<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, 2001          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 $1,579,000.

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>


                                     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.

         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").

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






                                       2




<PAGE>


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 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.

         Dunhaven Apartments, Section 2 Phase 2 - The loan encumbering Dunhaven
Apartments Phase II, ("Dunhaven") was in default and held by the U.S. Department
of Housing and Urban Development. The Partnership was unable to reach an
agreement with the general partner of the Local Limited Partnership which holds
title to Dunhaven pursuant to which the Partnership, or an affiliate of the
Partnership, would have been appointed as general partner of the Dunhaven Local
Limited Partnership and the Partnership, or its affiliate, would satisfy the
default on the loan. In June 1999, the Department of Housing and Urban
Development foreclosed on the mortgage for Dunhaven. For financial reporting
purposes, the Partnership's investment in this Local Limited Partnership had
previously been written down to zero. For tax reporting purposes, the
Partnership incurred a tax liability in 2000 due to the recapture of tax
benefits taken in prior years in proportion to its ownership interest in the
Local Limited Partnership.

         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.



                                       3

<PAGE>


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."

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, 2002:

<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

                                       4

<PAGE>
         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, 2001       Interest Rate      Amortized      Maturity Date       Maturity
        --------           -----------------       -------------      ---------      -------------       --------
<S>                        <C>                     <C>                <C>            <C>              <C>
Clear Creek                            $2,346,000      7.5%           36 years         10/1/2018                  (1)
Village Square                        $10,382,000      7.64%          30 years          6/1/2011           $8,900,000
Dunhaven
 Apartments,
 Section 2,
 Phase 1                               $1,972,000      7.5%           36 years          2/1/2022                  (1)
The Groves
 Apartments
                                       $1,771,000      7.5%           36 years          2/1/2019                  (1)
Autumn Chase                           $2,943,000      7.5%           40 years         11/1/2024                  (1)
Maple Manor                            $1,789,000      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, 2001, Clear
Creek had received insurance proceeds of approximately $1,013,000 and had paid
expenses of approximately $765,000 related to the flood with an additional
$241,000 to be paid. Clear Creek has completed most of the repair work and
residents have re-occupied the damaged units. The excess of insurance proceeds
received over expenses paid is included in accounts payable and accrued
expenses.

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

<TABLE>
<CAPTION>

                         Local Limited Partnership                         Ownership Interest
                         -------------------------                         ------------------
<S>                                                                        <C>
       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%
</TABLE>

                                       5


<PAGE>



      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:

<TABLE>
<CAPTION>
                                       Average Monthly        Average Monthly Rental
                                       Occupancy Rate             Rate per Unit
                                     ------------------      -----------------------
            Property                  2001         2000         2001         2000
            --------                  ----         ----         ----         ----
<S>                                  <C>           <C>         <C>          <C>
Clear Creek Landing (1)               82%           93%         $544         $536
Village Square                        97%           99%         $842         $711
Dunhaven Apartments,
  Section 2, Phase 1                  96%           95%         $670         $637
The Groves                            93%           93%         $438         $425
Autumn Chase                          98%           98%         $476         $473
Maple Manor                           88%           88%         $391         $414
</TABLE>

(1)      Occupancy rate is lower due to the flood damage that occurred to
         approximately 50% of the property's units.

         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, 2001 (in thousands):

<TABLE>
<CAPTION>
                                      Gross                                                                Federal
                                     Carrying         Accumulated                                            Tax
            Property                  Value           Depreciation             Rate           Method        Basis
            --------                  -----           ------------             ----           ------        -----
<S>                                <C>               <C>                    <C>              <C>
Clear Creek Landing                   $5,299             $3,524              3-25 yrs.          S/L         $ 720
Village Square                       $10,362             $7,021             10-25 yrs.          S/L        $3,021
Dunhaven Apartments,
 Section 2, Phase 1                   $2,404             $1,768             5-33.3 yrs.        S/L,DD       $ 290
The Groves                            $3,579             $2,401             10-25 yrs.          S/L         $ 384
Autumn Chase                          $3,460             $2,338              7-30 yrs.          S/L         $ 220
Maple Manor                           $2,918             $1,965             10-25 yrs.          S/L         $ 152
</TABLE>

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.


