<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, 2002
                                                 -------------

                                       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 executive office)                     (Zip Code)

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


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 14


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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------

                         PART I - FINANCIAL INFORMATION
                         ------------------------------


ITEM 1.  FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           JUNE 30, 2002  DECEMBER 31,
(IN THOUSANDS, EXCEPT UNIT DATA)                            (UNAUDITED)      2001
                                                            -----------     -------
<S>                                                           <C>          <C>
Assets
------

Cash and cash equivalents                                     $ 2,851      $ 2,902
Investments in Local Limited Partnerships                         467          497
Other assets                                                      103          108
Real estate (net of accumulated depreciation
      of $3,624 in 2002 and $3,524 in 2001)                     1,675        1,775
                                                              -------      -------

      Total Assets                                            $ 5,096      $ 5,282
                                                              =======      =======

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

Liabilities:

Accounts payable and accrued expenses                         $    89      $   339
Distributions payable                                              54          108
Mortgage payable                                                2,310        2,346
Accrued interest - subordinated loan payable                      107          100
Subordinated loan payable                                         133          133
                                                              -------      -------

      Total Liabilities                                         2,693        3,026
                                                              -------      -------

Partners' Capital:

Limited Partners -
   Units of Limited Partnership Interest,
   $1,000 stated value per unit; 25,005 units authorized,
   issued and outstanding                                       3,565        3,429
General Partners' deficit                                      (1,162)      (1,173)
                                                              -------      -------

         Total Partners' Capital                                2,403        2,256
                                                              -------      -------

         Total Liabilities and Partners' Capital              $ 5,096      $ 5,282
                                                              =======      =======
</TABLE>




                 See notes to consolidated financial statements.

                                     2 of 14




<PAGE>
           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------


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,
                                                                  2002        2001             2002        2001
                                                                 ------      ------           ------      ------
<S>                                                              <C>         <C>              <C>         <C>
Income:

    Rental income                                                $  307      $  287           $  580      $  590
    Income from Local Limited Partnership cash distributions        125         355              250         355
    Equity in loss of Local Limited Partnerships                    (24)       --                (19)       --
    Interest                                                         13          31               26          63
    Other                                                            13          14               22          25
                                                                 ------      ------           ------      ------

      Total income                                                  434         687              859       1,033
                                                                 ------      ------           ------      ------

Expenses:

    Operating                                                       228         226              413         406
    Interest                                                         47          49               94          97
    Depreciation                                                     50          50              100         100
    General and administrative                                       27          30               51          48
                                                                 ------      ------           ------      ------

      Total expenses                                                352         355              658         651
                                                                 ------      ------           ------      ------

Net income                                                       $   82      $  332           $  201      $  382
                                                                 ======      ======           ======      ======

Net income allocated to General Partners                         $    6      $   25           $   15      $   29
                                                                 ======      ======           ======      ======

Net income allocated to Limited Partners                         $   76      $  307           $  186      $  353
                                                                 ======      ======           ======      ======

Net income per Unit of Limited Partnership Interest              $ 3.04      $12.28           $ 7.44      $14.12
                                                                 ======      ======           ======      ======

Distributions per Unit of Limited Partnership Interest           $ 1.00      $ 4.00           $ 2.00      $ 5.00
                                                                 ======      ======           ======      ======
</TABLE>





                 See notes to consolidated financial statements.

                                     3 of 14

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------



CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (UNAUDITED)

(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, 2002                           25,005                $(1,173)                $3,429                 $2,256
                                                    ------                -------                 ------                 ------

    Net income                                           -                     15                    186                    201
    Distributions                                        -                     (4)                   (50)                   (54)
                                                    ------                -------                 ------                 ------

Balance - June 30, 2002                             25,005                $(1,162)                $3,565                 $2,403
                                                    ======                =======                 ======                 ======
</TABLE>


                 See notes to consolidated financial statements.


                                     4 of 14

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                  FOR THE SIX MONTHS ENDED
                                                                   JUNE 30,     JUNE 30,
(In Thousands)                                                       2002        2001
                                                                   -------      -------
<S>                                                               <C>          <C>
Cash Flows from Operating Activities:

Net income                                                         $   201      $   382
Adjustments to reconcile net income to net cash (used in)
  provided by operating activities:
      Depreciation                                                     100          100
      Income from Local Limited Partnership cash distributions        (250)        (355)
      Equity in loss of Local Limited Partnerships                      19         --
      Changes in assets and liabilities:
         Decrease (increase) in other assets                             5          (60)
         (Decrease) increase in accounts payable
           and accrued expenses                                       (250)          10
         Increase in accrued interest payable on
           subordinated loan                                             7            7
                                                                   -------      -------

