<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, 2000              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.)

5 Cambridge Center, 9th Floor, Cambridge, Massachusetts                 02142
-------------------------------------------------------              -----------
      (Address of principal executive offices)                       (Zip  Code)

Registrant's telephone number including area code:                (617) 234-3000
                                                                  --------------

        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 $2,147,000.

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.

         Clear Creek had two housing assistance contracts with the Department of
Housing and Urban Development which expired in 1999 and were not renewed.
Management replaced


                                       3

<PAGE>


the housing assistance contracts with subsidized payments from a local subsidy
contract. Based upon 2000 operations, the non-renewal of these contracts did not
have a significant impact on rental operations.

Employees
---------

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

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


                                       4

<PAGE>


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

         The following table sets forth certain information regarding the
properties owned by the six Local Limited Partnerships in which the Partnership
has retained an interest and which continue to own apartment properties as of
March 15, 2001:

<TABLE>
<CAPTION>

Property Name                    Location                        Date of Acquisition(1)          Number of Units
-------------                    --------                        ----------------------          ---------------
<S>                              <C>                               <C>                           <C>

Clear Creek Landing Apartments   Houston, TX                             4-28-83                       200

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

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

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

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

Maple Manor Apartments           Fayetteville, AR                       10-30-83                       128

</TABLE>

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


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


<TABLE>
<CAPTION>

                                                                                                        Principal
                           Principal Balance at                                                       Balance Due at

        Property           December 31, 2000       Interest Rate  Period Amortized   Maturity Date       Maturity
        --------           -----------------       -------------  ----------------   -------------       --------
<S>                        <C>                     <C>                                <C>                 <C>

Clear Creek                      $ 2,412,639           7.5 %          36 years         10/1/2018                  (1)
Village Square                   $10,475,900           7.64%          30 years          6/1/2011           $8,900,000
Dunhaven
 Apartments,
 Section 2,
 Phase 1                         $ 2,014,305           7.5 %          36 years          2/1/2022                  (1)
The Groves Apartments            $ 1,819,988           7.5 %          36 years          2/1/2019                  (1)
Autumn Chase                     $ 2,989,125           7.5 %          40 years         11/1/2024                  (1)
Maple Manor                      $ 1,808,430           7.08%          30 years          7/1/2008           $1,630,000


</TABLE>

(1)  Loan is a self-amortizing loan.

      On June 16, 1998, Fayetteville Apartments Limited Partnership, one of the
Local Limited Partnerships in which the Partnership has an equity interest,
refinanced its mortgage. The new mortgage in the amount of $1,850,000 replaced
indebtedness of approximately $1,217,000. The mortgage bears interest at 7.08%,
requires monthly payments of approximately $12,000 and matures on July 1, 2008,
with a balloon payment of approximately $1,630,000. During September 1998, the
Local Limited Partnership distributed $250,000 of refinancing proceeds to


                                       5

<PAGE>


the Partnership. The Partnership distributed the proceeds during the first
quarter of 1999.

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

                Local Limited Partnership            Ownership Interest
                -------------------------            ------------------
       Clear Creek Landing Apartments                       88.5%
       Village Square Apartments                              50%
       Dunhaven Apartments, Section 2, Phase 1                95%
       The Groves Apartments                                  50%
       Autumn Chase Apartments                                99%
       Maple Manor Apartments                                 50%

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

                                                    Average Monthly Rental
                             Average Monthly            Rate per Unit
                             Occupancy Rate
                            -----------------       ----------------------
            Property        2000         1999         2000         1999
            --------        ----         ----         ----         ----

Clear Creek Landing         93%           91%         $536         $518
Village Square              99%           93%         $711         $725
Dunhaven Apartments,
  Section 2, Phase 1        95%           73%         $637         $592
The Groves                  93%           91%         $425         $414
Autumn Chase                (1)           (1)          (1)          (1)
Maple Manor                 88%           88%         $414         $372

(1)      Information has not been provided by the Local Limited Partnership.


                                       6

<PAGE>



         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, 2000 (in thousands):

<TABLE>
<CAPTION>


                             Gross                                                                Federal
                            Carrying         Accumulated                                            Tax
            Property         Value           Depreciation             Rate           Method        Basis
           -----------     ---------         -------------            ----           ------       -------
<S>                          <C>            <C>                  <C>               <C>             <C>

Clear Creek Landing         $ 5,270                $3,293        3-25 yrs.            S/L          $  744
Village Square              $10,362                $6,849       10-25 yrs.            S/L          $3,186
Dunhaven Apartments,
 Section 2, Phase 1         $ 2,323                $1,682      5-33.3 yrs.            S/L,DD       $  221
The Groves                  $ 3,361                $2,279       10-25 yrs.            S/L          $  167
Autumn Chase                $ 3,460                $2,213        7-30 yrs.            S/L          $  222
Maple Manor                 $ 2,810                $1,864       10-25 yrs.            S/L          $  155

</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.


