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

                                    FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED DECEMBER 31, 1997

Commission File Number:

         33-19152

Exact name of Registrant as specified in its charter:

         Florida Income Fund III, Limited Partnership

State or other Jurisdiction of incorporation or organization:

         Delaware

I.R.S. Employer Identification Number:

         65-0016187

Address of Principal Executive Offices:

         12800 University Drive, Ste 675
         Fort Myers, FL 33907

Registrant's Telephone Number, including Area Code:

         (941) 481-2011

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

         None

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

         None

The registrant 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 has been subject to such filing requirements for the past 90
days.



<PAGE>
<PAGE>
                  FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
                                FORM 10-K - 1997
                       CONTENTS AND CROSS REFERENCE INDEX

PART   ITEM                                                          FORM 10-K
 NO.   NO.                    DESCRIPTION                             PAGE NO.
----   ----                   -----------                            ---------
I       1     Business                                                       3

        2     Properties                                                 4 - 6

        3     Legal Proceedings                                              6

        4     Submission of Matters to a Vote of
              Security Holders                                               6

II      5     Market for Registrant's Partnership
              Equity and Related Partner Matters                             7

        6     Selected Financial Data                                        7

        7     Management's Discussion and Analysis of
              Financial Condition and Results of Operations             8 - 11

        8     Financial Statements and Supplementary Data              12 - 30

        9     Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure                        31

III     10    Directors and Executive Officers of
              the Registrant                                           31 - 33

        11    Executive Compensation                                   33 - 35

        12    Security Ownership of Certain Beneficial
              Owners and Management                                         35

        13    Certain Relationships and Related Party
              Transactions                                                  35

IV      14    Exhibits, Financial Statement Schedules
              and Reports on Form 8-K                                       36

              Signatures                                                    37


                                       2

<PAGE>
<PAGE>



                                     PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS - Florida Income Fund III, Limited Partnership,
(the Partnership) is a Delaware Limited Partnership formed as of December 9,
1987, for the purpose of investing in a diversified portfolio of
income-producing commercial and residential real estate properties primarily
located in Southwest Florida. The Partnership's primary objectives are to
preserve and protect the Partnership's original capital, obtain capital
appreciation through increases in value of Partnership properties, realize
capital gains from the sale of Partnership properties and provide distributable
cash, a portion of which may not constitute taxable income.

There can be no assurance that these objectives will be achieved. The
achievement of these objectives depends on many factors, including principally
the ability of the Managing General Partner to manage its properties
successfully. The General Partners of the Partnership are Mariner Capital
Management, Inc., a Florida corporation (Managing General Partner or Mariner)
and MCD Real Estate, Inc., an Ohio corporation. For further information see
Item 10. The primary market is the west coast of Florida. The intent has been
to invest in more than one property in order to achieve a measure of
diversification. The Partnership's original intent was to hold these properties
as long-term investments. The Managing General Partner has chosen to invest
primarily in the west coast of Florida because of its experience in dealing in
real estate in this area. The west coast of Florida offers, in management's
opinion, a competitive but growing economic base in which to meet its
performance objectives.

The Partnership commenced an offering of $20,000,000 of units of limited
partnership interest (the units) at $1,000 per unit (20,000 total units) on
April 13, 1988, pursuant to a registration statement on Form S-11 under the
Securities Act of 1933 (Reg. No. 33-19152) (Registration Statement). McDonald
and Company Securities, Inc., an affiliate of MCD Real Estate, Inc., Morgan
Keegan & Company, Inc. and J. J. B. Hilliard, W. L. Lyons, Inc., acted as the
managing dealers of the offering. The Prospectus filed pursuant to Rule 424(B)
and 424(C) under the Securities Act of 1933 (the Prospectus) was supplemented
on December 30, 1988, The Prospectus and supplements are incorporated herein by
reference to the extent necessary or appropriate. Pursuant to the terms of the
offering, there was a right to offer for sale an additional 5,000 units. The
Partnership sold an aggregate of $13,098,879 (net of discounts and commissions)
(14,717 units) of Limited Partnership units.

The Partnership itself has no executive officers as employees. The Managing
General Partner, which has responsibility for the management of the
Partnership, has assigned certain individuals to devote as much time to the
operations of the Partnership as deemed necessary. All these individuals serve
the Partnership on a part-time basis. The Managing General Partner is a General
Partner in other publicly and privately offered limited partnerships, including
additional public partnerships with the same or similar investment objectives
as the Partnership.


                                       3

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<PAGE>



ITEM 2. PROPERTIES

The Partnership has purchased two properties. A brief description of these
properties and the terms of the purchases by the Partnership follows:

         PINK SHELL RESORT - On December 30, 1988, the Partnership purchased
         from an unaffiliated seller, a 100% ownership interest in the Pink
         Shell Family Resort located on Fort Myers Beach, Florida. This
         property is located at 275 Estero Boulevard on Estero Island, Lee
         County, Florida. At time of purchase, the Pink Shell Resort contained
         127 rentable units consisting of apartment units, condominium units
         and cottages, comprising a motel/resort operation. The property is
         situated on approximately twelve acres of land. At the time of
         purchase, there was a Planned Unit Development approved by Lee County
         which allowed for expansion of the resort to a maximum of 194 units.
         During 1990, the General Partners completed construction on a 60 unit
         motel building. In order to do this, 19 existing units were
         demolished.  These additional 41 units brought the property up to 168
         units, which were available for rent in 1991. Additional units were
         completed in 1995 and discussed later in this report.

         Amenities include three heated swimming pools, a general store, an
         outdoor restaurant, a pool bar, two tennis courts, shuffleboard
         courts, a 200 foot fishing pier, boat ramp, docks and 1,500 feet of
         frontage on both the Gulf of Mexico and on Mantanzas Pass, which is
         part of Estero Bay.

         The Partnership capitalized the following costs associated with the
         acquisition of the Pink Shell Resort:

                  Original Purchase Price                         $10,000,000
                  Acquisition Fee to General Partner                  500,000
                  Survey                                                9,000
                  Appraisal                                             8,000
                  Intangible Tax                                       10,000
                  Other Closing Costs                                  25,644
                                                                  -----------
                              Total                               $10,552,644
                                                                  ===========

         The purchase price of the Property, which included a non-compete
         agreement of $371,524; consisted of $5,478,736 cash at closing a
         $5,000,000 nonrecourse mortgage note given to the seller and two
         assumed mortgages totalling $73,908. The note called for monthly
         interest payments at an interest rate of 10% per annum with the
         principal due one year following closing. In 1989, the loan was
         extended at 11% per annum with the principal due January 31, 1991. On
         April 2, 1990, the Partnership borrowed $8,000,000 from a local
         financial institution which enabled it to pay off the seller, the two
         assumed mortgages as well as finish construction on the sixty-unit
         building. Current monthly payments are $78,409.05. In June 1994, the
         Partnership extended the loan at an interest rate of 11% until
         April 1, 2000, at which time the loan will balloon. The interest rate
         was changed to 10.5% on April 1, 1995.


                                       4

<PAGE>
<PAGE>


         During 1991, the Partnership purchased two bay-front units from
         individuals for purchase prices of $300,000 and $200,000,
         respectively.  The Partnership paid $100,000 cash and gave an interest
         only (10%) $200,000 note to the seller of one unit and paid $200,000
         cash on the other. The loan which was to mature January, 1994 has
         been refinanced at a rate of 7%. Each March until maturity, a
         principal payment in the amount of $10,000 is due. The loan matures,
         with a balloon payment due, in January 1998.

         During 1995, the Partnership completed construction on a 42 unit
         condominium building. All 42 units were sold and closed in early 1995
         and the construction loan in the amount of $6,200,000 was paid in
         full.  The cost of the project was approximately $7,309,000 (which
         includes land and building allocations) resulting in a gain of
         $2,307,000. This gain has been reported under the full accrual method
         of accounting.  The Partnership was required to demolish 7 cottages
         and discontinue use of 6 units in order to construct the new units.
         These are reported as a loss of disposal of fixed assets in 1994.

