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

FORM 10-K

(Mark One)

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

For the quarterly period ended December 31, 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 0-17691

Krupp Insured Plus-III Limited Partnership

Massachusetts
(State or other jurisdiction of incorporation or organization)

04-3007489
(IRS employer identification no.)

One Beacon Street, Boston, Massachusetts
(Address of principal executive offices)

02108
(Zip Code)

(617) 523-0066
(Registrant's telephone number, including area code)

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

Title Name of Exchange on which Registered

Shares of Beneficial Interest None

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

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-K 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-K or any amendment to this Form 10-K. [ ].
Aggregate market value of voting securities held by non-affiliates: Not applicable.
Documents incorporated by reference: see Part IV, Item 14
The exhibit index is located on pages 9-10




                                     PART I

This Form 10-K contains forward-looking statements within the meaning of section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934.  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.

ITEM 1.  BUSINESS
------

Krupp  Insured  Plus-III   Limited   Partnership   (the   "Partnership")   is  a
Massachusetts  limited  partnership  which was  formed on March  21,  1988.  The
Partnership  raised  approximately  $255  million  through a public  offering of
limited partner interests  evidenced by units of depositary  receipts  ("Units")
and used the net proceeds primarily to acquire  participating  insured mortgages
("PIMs") and  mortgage-backed  securities  ("MBS").  The  Partnership  considers
itself to be engaged in only one industry segment, investment in mortgages.

The  Partnership's  investments in PIMs on multi-family  residential  properties
consist of a MBS (the "insured  mortgage")  guaranteed as to principal and basic
interest and a  participation  feature that is not insured nor  guaranteed.  The
insured  mortgages  were issued or originated  under or in  connection  with the
housing programs of the Government  National  Mortgage  Association  ("GNMA") or
Fannie Mae. PIMs provide the Partnership  with monthly payments of principal and
interest on the insured mortgage and also provide for Partnership  participation
in the current  revenue stream and in residual  value,  if any, as a result of a
sale or other  realization  of the  underlying  property from the  participation
feature.  The  borrower  conveys  the  participation  rights to the  Partnership
through a subordinated promissory note and mortgage.

The Partnership also has investments in MBS  collateralized  by single-family or
multi-family mortgage loans issued or originated by Fannie Mae, the Federal Home
Loan  Mortgage  Corporation  ("FHLMC")  or the  Federal  Housing  Administration
("FHA").  Fannie Mae and FHLMC guarantee the principal and basic interest of the
Fannie Mae and FHLMC MBS,  respectively.  The  Department  of Housing  and Urban
Development ("HUD") insures the FHA mortgage loan.

The Partnership  must  distribute  proceeds  received from  prepayments or other
realization  of the  mortgages to the  investors  through  quarterly or possibly
special distributions.

Although the  Partnership  will  terminate no later than December 31, 2028 it is
expected  that  the  value  of  the  PIMs  generally  will  be  realized  by the
Partnership  through  repayment  or sale as early as ten years from the dates of
the closings of the  permanent  loans and that the  Partnership  may realize the
value of all of its other  investments  within that time frame thereby resulting
in a dissolution of the Partnership significantly prior to December 31, 2028.

The  Partnership's  investments  are not  expected  to be  subject  to  seasonal
fluctuations.  However,  the future  performance of the Partnership  will depend
upon certain factors which cannot be predicted.  Such factors  include  interest
rate  fluctuations and the credit worthiness of Fannie Mae, GNMA, HUD and FHLMC.
Any ultimate  realization  of the  participation  features on PIMs is subject to
similar  risks  associated  with  equity  real  estate  investments,  including:
reliance on the owner's operating skills,  ability to maintain occupancy levels,
control operating expenses,  maintain the property and obtain adequate insurance
coverage; adverse changes in government regulations, real estate zoning laws, or
tax laws; and other  circumstances over which the Partnership may have little or
no control.

The  requirements  for compliance with federal,  state and local  regulations to
date have not had an  adverse  effect on the  Partnership's  operations,  and no
adverse effect therefrom is now anticipated in the future.

As of  December  31,  2001,  there were no  personnel  directly  employed by the
Partnership.

ITEM 2.  PROPERTIES
------

None.





ITEM 3.  LEGAL PROCEEDINGS
------

There are no material  pending legal  proceedings to which the  Partnership is a
party or to which any of its investments is the subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------

None.
                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS
------

There currently is no established trading market for the Units.

The number of investors  holding Units as of December 31, 2001 was approximately
9,900.  One of  the  objectives  of  the  Partnership  is to  provide  quarterly
distributions  of cash flow  generated  by its  investments  in  mortgages.  The
Partnership  anticipates  that future  operations will continue to generate cash
available for distributions.

During  July 2001,  the  Partnership  made a special  distribution  of $0.53 per
Limited  Partner  interest  from the  principal  proceeds,  Shared  Appreciation
Interest and Minimum Additional Interest from the Casa Marina PIM.

During January 2000, the  Partnership  made a special  distribution of $1.17 per
Limited Partner interest from the principal proceeds from the Marina Shores PIM.

The Partnership may make special distributions in the future if PIMs prepay or a
sufficient amount of cash is available from MBS and PIM principal collections.

The Partnership made the following distributions, in quarterly installments, and
special  distributions,  to its Partners during the two years ended December 31,
2001 and 2000:

                                                        2001                                 2000
                                             ---------------------------         ----------------------------
                                                               Average                              Average
                                                 Amount        Per Unit            Amount           Per Unit
                                             --------------   ----------         ----------        ----------

Quarterly Distributions
   Limited Partners                          $   4,086,451    $    .32          $   6,895,888       $   .54
   General Partners                                 95,244          -                 108,116           -
                                             -------------                       ------------

                                                 4,181,695                          7,004,004
                                              ------------                       ------------
Special Distributions
   Limited Partners                              6,768,186    $    .53             14,941,091       $  1.17
                                             -------------                       ------------

Total Distributions                          $  10,949,881                      $  21,945,095
                                             =============                      =============




ITEM 6. SELECTED FINANCIAL DATA
-------

The following  table sets forth  selected  financial  information  regarding the
Partnership's  financial position and operating results. This information should
be read in conjunction  with  Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations  and the  Financial  Statements  which are
included in Item 7 and Item 8, (Appendix A) of this report, respectively.

                               2001               2000                     1999                1998                1997
                               ----               ----                     ----                ----                ----

Total revenues        $     3,531,049        $    3,998,335           $   6,770,135      $   10,782,454      $  18,896,423

Net income                  2,763,540             2,993,654               4,930,576           7,713,323         14,893,523

Net income allocated to:
  Limited Partners          2,680,634             2,903,844               4,782,659           7,481,923         14,446,717
  Average per Unit                .21                   .23                     .37                 .59               1.13

  General Partners             82,906                89,810                 147,917             231,400            446,806

Total assets at
 December 31               41,417,200            49,584,641              68,426,507          95,300,681        173,645,460

Distributions to:
  Limited Partners          4,086,451             6,895,888               9,705,323          11,110,042         15,324,194
  Average per Unit                .32                   .54                     .76                 .87               1.20

  Special                   6,768,186            14,941,091              21,453,869          73,811,533         11,237,742
  Average per Unit                .53                  1.17                    1.68                5.78                .88

  General Partners             95,244               108,116                 177,147             310,551            373,032

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
------

Certain  statements in this  Management's  Discussion  and Analysis of Financial
Condition and Results of Operations  and elsewhere in this Form 10-K  constitute
"forward-looking   statements"   within  the  meaning  of  the  Federal  Private
Securities  Litigation  Reform  Act of 1995.  These  forward-looking  statements
involve known and unknown risks, uncertainties and other factors which may cause
the Partnership's  actual results,  performance or achievements to be materially
different  from any future  results,  performance or  achievements  expressed or
implied by these forward-looking statements.  These factors include, among other
things, federal, state or local regulations; adverse changes in general economic
or local  conditions;  pre-payments  of  mortgages;  failure of borrowers to pay
participation  interests due to poor operating results at properties  underlying
the mortgages;  uninsured losses and potential conflicts of interest between the
Partnership and its Affiliates, including the General Partners.