                                      6

<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 15, 2002, there were 2,054 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, 2001 and 2000, 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:


<TABLE>
<CAPTION>
                                                  Amount of
        Distribution with                  Distribution Per Unit
            Respect to                   ------------------------
          Quarter Ended                   2001             2000
          -------------                   ----             ----
<S>                                      <C>              <C>
March 31                                 $1.00             $1.00
June 30                                  $4.00             $1.00
September 30                             $1.00             $1.00
December 31                              $1.00             $1.00
</TABLE>

         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) 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.

                                       7

<PAGE>


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

         The matters discussed in this Form 10-KSB contain certain
forward-looking statements and involve risks and uncertainties (including
changing market conditions, competitive and regulatory matters, etc.) detailed
in the disclosure contained in this Form 10-KSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such matters,
does not take into account the effects of any changes to the Partnership's
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.

         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, 2001 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, 2001, the Partnership had cash and cash equivalents
of $2,902,000 as compared to $3,052,000 at December 31, 2000. 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
2000. During 2001, the Partnership made investments in two Local Limited
Partnerships which amounted to $511,000. The investments were for property
improvements 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 level of liquidity based on cash and cash equivalents experienced a
$150,000 decrease at December 31, 2001, as compared to December 31, 2000. The
Partnership's $264,000 of net cash provided by operating activities was more
than offset by $185,000 of net cash used in





                                       8






<PAGE>

investing activities and $229,000 of cash used in financing activities. Cash
provided by investing activities consisted of $355,000 of distributions received
from Local Limited Partnerships which was more than offset by $511,000 of
investments made in two Local Limited Partnerships and $29,000 of property
improvements. Cash used in financing activities consisted of $162,000 of
distributions to partners and $67,000 of mortgage principal payments. For the
year ended December 31, 2001, Partnership distributions, paid or accrued,
aggregated $175,000 ($7.00 per Unit) to its limited partners and $14,000 to the
general partners.

         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, 2001, Clear
Creek had received the insurance proceeds of $1,013,000 and had paid expenses of
approximately $765,000 related to the flood, with another $241,000 to be paid.
Clear Creek has completed most of the repair work and residents were able to
re-occupy the damaged units. The excess of insurance proceeds received over
expenses paid is included accounts payable and accrued expenses.

         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 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.

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

         The Partnership's net income for the year ended December 31, 2001 was
$142,000, as compared to net income of $847,000 for the year ended December 31,
2000. The decrease is due to a decrease in income of $568,000 and an increase in
expenses of $137,000. The decrease in income is primarily due to a decrease of
$437,000 of cash received from the Local Limited Partnerships and a decrease in
rental income of $112,000. During the year ended December 31, 2001, the Local
Limited Partnerships owning Village Square Apartments and Maple Manor Apartments
distributed $335,000 and $20,000, respectively. During the year ended December
31, 2000, the Local Limited Partnerships owning Village Square Apartments, Maple
Manor Apartments and the Groves Apartments distributed $705,000, $48,000 and
$39,000, respectively. The distribution from Village Square in 2000 included
$400,000 of refinancing proceeds. The decrease in rental income is a result of
the flood damage as described above. The increase in expenses is primarily due
to an increase in operating expenses of $127,000 at Clear Creek. All other
expenses remained relatively constant.




                                        9




<PAGE>


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

         The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of SFAS No. 133." These statements require companies to recognize
all derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether they
qualify for hedge accounting. These statements were effective for fiscal years
beginning after June 15, 2000. There was no effect from these statements on the
Partnership's financial statements.

         In July 2001, the FASB issued SFAS No. 141 "Business Combinations".
SFAS No. 141 requires that all business combinations be accounted for under the
purchase method of accounting. SFAS No. 141 also changes the criteria for the
separate recognition of intangible assets acquired in a business combination.
SFAS No. 141 is effective for all business combinations initiated after June 30,
2001. There was no effect from this statement on the Partnership's financial
statements.