         The Partnership has entered into long term leases with each of the 42
         owners. This enables the partnership to include the 42 new two
         bedroom, two bath units in its resort rental operation. Terms of these
         leases are as follows:

                  The Partnership pays each owner a minimum annual rental of
                  $25,000 in 12 equal monthly installments. In addition, the
                  Partnership pays the owner an amount by which 42.5% of the
                  annual gross rental income generated by lessee from the unit
                  exceeds the amount of annual base rent paid. The minimum base
                  rents increase by $500 per year until the first year for
                  which percentage rent is payable.

         The Partnership has executed 11 leases which expire December 31, 2000,
         15 leases which expire December 31, 2002, and 16 leases which expire
         December 31, 2005.

         Total initial minimum payments associated with these leases are as
         follows:

                                            INITIAL
                                           MIN. LEASE            TOTAL
         EXPIRATION DATE      NO. UNITS     PAYMENTS            PAYMENT
         ---------------      ---------    ----------           -------
         December 21, 2000       11         130,833             $1,439,163
         December 31, 2002       15         186,500              2,797,500
         December 31, 2005       16         273,750              4,380,000
                                                                ----------
                                                                $8,616,663
                                                                ==========

         Future minimum lease payments at December 31, 1997 are projected as
         follows:


                                               1998            $1,113,000
                                               1999             1,134,000
                                               2000               902,917
                                               2001               868,000
                                               2002               527,250
                                            Thereafter          1,018,500
                                                               ----------
                                                               $5,563,667
                                                               ==========

         The $8,000,000 first mortgage on the resort was paid down by
         $1,637,000, from proceeds from the condo unit sales, in 1995.

         Subsequent to December 31, 1997, the Partnership entered into a
         Purchase Agreement with a hotel company to sell the Pink Shell.
         Limited Partners approval of this proposed transaction is expected to
         be solicited in March or April of 1998.  If approved, the sale could
         close in the second quarter of 1998.  The general partners would then
         adopt a formal plan of liquidation, in accordance with the Partnership
         agreement, which would be implemented as soon as all the terms and
         conditions of the sale are satisfied.

                                       5

<PAGE>
<PAGE>



         WALSINGHAM COMMONS - Walsingham Commons Shopping Center consists of
         approximately 42,600 square feet of retail space, constructed in 1986,
         situated on 4.6 acres of land within a shopping center, in Largo,
         Pinellas County, Florida. Walsingham Commons Shopping Center includes
         an additional 120,300 square feet of anchor space owned by individual
         retailers, thus, making the total size of the shopping center 162,900
         square feet. The retailers include, Albertson's Foods, (63,100),
         Scotty's hardware (32,200), Frank's Nursery (15,200), Barnett Bank
         (3,800), Long John Silver's (2,400) and Wags Restaurant (3,600).
         Although the Partnership did not purchase the above stores, they act
         as anchors, generating traffic to the shopping center.

         Walsingham Commons is located at the intersection of Ulmerton Road and
         Walsingham Road in Largo, Florida.

         The Partnership acquired Walsingham Commons on November 30, 1989, for
         all cash. The Partnership has capitalized the following costs
         associated with the acquisition of Walsingham Commons:

                  Contract Purchase Price                 $4,825,000
                  Acquisition Fee                            176,250
                  Closing Costs                               22,528
                                                          ----------
                                                          $5,023,778
                                                          ==========

         On May 16, 1990, the Partnership borrowed $3,200,000 on the Walsingham
         Commons Shopping Center with a life insurance company. This loan
         carries a fixed interest rate of 9.625%. The payment terms provide for
         monthly interest through June 1, 1997, at which time the principal was
         due.

         During 1995, management provided a provision for write down of
         Walsingham Commons of $1,236,502 to reflect the current net realizable
         value of the property.

         As a result of the Partnership's November 27, 1996 default under the
         terms of the above mentioned mortgage loan, the Partnership agreed to
         the appointment of a receiver on the Walsingham Commons on February 3,
         1997.  All rights, powers, interests and obligations in Walsingham
         Commons have been transferred to the receiver as of November 27, 1996.
         The outstanding mortgage balance of $3,200,000 is nonrecourse and will
         be satisfied upon the final judgment of foreclosure.  The foreclosure
         proceedings had not been finalized at December 31, 1997.

         This action was taken in response to a declining rental market in the
         area of Largo, FL where this property is located.  The subject
         neighborhood has been declining and losing many of the long term
         tenants to newer buildings located in more desirable areas of Pinellas
         County.  This resulted in a high supply of vacant space versus
         very low demand which in turn led to reduced rental rates.  The
         General Partner was of the opinion that the problem is long term and
         felt it was economically prudent to default on the mortgage loan to
         eliminate the negative cash flow being generated by the property.


ITEM 3. LEGAL PROCEEDINGS

The Partnership is not a party to nor is any of the Partnership's property the
subject of any material pending legal proceedings.


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

        None



                                       6

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<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANTS'S PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS

The units were not traded on any public market and it is not contemplated for
these units to be traded on any public market in the future. As of December 31,
1997, there were 1132 Limited Partners.

The Partnership commenced paying quarterly cash distributions in October 1988.
During 1997, 1996 and 1995, the total cash distributions were $679,605,
$680,661 and $680,661, respectively. The Partnership intends to distribute
operating cash produced by the Partnership on a quarterly basis in 1998 or
until the potential sale discussed in Item 2 above takes place.



ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                       1997             1996              1995             1994            1993
                                       ----             ----              ----             ----            ----
<S>                                    <C>              <C>               <C>              <C>             <C>
Operating revenues (including
interest income of $15,081, $17,992,
$53,663, $11,697 and $18,081 for
1997, 1996, 1995, 1994 and 1993        $10,050,298      $ 9,828,999      $11,477,902       $ 6,765,804      $ 7,007,502

Net income (loss)                      $   673,929      $   (63,805)     $ 1,061,549       $  (755,983)     $   233,744

Net income (loss) per weighted
average Limited Partnership unit       $     45.33      $     (4.29)     $     71.40       $    (50.85)     $     15.72

Total assets                           $18,293,585      $18,919,818      $19,590,595       $29,078,498      $22,607,756

Mortgages and notes payable            $ 8,577,510      $ 8,964,331      $ 9,315,294       $15,603,279      $11,586,872

Distributions to Limited Partners      $   679,605      $   680,661      $   680,661       $   589,155      $ 1,030,278

Distributions per Limited
Partnership unit                       $     46.18      $     46.25      $     46.25       $     40.03      $     70.01

Partners' equity                       $ 8,173,535      $ 8,179,211      $ 8,923,677       $ 8,542,789      $ 9,887,927

Book value per Limited
Partnership unit                       $    557.52      $    558.36      $    608.91       $    583.74      $    674.63
</TABLE>

Also, refer to Item #8 and the audited Financial Statements referred to herein.


                                       7

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

LIQUIDITY - The principal source of the Partnership's liquidity is income
from a hospitality property purchased for the Partnership's portfolio (as
described in Results of Operations), and the cash reserves held in
interest-bearing accounts.

The Partnership had one loan in the amount of $2,183 which matured in 1997.
The Partnership has one mortgage that matures in 1998 in the amount of
$160,000.

Management believes that 1998 distribution levels from operations will be
similar to 1997 until the potential sale discussed in Item 2 above takes
place.

As discussed above and in Item 2 regarding Pink Shell Resort, Management
anticipates the potential liquidation of this Partnership during 1998.

CAPITAL RESOURCES - As of December 31, 1997, the Partnership had $156,000 in
cash and interest bearing deposits.

The Pink Shell (net of accumulated depreciation of $4,536,637 was carried
at $14,485,000. Property and equipment purchases of $150,098 were a result of
refurbishing the cottages at the Pink Shell property. Walsingham Commons
Shopping Center was written down in 1995 by $1,236,502 to reflect market value
of the asset.  It is carried at $3,082,157 (net of accumulated depreciation of
$764,464).

The Partnership has entered into long term leases with the owners of the
condominium units. These leases are more fully described in Item 2.

RESULTS OF OPERATIONS

COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996

During the years ended December 31, 1997 and 1996, the Partnership's principal
sources of revenue were rental income of $8,486,992 and $8,300,728, interest
income of $15,081 and $17,992, expense reimbursements from tenants of $0 and
$142,618 and food, beverage and retail revenue of $1,548,225 and $1,367,661,
respectively.