Liquidity and Capital Resources

The most  significant  demands on the  Partnership's  liquidity  are the regular
quarterly distributions paid to investors,  which are approximately $1.0 million
each quarter.  Funds for investor  distributions come from the monthly principal
and  basic  interest  payments  received  on the  PIMs and  MBS,  the  principal
prepayments of the PIMs and MBS, and interest earned on the  Partnership's  cash
and cash equivalents. In general, the General Partners try to set a distribution
rate that  provides for level  quarterly  distributions  of cash  available  for
distribution.  To the extent that quarterly  distributions  do not fully utilize
the cash available for  distributions  and cash balances  increase,  the General
Partners may adjust the  distribution  rate or  distribute  such funds through a
special distribution. The portion of distributions attributable to the principal
collections  reduces the capital  resources of the  Partnership.  As the capital
resources  decrease,  the total cash flows to the Partnership also will decrease
and over time will result in periodic  adjustments to the distributions  paid to
investors.  The General Partners  periodically  review the distribution  rate to
determine  whether an  adjustment  is necessary  based on projected  future cash
flows.  Based on current  projections,  the  General  Partners  expect  that the
Partnership  will  reduce the  distribution  rate of $0.08 per  Limited  Partner
interest per quarter to $.04 per Limited  Partner  interest per quarter with the
May 2002 distribution.

In addition to  providing  insured or  guaranteed  monthly  principal  and basic
interest payments, the Partnership's PIM investments also may provide additional
income through its  participation  feature in the underlying  properties if they
operate successfully.  The Partnership may receive a share in any operating cash
flow that exceeds debt service  obligations  and capital needs or a share in any
appreciation in value when the properties are sold or refinanced.  However, this
participation  is neither  guaranteed  nor  insured,  and it is  dependent  upon
whether property operations or its terminal value meet certain criteria.

The  Partnership  received a  prepayment  of the Royal  Palm  Place  Subordinate
Promissory  note. On January 2, 2002,  the  Partnership  received  $1,004,379 of
Shared  Appreciation  Interest and $322,401 of Minimum Additional  Interest.  On
February  25,  2002,  the  Partnership  received  $14,764,062  representing  the
principal proceeds on the first mortgage. The Partnership has declared a special
distribution  of  $1.24  per  Limited  Partner  interest  consisting  of  Shared
Appreciation  Interest and  prepayment  proceeds which will be paid in the first
quarter of 2002.

During June 2001,  the  Partnership  received a payoff of the Casa Marina PIM in
the amount of  $6,727,016.  In addition,  the  Partnership  received  $15,000 of
Shared Appreciation Interest and $10,000 of Minimum Additional Interest upon the
payoff of the  underlying  mortgage.  On July 18, 2001, the  Partnership  paid a
special  distribution  of $.53 per Limited  Partner  interest from the principal
proceeds and Shared Appreciation received from Casa Marina.

During January 2000, the  Partnership  paid a special  distribution of $1.17 per
Limited   Partner   interest   consisting  of  principal   proceeds  and  Shared
Appreciation  Interest in the amounts of $14,491,746 and $426,321,  respectively
from the Marina Shores Apartments PIM payoff in December of 1999.

The Partnership  made two special  distributions  during 1999 as a result of the
following  PIM  prepayments:  In  February  1999,  an $.88 per  Limited  Partner
interest  special  distribution  consisting  of the  prepayment  proceeds in the
amount of $10,876,051 and Shared Appreciation Interest and prepayment premium of
$243,620  from the  Windsor  Court PIM that were  received in January  1999.  In
September 1999, an $.80 per Limited Partner  interest  special  distribution was
made  consisting  of the  prepayment  proceeds in the amount of  $9,751,550  and
Shared  Appreciation  Interest  of  $402,508  from the Mill  Ponds PIM that were
received during the third quarter of 1999.

With the payoff of the Royal Palm Place PIM in January,  2002, the Partnership's
only  remaining PIM  investment  is backed by the first  mortgage loan on Harbor
Club.  Presently,  the  General  Partners  do not expect  Harbor Club to pay the
Partnership any participation  interest or to be sold or refinanced during 2002.
However,  if favorable market conditions  provide the borrower an opportunity to
sell the property,  there are no  contractual  obligations  remaining that would
prevent a prepayment  of the  underlying  first  mortgage.  Harbor Club operates
successfully in Ann Arbor,  Michigan,  which is a very  competitive  market with
many newer apartment  properties.  Although Harbor Club has maintained occupancy
rates in the mid 90% range for the past two years,  most cash flow  generated by
the  property is used for capital  replacements  and  improvements  that help it
maintain its strong market position.

The  Partnership  has the option to call its remaining PIM by  accelerating  the
maturity  of the loan if it is not  prepaid by the tenth  year  after  permanent
funding. The Partnership will determine the merits of exercising the call option
as economic  conditions  warrant.  Such  factors as the  condition of the asset,
local market  conditions,  the interest rate  environment  and  availability  of
financing will affect this decision.

Critical Accounting Policy

The  Partnership's  critical  accounting  policy  relates  primarily  to revenue
recognition  related  to the  participation  feature  of the  Partnership's  PIM
investments. The Partnership's policy is as follows:

Basic interest on PIMs is recognized based on the stated coupon rate of the GNMA
or  Fannie  Mae  MBS.  The  Partnership   recognizes  interest  related  to  the
participation  features when the amount becomes fixed and the  transaction  that
gives rise to such amount is consummated.





ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------

Assessment of Credit Risk

The  Partnership's  investments  in mortgages  are  guaranteed or insured by the
GNMA,  Fannie Mae,  FHLMC or HUD and therefore the certainty of their cash flows
and  the  risk  of  material  loss  of  the  amounts  invested  depends  on  the
creditworthiness of these entities.

Fannie  Mae  is  a  federally  chartered  private  corporation  that  guarantees
obligations  originated  under  its  programs.  FHLMC is a  federally  chartered
corporation  that guarantees  obligations  originated  under its programs and is
wholly-owned  by the twelve Federal Home Loan Banks.  These  obligations are not
guaranteed  by the U.S.  Government  or the Federal  Home Loan Bank Board.  GNMA
guarantees  the full and timely  payment of principal and basic  interest on the
securities it issues,  which represent  interests in pooled mortgages insured by
HUD. Obligations insured by HUD, an agency of the U.S. Government, are backed by
the full faith and credit of the U.S. Government.

At December  31, 2001,  the  Partnership  includes in cash and cash  equivalents
approximately $1.6 million of commercial paper, which is issued by entities with
a credit  rating equal to one of the top two rating  categories  of a nationally
recognized statistical rating organization.

Interest Rate Risk

The  Partnership's  primary market risk exposure is to interest rate risk, which
can be defined as the exposure of the  Partnership's  net income,  comprehensive
income or  financial  condition  to adverse  movements  in  interest  rates.  At
December 31, 2001, the  Partnerships  PIMs, and MBS comprise the majority of the
Partnership's assets.  Decreases in interest rates may accelerate the prepayment
of  the  Partnership's  investments.   The  Partnership  does  not  utilize  any
derivatives or other instruments to manage this risk as the Partnership plans to
hold all of its investments to expected maturity.

The Partnership monitors prepayments and considers prepayment trends, as well as
distribution requirements of the Partnership,  when setting regular distribution
policy.  For MBS,  the  Partnership  forecasts  prepayments  based on  trends in
similar  securities  as  reported  by  statistical  reporting  entities  such as
Bloomberg.  For PIMs, the Partnership  incorporates  prepayment assumptions into
planning as individual properties notify the Partnership of the intent to prepay
or as they mature.

The  table  below  provides   information  about  the  Partnership's   financial
instruments  that are  sensitive  to changes in  interest  rates.  For  mortgage
investments,  the table  presents  principal  cash  flows and  related  weighted
average  interest  rates  ("WAIR")  by expected  maturity  dates.  The  expected
maturity date is contractual maturity adjusted for expectations of prepayments.


