State University and is a licensed Georgia
Real Estate Broker. Ms. Johnson has over 20 years of experience in property
management, asset management, investor services, and development of apartment
and assisted living properties. Ms. Johnson is currently responsible for the
asset management of over 150 investor partnerships and property management of
over 50 apartment communities.

     James L. Dewar, Jr. is the founder of Dewar Realty, Inc. and Dewar
Properties, Inc. Mr. Dewar is a graduate of the University of Georgia and is a
licensed Georgia Real Estate Broker. Mr. Dewar has 32 years experience in real
estate construction, property management and development of apartment and
assisted living properties. Mr. Dewar has produced over $100 million in
conventional and government funded family and elderly apartment communities.

Item 10. Executive Compensation.
         -----------------------

     The Partnership is not required to and did not pay any compensation to the
officers or directors of the Managing General Partner. The Managing General
Partner does not presently pay any compensation to any of its officers or
directors. (See Item 13, "Certain Relationships and Related Transactions.")

Item 11. Security Ownership of Certain Beneficial Owners and Management.
         ---------------------------------------------------------------

     (a) Security ownership of certain beneficial owners.
         ------------------------------------------------

     The General Partners own all the outstanding general partnership interests.
No person or group is known by the Partnership to be the beneficial owner of
more than 5% of the outstanding Units at March 15, 2003. Under the Partnership
Agreement, the voting rights of the Limited Partners are limited.

                                       34
<PAGE>

     Under the Partnership Agreement, the right to manage the business of the
Partnership is vested in the General Partners and is generally to be exercised
only by the Managing General Partners, although approval of Linnaeus-Oxford is
required as to all investments in Local Limited Partnerships and in connection
with any votes or consents arising out of the ownership of a Local Limited
Partnership interest.

     (b) Security ownership of management.
         ---------------------------------

     As of March 15, 2003, WFC Realty Co., Inc. owns 95 Units, which is less
than 1%. None of the officers, directors or the general partner of the General
Partners own any Units.

     (c) Changes in control.
         -------------------

     There exists no arrangement known to the Partnership the operation of which
may at a subsequent date result in a change in control of the Partnership. On
December 16, 1997, the Managing General Partner and certain of its affiliates
entered into a Services Agreement with Coordinated Services of Valdosta, LLC
("Coordinated Services") pursuant to which Coordinated Services was retained to
provide asset management and investor services to the Partnership and certain
affiliated partnerships. As a result of this agreement, Coordinated Services has
the right to direct the day to day affairs of the Partnership, including,
without limitation, reviewing and analyzing potential sale, refinancing or
restructuring proposals by Local Limited Partnerships, preparation of all
Partnership reports, maintaining Partnership records and maintaining bank
accounts of the Partnership. Coordinated Services is not permitted, however,
without the consent of the Managing General Partner, or as otherwise required
under the terms of the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement") to, among other things cause the Partnership to consent
to a sale of an asset or cause the Partnership to file for bankruptcy. As
compensation for providing these services, the Managing General Partner and its
affiliates assigned to Coordinated Services all of their right to receive fees
from the Partnership as provided in the Partnership Agreement. An affiliate of
Coordinated Services is the general partner of the Local Limited Partnerships
which own The Groves and Maple Manor Apartments.

Item 12. Certain Relationships and Related Transactions.
         -----------------------------------------------

     For the years ended December 31, 2002 and 2001, the Partnership allocated
taxable income to the General Partners of $34,000 and $37,000, respectively. For
each of the years ended December 31, 2002 and 2001, the Partnership paid or
accrued cash distributions to the General Partners of $8,000 and $14,000,
respectively.



                                       35
<PAGE>

Item 13. Controls and Procedures
         -----------------------

     The Managing General Partner's principal executive officer and principal
financial officer have, within 90 days of the filing date of this annual report,
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as defined in Exchange Act Rules 13a - 14(c) and have determined
that such disclosure controls and procedures are adequate. There have been no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect such internal controls since the date of
evaluation. Accordingly, no corrective actions have been taken with regard to
significant deficiencies or material weaknesses.

     However, the principal executive officer and principal financial officer
rely on the audited financial statements of the Local Limited Partnerships in
completing their evaluation of the Partnership's disclosure controls and
procedures (as defined in Exchange Act Rules 13a - 14(c). In connection with
this evaluation, the principal executive officer and principal financial officer
request that the general partners of the Local Limited Partnerships provide the
Partnership with a Certification in substantially the form of the Certifications
required as part of this report. The principal executive officer and principal
financial officer have not received such Certifications from the general
partners of the following Local Limited Partnerships: Walther Limited
Partnership, Village Square Associates and Autumn Chase Limited Partnership

Item 14. Exhibits and Reports on Form 8-K.
         ---------------------------------

(a)  Exhibits:

     The Exhibits listed on the accompanying Index to Exhibits are filed as part
of this Annual Report and incorporated in this Annual Report as set forth in
said Index.

(b)  Reports on Form 8-K - None



                                       36
<PAGE>

                                   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, there unto duly authorized as of this 10th day of
April, 2003.

                                            WINTHROP RESIDENTIAL ASSOCIATES III,
                                            A LIMITED PARTNERSHIP

                                            By: TWO WINTHROP PROPERTIES, INC.