Rental income at the Pink Shell Resort increased $621,323.  The increase at
Pink Shell was due to achieving a higher average daily rate and higher
occupancy.

During 1997 the Pink Shell rented 3,492 more rooms at an average daily
rate of $147.59.

Interest income decreased due to fewer funds invested.

Food, beverage and retail income increased at the Pink Shell by $180,564. This
is due to much higher occupancy at the property.  Food, beverage and retail
expenses increased $148,283.



                                       8

<PAGE>
<PAGE>




Property operating expenses decreased by $159,390 mostly due to the pending
foreclosure of Walsingham Commons.  Pink Shell lease payments increased
$21,002.  Marketing costs increased $40,895, room costs increased $62,699.
Administrative and general expenses increased $22,304.  Other expenses
increased $15,560.

Interest expense decreased $294,987 due to the decrease in outstanding
Partnership debt and the pending foreclosure of Walsingham Commons. The
Partnership's outstanding debt at December 31, 1997, was $8,577,510 as compared
to $8,964,331 at December 31, 1996.

Real Estate Taxes decreased $36,417.


COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995

During the years ended December 31, 1996 and 1995, the Partnership's principal
sources of revenue were rental income of $8,300,728 and $7,618,033, interest
income of $17,992 and $53,663, expense reimbursements from tenants of $142,618
and $122,303 and food, beverage and retail revenue of $1,367,661 and
$1,373,246, respectively. In 1995 the Partnership recognized a gain on the sale
of the 42 unit building at the Pink Shell in the amount of $2,307,106.

Rental income at the Pink Shell Resort increased $630,085 and Walsingham
Commons increased $52,610. The increase at Pink Shell was due to achieving
a higher average daily rate.  The increase at Walsingham Commons was due to
stabilizing the occupancy in 1996.

During 1996 the Pink Shell rented 704 fewer rooms at an average daily
rate of $145.63. The resort was able to achieve a 10% increase in average daily
rate as compared to 1995.

Interest income decreased due to fewer funds invested.

Food, beverage and retail income decreased at the Pink Shell by $5,585. This is
due to slightly lower occupancy at the property.  Food, beverage and retail
expenses increased $4,025.

Property operating expenses increased by $721,812.  This increase was
attributed to Pink Shell's expenses increasing due to lease payments being
made on the 42 unit condo building. These lease payments totaled $1,071,000.
Marketing costs decreased $13,007, room costs increased $208,095 Administrative
and general expenses increased $309,727 of which $92,000 is due to management's
increase of its insurance reserve. Other expenses increased $41,693.


                                       9

<PAGE>
<PAGE>



Interest expense decreased $257,550 due to the decrease in outstanding
Partnership debt. The Partnership's outstanding debt at December 31, 1996, was
$8,964,331 as compared to $9,315,294 at December 31, 1995.

Real Estate Taxes decreased $13,348.

No impairment loss was recognized in December 31, 1996.  An impairment loss of
$1,236,502 was recognized in December 31, 1995.


COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994

During the years ended December 31, 1995 and 1994, the Partnership's principal
sources of revenue were rental income of $7,618,033 and $5,564,685, interest
income of $53,663 and $11,697, expense reimbursements from tenants of $122,303
and $112,012 and food and beverage revenue of $1,373,246 and $1,072,691,
respectively. In 1995 the Partnership also recognized the gain on sale of the
42 unit building at the Pink Shell in the amount of $2,307,106. The gain was
recognized in accordance with the full accrual method of accounting.

Rental income at the Pink Shell Resort increased $2,005,895 and Walsingham
Commons increased $47,453. The increase at Pink Shell was due to more units
available to rent and a stronger Florida tourism market. The increase at
Walsingham Commons was due to stabilizing the occupancy in 1995.

During 1995 the Pink Shell rented an additional 13,321 rooms at an average
daily rate of $132.24. The resort was able to achieve a 6% increase in average
daily rate as compared to 1994. Construction on the 42 unit building was
completed in early 1995 and the units were all sold and closed in the first
quarter of 1995.  The availability of these rooms contributed to the increase
in the number of additional rooms rented in 1995.

Interest income increased due to more funds invested.

Food, beverage and retail income increased at the Pink Shell by $300,555. This
is due to more guests and higher occupancy being achieved by the property.

Property operating expenses increased by $1,948,972. This increase was
attributed to Pink Shell's expenses increasing due to lease payments being made
on the 42 unit condo building. These lease payments totaled $907,719. Marketing
costs increased $183,660, room costs increased $563,145, Administrative and
general expenses increased $228,453 of which $80,000 is due to management's
increase of its insurance reserve. Other expenses increased $65,995. Operating
expenses increased due to occupancy increasing by 32% from 41,395 rooms to
54,716.

                                       10

<PAGE>
<PAGE>

Food and beverage expenses increased $59,466 due to more rooms being rented.

Interest expense decreased $186,697 due to the decrease in outstanding
Partnership debt. The Partnership's outstanding debt at December 31, 1995, was
$9,315,294 as compared to $15,603,279 at December 31, 1994. The decrease was
attributable to the construction loan being paid off by $3,707,200, the loan
from an affiliate decreasing $700,000 and principal pay downs of $1,880,785 on
other outstanding debt.

Real Estate Taxes decreased due to the condo building being sold in February
1995.

Loss on disposal is a one time item that related to the demolition of seven
cottage units in order to prepare the site for the 42 unit condominium
building.  The demolition occurred in 1994.

The loss on impairment of rental property is Management's provision to write
down the book value of Walsingham Commons. Management believes that this
reduction realistically reflects the net realizable value of the property.












                                      11

<PAGE>
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Balance Sheets of the Partnership as of December 31, 1997 and 1996 and the
Statements of Operations, Statements of Partner's Capital and Statements of
Cash Flows of the Partnership for each of the three years in the period ended
December 31, 1997, as well as the Notes to Financial Statements and Schedule
III and the Report of Independent Accountants there on, dated March 10, 1998,
are set forth herein:


                                       12

<PAGE>
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners
Florida Income Fund III, Limited Partnership


We have audited the accompanying balance sheets of Florida Income Fund III,
Limited Partnership, as of December 31, 1997 and 1996, and the related
statements of operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Income Fund III,
Limited Partnership, as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.






                                            COOPERS & LYBRAND L.L.P.
Tampa, Florida
March 10, 1998


                                       13

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<PAGE>



FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
           ASSETS                                                1997                 1996
                                                             ------------        -------------
<S>                                                          <C>                 <C>
CURRENT ASSETS
   Cash and cash equivalents                                 $   156,000         $    101,108
   Accounts receivable, trade                                    377,930              346,767
   Inventory                                                      69,837               68,422
   Prepaid expenses and other                                     90,797              201,608
                                                             ------------        ------------
      Total current assets                                       694,564              717,905
                                                             ------------        ------------

RENTAL PROPERTY UNDER FORECLOSURE                              3,082,157            3,082,157
                                                             ------------        ------------

RENTAL PROPERTIES, net                                        14,485,000           15,073,430
                                                             ------------        ------------

INTANGIBLE ASSETS
   Deferred loan and organizational costs, net                    31,864               46,326
                                                             ------------        -------------
      Total assets                                           $18,293,585         $ 18,919,818
                                                             ============        =============

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES
   Current maturities of mortgages and notes payable         $   722,549         $    383,573
   Accounts payable, trade                                       405,986              619,317
   Accrued expenses                                              265,608              508,872
   Customer and security deposits, rentals                       504,885              453,988
   Property taxes payable                                        216,061              194,099
                                                             ------------        ------------
      Total current liabilities                                2,115,089            2,159,849
                                                             ------------        ------------
MORTGAGE PAYABLE RELATED TO RENTAL PROPERTY
UNDER FORECLOSURE                                              3,200,000            3,200,000
                                                             ------------        ------------