         In July 2001, the FASB issued 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 will not affect
the Partnership's 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. The Partnership does not expect that this
statement will have a material effect on the Partnership's 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, 2001 is at a fixed rate of interest.



                                       10

<PAGE>




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

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

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

                     YEARS ENDED DECEMBER 31, 2001 and 2000
                     --------------------------------------

                                      INDEX
                                      -----


<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                     <C>
Independent Auditors' Report                                                                               12

Financial Statements:

Consolidated Balance Sheets as of December 31, 2001 and 2000                                               13

Consolidated Statements of Income for the Years Ended
     December 31, 2001 and 2000                                                                            14

Consolidated Statements of Partners' Capital for the Years Ended
     December 31, 2001 and 2000                                                                            15

Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2001 and 2000                                                                            16

Notes to Consolidated Financial Statements                                                                 17
</TABLE>



                                       11


<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, 2001 and 2000, 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 and were written down to zero (see Note
1). 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,
2001 and 2000, 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 1, 2002


                                       12



<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                         ------------------------------------
                                                                                2001                2000
                                                                         ----------------    ----------------
<S>                                                                      <C>                 <C>
ASSETS
------

Cash and Cash Equivalents                                                $         2,902     $         3,052
Investments in Local Limited Partnerships                                            497                   -
Other Assets                                                                         108                  98
Real Estate, net                                                                   1,775               1,977
                                                                         ----------------    ----------------

      Total Assets                                                       $         5,282     $         5,127
                                                                         ================    ================

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

Liabilities:

Accounts Payable and Accrued Expenses                                    $           339     $           110
Distributions Payable                                                                108                  81
Mortgage Payable                                                                   2,346               2,413
Accrued Interest - Subordinated Loan Payable                                         100                  87
Subordinated Loan Payable                                                            133                 133
                                                                         ----------------    ----------------

      Total Liabilities                                                            3,026               2,824
                                                                         ----------------    ----------------

Partners' Capital:

Limited Partners -
      Units of Limited Partnership Interest,
      $1,000 stated value per unit; 25,005
      units authorized, issued and outstanding                                     3,429               3,473
General Partners' Deficit                                                         (1,173)             (1,170)
                                                                         ----------------    ----------------

      Total Partners' Capital                                                      2,256               2,303
                                                                         ----------------    ----------------

      Total Liabilities and Partners' Capital                            $         5,282     $         5,127
                                                                         ================    ================
</TABLE>






                 See notes to consolidated financial statements.

                                       13
<PAGE>

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

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


<TABLE>
<CAPTION>
                                                                              YEARS ENDED DECEMBER 31,
                                                                         ------------------------------------
                                                                                2001                2000
                                                                         ----------------    ----------------
<S>                                                                      <C>                 <C>

Income:

Rental Income                                                            $         1,070     $         1,182
Income from Local Limited Partnerships'
  Cash Distributions                                                                 355                 792
Equity in Losses of Local Limited Partnerships                                       (14)                  -
Interest                                                                             120                 125
Other Income                                                                          48                  48
                                                                         ----------------    ----------------

      Total Income                                                                 1,579               2,147
                                                                         ----------------    ----------------

Expenses:

Operating                                                                            921                 794
Interest                                                                             192                 196
Depreciation                                                                         231                 220
General and Administrative                                                            93                  90
                                                                         ----------------    ----------------

      Total Expenses                                                               1,437               1,300
                                                                         ----------------    ----------------

Net Income                                                               $           142     $           847
                                                                         ================    ================

Net Income Allocated to General Partners                                 $            11     $            64
                                                                         ================    ================

Net Income Allocated to Limited Partners                                 $           131     $           783
                                                                         ================    ================

Net Income per Unit of Limited Partnership Interest                      $          5.24     $         31.31
                                                                         ================    ================

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





                 See notes to consolidated financial statements.

                                       14

<PAGE>

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

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                  --------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                        (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, 2000                          25,005   $       (1,226)  $       2,790   $        1,564

     Net Income                                                         64             783              847

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

Balance - December 31, 2000                        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
                                            ==============  ===============  ==============  ===============
</TABLE>






                 See notes to consolidated financial statements.