                                    Expected maturity dates ($ in thousands)


                    2002        2003       2004       2005       2006       Thereafter          Total         Fair
                                                                                                 Face        Value
                                                                                                Value


Interest-sensitive assets:

MBS               $     595   $    515    $    449   $    394   $     349  $       8,992    $     11,294   $      11,629
WAIR                  7.51%      7.51%       7.51%      7.51%      7.51%          7.51%             7.51%

PIMs                 14,869        114         124        134         146          12,376          27,763         28,376
WAIR                  8.00%      8.00%       8.00%      8.00%       8.00%          8.00%             8.2%
                  ---------   --------    --------   --------   ---------  --------------   -------------  -------------

Total Interest-
sensitive assets  $  15,464   $    629    $    573   $    528   $     495  $       21,368   $      39,057  $      40,005
                  =========   ========    ========   ========   =========  ==============   =============  =============






Results of Operations

The following  discussion relates to the operation of the Partnership during the
years ended December 31, 2001, 2000 and 1999.

                                                                       (Amounts in Thousands)
                                                             2001              2000                 1999
                                                             ----              ----                 ----
   Interest income on PIMs:
     Basic interest                                       $ 2,511            $  2,755             $  4,210
     Participation interest                                    25               -                    1,001
   Interest income on MBS                                     894                 965                1,071
   Other interest income                                      101                 278                  488
   Partnership expenses                                      (553)               (624)                (732)
   Amortization of prepaid fees
    and expenses                                             (214)               (380)              (1,107)
                                                          -------            --------             --------

        Net income                                        $ 2,764            $  2,994             $  4,931
                                                          =======            ========             ========



Net income  decreased during 2001 as compared to 2000 due primarily to decreases
in basic interest on PIMs,  interest income on MBS and other interest income net
of  decreases in asset  management  fees,  amortization  expense and general and
administrative  expenses.  Basic interest on PIMs decreased primarily due to the
payoff of the Casa  Marina PIM in the second  quarter of 2001.  The  decrease is
partially  offset by an increase in the  interest  rate for the Royal Palm Place
PIM as specified in the workout agreement.  Interest income on MBS decreased due
to principal collections reducing the MBS investment  portfolio.  Other interest
income  decreased  due to lower average  interest  rates earned on cash balances
available for short-term  investing  during 2001,  when compared to 2000.  Asset
management  fees  decreased  due to the decline in the asset base.  Amortization
expense  decreased due to the full recognition of prepaid  expenses  relating to
the Casa  Marina and Royal Palm  Place PIMs  during the second  quarter of 2001.
General and  administrative  expenses  decreased due to lower  processing  costs
during 2001 when compared to 2000.

Net income  decreased  during 2000 as compared  to 1999 due  primarily  to lower
basic and participation interest on PIMs and lower MBS and other interest income
net of lower amortization  expense.  Basic interest on PIMs decreased due to the
payoffs of the Windsor  Court,  Mill Ponds  Apartments and Marina Shores PIMs in
1999.  Participation income decreased in 2000 as a result of the PIM prepayments
mentioned above.  MBS income decreased due to the principal  collections made on
MBS  investments.  The decrease in other interest income is primarily due to the
Partnership  having lower  average  short-term  investment  balances  during the
twelve months ended December 31, 2000 when compared to the corresponding  period
in 1999.  Amortization expense decreased due to the Partnership fully amortizing
the costs associated with the PIMs that were prepaid in 1999.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
------

See Appendix A to this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
------

None.




                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-------

The  Partnership has no directors or executive  officers.  Information as to the
directors and executive  officers of Krupp Plus  Corporation  which is a General
Partner of the  Partnership  and is the  general  partner of  Mortgage  Services
Partners  Limited  Partnership,  which  is  the  other  General  Partner  of the
Partnership, is as follows:

                                                          Position with
              Name and Age                                Krupp Plus Corporation

              Douglas Krupp (55)                          President, Co-Chairman of the Board and Director
              George Krupp (57)                           Co-Chairman of the Board and Director
              Peter F. Donovan (48)                       Senior Vice President
              Ronald Halpern (60)                         Senior Vice President
              Carol J. C. Mills (52)                      Vice President
              Robert A. Barrows (44)                      Vice President and Treasurer


Douglas Krupp  co-founded and serves as Co-Chairman and Chief Executive  Officer
of The  Berkshire  Group,  an  integrated  real estate  financial  services firm
engaged  in  real   estate   acquisitions,   property   management,   investment
sponsorship,   venture  capital   investing,   mortgage  banking  and  financial
management,  and ownership of two operating  companies  through  private  equity
investments.  Mr. Krupp has held the position of Co-Chairman since The Berkshire
Group was  established  as The Krupp  Companies in 1969 and he has served as the
Chief Executive  Officer since 1992. He is a graduate of Bryant College where he
received an honorary Doctor of Science in Business Administration in 1989.

George Krupp is the  Co-Founder  and  Co-Chairman  of The  Berkshire  Group,  an
integrated  real  estate   financial   services  firm  engaged  in  real  estate
acquisitions,  property  management,  investment  sponsorship,  venture  capital
investing,  mortgage  banking and  financial  management,  and  ownership of two
operating companies through private equity  investments.  Mr. Krupp has held the
position of Co-Chairman  since The Berkshire  Group was established as The Krupp
Companies in 1969. Mr. Krupp has been an instructor of history at the New Jewish
High  School in  Waltham,  Massachusetts  since  September  of 1997.  Mr.  Krupp
attended the  University  of  Pennsylvania  and Harvard  University  and holds a
Master's Degree in History from Brown  University.  Douglas and George Krupp are
brothers.

Peter F. Donovan is Chief Executive Officer of Berkshire  Mortgage Finance which
position he has held since January of 1998 and in this capacity, he oversees the
strategic growth plans of this mortgage banking firm. Berkshire Mortgage Finance
is the 10th largest  servicer of commercial  mortgage loans in the United States
with a servicing and asset management portfolio of $14.1 billion.  Previously he
served as  President  of  Berkshire  Mortgage  Finance  from  January of 1993 to
January of 1998 and in that capacity he directed the  production,  underwriting,
servicing and asset  management  activities  of the firm.  Prior to that, he was
Senior Vice President of Berkshire  Mortgage Finance and was responsible for all
participating  mortgage  originations.  Before  joining the firm in 1984, he was
Second Vice  President,  Real Estate Finance for Continental  Illinois  National
Bank and Trust,  where he managed a $300 million  construction  loan  portfolio of
commercial  properties.  Mr. Donovan received a B.A. from Trinity College and an
M.B.A. degree from Northwestern University. Mr. Donovan is currently a member of
the Advisory Council for Fannie Mae.

Ronald Halpern is President and COO of Berkshire Mortgage Finance. He has served
in these positions since January of 1998 and in this capacity, he is responsible
for the overall  operations  of the  Company.  Prior to January of 1998,  he was
Executive  Vice  President,   managing  the  underwriting,   closing,  portfolio
management and servicing  departments  for Berkshire  Mortgage  Finance.  Before
joining  the  firm in  1987,  he  held  senior  management  positions  with  the
Department of Housing and Urban  Development in Washington  D.C. and several HUD
regional  offices.  Mr.  Halpern has over 30 years of  experience in real estate
finance which includes his  experience as prior Chairman of the MBA  Multifamily
Housing Committee. He holds a B.A. degree from the University of the City of New
York and J.D. degree from Brooklyn Law School.



Robert A.  Barrows  is Senior  Vice  President  and Chief  Financial  Officer of
Berkshire  Mortgage  Finance.  Mr. Barrows has held several positions within The
Berkshire  Group since joining the company in 1983 and is currently  responsible
for  accounting,  financial  reporting  and  treasury  functions  for  Berkshire
Mortgage  Finance.  Prior  to  joining  The  Berkshire  Group,  he was an  audit
supervisor for Coopers and Lybrand  L.L.P.  in Boston.  He received a B.S.  degree
from Boston College and is a Certified Public Accountant.

Carol J.C.  Mills is Senior Vice  President  for Loan  Management  of  Berkshire
Mortgage Finance and in this capacity, she is responsible for the Loan Servicing
and Asset Management  functions of Berkshire  Mortgage Finance.  She manages the
estimated  $14.1  billion  portfolio of loans.  Ms.  Mills  joined  Berkshire in
December  1997 as Vice  President  and was promoted to Senior Vice  President in
January  1999.  From  January  1989 through  November  1997,  Ms. Mills was Vice
President of First Winthrop  Corporation and Winthrop Financial  Associates,  in
Cambridge,  MA. Ms. Mills earned a B.A.  degree from Mount Holyoke College and a
Master of Architecture degree from Harvard University.  Ms. Mills is a member of
the Real Estate  Finance  Association,  New England Women in Real Estate and the
Mortgage Bankers  Association.  Ms. Mills is currently a member of the Servicing
Advisory Council for Freddie Mac.