MORTGAGES AND NOTES PAYABLE, less current maturities           4,804,961            5,380,758
                                                             ------------        ------------
COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL
   General partners deficiency                                   (31,450)             (38,189)
   Limited partners, 20,000 limited partnership units
     authorized; 14,717 issued and outstanding                 8,204,985            8,217,400
                                                             ------------        ------------

      Total partners' capital                                  8,173,535            8,179,211
                                                             ------------        ------------
      Total liabilities and partners' capital                $18,293,585         $ 18,919,818
                                                             ============        ============
RM80</TABLE>

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


                                       14

<PAGE>
<PAGE>



FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
years ended December 31, 1997, 1996 and 1995



<TABLE>
<CAPTION>
                                                                       1997            1996             1995
                                                                       ----            ----             ----
<S>                                                               <S>               <C>               <C>
Revenues
   Rental income                                                  $  8,486,992      $   8,300,728     $   7,618,033
   Food, beverage and retail income                                  1,548,225          1,367,661         1,373,246
   Interest income                                                      15,081             17,992            53,663
   Tenant reimbursements                                                     0            142,618           122,303
   Other income                                                              0                  0             3,551
   Gain on sale of condominium units                                         0                  0         2,307,106
                                                                 ----------------   -------------    -----------

                                                                    10,050,298          9,828,999        11,477,902
                                                                 ----------------   -------------    -----------
Expenses
   Property operating expenses                                       6,876,266          7,035,660         6,313,848
   Cost of food, beverage and retail sales                             955,893            807,610           803,585
   Depreciation                                                        738,528            912,448           691,182
   Interest expense                                                    589,612            884,599         1,086,357
   Interest expense-affiliated                                               0                  0            19,044
   Property taxes                                                      216,070            252,487           265,835
   Loss on impairment of rental property                                     0                  0         1,236,502
                                                                 ----------------   -------------     ------------

                                                                     9,376,369          9,892,804       10,416,353
                                                                 ----------------   -------------    -------------

      Net income (loss)                                           $    673,929      $     (63,805)    $  1,061,549
                                                                 ================    ============    =============

Net income (loss) allocated to general partner                    $      6,739      $        (638)    $     10,615
                                                                 ================   =============    =============

Net income (loss) allocated to limited partners                   $    667,190      $     (63,167)    $  1,050,934
                                                                 ================   =============    =============

Net income (loss) per limited partner unit                        $      45.33      $       (4.29)    $      71.40
                                                                 ================   =============    =============

Distributions per limited partner unit                            $      46.18      $       46.25     $      46.25
                                                                 ================   =============    =============

Weighted average limited partner units outstanding                      14,717             14,717           14,717
                                                                 ================   =============    =============
</TABLE>

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


                                       15

<PAGE>
<PAGE>



FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1997, 1996, and 1995


<TABLE>
<CAPTION>

                                  GENERAL          LIMITED
                                  PARTNERS         PARTNERS          TOTAL
                                  --------         ------------      -----------
<S>                              <C>               <C>               <C>

Balances, December 31, 1994      $ (48,166)        $  8,590,955      $ 8,542,789

      Distributions                      0             (680,661)        (680,661)

      Net income                    10,615            1,050,934        1,061,549
                                 ----------        ------------      -----------
Balances, December 31, 1995        (37,551)           8,961,228        8,923,677

      Distributions                      0             (680,661)        (680,661)

      Net income (loss)               (638)             (63,167)         (63,805)
                                 ----------        ------------       ----------
Balances, December 31, 1996        (38,189)           8,217,400        8,179,211

      Distributions                      0             (679,605)        (679,605)

      Net income                     6,739              667,190          673,929
                                 ----------        ------------      -----------
Balances, December 31, 1997      $ (31,450)        $  8,204,985      $ 8,173,535

                                 ==========        ============      ===========
</TABLE>


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


                                       16

<PAGE>
<PAGE>



FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                                          1997               1996              1995
                                                                          ----               ----              ----
<S>                                                                <C>                <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                               $     673,929      $    (63,805)       $   1,061,549
   Adjustments to reconcile net income (loss) to net cash
    provided by operating activities
      Gain on sale of condominium units                                        0                 0           (2,307,106)
      Loss on impairment of rental property                                    0                 0            1,236,502
      Depreciation                                                       738,528           912,448              691,197
      Amortization of loan costs                                          14,462            36,748               40,343
      (Increase) decrease in:
        Accounts receivable                                              (31,163)            4,464             (145,798)
        Notes receivable                                                       0             3,038                  757
        Inventory                                                         (1,415)          (10,111)               9,062
        Prepaid expenses and other                                        110,811           (32,262)             (35,918)
        Restricted cash                                                        0                 0            1,899,357
      Increase (decrease) in:
        Accounts payable, trade and accrued expenses                    (434,633)          504,976             (709,235)
        Customer and security deposits, rentals                           50,897           (80,324)             176,471
        Customer deposits, condominium units                                   0                 0           (1,899,357)
                                                                   ----------------  ----------------  ----------------
           Net cash provided by operating activities                   1,121,416         1,275,172               17,824
                                                                   ----------------  ----------------  ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of condominium units                                     0                 0            7,719,236
   Work in progress, condominium units                                         0                 0             (849,117)
   Additions to rental property                                         (150,098)         (307,406)            (134,476)
                                                                   ----------------  ----------------  ----------------
          Net cash (used in) provided by investing activities           (150,098)         (307,406)           6,735,643
                                                                   ----------------  ----------------  ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of cash advanced by general partner                               0                 0              (25,000)
   Proceeds from borrowings from affiliated companies                    150,000                 0                    0
   Proceeds of borrowings from unaffiliated companies                          0                 0                6,822
   Repayment of borrowings from unaffiliated companies                  (386,821)         (350,963)          (5,594,807)
   Repayment of borrowings to affiliates                                       0                 0             (700,000)
   Loan origination fees paid                                                  0                 0               (9,799)
   Partner distributions paid                                           (679,605)         (680,661)            (680,661)
                                                                   ----------------  ----------------  ----------------
          Net cash used in financing activities                         (916,426)       (1,031,624)          (7,003,445)
                                                                   ----------------  ----------------  ----------------
Net increase (decrease) in cash and cash equivalents                      54,892           (63,858)            (249,978)
Cash and cash equivalents at beginning of year                           101,108           164,966              414,944
                                                                   ----------------  ----------------  ----------------

Cash and cash equivalents at end of year                          $      156,000     $     101,108       $      164,966
                                                                   ================  ================   ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid during the year for interest                         $      589,612     $     847,556       $    1,102,243
                                                                   ================  ================  ================
</TABLE>

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


                                       17

<PAGE>
<PAGE>

FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS


1.     ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

       ORGANIZATION

          Florida Income Fund III, Limited Partnership (the Partnership) was
          formed on December 9, 1987, by the filing of a Certificate and
          Agreement of Limited Partnership (Partnership Agreement) under the
          laws of the State of Delaware. The general partners, MCD Real
          Estate, Inc. (MCD) and Mariner Capital Management, Inc. (MCM), also
          the managing general partner, contributed $20,000 and the initial
          limited partner contributed $5,000 in the initial capitalization of
          the Partnership. The Partnership was formed for the purpose of
          investing in a diversified portfolio of income-producing commercial
          and residential real estate properties located in Florida.  As a
          result of Management's decision to abandon the Walsingham property
          (See Note 8), the Partnership's sole property is the Pink Shell Beach
          and Bay Resort (Pink Shell).   The business of Pink Shell is
          substantially dependent on tourism and leisure and business travel,
          which is dependent on general economic conditions in the U.S. and
          Europe.

          Pink Shell leases and rents condominium units owned by individuals as
          part of its resort rental operations.  A decline in the number of
          property owners that participate in the guaranteed lease and rental
          programs may have a material adverse affect on Pink Shell's results
          of operations and financial condition.


       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          A summary of the significant accounting policies of the Partnership
          follows:

          ALLOCATION OF NET INCOME (LOSS): In accordance with the Partnership
          Agreement, net income (loss), prior to recoupment is allocated one
          percent (1%) to the general partners and ninety-nine percent (99%)
          to the limited partners as a class. Upon reaching certain operating
          results and prior to recoupment, net income (loss) is allocated five
          percent (5%) to the general partners and ninety-five percent (95%)
          to the limited partners as a class. Subsequent to recoupment, income
          (loss) is allocated twenty percent (20%) to the general partners and
          eighty percent (80) to the limited partners as a class.