      Net cash (used in) provided by operating activities             (168)          84
                                                                   -------      -------

Cash Flows From Investing Activities:

      Distributions received from Local Limited Partnerships           261          355
                                                                   -------      -------

      Cash provided by investing activities                            261          355
                                                                   -------      -------

Cash Flows From Financing Activities:

      Mortgage principal payments                                      (36)         (33)
      Distributions to partners                                       (108)        (162)
                                                                   -------      -------

      Cash used in financing activities                               (144)        (195)
                                                                   -------      -------

Net (decrease) increase in cash and cash equivalents                   (51)         244

Cash and cash equivalents, beginning of period                       2,902        3,052
                                                                   -------      -------

Cash and cash equivalents, end of period                           $ 2,851      $ 3,296
                                                                   =======      =======

Supplemental Disclosure of Cash Flow Information:
-------------------------------------------------
      Interest paid in cash                                        $    87      $    90
                                                                   =======      =======

Supplemental Disclosure of Non-Cash
-----------------------------------
      Investing Activities
      --------------------
      Accrued distributions to partners                            $    54      $    54
                                                                   =======      =======
</TABLE>

                 See notes to consolidated financial statements.


                                     5 of 14

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------

                   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, 2001.

    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, 2001 was derived from
    audited financial statements at such date.

    The results of operations for the six months ended June 30, 2002 and 2001
    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 14

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------


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

           To date, all cash requirements have been satisfied by interest income
           earned on short-term investments, rental income from Clear Creek and
           cash distributed to the Partnership by the Local Limited
           Partnerships. If the Partnership funds any operating deficits, it
           will use monies from its operating reserves. As of June 30, 2002, the
           Partnership had cash and cash equivalents of $2,851,000, as compared
           to $2,902,000 at December 31, 2001. The managing general partner's
           current policy is to maintain a reserve balance sufficient to provide
           the Partnership the flexibility to preserve its economic interest in
           the Local Limited Partnerships. Therefore, a lack of cash distributed
           by the Local Limited Partnerships to the Partnership in the future
           should not deplete the reserves, though it may restrict the
           Partnership from making distributions. The Partnership did not fund
           any operating deficits to Local Limited Partnerships during the six
           months ended June 30, 2002.

           The level of liquidity based on cash and cash equivalents experienced
           a $51,000 decrease at June 30, 2002 as compared to December 31, 2001.
           The Partnership's $168,000 of net cash used in operating activities
           and $144,000 of cash used in financing activities were substantially
           offset by $261,000 of distributions received from Local Limited
           Partnerships (investing activities). Cash used in financing
           activities consisted of $108,000 of distributions to partners and
           $36,000 of mortgage principal payments. For the six months ended June
           30, 2002, the Partnership accrued distributions aggregating $50,000
           ($2.00 per unit) to its limited partners and $4,000 to the general
           partners. The Partnership's present policy is to accrue distributions
           on a quarterly basis and to pay them on an annual basis.

                                     7 of 14


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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------

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

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

           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 $181,000 for the six months ended June 30,
           2002, as compared to the six months ended June 30, 2001. The decrease
           is due to a decrease in income of $174,000 and an increase in
           expenses of $7,000. The decrease in income is primarily due to a
           decrease in income from Local Limited Partnership cash distributions
           of $105,000, a decrease in rental income of $10,000, and interest
           income of $37,000. Additionally, income decreased due to the equity
           in loss of Local Limited Partnerships of $19,000. During the six
           months ended June 30, 2001 the Partnership did not have any equity in
           income or loss of a Local Limited Partnership. The decrease in
           interest income was due to lower cash balances and lower interest
           rates. The increase in expenses is primarily due to an increase in
           operating expenses of $7,000 and general and administrative expenses
           of $3,000 which were partially offset by a decrease in interest
           expense of $3,000. All other items of income and expense remained
           relatively constant.

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

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

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

                                    8 of 14

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------

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

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

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

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

           The Partnership does not have any financial instruments that would
           expose it to market risk associated with the risk of loss arising
           from adverse changes in market rates and prices. The Partnership's
           mortgage note payable at June 30, 2002 is at a fixed rate of
           interest.




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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------



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


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

        (a)  Exhibits:

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

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

        (b)  Reports on Form 8-K:

             No reports on Form 8-K were filed during the three months ended
             June 30, 2002.


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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------


                                   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 13, 2002





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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
           ----------------------------------------------------------
                            FORM 10-QSB JUNE 30, 2002
                            -------------------------



Exhibit Index


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

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

99.2     Certification   Pursuant   to   Section   906  of  the
         Sarbanes-Oxley Act of 2002.                                      14






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