                                       7


<PAGE>



                                     PART II

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

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

         As of March 15, 2001, there were 2,079 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, 2000 and 1999, the Partnership has made the following cash
distributions with respect to the Units to holders thereof as of the dates set
forth below in the amounts set forth opposite such dates:

                                              Amount of
                                            Distribution
                                              Per Unit
                                     -------------------------
            Distribution with
                Respect to
               Quarter Ended           2000        1999
               -------------           ----        ----

                March 31               $1.00       $ 1.00
                June 30                $1.00       $ 1.00
                September 30           $1.00       $ 1.00
                December 31            $1.00       $20.00

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


                                       8

<PAGE>



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.


                                       9


<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, 2000, 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's general partner is the
sole 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 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, 2000, the Partnership had cash and cash equivalents
of $3,052,000 as compared to $2,683,000 at December 31, 1999. 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 and 1999.

              The level of liquidity based on cash and cash equivalents
experienced a $369,000 increase at December 31, 2000, as compared to December
31, 1999. The Partnership's $310,000 of net cash provided by operating
activities and $792,000 of distributions received from the Local Limited
Partnerships (investing activities) was partially offset by $529,000 of cash
distributed to partners (financing activities), $62,000 of mortgage principal
payments (financing activities), and $142,000 used for additions to fixed assets
(investing activities). As of December


                                       10

<PAGE>


31, 2000, Partnership distributions declared aggregated $100,000 ($4.00 per
Unit) to its limited partners and $8,000 to the general partners. During
September 1999, Village Square Associates distributed $942,000 of refinancing
proceeds to the Partnership. The Partnership distributed $475,000 related to the
refinancing proceeds in the quarter ended March 31, 2000. During 2000, Village
Square Associates distributed an additional $400,000 of refinancing proceeds to
the Partnership.

         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.

         In 1999, the Department of Housing and Urban Development foreclosed on
the mortgage for Dunhaven Apartments Phase II. 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 had two housing assistance contracts with the Department of
Housing and Urban Development which expired in 1999 and were not renewed.
Management replaced the housing assistance contracts with subsidized payments
from a local subsidy contract. The non-renewal of these contracts did not have a
significant impact on rental operations.

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

         The Partnership's net income for the year ended December 31, 2000 was
$847,000, as compared to net income of $1,271,000 for the year ended December
31, 1999. The decrease is due to a decrease in income of $382,000 and an
increase in expenses of $42,000. The decrease in income is primarily due to a
decrease of $556,000 of cash received from the Local Limited Partnerships which
was partially offset by a decrease of $72,000 of equity in loss of a Local
Limited Partnership, an increase in rental income of $55,000, interest income of
$42,000 and other income of $5,000. 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 an
additional $400,000 of refinancing proceeds. During the year ended December 31,
1999, the Local Limited Partnerships owning Village Square Apartments, Maple
Manor Apartments and the Groves Apartments distributed $1,308,000, $27,000 and
$13,000, respectively. The distribution from Village Square in 1999 included
$942,000 of refinancing proceeds. The increase in expenses is due to increases
in operating expenses of $10,000, depreciation and amortization of $28,000 and
general and administrative of $9,000, which were partially offset by a decrease
in interest expense of $5,000.


                                       11

<PAGE>


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

         The Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS No. 133." The Statement deferred for one year the
effective date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities". The Statement requires 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. This Statement is effective for fiscal years
beginning after June 15, 2000. The Partnership believes that the effect of SFAS
133 on its financial statements will be immaterial.

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, 2000 is at a fixed rate of interest.