                                       15





<PAGE>

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

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

<TABLE>
<CAPTION>
                                                                              YEARS ENDED DECEMBER 31,
                                                                         ------------------------------------
                                                                               2001                2000
                                                                         ----------------    ----------------
<S>                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                               $           142     $           847
Adjustments to reconcile net income to net cash provided
  by operating activities:
      Depreciation                                                                   231                 220
      Income from Local Limited Partnerships' cash distributions                    (355)               (792)
      Equity in losses of Local Limited Partnerships                                  14                   -
Changes in assets and liabilities:
      Increase in other assets                                                       (10)                 (7)
      (Decrease) increase in accounts payable and
         accrued expenses                                                            229                  28
      Increase in accrued interest payable on subordinated loan                       13                  14
                                                                         ----------------    ----------------

Net cash provided by operating activities                                            264                 310
                                                                         ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

      Distributions received from Local Limited Partnerships                         355                 792
      Property improvements                                                          (29)               (142)
      Investments in Local Limited Partnerships                                     (511)                  -
                                                                         ----------------    ----------------

      Net cash (used in) provided by investing activities                           (185)                650
                                                                         ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

      Mortgage principal payments                                                    (67)                (62)
      Distributions to partners                                                     (162)               (529)
                                                                         ----------------    ----------------

Cash used in financing activities                                                   (229)               (591)
                                                                         ----------------    ----------------

Net (decrease) increase in Cash and Cash Equivalents                                (150)                369

Cash and Cash Equivalents, Beginning of Year                                       3,052               2,683
                                                                         ----------------    ----------------

Cash and Cash Equivalents, End of Year                                   $         2,902     $         3,052
                                                                         ================    ================

Supplemental Disclosure of Cash Flow Information

      Cash paid for interest                                             $           179     $           184
                                                                         ================    ================

Supplemental Disclosure of Non-Cash Financing Activities

      Accrued distributions to partners                                  $           108     $            81
                                                                         ================    ================
</TABLE>


                 See notes to consolidated financial statements.


                                       16



<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------

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 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, 2001 and 2000, 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.


                                       17
<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (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 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
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 each Local Limited Partnership
using the equity method. 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. 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.

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.

                                       18
<PAGE>
           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (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
------------------------------------

The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of SFAS No. 133." These statements require companies to recognize
all derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether they
qualify for hedge accounting. These statements were effective for fiscal years
beginning after June 15, 2000. There was no effect from these statements on the
Partnership's financial statements.

                                       19

<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (Continued)


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

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

In July 2001, the FASB issued SFAS No. 141 "Business Combinations". SFAS No. 141
requires that all business combinations be accounted for under the purchase
method of accounting. SFAS No. 141 also changes the criteria for the separate
recognition of intangible assets acquired in a business combination. SFAS No.
141 is effective for all business combinations initiated after June 30, 2001.
There was no effect from this statement on the Partnership's financial
statements.

In July 2001, the FASB issued 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 will not affect the
Partnership's 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. The Partnership does not expect that this statement will have a
material affect on the Partnership's 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.

                                       20
<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (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, 2001 and 2000, respectively,
affiliates of Coordinated Services received $712,000 and $340,000 in fees and
expense reimbursements for managing these Local Limited Partnerships. Included
in the amount received for 2001, are $327,000 for property improvements made at
the Savannah River Associates and Fayetteville Apartments Local Limited
Partnerships.

Coordinated Services was entitled to receive 25% or approximately $14,000 for
2001 and $15,000 for 2000 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 10) to a company owned by a limited partner of Clear Creek. As of
December 31, 2001, Clear Creek had paid a total of $765,000 to this company,
with another $241,000 included in accounts payable. Clear Creek received
$1,013,000 of insurance settlement proceeds in 2001 related to the flood damage.

