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

                                   FORM 10-QSB

(Mark One)

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

                  For the quarterly period ended June 30, 2001

                                       OR

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

            For the transition period from ___________ to ___________

                         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 or other jurisdiction of        (I.R.S. Employer
             incorporation or organization)        Identification No.)


                7 Bulfinch Place,
               Suite 500, Boston, MA                  02114-9507
         -----------------------------------    -----------------------
                (Address of principal                  (Zip Code)
                  executive office)

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

           Five Cambridge Center, 9th Floor, Cambridge, MA 02142-1493
          ------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether 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_____

                                     1 of 13

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------
                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                   JUNE 30, 2001             DECEMBER 31,
(IN THOUSANDS, EXCEPT UNIT DATA)                    (UNAUDITED)                  2000
                                                ---------------------    ---------------------
<S>                                             <C>                      <C>
Assets
------

Cash and cash equivalents                       $              3,296     $              3,052
Other assets                                                     158                       98
Real estate (net of accumulated depreciation
      of $3,393 in 2001 and $3,293 in 2000)                    1,877                    1,977
                                                ---------------------    --------------------

      Total Assets                              $              5,331     $              5,127
                                                =====================    =====================

Liabilities and Partners' Capital
---------------------------------

Liabilities:

Accounts payable and accrued expenses           $                120     $                110
Distributions payable                                             54                       81
Mortgage payable                                               2,380                    2,413
Accrued interest - subordinated loan payable                      94                       87
Subordinated loan payable                                        133                      133
                                                ---------------------    ---------------------

      Total Liabilities                                        2,781                    2,824
                                                ---------------------    ---------------------

Partners' Capital:

Limited Partners -
   Units of Limited Partnership Interest,
   $1,000 stated value per unit;
   25,005 units authorized,
   issued and outstanding                                      3,701                    3,473
General Partners' deficit                                     (1,151)                  (1,170)
                                                ---------------------    ---------------------

         Total Partners' Capital                               2,550                    2,303
                                                ---------------------    ---------------------

         Total Liabilities                      $              5,331     $              5,127
         and Partners' Capital                  =====================    =====================

</TABLE>

                 See notes to consolidated financial statements.

                                     2 of 13

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>

                                                    FOR THE THREE MONTHS ENDED                FOR THE SIX MONTHS ENDED
                                                    JUNE 30,           JUNE 30,              JUNE 30,            JUNE 30,
                                                    2001                 2000                 2001                 2000
                                              ------------------   ------------------  -------------------  -------------------

<S>                                          <C>                   <C>                  <C>                 <C>
Income:

    Rental income                             $             287    $             293    $             590    $             582
    Income from Local Limited
      Partnership cash distributions                        355                  489                  355                  576
    Interest                                                 31                   31                   63                   59
    Other                                                    14                   13                   25                   22
                                              ------------------   ------------------  -------------------  -------------------

      Total income                                          687                  826                1,033                1,239
                                              ------------------   ------------------  -------------------  -------------------

Expenses:

    Operating                                               226                  190                  406                  354
    Interest                                                 49                   49                   97                   99
    Depreciation                                             50                   47                  100                   94
    General and administrative                               30                   28                   48                   48
                                              ------------------   ------------------  -------------------  -------------------

      Total expenses                                        355                  314                  651                  595
                                              ------------------   ------------------  -------------------  -------------------

Net income                                    $             332    $             512    $             382    $             644
                                              ==================   ==================  ===================  ===================

Net income allocated to General Partners      $              25    $              38    $              29    $              48
                                              ==================   ==================  ===================  ===================

Net income allocated to Limited Partners      $             307    $             474    $             353    $             596
                                              ==================   ==================  ===================  ===================

Net income per Unit of Limited
 Partnership Interest                         $           12.28    $           18.96    $           14.12    $           23.84
                                              ==================   ==================  ===================  ===================

Distributions per Unit of Limited
 Partnership Interest                         $            4.00    $            1.00    $            5.00    $            2.00
                                              ==================   ==================  ===================  ===================

</TABLE>




                 See notes to consolidated financial statements.

                                     3 of 13
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)

(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>

                                         UNITS OF
                                          LIMITED              LIMITED                GENERAL                 TOTAL
                                        PARTNERSHIP           PARTNERS'              PARTNERS'              PARTNERS'
                                         INTEREST              CAPITAL                DEFICIT                CAPITAL
                                     ------------------   -------------------    -------------------   ---------------------
<S>                                  <C>                  <C>                    <C>                   <C>
Balance - January 1, 2001                       25,005    $            3,473     $           (1,170)   $              2,303

    Net income                                                           353                     29                     382
    Distributions                                                       (125)                   (10)                   (135)
                                     ------------------   -------------------    -------------------   ---------------------

Balance - June 30, 2001                         25,005    $            3,701     $           (1,151)   $              2,550
                                     ==================   ===================    ===================   =====================
</TABLE>





















                 See notes to consolidated financial statements.