                                       12


<PAGE>



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


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP

                        CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 and 1999

                                      INDEX

<TABLE>
<CAPTION>

                                                                                               Page
                                                                                               ----
<S>                                                                                           <C>
         Independent Auditors' Report............................................................14

         Financial Statements:

         Consolidated Balance Sheets as of December 31, 2000 and 1999............................15

         Consolidated Statements of Income for the Years Ended
              December 31, 2000 and 1999.........................................................16

         Consolidated Statements of Partners' Capital for the Years Ended
              December 31, 2000 and 1999.........................................................17

         Consolidated Statements of Cash Flows for the Years Ended
              December 31, 2000 and 1999.........................................................18

         Notes to Consolidated Financial Statements..............................................19

</TABLE>


                                       13


<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, 2000 and 1999, 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,
2000 and 1999, 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, 2001


                                       14



<PAGE>



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

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

<TABLE>
<CAPTION>

                                                                     DECEMBER 31,
                                                           ----------------------------
                                                                2000           1999
                                                           ------------    ------------
<S>                                                       <C>              <C>
ASSETS

Cash and Cash Equivalents                                  $     3,052     $      2,683
Other Assets                                                        98               91
Real Estate, net                                                 1,977            2,055
                                                           ------------    -------------
      Total Assets                                         $    5,127      $     4,829
                                                           ============    =============


LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

Accounts Payable and Accrued Expenses                      $       110     $         82
Distributions Payable                                               81              502
Mortgage Payable                                                 2,413            2,475
Accrued Interest - Subordinated Loan Payable                        87               73
Subordinated Loan Payable                                          133              133
                                                           ------------    -------------
       Total Liabilities                                         2,824            3,265
                                                           ------------    -------------
Partners' Capital:

Limited Partners -
       Units of Limited Partnership Interest,
       $1,000 stated value per unit; 25,005
       units authorized, issued and outstanding                  3,473            2,790
General Partners' deficit                                       (1,170)          (1,226)
                                                           ------------    -------------
       Total Partners' Capital                                   2,303            1,564
                                                           ------------    -------------
      Total Liabilities and Partners' Capital              $     5,127     $      4,829
                                                           ============    =============

</TABLE>


                See notes to consolidated financial statements.


                                       15

<PAGE>



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

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


<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                                ----------------------------
                                                                    2000           1999
                                                                -----------    -------------
<S>                                                            <C>                     <C>
Income:

Rental Income                                                    $   1,182      $     1,127
Income from Local Limited Partnerships'
  cash distributions                                                   792            1,348
Equity in loss of Local Limited Partnership                              -              (72)
Interest                                                               125               83
Other income                                                            48               43
                                                                -----------    -------------
       Total Income                                                  2,147            2,529
                                                                -----------    -------------
Expenses:

Operating                                                              794              784
Interest                                                               196              201
Depreciation and amortization                                          220              192
General and administrative                                              90               81
                                                                -----------    -------------
       Total Expenses                                                1,300            1,258
                                                                -----------    -------------
Net Income                                                       $     847      $     1,271
                                                                ===========    =============
Net Income Allocated to General Partners                         $      64      $        95
                                                                ===========    =============
Net Income Allocated to Limited Partners                         $     783      $     1,176
                                                                ===========    =============
Net Income per Unit of Limited Partnership Interest              $   31.31      $     47.03
                                                                ===========    =============
Distributions per Unit of Limited Partnership Interest           $    4.00      $     23.00
                                                                ===========    =============

</TABLE>


                See notes to consolidated financial statements.


                                       16


<PAGE>


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

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                  --------------------------------------------
                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                     --------------------------------------
                        (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, 1999           25,005          $  (1,313)        $    2,189          $    876

     Net Income                                            95              1,176             1,271

     Distributions                                         (8)              (575)             (583)
                                -----------         ------------        ---------         ---------
Balance - December 31, 1999         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
                                ===========         ============      ===========         =========

</TABLE>


                See notes to consolidated financial statements.


                                      17


<PAGE>


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

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


<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                          ----------------------------
                                                                               2000           1999
                                                                          ------------    ------------
<S>                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
Net income                                                                $       847     $     1,271
Adjustments to reconcile net income to net cash provided
  by operating activities:
       Depreciation                                                               220             188
       Amortization                                                                 -               4
       Equity in loss of Local Limited Partnership                                  -              72
       Income from Local Limited Partnerships' cash distributions                (792)         (1,348)
Changes in assets and liabilities:
       (Increase) decrease in other assets                                         (7)              7
        Increase (decrease) in accounts payable and
          accrued expenses                                                         28             (26)
       Increase in accrued interest payable on subordinated loan                   14              13
                                                                          ------------    ------------
Net cash provided by operating activities                                         310             181
                                                                          ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
       Distributions received from Local Limited Partnerships                     792           1,348
       Additions to fixed assets                                                 (142)           (153)
                                                                          ------------    ------------
       Net cash provided by investing activities                                  650           1,195
                                                                          ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
       Mortgage principal payments                                                (62)            (58)
       Distributions to partners                                                 (529)           (358)
                                                                          ------------    ------------
Cash used in financing activities                                                (591)           (416)
                                                                          ------------    ------------
Net increase in Cash and Cash Equivalents                                         369             960