                                       21
<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (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:

<TABLE>
<CAPTION>
                           <S>                      <C>
                           2002                     $          72,000
                           2003                                78,000
                           2004                                84,000
                           2005                                90,000
                           2006                                97,000
                           Thereafter                       1,925,000
                                                    ------------------
                                                    $       2,346,000
                                                    ==================
</TABLE>

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:

<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                    -----------------------------------------
                                                                           2001                  2000
                                                                    -------------------   -------------------
               <S>                                                  <C>                   <C>
               Land                                                 $          500,000    $          500,000
               Buildings, improvements and
                  furnishings                                                4,799,000             4,770,000
                                                                    -------------------   -------------------
                                                                             5,299,000             5,270,000
               Accumulated Depreciation                                     (3,524,000)           (3,293,000)
                                                                    --------------------- -------------------
                                                                    $        1,775,000    $        1,977,000
                                                                    ===================   ===================
</TABLE>


                                       22



<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (Continued)


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

As of December 31, 2001, 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.

On May 27, 1999, Village Square Associates Limited Partnership ("Village
Square") refinanced its mortgage. During September 1999, Village Square
distributed $942,000 of the proceeds to the Partnership. At December 31, 1999,
the Partnership recorded an accrued distribution of $475,000 related to these
refinancing proceeds which was distributed during the first quarter of 2000.
During 2000, Village Square distributed an additional $400,000 of refinancing
proceeds to the Partnership.

The above Local Limited Partnerships have outstanding mortgages, as of December
31, 2001, totaling $18,857,000 secured by the Local Limited Partnerships' real
property, security interests, liens and endorsements common to first mortgage
loans.

During 2000, the Partnership made no additional investments in the Local Limited
Partnerships. During 2001, the Partnership made investments to 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 31st 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.


                                       23

<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (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,
                                                                   ------------------------------------------
                                                                          2001                     2000
                                                                   -------------------       ----------------
<S>                                                                <C>                       <C>
ASSETS

Real estate, at cost:
  Land                                                             $          1,063          $        1,063
  Buildings, net of accumulated depreciation of
  $15,494 and $14,887 in 2001 and 2000, respectively                          6,165                   6,365
  Cash and cash equivalents                                                   1,320                   1,113
  Other assets, net of accumulated amortization of
  $221 and $191 in 2001 and 2000, respectively                                  963                     957
                                                                 -------------------       -----------------

  Total Assets                                                    $           9,511         $         9,498
                                                                 ===================       =================

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Notes payable                                                   $             410         $           404
  Loans payable                                                                 533                      22
  Mortgage notes payable                                                     18,857                  19,108
  Accounts payable and accrued expenses                                         489                     377
                                                                 -------------------       -----------------

  Total Liabilities                                                          20,289                  19,911
                                                                 -------------------       -----------------

Partners' Deficit:
  Winthrop Residential Associates III                                       (5,827)                 (5,561)
  Other partners                                                            (4,951)                 (4,852)
                                                                 -------------------       -----------------

  Total Deficit                                                            (10,778)                (10,413)
                                                                 -------------------       -----------------

Total Liabilities and Partners' Deficit                          $           9,511         $         9,498
                                                                 ===================       =================
</TABLE>

                                       24


<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (Continued)



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

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

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31,
                                                                     -------------------------------------------------

                                                                              2000                       1999
                                                                     --------------------    -------------------------
<S>                                                                  <C>                     <C>
Income:

     Rental income                                                   $             4,925     $                  4,668
     Other income                                                                    188                          322
                                                                     --------------------    -------------------------

         Total income                                                              5,113                        4,990
                                                                     --------------------    -------------------------

Expenses:

     Interest                                                                      1,444                        1,465
     Depreciation and amortization                                                   644                          608
     Taxes and insurance                                                             438                          403
     Management and administrative fees                                              349                          290
     Repairs, maintenance and utilities                                            1,185                        1,160
     General and administrative                                                      779                          766
                                                                     --------------------    -------------------------

         Total expenses                                                            4,839                        4,692
                                                                     --------------------    -------------------------

Net Income                                                           $               274     $                    298
                                                                     ====================    =========================

Net income allocated to
 Winthrop Residential Associates III                                 $                54     $                     69
                                                                     ====================    =========================

Net income allocated to other partners                               $               220     $                    229
                                                                     ====================    =========================
</TABLE>