                                     4 of 13
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                              FOR THE SIX MONTHS ENDED
                                                                          JUNE 30,                 JUNE 30,

(In Thousands)                                                              2001                     2000
                                                                    ---------------------    ---------------------
<S>                                                                 <C>                     <C>
Cash Flows from Operating Activities:

Net income                                                          $                382     $                644
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Depreciation                                                                   100                       94
      Income from Local Limited Partnership cash distributions                      (355)                    (576)

      Changes in assets and liabilities:
         Increase in other assets                                                    (60)                     (88)
         Increase in accounts payable
           and accrued expenses                                                       10                       12
         Increase in accrued interest payable on
           subordinated loan                                                           7                        7
                                                                    ---------------------    ---------------------

      Net cash provided by operating activities                                       84                       93
                                                                    ---------------------    ---------------------

Cash Flows From Investing Activities:

      Distributions received from Local Limited Partnerships                         355                      576
                                                                    ---------------------    ---------------------

      Cash provided by investing activities                                          355                      576
                                                                    ---------------------    ---------------------

Cash Flows From Financing Activities:

      Mortgage principal payments                                                    (33)                     (31)
      Distributions to partners                                                     (162)                    (529)
                                                                    ---------------------    ---------------------

      Cash used in financing activities                                             (195)                    (560)
                                                                    ---------------------    ---------------------

Net increase in cash and cash equivalents                                            244                      109

Cash and cash equivalents, beginning of period                                     3,052                    2,683
                                                                    ---------------------    ---------------------

Cash and cash equivalents, end of period                            $              3,296     $              2,792
                                                                    =====================    =====================

Supplemental Disclosure of Cash Flow Information:

      Interest paid in cash                                         $                 90     $                 92
                                                                    =====================    =====================

Supplemental Disclosure of Non-Cash
      Investing Activities

      Accrued distributions to partners                             $                 54     $                 27
                                                                    =====================    =====================

                 See notes to consolidated financial statements.

                                     5 of 13
</TABLE>
<PAGE>




           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.           GENERAL

             The accompanying financial statements, footnotes and discussions
             should be read in conjunction with the financial statements,
             related footnotes and discussions contained in the Partnership's
             Annual Report on Form 10-KSB for the year ended December 31, 2000.

             The financial information contained herein is unaudited. In the
             opinion of management, all adjustments necessary for a fair
             presentation of such financial information have been included. All
             adjustments are of a normal recurring nature. The balance sheet at
             December 31, 2000 was derived from audited financial statements at
             such date.

             The results of operations  for the six months ended June 30, 2001
             and 2000 are not  necessarily  indicative of the results to be
             expected for the full year.

2.           CONSOLIDATION

             The accompanying financial statements have been prepared on a
             consolidated basis, including the accounts of Clear Creek Ltd.
             ("Clear Creek"). All significant intercompany transactions and
             balances have been eliminated.

                                     6 of 13


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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
           ---------------------------------------------------------

           The matters discussed in this Form 10-QSB 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-QSB 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 consolidated
           financial statements and other items contained elsewhere in the
           report.

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

           As of June 30, 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'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, 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 June 30, 2001, the
           Partnership had cash and cash equivalents of $3,296,000, 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 2001 and
           2000.

           The level of liquidity based on cash and cash equivalents experienced
           a $244,000 increase at June 30, 2001 as compared to December 31,
           2000. The Partnership's $84,000 of net cash provided by operating
           activities and $355,000 of distributions received from Local Limited
           Partnerships (investing activities) was partially offset by $195,000
           of cash used in financing activities. Cash used in financing
           activities included $33,000 of mortgage principal payments and
           $162,000 of distributions to partners.

                                     7 of 13
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
           ---------------------------------------------------------------------

           Liquidity and Capital Resources (Continued)
           -------------------------------------------

           At June 30, 2001, the Partnership  accrued  distributions
           aggregating  $50,000 ($2.00 per Unit) to its limited partners and
           $4,000 to the general partners.

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

           Net income decreased by $262,000 for the six months ended June 30,
           2001, as compared to the six months ended June 30, 2000. The decrease
           is due to a decrease in income of $206,000 and an increase in
           expenses of $56,000. The decrease in income is due to a decrease in
           income from Local Limited Partnership cash distributions of $221,000,
           which was partially offset by an increase in rental income of $8,000,
           interest income of $4,000 and other income of $3,000. The increase in
           expenses is primarily due to an increase in various operating
           expenses of $52,000 at Clear Creek. All other expenses remained
           relatively constant.

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

           The Financial Accounting Standards Board ("FASB") issued Statement of
           Financial Accounting Standards "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 was effective for fiscal years
           beginning after June 15, 2000. There was no effect from this
           Statement 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. This statement
           will not affect 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.

                                     8 of 13
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED
         --------------------------------------------------------------------

         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 June 30, 2001 is at a fixed rate of interest.

                                     9 of 13

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

PART II - OTHER INFORMATION
---------------------------

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.
           ---------------------------------

             (a)  Exhibits:

                  99.      Supplementary Information Required Pursuant to
                           Section 9.4 of the Partnership Agreement.

             (b) Reports on Form 8-K:

                  No reports on Form 8-K were filed during the period ended
                  June 30, 2001.

                                    10 of 13
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------

                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

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

                       BY:    TWO WINTHROP PROPERTIES, INC.
                              Managing General Partner

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

                        BY:   /s/ Thomas C. Staples
                              ------------------------------
                              Thomas C. Staples
                              Chief Financial Officer

                              Dated:     August 10, 2001

                                    11 of 13

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2001
                            -------------------------
Exhibit Index

         Exhibit                                                   Page No.
         -------                                                   --------

99.      Supplementary  Information  Required Pursuant
         to Section 9.4 of the Partnership Agreement.                  13

                                    12 of 13