ITEM 11.      EXECUTIVE COMPENSATION
-------

The Partnership has no directors or executive officers.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------

As of December 31, 2001, no person owned of record or was known by the General
Partners to own beneficially more than 5% of the Partnership's 12,770,261
outstanding Limited Partner interests. The only interests held by management or
its affiliates consist of its General Partner and Corporate Limited Partner
interests.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------

Information required under this Item is contained in Note F to the Partnership's
Financial Statements presented in Appendix A to this report.

                                                       PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------

(a)    1.      Financial  Statements - see Index to Financial Statements and
               Schedule included under Item 8, Appendix A, on page F-2 of
               this report.

       2.      Financial Statement Schedules - see Index to Financial Statements
               and Schedule included under Item 8, Appendix A, on page F-2 of
               this report. All other schedules are omitted as they are not
               applicable, not required or the information is provided in the
               Financial Statements or the Notes thereto.

(b)    Reports on Form 8-K

       During the last quarter of the year ended December 31, 2001, the
       Partnership did not file any reports on Form 8-K.

(c)    Exhibits:

       Number and Description
       Under Regulation S-K

       The following reflects all applicable Exhibits required under Item 601 of
Regulation S-K:

        (4)    Instruments defining the rights of security holders including indentures:
               ------------------------------------------------------------------------

(4.1)Agreement  of  Limited  Partnership  dated as of June 22,  1988  [Exhibit A
     included in Amendment No. 1 of Registrant's  Registration Statement on Form
     S-11 dated June 22, 1988 (File No. 33-21200)].*

(4.2)Subscription  Agreement  whereby a subscriber  agrees to purchase Units and
     adopts the  provisions of the Agreement of Limited  Partnership  [Exhibit D
     included in Amendment No. 1 of Registrant's  Registration Statement on Form
     S-11 dated June 22, 1988 (File No. 33-21200)].*




(4.3)Copy of First  Amended  and  Restated  Certificate  of Limited  Partnership
     filed with the Massachusetts  Secretary of State on June 22, 1988. [Exhibit
     4.4 to Amendment No. 1 of Registrant's  Registration Statement on Form S-11
     dated June 22, 1988 (File No. 33-21200)].*

(10)    Material Contracts:
        ------------------


(10.1) Revised form of Escrow  Agreement  [Exhibit  10.1 to  Amendment  No. 1 of
     Registrant's  Registration Statement on Form S-11 dated June 22, 1988 (File
     No. 33-21200)] *

(10.2) Form of agreement between the Partnership and Krupp Mortgage  Corporation
     [Exhibit  10.2 to  Registrant's  Registration  Statement on Form S-11 dated
     April 20, 1988 (File No. 33-21200)].*

Harbor Club Apartments

(10.3) Prospectus for GNMA Pool No. 259237(CS) and 259238(PN).  [Exhibit 19.3 to
     Registrant's  Report on Form 10-Q for the quarter ended March 31,1990 (File
     No. 0-17691)].*

(10.4) Subordinated  Multifamily  Mortgage  (including  Subordinated  Promissory
     Note) dated January 30, 1990 between Ann Arbor Harbor Club, a Texas limited
     partnership and Krupp Insured Plus-III Limited  Partnership.  [Exhibit 19.4
     to  Registrant's  Report on Form 10-Q for the quarter  ended March  31,1990
     (File No. 0-17691)].*

Royal Palm Place

(10.5) Prospectus for FNMA Pool No.  MB-109057.  [Exhibit 10.45 to  Registrant's
     Annual  Report on Form 10-K for the fiscal  year ended  December  31,  1995
     (File No. 0-17691)].*

(10.6) Subordinated Multifamily Mortgage dated March 20, 1991 between Royal Palm
     Place,  Ltd., a Florida  Limited  Partnership  and Krupp  Insured  Plus-III
     Limited Partnership.  [Exhibit 19.2 to Registrant's Report on Form 10-Q for
     the quarter ended June 30, 1991 (File No. 0-17691)].*

(10.7) Modification  Agreement  dated March 20, 1991,  between Royal Palm Place,
     Ltd.,  and Krupp Insured  Plus-III  Limited  Partnership.  [Exhibit 19.3 to
     Registrant's  Report on Form 10-Q for the quarter ended June 30, 1991 (File
     No. 0-17691)].*

(10.8) Participation Agreement dated March 20, 1991 by and between Krupp Insured
     Plus-III  Limited  Partnership and Krupp Insured Plus Limited  Partnership.
     [Exhibit  19.1 to  Registrant's  Report on Form 10-Q for the quarter  ended
     September 30, 1991 (File No. 0-17691)].*

(10.9) Amended and Restated  Subordinated  Promissory  Note by and between Royal
     Palm, Ltd. and Krupp Insured Plus-III Limited Partnership.[Exhibit 10.49 to
     Registrant's  Annual Report on Form 10-K for the fiscal year ended December
     31, 1995 (File No. 0-17691)].*


   * Incorporated by reference




                                   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, thereunto duly authorized, on the 22nd day of March,
2002

                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                                   By:    Krupp Plus Corporation,
                                          a General Partner



                                   By:    /s/ Douglas Krupp
                                          -------------------------------------------
                                          Douglas Krupp,  President,  Co-Chairman
                                          (Principal Executive Officer) and Director
                                          of Krupp Plus Corporation


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 indicated, on the 22nd day of March, 2002.

     Signatures                                            Title(s)
     ----------                                            --------




 /s/ Douglas Krupp                                  President, Co-Chairman (Principal Executive Officer), and Director of
-----------------------------
Douglas Krupp                                       Krupp Plus Corporation, a General Partner




 /s/ George Krupp                                   Co-Chairman (Principal Executive Officer) and Director of  Krupp Plus
-----------------------------
George Krupp                                        Corporation, a General Partner.




 /s/ Peter F. Donovan                               Senior Vice President of Krupp Plus  Corporation, a General Partner
-----------------------------
Peter F. Donovan




 /s/ Robert A. Barrows                              Treasurer and Chief Accounting Officer of Krupp Plus Corporation,
------------------------------
Robert A. Barrows                                   a General Partner.











                                                     APPENDIX A

                                     KRUPP INSURED PLUS-III LIMITED PARTNERSHIP











                                          FINANCIAL STATEMENTS AND SCHEDULE
                                                 ITEM 8 of FORM 10-K

                               ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
                                        For the Year Ended December 31, 2001





                                     KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                                     INDEX TO FINANCIAL STATEMENTS AND SCHEDULES




Report of Independent Accountants                                                                               F-3

Balance Sheets at December 31, 2001 and 2000                                                                    F-4

Statements of Income and Comprehensive Income for the Years
Ended December 31, 2001, 2000 and 1999                                                                         F-5

Statements of Changes in Partners' Equity for the Years Ended
December 31, 2001, 2000 and 1999                                                                                F-6

Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999                                                                                                   F-7

Notes to Financial Statements                                                                            F-8 - F-15





All schedules are omitted as they are not applicable or not required, or the
information is provided in the financial statements or the notes thereto.