Cash and Cash Equivalents, Beginning of Year                                    2,683           1,723
                                                                          ------------    ------------
Cash and Cash Equivalents, End of Year                                    $     3,052     $     2,683
                                                                          ============    ============

Supplemental Disclosure of Cash Flow Information
------------------------------------------------
       Cash paid for interest                                             $       184     $       188
                                                                          ============    ============
Supplemental Disclosure of Non-Cash Financing Activities
--------------------------------------------------------
       Accrued Distributions to Partners                                  $        81     $       502
                                                                          ============    ============



</TABLE>


                 See notes to consolidated financial statements.

                                       18

<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------


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, 2000 and 1999, 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, less accumulated depreciation. 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.


                                       19

<PAGE>



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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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.

     Uses 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. 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. Costs in excess of the
     Partnership's initial basis in the net assets of the Local Limited
     Partnership are amortized over the estimated useful lives of the underlying
     assets. Equity in loss of Local Limited Partnerships and amortization of
     investment costs and costs in excess of initial basis 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.


                                       20


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------


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 issued SFAS No. 137, "Accounting
     for Derivative Instruments and Hedging Activities - Deferral of the
     Effective Date of SFAS No. 133." The Statement deferred for one year the
     effective date of SFAS No. 133, "Accounting for Derivative Instruments and
     Hedging Activities". The Statement requires 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. This Statement is effective
     for fiscal years beginning after June 15, 2000. The Partnership believes
     that the effect of SFAS 133 on its financial statements will be immaterial.


                                       21


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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.

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

     Two Winthrop Properties, Inc. ("Two Winthrop" or 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, 2000 and 1999,
     respectively, affiliates of Coordinated Services received $340,000 and
     $358,000 in fees and expense reimbursements for managing these Local
     Limited Partnerships.

     Coordinated Services was entitled to receive 25% or approximately $15,000
     for 2000 and 1999 of the Clear Creek management fee for supervisory
     services.


                                       22


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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

     The mortgage, which is secured 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:

                       2001                       $        67,000
                       2002                                72,000
                       2003                                78,000
                       2004                                84,000
                       2005                                90,000
                       Thereafter                       2,022,000
                                                  ---------------
                                                  $     2,413,000
                                                  ===============

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

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

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

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

     Real estate is comprised of the following:

<TABLE>
<CAPTION>

                                                            December 31,
                                              -----------------------------------------
                                                     2000                  1999
                                              -------------------   -------------------
<S>                                          <C>                    <C>

               Land                           $          500,000    $          500,000
               Buildings and Improvements              4,647,000             4,569,000
               Furnishings                               123,000                59,000
                                              -------------------   -------------------
                                                       5,270,000             5,128,000
               Accumulated Depreciation               (3,293,000)           (3,073,000)
                                              -------------------   -------------------
                                               $       1,977,000     $       2,055,000
                                              ===================   ===================


</TABLE>

                                       23


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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

     As of December 31, 2000, 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. Clear Creek had two housing
     assistance contracts with the Department of Housing and Urban Development
     which expired in 1999 and were not renewed. Management replaced the housing
     assistance contracts with subsidized payments from a local subsidy
     contract.

     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, 2000, totaling $19,108,000 secured by the Local Limited
     Partnerships' real property, security interests, liens and endorsements
     common to first mortgage loans.

     During 2000 and 1999, the Partnership made no additional capital
     contributions in the Local Limited Partnerships.

     In 1999, the Department of Housing and Urban Development foreclosed on the
     mortgage for Dunhaven Apartments Phase II. For financial reporting
     purposes, the Partnership's investment in this Local Limited Partnership
     had previously been written down to zero.



                                       24


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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,
                                                                -----------------------------
                                                                      2000             1999
                                                                -------------   -------------
<S>                                                            <C>              <C>

ASSETS

Real estate, at cost:
  Land                                                          $      1,063     $     1,365
  Buildings, net of accumulated depreciation of
  $14,887 and $15,827 in 2000 and 1999, respectively                   6,365           6,793
  Cash and cash equivalents                                            1,113           2,789
  Other assets, net of accumulated amortization of
  $191 and $160 in 2000 and 1999, respectively                           957           1,336
                                                                -------------    ------------
  Total Assets                                                  $      9,498     $    12,283
                                                                =============    ============
LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
  Notes payable                                                 $        404             547
  Loans payable                                                           22              28
  Mortgage notes payable                                              19,108          21,855
  Accounts payable and accrued expenses                                  377             901
                                                                -------------    ------------
  Total Liabilities                                                   19,911          23,331
                                                                -------------    ------------
Partners' Deficit:
  Winthrop Residential Associates III                                 (5,561)         (6,079)
  Other partners                                                      (4,852)         (4,969)
                                                                -------------    ------------
  Total Deficit                                                      (10,413)        (11,048)
                                                                -------------    ------------
Total Liabilities and Partners' Deficit                         $      9,498     $    12,283
                                                                ============     ===========