          RENTAL INCOME:  Revenues from operation of the resort are recognized
          when services are provided to guests.

          WEIGHTED AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING:  Net
          income (loss) and distributions per limited partner unit are
          calculated based upon the weighted average number of units of limited
          partnership interest outstanding for the years ended December 31,
          1997, 1996 and 1995.

          CASH EQUIVALENTS: For purposes of the statement of cash flows, the
          Partnership considers all highly liquid investments purchased with a
          maturity of three months or less to be cash equivalents.

          RENTAL  PROPERTIES:  Rental properties are carried at cost less
          accumulated depreciation.  Depreciation is computed principally under
          the straight-line method over the estimated useful lives (31.5 years)
          of the assets. Repairs and maintenance are included in operating
          expenses and improvements are capitalized.

          Upon the sale or retirement of depreciable assets, the cost and
          related accumulated depreciation are removed from the accounts and
          the difference between the carrying value and any proceeds realized
          on sale is included in the determination of net income (loss).


                                       18

<PAGE>
<PAGE>




NOTES TO FINANCIAL STATEMENTS, CONTINUED


1.     ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

          RENTAL PROPERTIES, CONTINUED

          Statement of Financial Accounting Standards No. 121, "Accounting for
          the Impairment of Long-Lived Assets to be Disposed Of" (SFAS 121)
          requires that long-lived assets and certain identifiable intangibles
          to be held and used be reviewed for impairment whenever events or
          changes in circumstances indicate that their carrying amount may not
          be recoverable. In assessing recoverability, estimates of future cash
          flows expected to result from the use of the asset and its eventual
          disposition should be used. If the sum of the expected future cash
          flows (undiscounted and without interest charges) is less than the
          carrying amount of the asset, an impairment loss should be recognized
          based on the value of the asset.  Management reviews on a periodic
          basis its property holdings and believes that an impairment of the
          Walsingham Commons property exists. A loss of approximately
          $1,237,000 on impairment of the Walsingham Commons property was
          recognized in the year ended December 31, 1995.

          DEFERRED LOAN COSTS: Loan costs incurred from financing the various
          property acquisitions have been capitalized at cost and are being
          amortized over the lives of the related loans. Amortization of loan
          costs is included with interest expense in the statement of
          operations.

          INCOME TAXES: The accompanying financial statements do not show a
          provision or liability for Federal or State income taxes because the
          partners are taxed individually on their share of Partnership
          earnings.

          INVENTORIES:  Inventories  are stated at the lower of cost or market
          value,  determined  using the first-in, first-out (FIFO) method.

          PROFIT  RECOGNITION  ON  CONDOMINIUM  UNIT SALE:  The  Partnership
          has recognized a gain of approximately $2,300,000 on the
          sale-leaseback of the Pink Shell condominiums by the full accrual
          method in the year ending  December 31, 1995 in accordance with the
          provisions of Statement of Financial Accounting Standards
          No. 98, "Accounting for Leases", and Statement of Financial
          Accounting Standards No. 66, "Accounting for Sales of Real Estate".


                                       19

<PAGE>
<PAGE>


NOTES TO FINANCIAL STATEMENTS, CONTINUED

1.     ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

          FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial
          Accounting Standards No. 107, "Disclosures About Fair Value of
          Financial Instruments," requires that the Partnership disclose
          estimated fair values of financial instruments. The recorded value
          for cash and cash equivalents approximates fair value because of the
          short maturity of these instruments. The fair value of the
          Partnership's short- and long-term notes and mortgages payable at
          December 31, 1997, based upon market rates, approximates the amounts
          disclosed in Note 4.

          MANAGEMENT'S USE OF ESTIMATES: The preparation of financial
          statements in conformity with generally accepted accounting
          principles requires management to make estimates and assumptions
          that affect the reported amounts of assets and liabilities and
          disclosure of contingent assets and liabilities at the date of the
          financial statements and the reported amounts of revenues and
          expenses during the reporting period. Actual results could differ
          from those estimates.

          RECLASSIFICATIONS: Certain amounts in the 1996 and 1995 financial
          statements have been reclassified to conform to the current year
          presentation. These reclassifications have no effect on the net
          income or partners' capital previously reported.


2.     CONDOMINIUM UNITS:

       At the Pink Shell Resort site, the Partnership constructed a 42-unit
       condominium complex which was sold and leased back to the
       Partnership as of December 31, 1995. The Partnership received a
       certificate of occupancy in February 1995 with closing on the
       condominium units occurring in February and March 1995.

       All 42 owners have entered into 5 to 10 year leases with the
       Partnership. The leases state that the lessee shall pay the owner a
       base annual rent equal to $25,000 payable in 12 equal monthly
       installments. Lessee shall also pay the owner the amount by which 42.5%
       of the annual gross rental income generated by the lessee from the unit
       exceeds the amount of the annual base rent paid. Base rent under this
       agreement shall increase by $500 per year until the first year for
       which percentage rent is payable. Thereafter there shall be no further
       increases in base rent during the lease term (See also Note 6 - Lease
       Commitments).

       Total closing proceeds from the sale of the 42 unit condominium complex
       in the year ended December 31, 1995 was approximately $9,573,000. The
       cost of the condominium complex was approximately $7,138,000 (including
       capitalized interest of $36,088 and $114,154 in 1995 and 1994,
       respectively). Selling expenses totaled approximately $173,600,
       resulting in a gain of $2,307,106. Closing proceeds were used to pay
       down related mortgages and notes by approximately $6,283,000.


                                       20

<PAGE>
<PAGE>



NOTES TO FINANCIAL STATEMENTS, CONTINUED


3.     RENTAL PROPERTIES:

       Rental properties consisted of the following at December 31:
<TABLE>
<CAPTION>
                                                            1997            1996
                                                            ----            ----
<S>                                                  <C>               <C>
        Land                                         $  4,942,432      $    4,942,432
        Buildings, improvements and equipments         14,079,205          13,929,107
                                                    ----------------  ----------------
                                                       19,021,637          18,871,539
        Accumulated depreciation                       (4,536,637)         (3,798,109)
                                                    ----------------  ----------------

                                                     $ 14,485,000      $   15,073,430
                                                    ================  ================
</TABLE>

        Depreciation expense was approximately $738,500, $912,400 and $691,200
        for 1997, 1996 and 1995, respectively.

        Additionally, the Partnership has entered into Furniture and
        Furnishings lease agreements with all 42 condoninium owners.  The
        lease states that the owner shall pay the Partnership base rent of
        $9,900 payable in 60 equal installments of $165 over the five year
        lease term.

        Future minimum annual rentals from lease leases will be approximately
        as follows:

                                                     1998   $ 83,160
                                                     1999     83,160
                                                     2000     83,160
                                                     2001     13,860
                                                            -------
                                                            $263,340


                                       21

<PAGE>
<PAGE>


NOTES TO FINANCIAL STATEMENTS, CONTINUED

4.     DEFERRED LOAN COSTS:

       Deferred loan costs at December 31 are as follows:
<TABLE>
<CAPTION>
                                             1997              1996
<S>                                  <C>               <C>

        Deferred loan costs          $  142,262        $      142,262

        Accumulated amortization       (110,398)              (95,936)
                                    ----------------  ----------------
                                     $   31,864        $       46,326
                                    ================  ================
</TABLE>

       Additions to deferred loan costs relate to modifications of note terms
       and other refinancing transactions during the years ended December 31,
       1997 and 1996. Certain loan costs became fully amortized during the
       years ended December 31, 1997 and 1996 and, therefore, were written
       off. Amortization expense was approximately $14,500, $36,700 and $38,600
       for 1997, 1996, and 1995, respectively.