                                          REPORT OF INDEPENDENT ACCOUNTANTS







To the Partners of
Krupp Insured Plus-III Limited Partnership:

In our opinion, the financial statements listed in the accompanying index,
present fairly, in all material respects, the financial position of Krupp
Insured Plus-III Limited Partnership (the "Partnership") at December 31, 2001
and 2000 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





PricewaterhouseCoopers LLP
Boston, Massachusetts
March 22, 2002







                                        KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                                                      BALANCE SHEETS

                                                December 31, 2001 and 2000


                                                          ASSETS

                                                                                2001                2000
                                                                           -------------       --------------

      Participating Insured Mortgages ("PIMs")
       (Notes B, C, H and I)                                               $  27,762,795       $   34,608,223
      Mortgage-Backed Securities and insured
       mortgage ("MBS")(Notes B, D and H)                                     11,407,452           12,453,025
                                                                           -------------       --------------

               Total mortgage investments                                     39,170,247           47,061,248

      Cash and cash equivalents (Notes B, C and H)                             1,900,744            1,910,212
      Interest receivable and other assets                                       275,094              328,054
      Prepaid acquisition fees and expenses, net of
       accumulated amortization of $955,545 and
       $2,201,139, respectively (Note B)                                          36,194              200,938
      Prepaid participation servicing fees, net of
       accumulated amortization of $293,743 and
      $803,998, respectively (Note B)                                             34,921               84,189
                                                                           -------------       --------------

               Total assets                                                $  41,417,200       $   49,584,641
                                                                           =============       ==============



                                             LIABILITIES AND PARTNERS' EQUITY

      Liabilities                                                          $      17,877       $       17,650
                                                                           -------------       --------------

      Partners' equity (deficit) (Notes A, C, E and I):

        Limited Partners                                                      41,486,071           49,660,074
         (12,770,261 Limited Partner interests outstanding)

       General Partners                                                         (217,863)            (205,525)

       Accumulated Comprehensive Income (Note B)                                 131,115              112,442
                                                                           -------------       --------------

               Total Partners' equity                                         41,399,323           49,566,991
                                                                           -------------       --------------

               Total liabilities and Partners' equity                      $  41,417,200       $   49,584,641
                                                                           =============       ==============








                     The accompanying notes are an integral
                        part of the financial statements.



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

              For the Years Ended December 31, 2001, 2000 and 1999




                                                                     2001                  2000                 1999
                                                                 ------------          ------------         ------------
Revenues:(Notes B, C and D) Interest income - PIMs:
     Basic interest                                              $  2,510,661          $  2,755,352         $  4,209,758
     Participation interest                                            25,000                 -                1,000,885
   Interest income - MBS                                              894,099               964,919            1,071,160
   Other interest income                                              101,289               278,064              488,332
                                                                 ------------          ------------         ------------

         Total revenues                                             3,531,049             3,998,335            6,770,135
                                                                 ------------          ------------         ------------

Expenses:
   Asset management fee to an affiliate (Note F)                      318,136               354,888              508,943
   Expense reimbursements to affiliates (Note F)                       96,318                97,729               74,461
   Amortization of prepaid fees and expenses (Note B)                 214,012               380,069            1,106,566
   General and administrative                                         139,043               171,995              149,589
                                                                 ------------          ------------         ------------

         Total expenses                                               767,509             1,004,681            1,839,559
                                                                 ------------          ------------         ------------

Net income (Notes E and G)                                          2,763,540             2,993,654            4,930,576

Other comprehensive income:

   Net change in unrealized gain on MBS                                18,673               111,473             (326,520)
                                                                 ------------          ------------         ------------

Total comprehensive income                                       $  2,782,213          $  3,105,127         $  4,604,056
                                                                 ============          ============         ============

Allocation of net income (Notes E and G):

   Limited Partners                                              $  2,680,634          $  2,903,844         $  4,782,659
                                                                 ============          ============         ============

   Average net income per Limited Partner
   interest (12,770,261 Limited Partner
   interests outstanding)                                        $        .21          $        .23         $        .37
                                                                 ============          ============         ============

   General Partners                                              $     82,906          $     89,810         $    147,917
                                                                 ============          ============         ============









                     The accompanying notes are an integral
                        part of the financial statements.




                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

              For the Years Ended December 31, 2001, 2000 and 1999


                                                                                Accumulated            Total
                                               Limited             General     Comprehensive          Partners'
                                                Partners            Partners       Income              Equity
                                            -----------------    -------------- ------------       --------------

Balance at December 31, 1998               $  94,969,742         $  (157,989)   $    327,489       $   95,139,242

Net income                                     4,782,659             147,917          -                 4,930,576

Quarterly distributions                       (9,705,323)           (177,147)         -                (9,882,470)

Special distributions                        (21,453,869)            -                -               (21,453,869)

Change in unrealized gain on MBS                  -                  -             (326,520)             (326,520)
                                           -------------         -----------   ------------        --------------

Balance at December 31, 1999                  68,593,209            (187,219)           969            68,406,959

Net income                                     2,903,844              89,810          -                 2,993,654

Quarterly distributions                       (6,895,888)           (108,116)         -                (7,004,004)

Special distributions                        (14,941,091)              -              -               (14,941,091)

Change in unrealized gain on MBS                   -                   -            111,473               111,473
                                           --------------------  -----------   ------------        --------------

Balance at December 31, 2000                  49,660,074            (205,525)       112,442            49,566,991

Net income                                     2,680,634              82,906          -                 2,763,540

Quarterly distributions                       (4,086,451)            (95,244)         -                (4,181,695)

Special distributions                         (6,768,186)              -              -                (6,768,186)

Change in unrealized gain on MBS                  -                    -             18,673                18,673
                                           -------------         -----------   ------------        --------------

Balance at December 31, 2001               $  41,486,071         $  (217,863)  $    131,115        $   41,399,323
                                           =============         ===========   ============        ==============








                     The accompanying notes are an integral
                        part of the financial statements.



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

              For the Years Ended December 31, 2001, 2000 and 1999


                                                                             2001                  2000                  1999
                                                                        -------------          ------------     -------------------
Operating activities:
   Net income                                                           $  2,763,540           $  2,993,654         $  4,930,576
   Adjustments to reconcile net income to net
    cash provided by operating activities:
      Amortization of prepaid fees and expenses                              214,012                380,069            1,106,566
      Shared Appreciation Interest and prepayment premium                    (15,000)                 -                 (828,829)
      Changes in assets and liabilities:
         Decrease (increase) in interest
          receivable and other assets                                         52,960                317,642              (57,677)
         Increase (decrease) in liabilities                                      227                 (1,898)            (141,891)
                                                                        ------------           ------------         ------------ -

            Net cash provided by operating activities                      3,015,739              3,689,467            5,008,745
                                                                        ------------           ------------         ------------

Investing activities:
  Principal collections on PIMs including
      Shared Appreciation Interest and prepayment premium
      of $15,000 in 2001 and $828,829 in 1999, respectively                6,860,428                321,166           36,396,881
  Principal collections on MBS                                             1,064,246                607,297            2,322,861
                                                                        ------------           ------------         ------------

            Net cash provided by investing activities                      7,924,674                928,463           38,719,742
                                                                        ------------           ------------         ------------

Financing activities:
     Special distributions                                                (6,768,186)           (14,941,091)         (21,453,869)
     Quarterly distributions                                              (4,181,695)            (7,004,004)          (9,882,470)
                                                                        ------------           ------------         ------------

             Net cash used for financing activities                      (10,949,881)           (21,945,095)        (31,336,339)
                                                                        ------------           ------------         -----------

Net (decrease) increase in cash and cash equivalents                          (9,468)           (17,327,165)          12,392,148

Cash and cash equivalents, beginning of  period                            1,910,212             19,237,377            6,845,229
                                                                        ------------           ------------         ------------

Cash and cash equivalents, end of period                                $  1,900,744           $  1,910,212         $ 19,237,377
                                                                        ============           ============         ============

Non cash activities:
   Increase (decrease) in Fair Value of MBS                             $     18,673           $    111,473         $   (326,520)
                                                                        ============           ============         ============





                     The accompanying notes are an integral
                        part of the financial statements.






                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


A.    Organization

      Krupp Insured Plus-III Limited Partnership (the "Partnership") was formed
      on March 21, 1988 by filing a Certificate of Limited Partnership in The
      Commonwealth of Massachusetts. The Partnership was organized for the
      purpose of investing in multi-family loans and mortgage backed securities.
      The Partnership issued all of the General Partner Interests to Krupp Plus
      Corporation and Mortgage Services Partners Limited Partnership in exchange
      for capital contributions aggregating $3,000. The Partnership terminates
      on December 31, 2028, unless terminated earlier upon the occurrence of
      certain events as set forth in the Partnership Agreement.

      The Partnership commenced the public offering of Limited Partner interests
      on June 24, 1988 and completed its public offering having sold 12,770,161
      Limited Partner interests for $254,686,736 net of purchase volume
      discounts of $716,484 as of June 22, 1990. In addition, Krupp Depositary
      Corporation owns one hundred Limited Partner interests.