</TABLE>


                                       25


<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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                                                   $      4,668     $        4,861
     Other income                                                             322                268
                                                                     -------------    ---------------
         Total income                                                       4,990              5,129
                                                                     -------------    ---------------
Expenses:

     Interest                                                               1,465              1,606
     Depreciation and amortization                                            608              1,067
     Taxes and insurance                                                      403                420
     Management and administrative fees                                       290                305
     Repairs, maintenance and utilities                                     1,160              1,271
     General and administrative                                               766                765
                                                                     -------------    ---------------
         Total expenses                                                     4,692              5,434
                                                                     -------------    ---------------
Net Income (Loss)                                                    $        298     $         (305)
                                                                     =============    ===============
Net income (loss) allocated to
 Winthrop Residential Associates III                                 $         69     $         (393)
                                                                     =============    ===============
Net income allocated to other partners                               $        229     $           88
                                                                     =============    ===============


</TABLE>


                                       26



<PAGE>


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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                      YEAR ENDED DECEMBER 31, 2000 AND 1999
                      -------------------------------------

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

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

<TABLE>
<CAPTION>

                                                                           2000           1999
                                                                      ------------    ------------
<S>                                                                 <C>                  <C>
     Net income for financial reporting purposes                      $       847     $    1,271

         Amortization of capitalized costs and costs in
         excess of the Partnership's initial basis in the net
         assets of the Local Limited Partnerships.                              -              4

         Differences in equity in Local Limited Partnership's
         income/loss for financial reporting and tax reporting
         purposes.                                                          2,108            387

         Income from Local Limited Partnership's Cash
         Distributions                                                       (792)        (1,348)
                                                                      ------------    ------------

     Taxable income                                                   $     2,163     $      314
                                                                      ============    ============


</TABLE>


                                       27


<PAGE>

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


         There were no disagreements with Imowitz Koenig & Co., LLP regarding
the 2000 or 1999 audits of the Partnership's financial statements.


                                       28


<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, 2001, 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 48, 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.

         Thomas C. Staples, age 45, 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.



                                       29


<PAGE>

         Peter Braverman, age 49, 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. From 1988 to 1991, Mr. Braverman was a Vice President and Assistant
Secretary of Fischbach Corporation, a publicly traded, international real estate
and construction firm.

         Patrick J. Foye, age 43, has been Vice President-Residential and
Director of the Managing General Partner since October 1, 1998. Mr. Foye has
served as Executive Vice President 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 34, 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; and Winthrop Growth Investors
I Limited Partnership.

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

         Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership under Rule 16a-3(e) during the Partnership's most
recent fiscal year and Forms 5 and amendments thereto furnished to the
Partnership with respect to its most recent fiscal year, the Partnership is not
aware of any director, officer or beneficial owner of more than ten percent of


                                       31

<PAGE>


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 21 years of experience in property
management, asset management, investor services, and development of apartment
and assisted living properties. Ms. Johnson is currently responsible for the
asset management of over 150 investor partnerships and property management of
over 50 apartment communities.

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

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

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

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

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

         The General Partners own all the outstanding general partnership
interests. No person or group is known by the Partnership to be the beneficial
owner of more than 5% of the outstanding Units at March 15, 2001. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited.


                                       31

<PAGE>


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

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

         As of March 15, 2001, 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, 2000 and 1999, the Partnership
allocated taxable income to the General Partners of $162,234 and $23,513,
respectively. For each of the years ended December 31, 2000 and 1999, the
Partnership paid or accrued cash distributions to the General Partners of
$8,110.


                                       32


<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


                                       33


<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 6th day of
April, 2001.

                                      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 6, 2001
------------------
Michael Ashner

/s/ Thomas Staples                     Chief Financial Officer                           April 6, 2001
------------------
Thomas Staples

/s/ Peter Braverman                    Executive Vice President and Director             April 6, 2001
-------------------
Peter Braverman

</TABLE>


                                       34


<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         36
         Partnership Agreement.
</TABLE>


                                       35