                                       22

<PAGE>
<PAGE>


NOTES TO FINANCIAL STATEMENTS, CONTINUED

5.     MORTGAGES AND NOTES PAYABLE:

       Mortgages and notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
                                                                                       1997              1996
<S>                                                                              <C>               <C>
        Affiliated debt:
              Note payable to management company, balloon payment of
                $150,000 plus interest at 11% due February 1998                  $     150,000     $            0
        Unaffiliated debt:
              Mortgage payable to a bank, monthly payment of $78,409
                including interest at 10.5%, final payment due April 2000            5,217,510          5,592,148

           Other mortgages and notes payable:
              Mortgage payable to individual, quarterly interest payments at
                7%, principal payments of $10,000 every March, final
                balloon payment of $160,000 plus interest due January 1998             160,000            170,000

              Other                                                                          0              2,183
                                                                                ----------------  ----------------

                Total other mortgages and notes payable                                160,000            172,183
                                                                                ----------------  ----------------

                   Total mortgages and notes payable                                 5,527,510          5,764,331

           Less current maturities                                                    (722,549)          (383,573)
                                                                                ----------------  ----------------

                   Total long term debt less current maturities                  $   4,804,961     $    5,380,758
                                                                                ================  ================
       The mortgage payable to bank includes certain covenants primarily
       related to administrative matters and the availability of certain
       financial data.

</TABLE>

Long-term debt less current maturities is scheduled to mature approximately as
follows:

<TABLE>
<CAPTION>

<S>                                    <C>
              1999                     $     458,013
              2000                         4,346,948
                                      ----------------
                                       $   4,804,961
                                      ================

</TABLE>

       The Pink Shell Beach and Bay Resort property is pledged as
       collateral for the mortgage payable to a bank.




                                       23

<PAGE>
<PAGE>


6.     LEASE COMMITMENTS:

          The Partnership has entered into five to ten year operating leases
          with 42 condominium owners at the Pink Shell Resort property. The
          estimated future minimum lease payments associated with these
          operating leases are as follows:

<TABLE>
<CAPTION>
<S>                                       <C>
              1998                               1,113,000
              1999                               1,134,000
              2000                                 902,917
              2001                                 868,000
              2002                                 527,250
              Thereafter                         1,018,500
                                          ----------------
                                          $      5,563,667
                                          ================
</TABLE>

          Lease expense for the years ending December 31, 1997, 1996 and 1995
          was approximately $1,092,000, $1,071,000 and $907,800, respectively.



7.     RELATED PARTY TRANSACTIONS:

       The Partnership participated in the following related party
       transactions:

          The general partners and their affiliates are entitled to
          receive compensation for leasing and management fees in an amount
          not to exceed 5% of gross revenues from residential Partnership
          properties or 6% of gross revenues produced by commercial
          Partnership properties. Total management fees of approximately
          $602,800, $562,000 and $555,300 were incurred for the years ending
          December 31, 1997, 1996 and 1995, respectively.

                                       24

<PAGE>
<PAGE>



NOTES TO FINANCIAL STATEMENTS, CONTINUED

7.     RELATED PARTY TRANSACTIONS, CONTINUED

          The general partners and their affiliates are also entitled to
          reimbursement of costs (including amounts of any salaries paid to
          employees and officers of a general partner or its affiliates)
          directly attributable to the operation of the Partnership that could
          have been provided by independent parties. Expenses amounting to
          approximately $2,836,000, $3,238,000 and $2,878,500 were incurred
          during the years ending December 31, 1997, 1996 and 1995,
          respectively. Effective July 1, 1993, the employees of the Pink Shell
          Beach and Bay Resort become employees of Mariner Group, Inc. (parent
          of MCM), which pays the payroll and related benefits and charges the
          cost back to Pink Shell.

          Amounts due from and to the general partner and its affiliates
          arising from normal business operations are included in account
          balances as follows at December 31:

<TABLE>
<CAPTION>
                                                    1997            1996
                                               ------------    -------------
<S>                                            <C>             <C>
           Accounts payable, trade             $   161,614     $    123,840
                                               ------------    -------------
           Accrued expenses                    $   144,362     $    113,000
                                               ------------    -------------
</TABLE>

8.     RENTAL PROPERTY UNDER FORECLOSURE:

       As a result of the Partnership's November 27, 1996 default under the
       terms of the mortgage loan, the Partnership agreed to the appointment
       of a receiver on the Walsingham Commons on February 3, 1997.  All
       rights, powers, interests and obligations in Walsingham Commons have
       been transferred to the receiver as of November 27, 1996.  The
       outstanding mortgage balance of $3,200,000 is non-recourse and will be
       satisfied upon the final judgment of foreclosure.  The foreclosure
       proceedings had not been finalized at December 31, 1997.

9.     SUBSEQUENT EVENT:

       During February, 1998 the Partnership and a hotel company entered
       into a Purchase Agreement pursuant to which the Partnership agreed to
       sell all of the Pink Shell Property, which includes the Partnership's
       interest in certain real property, improvements, fixtures, furnishings,
       furniture, equipment, tenant leases and other tangible personal
       property.  The hotel company will pay to the Partnership a purchase
       price of $21,250,000 and will assume certain liabilities and obligations
       of the Partnership to the extent such liabilities and obligations arise
       or are incurred and are first required to be performed after the closing
       date.  The purchase price includes an earnest money deposit in the
       amount of $500,000 which the Purchaser deposited with a title company.
       The balance of the purchase price will be paid in cash to the
       Partnership at the time of closing.  The purchase price is subject to
       certain customary adjustments and prorations.

       Because the hotel earns a disproportionate amount of its earnings
       in the first quarter, the Purchase Agreement provides that the
       Partnership will pay to the purchaser a portion of the income
       it earned from the Pink Shell Property during the period from January
       1, 1998 until the closing date.  The Partnership's obligations to
       complete the Sale under the Purchase Agreement are conditioned on the
       Partnership obtaining the necessary Limited Partner approval of the
       Proposal.  In addition, the Partnership's obligations and the
       Purchasers obligations under the Purchase Agreement are conditioned
       upon the satisfaction of several conditions precedent to closing.  If
       those conditions are not satisfied or waived on or before the closing
       date, the Purchase Agreement will be terminated and canceled and the
       Sale will not occur.  If the sale does occur, Management will implement
       a formal plan of liquidation for the Partnership, in accordance with the
       Partnership agreement.

                                       25

<PAGE>
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS






Our report on the financial statements of Florida Income Fund III, Limited
Partnership, is included on page 13 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 36 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.






                                         COOPERS & LYBRAND L.L.P.
Tampa, Florida
March 10, 1998




                                       26

<PAGE>
<PAGE>

<TABLE>
<CAPTION>
                  FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER, 31, 1997

  COL. A              COL. B             COL. C                       COL. D             COL. E


                                                               COST CAPITALIZED       GROSS AMT AT WHICH
                                      INITIAL COST              SUBSEQUENT TO           CARRIED AT CLOSE
                                     TO PARTNERSHIP               ACQUISITION                OF PERIOD

                                               BLDGS. &                CARRYING             BLDGS &
DESCRIPTION        ENCUMBRANCES  LAND        IMPRVMENTS  IMPROVEMENTS  COSTS    LAND        IMPROVEMENTS    TOTAL
-----------        ------------  --------    ----------  ------------  -----    ----        --------        ---------
<S>                <C>           <C>         <C>         <C>          <C>      <C>          <C>             <C>
Pink Shell Resort
Ft. Myers, FL      $ 5,377,510   $4,942,432  $3,933,139  $10,146,066  $ -0-    $4,942,432   $14,079,205     $19,021,637
                   ===========   ==========  ==========  ===========  =====    ==========   ===========     ===========


</TABLE>

<TABLE>
<CAPTION>

                     COL. F         COL. G      COL. H             COL. I

                                                                LIFE IN WHICH
                                                               DEPRECIATION IN
                                   DATE OF                      LATEST INCOME
                   ACCUMULATED     CONSTR        DATE           STATEMENT IS
DESCRIPTION        DEPRECIATION    UCTION      ACQUIRED           COMPUTED
-----------        ------------    -------     --------        ---------------
<S>                <C>             <C>          <C>              <C>
Pink Shell Resort                  1954-
Ft. Myers, FL      $ 4,536,637     1973         1988             31.5 years
                   ===========