B.    Significant Accounting Policies

      The Partnership uses the following accounting policies for financial
      reporting purposes, which differ in certain respects from those used for
      federal income tax purposes (Note G):

      Basis of Presentation

      The accompanying financial statements have been prepared on the accrual
      basis of accounting in accordance with accounting principles generally
      accepted in the United States of America ("GAAP").

      MBS

      The Partnership, in accordance with Financial Accounting Standards Board's
      Statement 115, "Accounting for Certain Investments in Debt and Equity
      Securities" ("FAS 115"), classifies its MBS portfolio as
      available-for-sale. As such the Partnership carries its MBS at fair market
      value and reflects any unrealized gains (losses) as a separate component
      of Partners' Equity. The Partnership amortizes purchase premiums or
      discounts over the life of the underlying mortgages using the effective
      interest method.

      The Partnership holds a Federal Housing Administration ("FHA") insured
      mortgage which is classified as MBS and is carried at amortized cost. The
      Partnership holds this loan at amortized cost. The Partnership does not
      establish loan loss reserves as its investments are fully insured by the
      FHA.

      PIMs

      The Partnership accounts for its MBS portion of a PIM in accordance with
      FAS 115 under the classification of held to maturity. The Partnership
      carries the Government National Mortgage Association ("GNMA") or Fannie
      Mae MBS at amortized cost.

      Basic interest on PIMs is recognized based on the stated coupon rate of
      the GNMA or Fannie Mae MBS. The Partnership recognizes interest related to
      the participation features when the amount becomes fixed and the
      transaction that gives rise to such amount is consummated.

      Cash and Cash Equivalents

      The Partnership includes all short-term investments with maturities of
      three months or less from the date of acquisition in cash and cash
      equivalents. The Partnership invests its cash primarily in commercial
      paper and money market funds with a commercial bank and has not
      experienced any loss to date on its invested cash.




                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


B.    Significant Accounting Policies, Continued

      Prepaid Fees and Expenses

      Prepaid fees and expenses consist of prepaid acquisition fees and expenses
      and prepaid participation servicing fees paid for the acquisition and
      servicing of PIMs.

      The Partnership amortizes the prepaid acquisition fees and expenses using
      a method that approximates the effective interest method over a period of
      ten to twelve years, which represents the estimated life of the underlying
      mortgage.

      The Partnership amortizes prepaid participation servicing fees using a
      method that approximates the effective interest method over a ten year
      period beginning at final endorsement of the GNMA loan and at closing if a
      Fannie Mae loan.

      Upon the repayment of a PIM, any unamortized acquisition fees and expenses
      and unamortized participation servicing fees related to such loan are
      expensed.

      Income Taxes

      The Partnership is not liable for federal or state income taxes as
      Partnership income is allocated to the partners for income tax purposes.
      If the Partnership's tax returns are examined by the Internal Revenue
      Service or state taxing authority and such an examination results in a
      change in Partnership taxable income, such change will be reported to the
      partners.

      Estimates and Assumptions

      The preparation of financial statements in accordance GAAP requires
      management to make estimates and assumptions that affect the reported
      amount of assets and liabilities, contingent assets and liabilities and
      revenues and expenses during the period. Actual results could differ from
      those estimates.

C.    PIMs

      At December 31, 2001 and 2000, the Partnership had investments in two PIMs
      and three PIMs, respectively. The Partnership's PIMs consist of a GNMA or
      Fannie Mae MBS representing the securitized first mortgage loan on the
      underlying property and a participation interest in the revenue stream and
      appreciation of the underlying property above specified base levels.

      The borrower conveys this participation feature to the Partnership
      generally through a subordinated multifamily mortgage (the "Agreement").
      The Partnership receives guaranteed monthly payments of principal and
      interest on the GNMA and Fannie Mae MBS and HUD insures the first mortgage
      loan underlying the GNMA MBS. The borrower usually can not prepay the
      first mortgage loan during the first five years and may prepay the first
      mortgage loan thereafter subject to a 9% prepayment premium in years six
      through nine, a 1% prepayment premium in year ten and no prepayment
      premium thereafter. The Partnership may receive interest related to its
      participation interest in the underlying property, however, this amount is
      neither insured nor guaranteed.





                                    Continued


                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


    C.    PIMs, Continued

          Generally, the participation features consist of the following: (i)
          "Minimum Additional Interest" rates ranging from .5% to .75% per annum
          calculated on the unpaid principal balance of the first mortgage on
          the underlying property, (ii) "Shared Income Interest" ranging from
          25% to 30% of the monthly gross rental income generated by the
          underlying property in excess of a specified base, but only to the
          extent that it exceeds the amount of Minimum Additional Interest
          received during such month and (iii) "Shared Appreciation Interest"
          ranging from 30% to 35% of any increase in the value of the underlying
          property in excess of a specified base. Payment of Minimum Additional
          Interest and Shared Income Interest from the operations of the
          property is limited to 50% of net revenue or Surplus Cash as defined
          by Fannie Mae or HUD, respectively.

          The total amount of Minimum Additional Interest, Shared Income
          Interest and Shared Appreciation Interest payable on the maturity date
          by the underlying borrower usually can not exceed 50% of any increase
          in value of the property. However, generally any net proceeds from a
          sale or refinancing will be available to satisfy any accrued but
          unpaid Shared Income or Minimum Additional Interest. Shared
          Appreciation Interest is payable when one of the following occurs: (1)
          the sale of the underlying property to an unrelated third party on a
          date which is later than five years from the date of the Agreement,
          (2) the maturity date or accelerated maturity date of the Agreement,
          or (3) prepayment of amounts due under the Agreement and the insured
          mortgage.

          Under the Agreement, the Partnership, upon giving twelve months
          written notice, can accelerate the maturity date of the Agreement and
          insured mortgage to a date not earlier than ten years from the date of
          the Agreement for (a) the payment of all participation interest due
          under the Agreement as of the accelerated maturity date, or (b) the
          payment of all participation interest due under the Agreement plus all
          amounts due on the first mortgage note on the property.

          During June 2001, the Partnership received a payoff of the Casa Marina
          PIM in the amount of $6,727,016. In addition, the Partnership received
          $15,000 of Shared Appreciation Interest and $10,000 of Minimum
          Additional Interest upon the payoff of the underlying mortgage. On
          July 18, 2001, the Partnership paid a special distribution of $.53 per
          Limited Partner interest from the principal proceeds and Shared
          Appreciation received from Casa Marina.

          On January 11, 2000, the Partnership paid a special distribution of
          $1.17 per Limited Partner interest consisting of the principal
          proceeds and Shared Appreciation Interest in the amounts of
          $14,491,746 and $426,321, respectively from the Marina Shores
          Apartments PIM payoff in December of 1999.

          In August 1999, the Partnership received a prepayment of the Mill
          Ponds Apartments PIM in the amount of $9,751,550 representing the
          outstanding principal balance. In addition to the prepayment, the
          Partnership received $402,508 of Shared Appreciation Interest and
          $172,464 of Minimum Additional Interest and Shared Income Interest in
          July, 1999. The Partnership distributed the capital transaction
          proceeds from this prepayment to the Limited Partners through a
          special distribution on September 9, 1999 in the amount of $.80 per
          Limited Partner interest.

          In January 1999, the Partnership received a prepayment of the Windsor
          Court Apartments PIM in the amount of $10,876,051 representing the
          outstanding principal balance. In addition to the prepayment, the
          Partnership received $243,620 of Shared Appreciation Interest and
          prepayment premiums and $196,828 of Minimum Additional Interest and
          Shared Income Interest during December 1998. The Partnership
          distributed the capital transaction proceeds from this prepayment to
          the Limited Partners through a special distribution on February 26,
          1999 in the amount of $.88 per Limited Partner interest.





                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


C.        PIMs, continued

          At December 31, 2001 and 2000 there were no loans within the
          Partnership's portfolio that were delinquent as to principal or
          interest.