                                                By: /s/ Michael L. Ashner
                                                    ---------------------
                                                        Michael L. Ashner
                                                        Chief Executive Officer

     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/Name         Title                                      Date
--------------         -----                                      ----

/s/ Michael Ashner     Chief Executive Officer and Director       April 10, 2003
------------------
Michael Ashner


/s/ Thomas Staples     Chief Financial Officer                    April 10, 2003
------------------
Thomas Staples


/s/ Peter Braverman    Executive Vice President and Director      April 10, 2003
-------------------
Peter Braverman



                                       37
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                          FORM 10-KSB DECEMBER 31, 2002
                          -----------------------------

                                 CERTIFICATIONS

         I, Michael L. Ashner, certify that:

     1.  I have reviewed this annual report on Form 10-KSB of Winthrop
         Residential Associates III, A Limited Partnership;

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the Registrant as of, and for, the periods presented in
         this annual report;

     4.  The Registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
         have:

         a)    designed such disclosure controls and procedures to ensure that
               material information relating to the Registrant is made known to
               us, particularly during the period in which this annual report is
               being prepared:

         b)    evaluated the effectiveness of the Registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

         c)    presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures on our
               evaluation as of the Evaluation Date;

     5.  The Registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the Registrant's auditors and the
         audit committee of Registrant's board of directors (or persons
         performing the equivalent functions):


                                       38
<PAGE>


         a)    all significant deficiencies in the design or operation of
               internal controls which could adversely affect the Registrant's
               ability to record, process, summarize and report financial data
               and have identified for the Registrant's auditors any material
               weaknesses in internal controls; and

         b)    any fraud, whether or not material, that involves management or
               other employees who have a significant role in the Registrant's
               internal controls; and

     6.  The Registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: April 10, 2003                       /s/ Michael  L. Ashner
                                           -------------------------------------
                                           Michael L. Ashner
                                           Chief Executive Officer




                                       39
<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                          FORM 10-KSB DECEMBER 31, 2002
                          -----------------------------

                                 CERTIFICATIONS

         I, Thomas Staples, certify that:

     1.  I have reviewed this annual report on Form 10-KSB of Winthrop
         Residential Associates III, A Limited Partnership;

     2.  Based on my knowledge, this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances under which
         such statements were made, not misleading with respect to the period
         covered by this annual report;

     3.  Based on my knowledge, the financial statements, and other financial
         information included in this annual report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the Registrant as of, and for, the periods presented in
         this annual report;

     4.  The Registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
         have:

         a)    designed such disclosure controls and procedures to ensure that
               material information relating to the Registrant is made known to
               us, particularly during the period in which this annual report is
               being prepared:

         b)    evaluated the effectiveness of the Registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

         c)    presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures on our
               evaluation as of the Evaluation Date;

     5.  The Registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the Registrant's auditors and the
         audit committee of Registrant's board of directors (or persons
         performing the equivalent functions):

                                       40
<PAGE>


         a)    all significant deficiencies in the design or operation of
               internal controls which could adversely affect the Registrant's
               ability to record, process, summarize and report financial data
               and have identified for the Registrant's auditors any material
               weaknesses in internal controls; and

         b)    any fraud, whether or not material, that involves management or
               other employees who have a significant role in the Registrant's
               internal controls; and

     6.  The Registrant's other certifying officers and I have indicated in this
         annual report whether there were significant changes in internal
         controls or in other factors that could significantly affect internal
         controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Date: April 10, 2003                              /s/ Thomas Staples
                                                  ------------------------
                                                  Thomas Staples
                                                  Chief Financial Officer



                                       41
<PAGE>

                                INDEX TO EXHIBITS

Exhibit
Number            Title of Document                                        Page
------            -----------------                                        ----

3.A.           Agreement and Certificate of Limited Partnership of
               Winthrop Residential Associates III, A Limited
               Partnership, dated as of June 28, 1982 (incorporated
               herein by reference to the Partnership's Registration
               Statement on Form S-11, File No. 2-81033).

3.B.           Twelfth Amendment dated as of January 24, 1984 to the
               Agreement and Certificate of Limited Partnership
               (incorporated herein by reference to the Partnership's
               Annual Report on Form 10-K filed March 30, 1984, File
               No. 2-81033).

4.             Agreement and Certificate of Limited Partnership of
               Winthrop Residential Associates III, A Limited
               Partnership, dated as of June 28, 1982 (incorporated
               herein by reference to the Partnership's Annual Report
               on Form 10-K for the year ended December 31, 1995)

10A.           Sales Agency Agreement between Winthrop Residential
               Associates III, A Limited Partnership and Winthrop
               Securities Co., Inc. (incorporated herein by reference
               to the Registrant's Registration Statement on Form
               S-11, File No. 2-81033).

10B.           Escrow Deposit Agreement among Winthrop Residential
               Associates III, A Limited Partnership, Winthrop
               Securities Co., Inc. and United States Trust Company
               (incorporated herein by reference to the Registrant's
               Registration Statement on Form S-11, File No. 2-81033).

10C.           Services Agreement, dated December 16, 1997, by and
               between First Winthrop Corporation, Winthrop Financial
               Co., Inc., WFC Realty Co., Inc., WFC Realty Saugus,
               Inc., Winthrop Properties, Inc., Winthrop Metro
               Equities Corporation, Winthrop Lisbon Realty, Inc. and
               Northwood Realty Co., Inc. and Coordinated Services of
               Valdosta, LLC (incorporated by reference to the
               Registrant's Annual Report on Form 10KSB for the year
               ended December 31, 1998.

99.1           Certification Pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.                                 43

99.2           Supplementary Information required pursuant to
               Section 9.4 of the Partnership Agreement.                   44


                                  42