</TABLE>
SEE ACCOMPANYING NOTES TO SCHEDULE III





                                       27

<PAGE>
<PAGE>

                  FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
                              NOTES TO SCHEDULE III
                                DECEMBER 31, 1997
                    REAL ESTATE AND ACCUMULATED DEPRECIATION


Balance as of 12/31/94                                            $23,522,959

    Additions During 1995:
         Improvements, etc.                            134,460
         Impairment of Value                        (1,236,502)   ( 1,102,042)
                                                    ----------    -----------
Balance as of 12/31/95                                            $22,420,917

    Additions During 1996:
         Improvements, etc.                            307,406        307,406
                                                    ----------    -----------
    Deletions During 1996:
         Improvements, etc.                            (10,163)
         Rental property under foreclosure          (3,846,621)    (3,856,784)
                                                    ----------    -----------
Balance as of 12/31/96                                             18,871,539

    Additions during 1997:
         Improvements, etc.                            150,098        150,098
                                                     ---------    -----------
Balance as of 12/31/97                                            $19,021,637
                                                                  ===========

                                       28

<PAGE>
<PAGE>

                  FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
                              NOTES TO SCHEDULE III
                                DECEMBER 31, 1997
                    REAL ESTATE AND ACCUMULATED DEPRECIATION



Balance as of 12/31/94                                    $2,967,321

    Depreciation expense for 1995         691,181            691,181
                                         --------         ----------

Balance as of 12/31/95                                     3,658,502

    Depreciation expense for 1996         912,448
    Less deletions and rental property
    under foreclosure                    (772,841)           139,607
                                         --------         ----------
Balance as of 12/31/96                                     3,798,109

    Depreciation expense for 1997         738,528            738,528
                                         --------         ----------
Balance as of 12/31/97                                    $4,536,637
                                                          ==========



                                       29

<PAGE>
<PAGE>

                   FLORIDA INCOME FUND III LIMITED PARTNERSHIP
                              NOTES TO SCHEDULE III
                                DECEMBER 31, 1997
                    REAL ESTATE AND ACCUMULATED DEPRECIATION

(A)       The aggregate cost of land and buildings is the same for Federal
          Income Tax purposes.

(B)       See Note 1 to the Financial Statements for depreciation method.

(C)       See Note 5 to the Financial Statements for further information on
          debt obligations.


                                       30

<PAGE>
<PAGE>


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

          (A) AND (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

The Partnership, as an entity, does not have any directors or officers. The
Managing General Partner is Mariner Capital Management, Inc. (located at 12800
University Dr., Ste 675, Fort Myers, Florida 33907), a Florida corporation
formed for the purpose of becoming the general partner in limited partnerships
formed principally to invest in real estate. The Managing General Partner is a
wholly owned subsidiary of The Mariner Group, Inc., an Ohio corporation
(referred to herein as "Mariner Group").  The executive officers/directors of
the Managing General Partner as of December 31, 1997, were as follows: Robert
M. Taylor, Timothy R. Bogott, Allen G. Ten Broek and Joe K. Blacketer.

Mr. Taylor and Mr. Bogott have served as officers of the Mariner Capital
Management, Inc., since its incorporation on July 11, 1983. Allen G. Ten Broek
replaced Lawrence A. Raimondi as President as of December 31, 1997.  Subsequent
to December 31, 1997, Mr. Blacketer resigned as Secretary/Treasurer.  He was
replaced in the capacity by Elaine Hawkins.

MCD Real Estate, Inc. (located at 800 Superior Avenue, Suite 2100, Cleveland,
Ohio 44114) (referred to herein as "MCD") is a Co-General Partner. MCD is
an Ohio corporation and a wholly owned subsidiary of McDonald & Company
Securities, Inc., the Managing Dealer of the offering. McDonald & Company
Securities, an Ohio corporation, is a wholly owned subsidiary of McDonald
& Company Investments, Inc., a publicly-traded Delaware corporation listed on
the New York Stock Exchange. MCD was formed in February of 1981 for the
principal purpose of becoming the general partner of limited partnerships
formed to provide equity financing for various real estate projects. The
directors and officers of MCD as of December 31, 1997, were as follows: James
C. Redinger, Thomas M. O'Donnell and Richard R. Cundiff III.

          (C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES

          Not applicable

          (D) FAMILY RELATIONSHIP

          Not applicable



                                       31

<PAGE>
<PAGE>


          (E) BUSINESS EXPERIENCE

          ROBERT M. TAYLOR: Age 56, is Chairman of the Board and a Director of
          the Managing General Partner. He founded Mariner Group in 1971 and
          served as its President until his election as Chairman and Chief
          Executive Officer of Mariner Group in 1979. He also serves as an
          officer or director of various other Affiliates of Mariner Group. Mr.
          Taylor is a Director of Acme-Cleveland Corporation, Cleveland, Ohio,
          a manufacturer of machine tools; Barnett Bank of Fort Myers, Fort
          Myers, Florida; MIL- COM Electronics Corporation, San Antonio, Texas;
          Florida Council of 100; the Fort Myers Chamber of Commerce, and
          Chairman of the Business Development Corporation of Southwest
          Florida, Fort Myers, Florida. Since 1971, Mr. Taylor has directed the
          completion of over 30 real estate developments in Lee County,
          Florida. Prior to 1971, Mr. Taylor was a management consultant
          employed by McKinsey & Company, Inc., Cleveland, Ohio.

          TIMOTHY R. BOGOTT: Age 51, is a Director and the former President of
          the Managing General Partner. He was involved in all aspects of the
          organization and management of Florida Income Fund, L.P., Florida
          Income Fund II and Florida Income Fund III until January 1994 when he
          became President of South Seas Resorts Company. He joined Mariner
          Group in 1976 and has held the positions of Project Manager and
          Director of Administration and Secretary/Treasurer. Prior to 1976,
          Mr. Bogott was employed as an Assistant Vice President of Palmetto
          Federal Savings and Loan Association, Fort Myers, Florida (1974-1976)
          and held various management positions with the First National Bank of
          Fort Myers (1970-1974). Mr. Bogott was elected Secretary/Treasurer of
          Mariner Group in 1979 and Vice President -Finance in 1983. Mr. Bogott
          is also President of Mariner Capital Investment Corporation and is an
          officer or director of various other Affiliates of Mariner Group.

          ALLEN G. TEN BROEK: Age 57, Mr. Ten Broek became President of Mariner
          Capital Management, Inc. on December 31, 1997.  Mr. Ten Broek is also
          President and CEO of The Mariner Group, Inc., a position in which he
          served from 1979 to 1992, and again since October 1995.  The Mariner
          Group is an asset management, business development and real estate
          development company.  From 1992 to 1995 Mr. Ten Broek was the Vice
          Chairman and Managing Executive of Hilton Grand Vacations Company, a
          timeshare development and operations company affiliated with Hilton
          Hotels.  Mr. Ten Broek is an original shareholder of The Mariner
          Group, Inc. and has been a director of The Mariner Group, Inc.
          since 1973.  Mr. Ten Broek is the Chairman Emeritus of the Florida
          Shore and Beach Preservation Association and Chairman of the
          American Coastal Coalition.  He is a former director of two local
          banks and a founding director of Community Bank of the Islands.
          Mr. Ten Broek is an officer and director of various other Mariner
          affiliates.  Mr. Ten Broek is a graduate of the University of
          Wisconsin.  He worked for ten years in various executive positions
          with AT&T prior to joining Mariner.

          JOE K. BLACKETER: Age 45, was the Secretary/Treasurer of the Managing
          General Partner at December 31, 1997. Mr. Blacketer has been a
          Certified Public Accountant since 1983. He is a member of the
          American Institute of Certified Public Accounts (AICPA), and a member
          of the Florida Institute of Certified Public Accountants (FICPA). Mr.
          Blacketer joined Mariner Group in 1983. Mr. Blacketer was employed
          by Coopers & Lybrand, CPA's (1979-1983) prior to that time.

          ELAINE HAWKINS: Age 45, is the Vice President/Treasurer of the
          Managing General Partner.  She joined the Mariner Group in 1980 as
          the Director of Risk Management for all of the affiliated entities.
          In 1988 she became the President of South Seas and Captiva Properties,
          Inc., an affiliated real estate firm.  She holds licenses as a real
          estate broker, and in property, casualty, life and health
          insurance.  Prior to joining the company she was employed by
          Liberty Mutual Insurance Company in commercial sales.