          The Partnership's PIMs consist of the following at December 31, 2001 and 2000:


                                                                             Approximate
                    Original                              Maturity             Monthly
                      Face           Interest               Dates              Payment                 Investment Basis at
   PIMs              Amount           Rate (a)               (f)                 (g)                       December 31,
   ----              ------         -----------        ----------------      ------------        ------------------------------
                                                                                                      2001            2000
GNMA
Casa Marina
  Apts.
Miami, FL        $   7,099,700           -                    -               $   -             $       -        $   6,748,832

Harbor Club
                                                                                                                   -
  Apts.
Ann Arbor, MI       13,562,000         8.00%               10/15/31              95,000            12,998,733       13,095,330
                 -------------        (c) (d)
                                        (e)                                                     -------------    -------------

                    20,661,700                                                                     12,998,733       19,844,162
                 -------------                                                                  -------------    -------------

Fannie Mae
Royal Palm Pl.
  Apts
Kendall, FL         15,978,742         8.375%               4/1/06              103,000            14,764,062       14,764,061
                 -------------        (b) (h)                                                   -------------    -------------

   Total         $  36,640,442                                                                  $  27,762,795    $  34,608,223
                 =============                                                                  =============    =============
                                                                                                      (i)




        (a)  Represents the permanent interest rate of the GNMA or Fannie Mae
             MBS. The Partnership may also receive additional interest,
             consisting of (i) Minimum Additional Interest (ii) Shared Income
             Interest and (iii) Shared Appreciation Interest

        (b)  Minimum Additional Interest is at a rate of .5% per annum
             calculated on the unpaid principal balance of the first mortgage
             note.

        (c)  Minimum Additional Interest is at a rate of .75% per annum
             calculated on the unpaid principal balance of the first mortgage
             note.

        (d) Shared Income Interest is based on 25% of monthly gross rental
            income over a specified base amount.

        (e) Shared Appreciation Interest is based on 35% of any increase in the
            value of the project over the specified base value.

        (f) The Partnership's GNMA MBS have call provisions, which allow the
            Partnership to accelerate their respective maturity date.







                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


   C      PIMs, Continued


         (g) The normal monthly payment consisting of principal and interest is
             payable monthly at level amounts over the term of the GNMA MBS. The
             normal monthly payment consists of interest only for the Fannie Mae
             MBS. The GNMA MBS and Fannie Mae MBS may not be prepaid during the
             first five years and may generally be prepaid subject to a 9%
             prepayment premium in years six through nine, a 1% prepayment
             premium in year ten and no prepayment premium after year ten.

        (h)  During December 1995, the Partnership agreed to a modification of
             the Royal Palm PIM. The Partnership received a reissued Fannie Mae
             MBS and increased its participation percentage in income and
             appreciation from 25% to 30%. The Partnership will receive interest
             only payments on the Fannie Mae MBS at interest rates ranging from
             8.375% to 8.775% per annum through maturity. The original face
             value of the PIM on the underlying property was $22,000,000 of
             which 27% or $6,021,258 is held by Krupp Insured Plus Limited
             Partnership, an affiliate of the Partnership.

        (i)  The aggregate cost of PIMs for federal income tax purposes is $27,762,795.


             A reconciliation of the carrying value of PIMs for each of the
             three years in the period ended December 31, 2001 is as follows:


                                                           2001                  2000                    1999
                                                      --------------        -------------          ---------------

  Balance at beginning of period                      $    34,608,223       $  34,929,389          $    70,497,441

  Deductions during period:
   Principal collections                                   (6,845,428)           (321,166)             (35,568,052)
                                                      ---------------       -------------          ---------------

  Balance at end of period                            $    27,762,795       $  34,608,223          $    34,929,389
                                                      ===============       =============          ===============



       The underlying mortgages of the PIMs are collateralized by multi-family
       apartment complexes located in two states. The apartment complexes range
       in size from 208 to 377 units.

D.     MBS
       ---

       At December 31, 2001, the Partnership's MBS portfolio had an amortized
       cost of $3,343,185 and unrealized gains of $131,115. At December 31,
       2001, the Partnership's insured mortgage loan had an amortized cost of
       $7,933,152 and an unrealized gain of $221,970. At December 31, 2000, the
       Partnership's MBS portfolio had an amortized cost of $4,356,235 and
       unrealized gains and losses of $113,260 and $818, respectively. At
       December 31, 2000, the Partnership's insured mortgage loan had an
       amortized cost of $7,984,348 and an unrealized gain of $79,844. The
       portfolio has maturity dates ranging from 2016 to 2035.

                                                                                          Unrealized
                  Maturity Date                              Fair Value                      Gain
                 ---------------                           -------------                  ------------
                  2002 - 2006                              $     -                        $     -
                  2007 - 2011                                    -                              -
                  2012 - 2035                                 11,629,422                       353,085
                                                           -------------                  ------------

                     Total                                 $  11,629,422                  $    353,085
                                                           =============                  ============







                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


E.     Partners' Equity

       Under the terms of the Partnership Agreement, profits from Partnership
       operations and Distributable Cash Flow are allocated 97% to the
       Unitholders and Corporate Limited Partner (the "Limited Partners") and 3%
       to the General Partners.

       Upon the occurrence of a capital transaction, as defined in the
       Partnership Agreement, net cash proceeds and profits from the capital
       transaction will be distributed first, to the Limited Partners until they
       have received a return of their total invested capital, second, to the
       General Partners until they have received a return of their total
       invested capital, third, 99% to the Limited Partners and 1% to the
       General Partners until the Limited Partners receive an amount equal to
       any deficiency in the 11% cumulative return on their invested capital
       that exists through fiscal years prior to the date of the capital
       transaction, fourth, to the class of General Partners until they have
       received an amount equal to 4% of all amounts of cash distributed under
       all capital transactions and fifth, 96% to the Limited Partners and 4% to
       the General Partners. Losses from a capital transaction will be allocated
       97% to the Limited Partners and 3% to the General Partners.

       Upon the occurrence of a terminating capital transaction, as defined in
       the Partnership Agreement, the net cash proceeds and winding up of the
       affairs of the Partnership will be allocated among the Partners first, to
       each class of Partners in the amount equal to, or if less than, in
       proportion to, the positive balance in the Partner's capital accounts,
       second, to the Limited Partners until they have received a return of
       their total invested capital, third, to the General Partners until they
       have received a return of their total invested capital, fourth, 99% to
       the Limited Partners and 1% to the General Partners until the Limited
       Partners have received to any deficiency in the 11% cumulative return on
       their invested capital that exists through fiscal years prior to the date
       of the capital transaction, fifth, to the General Partners until they
       have received an amount equal to 4% of all amounts of cash distributed
       under all capital transactions and sixth, 96% to the Limited Partners and
       4% to the General Partners.

       During 2001, 2000 and 1999, the Partnership made quarterly distributions
       totaling $.32, $.54 and $.76 per Limited Partner interest respectively.
       The Partnership made special distributions of $.53, $1.17 and $1.68 per
       Limited Partner interest in 2001, 2000, and 1999, respectively.

       As of December 31, 2001, the following cumulative partner contributions
       and allocations have been made since inception of the Partnership:

                                                       Corporate                        Accumulated             Total
                                                        Limited         General        Comprehensive           Partners'
                                   Unitholders          Partner         Partners           Income                Equity
                                -----------------      ---------     ----------------  ---------------     ----------------

Capital contributions           $   254,686,736        $   2,000     $      3,000       $     -            $   254,691,736

Syndication costs                   (15,834,700)             -               -                -                (15,834,700)

Quarterly distributions            (193,374,105)          (1,625)      (4,445,830)            -               (197,821,560)

Special distributions              (140,598,377)          (1,101)            -                -               (140,599,478)

Net income                          136,606,104            1,139        4,224,967             -                140,832,210

Unrealized gains on MBS                   -                -                -               131,115                131,115
                                ----------------       ----------    ------------       -----------        ---------------
Total at December 31, 2001      $     41,485,658       $      413    $   (217,863)      $   131,115        $    41,399,323
                                ================       ==========    ============       ===========        ===============







                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


F.    Related Party Transactions

      Under the terms of the Partnership Agreement, the General Partners or
      their affiliates are paid an Asset Management Fee equal to .75% per annum
      of the remaining face value of the Partnership's mortgage assets, payable
      quarterly. The General Partners may also receive an incentive management
      fee in the amount equal to .3% per annum on the Partnership's total
      invested assets provided the Unitholders have received their specified
      non-cumulative return on their Invested Capital. Total Asset Management
      Fees and Incentive Management Fees payable to the General Partners or
      their affiliates shall not exceed 10% of Distributable Cash Flow over the
      life of the Partnership.