                                       25

<PAGE>

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------
                                   (Continued)





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

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

<TABLE>
<CAPTION>
                                                                                   2001                  2000
                                                                            -------------------   -------------------
<S>                                                                         <C>                   <C>
     Net income for financial reporting purposes                            $              142    $              847

         Differences in equity in Local Limited Partnership's
         income/loss for financial reporting and tax reporting
         purposes.                                                                         705                 2,108

         Income from Local Limited Partnership's Cash
         distributions                                                                    (355)                 (792)
                                                                            --------------------  --------------------
     Taxable income
                                                                            $              492    $            2,163
                                                                            ===================   ===================
</TABLE>

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. As of December 31, 2001, Clear
Creek had received the insurance proceeds of $1,013,000 and had paid expenses of
approximately $765,000 related to the flood, with another $241,000 to be paid.
Clear Creek has completed most of the repair work and residents were able to
re-occupy the damaged units. The excess of insurance proceeds received over
expenses paid is included in accounts payable and accrued expenses.



                                       26
<PAGE>



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


         There were no disagreements with Imowitz Koenig & Co., LLP regarding
the 2001 or 2000 audits of the Partnership's financial statements.

                                       27

<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, 2002, 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 49, has been the Chief Executive Officer of
Winthrop Financial Associates, A Limited Partnership ("WFA") and the Managing
General Partner since January 15, 1996. From June 1994 until January 1996, Mr.
Ashner was a Director, President and Co-chairman of National Property Investors,
Inc., a real estate investment company ("NPI"). Mr. Ashner was also a Director
and executive officer of NPI Property Management Corporation ("NPI Management")
from April 1984 until January 1996. In addition, since 1981 Mr. Ashner has been
President of Exeter Capital Corporation, a firm which has organized and
administered real estate limited partnerships. Mr. Ashner currently serves as a
director of Nexthealth Corp., Great Bay Hotel and Casino Inc., Burnham Pacific
Properties, Inc. and NBTY, Inc.

         Thomas C. Staples, age 46, 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.


                                       28


<PAGE>

         Peter Braverman, age 50, has been a Vice President of WFA and the
Managing General Partner since January 1996. From June 1995 until January 1996,
Mr. Braverman was a Vice President of NPI and NPI Management. From June 1991
until March 1994, Mr. Braverman was President of the Braverman Group, a firm
specializing in management consulting for the real estate and construction
industries.

         Patrick J. Foye, age 44, 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 a 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 35, has been employed with WFA since January 1993.
From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and Associate in
WFA's accounting and asset management departments. Ms. Tiffany was a Vice
President in the asset management and investor relations departments of WFA from
October 1995 to December 1997, at which time she became the Chief Operating
Officer of WFA.

         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.

                                       29

<PAGE>

         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 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


                                       30


<PAGE>


Units at March 15, 2002. Under the Partnership Agreement, the voting rights of
the Limited Partners are limited.

         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, 2002, 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, 2001 and 2000, the Partnership
allocated taxable income to the General Partners of $37,000 and $162,000,
respectively. For each of the years ended December 31, 2001 and 2000, the
Partnership paid or accrued cash distributions to the General Partners of
$14,000 and $8,000, respectively.

                                       31

<PAGE>


Item 13. 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

                                       32
<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 4th day of
April, 2002.

                                   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.

<TABLE>
<CAPTION>
Signature/Name                              Title                                             Date
--------------                              -----                                             ----
<S>                                         <C>                                               <C>
/s/ Michael Ashner                          Chief Executive Officer and Director              April 4, 2002
------------------
Michael Ashner

/s/ Thomas Staples                          Chief Financial Officer                           April 4, 2002
------------------
Thomas Staples

/s/ Peter Braverman                         Executive Vice President and Director             April 4, 2002
-------------------
Peter Braverman
</TABLE>


                                       33
<PAGE>


                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number            Title of Document                                                     Page
------            -----------------                                                     ----
<S>      <C>                                                                           <C>
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.      Supplementary Information required pursuant to Section 9.4 of the                      34
         Partnership Agreement.
</TABLE>