                                       32

<PAGE>
<PAGE>


          JAMES C. REDINGER: Age 61. Mr. Redinger joined McDonald & Company (a
          partnership that transferred all of its assets to McDonald & Company
          Securities, Inc.) in March 1974, becoming a partner in 1977, working
          in the area of corporate underwriting and syndication of real estate
          and oil and gas ventures. He has had extensive experience in site
          selection, cost projections of both commercial and residential real
          estate projects and the syndication of such projects through limited
          partnerships. Mr. Redinger has served as Chairman of the District
          Nine Committee of the National Association of Securities Dealers,
          Inc., is a Vice President and a Director of MCD Oil and Gas Company,
          Inc., a Director of McDonald & Company Venture Capital, Inc., a
          Director of McDonald & Company Securities, Inc., and a Managing
          Director of McDonald & Company Securities, Inc.

          THOMAS M. O'DONNELL: Age 62. Mr. O'Donnell joined McDonald & Company
          in 1965 in the Corporate Finance Department. Mr. O'Donnell became a
          partner of McDonald & Company in 1968 and has been a member of its
          Policy Committee since 1971. Mr. O'Donnell is a Chartered Financial
          Analyst and a member of the Cleveland Society of Security Analysts.
          Mr. O'Donnell is a director of Seaway Food Town, Inc., Maumee, Ohio,
          a grocery retailer. Mr. O'Donnell is Chief Executive Officer and
          Chairman of the Board of McDonald & Company Investments, Inc., Chief
          Executive Officer and Chairman of the Board of McDonald, which
          operates an insurance agency; a Director of MCD Oil & Gas Company,
          Inc., a Director of McDonald & Company Venture Capital, Inc.; and a
          Director of McDonald Financial Services.

          RICHARD R. CUNDIFF, III: Age 38. Mr. Cundiff joined McDonald &
          Company in December 1982 and has assisted in the development of the
          Real Estate and Specialty Finance Department. Specializing in real
          estate and oil and gas investment banking, his responsibilities
          include structuring, marketing and monitoring investments in these
          particular areas. Mr. Cundiff is a First Vice President of McDonald
          & Company.

          (F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

          No director or officer of the Managing General Partner was involved
          in any event during the past five years which would be responsive to
          this question.

ITEM 11. EXECUTIVE COMPENSATION

          (A) CURRENT REMUNERATION OF GENERAL PARTNERS, THEIR DIRECTORS AND
          OFFICERS

          No direct remuneration was paid or payable by the Partnership for the
          period ended December 31, 1997, to directors or officers of the
          General Partners. During the period ended December 31, 1997, no
          remuneration, direct or indirect, was paid to affiliates of the
          General Partners, except:


                                       33

<PAGE>
<PAGE>


          The General Partners and their affiliates are also entitled to
          receive compensation for leasing and management fees in an amount
          not to exceed 5% of gross revenues from residential Partnership
          properties or 6% of gross revenues produced by commercial Partnership
          properties.  During 1997, 1996 and 1995, $602,806, $562,098 and
          $555,259 were charged to the Partnership.

          The General Partners and their affiliates are also entitled to
          reimbursement for the actual cost to the General Partners or their
          affiliates of goods, materials and services used for or by the
          Partnership and obtained from unaffiliated entities and the cost of
          services performed by officers and employees of the General Partners
          and their affiliates which could be performed directly for the
          Partnership by independent parties. During 1997, 1996 and 1995,
          $2,946,169, $3,238,001 and $2,878,501 were charged to the Partnership
          for these services of which $482,576, $126,840 and $101,437 were
          included in accounts payable and accrued expenses at December 31,
          1997, 1996, and 1995 respectively. A portion of this amount is for
          the payment of insurance premiums which are collected by Mariner
          Group, Inc. (for all Mariner affiliates) and paid to the carrier on
          behalf of Florida Income Fund III. The balance is for reimbursement
          for on-site property management personnel and for reimbursement of
          other costs for services performed by the General Partner or
          affiliates which the Partnership would be required to pay to third
          parties for comparable services in the same geographical location.
          The increase in General Partner charges for 1994 over prior years
          is due to management's decision, effective July 1, 1993, to have the
          employees of the Pink Shell Beach and Bay Resort become employees of
          Mariner Group, Inc. (parent of Mariner Capital Management, Inc.),
          which pays the payroll and related benefits and charges the cost
          back to Pink Shell and for related charges on the 42 unit condominium
          building.

          In accordance with the Partnership Agreement, net income or loss,
          prior to recoupment, is allocated five percent (5%) to the General
          Partners and ninety-five percent (95%) to the Limited Partners as a
          class. However, if operating cash flow distributed or distributable
          doesn't reach 7%, then net income will be allocated 1% to the General
          Partners and 99% to the Limited Partners. Subsequent to recoupment,
          income or loss is allocated twenty percent (20%) to the general
          partners and eighty percent (80%) to the limited partners as a class.

          (B) PROPOSED REMUNERATION

          Except for the payment of acquisition fees and the allocation of net
          income or loss as described above, the Partnership has no ongoing
          plan or arrangement to compensate the persons and entities named
          above.   However, the Managing General Partner or its affiliates may
          receive leasing and management fees in connection with the management
          of the Partnership's properties, subject to the limitations described
          herein below.

          The Managing General Partner or its affiliates are entitled to
          receive property management fees not to exceed 6% of the gross
          revenues from commercial properties and 5% from residential
          properties. Other expenses attributable to the operation of the
          Partnership may be reimbursed to the General Partners or affiliates
          of the Managing General Partner.


                                       34

<PAGE>
<PAGE>


          The Managing General Partner or its affiliates are entitled to one
          half of the commissions paid as a result of the sale of Partnership
          properties based on property sales prices, in an amount not to exceed
          2.75% of such prices and subordinated to the right of the Limited
          Partners to receive aggregate cash distributions from the Partnership
          equal to their adjusted capital contribution plus the 10% preference
          amount.

          (C) REMUNERATION OF DIRECTORS

          None.

          (D) OPTIONS, WARRANTS AND RIGHTS

          The Registrant has granted no options, warrants or rights.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

No person is known to the Partnership to be the beneficial owner of over 5% of
the outstanding Partnership units. For information on net income or loss
allocation see Item 11 (A).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

See Note 7, Related Party Transactions in Notes to the Financial Statements, on
pages 23 and 24 in Item 8.


                                       35


<PAGE>
<PAGE>


                                     PART IV

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

          (A) 1. FINANCIAL STATEMENT SCHEDULES

          The following Financial Statement Schedules of the Partnership are
included in Part II, Item 8:

                                                                          PAGE
                                                                          ----

                Report of Independent Accountants                           13

                Balance Sheets as of December 31, 1997 and 1996             14

                Statements of Operation for the three years ended
                1997, 1996 and 1995                                         15

                Statements of Partners' Capital for the three years
                ended 1997, 1996 and 1995                                   16

                Statements of Cash Flows for the three years ended
                1997, 1996 and 1995                                         17

                Notes to Financial Statements                          18 - 25

                Report of Independent Accountants on Schedule III           26

                Schedule III Real Estate and Accumulated Depreciation  27 - 30

                Schedules Omitted:

                Other schedules have been omitted because of the absence of
                conditions under which they are required or because the
                required information is included in the Financial Statements.

        (A) 2. EXHIBITS

               27 Financial Data Schedule (for SEC use only)

        (A) 3. REPORTS ON FORM 8-K

               None.



                                       36

<PAGE>
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                        FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
                        (Registrant)
                        March 29, 1998

                        By: /s/ ALLEN G. TEN BROEK
                            ------------------------------------
                            ALLEN G. TEN BROEK
                            President, Director and CEO
                            Mariner Capital Management, Inc.
                            (Principal Executive Officer)



                        By: /s/ ELAINE HAWKINS
                            ------------------------------------
                            ELAINE HAWKINS
                            Mariner Capital Management, Inc.
                           (Principal Financial and Accounting Officer)


                                       37