      Additionally, the Partnership reimburses affiliates of the General
      Partners for certain expenses incurred in connection with maintaining the
      books and records of the Partnership, the preparation and mailing of
      financial reports, tax information and other communications to the
      investors and legal fees and expenses.

G.    Federal Income Taxes

      The reconciliation of the net income reported in the accompanying
      statement of income with the net income reported in the Partnership's 2001
      federal income tax return is as follows:

             Net income per statement of income                                              $  2,763,540

             Less:  Book to tax difference for amortization
                     of prepaid fees and expenses                                                (375,904)
                                                                                             ------------

             Net income for federal income tax purposes                                      $  2,387,636
                                                                                             ============


      The allocation of the net income for federal income tax purposes for 2001
      is as follows:

                                                                                               Portfolio
                                                                                                 Income

       Unitholders                                                                           $  2,316,739
       Corporate Limited Partner                                                                       18
       General Partners                                                                            70,879
                                                                                             -------------
                                                                                             $  2,387,636

       During the years ended December 31, 2001, 2000 and 1999 the average per
       unit net income to the Unitholders for federal income tax purposes was
       $.18, $.24 and $.34, respectively.

       The basis of the Partnership's assets for financial reporting purposes
       was less than its tax basis by approximately $815,000 and $1,191,000 at
       December 31, 2001 and 2000, respectively. The basis of the Partnership's
       liabilities for financial reporting purposes was less than its tax basis
       by approximately $18,000 at December 31, 2001. At December 31, 2000 the
       basis of the Partnerships liabilities for financial reporting purposes
       was the same as its tax basis.

H.     Fair Value Disclosures of Financial Instruments

       The Partnership uses the following methods and assumptions to estimate
       the fair value of each class of financial instrument:

       Cash and cash equivalents

       The carrying amount approximates the fair value because of the short
       maturity of those instruments.




                                    Continued



                   KRUPP INSURED PLUS-III LIMITED PARTNERSHIP

                    NOTES TO FINANCIAL STATEMENTS, Continued


H.     Fair Value Disclosures of Financial Instruments, Continued
       -----------------------------------------------

       MBS

       The Partnership estimates the fair value of MBS based on quoted market
       prices while it estimates the fair value of insured mortgages based on
       quoted prices of MBS with similar interest rates. Based on the estimated
       fair value determined using these methods and assumptions, the
       Partnership's investments in MBS and insured mortgages had gross
       unrealized gains of approximately $353,000 at December 31, 2001 and
       unrealized gains and losses of approximately $193,000 and $1,000 at
       December 31, 2000.

       PIMs

       As there is no active trading market for these investments, Management
       estimates the fair value of the PIMs using quoted market prices of MBS
       having a similar interest rate. Management does not include any
       participation interest in the Partnership's estimated fair value arising
       from the properties, as Management does not believe it can predict the
       time of realization of the feature with any certainty. Based on the
       estimated fair value determined using these methods and assumptions, the
       Partnership's investments in PIMs had gross unrealized gains of
       approximately $613,000 and $161,000 at December 31, 2001 and December 31,
       2000, respectively.


       At December 31, 2001 and 2000, the Partnership estimates the fair values
       of its financial instruments as follows (amounts rounded to nearest
       thousand):


                                                               2001                         2000
                                                     ------------------------      -----------------------
                                                        Fair         Carrying         Fair       Carrying
                                                       Value           Value         Value         Value

          Cash and cash equivalents                  $   1,901       $  1,901      $    1,910   $    1,910

          MBS and insured mortgage                      11,629         11,407          12,533       12,453

          PIMs                                          28,376         27,763          34,769       34,608
                                                     ---------       --------      ----------   ----------

                                                     $  41,906       $ 41,071      $   49,212   $   48,971
                                                     =========       ========      ==========   ==========


I.      Subsequent Events

        The Partnership received a prepayment of the Royal Palm Place
        Subordinate Promissory note. On January 2, 2002, the Partnership
        received $1,004,379 of Shared Appreciation Interest and $322,401 of
        Minimum Additional Interest. On February 25, 2002, the Partnership
        received $14,764,062 representing the principal proceeds on the first
        mortgage. The Partnership has declared a special distribution of $1.24
        per Limited Partner interest consisting of Shared Appreciation Interest
        and prepayment proceeds which will be paid in the first quarter of 2002.





 Unaudited Distributable Cash Flow and Net Cash Proceeds from Capital Transactions

Shown below is the calculation of Distributable  Cash Flow and Net Cash Proceeds
from Capital Transactions as defined in Section 17 of the Partnership  Agreement
and the source of cash  distributions  for the year ended  December 31, 2001 and
the period from  inception  through  December  31,  2001.  The General  Partners
provide certain of the information below to meet requirements of the Partnership
Agreement  and  because  they  believe  that it is an  appropriate  supplemental
measure of operating performance.  However, Distributable Cash Flow and Net Cash
Proceeds from Capital  Transactions  should not be considered by the reader as a
substitute  to  net  income  as an  indicator  of  the  Partnership's  operating
performance or to cash flows as a measure of liquidity.
                                                                                                        Inception
                                                                                 Year Ended              Through
                                                                                  12/31/01               12/31/01
                                                                                 ---------             --------------
                                                                         (Amounts in thousands, except per Unit amounts)
  Distributable Cash Flow:
  -----------------------
  Income for tax purposes                                                        $   2,388             $   141,760
  Items not requiring or (not providing)
   the use of operating funds:
    Amortization of prepaid expenses, fees
         and organization costs                                                        590                  15,469
    MBS premium amortization                                                         -                          92
    Acquisition expenses paid from offering
         proceeds charged to operations                                              -                         184
    Shared Appreciation Interest/prepayment premiums                                   (15)                 (8,378)
    Gain on sale of MBS                                                              -                        (253)
                                                                                 ---------             -----------
    Total Distributable Cash Flow ("DCF")                                        $   2,963             $   148,874
                                                                                 =========             ===========

  Limited Partners Share of DCF                                                  $   2,874             $   144,408
                                                                                 =========             ===========

  Limited Partners Share of DCF per Unit                                         $     .23             $     11.31(c)
                                                                                 =========             ===========

  General Partners Share of DCF                                                  $      89             $     4,466
                                                                                 =========             ===========

  Net Proceeds from Capital Transactions:
  --------------------------------------
  Principal collections and prepayments
   (including Shared Appreciation Interest
    and prepayment premiums) on PIMs                                             $    6,860            $   149,107
  Principal collections and sales proceeds on MBS
   (including prepayment premiums and gain on sale)                                   1,064                 84,608
  Reinvestment of MBS and PIM principal collections                                  -                     (41,960)
                                                                                 ----------            -----------
  Total Net Proceeds from Capital Transactions                                   $    7,924            $   191,755
                                                                                 ==========            ===========

  Cash available for distribution
   (DCF plus proceeds from Capital Transactions)                                 $   10,887            $   340,629
                                                                                 ==========            ===========

  Distributions:
  -------------
    Limited Partners                                                             $   10,855(a)         $   334,997(b)
                                                                                 ==========            ===========

    Limited Partners Average per Unit                                            $    0.85(a)          $     26.23(b)(c)
                                                                                 =========             ===========

    General Partners                                                             $      89(a)          $     4,466(b)
                                                                                 =========             ===========

               Total Distributions                                               $  10,944(a)          $   339,463(b)
                                                                                 =========             ===========

(a)   Represents all distributions paid in 2001 except the February 2001
         quarterly distribution and includes an estimate of the distribution to
         be paid in February 2002.
(b)   Includes an estimate of the quarterly distribution to be paid in
         February 2002.
(c)   Limited Partners average per Unit return of capital as of February 2002
         is $14.92 [$26.23 - $11.31]. Return of capital represents that portion
         of distributions which is not funded from DCF such as proceeds from the
         sale of assets and substantially all of the principal collections
         received from MBS and PIMs.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

KRUPP INSURED PLUS III LIMITED PARTNERSHIP 10-K
